Start-up Nation – More than just the education system

Israel has been named in many places in the world the “Start-up Nation.” Business people and scholars come from all over the world to learn about and uncover Israel’s secret – is there such a secret? – why Israelis are so conspicuously successful in the high-tech industry, as well as in entrepreneurship and innovation.

In this document, I would like to address a number of major historical, social, security and economic aspects and others, whose unique combination within a short period of time, inside a tiny geographic area that is home to a relatively small population, has positioned and continues to position Israel in a very respectable place on the list of countries where successful start-ups have developed on a global scale. In my view, Israel’s unique ecosystem, which fostered Israel’s hi-tech industry, was instrumental in driving its international success. This in no way minimizes the contribution of Israel’s education system over the years. However, it only further underscores the fact that we must not rely solely on strengthening and improving the education system in order to continue stoking one of the main growth engines of the Israeli economy.

Clearly, the education system is a major and central component in the success of the Israeli high-tech industry. Nevertheless, even in the years when Israel does not score the highest marks in standardized international tests for students, Israel’s high-tech industry continues to develop apace and trend upward. My view is that education does not operate in a vacuum, but rather within a wider range of impact factors in whose context it must be examined. In the broader educational context, a person growing up and living in Israel gains a unique life experience colored by historical, security and economic aspects, all of which are significantly impactful, beyond what is taught by the formal education system.

In this document, I have allowed myself to set aside the variable of the education system and present a deliberately biased perspective that maintains that the start-up nation is the result of several factors that have come together at a given time in a given area in a specific technological situation. Moreover, let it be noted that this document will not deal with ostensibly biological concepts, such as “the Jewish gene.” It must be repeatedly emphasized and reiterated that Israel’s success cannot be accredited to any single variable. In the following paragraphs, I will try to describe the unique environment and situation in Israel that have influenced and continue to influence today the attraction of young Israelis to the world of high-tech entrepreneurship and their success in it.

The historical aspect

How the Jewish people see its place in the world – “For you are a holy people to the Lord your God, in you the Lord your God has chosen you to be His chosen people, of all the nations on earth” (Deuteronomy 7:6). A central idea in Judaism is the election of the people of Israel by God. Beyond the Torah, the idea of election is expressed in various passages in the prayers, in the blessings of the Torah, the blessing before the Shema, the prayers for the holidays and the Kiddush for Yom Tov. Thus, for thousands of years, every Jew has been exposed almost daily to the idea that he is part of a chosen people, an idea that constitutes a cornerstone of Judaism.

A simple and sweeping idea from thousands of years ago has taken on diverse significance over the years, which in part has been essential to the survival of the Jewish people throughout the generations. Looking at the idea of the “chosen people” at the present time through the perspective of entrepreneurship will show that the fact that the idea of being part of a chosen entity is part of your psychic DNA for generations gives one self-confidence, the capacity to cope and a sense of self-efficacy that a solution can be found to every problem.

Looking at the world from the vantage point of being chosen gives you the feeling that there is no limit to your ability and you belong at the top. The Jewish culture that developed around this idea of the capacity of the Jewish mind and its skills in science and technology further strengthened the concept of the “divine promise” and instilled and reinforced the sense of Jewish self-confidence regarding its supremacy in intellectual spheres. Thus, we find thousands of entrepreneurs in Israel who are not afraid to jump into the cold water and are confident that the solution they bring with them is the one that will succeed.

The Holocaust: The survivor grows stronger and adapts – The Holocaust was the most significant event in the history of the Jewish people in the 20th century and certainly one of the most traumatic in the annals of the Jewish people. The implications of the events of the Holocaust for the establishment and shaping of the State of Israel are evident in all aspects of life. I would like to go beyond and to look at the Holocaust from a sociological-functional point of view. After the Holocaust, from the end of World War II until the 1960s, more than half a million immigrants from Europe were absorbed into Israeli society.

A traumatic event of the nature of the Holocaust poses such a high and impossible threshold for those who have experienced it, that it appears that those who survived the Holocaust for a variety of reasons became stronger – the survivor grows stronger. Further to that, I argue than in the reality of the ghetto and the camps, in order to survive, the people had to improvise and adapt every day anew in the face of the new situations and the world that continued to rapidly change for the worse as time went by. For daily survival, street smarts were needed in order to deal with a situation becoming increasingly extreme every day.

