Self Help

Start-Up Nation The Story of Israel’s Economic Miracle (Dan Senor, Saul Singer)

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Matheus Puppe

· 43 min read



Here is a summary of the key points about copyright from the passage:

  • Copyright ownership is retained by the publisher (Hachette Book Group) and authors (Dan Senor and Saul Singer).

  • No part of the work can be reproduced, distributed, transmitted, stored in a database, etc. without permission from the copyright holder.

  • The standard copyright notice for works published in 2009 is included.

  • Standard information about the publisher (Twelve) and imprint (Grand Central Publishing) is provided.

  • An ISBN number is given for the eBook edition.

  • The book is dedicated to friends and family members who supported the authors in their work.

  • A table of contents is listed to outline the book’s structure and coverage.

So in summary, the copyright information outlines who holds legal ownership over the content and restrictions on how it can be used, along with basic publishing details like the publisher, year of publication, and dedications. It establishes the authors’ and publisher’s rights according to standard copyright law.

  • Shimon Peres, former Israeli president, helped Agassi arrange over 50 meetings with Israeli industry and government leaders to promote his idea for an electric vehicle startup called Better Place.

  • At Davos, the first auto exec they met shot down the idea, embarrassing Peres. But their next meeting was with Carlos Ghosn of Renault-Nissan, who surprised them by saying he agreed electric was the future.

  • Agassi explained how Better Place would work - they would own the batteries, not consumers, allowing the cost to be spread over time like cell phone plans. Charging stations and battery swaps would address range issues.

  • Israel was a good starting place due to its small size, being an “electric transportation island”, and its tech expertise needed for the smart grid. Peres committed to building 100k cars a year there if Ghosn was onboard. Ghosn agreed pending Peres delivering on production.

Here is a summary of the key points about omise from the passage:

  • Shai Agassi founded Better Place, a company aiming to make Israel the first country free of oil by transitioning to electric vehicles with swappable batteries.

  • Agassi needed commitments from Israel (as a test country), an automaker, and $200 million in funding. But he couldn’t get any one without securing the others first.

  • The prime minister at the time, Ehud Olmert, agreed to Israel being the test country if Agassi signed an automaker and raised the $200 million.

  • Agassi had secured Renault-Nissan as the automaker partner, so now he just needed the $200 million.

  • Investors were skeptical due to the massive overhaul of industries like cars, oil and electricity that was required. The infrastructure also had to be built before cars could be sold.

  • Israeli billionaire Idan Ofer invested $100 million initially after meeting with Agassi, then increased it to $130 million. This allowed Agassi to raise the full $200 million.

  • Better Place developed a working automated battery swapping station that could swap a battery in 65 seconds, solving a major engineering challenge.

  • Israel has become known as a global epicenter of innovation and entrepreneurship, producing many successful startups and attracting major tech companies to open R&D centers there.

  • Warren Buffett broke his tradition of not buying foreign companies by acquiring an Israeli company for $4.5 billion, reflecting Israel’s prominence. Tech giants like Cisco, Google and Microsoft rely heavily on their Israeli teams.

  • Israel punches above its weight given its small size. Despite adversity, it has cultivated a thriving entrepreneurial culture and churns out startups at a higher rate than places like Silicon Valley. Its success is difficult to explain through simplistic notions like claiming all Jews are smart.

  • Israel is highly diverse and not culturally or linguistically unified. Its secret seems to lie in fostering an entrepreneurial mindset through qualities like tenacity, questioning authority, informal culture, unique views on failure and teamwork.

  • Understanding Israel’s story is important as nations seek to spur innovation-driven economic growth. The book aims to explain why Israel in particular emerged as a global innovation leader against the odds.

  • Scott Thompson, president of PayPal, meets with Shvat Shaked from the Israeli startup Fraud Sciences to hear about their approach to reducing fraud.

  • Fraud Sciences claims they can distinguish “good people” from “bad people” online based on their digital footprints. Thompson is skeptical.

  • As a test, Thompson gives Shaked 100,000 real PayPal transactions to analyze. Shaked returns results in just a few days, which are more accurate than PayPal’s.

  • Thompson realizes Fraud Sciences has developed a truly innovative fraud detection system. Their approach beats PayPal’s, even with less data.

  • Thompson wants PayPal to acquire Fraud Sciences to obtain their breakthrough technology. However, when he offers $79 million, Shaked declines, believing the company is worth more like $200 million.

  • The passage shows how an outside startup was able to develop a more effective fraud detection solution than the industry leader PayPal, through an original approach of analyzing users’ “digital footprints.” This caught PayPal by surprise.

  • Barkat had previously founded and built Checkpoint, an Israeli cybersecurity company worth $5 billion today, which protects against internet hacking and fraud.

  • He believed Fraud Sciences had the best team and technology to defend against internet and credit card fraud.

  • After brief negotiations, PayPal agreed to acquire Fraud Sciences for $169 million. The Israeli founders stuck to their price despite PayPal trying to negotiate lower, based on their conviction in the company’s value.

  • Thompson was initially nervous about visiting Israel due to its geopolitical tensions but was impressed by the employees’ intensity, challenging questions, and lack of inhibition in criticizing PayPal’s practices.

  • This “chutzpah” or brazenness stems from Israeli culture that encourages assertiveness and tolerates intelligent failures in innovation. It allows for informal address even of high-level figures and easy company formation after bankruptcy.

  • The story then shifts to Intel’s battles with its assertive Israeli team that argued for moving to a new transistor design, which ultimately allowed for widespread laptop computers.

  • In the 1980s, Intel’s team in Haifa, Israel designed the 8088 chip, which was a breakthrough as it allowed for the creation of smaller, more affordable personal computers. IBM chose the 8088 as the processor for its first PC, launching the PC era.

  • Computing continued advancing with smaller, faster chips like the 386 produced in Israel in 1986. However, by 2000 a new challenge emerged - chips were generating more heat as they got faster. This “power wall” threatened to limit further advances.

  • Intel’s Israeli team saw this issue coming and began brainstorming solutions. One engineer, Rony Friedman, experimented with lower-power chips that could run software faster without overheating. This went against the industry focus on higher clock speeds.

