The Chilean Mindset Needs to Change from Extraction to Value Creation

People always ask me questions along the lines of “what’s the one thing holding Chile back from being an innovative country?” It’s a question I’m really interested in, not just for Chile, but for the US as well.

My latest column in the Santiago Times titled The Extraction vs. Value Added Mindset talks about Chile’s current preference for business models that extract value, either from the ground, the sea, or even other people, rather than business models that create new value.

From the article:

I was invited to speak at a roundtable at the Universidad de Desarrollo about the challenges of teaching entrepreneurship in Chile. We had a lively and wide ranging discussion about how best to continue to foment entrepreneurship at all levels of Chilean society. One of the best debates was about trying to answer the question: What is the biggest factor holding Chilean culture back from being more entrepreneurial?

The general consensus was that it’s the Chilean family’s fault. Kids live with their parents until their mid- to late-twenties and generally only move out when they get married. Moms and Dads tell their kids they can do no wrong. Many lead pampered lifestyles with doting parents (and sometimes nanas), who solve even the most trivial of problems.

Since entrepreneurship is opportunity recognition and problem solving, the thinking goes that if you never have to solve problems on your own and always turn to Mommy and Daddy when things get tough, you won’t be a good entrepreneur. And if we just got kids to move out at a younger age like they do in the United States, we’d have more successful Chilean entrepreneurs.

I agree that this is part of the problem, but I actually think the real root of the problem goes much deeper and that the solution is much harder to achieve. The real problem is that Chilean culture values extraction over value creation. Look at the biggest Chilean industries: mining, fishing, fruit, wine, logging, banking and retail (trading). Of the principal exports (mining’s currently 56 percent of total exports), only salmon exports are showing growth in the past 12 months, (+53%) while forestry (0%), wine (-8%), fruit(-16%) are in decline. Some are literally extraction, like mining and fishing, while others are extracting wealth from their fellow citizens via banking or arbitrage opportunities in trading.

Read the full article at The Santiago Times.

If you want to help change the culture to make it more entrepreneurial, we have to start valuing value creation above all else. We need to stop making entrepreneurs (especially those who are using extraction business models) into rockstars and heroes. The real stars of an entrepreneurial ecosystem that’s starting to take root are those who are creating new opportunities and creating value for their customers.

The most important piece of the puzzle is the entrepreneurial mindset. My partners and I have been working on trying to help shape this mindset via teaching classes at universities, but would love to see this effort expanded. I believe changing the mindset is the key to creating a thriving entrepreneurial ecosystem.

  • http://www.expat-chronicles.com/ Colin Post

    Excellent article. As you mentioned in the whole piece, it comes from the Spanish legacy. Carrying that logic further, it’s by no way limited to Chile. In fact, Chile has been better than the rest of Latin America in shaking its Spanish legacy (look at the flag).

    If you want to go down the rabbit hole of the extraction legacy, read The Conquest of the Incas by John Hemming. Subduing the Incas was the easy part. The inter-factional wars between Spaniards are amazingly unbelievable for gringos – like you and I – raised with progressive ideals. Those Spaniards fought and died for high stakes: a life of leisure and prosperity on the backs of slave labor.

    • http://www.nathanlustig.com Nathan Lustig

      I’ll check it out! Thanks for commenting.