Chile, country of innovators?

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Seabee
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Chile, country of innovators?

Post by Seabee » Mon May 23, 2011 1:40 pm

A resent article appeared in Las Ultimas Noticias on May 18, 2011 tittled "Guro gringo nos trato de poco productivos" mentions some of the gripes expats and some locals have with the Chilean "system." In the article, journalist Gabriel Esteffan makes reference to an encounter Michael Porter (Leading authority on company strategy and the competitiveness of nations and regions) had at the Antofagasta airport.

"Five people came to greeted me, who were doing the job of one person!" he said. Porter criticized the Chilean model as less productive and lacking of innovation incentives, "Being productive is essential for the development, It does not depend of what is done. But, How is done" he explained.

He also asked, "why Chile has so few innovators?..."

Chilean are proud of the statistics, placing Chile high in the economical scale in the region, but Porter explained "if it is not for the high prices in raw materials, Chilean economy would've been stagnated. There is a need for innovation, and variety of other products for exportation"
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Re: Chile, country of innovators?

Post by admin » Tue May 24, 2011 2:49 pm

On the one hand, I agree with a lot of what he said. On the other hand, I want to say he is missing the problem by more than a mile.

As an economics professor I had years ago said the first day of class, "we can teach people all about running a business, but we still can not teach them to take risks. All we can do is show them how to minimize those risks."
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Re: Chile, country of innovators?

Post by admin » Tue May 24, 2011 3:21 pm

One thing you see, across Chilean culture, is the risk aversion of Chileans as a society. I have never seen such terror in Chileans eyes and / or confusion, as when people that have decided to start their own business talk to people that have not. There is that, "why would you give up your security" sort of deer in the head lights look. I have seen this when we started our own business and among others in similar situations.

One thing you see among the successful, innovative, businesses in Chile is that the people that started them, had some sort of money to start. Not talking about the guy on the corner with a paper stand or a lawn mower, but real companies. You do not see a whole lot of people jumping off the ledge with no safety net under them to try and start their own business. People that do that, tend to do it from the safety of a position that is almost from what could be described as a hobby level of safety (e.g. someone else in the family has a good job).

I think the great hope of Chile is not the men. It is the women. The best run small businesses I have seen in this country, had a woman running it (even if there was a token guy involved somewhere). Besides that they tend to be more get things done and organized, on top of also often being in a position in the family household of being under utilized or having more flexibility in time. Essentially, they are a labor force that is under employed in Chile, and when employed tend to have less reason to work for someone else because they are rewarded less by society for that work. There is also a large amount of women in this country that are single parents. They often have a lot of motivation to chase something better. Chile needs to throw some serious money and business training at the women in this country.

Besides that, or in addition to it, there is still the fundamental problem of risk. If someone does stick their neck out on the line for a startup, they almost always will go conservative. Conservative means starting a business that is in a proven market. Rather than trying to break ground in some respect in the IT industry or whatever, they are going to tend to be attracted to the ho, hum. They are going to say open a store on a street where there is already 10 stores selling the same thing. Not exactly what gets the venture capitalist excited.

The people I have seen make the leap in Chile, tend to come from families that have a strong history of starting businesses. Those also tend to be the financially well off families, and the venture capital in Chile still comes overwhelmingly from the family. Not some crazy rich guy or even the bank. Those that come from blue collar sorts of backgrounds, tend not to see beyond the steady pay check because there are very few to no one in the family that has started a business nor are there many resources for them to start. There is also going to be a very strong lack of support from the family, and in Chile the support or lack of support of the family is everything.

So, a foreign expert (or armchair economist) coming in to Chile, it is common to look at this country and say things like "Chile OUGHT to do x, y, or z", "Chile COULD do A, B, and C", "Chile SHOULD do yada, yada". That is the easy part. Been doing it myself for years on this forum. Still, getting and IS out of an OUGHT, COULD, or SHOULD is difficult under the best of circumstances, and Chile is far from the best of circumstances for such spectacular feats of logic or culture. It is a culture that is very much immune to foreign or domestic born OUGHTS.
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Re: Chile, country of innovators?

Post by admin » Tue May 24, 2011 3:28 pm

Here is an example of risk aversion that comes to mind.

Why do most of the housing developers build say a 100 house development, and paint them all the same color in Chile? Often using the exact same floor plan. Because Chileans don't like to be different, or only within very limited approved parameters. Starting your own business is not an approved cultural parameter; except for the very wealthy (they are expected to do that, because they are the wealthy).
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Re: Chile, country of innovators?

Post by helitool » Tue May 24, 2011 5:48 pm

I was in Frutillar about a year ago and was given a tour of the german technical school there for teenagers. This is where they learn to do basic machine shop and fabrication work (my specialty). All of their machine shop equipment was about 50 years old with no CNC capability. I asked them why no CNC and was informed that they could not afford to import any CNC machinery. My next question was "Why not build your own plasma cutting table". I got the same deer in the headlights stare that others have noticed. The step motor controllers and power supplies are only 4" square and cost about $30 I could easily bring it all in one pocket of a carry on, the rest is just standard steel tubing fabrication and welding. Within 5 minuets I had worked out the solution that of course had little chance of working.

