Posted on 10/26/2009 5:28:22 PM PDT by Ravnagora
Israel has thrived during the global collapse—thanks to an entrepreneurial culture built on compulsory military service. Dan Senor and Saul Singer on why U.S. companies should take notes.
For all the press coverage of the Middle East, there is one side of Israel that gets scant attention: the country’s economy has the highest concentration of innovation and entrepreneurialism in the world today. For years, multinational technology companies and global investors have been beating a path to Israel. Even in 2008—a year of global economic turmoil—per capita venture investments in Israel were 2.5 times greater than in the United States, more than 30 times greater than in Europe, 80 times greater than in China, and 350 times greater than in India. And Israel still boasts the highest density of start-ups in the world (a total of 3,850 start-ups, one for every 1,844 Israelis). More Israeli companies are on NASDAQ than companies from all of Europe, China, India, Korea, and Japan combined.
“When it comes to U.S. military résumés, Silicon Valley is illiterate. It’s a shame. What a waste of the kick-ass leadership talent coming out of Iraq and Afghanistan,” said Israeli entrepreneur Jon Medved.
The root of Israel’s economic dynamism—and the way it weathered a global downturn—can be traced to government policies that cultivate a unique entrepreneurialism. These include innovative immigration policies and disproportionate research and development spending (Israel is the world leader in the percentage of the economy that is spent on R&D). But the real turbocharger has been its universal military training and national service program.
Here's how it works. While students in other countries are preoccupied with deciding which college to attend, Israelis are weighing the merits of different military units. And just as students elsewhere are thinking about what they need to do to get into the best schools, many Israelis are positioning themselves to be recruited by the elite units of the IDF (Israel Defense Forces).
One IDF Army officer with whom we spoke knew when he was just twelve years old that he wanted to learn Arabic, partly because he realized even then that it might help him get accepted into the best intelligence units.
One year before reaching draft age, all seventeen-year-old males and females are called to report to IDF recruiting centers for an initial one-day screening that includes aptitude and psychological exams, interviews, and a medical evaluation. At the end of the day, a health and psychometric classification is determined and service possibilities are presented to the young candidate in a personal interview.
Those who complete the training together remain as a team throughout their regular and reserve service. Their unit becomes a second family. They remain in the reserves until they are in their mid-forties.
While it’s difficult to get into the top Israeli universities, the nation’s equivalent of Harvard, Princeton, and Yale are the IDF’s elite units. The unit in which an applicant served tells prospective employers what kind of selection process he or she navigated, and what skills and relevant experience he or she may already possess.
“In Israel, one’s academic past is somehow less important than the military past. One of the questions asked in every job interview is, Where did you serve in the army?” says Gil Kerbs, an intelligence unit alumnus who today works in Israel’s venture capital industry, specializing in China’s technology market.
The advantage that Israel’s economy and its society gains from this equally dispersed national service experience was driven home to us by neither an Israeli nor an American—but rather by Gary Shainberg, an eighteen-year veteran of the British navy. Today, he is vice president for technology and innovation at British Telecom.
“There is something about the DNA of Israeli innovation that is unexplainable,” Shainberg said. But he did have the beginnings of a theory. “I think it comes down to maturity. That’s because nowhere else in the world where people work in a center of technology innovation do they also have to do national service.”
At the age of 18, Israelis go into the army for a minimum of two to three years. If they don’t reenlist, they typically enroll at a university. “There’s a massive percentage of Israelis who go to university out of the army compared to anywhere else in the world,” said Shainberg.
In fact, according to the Organisation for Economic Co-operation and Development (OECD), 45 percent of Israelis are university-educated, which is among the highest percentages in the world. And according to a recent IMD World Competitiveness Yearbook, Israel was ranked second among sixty developed nations on the criterion of whether “university education meets the needs of a competitive economy.”
By the time students finish college, they’re in their mid-twenties; some already have graduate degrees, and a large number are married. “All this changes the mental ability of the individual,” Shainberg reasoned. “They’re much more mature; they’ve got more life experience. Innovation is all about finding ideas.”
Innovation often depends on having a different perspective. Perspective comes from experience. Real experience also typically comes with age or maturity. But in Israel, you get experience, perspective, and maturity at a younger age, because the society jams so many transformative experiences into Israelis when they’re barely out of high school. By the time they get to college, their heads are in a different place than those of their American counterparts.
“You’ve got a whole different perspective on life. I think it’s that later education, the younger marriage, the military experience—and I spent eighteen years in the [British] navy, so I can sort of empathize with that sort of thing,” Shainberg went on. “In the military, you’re in an environment where you have to think on your feet. You have to make life-and-death decisions. You learn about discipline. You learn about training your mind to do things, especially if you’re frontline or you’re doing something operational. And that can only be good and useful in the business world.”
This maturity is especially powerful when mixed with an almost childish impatience.
Since their country’s founding, Israelis have been keenly aware that the future—both near and distant—is always in question. Every moment has strategic importance. As Mark Gerson, an American entrepreneur who has invested in several Israeli start-ups, described it, “When an Israeli man wants to date a woman, he asks her out that night. When an Israeli entrepreneur has a business idea, he will start it that week. The notion that one should accumulate credentials before launching a venture simply does not exist. This is actually good in business. Too much time can only teach you what can go wrong, not what could be transformative.”
