By 2014 Israel Trip participant, Nikki Keister, of the College of William and Mary
Quick, answer three questions for me. What country has the highest ratio of university degrees in its population? What country has the highest concentration of startups in the world? What country has more companies listed on NASDAQ than the entire European continent combined? If you answered, Israel, to any of these three questions… Ding-ding-ding-ding-ding!!!! You were right, on all three counts.
In the new book, Start Up Nation, Dan Senor and Paul Singer explain how Israel, a tiny country the size of New Jersey with no natural resources, surrounded on all sides by hostile Anti-Semitic enemies, in a constant state of war is still able to produce more start-ups than any other country besides the U.S.
The emergence of Israel’s high-tech sector put the small country’s economy on track. Specializing in computer hardware, software, medical technologies and pharmaceuticals, Israel’s technology sector has become world renowned for it’s innovation: Flash drives, cardiac stents, camera-pills and instant messaging are only a few Israeli innovations that have emerged in the last few decades. So, how does this little powerhouse, admired and envied by so many around the world, do it against all odds?
Persistence and Resilience:
A very strong trait in Israeli culture behind the “startup nation’s” success is Israeli chutzpah. Chutzpah does not have an equivalent word in English, but it basically translates to “in your face, cheeky, boldness that borders on being rude”. Chutzpah is a Yiddish word from the Hebrew word “hutspa”. Israeli chutzpah is a necessity because Israel exists in a hotbed of Anti-Semitic Islamic and Arab theocracies that constantly threaten it’s people’s annihilation. That chutzpah helps Israelis keep their strong resilience, and assures them that they are good people, they are smart people, they are honest people and they do the right thing even when everyone around them are not. That chutzpah will not let Israel’s enemies get her down. That chutzpah accounts for much of the Israel’s success against all odds.
Compulsory Service in a Unique Military
Another contributing factor is that Israel has a compulsory military service for all citizens over the age of 18, three years for men and two years for women. Innovation comes from having a unique perspective. Perspective comes from knowledge. Knowledge comes from a wide variety of experiences in a lifetime. In Israel, young people get experience, knowledge, perspective, and maturity at a much younger age, because the Israeli society jams so many transformative experiences into it’s people when they’re barely out of high school. By the time they get to college, their heads are in a different place than their American counterparts.
Much of this life experience Israelis get comes from its compulsory military service, which not only provides early training in some very sophisticated technologies, it often entails very serious life-and-death situations that teach Israelis to think quickly on their feet and make tough decisions under extremely stressful conditions.
The IDF also has a very unique, anti-hierarchical structure, which results in very few levels of middle and upper management. The result of this is, very young soldiers barely out of their teens serve on the front lines of battle with minimal guidance from superiors. The IDF places a very strong emphasis on soldiers taking personal responsibility. This leads to soldiers having to solve problems on their own on the front lines of battle, under incredible pressure, in very intense real world, life-and-death situations. One Israeli soldier explains it like this:
“A company commander is in charge of a specific territory. If a terrorist infiltrates that area, there’s a company commander whose name is on it. Tell me how many twenty-three-year-olds elsewhere in the world live with that kind of pressure… How many of their peers in their junior colleges have been tested in such a way? How do you train and mature a twenty-year-old to shoulder such responsibility?”
IDF soldiers are also discouraged from being overly compliant and instead are taught to speak up and question authority if they have serious doubts about decisions made by senior officers. Yes, it’s that chutzpah, again that contributes to a very unconventional system to challenge senior officers who are not working up to the IDF’s high standards.
“I was in Israeli army units where we threw out the officers,” Oren told us, “where people just got together and voted them out. I witnessed this twice personally. I actually liked the guy, but I was outvoted. They voted out a colonel.” When we asked Oren in disbelief how this worked, he explained, “You go and say, ‘We don’t want you. You’re not good.’ I mean, everyone’s on a first-name basis… You go to the person above him and say, ‘That guy’s got to go.’… It’s much more performance-oriented than it is about rank. “The phrase ‘It was not my fault’ does not exist in the military culture”.
There is also a cultural tolerance in Israel for what some call “constructive failure” or “intelligent failures.” Most Israelis believe that without tolerating a large number of failures, it is impossible to achieve true innovation. In the IDF, there is a tendency to treat all performance, both successful and unsuccessful, both in training simulations and in live battle, as value-neutral. So long as the risk was taken intelligently, and not recklessly, even if the performance failed, there is something to be learned.
Israel’s economic miracle is due as much to immigration as to anything. Foreign-born citizens of Israel currently account for over one-third of Israel’s population. That is three times the ratio of immigrants to natives in the U.S.A. Israel is now home to more than 70 diverse nationalities and cultures.
The success of the Venture Capital industry in Israel grew even stronger with the creation of a program they named Yozma (Hebrew for “initiative”). A group of young bureaucrats at Israel’s Ministry of Finance came up with the idea for a program where the Israeli government would invest money to create ten new venture capital funds Each fund had to be represented by three parties: Israeli venture capitalists in training, a foreign venture capital firm, and an Israeli investment company or bank. As a result of these efforts, Israel’s annual venture-capital outlays rose nearly 60-fold, from $58 million to $3.3 billion, between 1991 and 2000. Venture capital was the match that sparked the fire.
There’s a multitask mash-up mentality in Israel, a multitasking mentality that produces an environment in which job titles and the compartmentalization mentality that goes along with them do not apply as much in Israel. Israelis will think nothing of working in fields that combine mathematics, biology, computer science, chemistry and other specialties. Everyone becomes a jack-of-all trades, thinking nothing of combining radically different technologies and disciplines. When an Israeli man wants to date a woman, he asks her out that night. He does not wait. When an Israeli entrepreneur has a business idea, he will start it that week. He does not wait. The notion that one should accumulate all of his credentials before launching a venture simply does not exist in Israeli culture. Too much time can only teach you what can go wrong, not what could be transformative.
Clusters with Strong Bonds
Clusters in businesses are based on “geographic concentrations” of interconnected institutions (businesses, government agencies, and universities) in a specific field. Clusters are just communities of people who live and work and even raise families closely together so everyone is connected to each other in some way or another. This includes the same people who also serve together in the same military units fighting to defend their home turf against enemies who want to annihilate them for being Jewish, then go on to learn together at the same great universities, and go on to work at the same start-up companies, live in the same communities where they raise families where their children go to the same schools together, etc, etc… That same “social glue” that binds a cluster together also provides critical access to information, understanding and collaboration between very talented people in their fields. The cluster’s sense of shared commitment and destiny on both a personal and professional level, like that of Israel and Silicon Valley, is not easy to create, but when it is created, it results in robust economic growth.
It has been said that Israel is a country with no natural resource, that couldn’t be further from the truth, it does have a resources, one that accounts for much of it’s success, that is the ingenuity and resilience of the Israeli people.