START UP NATION – ECONOMIC MIRACLE OF ISRAEL by Dan Senor and Saul Singer

Shai Agassi, an Israeli was an executive at SAP, the largest software company in the world, “he decided that the most important thing to do was how to take a single country off of oil”. Agassi believed that if one country was able to become completely independent of oil, the world would follow.  This was a revolutionary insight. His first step was to find a way to run cars without oil; battery powered electric vehicles. Israel was first test case country to free itself from oil. Other countries like Australia, Denmark, San Francisco Bay Area, Hawaii and Ontario announced they would join the better place plan as adopted by Israel. 

The name of the company that revolutionized this concept is Better Place, and entrepreneur like Shai Agassi don’t appear every day. Technological companies and global investors are beating a path to Israel and finding unique combination of audacity, creativity and drive everywhere they look in Israel.

This explains why in addition to boasting the highest density of start-ups in the world (a total of 3,850 start ups, one for every 1,844 Israelis) more Israeli companies are listed in NASDAQ exchange than all companies from entire European Continent.

-         Israel has one of the highest concentrations of engineers, research and development spending in the world.

-         In 2008, per capital venture investment in Israel was 2.5 times greater than in USA, more than 30 times greater than in Europe, 80 times greater than in China, 350 times greater in India. Israel with a population of 7.1million people attracted close to $2billion in venture capital as much as flows to UK with 61 million people or 145 million people living in Germany and France combined.

-         After USA, Israel has more companies on NASDAQ (New stock exchange) than any other countries in the world including India, China, Korea, Singapore and Ireland.

-         Israel is the world leader in the percentage of the economy that is spent on Research and Development.

-         Israel has been in several wars. More Israelis died in the war for Israel establishment than American in both world wars combined, yet they multiplied their population five fold despite these wars and their country still prospered.

-         Almost half of the world top tech companies (Google, Cisco,  Microsoft, Intel, EBay, etc) have bought start ups or open R & D centres, in Israel. Cisco alone acquired nine (9) Israel start ups and looking for more.

Why are all thEsE happening in Israel? I have never seen so much chaos and yet so much innovation in one tiny place.

WHY ISRAEL?

Most people adjudged this to be either adversity, by neighbouring countries, or heterogeneous nature of Israeli population, (Israel consists of over 70 different nationalities), or influx of diaspora talents, etc. Others ascribed it to Israel’s success in military and defence industry that has produced other spin-off industries (though IDF represents just 5% of Israel GDP).

-         No, its not just the story of talent but tenacity of insatiable questioning of authority, of determined informallity, combined with unique attitude toward failure, team work, mission, risk, and cross-disciplinary creativity. Israel is replete with such stories.

 

-         Israelis exhibit what they call in Hebrew “Chutzpah” gall, brazen nerve, effrontery, incredible guts, presumption plus arrogance such as no other word and no other language can do justice too. An outsider in Israel will see chutzpah everywhere in Israel. In the way university student speak with their professors, employees challenge their bosses objectively, sergeant question their generals, and clerks second guess government ministers. This to them is a way of life, they believe that assertiveness is the norm, reticence is something that risks being left behind.

 

-         This dovetail into what is called nicknamed barometer. Israel is the only place in the world where everybody in position of power including Prime Ministers and army general have nick name used by all including masses. This is a representative of Israel level of informality.

-         Israel attitude and informality flows from a cultural tolerance for what some Israel call “constructive failure”. Israelis are always hustling, pushing, looking for new opportunities.

 

 

-         Israelis do not have a much disciplined culture, from the age of zero, they are educated to challenge the obvious, ask questions, debate everything, innovative, etc.

-         Israeli soldiers are not defined by rank; they are defined by what they are good at. When asked why Israeli Army are anti-hierarchical and open to questioning – an army general response “it is not just the army or military but Israel entire society is an open book” Judaism and Israel have always cultivated a culture of doubt and argument, interpretations, re–interpretations, opposing, interpretations from the beginning of the existence of the Jewish civilization, it was recognized by its argumentative.

