WINDS OF CHANGE OVER BUENOS AIRES NURTURING ENTREPRENEURSHIP IN A DEVELOPING MEGACITY

FRANCISCO CABRERA AND MARIANO MAYER

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.1 In 2014, Buenos Aires was identified as one of the three, the others being Mexico City and Sao Paulo.2 Its metropolitan area is home to roughly 41 percent of the 41 million people living in all of Argentina.3

In recent decades, the abrupt advancement nition of each person as an individual and a of technology and expansion of globaliza- citizen of Argentina. tion have had a significant impact on the social and economic development of all When looking at our city from this stand- cities, and Buenos Aires is no exception. point, we recognized that too many citizens The digital reality of social interactions has were struggling daily to survive, let alone to reached a level at which no citizen, for bet- accomplish their dreams. The world is ter or for worse, is indifferent to global fluc- developing at a pace that will only increase tuations.4 This picture highlights the entre- this gap, and we needed a human-centered preneurial challenge governments face solution that would help to close it. We when designing public policy to foster the wanted our people to regain confidence in wellbeing of its citizens. their capabilities and develop the basic skills they needed to reach their goals. Even Buenos Aires has made a particular effort to though conditions in Buenos Aires were not promote collaborative value creation. The always optimal, we set out to design a sys- city’s complex social ecosystem must be tem that would reinforce risk-taking by developed with a well-defined plan, as with- establishing a rewarding social environ- out a clear purpose it is impossible to deter- ment, and thus to unleash the potential all mine where to start and what to prioritize. people have within. We wanted our city to Given this situation, the city decided to take function as a systemic force that would a human-centered approach to entrepre- increase value creation by facilitating posi- neurial development, the aim being a recog- tive interactions, such as connecting unskilled workers with retired experts,

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skilled unemployed workers with entrepre- tions with the Querandí tribe, famine and neurs, and entrepreneurs with potential disease forced the remaining settlers to company cofounders or investors. After all, leave. Forty years passed before a second no citizen is entirely on their own, nor group of Spaniards, led by Juan de Garay, should they be. permanently settled in what would later become Buenos Aries. None of what fol- This essay explains how we designed a lowed would have been possible without human-centered approach that would nur- the first settlers’ efforts. In fact, the cattle ture an entrepreneurial ecosystem from and horses they left behind in 1541 flour- within the walls of Buenos Aires’ Office of ished in the rich environment, creating Entrepreneurship (GOE). We begin by unique conditions that enabled the second explaining the origins and history of the group of settlers to succeed. The concept of city, which connects to the challenges we creative destruction has guided our city’s experienced upon taking our posts as the development ever since. main promoters and facilitators of an entre- preneurial culture in Buenos Aires. We But history also left its scars. The political then discuss some of the contemporary instability and economic rollercoaster of challenges Argentina faces to contextualize recent decades stressed the city, and the the issues our citizens face and describe infrastructure did not keep pace with fluc- how we changed limitations into opportu- tuations in population caused by rapid nities and executed a strategy that has sup- urbanization and waves of migration.5 The ported significant growth and entrepre- chasm between basic social needs and the neurial activity across Buenos Aires. The deficient infrastructure and governmental execution of this strategy laid the founda- capability has only widened over time, sig- tion for a cultural shift that continues to nificantly increasing the diseconomies of spread across Argentina. scale that stem from population growth. This combination of factors caused the city to expand well beyond its original bound- THE ORIGINS aries, which has increased the number and From the beginning, Buenos Aires’ exis- complexity of coordination requirements tence has been based on entrepreneurial between intra- and inter-municipal offices. drive. In 1536, a convoy carrying the first As a result, people sought alternative solu- Spaniards from Europe settled in a nearby tions to fill unmet housing and labor needs, riverbed. After five years of adverse rela- which further complicated existing prob-

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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lems. These and other issues decreased pro- government positions, we recognized that ductivity in Buenos Aires and reduced the social anxiety would increase over time, efficacy of public and private efforts to regardless of any efforts we made to estab- improve the population’s health, education, lish long- and short-term goals. The coun- and economic development and growth. try 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 When we looked at our failed to create equal social development for all our citizens.6 This merely moved the city, we recognized that problem ahead in time.

