Israel and Innovation

From time to time - with rising frequency these days - I ponder on how it must have been to be a Jew in the 1930s, with antisemitism the official policy of some of the world's greatest powers, with antisemitic parties in most countries, and with loud antisemitic cries from all sides. It must have been very frightening. Not like these days, when the rising tide of Jew-hatred is very aggravating, certainly, but not really frightening.

Less often, I think about how the world must have looked to the dazed survivors in Europe of summer 1945, or to their grim relatives elsewhere. Their story is not told that often, and very rarely is it dwelt upon. As a general statement, Israel's critics and enemies, both, detest it when Jews in general and Israelis in particular talk too much (or at all) about the Shoah. Israel hasn't learned the lessons of the Jews' own past, they'll tell you. Israel has learned the lessons too well, and is now copying its tormentors, they'll tell you. Israel, of all nations, should understand better, they'll tell you. Israel is trying to wield the ultimate victim-weapon to as to stifle thought, discussion or recognition of what's really going on, they'll tell you. And so on.

I expect a more profound reason for all the shrieking is a dim awareness that actually, the multi-stranded story of those dark days has the potential to disrupt almost all the pat templates they use to explain the world - so they ward it off.

Take, for example, the multiple-tiered explanations about how when people suffer, they aren't nice in return. They must be assuaged, their needs addressed, their woes removed, their grievances respected, acknowledged, and rectified. You know the line; it's one of the top meta-narratives of our age. It's also all wrong, fundamentally wrong, and quite pernicious. Those Shoah survivors disprove it by the simple fact of how they pulled themselves up by their bootstraps (after they acquired boots) in a mostly indifferent and partially hostile world.

Some fifty years later, on February 20th 1999, the Economist published a Special Report titled Innovation in Industry. It was a fun read, so much so that I made myself a copy, which was fortunate because I can't find it now on their website. They talked endlessly about Silicon Valley, of course, but also had this:

Apart from its genius for networking, Silicon Valley seems to have an abundance of two other ingredients that other places lack. One is a culture that rewards risk, handsomely, but does not punish failure. The other is simply chutzpah—that upbeat sense of self-confidence that says anything is possible, go for it, and never be too shy to ask for help. Perhaps it is no coincidence that the place emerging as California’s most likely rival in innovation is Israel, with its close-knit society that networks ceaselessly, deals daily with risk, reveres learning, and is blessed with a torrent of well-educated immigrants from the former Soviet Union. Natan Sharansky, a physicist and former gulag prisoner who is now Israel’s trade and industry minister, points out that a fifth of his new country’s population arrived in the past five years, doubling the number of technicians, engineers and scientists there. Israel has 135 engineers and technicians for every 10,000 people, compared with America’s 18. This abundance of talent shows up in the success rate of new ventures in Israel. No surprise that Israel trails only America and Canada in its number of new listings on the innovation-driven Nasdaq stockmarket each year. With such stellar results, the amount of venture capital chasing Israeli innovations has been increasing by around 35% a year. Last year more than $4 billion of high-risk money found its way into innovative start-ups there, not far off the figure that venture capitalists invested in Silicon Valley. If it can keep this up, Israel is set to become the innovation centre of the world.

That was then, and now is now. The Dotcom bubble exploded, the "Peace Process" did too, the Palestinian culture of death attacked Israel with its full potency while the world media looked on and tut-tutted; more recently the entire world economy is staggering. And on March 12th 2009, a decade and a week after the previous report, the Economist came back with another (it starts here). "Global heroes. A special report on entrepreneurship".

For me personally this one was even more fun that the previous one, since - contrary to any reasonable expectation I ever had - I'm deep in the entrepreneurship world myself, in spite of my advanced age and encroaching senility. More pertinent, however, after the first few conceptual chapters about the phenomenon in general, the reports turns to discuss who's doing what, and why. Sure enough, as if the decade never happened, Israel gets mentioned, again, and again, singled out beyond all others. Here, for example:

DOV MORAN’S desk is littered with the carcasses of dismembered phones. Mr Moran has already had one big breakthrough: inventing the now ubiquitous memory stick. But he dreams of another one: he wants to separate the “brains” of the various gizmos that dominate our lives from the “bodies” to enable people to carry around tiny devices that they will be able to plug into anything from phones to cameras to computers. Mr Moran sold his memory-stick business to SanDisk for $1.6 billion, creating a thriving technology cluster near his office. This time he wants to build an Israeli business that will last, challenging the giants of the camera and phone businesses.

Israel is full of would-be Dov Morans. It is home to 4,000 high-tech companies, more than 100 venture-capital funds and a growing health-care industry. Innovations developed in the country include the Pentium chip (Intel), voicemail (Comverse), instant messaging (Mirabilis, Ubique), firewalls (Checkpoint) and the “video pill”, which allows doctors to study your insides without the need for invasive surgery.

Even more than other countries, Israel has America to thank for its entrepreneurial take-off. A brigade of American high-tech companies, including Intel and Microsoft, have established research arms there. And a host of Israelis who once emigrated to America in search of education and opportunity have returned home, bringing American assumptions with them. Many Israeli entrepreneurs yo-yo between Silicon Valley and Tel Aviv; almost 70 Israeli companies are traded on NASDAQ.

The Israeli government helped by providing a ready supply of both human and physical capital. Israel has the world’s highest ratio of PhDs per person, the highest ratio of engineers and scientists and some of the world’s best research universities, notably Technion. The country’s native talent was supplemented by the arrival of 400,000 well-educated Jewish refugees from the former Soviet empire.

However, Israel’s main qualification for entrepreneurialism is its status as an embattled Jewish state in a sea of Arab hostility. The Israeli army not only works hard to keep the country at the cutting edge of technology, it also trains young Israelis (who are conscripted at 18) in the virtues of teamwork and improvisation. It is strikingly common for young Israelis to start businesses with friends that they met in the army. Add to that a high tolerance of risk, born of a long history and an ever-present danger of attack, and you have the makings of an entrepreneurial firecracker.

Eat your hearts out, Guardianistas and boycotters.