Start-up Nation

“Looking for a few good programmers?” CNNMoney.com recently asked in a feature listing Tel Aviv among the “best places to do business in the wired world.” “So are IBM, Intel, Texas Instruments, and other tech giants, which have flocked to Israel for its tech savvy. . . . The best place to close a deal is at Yoezer Wine Bar, with its extensive selection of varietals and deliciously doused beef bourguignon.”¹⁸ In 1990, though, there wasn’t a single chain of coffee shops, and probably not a single wine bar, decent sushi restaurant, McDonald’s, Ikea, or major foreign fashion outlet in all of Israel. The first Israeli McDonald’s opened in 1993, three years after the chain’s largest restaurant opened in Moscow, and twenty-two years after the first McDonald’s in Sydney, Australia. Now McDonald’s has approximately 150 restaurants in Israel, about twice as many per capita as there are in Spain, Italy, or South Korea.¹⁹

The second-phase turnaround began after 1990. Up to that point, the economy had a limited capacity to capitalize on the entrepreneurial talent that the culture and the military had inculcated. And further stifling the private sector was the extended period of hyperinflation, which was not addressed until 1985, when then finance minister Shimon Peres led a stabilization plan developed by U.S. Secretary of State George Shultz and IMF economist Stanley Fischer. The plan dramatically cut public debt, limited spending, began privatizations, and reformed the government’s role in the capital markets. But this didn’t yet generate for Israel a private and dynamic entrepreneurial economy.

For the economy to truly take off, it required three additional factors: a new wave of immigration, a new war, and a new venture capital industry.

CHAPTER 7

Immigration

The Google Guys’ Challenge

Immigrants are not averse to starting over. They are, by definition, risk takers. A nation of immigrants is a nation of entrepreneurs.

—GIDI GRINSTEIN

IN 1984 SHLOMO (NEGUSE) MOLLA left his small village in northern Ethiopia with seventeen of his friends, determined to walk to Israel. He was sixteen years old. Macha, the remote village where Molla grew up, had virtually no connection to the modern world—no running water, no electricity, and no phone lines. In addition to the brutal famine that plagued the country, the Ethiopian Jews lived under a repressive anti-Semitic regime, a satellite of the former Soviet Union.

“We always dreamed of coming to Israel,” said Molla, who was raised in a Jewish and Zionist home. He and his friends planned to walk north—from Ethiopia to Sudan, Sudan to Egypt and through the Sinai Desert, and from Sinai to Israel’s southern metropolis, Beersheba; after that, they would continue on to Jerusalem.¹

Molla’s father sold a cow in order to pay a guide two dollars to show the boys the way on the first leg of their journey. They walked barefoot day and night, with few rest stops, trekking through the desert and into the jungle of northern Ethiopia. There they encountered wild tigers and snakes before being held up by a band of muggers, who took their food and money. Yet Molla and his friends continued, walking nearly five hundred miles in one week to Ethiopia’s northern border.

When they crossed into Sudan, they were chased by Sudanese border guards. Molla’s best friend was shot and killed, and the rest of the boys were bound, tortured, and thrown in jail. After ninety- one days, they were released to the Gedaref refugee camp in Sudan, where Molla was approached by a white man who spoke crypti-cally but clearly seemed well-informed. “I know who you are and I know where you want to go,” he told the teenager. “I am here to help.” This was only the second time in Molla’s life that he had seen a white person. The man returned the next day, loaded the boys onto a truck, and drove across the desert for five hours, until they reached a remote airstrip.

There, they were pushed inside an airplane along with hundreds of other Ethiopians. This was part of a secret Israeli government effort; the 1984 airlift mission, called Operation Moses, brought more than eight thousand Ethiopian Jews to Israel.² Their average age was fourteen. The day after their arrival, they were all given full Israeli citizenship. The New Republic’s Leon Wieseltier wrote at the time that Operation Moses clarified “a classic meaning of Zionism: there must exist a state for which Jews need no visas.”³