Winds of Change over Buenos Aires Nurturing Entrepreneurship in a Developing Megacity

Buenos Aires has made a particular effort to promote collaborative value creation.
by Mariano Mayer and Francisco Cabrera
Updated Nov 16, 2017 (3 Older Versions)chevron-down
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Winds of Change over Buenos Aires Nurturing Entrepreneurship in a Developing Megacity
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Cities across the globe are complex webs of economic activity and centers of ideas and innovation where entrepreneurial activity can thrive when given the proper environment. With three of the world’s 28 megacities, Latin America is more urbanized than any other region in the developing world.

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Cadena, Andres, Jaana Remes, James Manyika, Richard Dobbs, Charles Roxburgh, Heinz-Peter Elstrodt, Alberto Chaia, and Alejandra Restrepo, Building Globally Competitive Cities: The Key to Latin American Growth, McKinsey Global Institute, August 2011.
In 2014, Buenos Aires was identified as one of the three, the others being Mexico City and Sao Paulo.
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Inter-American Development Bank, Mega-Cities & Infrastructure in Latin America: What Its People Think, Felipe Herrera Library, 2014.
Its metropolitan area is home to roughly 41 percent of the 41 million people living in all of Argentina.
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¿Qué es el Gran Buenos Aires? INDEC Buenos Aires, August 2003, revised version 2005.

In recent decades, the abrupt advancement of technology and expansion of globalization have had a significant impact on the social and economic development of all cities, and Buenos Aires is no exception. The digital reality of social interactions has reached a level at which no citizen, for better or for worse, is indifferent to global fluctuations.

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Manyika, James, Susan Lund, Jacques Bughin, Jonathan Woetzel, Kalin Stamenov, and Dhruv Dhingra, Digital Globalization: The New Era of Global Flows, McKinsey Global Institute, February 2016.
This picture highlights the entrepreneurial challenge governments face when designing public policy to foster the wellbeing of its citizens.

Buenos Aires has made a particular effort to promote collaborative value creation. The city’s complex social ecosystem must be developed with a well-defined plan, as without a clear purpose it is impossible to determine where to start and what to prioritize. Given this situation, the city decided to take a human-centered approach to entrepreneurial development, the aim being a recognition of each person as an individual and a citizen of Argentina.

When looking at our city from this standpoint, we recognized that too many citizens were struggling daily to survive, let alone to accomplish their dreams. The world is developing at a pace that will only increase this gap, and we needed a human-centered solution that would help to close it. We wanted our people to regain confidence in their capabilities and develop the basic skills they needed to reach their goals. Even though conditions in Buenos Aires were not always optimal, we set out to design a system that would reinforce risk-taking by establishing a rewarding social environment, and thus to unleash the potential all people have within. We wanted our city to function as a systemic force that would increase value creation by facilitating positive interactions, such as connecting unskilled workers with retired experts, skilled unemployed workers with entrepreneurs, and entrepreneurs with potential company cofounders or investors. After all, no citizen is entirely on their own, nor should they be.

This essay explains how we designed a human-centered approach that would nurture an entrepreneurial ecosystem from within the walls of Buenos Aires’ Office of Entrepreneurship (GOE). We begin by explaining the origins and history of the city, which connects to the challenges we experienced upon taking our posts as the main promoters and facilitators of an entrepreneurial culture in Buenos Aires. We then discuss some of the contemporary challenges Argentina faces to contextualize the issues our citizens face and describe how we changed limitations into opportunities and executed a strategy that has supported significant growth and entrepreneurial activity across Buenos Aires. The execution of this strategy laid the foundation for a cultural shift that continues to spread across Argentina.


The Origins

From the beginning, Buenos Aires’ existence has been based on entrepreneurial drive. In 1536, a convoy carrying the first Spaniards from Europe settled in a nearby riverbed. After five years of adverse relations with the Querandí tribe, famine and disease forced the remaining settlers to leave. Forty years passed before a second group of Spaniards, led by Juan de Garay, permanently settled in what would later become Buenos Aries. None of what followed would have been possible without the first settlers’ efforts. In fact, the cattle and horses they left behind in 1541 flourished in the rich environment, creating unique conditions that enabled the second group of settlers to succeed. The concept of creative destruction has guided our city’s development ever since.

But history also left its scars. The political instability and economic rollercoaster of recent decades stressed the city, and the infrastructure did not keep pace with fluctuations in population caused by rapid urbanization and waves of migration.

