Startup Nation

I’m a little embarrassed to admit that I’ve only recently read Startup Nation, Dan Senor and Saul Singer’s bestseller speculating on the origins of Israel’s startling economic success over the last decade. I’ve written about this phenomenon in the context of pointing out that Israel’s economy doubled in size during the very decade BDS was allegedly on its unstoppable march. But how and why this miraculous growth is occurring now is worth consideration, even beyond the context of how much it exposes the embarrassing lack of success of the boycott, divestment and sanctions “movement.”

An earlier treatment of this subject, George Gilder’s The Israel Test, was a bit of a disappointment. Not that the author’s heart wasn’t in the right place, but his portrayal of Israel’s success representing the victory of civilization, creativity and life over the forces of barbarism, envy and death just seemed too Manichean to explain trends that I suspected were grounded in the more down-to-earth, pragmatic factors usually driving economics.

Articles on Israel’s decade of success tend to focus on individual aspects of the country’s character: the national solidarity and character-building deriving from universal military service, the influx of huge numbers of skilled immigrants in the 1990s, the liberalization of the economy by then Finance Minister, now Prime Minister Benjamin Netanyahu. These all seemed to tell part of the story, but not the whole.

After all, other nations couple national conscription to meet existential threats with a commitment to export-driven economic success (think South Korea), yet they have not managed to create the eco-system required to support high-risk startups that are driving Israel’s growth. Immigration has proven to be as much of a burden as a boon to most nations, and even the notion that Netanyahu unchained the nation from the anchor of its socialist past ignores the spectacular nation-building that took place during Israel’s earliest years when the economy was its most statist.

As a business book, Startup Nation avoids the analytic pitfalls that often derive from reading economic trends through potentially distorting lens of global or domestic politics. Not that business books don’t suffer from their own problems, especially their tendency to “predict the present” when looking at current “hot” success stories. Think back to the 1980s and early 90s when bookstore shelves groaned under the weight of tomes hailing Steve Jobs as the penultimate genius, only to be reshelved with books featuring titles such as Accidental Millionaire exposing Jobs as a fraud, followed by today’s titles again celebrating the Apple pioneer’s brilliance. (Along the same line, one wonders how many biographies hailing the wonderfulness of business leaders responsible for the recent economic meltdown are in the process of being pulped.)

Startup Nation dodges these various bullets by taking an integrated historical approach to the subject matter. Yes, the conservative Netanyahu is a hero of the tale due to his dismantling of state enterprises that were standing in the way of growth in the 1990s. But the book also celebrates the left-leaning Shimon Peres for creating the very industries (aircraft, arms, etc.) that got Israel to a point where they had valuable national enterprises worth privatizing. In addition to exploring factors related to universal military conscription (high levels of responsibility and high-tech training at a young age, etc.), the book also explores the unique nature of Israel’s military where initiative and cross-service cooperation is celebrated, rather than stifled, up and down the ranks.

Humility is probably the greatest asset Startup Nation brings to the table, specifically with regard to pointing out that Israel’s current success owes as much to global changes in technology and economics as it does to the nature of Israeli society itself. Simply put, the world has transformed over the last 2-3 decades in a way that the unique strengths of the Jewish state (limited patience, flat institutional hierarchies, forgiveness of failure, acceptance of inter-disciplinary approaches to problems) happen to be just the factors that support the driving force of the new economy: entrepreneurial startups.

Other factors, such as support from the Jewish Diaspora and a culture which celebrates learning (represented by so many high-quality Israeli universities) play a part in the tale of Israel’s success, but those things have been in place since before Israel’s founding. If we were in an era when national wealth and power was derived from heavy industry requiring massive resources and the ability to mobilize large pools of unskilled labor, Israel would simply not be a player. But in an era when the ability to create and sustain high-risk startups is the world’s most valuable commodity, Israel is in the fortunate position of having the very qualities needed for today’s definition of success.

As my friend Sol often says, read the whole thing

Google will never divest…

Jeff Goldberg has been on a roll this week, following up the interview I mentioned last posting with this one in which he talks with authors Dan Senor and Saul Singer and their new book Start Up Nation which documents the phenomenal economic success of the entrepreneurial Israeli economy.

While I could quibble about some political assumptions made by the interviewer, the key points he makes is that major corporations and major investors would pull out of India or Ireland long before they would ever consider pulling out of Israel. This is because while the former “I” countries provide manpower and brainpower, the latter combines these with proven entrepreneurial creativity which has provided companies like Google and Intel with the most important innovations critical for their success.

I’ve been thinking recently about why we allow the divestment crew to claim as a “success” some retirement fund selling off a quarter-million dollars worth of crashing Israeli real-estate stock (putting aside that the sale had nothing to do with BDS), yet fail to count those same investors socking hundreds of millions of dollars into the Israeli economy as a measure of our success. After all, if the BDSers want to set the rules whereby any negative economic measure, not matter how small, taken by a North American or European firm represents a loss of support for Israel among the nations and a vindication of their political message, why can’t we apply those same rules with regard to the billions these same firms confidently invest in the Jewish state?

In many ways, the divest-niks look to Europe as their model, hoping their calls for boycott, divestment and sanction will eventually get the same hearing in the US as they allegedly get on the continent. With that in mind, it was interesting to discover reading Goldberg’s piece that European venture capitalists invest more into Israel than they do into any individual European country.

Stuff that into your pipe and smoke it, Naomi Klein!