The general subject of Israel normally provokes considerable disagreement in politically-aware circles, but it's hard to disagree with the country’s track record of innovation and entrepreneurship. Given that innovation is widely accepted as the best engine for creating jobs and growth and much of that innovation will come from start-ups rather than incumbents, I wondered what other countries could learn from Israel.
Start-up Nation is written by two Americans, Dan Senor and Saul Singer, one of whom now lives in Israel and the other is a frequent visitor and investor in Israeli companies (none of which are covered in the book by the way). Avoiding any discussion about the fundamental right of the state of Israel to exist or regional politics, the book looks specifically at what it is about the place and its people that has created the highest concentration of innovation and entrepreneurship in the world.
- Israel has the densest concentration of start ups in the world – more than one per 2,000 Israelis More Israeli companies are listed on NASDAQ - than from any other country and the whole of Europe combined
- Per capital venture capital is 2.5 times higher than in the US and 30 times higher than in Europe
- Highest % of GDP spent on R&D in the world
- Israel experienced only one quarter of negative growth in the recent recession.
Yes, Israel has all the ingredients Michael Porter identified in the late 1990s as a requirement for successful clusters: universities, large companies, talent and money co-located and well networked. But so now do most other developed countries. Yes, Israel stands out from its neighbours in being a democracy where talent doesn’t tend to be stifled by nepotism. Yes, its small domestic market and regional isolation have forced Israeli companies to develop a global customer base from the outset. Yes, tech entrepreneurship has the same cachet with Israeli mums as lawyers and accountants do with Jewish mums elsewhere. But none of these factors is unique to Israel either.
Senor and Singer suggest the key difference is the role the Israeli military has in shaping the characters of its young people. Military service is compulsory in Israel. The best and brightest school leavers are recruited into elite units where they receive three years of advanced technical training as well as yearly follow-up stints as reservists well into their 40s. There is fierce competition to get into these units as career benefits will undoubtedly ensue. Other countries have conscription of course, but in the Israeli Defence Force and especially the elite units, junior ranks are encouraged to challenge their superiors and improvise. The phrase “an insatiable need to tinker, invent and challenge” seems to sum up their disregard for the rules. Not just in training, but in live situations. Senor and Singer argue that it is this on the job training and heavy responsibility from an early age that creates individual self-confidence, as well as tight and lasting bonds between team members, many of whom go on to set up innovative companies together.
Start Up Britain and Tech City are evidence of our own government’s belief in entrepreneurship as driver for economic growth, so what can we and other countries learn from Israel? Senor and Senior do not suggest conscription, but that military experience should be valued far more by employers and society at large. Also that we should find ways to challenge our young people with real responsibility, so they develop the confidence to question and invent. Another thing that struck me about the book was the sense that Isreal’s politicians, although not business people, are risk-takers, thereby creating a tolerance of risk and failure throughout society.
Finally, and possibly the most transferable lesson for other governments, Israel’s economic miracle may be due as much to immigration as anything else. Israel is possibly the only country that seeks to increase immigration and not just to people of narrowly defined origins, educational or economic status. It is now home to more than 70 different nationalities and cultures. It is well known that migrants often have more drive than better-established sections of society.