The IDF also offers recruits another valuable experience: a unique space within Israeli society where young men and women work closely and intensely with peers from different cultural, socioeconomic, and religious backgrounds. A young Jew from Russia, another from Ethiopia, a secular sabra (native-born Israeli) from a swanky Tel Aviv suburb, a yeshiva student from Jerusalem, and a kibbutznik from a farming family might all meet in the same unit. They’ll spend two to three years serving together full-time, and then spend another twenty-plus years of annual service in the reserves.
The IDF was structured to rely heavily on reserve forces, since there is no way for such a small country to maintain a sufficiently large standing army. So for combat soldiers, connections made in the army are constantly renewed through decades of reserve duty. For a few weeks a year, or sometimes just a week at a time, Israelis depart from their professional and personal lives to train with their military unit. Not surprisingly, many business connections are made during the long hours of operations, guard duty, and training.
While a majority of Israeli entrepreneurs were profoundly influenced by their stint in the IDF, a military background is hardly common in Silicon Valley or widespread in the senior echelons of corporate America.
As Israeli entrepreneur Jon Medved—who has sold several start-ups to large American companies—told us, “When it comes to U.S. military résumés, Silicon Valley is illiterate. It’s a shame. What a waste of the kick-ass leadership talent coming out of Iraq and Afghanistan. The American business world doesn’t quite know what to do with them.”
In Israel it is the opposite. While Israeli businesses still look for private-sector experience, military service provides the critical standardized metric for employers—all of whom know what it means to be an officer or to have served in an elite unit.
Dan Senor, a professional investor, is an adjunct senior fellow at the Council on Foreign Relations and author of Start-up Nation: The Story of Israel's Economic Miracle. From 2003-2004, he was based in Baghdad as a senior adviser to the U.S.-led Coalition in Iraq.
Saul Singer is a columnist for the Jerusalem Post, where he also served for six years as editorial page editor.
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I just returned from a month in Israel. There is no recession in Israel. There is a building and housing boom.
I fail to see how some big government mandate like this preserves the economy.
It probably helps that most of Israel’s largest companies probably operate under the premise of putting their country first.
Our largest companies care only about $$$$$$$.
Last night in Kansas City. Ehud Olmert spoke to a Jewish Federation meeting whe he satated the same facts in this article. He said that the investment in EDUCATION from birth to 10 years of age was why Israel is so sucessful in economic terms.
He said that there was no recession in Israel as the were a NET EXPORTER not an Importer.
He also attributes this education push on the fact that they had to assimulate refugees from all over the world that came to Israel escaping anti-semitism in their native homelands.
The most important thing in Education is a common language.
Now look at America!
This does not include the value of corporate espionage that Israel also perpetrates in the USA.
This number also does not include the money laundering and financial fraud, most run by Russian-origin Israelis.
$15 Billion divided by 7.5 million population = $2K subsidy per person, per year.
Total amount of restitution paid by Germany over the years totals at least $70B in today's dollars.
Look over the amount of money the USA has given since 1948-49 ... Israel shows what over $300B of US Dollars can do for a nation of a few million people!
There is no conflict between profit and serving one’s nation.
There certainly is. I could imagine such a conflict when a company desires to make a profit selling state of the art satellite and missile technology to an enemy/competitor nation...
An exceedingly rare exception.
...But true none the less.
How about the shady people in just about every large financial institution that have all but financially ruined our country in recent years? Of course, they had lots of help from politicians, fiscal policy makers, and irresponsible people, but you get the idea.
If you’d like to be on or off, please FR mail me.
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So, oppressing poor, piece-loving Palestinians is good training for the job market? Man, I should have come in my 30s.
Two words — Stanley Fischer
“As Israeli entrepreneur Jon Medved”
Michael Medved’s brother.
That's odd. I didn't know that the DemocRATs were all Russian-origin Israelis.
What part do you consider to be “BS” - sorry, I am not a psychic. I will give you citations for whatever you want to ask about, that I mention in my original post.
This does not include the value of corporate espionage that Israel also perpetrates in the USA.
And American companies don't commit corporate espionage? I hate to tell you, but much of our industrial revolution was built on stealing British patents.
However, I would also reminds you too look at the benefits to the US from Israeli advances in technology, medecine and agriculture. If your computer has an Intel microprocessor built after 2004, it probably is based on technology developed in Israel. You don't think that the code names "Yonah", "Merom" and "Nehillim" are accidental, do you?
This number also does not include the money laundering and financial fraud, most run by Russian-origin Israelis.
And Israel makes money from this how? You think the criminals don't screw Israel? Good grief.
$15 Billion divided by 7.5 million population = $2K subsidy per person, per year.
Actually, it is more like 3 Billion divided by 7.5 Billion or $400. I happen to oppose this aid, but stop inflating it.
Total amount of restitution paid by Germany over the years totals at least $70B in today's dollars.
And that is what, $11,666.67 per Jew killed? And what does money paid to my grandparents in Sweden or my father in the US have to do with Israel?
Look over the amount of money the USA has given since 1948-49 ... Israel shows what over $300B of US Dollars can do for a nation of a few million people!
Someone who doens't understand the difference between a loan guarantee (ie co-signing for a lower interest rate) and direct payment, should not comment on the matter.
“The most important thing in Education is a common language.”
Just a naive and friendly question...is the common language Hebrew?
(and/or English?)
The only reason I ask is the talented post-docs from Isreal I’ve
met speak English better than a fair number of our native-born
USA post-docs/grad students.
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