These adaptable survivors constituted the nucleus of the nascence and development of the State of Israel. In his book Adapt: Why Success Always Starts with Failure: Tim Hurford writes: “We face a difficult challenge: The more complex and elusive our problems are, the more effective trial and error becomes, relative to the alternatives. Yet it is an approach that runs counter to our instincts, and to the way in which traditional organizations work [...] because this process involves failures, and people tend to avoid failures. When it comes to organizations, avoidance of trial and error can cause them to fail [...] and when it comes to humans, it could lead to living a drab life that may be devoid of major failures and losses, but also of grand triumphs and growth.” Today, we all know that in an ever-changing world, an entrepreneur and high-tech developer able to adapt himself and his product and adjust to new situations – even failure – will achieve greater success.

Security/Army

The doctrine of deterrence: After the trauma of the War of Independence, Israel developed a doctrine of deterrence based on the understanding that having to fight with all the Arab states at the same time is dangerous to Israel while fighting in clearly defined theaters enables Israel to defeat and crush the enemy. That is why Israel has chosen to significantly deter its enemies in order to diminish the motivation even of large armies to attack it.

This view, which from a historiographical perspective connects with the biblical story of David and Goliath, has led to Israel’s firm and unique position when facing the regional powers and to its consolidation as a regional power. Today, one can see the impact of this perception among Israeli high-tech entrepreneurs who are not deterred by competition with giants in their fields. Israeli entrepreneurs and managers of many companies approach their markets unafraid to face the giants of the global industry based on a firm belief that they have the ability to meet, compete with and even defeat those companies.

Age is not a factor – The maturation process in Israel includes recruitment into the military. I would like to especially emphasize the fact that many soldiers during their military service are required to assume positions that in other armies in the world are carried out by much older, higher ranking officers or NCOs. The fact that most soldiers in the course of their military service will advance and bear responsibility of one kind another, certainly if trained as officers, presents them with a challenge, but also opens a door and enables them to realize that age does not have to be a significant factor in the success and/or evaluation of an individual.

Moreover, in a number of particular fields in the army, those involved in research and development, these soldiers are taught already during their training period that age is not a factor in how others relate to them, and that what counts in their own self-efficacy and capabilities – and the sky is the limit. Those soldiers are often required to develop expertise in their fields regardless of experience or lack thereof. Thus, we can see in the IDF young soldiers and generals sitting together around a table discussing possible solutions to a unique security / technological problem. The result of this process is a cohort of enlisted soldiers and junior soldiers and officers, who upon their discharge from the army and their integration into the business world come with a strong sense of confidence in their ability to succeed in the adult world, regardless of their age, and with the belief that the only thing that counts is the ability to make the effort and learn.

OJT –On the job training – Israel is a tiny country with a small army surrounded by numerous enemies and threats that have further increased in recent years due to the disintegration of countries, the entry of additional actors into the Middle East and the development of the cyber dimension. How can we contend with all the major new threats that are continually posed to us right on our doorstep, in addition to the need to make the most of the soldiers' service, because it has been shortened in length. So, how does the IDF manage to cope with the various challenges? OJT – on the job training. For some IDF positions, the IDF conducts focused and general training, while the special focused, professional learning is done by the soldier in his unit. In most cases, the soldiers learn on their own. In order for this approach to succeed, the army identifies those that have the ability to learn on their own and above all, those who are motivated to self-learn in addition to making sure they are suited to the areas they are in charge of, leading to self-training on an especially high level. After their discharge upon completion of their service, these soldiers and officers have a high capacity to self-teach, which they have fine-tuned during their service. And even more importantly, they are confident of their ability to learn new and challenging subjects outside the army too. This ability gives them an advantage in the world of academic studies and the high-tech world.

