Saturday, February 12, 2011

Start Up Nation

Start-up Nation: The Story of Israel's Economic Miracle 

Amazon US, Kindle US, Amazon IN, Kindle IN (my user review on

Readable, informative, insightful, slightly hagiographic. Could have had more detailed case studies.

This is a very readable and informative delivered with insight, analytical skills, and a just a little bit rose-tinted glasses. It covers a lot of ground into Israel's entrepreneurial successes and the causes behind it. When delving into the secret sauce, so to say, of Israel's success, the authors point out there is no secret mantra here, rather a congruence of several factors, cultural, geo-political, religious, and sheer happenstance that have combined over the decades. However, the book suffers a little by its lack of any detailed case study of a company or entrepreneurial success that would have lent the book academic heft. The author(s) also seem to be overawed by Israeli military prowess and success and spend a disproportionate amount of time documenting Israel's many military successes against its Arab neighbors. These details however do not end up fitting convincingly into the narrative. The theory put forward is intriguing for sure, and at least at face value looks convincingly. But a lot more is needed, by careful piecing of several of the pieces that could possibly make this puzzle. Which does not happen in the book.

These two picayunes notwithstanding, this is a very engaging read. Highly recommended. 

Israel is a most unlikely country to be considered a successful breeding ground cutting-edge technology startups. Despite few natural resources, a population consisting of immigrants, an ever-hostile neighborhood, it has managed to make a name for itself as a country where cutting edge technological innovations are churned out with amazing regularity, a place where technology behemoths like Intel and Google come to do cutting edge work.

The authors do a commendable job of documenting and highlighting Israel's long road from its tumultuous creation in 1948 to its present day reputation. They look at several factors that explain its success - both because and despite of. The frankness of the Jews ("What is said about Jews—two Jews, three opinions—is certainly true of Israelis. People who don’t like this sort of frankness can be turned off by Israel"), the military service that every adult goes through, the foresight of some of its early leaders like Ben Gurion and Shimon Peres in accepting the need for and funding the creation of a technology industry, the geo-political necessities (Arab nations enforced a trade boycott of Israel that continues even today - "Every government of the Arab League established an official Office of the Boycott, which enforced the primary boycott... According to Christopher Joyner of George Washington University, “Of all the contemporary boycotts, the League of Arab States’ boycott against Israel is, ideologically, the most virulent; organizationally, the most sophisticated; politically, the most protracted; and legally, the most polemical.” ") and the need to be independent of political allies that could not be relied upon - all play their part.

Of all the factors identified and studied by the authors, the military is by far the biggest in their eyes. The fact that it is compulsory, that entry into its elite units is not only very competitive but also something desired on a resume, that military service is atypically non-hierarchical, where authority of even a general can be questioned by even the lowest ranking soldier, that it forces young people to learn to think on their feet and make critical decisions with less than perfect information - are skills that stand them in good staid in the corporate world. The authors however seem to be overawed by Israel's military successes, specifically the Six-Day War in 1967, and probably rush to attribute much of Israel's startup success to this military prowess. Notwithstanding Israel's military successes and famed intelligence services (Mossad), a credible defence of such a position would have required a much more detailed and exhaustive analysis than is offered up in the book. Comparative studies, longitudinal studies or references to such studies, and more is needed.
"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."
"Each year, the top 2 percent of Israeli high school students are asked to try out—two thousand students. Of these, only one in ten pass a battery of tests, mainly in physics and mathematics."
"Despite the military leadership’s outreach, too few young Americans today feel any connection to their contemporaries in the military..."

This potent combination of extreme selectivity and extreme desirability can also be seen in the premier Indian schools - Indian Institutes of Technology, and the Indian Institutes of Management. The IITs have had a remarkable run of success where literally thousands of engineers have gone on to found successful companies. Some illustrious names include Narayana Murthy and Nandan Nilekani (co-founders of Infosys), Ashok Soota (found of Mindree), Vinod Khosla (co-founder, Sun Microsystems), Suhas S. Patil (founder of Emeritus Cirrus Logic), Kanwal Rekhi (CTO, Novell), Krishna Bharat (creator of Google News), Amit Singhal (Google Fellow). These and hundreds of other IIT graduates have been very successful in creating value through technology startups.
Perhaps a much better explanation of this desire and hunger and almost desperation to succeed can be explained by the socio-economic and geo-political contexts in which people grow up.

