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.
Note 22 January 2017: Santiago Times no longer hosts my article, so I reposted it here.
Chile needs to foster value creation over extraction if it wants to establish a real entrepreneurial ecosystem.
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. (more…)
As I was reading The Everything Store, a book that chronicles Jeff Bezos’ and Amazon’s rise to its current status as retail giant, I was struck by how similar Amazon and WalMart are, but how different their public reputations are.
Walmart is consistently one of the most hated companies in the US. Some people even call them evil. Amazon is consistently one of the most loved. But when you really peel away the layers, both companies are nearly identical. Walmart employs 20x more employees than Amazon and Amazon cloaks itself in startupy, technology marketing, but 0ther than that, they’re pretty much the same.
They both have used advanced technology and inventory management systems to outclass their rivals. They’ve both used extremely low margins for extended periods of time to put their rivals out of business. They’ve used the same bully tactics to punish rivals.
This dichotomy plays itself out in nearly all tech startups. Although I’d contend that the majority of new startups are net job killers that make huge amounts of money for a small number of people, a bit of money for another larger group and give non monetary benefits to the rest, startups have been able to successfully wrap themselves in the all protecting shroud of being job creators and the engine of our economy. Almost nobody questions it.
The public thinks startups are the way out of slow job growth. So do politicians on both sides of the aisle. Startups are the job creators. They’re completely meritocratic. They’ve (or in this case, we’ve) been almost deified by the adoring public, press and politicians. This deification has brought with it an insidious self righteousness and self aggrandizement that’s reaching social darwinist proportions that we haven’t seen since the gilded age.
Too many founders and the general public have bought the narrative that founders are rugged individualists that succeed all on their own. That they deserve massive rewards because everyone else who hasn’t done it is lazy or stupid. And the most sacred of all, that startups create jobs. Startups and entrepreneurs have wrapped themselves in a narrative of technology and progress that allows people like Jeff Bezos to say things like “were not putting people out of business, the future is happening to them,” and say it with a straight face and a sense of self riotousness. If you want insight into this new phenomenon, look to Peter Theil, who’s best advice for prospective founders is to “find monopolies” where you can take the entire market.
So in our new world Walmart is hated and Amazon loved. It’s bizarre. From my point of view they’re pretty much the same. One just happens to be wrapped in better marketing. I wonder how much longer this tech inoculation will last?
I’d love to get a discussion going, so please leave comments or email me directly.
I’m writing a bimonthly column for The Santiago Times, one of Chile’s English language newspapers, about doing business in Chile and the entrepreneurial ecosystem. My first article was published today and it overviews some of the changes I’ve seen in the Chilean entrepreneurial ecosystem since I first came to Chile in 2010. From the article:
But entrepreneurs in 2010 also had to face powerful cultural obstacles. Chile was risk averse and punished failure. A typical conversation went something like this:
Chilean: “What do you do?”
Me: “I have my own business.”
Chilean: Blank look … “But what do you do?”
Me: “I have my own business!”
Chilean: “So you don’t have a job?”
When new businesses failed, as many do, the typical Chilean response was that the entrepreneur was either: a) stupid, b) lazy, c) stole the money or d) all of the above. Almost none of my new Chilean friends even could imagine themselves starting a business and looked at me like an odd duck who was on a weird path — not the traditional one of getting a job at a big, prestigious company with a comfortable salary and three weeks of vacation, plus fifteen days of “feriados.”
Bolivia, wedged between Chile, Peru, Paraguay, Argentina and Brazil, is an amazing country of contrasts. With unmatched deposits of silver, tin, zinc, natural gas and enough lithium to power all of our modern devices for centuries, Bolivia should be a wealthy country. But is one of the poorest countries in the western hemisphere, only slightly better off than Haiti.
Since its “discovery” by the Spanish in the 1500s until today, Bolivia has been screwed over by nearly everyone, first by Spain, then Britain, the United States, Chile, Brazil, Paraguay and Argentina, all in partnership with its small upper class that has exploited its natural resources a labor. As I traveled through Bolivia over the past ten days, taking in its incredibly natural beauty, I read A Concise History of Bolivia and reread Open Veins of Latin America and began to appreciate just how unlucky the Bolivians have been.
Salar de Uyuni
I started my trip from San Pedro de Atacama in Chile, booking the three day tour to the Salar de Uyuni. I’d done this trip before in 2011, but I still loved doing it again. You can read horror stories about this trip, but both times I’ve gone, I’ve never had a problem. This time I booked with Cordillera Traveller on the Chilean side and the accommodations were much better than with Colque Tours in 2011. We paid about $20 more than the competition but our driver seemed safer and more knowledgable.
I joined a group of 18 people in four Jeeps and we left San Pedro at 8am and made the one hour trek to the Bolivian border, where pretty much the only people who cross are tourists. We climbed from 2000 meters all the way up to 5000m (~16,000 feet) by nightfall. The scenery, along with the altitude, is (literally) breathtaking. We slept at altitude, but kept waking up every hour or so, our hearts racing and throats dry from the altitude.