too many citizens were This lost opportunity to achieve greater equality had been at the top of the agenda struggling to survive and for most Latin American government offi- cials for the previous five years, which was accomplish their dreams a warning to Buenos Aires about its poten- on a daily basis. Our tial for long-term value creation. But given the gap we faced and our historical reliance people needed to regain on agricultural commodities, due to our underdeveloped economy, we had no confidence in their choice but to leapfrog these barriers and focus instead on our strengths—our great- capabilities and develop est asset was our people—and our cultural resilience. In other words, we decided to basic skills to reach their tap into the city’s deep entrepreneurial goals. The world was and roots and to harness the original spirit of Argentina to gain traction with our citi- continues to develop at a zens. pace that only increases this gap, and we needed THE SOLUTION Buenos Aires collapsed socially and eco- a human-centered solution nomically as a result of the 2001 economic and debt crisis, and yet it has come back to to close it. produce four of the six current Latin American unicorns.7 Against this back- drop, we set out to create a center of inno- vation and entrepreneurial activity in the city of Buenos Aires that could benefit all These historical challenges continue to have of Argentina. an impact in modern-day Buenos Aires. To increase the city’s collective productivity, In 2008, after decades of bipartisanship in dramatic improvements are needed in a the Buenos Aires government, a new politi- number of areas: infrastructure, urban plan- cal party—the Republican Proposition, of ning, transportation, health care, and access which we are members—gained control. to equal employment opportunities and We repeated the feat at the national level in skills development. Given the magnitude of November 2015. The original 2008 govern- these challenges when we took our current mental experience of the GOE focused on

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gaining connectivity at all levels of social to tap into the economic revolution the rest interactions. The heart of the new city gov- of the world was experiencing. ernment’s strategy was that, the more citi- zens interacted and collaborated socially The new team started by designing a and economically, the more value they human-centered strategy that would adopt could create. Citizens needed a proper the incipient trends that were creating a ecosystem that allowed them to overcome new approach to building and scaling com- the city’s social and economic fragmenta- panies. Trending initiatives like design tion. A range of strategic guidelines materi- thinking, the lean startup movement, and alized into initiatives that included moving the business model canvas were parts of a city offices into impoverished areas, creat- new management wave intended to help ing and promoting business districts, pro- entrepreneurs fulfill their dreams. Buenos moting environmentally friendly trans- Aires needed to embrace it all. portation, improving access to quality edu- Given our small budget, the first decision cation, and promoting a broad cultural was to increase scope and impact by elevat- agenda. ing all initiatives to a strategic level beyond It was within this framework that the GOE the reach of our office. We imagined our- started to work on what would become a selves as a central hub whose initiatives not two-phase development program. The first only set the pace for the national entrepre- phase focused primarily on creating mini- neurial agenda but also set the standard for mum required conditions in infrastructure best practices. It became critical to influence and citizen services. Cluster development and coordinate with other public and pri- districts were created, promoted, and rein- vate entities moving in the same direction. forced, and entrepreneur development pro- To do this we followed Michael grams to develop a broad range of skills Mauboussin’s advice on cognitive diversity were launched, despite initial cultural chal- by “intentionally putting together different lenges, such as city employees’ resistance to points of view that will challenge one anoth- change and businesspeople’s reluctant atti- er”—the most essential characteristic when tudes. A hard lesson learned from this ini- hiring and building teams in this complex 8 tiative was that most of the benefit went to world. Once we put together a diverse the first movers, thus the entrepreneurial team with both private and public experi- startup community wasn’t benefiting as ence, we set out to diagnose the local we’d intended. The initiative was not gener- ecosystem. ating many new projects, in part because the country’s suboptimal economic situation did not attract foreign investment. Once the THE EXECUTION first phase had been implemented, the city In mapping the local ecosystem, we again still faced significant challenges. We had to emphasized the needs of our citizens and ask ourselves how an underdeveloped approached the process from a human-cen- megacity could emulate the conditions of tered perspective. Our exhaustive initial unique hubs like Silicon Valley or Tel Aviv. review captured the needs of social, politi- cal, economic, and governmental stake- As minister of economic development of holders. The wider our research, the more the city of Buenos Aires at the time (2013), similarities we found in what individuals Francisco Cabrera decided to create a new required. At the same time, the more we undersecretary position that would be searched, the clearer our key milestones charged with nurturing the early stages of a became. In the end our agenda was built on creative economy that would foster interac- these insights, balanced between network tion between technology, knowledge, and innovation. We hoped this would enable us