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The Tragedy of Argentina: A Century of Decline, Buenos Aires, February 15, 2014.
The chasm between basic social needs and the deficient infrastructure and governmental capability has only widened over time, significantly increasing the diseconomies of scale that stem from population growth. This combination of factors caused the city to expand well beyond its original boundaries, which has increased the number and complexity of coordination requirements between intra- and inter-municipal offices. As a result, people sought alternative solutions to fill unmet housing and labor needs, which further complicated existing problems. These and other issues decreased productivity in Buenos Aires and reduced the efficacy of public and private efforts to improve the population’s health, education, and economic development and growth.

These historical challenges continue to have an impact in modern-day Buenos Aires. To increase the city’s collective productivity, dramatic improvements are needed in a number of areas: infrastructure, urban planning, transportation, health care, and access to equal employment opportunities and skills development. Given the magnitude of these challenges when we took our current government positions, we recognized that social anxiety would increase over time, regardless of any efforts we made to establish long- and short-term goals. The country was coming out of the great agricultural commodity super-cycle of the past decade, which increased the fiscal surplus used to fuel inefficient social welfare policies that did not achieve their objectives, as they failed to create equal social development for all our citizens.

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Bertrand Gruss, After the Boom: Commodity Prices and Economic Growth in Latin America and the Caribbean, IMF working paper, Western Hemisphere Department, August 2014.
This merely moved the problem ahead in time.

This lost opportunity to achieve greater equality had been at the top of the agenda for most Latin American government officials for the previous five years, which was a warning to Buenos Aires about its potential for long-term value creation. ­But given the gap we faced and our historical reliance on agricultural commodities, due to our underdeveloped economy, we had no choice but to leapfrog these barriers and focus instead on our strengths—our greatest asset was our people—and our cultural resilience. In other words, we decided to tap into the city’s deep entrepreneurial roots and to harness the original spirit of Argentina to gain traction with our citizens.


The Solution

Buenos Aires collapsed socially and economically as a result of the 2001 economic and debt crisis, and yet it has come back to produce four of the six current Latin American unicorns.

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Lessons from the Crisis in Argentina, International Monetary Fund, Policy Development and Review Department, October 8, 2003.
 Against this backdrop, we set out to create a center of innovation and entrepreneurial activity in the city of Buenos Aires that could benefit all of Argentina.

In 2008, after decades of bipartisanship in the Buenos Aires government, a new political party—the Republican Proposition, of which we are members—gained control. We repeated the feat at the national level in November 2015. The original 2008 governmental experience of the GOE focused on gaining connectivity at all levels of social interactions. The heart of the new city government’s strategy was that, the more citizens interacted and collaborated socially and economically, the more value they could create. Citizens needed a proper ecosystem that allowed them to overcome the city’s social and economic fragmentation. A range of strategic guidelines materialized into initiatives that included moving city offices into impoverished areas, creating and promoting business districts, promoting environmentally friendly transportation, improving access to quality education, and promoting a broad cultural agenda.

It was within this framework that the GOE started to work on what would become a two-phase development program. The first phase focused primarily on creating minimum required conditions in infrastructure and citizen services. Cluster development districts were created, promoted, and reinforced, and entrepreneur development programs to develop a broad range of skills were launched, despite initial cultural challenges, such as city employees’ resistance to change and businesspeople’s reluctant attitudes. A hard lesson learned from this initiative was that most of the benefit went to the first movers, thus the entrepreneurial startup community wasn’t benefiting as we’d intended. The initiative was not generating many new projects, in part because the country’s suboptimal economic situation did not attract foreign investment. Once the first phase had been implemented, the city still faced significant challenges. We had to ask ourselves how an underdeveloped megacity could emulate the conditions of unique hubs like Silicon Valley or Tel Aviv.

As minister of economic development of the city of Buenos Aires at the time (2013), Francisco Cabrera decided to create a new undersecretary position that would be charged with nurturing the early stages of a creative economy that would foster interaction between technology, knowledge, and innovation. We hoped this would enable us to tap into the economic revolution the rest of the world was experiencing.

The new team started by designing a human-centered strategy that would adopt the incipient trends that were creating a new approach to building and scaling companies. Trending initiatives like design thinking, the lean startup movement, and the business model canvas were parts of a new management wave intended to help entrepreneurs fulfill their dreams. Buenos Aires needed to embrace it all.

