The Brazilian New Economy: Why entrepreneurs are overrunning Brazilian traditional businesspeople

By Diego Barreto

BRAZIL IS SILENTLY CHANGING.
Globalization and the massification of technology generate opportunities for new business to emerge and for the transformation of the traditional business people into entrepreneurs. Startups and corporations that noticed this movement are shaping the New Economy, while the most traditional companies remain static, living in the past. The old Brazil allowed poor services and artificial results to perpetuate, but now the dynamic has changed.
It seems obvious to say that the world has changed since we entered the information and telecommunication age. By scrolling our smartphone screen, we have the power to transform an entire battlefield. We are always one innovation away from finding out that everything we know has become obsolete. Data has turned into the most valuable coin for companies. This is the age of the New Economy.
In this turbulent and dynamic scenario, remaining stuck to old practices and paradigms can mean being swallowed up by businesses aligned with the principles of constant innovation. Mastering the new rules will define who remains in the market. To avoid the risk of being undertaken by the avalanche of information in this new world, Diego Barreto, Finance and Strategy Vice President at iFood, will teach us how to navigate the New Economy and to use the new reality to our advantage.
With this book, you will learn:

- What is the New Economy and why is it taking shape in Brazil;
- How to identify Old Economy practices that are harming your business;
- Why meritocracy of ideas, diversity & inclusion, sustainability, radical transparency and conscious capitalism are key factors to the success of companies;
What are the 

• Language: English
• Publisher: Editora Gente
• Release date: Aug 1, 2022
• ISBN: 9786555441802

Book preview

CapaFolha de Rosto

Cataloging-in-Publication Data (CIP)

Angélica Ilacqua CRB-8/7057

---

Barreto, Diego

The Brazilian New Economy [electronic book] : Why Entrepreneurs Are Overrunning Brazilian Traditional Businesspeople/ Diego Barreto; translate by Sally Tilelli. – São Paulo: Editora Gente, 2022.

ISBN 978-65-5544-180-2 (e-book)

Original title: Nova Economia: Entenda por que o perfil empreendedor está engolindo o empresário tradicional brasileiro

1. Business I. Title II. Tilelli, Sally

---

Index for Systematic Catalog:

1. Business

PUBLISHER’S NOTE

It is undeniable that the world is undergoing a wave of profound changes: innovative technologies transform routines and facilitate our personal interactions; knowledge becomes increasingly accessible; our society is gradually transformed, not only by the impacts of globalization but also by the global awareness of what fits—or does not fit—in this new reality.

We are one innovation away from the total obsolescence of all our knowledge. The old and the new come into conflict, bringing us to the edge of an entirely unfamiliar world—a world in which cutting-edge innovations and new practices are overrunning known and tested formulas.

In this dynamic and turbulent scenario, there is no one better than Diego Barreto to explain the nuances of this conflict and guide us through the new path ahead of us. Unafraid of exploring the unknown, Diego stimulates readers with a direct and coherent approach, and a prominent and significant work among the companies of the New Economy.

In this book that you hold in your hands, dear reader, the author prompts us with an important—and necessary—provocation: What exactly do we want to take into this new reality we are creating? In addition, the text presents possible ways for us to reinvent and readjust our businesses for this future that knocks on our doors every day. I’m quite sure that, just like me, you will not be the same after reading this book.

Welcome to the New Economy!

ROSELY BOSCHINI

CEO and Publisher at Editora Gente

DEDICATION

My path towards the New Economy was not without difficulties, as expected in movements from a safe life to a future full of uncertainties. Overcoming the huge personal costs along this process was only possible because I had Carol­—who inspires and teaches me all the time. She understood my dreams, held my hand, and walked by my side along the way. This new journey gained a broader and deeper significance with her presence.

ACKNOWLEMENTS

When I look back, I can still clearly see the influences I had in the process of understanding the New Economy. However, it’s obvious that I was not fully conscious of that in the past.

My father, Reginaldo; my uncle, Nivaldo; and my grandfathers, Onofre and Darwin, were all entrepreneurs. With a perpetual warm smile on their faces, these men taught me how costly it was to run a business in Brazil. At the time, I could watch them right on the verge of the abyss, but always building the necessary bridges to cross it. During part of my childhood, I literally lived inside their premises, although that situation felt like a big adventure to me.

