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Thursday, October 29, 2009

The secret to Israel's success

Dan Senor and Saul Singer have written a new book: Start-Up Nation: The Story of Israel's Economic Miracle. Kathryn Jean Lopez of National Review Online interviewed Senor about the book. Here are some highlights.
KATHRYN JEAN LOPEZ: What’s so special about Israel?

DAN SENOR: Israel represents the highest concentration of innovation and entrepreneurship in the world today: the most start-ups per capita; the highest percentage of GDP invested in civilian R&D; more companies on NASDAQ than all of Europe, Korea, Japan, India, and China combined; and the biggest destination for global venture capital per capita. Israel raises 2.5 times as much global venture capital as the U.S., 30 times more than Europe, 80 times more than India, and 350 times more than China — and these numbers are from 2008, when the world was in the midst of an economic meltdown. Israel all but escaped the crisis that ripped through economies everywhere else.


LOPEZ: What’s the secret of its success?

DAN SENOR: Our book dives into many interacting factors, but one of the most important is the training and battlefield experience that most Israelis receive in the military. The military is where many Israelis learn to lead and manage people, improvise, become mission-oriented, work in teams, and contribute to their country. They tend to come out of their years of service (three for men, two for women) more mature and directed than their peers in other countries. They learn “the value of five minutes,” as one general told us. They even learn something more uniquely Israeli: to speak up — regardless of ranks and hierarchy — if they think things can be done better.

LOPEZ: Where has Israel fallen behind?

DAN SENOR: The non-tech portion of the economy is overconcentrated, overregulated, and overtaxed, and has consequently performed at a mediocre level. If the conditions that have allowed the high-tech sector to flourish were applied to the rest of the economy, Israel could grow even faster. If Israel also were to address the low labor-force-participation rates in certain demographics, we agree with Prime Minister Netanyahu that Israel could become one of the top ten largest economies in the world.

LOPEZ: Has this been an ethical success story?

DAN SENOR: We believe that the free-market system is progressively eliminating the extreme poverty that was the lot of the world throughout history. This process is largely driven by improvements in productivity, which are in part a result of advancements in technology, especially by small, scrappy start-ups. Also, Israel has specialized in life-enhancing and life-saving technologies like medical devices, water conservation, desalination, and irrigation, not to mention the information technology that is making the world smaller. The great thing about innovation is that, unlike physical resources, ideas can be shared and duplicated by all without taking from anyone else.
Read the whole thing.

I'm probably not the best one to discuss this story, because I never served in the army (I was 34 years old when we immigrated to Israel and the major Russian immigration started a year or two before we came, so they didn't want me) and I never got the army culture down pat as a result. In a lot of ways, I still prefer the American way of doing business. With Israelis, everything is face-to-face meetings and despite what he says about speaking up, in my experience, most Israelis are conformists. Tell me where they grew up and how they dress and I can tell you an awful lot about them.

But it's difficult to argue with the success. Maybe I need a review copy of the book.


At 3:34 PM, Blogger NormanF said...

Carl - Israel does have a can-do spirit. Show me an Arab country that emphasizes entrepreneurship, risk-taking and innovation as Israel does. You won't find one. Israel does have its problems but contrary to what is depicted in the media, its future is a bright one. While the Palestinians are obsessed with destroying Israel, Israel is looking to the day ahead. The real secret of Israel's strength is not the IDF; its due to its enormous human potential, which goes untapped and wasted in the Arab World.

That's a story no one's talking about.


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