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and capability issues that were aligned with basis to increase their permeability while the city’s strategy to increase connectivity. also gaining knowledge, perspective, and experience.10 At the same time, the city cre- To strengthen the network, all our initia- ated diverse project and innovation compe- tives were required to have a demonstrable titions (such as IncuBA11), hackathons, and and lasting direct and indirect social impact prizes that incentivized young entrepre- through some kind of innovation in their neurs to form and follow their dreams. model or value proposition. We aimed to take advantage of as many initiatives as pos- A key element of the network development sible in our quest to promote solutions that was to push data sharing and transparency addressed systemic inefficiencies and exist- at all levels and in all types of public institu- ing gaps in human development. We were tions. The city used data to optimize servic- not promoting the creation of individual es and provided free access to raw data. The wealth, but if that occurred as a result we GOE created an observatory to keep track of would be happy for the risk-taking entre- government and third-party activities in the preneur who benefited from hard work. entrepreneurship ecosystem. We measured Our official aim was the direct and indirect progress and the impact of public policy, creation of social value, and we viewed any helped reorient decisions, offered feedback thriving business as a newborn hub of social to all stakeholders on their ideas, and con- wealth that was weaving its network deeper stantly utilized information to realign and into our community. execute our initiatives more effectively. We also mapped all entrepreneurial activity in At the same time, a core element of the net- the city, making it easier for stakeholders to work agenda was based on disseminating understand their positions and the options our approach at an exponential rate using available to grow their initiatives.12 “cross-pollination” hubs. Believing that Mapping strengthened our understanding every citizen should be able to access a pri- of what was working and of how to increase vate or public co-ideation workspace in and improve on citizen interactions. which to collaborate and develop ideas and engage with support services, we aimed to On the capability side of the agenda, we create social interaction within collabora- focused on giving entrepreneurs a broad tive spaces. In fact, the City Initiatives for array of skills and financial solutions to Technology, Innovation and increase the success rate of their ventures. Entrepreneurship evaluation of Buenos We must not forget that, during this period, Aires gave the city two of the three highest the country’s economy was slowing down ranked elements related to our connectivity and inflation was compounding annually by infrastructure: “host”—how does the city 40 percent, year after year. Conditions were use space to create opportunities?—and not optimal, but the team was able to create “connector”—how does the city facilitate matching funds with four local incubators. physical and digital connectivity?9 The city This is one of the most fundamental ele- also dramatically increased its traditional ments of any entrepreneurial ecosystem, connectivity; through better public trans- and it’s probably the weakest in the Buenos port, infrastructure projects, and biking Aires environment. Most successful entre- services, entrepreneurs were able to access preneurs to date have found financing from one of the 15 hubs in the city, which enabled their social network or from high net worth them to reach new and existing networks. individuals who are comfortable with the The most emblematic of these hubs is the local economic conditions and not affected Metropolitan Design Center, which pro- by its unpredictability. Beyond these net- motes design as a central element of value works, traditional bank financing tends to creation. Companies here were engaged to concentrate on profitable segments, while open up to the community on a regular public institutions focus on production-ori-