Durval, Guilherme (Eré), Fabiano, Fernando, Tiago C., and Tiago L. are my dear—and still best—childhood friends from Uberaba, a city in the state of Minas Gerais, in Southeastern Brazil. Out of the six, five are entrepreneurs. I still remember all of them: having ideas, creating, constituting families, and leaving entirely out of their dreams. These are the people with whom I constantly debate my thoughts in the most mature ways. Thus, they are also the ones who teach me more every single day of my life.

As a young man with big dreams, I was pushed into São Paulo—Brazil’s financial, economic, and cultural center—which was a natural move twenty years ago. There I met the man who would become my first important professional reference: José Eduardo Carneiro Queiroz, one of the partners of Mattos Filho Advogados, a big law firm. He was a great inspiration to me, not only for his professional behavior but also for his sophisticated thinking and the high standards he adopted. Zé—as he used to be affectionately called by everyone—immediately became my professional foothold, and remained even after I had left Mattos Filho. Unfortunately, he passed away in 2020, so I dedicate this memory to his wife Helena and his kids.

Moving from Law into Finance was only possible because of one person: Roberto Amatuzzi, then CFO in Lopes Imobiliária, a real estate agency. At that time, Amatuzzi was one of the prominent executives in Brazil and indicated to me a broader path to follow. He proposed and supported my career change into finance. He brought me references from MBA abroad and technology. Amatuzzi was one of the first Brazilians to obtain an MBA abroad—he studied at Wharton School—and brought his experience into Brazil when few Brazilians had this kind of opportunity. He was also co-founder of Planeta Imóvel (now ZAP Imóveis), one of the first successful cases in Brazilian online services.

When moving to Switzerland, I came across two of the most influential people in my academic life: Carlos Braga and Ralf Boscheck. Carlos, who is Brazilian, was a senior executive in The World Bank at that time, having obtained academic credentials in some of the most renowned educational institutions in the world. Moreover, he is one of the most respected experts in International Economy, globalization, and international organizations. As my professor at IMD Business School, and after the MBA, he helped me understand much better the basis for the New Economy: globalization.

German professor Ralf Boscheck, on the other hand, used to teach at the IMD and Harvard University. In his classes, I realized that the New Economy would soon arrive in Brazil powerfully. So, I should treat that subject as my imminent future. Ralf is my role model when it comes to being rigorous whenever I outline the fundamentals of an idea.

After finishing my MBA at IMD, and upon my return to Brazil, my mind was focused on the New Economy and still trying to understand how it worked. Then I had the idea to become a mentor for startups, something that would make it possible for me to understand this whole new beast. Guilherme Massa, Rogerio Tamassia, and Daniel Grossi, from Liga Ventures, opened their doors for me to do that. But in fact, I soon realized that I was the one who would be mentored. I also need to thank the hundreds of entrepreneurs I had the opportunity to follow in several countries. You were all mentors to me.

Soon the highly-awaited chance to access the New Economy emerged. This opportunity was given to me by Petras Veiga, executive and partner of Movile. He soon became another role model, showing me how to think, behave and become antifragile. With Petras, I lived through the most challenging days of an entrepreneur (I do feel like one today) and learned important lessons that I have since carried with me.

By my side, experiencing the New Economy, I have Fabrício Bloisi, founder of Movile. It’s a real privilege to be on this journey with the only Brazilian in command of two unicorns and dozens of successful startups. Fabrício is a loyal son of the New Economy (and maybe its father in Brazil) and does not accept the typical behaviors of the old economy. His name will definitely be amongst the celebrated entrepreneurs who changed the destiny of our country.

Nevertheless, along my trajectory with the New Economy, I met many people who endured this transition period and suffered alongside me. My brother-in-law Gustavo Machado, for example, left behind the comfortable universe of big organizations and decided to become an entrepreneur. We supported one another all the way. Marco Affonseca, my most provocative friend, went after entrepreneurial experiences in other parts of the world and, despite being far away, I still feel his presence around.