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Experience at failure – According to data from 2015, out of the 10,000 start-ups established in Israel – only 480 were successful (4.8%); 46% of the technology companies established in Israel from 1999 to 2014 has shut down. Only half of the companies were sold for a sum that exceeded the amount invested in them. If the success rate is so low (about 2.5% according to an IVC study), how is it that we saw the establishment of more than 1,400 start-ups in 2015 alone?

I would like to point out that beyond being dazzled by successes, in my view, there is yet another factor at play that encourages young entrepreneurs to re-enter the start-up market. I am referring to their repeated experience of failures during their military service. The fact that many of the sharp young minds in the military pursue truly critical problems with far-reaching implications presents them with a tremendous challenge to find solutions, along with the inability to give up. It is unthinkable for a soldier in the Intelligence Branch to get up one morning and say: That’s it, I’ve had enough. I’m not going to keep looking for the place where Gilad Shalit is being held? These soldiers and officers take this approach and experience with them when being discharged from the army along with the ability have developed to start each morning anew and know ultimately that it is in their power to succeed and solve any problem that comes their way. The result is young entrepreneurs who are not afraid to fail, but who have the ability to set a goal and keep marching unflaggingly toward it despite repeated failures.

Planning within a limited time in a changing world – For years, the IDF had a saying that, “A good officer is an officer that knows how to improvise.” In addition, the IDF teaches its soldiers that, “Every plan is a basis for change.” The IDF's ability to provide real-time solutions to emerging problems is one of its foundational principles. Furthermore, it has already been noted here that an army that lives in a region that is constantly shifting and changing must be able to adapt itself to the emerging reality – to build and close down units, develop capabilities, establish designated teams and to divert personnel to tasks as needed. All of these things require rapid decision-making, the ability to find a quick and innovative solution for the customer and to make an exit within a very limited time. Many of these principles are evident in the way many Israeli high-tech companies work. The rapid planning to deal with new challenges and the sprint to produce, at the end of which comes the presentation of an initial product to the customer and back again to the drawing table enables the development group to quickly arrive at a high-quality solution while gaining experience in other areas along the way. This is especially so in comparison to others in the global high-tech industry.

Industry

High school-Military-Academy-Industry – The unique network that has been woven in Israel over the years includes personal relationships and the exchange of information at different points of learning. It is enough to look at how high school students choose their course of studies to see how strong the connection between the high school and military service tracks is, and the extent to which this connection is strengthened on both sides in order to create academic motivation on the one hand, in addition to the military gaining brilliant soldiers on the other. The ties between the military and the academy and industry have grown stronger in recent years, allowing all sides to benefit from the knowledge and experience of the other, with the army providing the challenges and unique knowledge, academia, and industry the unique solutions based on civilian knowledge and experience in a variety of fields. This unique ecosystem leads to students being drawn into the high-tech and entrepreneurial world already at the high school stage, and this operates as a circle within a developing cycle. Furthermore, the successes of Israeli companies around the world and in the Israeli market serve as fuel to attract many to the high-tech world either as entrepreneurs or as regular employees.

The defense industry – A constant challenge – I have already noted Israel's long-term security situation in this paper. It is a nation that was born under threat and has been fighting for years, and between wars and rounds of fighting is confronted daily with the need to develop diverse solutions to the threats posed to it. Israel's defense industry has for years developed technological solutions to contend with the technological capabilities developed by the superpowers. In practice, Israel's defense industry has always been in a state of constant competition in order to remain one step ahead.

A nation and industry that grows and lives in conditions that require sustained innovation, creativity, and constant change develop a technological DNA, and its security field is in a state of constant growth, which orients and impacts the entire economy. The cyber age brought with it many opportunities, coinciding with the maturation of Israel’s defense industry, connected to that same technological DNA, which led to the migration of knowledge, technologies, and experts from the field of security to the civilian market. From there, it was a short path to meteoric progress and development in the high-tech market, which became the new locomotive pulling the entire Israeli economy forward.

Socioeconomic aspects

An opportunity for socio-economic upgrading – Globalization alongside the difficulties facing the middle class in Israel are two significant factors impacting Israeli society. Young people who begin their lives after three years of service in the IDF face a difficult situation: The official figure for the number of average salaries required to purchase an apartment in Israel is about 140, while in other parts of the world it stands at about half that amount. In order to buy a four-room apartment in Tel Aviv with a mortgage, a household must earn at least NIS 25,000-30,000 a month, when the average salary in Israel stands at NIS 9,767 per month. The result is that couples who do not enjoy significant parental support face three realistic options.

