Israel’s Technology Boom

Hat tip to David Kelsey who keeps us informed:

The Wall Street Journal reviews “Start-Up Nation” by Dan Senor and Saul Singer, a book that reviews Israel’s incredible success with innovative technologies and their related industries.

‘There are more new innovative ideas . . . coming out of Israel than there are out in [Silicon] Valley right now. And it doesn’t slow during economic downturns.” The authors of “Start-Up Nation,” Dan Senor and Saul Singer, are quoting an executive at British Telecom, but they could just as easily be quoting an executive at Intel, which last year opened a $3.5 billion factory in Kiryat Gat, an hour south of Tel Aviv, to make sophisticated 45-nanometer chips; or Warren Buffett, who in 2006 paid $4 billion for four-fifths of an Israeli firm that makes high-tech cutting tools for cars and planes; or John Chambers, Cisco’s chief executive, who has bought nine Israeli start-ups; or Steve Ballmer, who calls Microsoft “as much an Israeli company as an American company” because of the importance of its Israeli technologists. “Google, Cisco, Microsoft, Intel, eBay . . . ,” says one of eBay’s executives. “The best-kept secret is that we all live and die by the work of our Israeli teams.”

Israel is the world’s techno-nation. Civilian research-and-development expenditures run 4.5% of the gross domestic product—half-again the level of the U.S., Germany or South Korea—and venture-capital investment per capita is 2½ times that of the U.S. and six times that of the United Kingdom. Even in absolute terms, Israel has only the U.S.—with more than 40 times the population—as a challenger.

As Messrs. Senor and Singer write: “Israel—a country of just 7.1 million people—attracted close to $2 billion in venture capital [in 2008], as much as flowed to the U.K.’s 61 million citizens or the 145 million people living in Germany and France combined.” At the start of 2009, some 63 Israeli companies were listed on the Nasdaq, more than those of any other foreign country. Among the Israeli firms: Teva Pharmaceuticals, the world’s largest generic drug maker, with a market cap of $48 billion; and Check Point Software Technologies, with a market cap of $7 billion.

Such economic dynamism has occurred in the face of war, internal strife and rising animosity from other nations. During the six years following the bursting of the tech bubble in 2000, Israel suffered one of its worst periods of terrorist attacks and fought a second Lebanese war; and yet, as the authors note, its “share of the global venture capital market did not drop—it doubled, from 15 percent to 31 percent.”

The review goes on to note that the authors of Start Up Nation do not attribute this success to the predominance of Jews in Israel. Instead, they claim that Israel’s military culture fosters the type of skills, innovation, entrepreneurial spirit and individualism that enable people to develop products and companies.

Interesting idea. It’s always hard to say that it’s Jewish intellect that is driving this extraordinary success because let’s face it, we all know some fairly stupid Jewish people, not to mention average ones. Then again, I’m sure I’m no exception in knowing a large number of extraordinarily smart Jews.

It’s a difficult subject to address, especially for those of us who don’t often wade into the messy idea of a Jewish ethnicity, but the question here is dangling tantalizingly and it is a fair one to ask: is it Judaism or is it simply the way Israeli culture has evolved that has led to this unusual situation?

Also, if it is Judaism, is it ethnicity or is it a cultural aspect of Judaism that has brought about this unusual success?

One clue is that a very large proportion of Nobel Prize winners, Wolf Prize winners and chess grandmasters are Jewish, not to mention a disproportionate number of the Forbes 400 and of the biggest individual contributors to charity in North America. Although 9 of the Nobel Prize winners come from Israel, the vast majority of other Jewish winners and businesspeople come from other countries including the USA. This is a strong clue.

I think, however, that a better clue might be that Jews are also disproportionately represented among lawyers, doctors and academics. This leads me to believe that perhaps the issue isn’t ethnicity after all and maybe it’s also not military training. How about the reason being education as an emphasis in Jewish families and culture?

Education.

That might explain why today at Barnes and Noble I was looking at the Humor section and the only group that had joke books dedicated to them were Jews. There were three large Jewish joke volumes spread out among the multitudes of adult joke books, silly joke books, toilet joke books, etc. I asked myself why there would be a large enough audience for publishers to put out these books (two were hardcovers) dedicated to Jewish jokes. The answer is that there are enough customers, and there are enough customers because Jews buy books. I know this because Israel publishes and sells more books per capita than any nation on earth. It boils down to education, I think. A culture that promotes education, encourages learning and maybe even promotes “outside the box” thinking because we are usually a minority wherever we live.