  • The Israeli team pushed their solution, creating better arguments and data over time. Eventually CEO Paul Otellini changed his view and in 2003 they released the Centrino mobile chip based on Israel’s design. This “right turn” shifted the industry away from sole focus on clock speed and helped advance laptop/mobile computing. It showed how Intel Israel advanced the company by addressing future challenges, not just following existing approaches.

  • In the early days of the Yom Kippur War in 1973, the Egyptian army launched a surprise attack against Israel on the holiest day of the Jewish calendar. They breached Israeli defenses along the Suez Canal.

  • Colonel Amnon Reshef was commanding an Israeli tank brigade defending a large front with few tanks. His tanks started getting destroyed, but he couldn’t see any enemy tanks or anti-tank guns.

  • It was discovered that the Egyptians were using a new weapon called the Sagger missile, which could be guided by infantry soldiers over long distances to destroy tanks. This caught the Israeli military off guard.

  • The Sagger had a range of 3,000 meters, 10 times that of regular rocket propelled grenades. Individual soldiers could operate it from covered positions on the ground to guide missiles into tanks.

  • Israeli tanks suffered heavy losses to the Saggers in the initial battles, damaging their reputation of military invincibility gained since the 1967 war. This new threat from guided missiles required adaption by Israeli tank commanders and military strategy.

  • Israeli soldiers at the front lines during the Yom Kippur War had to improvise a new tactic on their own to counter novel Sagger anti-tank missiles used by the Egyptians and Syrians. Noting weaknesses in the missile system, they devised a tactic of moving tanks randomly while firing in the direction of the unseen shooter, obscuring their view.

  • This bottom-up tactical innovation contrasts with most militaries where strict hierarchies limit individual initiative. The IDF deliberately structures itself with fewer senior officers, meaning more responsibility devolves to lower ranks like company commanders in their early 20s.

  • Examples are given of young company commanders and helicopter pilots having to independently make complex life-or-death decisions in real combat situations with little oversight, showing the high degree of authority and responsibility given to junior IDF members out of necessity. This level of individual initiative and burden of responsibility at a young age is unusual compared to other militaries and civilian contexts.

  • In 1974, a female IDF soldier from Unit 8200 (Israel’s NSA equivalent) was kidnapped by terrorists. Prime Minister Rabin was surprised that a low-ranking sergeant would have access to such highly classified information.

  • The Unit 8200 commander, Major General Farkash, explained to Rabin that due to manpower constraints, they needed to train lower-ranking soldiers on sensitive topics, not just officers. Limiting information to only officers would prevent them from having enough trained personnel.

  • This scarcity of manpower is what led Israel to adopt a unique reserve force system, where reservists make up the backbone of the military rather than just supplementing a standing army. Reservists are often commanded by other reserve officers with minimal refresher training.

  • The dilution of ranks and hierarchies in the reserve system carries over to civilian life in Israel. Professors respect students from the military, and superiors interact as equals with their subordinates. Generals have been known to serve coffee to low-ranking soldiers.

  • There are unconventional ways to challenge authority in the IDF, like soldiers voting to remove a colonel from command. Performance is prioritized over rank. Trust between soldiers and commanders is important.

  • The article describes a tradition known as “The Book” among Israeli travelers, which is a collection of handwritten travel journals left in hostels, restaurants, etc. around the world to share advice between travelers.

  • The first Book was started in Israel in the 1970s and spread to locations frequented by Israelis abroad, like El Lobo hostel in Bolivia. It predates the internet but remains popular.

  • The Books contain varied, multilingual entries with recommendations and warnings. They have become hubs that Israeli travelers use to plan routes between countries.

  • Israeli travel is driven by a desire to escape after mandatory military service, but also a response to Israel’s isolation from neighboring countries due to political and diplomatic tensions.

  • This isolation stems from an Arab boycott of Jewish businesses and Israel dating back to the late 1800s, which aimed to block immigration, land sales, and trade. The Arab League organized a comprehensive boycott after Israel’s founding in 1948.

  • The boycott reinforced Israelis’ impulse to travel widely and use technologies like the internet that circumvent geographic borders and isolation. The tradition of The Book allows Israelis to maintain global connections outside official political channels.

  • Israel developed a large high-tech sector out of necessity due to being surrounded by hostile neighbors and subject to international embargoes that made exporting large manufactured goods difficult.

  • This pushed Israeli entrepreneurs towards small, anonymous components and software which positioned the country well for the global shift to knowledge- and innovation-based economies.

  • Estimates are the embargoes have cost Israel $100 billion over 60 years in lost markets and economic development difficulties. However, it also spurred Israel to develop competitive advantages in areas like telecom, cybersecurity, etc.

  • Today Israeli companies have significant presences in growing markets like China, India, Latin America thanks to their early focus on telecom and willingness to operate in new markets. One example given is an Israeli social media company in China.

  • Israel’s military service gives many citizens experience operating in unfamiliar cultures globally by their 30s, aiding their business activities.

  • Netafim is highlighted as an Israeli agrotech company that pioneered drip irrigation globally and helped improve relations with some previously hostile states through its operations.

  • Many Israeli businesspeople and investors see part of their role as “selling” Israel internationally and helping other countries and companies understand its innovation ecosystem.

  • Yossi Medved, an Israeli entrepreneur, gives frequent presentations promoting Israeli startups around the world. Though he runs his own company Vringo, he rarely mentions it in his talks, instead focusing on promoting Israel’s tech sector overall.

  • Getting into Israel’s elite military units is extremely competitive and considered equivalent to top universities like Harvard. Units like the air force, commando units, and intelligence units 8200 undergo rigorous selection and training processes.

  • The most elite and selective unit is Talpiot, which takes the longest training at 41 months. It aims to take Israel’s top math and physics students and give them accelerated degrees combined with exposure to all IDF branches and their technological needs.

  • The goal is to transform cadets into leaders who can solve problems across disciplines. They are given missions with minimal guidance to practice this, like designing solutions for real military issues around areas like helicopter vibrations.

  • Researchers redesigned military helicopter seats by studying vibrations caused by different flights using high-speed cameras and computer analysis of photos.

