Start-up Nation: The Story of Israel’s Economic Miracle

By Jerry Levine

How can Israel — a country of only 7 million, with no natural resources, enemies on every border, and in a constant state of war, produce more start up companies then Japan, India, Korea, Canada, and the UK? In Start-up Nation Dan Senor and Saul Singer describe how Israel’s adversity-driven culture does it — how they foster their unique combination of innovation and entrepreneurial spirit.

The short, partial answer is: Israelis put chutzpah first! But more in-depth: their policies on immigration, R&D, and military service have spurred the country’s rise. For the US and others there has never been a better time to look at this remarkable and resilient country for some impressive and surprising lessons.

Israel is most noted for its high-tech developments, and ties to the likes of Google, Intel, Microsoft, and Cisco; but their real start began 80-100 years ago in the low tech battle against the desert. In 1869 the “tourist,” Mark Twain, described the area as a desolate land — infertile and lacking water. But this infertile land eventually yielded to invention and technology, and more and more is now covered with agricultural fields and forests. Over two hundred and fifty million trees have been planted.

The IDE seawater desalination plant in Ashkelon produces 120 million cubic meters of water annually.

It started with smart water management. The first great innovation was trickle irrigation combined with water recycle and desalination. These techniques have now grown worldwide. On a recent trip to Ecuador, I was impressed to visit a huge rose farm with big signs out front indicating that it was operating on Israeli irrigation technology. Israel also leads the world in recycling of waste water; over 70% is recycled which is three times the percentage recycled in Spain, the second leading country.

When water wells were drilled in the desert, the water came up warm and salty — bad for irrigation, but ideal for fish farming! That technology has spread to the US Midwest, home to several huge talapia farms. In Israel they are called St. Peters fish. Here they are called talapia — different names for different markets, but the same technology and the same fish.

Not only was the environment hostile, so were their so-called friends and neighbors. Facetiously, the two real fathers of Israeli high-tech were the Arab Boycott and Charles DeGaulle. They forced the need for secure home-grown industry. Israel’s industry developed out of Israeli traits of tenacity, constant  questioning of authority, determined informality, and unique attitudes toward failure, teamwork, mission, and cross-disciplinary creativity.

Many Israeli start-ups fail, but their attitude is to bring failed entrepreneurs back into the system, use their experience and try again. By contrast, in the Far East, loss of face inhibits risk taking. This is not an Israeli characteristic.

Israelis, in addition to their unique attitude toward failure, constantly question authority. Their focus is on the mission, and their stress is on teamwork and cross disciplinary creativity. The authors relate a story at Intel where there was a great internal debate about the future of chip design. The Israeli workers argued for a different direction from their US supervisors. The Israelis persevered, and moved the company in a totally new, but winning direction. To the Israelis the fight wasn’t about winning the battle inside Intel, rather it was about winning the war outside, against the competition. This story epitomizes so many US union/management fights, where the union’s adversary is their management. Obviously, the focus for both sides ought to be uniting to win the war over the competition. But this doesn’t always happen.

Collaborative behavior comes from the military training, which essentially all Israelis — male and female alike — undertake. The Israeli Defense Force (IDF) stresses a downward delegation of authority. The army has very few colonels and an abundance of lieutenants. The ratio of senior officers to combat troops in the IDF is 1 to 9. In the US army, it is 1 to 5. This culture generates more maturity and better judgement at lower levels of the organization. The authors doubt there is any other country in the world where the creative types all have done (and continue to do) national service. When hiring, Israeli businesses still look for private sector experience, but the crucial metric is the applicant’s military service — what unit was he or she with.

The authors draw an analogy to the 1967 Six Day War where the combined militaries of Egypt, Jordan and Syria (probably 10 times the size of Israel) boasted they were about to destroy Israel and drive all the Jews into the sea. At that time Israel did not have strong world-wide support. President Johnson counselled against a preemptive strike. He suggested they wait to be attacked first, and suffer some losses to garner world sympathy. Israel told the President “no,” struck first, destroyed the Egyptian air force on the ground, and won the war.

So, what is the answer? What makes Israel so innovative and entrepreneurial? The conclusion is a set of contradictions: 1) aggressiveness yet team orientation, 2) isolation yet connectedness, and 3) being small yet aiming big. Also, it’s OK to try and fail. Success is better, but failure is not a stigma.

Many worry that Silicon Valley may be losing its creative mojo. I don’t know if that’s true, but I suspect managements worldwide are studying the Israeli model for guidance.

Question: Do you have faith that Obama can make a good deal with Iran on nuclear weapons?

Share this post

24 thoughts on “Start-up Nation: The Story of Israel’s Economic Miracle

  1. Jack

    What makes Israel so innovative and entrepreneurial – They have to be to survive.

    I have zero faith in President Obama.

  2. Karl

    Obama will make the best deal any president ever made with Iran, he’ll share technology and learn from the Iranians.
    That will open the doors for trade just like opening the doors to Cuba that Kennedy’s failure shut.

    1. Robert

      Creating a trading agreement with our enemies is no guarantee of regime change. We have been trading with Russia and China, which has not resulted in any meaningful reversal of their attitude towards their own people or our Country. The USA has fasciliated the Chinese in building up their military to rival our own, without resulting in any increased freedoms for the Chinese people. We already saw an example of the appeasement of Germany, which helped to create WWII. Iran has not intention of honoring any agreement with the US, no matter how weak and they are and will remain the enemy of the West as long as they adhere to their radical Ismalic beliefs.

