Start-up Nation

Many other nations, of course, have emerged from scratch, at the stroke of a departing colonial power’s pen. Neighboring Jordan, for example, was created in 1921 by Winston Churchill, who decided to hand the Hashemite clan a kingdom.

Other countries, like the United States, were the product of a truly entrepreneurial or revolutionary process, rather than a national amalgamation that had accrued slowly over centuries, such as England, France, and Germany. None, however, were the result of such a conscious effort to build from scratch a modern reincarnation of an ancient nation-state.

Some modern countries, of course, can trace their heritage back to ancient empires: Italy to the Romans, Greece to the Greeks, and China and India to peoples who lived in those areas for thousands of years. But in all these other cases, either the original commonalty continued in an unbroken chain from the ancient generations to the modern one, without ever completely losing control of its territory, or the ancient people simply disappeared, never to be heard from again. Only Israel’s founders had the temerity to try to start up a modern first-world country in the region from which their ancestors had been exiled two thousand years earlier.

So what is the answer to the central question of this book: What makes Israel so innovative and entrepreneurial? The most obvious explanation lies in a classic cluster of the type Harvard professor Michael Porter has championed, Silicon Valley embodies, and Dubai has tried to create. It consists of the tight proximity of great universities, large companies, start-ups, and the ecosystem that connects them—including everything from suppliers, an engineering talent pool, and venture capital. Part of this more visible part of the cluster is the role of the military in pumping R&D funds into cutting-edge systems and elite technological units, and the spillover from this substantial investment, both in technologies and human resources, into the civilian economy.

But this outside layer does not fully explain Israel’s success. Singapore has a strong educational system. Korea has conscription and has been facing a massive security threat for its entire existence. Finland, Sweden, Denmark, and Ireland are relatively small countries with advanced technology and excellent infrastructure; they have produced lots of patents and reaped robust economic growth. Some of these countries have grown faster for longer than Israel has and enjoy higher standards of living, but none of them have produced anywhere near the number of start-ups or have attracted similarly high levels of venture capital investments.

Antti Vilpponen is a Finnish entrepreneur who helped found a “start-up movement” called ArcticStartup. Finland is home to one of the great technology companies of the world, Nokia, the cell phone maker. Israelis often look to Finland and ask themselves, “Where’s our Nokia?” They want to know why Israel hasn’t produced a technology company as large and successful as Nokia. But when we asked Vilpponen about the start-up scene in Finland, he lamented, “Finns produce lots of technology patents but we have failed to capitalize on them in the form of start-ups. The initial investment in Finland into a start-up is around three hundred thousand euros, while it’s almost ten times higher in Israel. Israel also produces ten times more start-ups than Finland and the turnover of these start-ups is shorter and faster. I’m sure we’ll see a lot of growth, but so far we’re way behind Israel and the U.S. in developing a start-up culture.”²

While the high turnover of start-ups concerns Israelis, Vilpponen sees them as an asset. What is clear is that Israel has something that’s sought by other countries—even countries that are considered on the forefront of global competitiveness. In addition to the institutional elements that make up clusters—which Finland, Singapore, and Korea already possess—what’s missing in these other countries is a cultural core built on a rich stew of aggressiveness and team orientation, on isolation and connectedness, and on being small and aiming big.

Quantifying that hidden, cultural part of an economy is no easy feat, but a study by professors comparing the cultures of fifty-three countries captured part of it. The study tried to categorize countries according to three parameters that particularly affect the workplace: Are they more hierarchical or more egalitarian, more assertive or more nurturing, more individualist or more collectivist?³