  • The Talpiot program selects top Israeli students for a specialized military training program in science and technology. Graduates become “Talpions” with prestige in military and civilian life.

  • Critics argue the program’s focus on a small elite group isn’t worthwhile, and that most graduates don’t stay in the military long-term. Supporters counter that the graduates significantly contribute to Israel’s economy and technology sector after leaving the military.

  • The experience of national military service, combined with higher education, contributes to Israeli maturity and innovation at a young age compared to other countries. Military experience provides discipline, decision-making skills, and connections that benefit careers.

  • Close lifetime bonds are formed through regular annual reserve military service, providing an extensive networking system within Israeli society and business. The small, interconnected nature of Israel amplifies this effect.

  • The US military can only recruit from those who express interest in serving, unlike Israel which conscripts citizens and selects the best recruits.

  • The US military makes extensive outreach efforts, like West Point which tracks potential recruits from a young age and has high academic standards. But they cannot access all Americans’ academic records to target recruitment.

  • Colonel John Lowry praised the skills developed in the Israeli and American military, like leadership, responsibility, thinking strategically, and social skills from diverse peers. But few American business leaders have military experience.

  • The divide between American military and civilian society has grown since the end of the draft in 1975. Less than 1% of Americans now serve, compared to 10% after WWII when veterans easily found private sector jobs.

  • Recent wars have given more authority and real-world experience to junior officers, developing skills applicable to business like improvisation, managing resources, and balancing security and civic duties. But American business is not fully leveraging this talent from veterans.

  • Israel, South Korea, and Singapore are among the few developed nations that require lengthy mandatory military service, generally over 18 months, due to existential threats they have faced.

  • Singapore modeled its military and conscription system after Israel’s due to threats from neighbors and a desire to unify its diverse population. Israeli military advisors helped establish Singapore’s defense forces.

  • Military service is intended to foster national identity and bonding among diverse populations in these countries. Soldiers serve alongside each other regardless of ethnicity.

  • While Singapore adopted aspects of Israel’s military model, it has failed to incubate the same level of startups and entrepreneurship as Israel. Risk-taking and initiative are more ingrained in Israeli culture.

  • Singapore’s finance minister visited an Israeli venture capitalist to understand how Israel cultivates so much innovation and commercialization of research, showing Singapore’s interest in emulating this aspect of Israel’s success. In summary, the passage draws parallels between the military systems of Israel, Singapore, and South Korea due to security threats, and notes Singapore looked to Israel as a model but has struggled to match its entrepreneurial output.

Here is a summary of the key points about Israel from the passage:

  • Israel has a strong start-up culture that produces many startups per capita compared to other countries like Korea. This is despite Israel also having a military draft and sense of external threat like Korea.

  • The cultural aspects that make Israel’s startup scene successful include not caring about the social price of failure and being willing to develop projects regardless of economic or political situations. Israelis seem to be on the “other side of the spectrum” from Koreans who fear losing face from failure.

  • An analogy is drawn to improvisation skills taught in the Israeli military. Commanders are expected to improvise and think quickly in crisis situations similar to how NASA flight director Gene Kranz managed the Apollo 13 crisis.

  • An Israeli entrepreneur started a successful startup with a fellow commando after graduating from Harvard Business School, turning down a job at Google to do so. This shows how military experience breeds risk-taking and creativity that fuels Israel’s startup culture.

  • The risk-taking and flexibility of Israel’s culture is contrasted with more rigid organizational cultures like NASA had become, which failed to properly address warnings during the Columbia shuttle disaster due to adherence to routines over experimentation.

  • The passage discusses the contrasting management approaches of NASA and the Israeli military when it comes to space travel/ operations vs. wartime operations.

  • NASA initially pitched the space shuttle program as routine and cost-efficient, like operating a 747 airplane. But space travel is an experimental endeavor and should be treated as such, with each flight a test.

  • The Israeli military, on the other hand, takes an experimental and learning-oriented approach. Each operation is rigorously debriefed to identify lessons, without defending past decisions. Mistakes are accepted if lessons are learned.

  • This “Apollo culture” of experimentation and challenge stems from Israel’s military tradition since its founding. Major reforms were instituted even after successful wars to prevent ossification.

  • Examples of Israeli commissions that critically examined wars and held leaders accountable are provided, unlike closed after-action reports in the US military. Even during existential wars, Israel prioritized self-examination and debate.

  • Israel experienced two major periods of economic growth - from 1948-1970 and from 1990 to the present.

  • The first period saw almost quadruple growth in GDP per capita and a tripling of population, despite wars. This was achieved through an entrepreneurial government dominating a small private sector.

  • The roots of the first period stretch back to the late 1800s, when Jewish settlers tried to establish farming communities but faced many hardships until receiving support from Edmond de Rothschild in 1883.

  • From the 1920s through the 1930s during a global depression, the Jewish community in Palestine still experienced average annual economic growth of 28% for Jews and 14% for Arabs.

  • The second period of growth from 1990 on transformed Israel from a sleepy backwater to an innovation leader, through a thriving entrepreneurial private sector initially catalyzed by government action.

  • Dramatically different and almost opposite means were used for the two periods of growth - an entrepreneurial government led the first, while a thriving private sector led the second, initially supported by government.

  • David Ben-Gurion emerged as the uncontested leader of the Yishuv (pre-state Jewish community in Palestine). He is considered the main organizer and driver who turned Zionist visions into a functioning nation-state.

  • Ben-Gurion launched major efforts to secretly transport Jewish refugees to Palestine in defiance of British immigration restrictions, while also organizing Jewish battalions to fight alongside the British against the Nazis.

  • Though influenced by socialism, Ben-Gurion was primarily pragmatic and focused on nation-building above all else. He opposed policies that did not directly support this goal.

  • A major focus was widely dispersing the Jewish population through a intense settlement program to secure sovereignty over contested areas and avoid being targets. Private capital was unlikely to take on such risky development efforts.

  • The kibbutz movement played a central role in development, producing well beyond their small size and population through innovation in agriculture. Though highly collective, kibbutzim demanded hard work and asceticism from members.

  • Key figures like Pinchas Sapir took an informal, hands-on approach to guiding the economy through different policy levers, which some believe only worked due to the small, idealistic nature of the new nation.