The next day, we went past geysers, interesting rock formations and more colored lagoons until we reached a tiny town called Culpina K. It looked like a ghost town. Our guide, Humberto, told us that most of the people in the town either cultivate quinoa or work in the mines, so they got to bed by sundown at the latest. It was like going back in time to when most people farmed and lived in small towns.
We woke up early and drove through Uyuni, a poor, broken down town in the middle of nowhere, that wouldn’t exist without the Salar that’s just next door. At 10,000 square km, its the largest salt flat in the world and contains 50%-70% of the world’s lithium supply.It’s so different from anything I’ve ever seen and coming back a second time just brought the point home again. It’s so flat, so white and so big that you can see the curve of the earth. On cloudy days, the guides can’t go too far away from the “shore” or they risk getting disoriented and lost on the Salar. Not taking my own advice from 2011, I got burned to a crisp. Again.
We arrived back to Uyuni in the afternoon, burned, thirsty and caked in salt and went directly to the bus depot to reserve tickets to Potosí. Bolivian roads are unsafe. Drivers aren’t very experienced, road conditions vary and you have to keep your eye out for mudslides and the occasional llama darting into the road. As a rule in Bolivia, always buy the most expensive bus ticket. Our bus trundled out of Uyuni onto the brand new road that connects Uyuni-Potosí-Sucre and prepared ourselves for the four hour trip. It was the first paved road we’d seen in four days and had only been completed in the past year. The bus seemed safe enough, but it was easy to imagine the bus falling off the hairpin turns.
We arrived safely into Potosí and got off at the “ex terminal”, which is really just a service station in the middle of the town and took a taxi to the Tukos Casa Real, an old building that’s been refurbished into a hotel. The room was massive, had hot water and the hotel provided a nice breakfast and only cost $40 per night for something that would cost at least $150 in the US. My heart was pounding and I was struggling to breath after walking up the three flights of stairs to get to the room. The 4060m altitude really takes it out of you. I can’t imagine playing a world cup qualifier in La Paz, Quito or even Mexico City.
Potosí was the city that drove Europe’s economy for almost three hundred years. From 1550-1783, it’s estimated that 45,000 tons of pure silver came out of Cerro Rico, one of the richest silver mines in the history of the world. The mine made people fabulously wealthy and the town grew to a peak of 200,000 people at a time when Madrid only had about 50,000. But it was all built on exploitation of natives and africans, who were used as slaves. Some people estimate that eight million people have died in Cerro Rico mining first silver, then tin and now zinc.
The mine created incredible wealth, which led to some amazing churches, cathedrals, public spaces and houses, much of which has gone into different stages disrepair after the richest minerals were extracted. Cerro Rico’s riches pushed the Spanish to create Bolivia’s first national mint, which has been preserved and converted into a beautiful museum. The original donkey powered minting machines are preserved alongside some of the original coins.
The cathedral has been beautifully restored over the past ten year. During the war for independence, Simon Bolivar ordered the colorful cathedral to be whitewashed. People forgot and the incredible colors were rediscovered during the renovation. Now a UNESCO world heritage site, parts of colonial Potosí have been preserved, but the poverty remains.
Today, it’s a loud, bustling city filled with diesel busses that come directly from China after they’ve been banned for expelling too much pollution, broken down cars honking at every intersection and people everywhere. I only saw a few non-natives during my three days in Potosí. Even today, an estimated 25% of Bolivians aren’t fluent in Spanish and many people are still bilingual Quechua or Ayamar speakers, including a taxi I got into.
You can see the grinding poverty: Potosí is now one of Bolivia’s poorest areas. There’s hardly any industry, other than mining, and the occasional tourist, so locals, mostly indigenous people, are forced into the mines. The miners forced out the government’s nationalization attempt because of rampant corruption, so now the miners have an elaborate series of cooperatives where you work for yourself. If you strike it rich, you can be a millionaire. If not, you may starve to death or be relegated to extreme poverty.
Because life expectancy is so short and families are large, Bolivia is an incredibly young country, with an average age of 22, compared to 33 in Chile and 36 in the US. It’s noticeable. There are school aged kids everywhere, decked out in formal school uniforms. After school, the kids held massive water balloon and squirt gun fights on the main roads and plazas. I got caught in the crossfire a few times.
The food reflects the local conditions, making the most out of less expensive ingredients to provide the highest level of nutrition possible. There’s lots of potatoes, quinoa, corn and vegetables. Meat is a luxury. Llama features on many menus. Coca Cola is ubiquitous, but I didn’t see many international chain fast food restaurants.
We tried to go to Doña Eugenia, a restaurant specializing in local food, but it was closed. We ended up at a tiny restaurant nearby where I tried Kalapulca, a corn based soup with bits of meat and potatoes that’s served with two superhot rocks that creates a volcano like soup. Another good option was Koala Cafe, which has cheap fixed price menus and featured an awesome quinoa soup.
