Punishing Failure, Stifiling Innovation [Part 1]

Ever since we’ve gotten to Santiago, we’ve heard from all sorts of people about Chile’s penchant for punishing failure.  Jesse wrote a really good post a few weeks ago about this topic called Punishing Failure and the Ramifications on Entrepreneurship and I wanted to add some more thoughts.

I met a 26 year old Chilean who graduated from one of the top universities in Chile with a degree in engineering.  He spoke great English and wanted to start a business.  He even had a good idea.  I asked him why he hadn’t started his business yet and he told me that he had a good job at a consulting firm and that he couldn’t risk failure because he would never be able to get another good job if his business failed, even if it failed because of factors outside of his control.

He told me his plan was to go back to the US to get his MBA and then come back to Chile to start his business.  He said that if he failed, he would still be able to get a job because he was so over qualified and would have better qualifications than his boss.

So, in order for this 26 year old to feel comfortable starting a business, he had to graduate from the best university in Chile, work at a top consulting firm, learn english, get an MBA from a top US university and then he could start a business.  He told me that if he started a business and failed, a potential employer would rather have a 22 year old recent grad with no experience, instead of his work and entrepreneurial experience.  Talk about overhead!

In the US, companies would love to hire someone who tried to start their own business out of college, even if they failed.  They would call it “real world experience” and employers would like that the potential hire was a “go getter.”  I’m confident that if I decide I want to get a job instead of doing startups, I could.  Here, it’s the opposite.  People believe that if a business fails, its because the owner was either corrupt, stupid or both.  People shun failures.

It’s not exactly the best environment for creating new businesses or innovation.  Many people here have good ideas, but they don’t believe it’s worth it to take the risk to start a business.  I also learned that making a ton of money is sort of looked down upon here.  Multiple people have told me that Chilean President Sebastián Piñera had to fight off attacks from the opposition that he was TOO successful.  Not that he was corrupt, but that he was too successful.

It’s a very difficult cultural difference for people who want to start businesses, but it’s an opportunity for Chileans who are willing to take risks and shun the cultural pressures to make money and be extremely successful.  There are so many opportunities to create amazing businesses here in Chile that people who can break free from the cultural pressures will be able to create some amazing businesses.  That’s part of the reason we are here:  Start-Up Chile was created to show Chileans that starting a business is an option, failure is ok and that Chile is a great place to start a business.  We’ll see what happens.

Part 2 in this series will have some thoughts about why some places have more entrepreneurs than others.

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