Start-up Nation of Israel

Just finished the Start-up Nation by Dan Senor, Saul Singer.

I would say it’s an Israeli XXI century version of Max Weber with his The Protestant Ethic and the Spirit of Capitalism meets Antifragile: Things that Gain from Disorder by NNT sparkled by Triple Package by Amy Chua.  Or, more broadly, how ethics and culture could positively or negatively impact economic growth.

I’ve had a privilege to meet and talk to many Israeli entrepreneurs and business people and could wholeheartedly agree with many of the book’s statements and representations. Israelis are indeed very tenacious in business, not at all hierarchical,  thrive dealing with ambiguity, comfortable with risk-taking, open to new ideas, challenge everyone all the time, don’t worry about saving face, and never operate in professional silos, because they don’t know silos exist.

I often vet new PayPal business customers, and Israel brings more unusual cases (in numbers and in the level of craziness) than anybody else.

A little anecdote from the book:

Four guys are standing on a street corner… an American, a Russian, a Chinese man, and an Israeli…. A reporter comes up to the group and says to them: “Excuse me…. What’s your opinion on the meat shortage?” The American says: What’s a shortage? The Russian says: What’s meat? The Chinese man says: What’s an opinion? The Israeli says: What’s “Excuse me”?

The book suggests that an important contributor to Israelis’ success in entrepreneurship is military training, especially if you serve in one of the prestigious military or intelligence units. Apparently it’s very competitive and incredibly hard to get there, which make it a great honor,  to be selected by one of the prestigious units, similar to Ivy League Colleges applications. Once you are in, it’s not only a great experience of decision-making, people management and responsibility very early on in your career, it’s also a precious resume and network builder –  for life. It’s even suggested that many businesses only take alumni from certain military units and would never employ a non-veteran. Military service plays a role of a merit-based social elevator.

There is no leadership without personal example and without inspiring your team to charge together and with you. There is no leaving anyone behind. You have minimal guidance from the top and are expected to improvise, even if this means breaking some rules. If you’re a junior officer, you call your higher-ups by their first names, and if you see them doing something wrong, you say so.

This is where I stumble a bit. Obviously, if the rules of the game demand that you need to prove yourself in the military and you are ambitious, you’d do whatever it takes. But at the same time, it’s not a bootcamp, it’s an actual military service, where you risk your life and could get killed or handicapped or whatever they mean by PTSD. Why the society hasn’t developed an alternative elevator?  Going to war and risking your life is a bad idea, and the thought of teenagers linking their after-school dreams and aspirations with military units for 2-3-4 years, is … very foreign.

Russia and its military service is obviously a totally different dimension, but even there the survival instincts prevail and, as far as I hear, almost everyone with any intelligence or some money is able to cheat their way out of military service.

The book suggests Israel has no choice whatsoever, which may be true. But it’s still hard to accept that military service is good for building a character at the age of 18.

Another puzzle I am trying to solve about Israel is how it is possible for one country to combine very progressive regulatory framework for tech start-ups and very conservative, rigid  and oftentimes outdated regulations for many other areas, such as   finance, retail, taxation, currency regulations, or banking.

I will be thinking about it in the next weeks and months.

Some of my favorite highlights:

An interesting idea how to tell bad guys on the internet from the good guys:

We believe that the world is divided between good people and bad people, and the trick to beating fraud is to distinguish between them on the Web… Good people leave traces of themselves on the Internet—digital footprints—because they have nothing to hide… Bad people don’t, because they try to hide themselves. All we do is look for footprints. If you can find them, you can minimize risk to an acceptable level and underwrite it. It really is that simple.

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9 Responses to Start-up Nation of Israel

  1. Olga Brukman says:

    This book is a really a pile of bs. I’ve been living in Israel for 25 years now and Israeli society changed dramatically over last 15-18 years.

    Army service in elite combat unit: it used to be very prestigious and children of elite were eager to serve in such units. So then rich kids finished their arm service they used their families and friends families connections to get ahead. These times are gone. People that serve in combat units today come from poverty/low-middle class. After super demanding service they start from the bottom of the bottom. Kids of elite serve in technological units, PR units, etc and go to prestigious USA and European universities.