We did a mine tour with Big Deal Tours, the best company in town. Founded and run by ex-miners, the guides take you on a 3km walk underground through the mine. I felt a bit conflicted about doing a mine tour to basically gawk at people who were working in terrible conditions, but after talking to the miners at the tour agency, I decided to do it. I’m glad I did. It was a sobering tour.
Miners still work nearly the same as they did in the 1500s. Most don’t have electricity, so they use pickaxes, hammers and dynamite to bust open the rocks. They carry out the ore on their backs in 40-50kg loads or in wheeled carts weighing between one and two tons. If they slip, they get crushed. Life expectancy for miners is between 40 and 50.
It’s dark, dank and filled with ankle deep water. Particles hang in the air, invading your lungs. Miners chew massive amounts of coca leaves to suppress hunger, fatigue and keep them energized, just like the slaves and exploited indigenous did in the colonial era. They drink 96% pure alcohol that costs the same as a beer to dull the pain and for luck to get “pure” veins of minerals and make sacrifices to “El Tio” the God who has domain of the mountain.
We started at the miners’ market where we purchased gifts for the miners: coca leaves, juice and dynamite. A full dynamite kit (detonator, accelerant and stick) cost $3. As we walked through the mine, crouching down to try to avoid smashing our heads, and not doing so very well, we ran into miner after miner. They all looked similar. Dirty, old clothes. A huge wad of coca leaves. Many missing teeth. Upbeat. Happy to chat with us.
“How old are you?” asked our group to a miner who looked at least 35.
“Twenty-five,” he replied.
“How much do you make per week?” we asked.
“About 1000 Bolivianos per week,” he replied, which is about $140 per week.
“And how long have you been working in the mine?” we all wanted to know.
“Fifteen years,” he said.
His story is fairly typical. There are so few jobs and money is so tight that fathers bring their sons to the mine starting at as young as ten. Or if the father dies and there’s many kids, the oldest kids have to go into the mine to support the family.
After a three hour tour or just walking through the mine I was exhausted. The 4400m altitude didn’t help, but the crouching, the head smashing and shuffling through water sapped my energy. I can’t imaging having to hammer all day, run away from dynamite explosions and having to push 1-2 tons carts manually out of the mine for long shifts, with hunger pangs that are only dulled by coca leaves and alcohol.
I’m really glad I got to see Potosí, but it was incredibly sad to see a place that had such natural wealth that has been exploited and squandered to the point where its inhabitants live such a hard life.
We decided to leave Potosí via the new bus terminal, which is located about twenty minutes from the town center. It’s brand new and clearly is an investment from the central government, as the location clearly wasn’t chosen for business reasons. We got out of the taxi and immediately felt like we were in a zombie movie. There were ticket sellers bleating like sheep, but there weren’t any customers. The zombies activated and attacked from all sides, trying to get the commission on the $4 bus tickets. Check out the video.
After getting past the zombies, we settled into the four hour bus ride down from 4060m to Sucre’s 2800m above sea level. Getting off the bus was like being able to drink the air. We took a taxi from the bus station to Hostal de Su Merced, a four star hotel in a refurbished building right downtown. It cost about $60 per night for a level of service that would cost $175+ in the US or Chile.
The first thing I noticed was the architecture. Everything is white. Sucre was Bolivia’s capital during colonial times until the seat of government was changed to La Paz during one of Bolivia’s many coups, dictatorships and revolutions and has preserved its historical buildings. The center is designated a UNESCO world heritage site, so there are building restrictions to keep the local character. The main square is surrounded by the cathedral, the municipality and the house where Bolivia’s declaration of independence was signed. There are a multitude of churches and church buildings, schools and universities, including South America’s first law school.
Although Sucre is a tourist city, the attractions are only open from about 10am-12pm, then again from 2pm-5pm, at most. It was frustrating, but by the second day I’d figured it out. Just like in other parts of Bolivia, the daily schedule is very different from Chile or what you might think of a Latin schedule. Shops open early and lunch ends by 1pm. Dinner is from 7-9 and most restaurants are closed by 9 or 930. People are out drinking at bars by 930pm. In Chile, people are just starting to eat dinner! It’s another example in the long list that show Latin America is not just one homogeneous cultural unit.
I really enjoyed salteñas, Bolivian empanadas, especially from El Patio Salteñaria. They have a sweet, flaky dough and have a bit of sugar on the top and are filled with meat and vegetables. The filling is similar to a Chilean empanada de pino, but the dough is completely different. People eat salteñas from breakfast until lunch and not in the afternoon, whereas in Chile empanadas are a lunch or later food. It was hard to find high quality food, but I really enjoyed Condor Cafe, Cafe Mirador, and especially Cafe El Tapado, where I tired a variety of local, quinoa heavy dishes.
I had an amazing time in Bolivia. The country is absolutely beautiful, the people are welcoming and warm and the country just oozes with history. I hope Bolivia has better luck and better leadership as it moves into this century, as it has all of the natural resources to be much better developed than it is today.