One is to move abroad and try their luck there, although, without a relevant profession, the couple will find it hard to make ends meet there too. The second is to study a profession in Israel that offers a high prospective income already at an early stage, right after graduation, high enough to cover the required mortgage; and the third, to move abroad and work there after graduation from university in Israel. As a result, many of those discharged from the army turn to the only way available to them in order to realize their dream of owning their own home – high-tech-related studies. There is a constant demand for and a shortage of professionals in the high-tech market everywhere in the world and in Israel too, and the consequence is competition over people, high salaries, and benefits. It should be borne in mind that the opportunities offered by work in high-tech lay not only in the ability to be able to buy a home but in terms of social mobility in general. High-tech enables young people from disadvantaged populations to learn a profession that will enable them to move out of the cycle of poverty in which they grew up, opening up new possibilities for their future.

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Summary

In this document, I have presented the historical, social, security and environmental impact factors that have been most instrumental in shaping the ecosystem of Israel’s high-tech industry. This in no way minimizes the importance of other impact factors, particularly Israel’s schools, both before and after the army, which also plays a major role in shaping this ecosystem. The purpose of this document is to emphasize the importance of independent bodies that have joined forces, without prior planning and direction, and which derive from the unique nature of the State of Israel as a Western state with a Jewish majority in the heart of the Middle East.

My argument is that the factors reviewed in this document affect a large proportion of the younger generation growing up and living in Israel, like it or not. The environment, the atmosphere, the experiences, knowledge and subject matter to which each individual is exposed – large and small – position them uniquely in comparison to their peers in the rest of the world. The addition of these factors to the cognitive capacities among many of the graduates of military service places them in an excellent position from which to set out on their path of learning, entrepreneurship, and integration into the high-tech industry. For many of them, the path to the industry goes through the university.

Further bolstering this argument is the OECD research data from 2012, according to which Israel ranks second among the 10 most educated countries in the world. As of 2012, 46% of Israel’s population has an academic degree, right after Canada that has a university education rate of 51%, with Japan following Israel with 45% of the population holding degrees.

Thus, the development of Israeli society was unique, as a result of historical aspects as well as the current security and economic situations, providing fertile ground for the growth of a high-tech industry. The various factors noted here have come together to ripen and flourish exactly when the global high-tech industry was developing. The combination of the development of technology and the various Israeli components is what enables and still enables the salience of such a small country in the global market.

I will sum up and say that in my view, the totality of “Israeli education” teaches and gives Israeli adolescents a unique educational payload that enables them to arrive better prepared and more ready for the challenges of the high-tech industry and of the frequently changing technological world. This demonstrates that a successful high-tech industry cannot grow solely on the basis of the successes of the formal education system and excellence in international tests. There is no doubt that the Ministry of Education’s program to increase the number of high school students in Israel studying advanced-level mathematics will contribute and perhaps even boost the high-tech market, but without the continued existence of the other components noted in this document, this program alone will not suffice.

Furthermore, perhaps some of the aspects presented in this document can offer a new educational approach regarding how to learn and promote motivation, creativity, entrepreneurship, and innovation. As I see it, we need to see how to expand and import at least some of the elements of the military environment into the formal and informal educational systems.

In light of the many aspects mentioned in this document, it would be difficult for other similar-sized countries to mimic Israel’s success because of the difficulty in reconstructing and conflating the full range of Israel’s unique elements. Nevertheless, Israel must not rest on its laurels and must continue to work hard to preserve and maintain all the various components that contribute to its success. It must make every effort to boost their strength, while also strengthening the high school and academic education system. Like in any other competitive market, Israel must analyze the dangers posed by the continuing existence of the elements mentioned in this document as in the past. Among the dangers to the continued existence of this successful ecosystem, I will note in particular the changes that are occurring in the Israeli army and the ongoing brain drain from Israel.

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