  • In the early 1950s, a group of Jewish militiamen established a community called Hatzerim kibbutz in the remote and barren Negev Desert region of southern Israel. It was a challenging environment with harsh conditions.

  • Over the years, the community overcame difficulties like lack of water supply and salty soil that was hard to cultivate. They debated closing down but decided to persist.

  • In the 1960s, an engineer approached Hatzerim with the idea of drip irrigation, which helped irrigation of crops. This led to the founding of Netafim, a global drip irrigation company.

  • Prof. Ricardo Hausmann noted that Israel is good at taking problems like lack of water and turning them into assets by innovating in fields like desert agriculture, drip irrigation and desalination. Kibbutzim like Hatzerim were on the frontlines of this.

  • Examples of innovation and reversing desertification include forests planted in the Negev like the Yatir Forest, use of warm salty water for fish farming, and recycling of wastewater.

  • Israel managed to significantly increase its GDP per capita relative to the US between 1950-1970 through rapid growth, demonstrating an economic “leapfrog.” Infrastructure projects and creation of industries helped stimulate this growth.

  • An Israeli entrepreneur convinced the government to allow repairing surplus WWII aircraft, launching Israel Aircraft Industries (IAI), once Israel’s largest employer.

  • Once the government saturated the economy with infrastructure spending in the 1960s, only private entrepreneurs could drive further growth by finding new economic opportunities.

  • The transition to a private entrepreneurial economy was delayed by the 1967 Six-Day War, which provided another stimulus for infrastructure spending to develop captured territories.

  • The 1973 Yom Kippur War hurt the economy through heavy casualties, infrastructure damage, and mobilizing much of the workforce for six months. The government maintained wage levels artificially through debt.

  • Israel experienced high inflation and debt in the 1970s-1980s, a period known as its “lost decade.” The economy struggled until reforms in the 1980s opened it up to private enterprise and international markets.

  • In the 1980s and 1990s, Israel underwent major waves of immigration, including Ethiopian Jews and Jews from the former Soviet Union. Large-scale operations like Operation Moses and Operation Solomon airlifted thousands of Ethiopian Jews to Israel.

  • Immigrants from the Soviet Union, like Sergey Brin’s family, helped stimulate Israel’s economy and high-tech sector. Brin visited the Shevach-Mofet high school in Israel, which had a large population of Soviet Jewish immigrants.

  • In the 1990s, the Shevach-Mofet high school in Tel Aviv had a reputation as one of the worst schools, as its student body became more integrated and included immigrants. It later improved drastically under new leadership that focused on academics.

  • Natan Sharansky, a famous Jewish human rights activist and former Soviet refusenik, discussed the history of immigration waves to Israel and their impact on schools like Shevach-Mofet. He pointed to immigrants initially facing difficulties integrating and finding appropriate jobs.

  • The waves of immigration in the 1980s-1990s, particularly from the Soviet Union, played a key role in transforming Israel’s economy and helping it develop into a global high-tech and startup powerhouse. Figures like Brin and immigrants’ talents were an important factor in this.

  • Sergey Mozgovov started a night school called Mofet to teach science and math to unemployed or underemployed Russian immigrants with advanced degrees. This school was very successful.

  • Many Russian immigrants with PhDs and engineering degrees arriving in Israel in the 1990s could not find jobs in their fields, especially while still learning Hebrew. Mozgovov’s night school helped address this issue by providing teaching jobs.

  • This large wave of immigration from the former Soviet Union in the 1990s, totaling around 800,000 people in just a few years, provided a major boost to Israel’s population and economy. These immigrants brought a strong drive for excellence in education.

  • While many struggled at first due to language/cultural barriers, the private tech sector in Israel was expanding and needed engineers, providing jobs for these talented immigrants. Their emphasis on education and competitiveness influenced Israel’s technology sector.

  • This drive for excellence and willingness to take risks that immigrants often have, due to coming from difficult circumstances, helped fuel Israel’s entrepreneurial and tech boom according to some analysts.

  • In the early 1940s, Latin American countries only opened their doors in limited ways to Jewish refugees, while European countries tolerated Jewish refugees temporarily before hoping they would settle elsewhere permanently.

  • Even after WWII and knowledge of the Holocaust, Western countries were still unwilling to accept more Jewish refugees. A Canadian official famously said “none is too many.” British quotas on immigration to Palestine also tightened. There was literally nowhere for many Jews to go.

  • In 1948, Israel declared statehood with the goal of providing a home for Jews after the Holocaust catastrophe. Israel’s founding documents explicitly addressed the need for liberal immigration policies.

  • Israel enacted the Law of Return in 1950, guaranteeing every Jew the right to immigrate with no quotas. Citizenship is also extended to Jewish family members and converts.

  • Israel seeks to actively increase immigration through dedicated government ministries and programs, unlike other countries that try to limit immigration. Integration programs help new immigrants learn Hebrew and find work.

  • Against this backdrop, Israel has undertaken large rescue missions to bring Jewish immigrants to Israel from places like Yemen and Romania, even secretly paying Romania to allow Jewish emigration. Immigration continues to be a high national priority.

  • The passage discusses the CRS-1 router developed by Cisco, which had a massive 92 terabit capacity. This is incredible compared to typical home internet speeds of around 50 megabits per second.

  • A key proponent of developing the CRS-1 was Israeli engineer Michael Laor. He helped open Cisco’s first R&D center outside the US in Israel in 1997. At the time, the idea of such a huge router seemed far-fetched, but Laor argued the internet growth would create demand.

  • Laor’s team in Israel played a pivotal role in designing the chips and architecture for the CRS-1. It was a success, selling for $2 million each when unveiled in 2004.

  • Laor’s decision to return to Israel from Cisco in California ultimately benefitted both Cisco and Israel’s economy. Cisco became deeply invested in Israel and Laor’s team central to its core business.

  • The passage discusses how talented individuals who gain experience abroad through “brain circulation” can benefit both their home and host countries, as Laor and others from Israel working at multinational firms did.

  • Albert “Al” Schwimmer was an American Jew who smuggled planes and equipment to Israel in the late 1940s to help build up the new country’s aviation and defense industries. This violated U.S. neutrality laws but helped Israel in its war for independence.