This book brings the reader important contents that navigate from the technical thinking to the feeling fields. Along this journey, I recognized the privilege that I have. I realized what our society does to women and other minorities. I shared my path with people who forced me to think better and change my perceptions. Handemba Mutana, for example, was my mentor in what concerns racial debates. Carol, my wife, was my inspiration to fight for a fairer world for women. She’s also my partner in educating Fefê, Oli, and Pedro as citizens of a better world.

Along this special journey, I also enjoyed the company of three people who were important subjects in the research, reflections, and construction process: Denise Gianoglio, Silvana Cintra, and Almir de Freitas were good companions on this special path.

And last but not least, I thank the people who have always been a safe haven for me: my mother, Ana Maria; my sisters, Karina and Mariana; my brother-in-law Rafael; and my good friend Dani.

CONTENTS

Foreword: Change is the only certainty

Preface

Introduction

The New Brazilian Economy

The Age of Innovation

Contextualizing the Past

A Shift in Power

Winds of Change

Part 1

A New Brazil: The Power of Idea, Technology, Agility, And Scale

Globalization and the Network Economy

From Globalization to E-globalization

The Birth of the New Economy

The End of Traditional Powers

Evidence of Backwardness

The Rise of New Powers

The Voice of Web Society

Creative Conflict

Antifragile: The Meritocracy of Ideas and Transparency

The Post-meritocratic World

Leadership Through Transparency

The Companies in the New Economy

Time to Weigh Anchors

Startups and Unicorns

Part 2

Signs of a New Era

The Rise of the Entrepreneur and the Fall of the Tradicional Businessman

The Seeds of Change

A New Ecosystem

Diversification of Investments in Brazil

Digitalization of the Brazilian Economy

A More Comprehensive Ecosystem

New Business Models

Entry Barriers Versus Competitive Advantage

Digital Business Models

The Value of Innovation in Business

Conscious Capitalism

Challenges Are Not Small

Domino Effect

Diversity and Inclusion

The Rise of Segregated Brazilians

Crawling Companies

Part 3

The Transition Into The New Economy

The Rivals of the Old Economy

Solutions That Tear Down Barriers

The Future of Wise Traditional Companies

Proprietary Technology is the Key

Career Plans Do Not Create Antifragile Leaders

An Empathetic Look

How to Assemble the Team

Ownership Culture

The Power of Plurality

Conclusion

Afterword

Notes

Reading Suggestions

FOREWORD

CHANGE IS THE ONLY CERTAINTY

Most people overestimate what they can do in one year and underestimate what they can do in ten years.

Bill Gates

Many people see the Internet and smartphones’ transformation and think that we live in the age of changes, as never before. Well, this is true, at least partially. One thing we can be sure about in our civilization is change.

A lot of change. Always. And these changes cause the destruction of the existing companies and the launching of new ones, with countries emerging as leaders and bringing better conditions to their population.This is not something new, that happens only due to the Internet or smartphones. Massive transformations have been happening along the last five hundred years, due to long technological cycles that have completely changed the world, the companies, and the people who live in it.

Furthermore, in the 1950s, economist Joseph Schumpeter popularized the expression creative destruction, referring to entrepreneurs who develop new products and markets and, by the innovation, destroy companies that have led previous cycles. Schumpeter also professed that these innovation cycles would get shorter, making the new winners quickly lose their recently achieved positions to even younger, more creative players.

If this reality seems quite distant from us, think about the companies that were icons about twenty years ago, but now are only distant memories of their success. Nokia, for example (the absolute market leader in smartphones, and worth US$ 200 billion), is now worth ten times less and gave way to Apple, Samsung, and Huawei. Kodak is another good example. Because of smartphones, the absolute leader in the photographic niche lost its market relevance during the transition from analog to digital photography. Blockbuster’s destiny was even worse; the most important video rental in the world collapsed and shut its doors after the emergence of Netflix and streaming services.There are many examples like these and in various markets. But this is not something new that only happened because of the Internet. Instead, new technologies and new ways of operating companies—in cycles that tend to become shorter and shorter—end up naturally dethroning former leaders. They create opportunities for new companies to grow, introducing new, better, and cheaper products that reach many more people.