I could build a small XY table that the students could write programs for using Autocad then convert the DXF file to G-code using a free program off the net then feed the program to the XY table and see if it drew what they had programed. If they ever got a full size plasma table operational they could take in jobs from the local community to cut metal parts, thereby giving the students an opportunity to learn basic business practice as well. But unless I found some of the teachers or kids that spoke standard Spanish or Italian or German they would understand what I was saying in standard LAS but I would not be able to understand their dialect of Spanish. This I feel is one of the problems with Chile moving ahead in technology. There are lots of gringos who are retired and have very valuable knowledge that we are willing to teach for free and are more than willing to meet them half way linguistically (Standard latin american spanish would be a good start). They could also learn all of this very quickly off the internet, but unfortunately it is all in english (oops, guess that won't work either). :)

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Re: Chile, country of innovators?

Post by admin » Tue May 24, 2011 6:40 pm

Well, that would likely describe at least in part my rather open hostility towards what startup Chile did or is doing in their first rounds of excluding people inside the country (we will see if they really correct this in the next rounds). There are a million things, that could be done with a 12 million+ dollars, with a much higher priority than providing free pizza for foreign programmers. Just about any of which would move this country along for innovation and entrepreneurship. Essentially, the government was putting up VC money, but excluding Chileans and foreigners inside the country from accessing it. In fact, soo stupid, it was almost a stereotypical Chilean government screwup as would be expected with many other things, all in the name of finally trying to do things right ( I don't think many people appreciate the irony of that screwup ).

http://www.allchile.net/chileforum/topic5425-12.html

Now, Startup Chile, how about bank accounts for foreigners, that might be inclined to become venture capitalist?

I know gringos in this country, on their own dimes, have sunk money in to small companies (some that are successful and are going international). They did not have bank accounts either.
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Re: Chile, country of innovators?

Post by otravers » Wed May 25, 2011 12:53 am

I've been in touch a couple times with a French guy who was part of the first Startup Chile wave. He said their experience in Chile had been OK, they built a prototype of their website, couldn't raise money in Chile, raised money from Americans and Europeans, and... they're back in California (the guy heard about Startup Chile while studying at Stanford).

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Re: Chile, country of innovators?

Post by KJS » Wed May 25, 2011 12:04 pm

The country has to undergo some pretty significant systematic (financial, legal) changes in order for true foreign investment (something a little better than plain old resource extraction schemes) to be worth bigger innovation bucks. It's true, Chile is open and relatively corruption free, yet a lot of the comparatively small market is already divided amongst the top tier...those top cartels are really not interested in partnering; they would rather just sit on it, pass it on to junior. Therefore, it's not enough to tell foreigners, "hey come on over to Chile, dump some money here whenever you like, we don't mind. Let's have a pisco sour and talk about it." There has to actually be profound incentive within the markets aimed at tapping other partnership investment opportunities. In view of the intellectual property issues, and recent selling of the farm, how would a true innovator feel secure developing a potentially dynamo idea now? $40K is not nearly attractive enough for that...

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Re: Chile, country of innovators?

Post by go play outside » Fri May 27, 2011 12:32 pm

The new Start-up round is, I believe, inviting more people, but still not people already here. I agree it's a bit of a misfire. Lots of people I know have spent valuable time on the ground here and could really do something with that knowledge PLUS 40k.

I wonder how much follow-up we can get from their first intake .... how many are back in Cali?

BTW this is a good snapshot of what you are talking about Charles... check out the risk aversion

http://www.geert-hofstede.com/hofstede_chile.shtml

Chile's highest Hofstede Dimension is Uncertainty Avoidance (UAI) at 86, indicating the society’s low level of tolerance for uncertainty. In an effort to minimize or reduce this level of uncertainty, strict rules, laws, policies, and regulations are adopted and implemented. The ultimate goal of this population is to control everything in order to eliminate or avoid the unexpected. As a result of this high Uncertainty Avoidance characteristic, the society does not readily accept change and is very risk adverse.

And interestingly, a really high acceptance of the inequality from the "bottom-up".

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Re: Chile, country of innovators?

Post by Hightower » Fri May 27, 2011 1:51 pm

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Re: Chile, country of innovators?

Post by admin » Fri May 27, 2011 4:41 pm

I think the target, and I am not sure how, would be to some how inject an incentive at the family level. Family is everything as far as directing people and the society as a whole in Chile. If you can motivate the family to motivate someone, you can get a lot done in Chile.

Not sure how that would work. I have found that it does work even in our own business. Taking some sort of interest in employees family or building a relationship with their family produces better and more motivated workers that are loyal.

Now, how to translate that in to real innovative entrepreneurs is a problem I am not sure about how, but if there is a solution it will be at the family level.
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Re: Chile, country of innovators?

Post by admin » Fri May 27, 2011 4:49 pm

You know on the research front, I can not completely knock Chile (although it is bad). I went to grad school in Europe, and I seen a lot of really talented professors writing papers and then just exchanging them up and down the hall way or self-publishing their books (with grants from the government or the University). There was no real motivations or need for them to chase publications outside their departments or university. There was high level of academic or intellectual inbreeding going on in the way they patted each other on the back for rather so so "just meet the employment contract requirements" sort of work with no real concern about being fired or replaced.

A few outright told me that for grad school go to the states, for undergraduate studies go to europe (of course I found that out way too late).
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