Why Does Start-Up Chile Want to Mimic Silicon Valley?

The goal of Start-Up Chile is to produce the next Silicon Valley, but it’s prudent to be careful what you wish for. The official reported unemployment rate in Silicon Valley is 11%, 4 points higher than their technology competitors in Austin, Texas. According to the “Pollyanna Creep” theory espoused by economist John Williams, even those estimates may be optimistically misleading, or even useless.

As TechCrunch notes, venture capital investments have declined 70% in the last 3 years due to poor returns. Even after this steep fall, there is still too much capital in Silicon Valley, as noted by Ben Casnocha in his Twitter feed:

Seeing companies promote their Facebook fan page in advertisements reminds me of when companies promoted their AOL keyword.

The Glory Days of Silicon Valley Have Passed
Silicon Valley enjoyed explosive growth in the 1950-1985 period, much greater than Texas, but population growth has decreased to the overall United States growth rate, and now Silicon Valley starts businesses that export wealth and jobs to other states and countries.

Integrated chip using 14 pins

Intel, whose founder Robert Noyce invented the semiconductor integrated circuit at the same time as Jack Kilby of Texas Instruments, is a Silicon Valley microcosm that creates engineering wealth in Oregon and manufacturing jobs in enormous fabrication plants outside California, including many in Israel, and is the largest private employer in Oregon, New Mexico, and Ireland. Few work for Intel in Silicon Valley.

Many Silicon Valley start-up companies aspire to be listed on the NASDAQ stock exchange, or to be acquired by one of the large companies of that index such as Google, Cisco, Intel, or Microsoft; and the NASDAQ has declined 50% during the last 10 years. In the same period, the IPSA performance of Chilean companies quintupled.

Why should Chile jettison a successful ascending culture in favor of a declining one? Chile should aspire to be known as the Hong Kong economy of South America.

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