Wednesday, January 06, 2010

Ascent of a Tech Powerhouse How Israel became a world leader in innovation.

IF YOUR COMPUTER HAS "INTEL INSIDE," then the Intel inside has "Israel inside." So does eBay. And thousands upon thousands of other highly innovative companies and technologies.

This book, subtitled The Story of Israel's Economic Miracle, shows how venomously anti-Israel neighbors, terrorism and almost constant war drove a tiny, poor, fledgling country to create a first-world economy with "the greatest concentration of innovation and entrepreneurship in the world."

The numbers are staggering. "In addition to boasting the highest density of start-ups in the world (a total of 3,850, one for every 1,844 Israelis), more Israeli companies are listed on the Nasdaq exchange than all companies from the entire European continent," write Dan Senor and Saul Singer.

At times, they point out, Israeli entrepreneurs have come to the rescue of the world's best-known companies.

Take the episode that could have been titled, "How Israel saved Intel." Around the year 2000, computers -- especially laptops -- were hitting a performance wall limited by power consumption and the heat generated within the machines. Intel's team in Jerusalem suggested a way to operate a microprocessor at lower clock speeds, thus consuming less power and generating less heat, allowing laptops to run longer on a battery charge. Along the way, they built in a method that would let software run even faster.

Intel headquarters in Silicon Valley tried to kill the project because executives were operating in an obsolete mindset where only faster (and hotter) processor speeds created better performance. But the Israelis persisted, leading in 2003 to the famed Centrino chip. The Israelis followed that with the Core Duo processor -- two microprocessors on one chip.

Start-Up Nation vividly illustrates how Israel has developed a culture where authority not only can be challenged, but must be. Bluntly. No waffling. Instead of showing corporate deference or blind obedience to a superior, the average Israeli challenges questionable decisions and pushes alternative suggestions with real tenacity.

[books1]

Start-Up Nation
By Dan Senor and Saul Singer
Twelve (Hatchette Book Group)
320 pages
$26.99

That cultural trait comes, in large part, from the near-universal military service that throws the wealthy in with the poor, corporate executives in with assembly-line workers. In the IDF -- the Israel Defense Forces -- a CEO might very well report to one of his or her corporate underlings. Regardless of rank in the military or civilian world, it is the best idea that matters, not the status of the proponent.

Another force behind Israeli success is Jewish immigrants. The authors quote Israeli venture capitalist Erel Margalit on their importance: "If you're an immigrant in a new place, and you're poor, or you were once rich and your family was stripped of its wealth -- then you have drive. You don't see what you've got to lose; you see what you could win."

With immigrants from 70 countries speaking no common language, sharing little common culture other than the Torah and a tradition of persecution, military service, the authors argue, is at the forefront of both immigrant assimilation and overall technological success. Service in the Israel Defense Forces begins at age 18 and lasts for a minimum of two years. Business people often serve in the reserves well into their 40s, 50s and 60s.

"So for combat soldiers, connections made in the army are constantly renewed through decades of reserve duty," says Start-up Nation. "...Not surprisingly, many business connections are made during the long hours of operations, guard duty and training."

Although the authors do not draw the analogy, this is very much like Switzerland, where the business elite are connected by years of reserve military service. But Switzerland isn't known for innovation. It also is not a nation of immigrants, tolerates failure poorly, behaves with a reserve that is the antithesis of chutzpah, and lacks the "advantage" of being surrounded by rapacious enemies ready to incinerate them at a moment's notice.

In all, Start-Up Nation is a compelling and satisfying work, filled with eye-opening revelations and shot through with rich examples, explanations and analysis.

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