Given our small budget, the first decision was to increase scope and impact by elevating all initiatives to a strategic level beyond the reach of our office. We imagined ourselves as a central hub whose initiatives not only set the pace for the national entrepreneurial agenda but also set the standard for best practices. It became critical to influence and coordinate with other public and private entities moving in the same direction. To do this we followed Michael Mauboussin’s advice on cognitive diversity by “intentionally putting together different points of view that will challenge one another”—the most essential characteristic when hiring and building teams in this complex world.

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Tim Sullivan, “Embracing Complexity,” Harvard Business Review, September 2011.
Once we put together a diverse team with both private and public experience, we set out to diagnose the local ecosystem.


The Execution

In mapping the local ecosystem, we again emphasized the needs of our citizens and approached the process from a human-centered perspective. Our exhaustive initial review captured the needs of social, political, economic, and governmental stakeholders. The wider our research, the more similarities we found in what individuals required. At the same time, the more we searched, the clearer our key milestones became. In the end our agenda was built on these insights, balanced between network and capability issues that were aligned with the city’s strategy to increase connectivity.

To strengthen the network, all our initiatives were required to have a demonstrable and lasting direct and indirect social impact through some kind of innovation in their model or value proposition. We aimed to take advantage of as many initiatives as possible in our quest to promote solutions that addressed systemic inefficiencies and existing gaps in human development. We were not promoting the creation of individual wealth, but if that occurred as a result we would be happy for the risk-taking entrepreneur who benefited from hard work. Our official aim was the direct and indirect creation of social value, and we viewed any thriving business as a newborn hub of social wealth that was weaving its network deeper into our community.

At the same time, a core element of the network agenda was based on disseminating our approach at an exponential rate using “cross-pollination” hubs. Believing that every citizen should be able to access a private or public co-ideation workspace in which to collaborate and develop ideas and engage with support services, we aimed to create social interaction within collaborative spaces. In fact, the City Initiatives for Technology, Innovation and Entrepreneurship evaluation of Buenos Aires gave the city two of the three highest ranked elements related to our connectivity infrastructure: “host”—how does the city use space to create opportunities?—and “connector”—how does the city facilitate physical and digital connectivity?

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See http://citie.org/cities/BuenosAires/.
The city also dramatically increased its traditional connectivity; through better public transport, infrastructure projects, and biking services, entrepreneurs were able to access one of the 15 hubs in the city, which enabled them to reach new and existing networks. The most emblematic of these hubs is the Metropolitan Design Center, which promotes design as a central element of value creation. Companies here were engaged to open up to the community on a regular basis to increase their permeability while also gaining knowledge, perspective, and experience.
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See http://www.buenosaires.gob.ar/cmd/.
At the same time, the city created diverse project and innovation competitions (such as IncuBA
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See http://www.buenosaires.gob.ar/emprendedores/incubadoras/que-es-incuba.
), hackathons, and prizes that incentivized young entrepreneurs to form and follow their dreams.

A key element of the network development was to push data sharing and transparency at all levels and in all types of public institutions. The city used data to optimize services and provided free access to raw data. The GOE created an observatory to keep track of government and third-party activities in the entrepreneurship ecosystem. We measured progress and the impact of public policy, helped reorient decisions, offered feedback to all stakeholders on their ideas, and constantly utilized information to realign and execute our initiatives more effectively. We also mapped all entrepreneurial activity in the city, making it easier for stakeholders to understand their positions and the options available to grow their initiatives.

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See http://www.buenosaires.gob.ar/legacy/mapaemprendedor/.
Mapping strengthened our understanding of what was working and of how to increase and improve on citizen interactions.

On the capability side of the agenda, we focused on giving entrepreneurs a broad array of skills and financial solutions to increase the success rate of their ventures. We must not forget that, during this period, the country’s economy was slowing down and inflation was compounding annually by 40 percent, year after year. Conditions were not optimal, but the team was able to create matching funds with four local incubators. This is one of the most fundamental elements of any entrepreneurial ecosystem, and it’s probably the weakest in the Buenos Aires environment. Most successful entrepreneurs to date have found financing from their social network or from high net worth individuals who are comfortable with the local economic conditions and not affected by its unpredictability. Beyond these networks, traditional bank financing tends to concentrate on profitable segments, while public institutions focus on production-oriented investments, which leaves very limited investment for the venture community. Our team acknowledges the limited impact we have had on this issue from within the GOE; with our current greater prospects we will continue to tackle this unmet challenge at the national level and, finally, with a political agenda aligned to our needs.

In terms of skill development, the GOE worked on different initiatives to decentralize knowledge creation, share access to “best in class” content, and increase the availability of public and private education institutions.

