In 1984, Steve Jobs launched the first Mac. The classic film “Revenge of the Nerds” was released the same year. At the time, computers and nerds went hand in hand. During my adolescence, the impression of what seemed to be happening in Silicon Valley was “not cool.”
In recent decades, the area that stretches to the south of San Francisco has become the undisputed pole of innovation worldwide. Many countries have tried to develop their own versions of Silicon Valley, but for most of them this is an elusive goal. Silicon Valley is a unique ecosystem, thanks to the clustering of the top technology companies, universities closely linked to the subject, innovation laboratories, and a very extensive private equity industry.
But what really makes this valley unique is its entrepreneurial culture. They take risks, learn from their failures, and always think big: growing 10 times and not by 10%. In his recent annual letter to Amazon’s shareholders, Jeff Bezos emphasizes the importance of having an obsessive customer focus. Bezos explains how machine learning and artificial intelligence impact almost all areas of his company. Above all, he highlights the enormous risk of becoming irrelevant if they get stuck on internal processes, if they don’t make quick decisions, and they don’t adapt to major trends. In summary, the letter is a manifesto to the Silicon Valley culture, an exponential vision of the future.
The Silicon Valley recipe: New business models
Last June, the directors of the Inter-American Development Bank (IDB) and the staff of IDB Invest (formerly known as Inter-American Investment Corporation) spent three days in Silicon Valley, for their first joint trip. The intense agenda included several of the most emblematic technology companies, incubators, accelerators, risk equity funds, and think tanks. Some of the most mentioned technologies were the Internet of Things, artificial intelligence, blockchain, robotics, 3D printing, virtual reality, and augmented reality.
However, beyond its inventions, Silicon Valley is well-known for mainstreaming new business models. In many cases, these models have changed complete paradigms, such as the economy “uberization” and the crowdfunding.
Ultimately, Silicon Valley is the window from which we glimpse the changes that will impact all areas of our lives, from our work, home, cities, and transportation to our finances, health, education, and entertainment. Computer processing costs continue to fall, so we should expect disruptive changes in every industry exposed to technology. This means nearly all industries!
Silicon Valley’s key for Latin America and the Caribbean
Upon our return, we had many questions about Latin America and the role of development banking: What are the major development challenges emerging from these technological changes? How can we prepare to buffer the imminent impact that the most vulnerable will suffer? What kind of knowledge should we generate and how should we disseminate it? How can we ensure that regulations and laws (that by nature move more slowly than technology) favor innovation, efficiency, and inclusion? How can we deepen support for the Latin American entrepreneur?
In the ICT (Information and Communications Technology) industry it is essential to support, in public and private spheres, investments in broadband in a region that has consistently under-invested in infrastructure. Mobile broadband is the great facilitator of the technology ecosystem and the great democratizer of the twenty-first century. Networks must be ubiquitous and costs need to be accessible. It is important to promote competition and entrepreneurship, and prevent market concentration.
During 2017, IDB Invest has contributed to this goal/effort with loans to Telecom Personal in Argentina and to Tigo in Paraguay. Despite this, development banking must be more ambitious. In a world that is accelerating at great speed, banking must lead by looking forward and not in the rear-view mirror. The recipes from the past do not work when we are facing paradigm changes.
The quantity of data circulating on the Internet doubles every year and a half. Currently, more content and information is generated per day than what was generated in entire centuries during the pre-digital age. Using landline phones, we took more than 100 years to connect all households. With cell phones, we connected nearly everyone in less than 20 years. And now, Dell, IDC, and others expect that by 2020 there will be between 30 billion and 50 billion objects connected to the Internet, helping in turn to provide feedback for machine learning and artificial intelligence.
Much has changed since the release of “Revenge of the Nerds.” Now, in Silicon Valley, nerds are cool: they work in jeans and sandals, get around on skates and colored bicycles, they relax on beanbags, and are offered free meals, 24/7. In many cases, their bank accounts feature a lot of zeros, which is not surprising since the five companies with the greatest market capitalization in the world are Apple, Alphabet, Microsoft, Amazon, and Facebook. The nerds have in fact had their revenge!
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