    While Israel has interesting startup scene, you should know that most of it is supported by government funds. For example, I work on a new product for a mid size Israeli company (500 people). Recently my tam was asked to submit our working hours records for government funding. 99.99% of successful Israeli startups sell themselves to a higher bidder within few years if they are lucky. So most money leaves Israel. Lively startup scene does not lead to growing into stable big Israeli owned companies.

    I get pretty decent salary working in Israeli hi tech industry, but nothing more: no stock options, no promotion, no career path. Israel is very socially conservative country with poor work ethic and poor management traditions.

    Please throw this book into recycle bean.

    • Yana says:

      Wow, that’s interesting. The start-ups i met in Tel Aviv were indeed aiming at either IPOs or to be acquired by large companies, but that’s the whole idea of start-ups. Are you saying that prestigious military experience is now replaced by military-tech-intelligence service, but not combat? I have actually met lots of owners of large businesses who went into Israeli universities, not foreign, mostly they went to Technicon in Haifa or University of Tel Aviv, maybe it’s a different generation? Why do you think it’s bad for the government to fund start-ups? or did i miss something? Another point – Fiver, Plus500, Playtech, Etoro, Waze, Moovit – all stable successful Israeli companies, are they reputable in Israel, in your view?

      • Olga Brukman says:

        » Are you saying that prestigious military experience is now replaced by military-tech-intelligence service, but not combat?
        Yes, exactly.

        > have actually met lots of owners of large businesses who went into Israeli universities, not foreign,
        Obviously, not every kid from a rich family goes abroad for BA. However, if you’re from rich established privileged family, you’d go abroad for a grad school or job or something.

        >Fiver, Plus500, Playtech, Etoro, Waze, Moovit
        Waze has been sold to Google couple of years ago. I use Moovit every day, but don’t know about their business model. Rest of the companies you’ve mentioned – didn’t really register on my radar.

  2. The fact of the matter is that Israel has a lot of startups, and many of them are successful. This is puzzling for me: where all those entrepreneurship ideas and energy are coming from? I used to live in Israel for many years, did military service in one of the technical units (albeit not the elite one), and graduated from Technion with very good grades. I disagree that military training and education are major contributors.

    • Yana says:

      So, what would be your theory?

      • outputlogic says:

        I can build a theory based on facts: people I personally know for a long time. One example is Saar Dickman ( http://tower-sec.com/2015/11/26/saar-dickman-ceo/ ). He was my platoon commander in the military in ’93-94. The guy built and sold several startups over the course of his career. He was already charismatic and natural leader in his ‘teen years, during military service and before getting a university degree. I think “struggle for survival” + government incentives do play a role in this phenomenon.

  3. NN says:

    I am sorry I know it is totally stupid, but can anyone please explain this joke .. ?

    Four guys are standing on a street corner… an American, a Russian, a Chinese man, and an Israeli…. A reporter comes up to the group and says to them: “Excuse me…. What’s your opinion on the meat shortage?” The American says: What’s a shortage? The Russian says: What’s meat? The Chinese man says: What’s an opinion? The Israeli says: What’s “Excuse me”?

    I mean, Why the Israeli says ‘What’s Excuse me’ .. ?

  4. Anonymous says:

    Olga, Yana.. you’ve missed the whole point.
    As for Israeli Army case – elite/non elite units, which generation you belong, it doesn’t really matter.
    What mainly matters is that simply fact of serving at age of 18.

    One word: “Geography” .

    We live in the middle east, The threats on Israel are 24/7. The “Israeli clock” ticks faster.
    Everything collapses around us, The middle east is Hell on Earth,
    and still we manage to live and fulfill a great phenomenon, called democracy.
    Over 69 years of existence we truly internalized that if we won’t help ourselves, no one would.
    As for the future Conflicts/challenges & threats upon Israel (such as an existential threat – Iran nuclear case) – there is no way to be optimistic BUT as for Israel ability to deal with those challenges and threats – there is no need to be pessimistic.

    Regarding the anecdote from the book: ” Four guys are standing on a street corner… ”
    If one can’t understand this, one would never figure out our success throughout many fields….

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