Israel’s economy will continue to grow exponentially

They tried to kill us, we won, now we are changing the world

David Horovitz, Jerusalem Post, April 1st, 2011

To our considerable sorrow here at The Jerusalem Post, our super-smart, relentlessly questioning, insightful editorial writer, Saul Singer, left the paper three years ago to write a book. To the great and still evolving benefit of the State of Israel, that book was Start-Up Nation: The Story of Israel’s Economic Miracle.

Along with his New York-based co-author Dan Senor, Jerusalemite Singer set out to answer the question of how our tiny country, all but bereft of natural resources and in the midst of a constant struggle for physical survival, has nonetheless managed to outstrip every other nation on Earth in terms of hi-tech innovation.

The two answered that question with such conviction and flair as to turn their book into a bestseller, with over 100,000 copies in print in its English-language edition and numerous foreign language translations emerging worldwide. So compelling was their diagnosis, moreover, that the book is gradually transforming perceptions of Israel–at least in parts of the global technology world. Start-Up Nation, Singer reports, is being read in some economies as a kind of “how to” manual–as in, how to orient your economy to maximize its talent for innovation, with the Israel experience held up as an exemplar…

[The] capacity for innovation, says Singer, has gradually transformed the Israeli economy over the past three decades, but it has the potential to achieve a great deal more. It is already enabling us to genuinely serve as a “light unto the nations,” Singer argues–saving lives, bettering the world. Tikkun olam in practice.

Among the examples Singer cites here are Shai Agassi’s trailblazing Better Place electric car venture, and the dramatic new approach to teaching being pioneered by Time To Know, revolutionizing the classroom. (It has been widely reported, to give one more telling instance, that Congresswoman Gabrielle Giffords’s life was saved after she was shot in Arizona in January because the emergency medical team applied a revolutionary elasticized bandage, developed in Israel, that creates pressure to quickly staunch head wounds.)

We now need to more deeply internalize that potential ourselves, Singer says, maintain our cutting edge, and begin building deeper and wider relationships worldwide to further our positive impact.…

…just how marvellous is[Israel’s start-up scene] really?

Truly amazing. Israel has the largest number of start-ups per year outside the US of any country. Not per capita. The largest number. Period. We have about 500 a year, and all of Europe has 600-700. Our 7.5 million people compared to that whole continent’s 700 million people.

There is no sentiment involved in the allocation of venture capital to fund startups. It doesn’t care where it goes. Venture capital is looking for “the next big thing”–the next Microsoft or Google. And Israel gets two-and-a-half times as much venture capital per capita as the United States and 30 times as much as Europe. The proportion of our GDP that goes on research and development is 4.8 percent. The OECD average is 2.5%, and the US is about the same. So Israel is far ahead in civilian R&D.

How do you explain the phenomenon. What’s the Israeli start-up secret?

That takes us into the nature of innovation. There’s a difference between ideas and startups. Generally, if you ask, “Why is Israel successful?” the answer you get is that “there are lots of smart people here.” But that’s not really the answer…

[I]t doesn’t just come down to the number of ideas and the number of smart people… There are two other factors: drive and the willingness to take risk. Israel has more of those qualities than other countries.

And why’s that?

We talk about seven or eight reasons in the book. Two of the most important relate to the military and to immigration.

There’s a misconception that the military plays a central role in Israeli start-ups through various IDF hi-tech units and through military R&D. In fact, the main military influence is cultural. So many Israelis go through the IDF, they learn leadership skills, they learn about teamwork, improvisation, sacrifice for a larger goal–these are things you don’t learn in school or in business. It’s a kind of third stage in life.

When people abroad characterize what’s unique about Israeli innovation, you hear the same two terms over and over: maturity and sense of purpose. And both of those come from the military experience. Sense of purpose comes, too, from the fact that Israel itself is a start-up…

For this start-up generation here, it’s not just about making money and finding an exit. It’s motivated by a desire to contribute to the country–21st-century Zionism–and to the world. This is the new form of pioneering. Our grandparents drained the swamps. This–innovation–is what we do…

Were there key players who set this remarkable start-up phenomenon into motion?

Economists talk of “clusters”–environments where one industry develops and snowballs. In Silicon Valley, the “cluster” comprised one key company, Hewlett Packard, a great university, Stanford, and nice weather. That’s what it took. Israel had the classic “cluster” elements. Intel came here. This was its first R&D presence outside the United States.… There were also great pioneering Israeli companies, like Uzia Galil’s Elron, which was founded in 1962. We had great universities. And we, too, had nice weather. That was our cluster.

All that was boosted by the Yozma program of the 1990s, which created a venture capital sector out of nothing. It established a threeway partnership: government funding was provided, local venture capital funds were created and American venture capital funds came in… [W]hat we needed were electrical engineers. Well, for $2,000 per person, we trained [Russian Immigrant] engineers who became worth $200,000. It was a 100-fold return on investment…

Israeli start-ups have transformed adversity of all kinds into a renewable source of creative energy. Look at all the obstacles start-ups here face. They have no sufficiently large local market. They have no ready access to the regional market, because of hostility. Israel is under constant attack, and constant boycott pressure. All these adversities have been turned into assets. And that creative energy has not only been focused on hi-tech innovation. It has also been channeled into social entrepreneurship. Into the arts. Start-ups are just a part of it…

When I moved here 16 years ago, we thought that the dream of being a light unto the nations probably had to wait for peace. We were busy surviving. That challenge is still there. But what we learned writing this book is that the light unto the nations dream is already happening. We are saving lives though medicine–through medical innovation. Better Place is showing the whole world how to get off oil. Almost every technology you look at–computers, cellphones, Internet–has a piece of Israel in it. Almost all of the major technology companies are doing some of their research here. We’re having an impact and it can increase dramatically. There’s tremendous potential for it to grow…

Can this also have a positive impact on the ongoing challenge of survival?

Yes, definitely. The way we currently deal with the threats and challenges of delegitimization, of boycotts, is defensive. But you can’t win by being defensive. “Winning,” with that strategy, is merely moving from negative territory to zero in the best-case scenario. You’re not advancing positive thinking on Israel in that way.…

Our purpose, the Jewish people’s purpose, is not to survive. The purpose of surviving is to have a positive impact. It so happens that innovation, and solving world problems, is the main means by which we have been having a positive impact so far, and it offers potential for even greater impact in the future… This country is being driven, and needs to be more driven, by a creative, world-bettering imperative. I’m convinced that will actually make us more successful in every way, including in the struggle for our survival.