Lessons from a Start-up Nation

A book review on Start-up Nation: The Story of Israel’s Economic Miracle by Dan Senor and Saul Singer

It’s very good you came to me,” said Shimon Peres when the  Israel met him to discuss his idea to make textile exports the focus of the country’s virgin economy. What Peres said next is what is mostly remembered from this encounter: “I shall make sure you won’t get a penny.”

The year was 1951, just two years after Israel gained independence for a scrap of land in one of the most hostile regions in the world. Peres, who was the deputy minister of defense at the time, wanted to push resources towards the creation of a nuclear and aeronautics industry. The move was inconceivable, especially for a country that was on the brink of a food scarcity and refugee crisis. Even its nascent bicycle industry was failing. “We can’t even make bicycles,” cried his fellow ministers. But, Peres prevailed, starting by opening a government-sponsored enterprise to repair surplus World War 2 aircraft. Today, that company is Israel Aerospace Industries Ltd. With $3.8 billion in revenue, the company specializes in cutting-edge technology for machines from fighter aircraft to surveillance satellites.

The evolution of Israel as a technology juggernaut is littered with a litany of accomplishments. Today, Israel leads the world in the percentage of its GDP that goes into R&D, and has the highest number of startups per capita. Its high-tech industry employs only 10% of the workforce, but accounts for 40% of the company’s exports.

How did a nation that has an 8 million population in a desolate land that is half the size of Sri Lanka, wedged between countries that want to wipe it off the map, become a world leader in tech? In Start-up Nation: The Story of Israel’s Economic Miracle, Dan Senor and Saul Singer argue that these restraints, mired in the need for security and scarcity, spawned its unnatural drive for innovation.

Senor and Singer portray a community where every idea is openly challenged regardless of status or power, either in the military or the ivory tower. Being reticent is scorned upon, and dialogue, debate and informality are encouraged and have become ingrained in the daily lives of the people.

Military conscription is another significant factor of Israel’s tech dominance, where every citizen joins the Israeli Defense Force (IDF) for two to three years of service. This may seem contrarian: how can strict hierarchies and the unwavering obedience of a military regiment enable a prospering startup culture? But, the authors point out that the IDF is unique in its own right for its open culture and responsibility passed down to its lower-ranked soldiers. Company commanders are appointed in their early 20s, and each of them is in charge of 100 soldiers, 20 officers and sergeants, and 3 vehicles. “If a terrorist infiltrates that area, there’s a company commander whose name is on it. Tell me how many 23-year-olds living elsewhere in the world face that kind of pressure?” asks one of the company commanders in the book.

The allure of Israel’s model among aspiring small developing countries makes sense. Even in Sri Lanka, there is an emerging rhetoric in the startup community along the lines of “we want to be the next Tel Aviv, not Silicon Valley”. What it really means is to shift the focus from consumer-heavy applications to high-tech industry-oriented innovations like cyber security, manufacturing and bio-engineering. There’s lot of things that worked in Israel’s favour to make this model work. Even in dire economic situations at the country’s inception, a slew of highly educated Jewish refugees from countries like Soviet Russia migrated to Israel, creating a fertile ground for technological breakthroughs. It also had leaders like Shimon Peres, who eventually became prime minister and then president of Israel, with immense political might to see its decade-long industrial initiatives through to the end. Taking these factors into consideration, making Sri Lanka the next Tel Aviv is a long road, but at least it would be in the right direction