  • Schwimmer recruited Jewish pilots from the U.S. and UK under false pretenses to fly the planes to Israel. The FBI investigated but Schwimmer succeeded in smuggling some planes. These planes then played a role in Israel’s air force in the 1948 war.

  • After the war, Schwimmer was tried in the U.S. but was exonerated on the grounds that the neutrality law was unjust. He then continued smuggling old fighter planes from the U.S. to Israel and reassembling them.

  • In 1951, Schwimmer partnered with Shimon Peres of the Israeli Defense Ministry to import surplus Mustang aircraft from the U.S. They rebuilt and shipped them disassembled as “irrigation equipment” to Israel.

  • After this, Ben-Gurion recruited Schwimmer to Israel to set up an aircraft maintenance company, which grew to became Israel Aircraft Industries, helping build Israel’s aviation industry from the ground up. Schwimmer played a key role in Israel’s early development of its air force and aviation sector.

  • Bill Gates and Warren Buffett were investing heavily in Israeli tech companies, seeing Israel as a major center of technology innovation.

  • Buffett’s purchase of Iscar, an Israeli machine tool company, was his first acquisition outside the US. He visited Israel and was impressed by the proximity of history and modern industry.

  • However, Israel is seen as a risky place to do business due to geopolitical tensions and threat of violence. But Israeli companies have shown resilience during conflicts like continued shipping orders even during wars.

  • This grit and ability to overcome risk has convinced investors like Buffett that Israeli talent and companies can survive threats. The people and innovation are more important than physical assets like factories that can be rebuilt.

  • Intel co-founder Dov Frohman showed this Israeli determination, leaving Intel just before its IPO to pursue his own ventures but eventually convincing Intel to open a major design center in Israel, establishing it as a tech hub. Major companies were convinced of Israel’s talent and innovation potential despite risks.

Here is a summary of the key points about Intel establishing a search and development center in Israel:

  • In the 1980s, Intel took a risk by opening its first overseas R&D center in Israel. Many thought this was a risky move by putting core operations abroad.

  • The Israel center started small but grew significantly over time, becoming Intel’s largest employer outside the US with over 5,400 workers.

  • The Israel center was highly successful and responsible for many important Intel chip designs that drove the company’s success.

  • Intel built a $3.5 billion chip manufacturing plant in Israel, showing its commitment to the country as a key location.

  • During the Gulf War in 1991, Intel’s Israel operations continued producing microchips despite missile attacks from Iraq. The Israel team stayed dedicated to their work.

  • Dov Frohman, who led Intel Israel, made the risky decision to keep operations open during the war instead of shutting down as the Israeli government advised.

  • Frohman believed keeping Intel Israel open during the war would boost confidence in Israel’s economy and stability as a location for high-tech investment.

  • His decision paid off as Intel Israel’s production continued smoothly throughout the war, cementing Israel’s credibility as a center for Intel’s global operations.

  • Before the early 1990s, there was very little venture capital funding available for Israeli startups. This made it difficult for entrepreneurs to raise money to commercialize new technologies and build companies.

  • The Israeli government program called Yozma (which means “initiative” in Hebrew) was launched in the early 1990s to address this problem by establishing a venture capital industry in Israel.

  • Yozma provided government funding to establish large VC funds that would invest in Israeli startups. It also incentivized foreign VC firms to establish operations in Israel by matching private investment dollars.

  • One of the first startups to benefit from this new venture funding model was Orna Berry’s company Ornet Data Communications. With Yozma funding new VC funds, Ornet was able to raise private funding that allowed it to eventually be acquired by Siemens, one of the first Israeli exits to a European company.

  • The establishment of a robust VC industry through Yozma addressed both funding and mentorship needs of Israeli entrepreneurs. It helped propel Israel’s technology sector globally and laid the foundations for its success.

  • Jon Medved struggled to get startup funding in Israel in the early 1980s and had to “bootstrap” his father’s company through personal connections and resources.

  • The Israeli government created technology incubators in 1991 to help employ Soviet immigrants, many of whom were scientists and engineers. However, the incubators struggled to commercialize research into viable products.

  • Chief scientist Erlich wanted to establish a private venture capital industry in Israel, knowing it needed strong ties to foreign financial markets to succeed.

  • This led to the creation of the Yozma program in 1992, where the government invested $100 million to create 10 new VC funds through partnerships with Israeli and foreign VC firms. The program offered matching funds and upside potential to attract foreign investment.

  • The Yozma program was successful in catalyzing the Israeli VC industry and helped companies like Ornet Data Communications get funding and management support to commercialize their technology. It served as an important turning point for Israel’s high-tech sector.

  • The Yozma program launched in Israel in the early 1990s helped spark venture capital in Israel by providing government funding matches. This led to the creation of 10 VC funds between 1992-1997 that raised over $200 million.

  • Some early successes of Yozma-backed companies included ESC Medical, Galileo, Commontouch, and Jacada.

  • Jon Medved started one of Israel’s first seed funds in 1994 called Israel Seed Partners, even without Yozma backing, due to the buzz around venture capital that Yozma created.

  • By the late 2000s there were over 45 Israeli VC funds. Other countries like Ireland modeled new innovation programs after Yozma’s success in spurring startups and venture capital.

  • Yozma provided critical support that helped Israel’s tech sector join the 1990s tech boom. Reforms by Finance Minister Bibi Netanyahu in the 2000s further supported growth in venture capital and asset management in Israel beyond just tech. This included allowing performance fees for investment managers.

  • Tal Keinan started Israel’s first full spectrum asset management firm KCPS in Tel Aviv in 2005 due to the new legalization of performance fees. This helped untap local investment talent beyond just tech.

  • After Israel gained independence, it relied on allies like France for arms and military supplies. France became a key supplier in the 1950s.

  • In 1967, on the eve of the Six-Day War, French president Charles de Gaulle abruptly cut off arms supplies to Israel. France was pursuing closer ties with Arab states.

  • This betrayal showed Israel it could no longer depend on foreign suppliers. It forced Israel to develop its own indigenous military-industrial complex, like building tanks and fighter jets.