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ented investments, which leaves very limit- ual, and to seek to unleash the entrepre- ed investment for the venture community. neurial spirit in all of our citizens. Our team acknowledges the limited impact we have had on this issue from within the GOE; with our current greater prospects we SUMMING UP will continue to tackle this unmet challenge Buenos Aires has been recognized as an at the national level and, finally, with a Emerging Entrepreneurial Ecosystem at the political agenda aligned to our needs. Global Entrepreneurship Congress.14 With all the success we have had thus far, this is a In terms of skill development, the GOE reminder of the coming challenges and the worked on different initiatives to decentral- fact that there is still much to be done. The ize knowledge creation, share access to “best lessons we have learned from this journey in class” content, and increase the availabil- can be summed up in one sentence: It’s all ity of public and private education institu- about culture. tions.13 As a result, a strong network was created of coaches, experts, businessmen, About 86 percent of the companies in and teachers and put within reach of all Argentina employ fewer than ten people, interested entrepreneurs. At the same time, and 30 percent of these companies are less public schools incorporated entrepreneurial than three years old. Within the greater subjects into their curriculum in the final Buenos Aires area, 237,000 companies have three years of school. This new curriculum fewer than 25 employees. In other words, a lowered cultural and educational barriers great part of our economy is being sustained while increasing real-world preparedness. by formal and informal entrepreneurs. If we limit the term entrepreneur to include those These initiatives, grouped into network and who oppose risk-taking and are merely capability elements, represent a brief sum- business people providing basic services, we mary of eight years of hard work, which will are just using a fancy name for something be followed and improved on by an even that has existed for a long time. But if we are better prepared and more experienced team using it to define socially conscious, profes- operating from the national office. We have sional, value-creating citizens, we are barely scratched the surface here of all that including the people who are essential to has been done, and we don’t do justice to every city and, indisputably, any megacity. the underlying framework and strategic The citizen entrepreneur plays a much guidelines that directed the GOE’s work needed social role that will continue to during this time. In the end, all the initia- expand cultural boundaries and lead cities tives sought to address two interdependent during the era of globalization. realities—strengthening the entrepreneur and improving the business environment. Government action will always change from None will produce change by itself or guar- one ruling party to another, but the city will antee faster results, even when fully devel- keep growing and developing no matter oped. Beyond wisdom and mastery lies the which party is in charge, and thus will ability to comprehend gaps, maintain a become more interconnected and global- long-term perspective, and focus on the ized. The impact of technology will increase next realistic step that all parties will be will- while human need will remain more or less ing to take. Understanding our role as pub- the same—although it may be expressed in lic servants has made a huge difference in different ways. We can’t stop change, but we enabling us to connect our personal pur- can increase our city’s readiness to embrace pose with the needs of our community. All it. We can’t regulate the market, but we can in all, we continue to root our approach in make rules that give all our citizens access to the perspective of including every individ- equal opportunities. And, finally, the gov-

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ernment won’t and shouldn’t be able to Bughin, Jonathan Woetzel, Kalin change people, but we can give them hope Stamenov, and Dhruv Dhingra, Digital for greater future possibilities. Our strategy Globalization: The New Era of Global is to mold the culture on two fronts: the Flows, McKinsey Global Institute, February frame of mind to accept change, and the 2016. community’s responsibility to its entrepre- 5. The Tragedy of Argentina: A Century of neurs. Decline, Buenos Aires, February 15, 2014. Evolution requires trial and error, and . Bertrand Gruss, After the Boom: someone has to take chances. If it weren’t Commodity Prices and Economic Growth for the mass of entrepreneurs who seek to in Latin America and the Caribbean, IMF create value, communities would vanish. As working paper, Western Hemisphere Nasim Taleb rightly identifies in Department, August 2014. Antifragile, we as a society should learn to . Lessons from the Crisis in Argentina, thank those who take risks, and as a govern- International Monetary Fund, Policy ment we should create the conditions to Development and Review Department, destigmatize and embrace failure.15 October 8, 2003. Entrepreneurs are social assets that cities 8. Tim Sullivan, “Embracing Complexity,” must develop and foster to benefit the com- Harvard Business Review, September 2011. munity’s wellbeing. . See http://citie.org/cities/BuenosAires/. . See http://www.buenosaires.gob.ar/cmd/. From our experience, all our initiatives were appropriate to our circumstances in Buenos . See Aires, but any city or megacity focused on http://www.buenosaires.gob.ar/emprende- developing conditions that foster an entre- dores/incubadoras/que-es-incuba. preneurial culture will find that they are . See creating better conditions, increasing http://www.buenosaires.gob.ar/legacy/map understanding, empowering their citizens, aemprendedor/. and allowing them to create their future . See through richer social interactions. We http://academiaemprende.buenosaires.gob. should make it easier for any person to ar/. accomplish their dreams by fostering an . See http://gec.co/buenos-aires-recognized- open and adaptive culture. emerging-entrepreneurial-ecosystem. 15. Nassim Nicholas Taleb, Antifragile: Things That Gain from Disorder (Incerto), Random 1. Cadena, Andres, Jaana Remes, James House Trade Paperbacks, reprint edition, Manyika, Richard Dobbs, Charles January 28, 2014. Roxburgh, Heinz-Peter Elstrodt, Alberto Chaia, and Alejandra Restrepo, Building Globally Competitive Cities: The Key to Latin American Growth, McKinsey Global Institute, August 2011. 2. Inter-American Development Bank, Mega- Cities & Infrastructure in Latin America: What Its People Think, Felipe Herrera Library, 2014. 3. ¿Qué es el Gran Buenos Aires? INDEC Buenos Aires, August 2003, revised version 2005. 4. Manyika, James, Susan Lund, Jacques

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