This drive for technology in Israel is not restricted to computer software or hardware. There are numerous fields in which Israel has achieved notable success.
"Israel now leads the world in recycling waste water; over 70 percent is recycled, which is three times the percentage recycled in Spain, the country in second place."
"Intel Israel was responsible for designing the chip in the first IBM personal computers, the first Pentium chips, and a new architecture that analysts agree saved Intel from a downward spiral during the 1990s, as we chronicled in chapter 1."...
"NICE Systems, the global corporation behind call-monitoring systems used by eighty-five of the Forbes 100 companies, was founded by a team of Talpions. So was Compugen, a leader in human-genome decoding and drug development."
"Cisco’s acquisition of nine Israeli start-ups, more companies than Cisco had bought anywhere else in the world. In addition, Cisco’s investment arm made another $150 million in direct investments in other Israeli start-ups, and also put $45 million into Israel-focused venture capital funds. All told, Cisco has spent about $1.2 billion to buy and invest in Israeli companies."
Even projects that could be termed as failures paid off in the long run by virtue of the investments and knowledge acquisition they fueled.

"...the Lavi fighter jet, using American-made engines. The program was jointly funded by Israel and the United States."
"The Lavi went into full-scale development in 1982; on the last day of 1986, the first plane took its inaugural test flight. But in August 1987, after billions of dollars had been spent to build five planes, mounting pressure in both Israel and the United States led to the program’s cancellation, first by the U.S. Congress and then by a 12–11 vote in the Israeli cabinet."
"...although the Lavi was canceled, the billions invested in the program brought Israel to a new level in avionic systems and, in some ways, helped jump-start the high-tech boom to come."

The authors try and tackle the obvious question: if Israel could do it, why can't the others? One candidate is  Singapore, which more similar to Israel than one may think. Or what about Israel's neighbors, which are far richer in natural resources, specifically oil? The answers are slightly different for each. In the case of Singapore, it is its insistence of obedience and the proscribing of spitting or chewing gum that does them in. Really.
"As noted above, Singapore differs dramatically from Israel both in its order and in its insistence on obedience. Singapore’s politeness, manicured lawns..."
Detect some sarcasm? I certainly did. Singapore has other achievements to its credit. Its success as a hub of global business is unparalleled, and certainly worth emulating. Manicured lawns and insistence that its citizens do not go about spitting and defacing public property are traits worth emulating, not to be belittled one would think.

The answer when it comes to the Arab nations is wider in its sweep, and covers ground that we are familiar with.
"So what are the barriers to an Arab “start-up nation”? The answer includes oil, limits on political liberties, the status of women, and the quality of education."
One cannot argue with the universal desirability of these virtues. Oil may seem like an odd barrier to inculcating a start-up culture, but as the authors point out, oil blunts the drive to achieve. And yes, a sense of entitlement, whether based on gender, race, caste, religion, color, or whatever else one can think of as a means to discrimination.
"Landes believes that nothing is more dilutive to drive and ambition than a sense of entitlement. Every society has elites, and a number of them were born into their upper-echelon status. But there is no more widely dispersed sense of entitlement than ingraining in the minds of half the population that they are superior, which, he argues, reduces their “need to learn and do.” This kind of distortion makes an economy inherently uncompetitive..."
This book is successful at bringing alive the start-up culture of Israel, and offers several interesting theories and lessons for countries to emulate in their quest for similar entrepreneurial success.

Read an excerpt via Amazon Kindle:

Buy Start-Up Nation: The Story Of Israel's Economic Miracle from

© 2011, Abhinav Agarwal. All rights reserved.