These changes, technologies, and innovations were responsible for raising the living standards in the world. Even though we live on headlines that only emphasize chaos and disaster, which encourages polarization, when we look through a broader lens showing us the last five hundred years, it’s easy to see how technological innovation has reduced extreme poverty, illiteracy, and death of newborns, but has also prolonged life expectancy all over the world.² In fact, we can realize huge improvements for everyone, and this is the main benefit from innovation. Of course there is still a lot to be done; above all, it’s necessary to reduce inequalities, to promote more inclusion, and to protect the environment. But it is undeniable that innovations mentioned before have contributed a lot to improve our civilization.

LIFE EXPECTANCY, 1543 TO 2019³

GLOBAL CHILD MORTALITY⁴

LITERATE AND ILLITERATE WORLD POPULATION⁵

I believe it’s up to us to keep contributing to the progress of our countries, improving education, and providing equal opportunities for all, with the help of the new tools offered by the Internet and smartphones.

In the center of the transformation that will take place in the next ten years are the companies of the New Economy. We have the opportunity to use this revolution in our favor. Let’s take the examples of Great Britain (during the Industrial Revolution) and the United States (that used the information technology revolution) to create wealth and reduce inequity to their people.

I believe that the next big technology companies, those that are worth US$ 100 billion, will not be born in California anymore. The new world allows them to pop up in China, Europe, and also here, in Brazil. So, it’s up to us, Brazilians, to think big, to believe that it’s possible to be among the winners in the New Economy and to search for companies that are really innovative and global leaders. The benefit for them is vast, and not only for its associates but also for the entire society.

Innovative companies create lots of jobs, pay taxes and develop products that make everybody’s lives much easier. They make the economy more dynamic and create a positive cycle around it, as it’s possible to see in California’s Silicon Valley. We need our next leaders to be here so we can profit from the creative destruction as a nation.

We have an incredible domestic market, access to knowledge as never before, people that are as competent as anybody I met in my travels to Silicon Valley or China. However, we still lack the boldness to think big and believe that change and the new can bring us the opportunity to benefit the entire society.

That’s why I believe everybody should read this book—from students to professionals working for traditional companies or those who already work for companies of the New Economy. What is covered here will help us to improve our perceptions of how creative destruction will benefit Brazilian companies. Furthermore, this content will help our country change its focus and stop doing things as they have always been done and embrace a different mentality—that of the companies that will be the great winners in the next transformation cycle.

The terms of the current disruption include: mindset of innovation, lean companies,* organizations with simple hierarchy, bringing quick and decentralized decisions. Include looking at technology, innovation, and data as a central part of any business. Include to place people first by hearing them and listening to them, learning, and being open to making plan adjustments all the time. They also include the adoption of a protagonist role in reducing social inequalities and promoting diversity, opening your mind to new management models, and seeing digital channels as the main part—the core—of modern companies.

Change is the only certainty. It’s up to each of us to study for being on the side of those who create value and opportunities derived from it. I hope you agree with me and find all the tools you need as you read this book.

FABRÍCIO BLOISI

Founder of Movile and member of its board. Executive-President of iFood. Holds a BA degree in Computer Science from Unicamp, a master’s degree from Fundação Getúlio Vargas, and extensions courses from Stanford Graduate School of Business and Harvard Business School.

---

* Created by Silicon Valley entrepreneur Eric Ries, the lean startup concept applies to the set of processes used to develop prototypes, and it’s designed to validate hypotheses through consumer feedback. This process accelerates the maturity curve of a product before the market. So, the lean startup aims to reduce wasted resources (time, money, etc.) while improving customers’ perception of the product or service.

PREFACE

This book is about a Brazil that few people know. A Brazil that is full of opportunities for millions of citizens who do not necessarily belong to wealthy traditional families or do not have relationships with politicians but still want—and can—be successful. And this is not a utopia. The country I describe in the following pages exists and offers opportunities for anyone to grow, as long as they have the courage, the energy, and the will to do something different.

I have already transitioned from the old Brazil into the new one. In the past, I held executive positions in big corporations. Then