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See http://academiaemprende.buenosaires.gob.ar/.
As a result, a strong network was created of coaches, experts, businessmen, and teachers and put within reach of all interested entrepreneurs. At the same time, public schools incorporated entrepreneurial subjects into their curriculum in the final three years of school. This new curriculum lowered cultural and educational barriers while increasing real-world preparedness.

These initiatives, grouped into network and capability elements, represent a brief summary of eight years of hard work, which will be followed and improved on by an even better prepared and more experienced team operating from the national office. We have barely scratched the surface here of all that has been done, and we don’t do justice to the underlying framework and strategic guidelines that directed the GOE’s work during this time. In the end, all the initiatives sought to address two interdependent realities—strengthening the entrepreneur and improving the business environment. None will produce change by itself or guarantee faster results, even when fully developed. Beyond wisdom and mastery lies the ability to comprehend gaps, maintain a long-term perspective, and focus on the next realistic step that all parties will be willing to take. Understanding our role as public servants has made a huge difference in enabling us to connect our personal purpose with the needs of our community. All in all, we continue to root our approach in the perspective of including every individual, and to seek to unleash the entrepreneurial spirit in all of our citizens.


Summing Up

Buenos Aires has been recognized as an Emerging Entrepreneurial Ecosystem at the Global Entrepreneurship Congress.

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See http://gec.co/buenos-aires-recognized-emerging-entrepreneurial-ecosystem.
ith all the success we have had thus far, this is a reminder of the coming challenges and the fact that there is still much to be done. The lessons we have learned from this journey can be summed up in one sentence: It’s all about culture.

About 86 percent of the companies in Argentina employ fewer than ten people, and 30 percent of these companies are less than three years old. Within the greater Buenos Aires area, 237,000 companies have fewer than 25 employees. In other words, a great part of our economy is being sustained by formal and informal entrepreneurs. If we limit the term entrepreneur to include those who oppose risk-taking and are merely business people providing basic services, we are just using a fancy name for something that has existed for a long time. But if we are using it to define socially conscious, professional, value-creating citizens, we are including the people who are essential to every city and, indisputably, any megacity. The citizen entrepreneur plays a much needed social role that will continue to expand cultural boundaries and lead cities during the era of globalization.

Government action will always change from one ruling party to another, but the city will keep growing and developing no matter which party is in charge, and thus will become more interconnected and globalized. The impact of technology will increase while human need will remain more or less the same—although it may be expressed in different ways. We can’t stop change, but we can increase our city’s readiness to embrace it. We can’t regulate the market, but we can make rules that give all our citizens access to equal opportunities. And, finally, the government won’t and shouldn’t be able to change people, but we can give them hope for greater future possibilities. Our strategy is to mold the culture on two fronts: the frame of mind to accept change, and the community’s responsibility to its entrepreneurs.

Evolution requires trial and error, and someone has to take chances. If it weren’t for the mass of entrepreneurs who seek to create value, communities would vanish. As Nasim Taleb rightly identifies in Antifragile, we as a society should learn to thank those who take risks, and as a government we should create the conditions to destigmatize and embrace failure.

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Nassim Nicholas Taleb, Antifragile: Things That Gain from Disorder (Incerto), Random House Trade Paperbacks, reprint edition, January 28, 2014.
Entrepreneurs are social assets that cities must develop and foster to benefit the community’s well being.

From our experience, all our initiatives were appropriate to our circumstances in Buenos Aires, but any city or megacity focused on developing conditions that foster an entrepreneurial culture will find that they are creating better conditions, increasing understanding, empowering their citizens, and allowing them to create their future through richer social interactions. We should make it easier for any person to accomplish their dreams by fostering an open and adaptive culture.

When we looked at our city, we recognized that too many citizens were struggling to survive and accomplish their dreams on a daily basis. Our people needed to regain confidence in their capabilities and develop basic skills to reach their goals. The world was and continues to develop at a pace that only increases this gap, and we needed a human-centered solution to close it.



About the Authors:

Francisco Cabrera is Argentina’s Minister of Production. He previously served as Minister of Economic Development for Buenos Aires.

Mariano Mayer is the National Secretary of Entrepreneurs and Small and Medium Enterprises in Argentina’s Ministry of Production. In September 2013 he was appointed head of the General Direction of Entrepreneurship of Buenos Aires City, which is part of the Undersecretary of Creative Economy; both were established as part of the city’s new Innovation Plan.

© 2016 Francisco Cabrera and Mariano Mayer

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