 

-         This is opposite of the American military.  You salute the rank not the person. Emphasis on positional leadership. However, it’s not worthy to mention that the key for leadership is the soldiers’ confidence in their commander not in his position.

 

-         22 Arab nation boycott of Israel products over the years also led to Israel embrace of internet, software, computer and telecommunication areas. In these industries, borders, distances, and shipping cost are practically irrelevant. High Tech communication became a natural sport to help feud against the claustrophobia that is life in a small country surrounded by enemies.

 

-         Today, Israel companies are firmly rooted into economies of China, India and Latin America. Every major telecommunication company in China relies on Israeli telecom equipment and soft ware. China third largest social networking website, which services 25 million of country young people web surfers, is actually an Israel stat up called “Koolano” which means all of us in Hebrew. Israel company is providing the voice biometric tech for China largest retail bank. Israel has established link in these axis before most nation.

 

 

-         Netafim, an Israeli company is an example of Israel’s avid internationalism. They became the largest provider of drip irrigation in the world. They converted a desert into a fertile land. Netafim operates in 110 countries and five (5) continents.  Vringo, is another Israeli company that pioneered video ring tones for cell phones which penetrated the European/Asian market.  They say Israel is inside almost everything we touch because almost every company we touch is inside Israel.

-         NICE SYSTEMS, the global corporation behind call monitoring systems, used by 85% of Forbes 100 companies, was founded by a team of Talpions (Elite Unit of IDF.)

 

-         While most students are thinking of best university to attend, either Harvard or Princeton, an average Israeli is positioning himself to be recruited by the Israeli Defence Force elite Unit. That is their Harvard, the training they receive here is second to none.  There is a massive percentage of Israelis who go to university out of the army compared to anywhere in the world. According to QECD, 45% of Israelis are university educated, which is among the largest in the world. Also accordingly to IBM world competitiveness year book, Israel ranked 2^nd among 60 developed nation on the criterion whether university education meets the needs of a competitive economy.

 

-         By the time Israeli finishes college, they are in their mid 20s, some already graduate, large number married. All these change the mental attitude of the individual. They are more matured, got more life experience. Innovation depends on having a different perspective. Perspective comes from experience. Real experience also typically comes with age or maturity. But in Israel you get experience, perspective and maturity at a younger age because the society jams so many transformative experiences into Israelis when they are barely out of college. Post army Israelis would have visited over 12 countries before age 35 years. Their heads are in a different place than those of their American counterparts.

 

-         When an Israeli wants to date a woman, he asks her out that night, when an Israeli entrepreneur has a business idea, it gets started that week.

 

-         The Israel military gets you at a young age and teaches you that when you are in charge of something, you are responsible for everything that happens and everything that does not happen. The phrase  “it’s not my fault “  does not exist in their military parlance.

 

-         All countries have problems, but the striking thing about Israel is the penchant for taking problems.  Like the lack of water  -  turning them into assets    -  in this case by becoming leaders in field of desert agriculture, drip irrigation and desalination. Israel is 95% categorized as semi and, arid or hyper-arid, as quantified by level of annual rainfalls but now it leads the world in recycling waste water, over 70% is recycled, which is three times the percentage recycled in Spain, the country in second place.

 

-         A century ago, Israel was described as a barren waste land. Today, they grow fish and have 240 million trees; millions of them are planted one at a time, forests have been planted all over the country, but the largest is perhaps the most improbable of all-Yatir forest.

 

-         Israelis have more cell phones per capita than anywhere in the world.

 

-         In 1960, there wasn’t a single chain of  coffee shops, and probably not a single wine bar, decent sushi restaurant, Mcdonald’s, Ikea,  or major foreign fashion outlet in the whole of Israel. First Israel Macdonald outlet was opened in 1993, three (3) years after, largest chain restaurant opened in Moscow and 22 years after, the first Mcdonald opened in Sydney, Australia. Now Mcdonald has approximately 150 outlets in Israel, about twice as many per capita as there are in Spain, Italy or South Korea.

