Friday, April 8, 2011

Israel Today

By J. Mac Holladay, Market Street founder and CEO. 

I have just returned from 2 weeks in Israel. While it is a land full of history that dates back thousands of years, it is also an “economic miracle.” This country of some 7 million people, with over 5.5 million being Jewish, has accomplished nothing short of miraculous economic progress since its founding in 1948. In their book “Start-Up Nation,” Dan Senor and Saul Singer frame how that success has been reached. There are more than 70 different nationalities and cultures in Israel. Between 1990 and 2000, 800,000 Jews came from the former Soviet Union. The Law of Return allows any Jew (a convert or born to a Jewish mother) to come to Israel and be granted citizenship effective the day of arrival no matter what language they speak and there are no tests. It is a nation of immigrants from all over the world. 

The authors attribute the progress to three primary components. First of all the young people in Israel must serve their nation in the military. So from high school, all the young women serve two years and the young men three. They not only serve but travel the country and go to class about their history, ancient and new as well. It is then that the young people test to enter their amazingly strong college system. I visited the premier university in the country called Technion – the Israel Institute of Technology. To say it rivals MIT is an understatement. To those selected to attend the tuition is $2500 per year. Their military is structured completely differently from ours with everyone serving in the Israeli Defense Force. They take great advantage of their training and try to integrate each soldier’s experience and skills sets back into the economic structure. The connections made during military service last a lifetime. The Dean of the Technion materials engineering /nanotechnology graduate school was on military duty when we visited; he is a sergeant. 

The second component of their success is that as an immigrant nation there is a cultural commitment to entrepreneurship. Their history has created an entrepreneurial culture and their military experience forges networks and relationships which are often critical to small business success. It is highly valued to own your firm and many support mechanisms exist to provide needed assistance. At the top of the list is a well developed venture and seed capital fund system. While the country is small, investors from all over the globe view Israel as a fertile ground for quality companies. 

Lastly, they are a “mash-up” of all kinds of things. They are nurturing, individualistic and egalitarian all at the same time. They honor their past, but push aggressively toward innovation. Everyplace and everything is “wired.” You are never out of contact with the world wide web. They have more cell phones per capita that any nation in the world. And, they operate as a team on everything. Their commitment to technology and innovation is driven by both global competition and their commitment to survival. For example, they have no oil, no gas, and no other natural resource assets. While 95% of the country is semi-arid, arid, or hyperarid; because of its technological advances in desert agriculture, drip irrigation and desalination, it is able to feed itself. It leads the world in recycled waste water with over 70% being reused. 

The day I arrived in Israel, I had the good fortune of seeing Simon Peres, the eighty six year old President of Israel, in my hotel in Jerusalem as he prepared to meet with the President of Cyprus. It was Peres many years ago who became known across the country as “the founder of industries.” In his many different roles over the past 60 years, he has believed in the vital role of science and technology and today Israel leads the world in the percentage of GDP that goes to research and development. As Peres had said, “The most careful thing is to dare. “ That is how you create an “economic miracle.”