  3. Lloyd Graff

    I listened to Benjamin Netanyahu ‘s speech this morning about the possible Iran nuclear weapons deal. I had mixed feelings about the speech beforehand but I found the speech very moving and convincing. I think a deal with Iran would be Neville Chamberlain, “peace in our time” déjà vu. And if Hillary Clinton divulged Israeli war plans to Iran to keep negotiations going she may have broken the law and “snowdened” herself. This was a bold move by Netanyahu which may save him politically, but also change the course of history. A deal will never pass the Senate.

  4. Art Santana

    No, Obama will go down in history as the first black president but also as one of the weakest presidents dealing with foreign policy. (never mind as the biggest spender)
    One of the reasons ISIS is taking terrorism to levels never imagined before; they know big brother is out of the picture and they are pushing all the buttons to see what they can get away with. Ronald or George W would have never put up with this or Iran’s defiant stance that is now going soon to be a decade long defiance.

    1. Emily Halgrimson Post author

      Are you and I living in the same country? Wonderful economic growth, low unemployment, no major foreign attacks on our land. I just don’t get the hate. If a Republican President had such an 8 years you’d be lauding him.

      1. Robert

        If a true Republican president such as Ronald Reagan were in charge, unemployment would be a real 4% or less, not disguised by counting immigrants, legal and illegal who have made up for the majority of new jobs created since Obama has been in office or not counting the 10’s of millions that have given up looking for employment or who are underemployed. Labor participation rate is at the lowest since the 1970’s. I do know which country you are referring to that has “wonderful economic growth” but it is not the USA where the GDP has been stuck at around 2 %. If it weren’t for private land oil fracking it would be worse than that.

      2. Eric

        Economy in neutral just now starting to recover in most areas of the country, unprecedented underemployment and lack of participation which is not accounted for in the unemployment #’s. Reagan reversed Jimmy Carter’s train wreck in about 3 years. Obama is, near as I can tell, doing everything he can to deter capitalism. There is no excuse for anemic or no growth after 6 years.

  5. Eric

    The Obama administration has proven very weak and unwise in negotiations. Iran is just one more example. The Democrat party is making a big mistake snubbing Netanyahu’s visit. The great Teddy Roosevelt once said, “Patriotism means to stand by the country. It does not mean to stand by the President or any other public official.”
    The reason Israel is so successful is simple and no surprise… they are blessed by God. Israel will prevail regardless of our current arrogant leadership (or lack of).

  6. Jim Bradshaw

    To all the Republicans in the crowd. The stock market is at an all time high. Executive compensation is at an all time high, The 1% own a greater percentage of all wealth than ever, Housing Is growing, Industrial Output is growing, Employment is growing, all the countries that followed the austerity programs are in recessions, our military remains larger than at lease the next 15 countries combined. What is your problem. Is it the fact that he is Black or Democratic. What is it you can’t stand the peace or the prosperity.

    Trickle down economics is vodoo hoey. Taxes breaks for the wealthy does not create jobs. Wake up and work of equality and justice for individuals, not the false rights of corporations, tax dodges and lobbyists.

    Have a nice day

    1. Kelly

      Tear up the Consitituion lie through your teeth and spend till there’s no tomorrow.
      Hey that sounds like Illinois politics. Keep in mind that 25% of Illinois budget goes to pensions and the debt per person is over 24K each highest in the nation. All President BO did was bring Illinois politics to the national and world level. Can’t wait to see what tomorrow brings.
      Have a wonderful day and oh yes I would like a Pink Unicorn please.

    2. Jack

      Taxes breaks for the wealthy does not create jobs. tax dodges and lobbyists.

      This describes the Obama administration.

  7. Don Rank

    As for foriegn policy, President Obama makes Jimmy Carter look like Winston Churchill. I hope we can survive 2 more years .

  8. Erik

    The modern political system is broken. I see people invoke Reagan all the time. Well, Dutch wouldn’t get elected right now because he had principles. So put that nonsense away.

    The prostitution of the election process, Citizen’s United, and a venal, unfocused, entertainment-driven press corps have irrevocably broken the process by which we put smart, values driven people in office. It’s all a reality TV show watching ideologues from both sides defend the positions their corporate masters dictate them to defend. There is no substantive argument, and these politicians can no longer even present one. Just watch the Republican and Democratic arguments on funding Homeland Security. If my children argued that way, I’d ground them.

    The last 2 presidents will go down in history as worst and second-to-worst. And this congress will go down in history as the single most corrupt group ever.

    Until the money is out of the election process, we will continue to get the level of “National Service” we get today. There will be no Reagan’s, Nixon’s, Johnson’s, or Bush 1’s. Yes, Bush 1. Not his son. These were folks who committed “Political Suicide” because it was the right thing to do. No new Taxes? Well, on principle he had to break the pledge, and he did for the good of the country, knowing it could cost him the election. Not happening today.

    Can you see a modern Republican founding the EPA? No, but Nixon made it happen. On principle. No principles any more, just politics and money. Sad, sad, sad.

    And Obama will not successfully deal with Iran. I had High hopes that a younger voice would help pull us out of this spiral. Not any more.

  9. John

    I think I can trust Obama about as much as I can trust that old fox that use to guard our chickens for us. You Think?

  10. Peter

    We have some great customers in Israel. I’m always impressed by their attention to detail and broaching innovation.

  11. mike

    If Miami and NY did not support Israel then there is no Israel – it is easy to be aggressive when big brother is always there to help . . .

    i served in the military and while it is patriotic to do so – stating Israel is better for it is somewhat presumptous – even for a Jew Lloyd . . . i am disappointed here –

    Why is it hard to start a business in India – because of the beuracracy – excuse my spelling.

    anyway – without the US army and money there is no Israel . . . you forgot to state that –


Comments are closed.