  • Efforts included copying French jet schematics, smuggling gunboats from France, and an ambitious but ultimately canceled fighter jet program called the Lavi.

  • While costly, these programs demonstrated Israel could supply itself and boosted its technological capabilities in areas like aviation and satellites. Many engineers stayed in Israel, fueling its future high-tech boom.

  • The French cutoff had a profound impact similar to the “Sputnik moment” in the US, motivating Israel to rapidly develop its domestic defense industry for national security reasons.

  • The cancellation of the Lavi fighter jet project in Israel led to an influx of engineering talent from the military industries into the private sector. This suddenly unleashed tremendous technological talent into the broader economy.

  • Yossi Gross was one such engineer who worked on the Lavi project. Unable to be creative within the large government-owned aircraft industry, he left to start his own companies. He ended up founding 17 startups and obtaining over 300 patents.

  • The experience engineers gained from heavily funded military R&D projects in Israel provided valuable experience, but it was combined with Israel’s willingness to take risks and interconnect disciplines that helped catalyze Israel’s startup scene. Engineers were not confined to silos and would collaborate across fields.

  • This chapter discusses how this spillover of talent and crossover of disciplines outside of traditional boundaries continues to drive innovation in Israel’s technology sector today. Individuals are multi-skilled and companies encourage mashups of different technologies and industries.

  • Gavriel Iddan, a former rocket scientist, adapted camera technology from missile nose cones to develop an ingestible pill camera (Given Imaging’s PillCam) that could transmit images from inside the human body. This was a novel technology transfer from military to medical applications.

  • Given Imaging grew rapidly after launching in 2001, selling over 600,000 PillCams by 2007. The technology allows painless recording and transmission of intestinal images to doctors.

  • Compugen was founded by IDF veterans who applied algorithms for analyzing intelligence data to problems in genetic sequencing. They pioneered “predictive” drug development based on genetic expression.

  • Several other Israeli startups have made innovative medical devices through unconventional combinations of technologies, or “mashups”, drawing on founders’ multidisciplinary backgrounds from both military and civilian experience.

  • Examples discussed include Aespironics’ credit card-sized inhaler with a breath-powered turbine, and Yossi Gross’ projects combining diverse fields like algae, optics, RF pulses and more for technologies like an implantable artificial pancreas for diabetes treatment.

  • Such technological mashups and multidisciplinary thinking are seen as driving forces behind Israel’s leadership in biomedical innovation.

The chapter discusses the challenges of building technology clusters in less free societies by comparing Erel Margalit’s work in Jerusalem to efforts in Dubai.

Margalit founded a successful venture capital firm in Jerusalem and invested in boosting the city’s arts and culture scene through projects like an animation studio, despite challenges like Jerusalem’s religious focus and Tel Aviv being Israel’s tech hub. Israel’s conditions like connected social networks, transparency, and outlets for free thinking enabled it to develop a strong tech cluster.

In contrast, Dubai operates more like a monarchy where the ruler’s interests are intertwined with the state. It lacks free speech, transparency, and opportunity for citizens to influence leadership or policy. While open to business, only Emirati elites can hold senior roles. Despite large investments, Dubai has struggled to build a self-sustaining innovation cluster due to limitations in its political and cultural environment that curb disruptive advances and free thinking compared to Israel.

  • Sheikh Rashid of Dubai built one of the largest man-made harbors in the world at Jebel Ali port in Dubai. By 1979 it had become the largest port in the Middle East.

  • Rashid realized Dubai’s oil reserves would dry up, so he pushed to diversify the economy through trade and business. He established the Middle East’s first free trade zone.

  • Subsequent leaders like Sheikh Mohammed further developed business parks focused on sectors like technology and media. The first was Dubai Internet City (DIC), which attracted many global tech companies.

  • However, while DIC was successful in attracting big companies, it did not foster local innovation or startups. Companies came to spread innovations made elsewhere rather than develop new technologies.

  • In contrast, clusters in Israel like technology hubs emerged organically from local entrepreneurs and startups. Figures like Yossi Vardi played a key role in cultivating innovation culture and investing in startups.

  • While Dubai created large service hubs, it struggled to develop truly innovative clusters due to its transient foreign population and lack of local rootedness and community commitment compared to Israel.

  • Yossi Vardi played a key role in supporting Israeli startups and helping turn around the country’s Internet sector during a difficult period. His involvement helped legitimize and attract funding to the sector.

  • James Collins cites Israel’s core purpose as “to provide a secure place on Earth for the Jewish people.” This sense of purpose and motivation to build the country’s economy drives many Israeli entrepreneurs and investors.

  • Arab countries face major challenges in developing strong entrepreneurial ecosystems, including large youth populations that need jobs, over-reliance on oil revenues, limited political freedoms, gender inequality, and education quality issues.

  • Some government and business leaders see Israel as a model and are studying how it developed a thriving startup culture. Arab countries need to create around 80 million new jobs by 2020 to employ youth.

  • Oil wealth has insulated governments from reform but stifled entrepreneurship. Infrastructure modernization has not been matched by political liberalization needed to support entrepreneurs and innovation. Real estate bubbles have also burst in places like Dubai.

  • Large-scale construction projects in the Gulf have been focused on academic research clusters and universities, based on the model of technology hubs like Silicon Valley which grew out of universities. However, these efforts have not succeeded in building a true innovation economy.

  • Cultural and social institutions in the Arab world are underdeveloped compared to places like Israel. Metrics like books translated, patents registered, literacy rates, and number of cited scientists are much lower in Arab countries.

  • New universities established by Gulf countries have struggled to recruit stable talent and focus more on reputation than innovation. Residency restrictions prevent long-term commitment. Academic freedom and political constraints are also issues.

  • Education systems in the Arab world over-emphasize rote memorization and standardization over experimentation and outcomes. This shapes risk-averse cultures not conducive to entrepreneurship. Gender segregation and lack of support for women further limits innovation potential.

So in summary, while infrastructure investments have been made, deep-seated cultural, social, and educational factors have prevented the Gulf from building thriving entrepreneurial economies through university and technology clusters like in places like Silicon Valley or Israel. Constraints on academic talent, risk-taking, and women also limit innovation potential.