 

-         Israel Economic miracle is due as much to immigration as to anything. Large populations of Jews from about 70 nationalities emigrate to Israel. As Jews, there were anti-semitism against you. You have to be exceptional in your field otherwise you are dead or unprotected. In Russia, Jews accounted for 2% of the population, but account for some 30% of the Doctors, 20% of Engineers and so on.  Before this mass immigration, Israel already accounted for highest numbers of doctors are capital in the world.  Favourably, Israel immigration policy allowed influx of Jewish settlement into Israel.

 

-         An Israeli, Micheal Laor, is the chief proponent of the CRS-1, a router, which connects our computers to the internet. It was unveiled by Cisco, it took four (4) years and $500 million to develop, and earned a place in Guinness book of record has a fastest router in the world. It does 92 million terrabits per second, The Terra in Terrabits means “trillion” according to Cisco, the CRS-1 has the capacity to download the entire printed collection of the US library of congress in 4.6 seconds. Doing this by a dial up modem would take about 82 yrs.

 

-         Israel also owes much of its success to a deep Diaspora network.  Israelis are people of multi task mentality.

 

-         Second richest man in the world, Warren Buffet invested $4.5billion in Iscar, a machine tool company in Israel in 2006, during the Lebanon war.  Also, in 1988 Israeli joined the club of only about a dozen nations that had launched satellites into space.

 

-         Gavriel Iddan, a rocket scientist, used the newest miniaturization technology used in missiles to develop a camera within a pill that could transmit pictures from inside the human body. In 2001 Give Imaging became the 1^st company in the world to go public on Wall Street after 9/11 attacks. This is a phenomenal breakthrough since ailment of gastrointestinal tracts are responsible for more than 30million American visits to clinics in USA.

 

In his bestselling book “Built to Last” James Collins identified several enduring legacies that successful businesses have in common, i.e. “core purpose” articulated in one or two sentences – organizational fundamental reasons for existing. This reflects the importance the people attached to the company work, beyond making money.  He listed the companies like Wal Mart, Mckinsy Disney, Sony and with one exception “Israel”. Collins described Israel’s core purpose as “to provide a secured place on earth for Jewish people”.

-         building Israel economy and participating in its cluster, which are interchangeable and pitching it to the most for flung places in the world are what in part motivates Israel’s profitable patriots”

With all problems, Israel may not have affluence or the quiet life but they have what affluence tends to smother; a motive.

-         The absence of motives is a problem in a number of Arab states i.e. UAE, S/Arabia, Bahrain, Kuwait etc. In case of Dubai, people relocating there are profit motivated – and not interested in building the fabric of the Dubai community. When Economic times becomes difficult like in Dubai 2008 and security dicey, those not committed to building a home, a community and a state are often first to flee.

-         Other factor limiting the growth of Arab world is oil, 20% of the Arab world population is under age 25, industrial growth, education, status of a woman, etc.

 

-         In 2003, China published list of 500 best universities in the world, it did not include a single mention of more than 200 universities in Arab world.  Today, Israel has 8 universities and 27 colleges. Four of them are in top 150 worldwide universities and seven are in top 100 Asia pacific universities.

 

-         Israel research institutes are first in the world to commercial academic discoveries.  A global 2008 survey by scientist magazine named two Israeli institutes. The Weizmann Institute and Hebrew University of Jerusalem,  as top best two places to work in “academia” outside the US.

-         As at 2005, Israel was the world tenth largest producer of nuclear patents.

 

Indeed what makes the Israelis blend so powerful is that, it is a mash up of the founders patriotism, drive and constant consciousness of scarcity and adversity and the curiosity and restlessness that have deep roots in Israeli and Jewish people in history.  The greatest contribution of the Jewish people in history, is “dissatisfaction” though it is poor for politics but good for science.

Every technology that arrives in Israel from America, comes to the army and in five (5) minutes, they change it.  But the same thing goes on outside the IDF (Israeli Defence Force) – an insatiable need to tinker, invent and challenge.

 

This 2012, lets all be Israeli.

 

Thank you.