Start-up Nation

A longer official boycott by the twenty-two-nation Arab League, which banned the purchase of “products of Jewish industry in Palestine,” was launched in 1943, five years before Israel’s founding. This ban extended to foreign companies from any country that bought from or sold to Israel (the “secondary” boycott), and even to companies that traded with these blacklisted companies (the “tertiary” boycott). Almost all the major Japanese and Korean car manufacturers—including Honda, Toyota, Mazda, and Mitsubishi—complied with the secondary boycott, and their products could not be found on Israeli roads. A notable exception was Subaru, which for a long time had the Israeli market nearly to itself but was barred from selling in the Arab world.³

Every government of the Arab League established an official Office of the Boycott, which enforced the primary boycott, monitored the behavior of secondary and tertiary targets, and identified new prospects. 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.”⁴

The boycott has at times taken on unusual targets. In 1974, the Arab League blacklisted the entire Baha’i faith because the Baha’i temple in Haifa is a successful tourist attraction that has created revenue for Israel. Lebanon forbade the showing of the Walt Disney production Sleeping Beauty because the horse in the film bears the Hebrew name Samson.⁵

In such a climate, it is natural that young Israelis seek both to get away from an Arab world that has ostracized them and to defy such rejectionism—as if to say, “The more you try to lock me in, the more I will show you I can get out.” For the same reason, it was natural for Israelis to embrace the Internet, software, computer, and telecommunications arenas. In these industries, borders, distances, and shipping costs are practically irrelevant. As Israeli venture capitalist Orna Berry told us, “High-tech telecommunications became a national sport to help us fend against the claustrophobia that is life in a small country surrounded by enemies.”⁶

This was a matter of necessity, rather than mere preference or convenience.

Because Israel was forced to export to faraway markets, Israeli entrepreneurs developed an aversion to large, readily identifiable manufactured goods with high shipping costs, and an attraction to small, anonymous components and software. This, in turn, positioned Israel perfectly for the global turn toward knowledge- and innovation-based economies, a trend that continues today.

It is hard to estimate how much the Arab boycott and other international embargoes—like France’s military ban—have cost Israel over the past sixty years, in terms of lost markets and the difficulties imposed on the nation’s economic development. Estimates range as high as $100 billion. Yet the opposite is just as difficult to guess: What is the value of the attributes that Israelis have developed as a result of the constant efforts to crush their nation’s development?

Today, Israeli companies are firmly integrated into the economies of China, India, and Latin America. Because, as Orna Berry says, telecommunications became an early priority for Israel, every major telephone company in China relies on Israeli telecom equipment and software. And China’s third-largest social-networking Web site, which services twenty-five million of the country’s young Web surfers, is actually an Israeli start-up called Koolanoo, which means “all of us” in Hebrew. It was founded by an Israeli whose family emigrated from Iraq.

In the ultimate demonstration of nimbleness, the Israeli venture capitalists who invested in Koolanoo when it was a Jewish social-networking site have utterly transformed its identity, moving all of its management to China, where young Israeli and Chinese executives work side by side.