The passage argues that the economic potential of a country is closely tied to the legal rights and status of its women. Granting full rights and equality to women allows a country to tap into their talent and labor, boosting the overall economy. It also reduces a sense of entitlement among men, encouraging greater achievement and ambition.

The economies of Israel and some Arab nations offer examples of how treating women as subordinate negatively impacts innovation and competitiveness. In contrast, ensuring all citizens have a stake in their country’s success provides motivation to build businesses and take risks.

Israel’s economic miracle arose from a rare confluence of favorable events in the late 1990s like technology growth, immigration, and peace prospects. However, the miracle has proved resilient even as many positive factors disappeared. Major threats to Israel’s long-term success include potential declines in venture capital due to the global economic slowdown, overdependence on exports, and deterioration of regional security, especially if Iran acquires nuclear weapons. Within Israel, some point to concerns over “brain drain” from universities. So far, threats have not derailed foreign investment, but remain areas to watch.

  • Shimon Ben-David warned that Israel’s academic lead over other countries has lessened and will fall further as older faculty retire and many rising stars leave to teach abroad. Of the top 1000 economists in the world from 1990-2000, 25 were Israeli but only 4 have remained in Israel full-time.

  • Israel’s economic growth in recent years simply returned it to its long-term path after a recession, rather than exceeding expectations. The tech sector has surged but the rest of the economy has not kept up. Low workforce participation, especially among Haredi Jews and Israeli Arabs, threatens continued growth.

  • Haredi participation is low because their yeshiva studies exemption from military service isolates them socially and economically. Arab participation is low due to lack of military/entrepreneurial experience and business networks.

  • Despite high education, most Arab graduates struggle to find jobs matching their skills due to lack of social connections. Traditional gender roles also hold back Arab women’s participation.

  • Growing Haredi and Arab populations risk further reducing workforce participation rates unless participation increases dramatically. Israel must grow its economy faster than 4% annually to close quality of life gaps with developed peers and reduce emigration incentives. Increasing participation is key to achieving this goal.

  • Shimon Peres is described as an entrepreneurial leader who helped launch Israel’s high-tech industry despite having no formal business background. He saw opportunities where others saw obstacles.

  • As deputy defense minister, he pushed to develop Israel’s aeronautics, nuclear, and defense research industries against resistance from ministers and scientists. Key projects included the Dimona nuclear reactor.

  • Today Israel leads in R&D investment as a percentage of GDP, creating both economic and security benefits. Its culture of entrepreneurship has roots in the pioneer spirit of early Zionism on kibbutzim and adapting agriculture through science.

  • Ben Gurion and Peres formed a technological partnership, believing technology was key to Israel’s future security and development. Peres relentlessly pursued new ideas and changing existing technologies.

  • This entrepreneurial spirit has morphed into a national condition in Israel where innovation, risk-taking, and constant improvement are valued. While early Zionist culture frowned on profit, today’s entrepreneurs feel they are “inventing for humanity.”

  • Israel has emerged as a “startup nation” uniquely built from scratch to be a modern, technological country through the audacious vision and relentless drive of leaders like Peres. This cultural core is what most sets it apart from other developed, innovative countries.

Based on the passage, Israel can be described as having the following cultural attributes:

  • Individualistic: It emphasizes personal ambition and independence. However, this individualism is combined with collectivism.

  • Collectivist: Despite emphasizing individual achievement, Israelis also strongly value teamwork. The military experience teaches them to complete missions as a team.

  • Nurturing: Even though Israelis are ambitious and competitive, they also score high on being nurturing towards others. The military teaches the value of not leaving anyone behind.

  • Egalitarian: Israeli society scores highly on egalitarianism and lacks rigid hierarchies. Positions are determined more by skills and experience than status.

So in summary, Israel has a relatively unique combination of being both individualistic and collectivist, assertive but also nurturing, with an egalitarian culture that lacks strict hierarchies. The military experience is cited as helping develop these seemingly contradictory traits by focusing on team-based missions and leadership through personal example rather than just authority.

  • This book aims to explain Israel’s vibrant startup scene and culture of innovation. It began as a discussion between the two authors after one of them brought a group of Harvard MBA students to Israel in 2001.

  • The authors acknowledge all the people who helped with research, interviews, editing, and providing feedback on drafts. This includes over 100 people interviewed, staff at the Council on Foreign Relations where one author is based, research assistants, friends and family, and Israeli startup investors, entrepreneurs, and politicians.

  • The book is dedicated to the authors’ wives for their support during the writing process, and to their fathers who had connections to Israel/the Middle East and pioneering work in related fields like solar energy.

  • In sum, the acknowledgments section outlines all the inputs and support that went into researching and writing this book exploring Israel’s successful innovation ecosystem.

  • The passage discusses two people, Jim and Alex, and their inspiring lives as seen through Alex’s letters, journals and art in the book “Alex: Building a Life.”

  • Jim and Alex worked on telling the story of Israel’s startup nation. Their guidance and ability to share their amazement at what Israel has become as a startup hub is now missed.

  • No other details are provided about Jim and Alex or the specific work they did. The summary focuses on noting they helped share the story of Israel’s startup success and their perspective is now missed based on the inspiration of Alex’s life seen in his writings.

Here is a summary of the key points from the provided passage:

  • The passage discusses Israel’s efforts to rescue Ethiopian Jews through covert airlifts in the 1970s-1980s and bring them to Israel, citing interviews.

  • It also discusses the challenges faced by immigrant entrepreneurs in Israel, citing interviews with figures like Natan Sharansky and Erel Margalit.

  • There is discussion of US immigration restrictions and policies in the 1930s that made it difficult for Jewish refugees to escape Nazi Germany, citing scholars like David Wyman.

  • The passage draws parallels between the challenges facing immigrants then and ideas of open immigration today, especially for entrepreneurs and refugees.

  • Various interviews are cited from public figures, entrepreneurs, historians and scholars to provide context and perspective on Israel’s immigration history and policies.

  • After WWII, Britain wanted to admit Jewish refugees into Palestine but faced Arab opposition. Truman asked Congress to allow some refugees into the US.

