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

Invest

Whenever divestment hits a college or other institution, a frequent response of divestment opponents is to propose positive investment in companies and organizations that support both Arabs and Jews in Israel as a counter to the wholly negative program of divestment.

While investment is a logical response to BDS, one that reflects the commendable desire to build and grow vs. punish and destroy, I’ve rarely seen much come out of these suggestions. Partly this is because divestment really has nothing to do with business or economics. As has been pointed out here again and again, BDS is a political propaganda project, one designed to drag high-profile organizations (by any means necessary) under the banner of “Israel=Apartheid.” As such, the idea of investing to benefit the people of the region means nothing to advocates of boycott, divestment and sanction.

But even when investment in the region is proposed (regardless of whether or not such suggestions were triggered by a divestment program), such projects are difficult to sustain (assuming they can get off the ground in the first place). This is no great surprise since most activism (particularly campus activism) involves short bursts of activity: holding a rally, protesting an event, sponsoring panel discussions or educational events, etc., etc.. These are all extremely important and valuable activities, but not ones that fit the “buy and hold” timeframes required for involvement in a real investment program.

Can this circle be squared? Can these noble sentiments for positive change via investment be channeled in a direction where they can do long-term good?

Enter the Israeli economy.

Two books, The Israel Test and Startup Nation have come out recently highlighting the incredible dynamism of Israel’s entrepreneurial society, one which continues to grow and thrive despite 60 years of being in the cross-hairs of every dysfunctional government in the Middle East, despite endless war and terror, despite even the recent economic downturn.

Such an economy provides open doors for those offering to combine good ideas, hard work and a willingness to take risks. And a group of students at the University of Michigan has walked through one of those doors, creating the Tamid Israel Investment Group, a remarkable student-run organization that connects members with entrepreneurs in Israel, providing opportunities to invest, intern and generally take part in the project that is Israel in ways that jibe with these student’s emerging identities as international businessmen and women.

Now this is not to say that taking part in the wide variety of social, religious and political organizations designed to support Israel should be supplanted by a drive towards economics and business. As we’ve seen in the two decades since Oslo, economic development will not create the incentive for those who prefer war to opt for peace. The battle against BDS, like the battle to defend Israel from its enemies and defamers can and must go on at all levels.

But one of those levels can and should be the practical activities of business. Tamid (an organization I can only hope will spread to campuses across the nation) provides students who may not have felt they had a stake in the Jewish state a way to connect deeply and professionally with Israel, creating bonds that will last a lifetime. And if they can accelerate their careers and grow the Israeli economy in the process, so much the better.