Start-up Nation

It was somewhat ambitious, then, for Google Israel to take on a project that went right to the heart of the company, to the search box. The Israeli team took a small experimental idea that had been sitting untouched for two years—Google Suggest—and made it something that millions of people see and use every day.

For those who have not noticed it, Google Suggest is that list of suggestions that pop down as you type in a search request. The suggestions update as you type in each letter of the request, just about as fast as you can type.

Google is famous for delivering results almost instantaneously. But Google Suggest had to achieve this feat with each letter. Information had to go to Google’s servers and send back a list of relevant suggestions, all in the split second before the next letter was typed.

Two months into the project, the team got its first break. Kai-Fu Lee, who was the president of Google China, said that he was willing to take the risk that queries would be slowed down. Chinese is very hard to type, so having Suggest to fill words in was particularly valuable in China. Suggest worked, and it expanded quickly to Google’s sites in Hong Kong, Taiwan, Russia, and Western Europe, and soon to Google around the world.

Microsoft was not far behind in capitalizing on Israel. While the damage from two thousand missile strikes during the 2006 Lebanon war was still being repaired, a defiant Bill Gates arrived for his first visit to Israel. He came with a clear message: “We are not afraid of Google,” he told an Israeli news agency. While he couldn’t resist getting in a dig about Internet search engines being “in a terrible state compared to where they could be,” he also conceded that Google and Microsoft were in fierce competition. And the new battlefront was Israel. Earlier Gates had said that the “innovation going on in Israel is critical to the future of the technology business.”²

No sooner did the richest man in the world leave Israel than the second-richest, Warren Buffett, showed up. The most revered investor in America had arrived to visit the first company he’d bought outside the United States. Buffett spent fifty-two hours touring Iscar, the machine-tool company he’d purchased for $4.5 billion, and Israel, the country he had heard so much about. “You think of people walking those steps 2,000 years ago,” he said of his visit to Jerusalem, “and then you look at the Iscar factory on a mountaintop, supplying 61 countries—whether it’s Korea or the United States or Europe or you name it. It’s pretty remarkable. I don’t think you can really find that kind of combination of the past and the future, in such close proximity, virtually any place in the world.”³

But it seems unlikely that it was an appreciation of history that convinced Warren Buffett to choose Israel as the place to change his decades-long policy of not making acquisitions outside the United States. And nor was it, for this apostle of risk aversion, an indifference to Israel’s vulnerabilities.

You do not have to be Warren Buffett to worry about risk. Every company carefully considers the risks of doing business anywhere far from headquarters, let alone somewhere perceived as a war zone. The question, according to Buffett, is how you think about risk.

We sat in Jon Medved’s office—at the Vringo headquarters, in Beit Shemesh, a neighborhood between Jerusalem and Tel Aviv—to discuss the risks of investing in Israel.⁴ But before he would answer our questions, Medved posed one of his own. He pulled out one of the slides from a PowerPoint presentation, the “Israel Inside” presentation he often gives in his role as unofficial economic ambassador.

FIGURE 9.1

“Look at this graph,” he told us (figure 9.1).

“What do you see here?” Medved probed. The horizontal x-axis showed the years 2002 through 2004; the vertical y-axis was unlabeled. And there was a line heading—in a relatively linear, diagonal direction—up into the upper-right corner of the graph. But with no y-axis label, the graph was incomplete. We figured Medved had posed a trick question.

“Well, there is something increasing over the 2002-to-2004 time frame,” we hazarded. “But the vertical y-axis doesn’t tell us what the ‘it’ is.”

“Exactly,” he quickly responded. “The ‘it’ could be a number of things. For one: violence. It was, tragically, one of Israel’s most violent periods in our history, during the second intifada and leading up to the second Lebanon war. The graph illustrates the number of rockets that hit Israel over those years.”