  • In 1948, a law was passed to issue visas to displaced persons, but it was manipulated by Senator Pat McCarran so that it actually discriminated against Eastern European Jews. Only about 16% of visa recipients between 1948-1952 were Jewish.

  • McCarran’s actions were effective in limiting the number of Jewish refugees who could choose to resettle in the US. Many Jewish refugees who otherwise may have chosen the US ended up going to Israel instead.

  • The document discusses issues of ethnic tensions between European Holocaust refugees and Jews from the Arab world in Israel after its founding. It quotes a sociologist describing the cultural repression felt by Iraqi Jewish immigrants.

So in summary, it discusses Truman’s efforts to help Jewish refugees after WWII, how a US law was manipulated by McCarran to limit Jewish immigration, and some of the ethnic tensions that arose in early Israel between different Jewish groups.

Based on the references provided,

  • The passage discusses Israel’s economic miracle and challenges facing its continued economic growth.

  • It cites studies and experts discussing Israel’s strong innovation culture and high-tech sector. Statistics are provided on Israeli patents and R&D spending.

  • Challenges mentioned include declining workforce participation rates, especially among ultra-Orthodox Jews and Arab women. Studies are cited calling for increasing participation from these groups.

  • Demographic pressures from a growing ultra-Orthodox and Arab population are discussed as potential economic threats if workforce integration is not achieved.

  • Examples are given of Israeli companies and entrepreneurs along with studies analyzing Israel’s venture capital industry and military-technology commercialization.

  • Experts and leaders are quoted discussing the importance of education, human capital, cooperation between the private and public sectors, and maintaining peace for Israel’s continued economic success.

  • In summary, the passage analyzes factors behind Israel’s strong innovation-driven economy while also outlining demographic and social challenges that could threaten sustained growth if not adequately addressed. A variety of studies, statistics, and expert opinions are cited.

Here is a summary of the references:

  • CIA (U.S. Central Intelligence Agency) entries on population and military service age/obligation statistics from The World Factbook 2008.

  • Cisco press release about growth in video service delivery driving sales of their CRS-1 routing platform.

  • Book by Rodger Claire about Israel’s efforts to deny Iraq nuclear weapons.

  • article about best places for business connectivity.

  • Newspaper article about Israeli kibbutzim adopting a 4-day workweek.

  • Book by Avner Cohen about Israel’s nuclear program.

  • Book by Eliot Cohen on civil-military relations and leadership in wartime.

  • Book by Uri Cohen about climbing Mount Hermon.

  • Book by Jim Collins and Jerry Porras about visionary companies.

  • Session at an Israel Venture Association conference on current economic challenges.

  • Harvard Business Review article by Diane Coutu on resilience.

  • Harvard Business Review article on learning from experience in complex situations.

  • Book about Israel Aircraft Industries founder Al Schwimmer.

  • Book about the rise and vulnerabilities of success in Dubai.

And several other newspaper articles, books, reports, etc. related to topics like Israel’s economy, innovation, the semiconductor industry, venture capital, Dubai, and military/national security issues.

Here is a summary of the source:

Kittani, Helmi, and Hanoch Marmari. “The Glass Wall.” The Center for Jewish-Arab Economic Development, June 25, 2006.

This article discusses the “glass wall” separating Jewish and Arab economic development in Israel. It was published by the Center for Jewish-Arab Economic Development on June 25, 2006.

Here is a summary of the sources provided:

  • Solow-Robert M. Solow won the Nobel Prize in economics in 1987 for his research on economic growth. The provided link is to the Nobel lecture he gave that year.

  • Snook et al.- A 2004 Harvard Business School case study examining issues related to friendly fire incidents in military operations.

  • Steil et al.- A 2002 book published by Princeton University Press examining the relationship between technological innovation and economic performance.

  • Stern- A 2009 article from the Israeli newspaper Haaretz reporting on changes in Israeli Arab attitudes toward women.

  • Sternhell- A 1998 book published by Princeton University Press translating and examining Zeev Sternhell’s work on the founding myths of Israel.

  • Symmes- A 2005 article from Outside magazine profiling the Israeli outdoor guidebook “The Book.”

  • Tal- A 2006 report submitted to the UN Convention to Combat Desertification providing Israel’s national report on issues related to pollution and desertification from 2003-2005.

  • Tal- A 2002 book published by UC Berkeley examining the environmental history of Israel.

  • Theil- A 2007 article from Newsweek International on teaching entrepreneurship in the Arab world.

  • Time/CBS- A 1999 book published by Simon & Schuster profiling 100 people who shaped the last 100 years.

  • Trajtenberg & Shiff- A 2008 working paper examining the identification and mobility of Israeli patenting inventors.

  • Several other sources examining topics related to Israel, economics, business, technology, and the Middle East region.

Here is a summary of the interviews and events from 2009 mentioned in the passage:

  • Christian H. M. Ketels, economist at Harvard Business School, interview in March 2009.

  • Isaac T. Kohlberg, senior associate provost at Harvard University, interview in January 2009.

  • Eugene (Gene) F. Kranz, former NASA flight director and manager, died in May 2009.

  • Michael Laor, founder of Cisco Systems Development Center in Israel, interview in February 2009.

  • Jonathan Lipow, economics professor at Oberlin University, discussed in May 2008.

  • David Lipsky, author, discussed book Absolutely American in March 2009.

  • John (res.) Lowry, general manager of Harley-Davidson Motor Company, interviewed in November 2008.

  • Edward Luttwak, senior associate at CSIS, interviewed in December 2008.

  • Yael Luttwak, former IDF tank commander and filmmaker, discussed in August 2008.

  • Yoelle Maarek, former director of Google’s R&D center in Israel, interviewed in January 2009.

  • Darya Maoz, anthropologist at Hebrew University, discussed in June 2009.

  • Several other Google executives and Israeli startup founders were interviewed in January 2009.

  • Brigadier General H.R. McMaster, U.S. Army officer, discussed in May 2009.

  • David McWilliams, Irish economist, discussed in July 2009.

  • Lesa Mitchell, vice president at Kauffman Foundation, discussed in March 2009.

  • This covers the major people and events mentioned from 2009 in the passage.

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About Matheus Puppe