My Promised Land: The Triumph and Tragedy of Israel

by Ari Shavit

  Kobi Richter was a perceptive boy. As his bar mitzvah approached, he recognized that there was an inherent contradiction between the two values the kibbutz upheld: equality and freedom. But though he recognized the jealousy, hypocrisy, and pettiness in the commune’s life, he was devoted to the kibbutz. He sang and danced in the grand socialist, national, and Jewish holidays and celebrations. When the women danced in circles and the men reenacted harvest time with plowshares in hand and the children were lifted up high, Kobi would have tears in his eyes. He identified totally with the mesmerizing secular religion of Israeli pioneerism. He felt privileged to be one of the select few who would lead his people from slavery to liberation, from weakness to might, from Shoah to resurrection.

  Ramat Yohanan was not only a commune fulfilling the socialist-Zionist dream, it was a successful business. The cows in its modern dairy produced twice as much milk as the cows of the American Midwest. Its new plastics plant was one of the first of the kibbutz movement. The kibbutz also had avocado groves in which the sixteen-year-old Richter laid out an innovative irrigation system. It had cotton fields for which the seventeen-year-old Richter built a mechanical picker of his own design. Ramat Yohanan’s agriculture was already industrialized, and its industry was quite sophisticated. The commune was not only the greenhouse of romantic Zionist socialism but the greenhouse of a demanding can-do ethos and impressive technological capability. When Richter joined the Israeli Air Force in 1964, he found there what he valued most: excellence, competitiveness, and high technology. He loved the challenge of seizing control of the flying machines that defied the heights and speed man was designed for. For Richter, the pilot was a modern knight, a solitary warrior battling other solitary warriors to the death. Richter loved the fight. He believed in his own capability and loved testing it daily. His sense of superiority didn’t make him popular among his peers and commanders, but no one could deny his extraordinary talent. The excellent pupil, welder, swimmer, hunter, dancer, and technological prodigy became an excellent fighter pilot. Handsome, proud, and arrogant, Richter was the poster boy of the Israeli Air Force of the 1960s.

  On June 5, 1967, Kobi Richter took off from Lydda airport in a French-made Ouragan bomber. Along with his comrades from Squadron 107, he headed south, flying low and maintaining absolute radio silence before turning southeast toward Egypt. Operation Moked had been rehearsed by the Israeli Air Force for years. Richter himself had rehearsed it dozens of times. The strategic idea was to get nearly all of Israel’s combat aircraft in the air at once and then strike—with complete surprise and accuracy—the thirty air bases of Egypt, Syria, Jordan, and Iraq. But now, as Squadron 107 hovered over the western Negev, Richter was thrilled to see the plan become reality. Dozens of planes were in the air, some heading for Luxor, some for Amman, some for Damascus. The sky was almost blackened with the flocks of eagles about to attack. Richter felt as if mighty vectors of power were bursting out of the tiny State of Israel and were about to rattle the entire Middle East. He felt that he was part of some mythical force that had suddenly risen from the Promised Land. Every bomber was in the right location, at the right altitude, on the right course. And it all took place in absolute silence, in perfect coordination, like an extraordinary sacrament. Such an event had never happened before and would never happen again.

  At 0745, Richter took his Ouragan from three hundred to three thousand feet. As the airfield of El-Arish came into view, it looked exactly as he had memorized it: the control tower, the runways, the MiG jets. Richter fired seventy-six French-made rockets at the antiaircraft battery, which ceased to exist in about thirty seconds. Then he returned for three more precision strikes, destroying three MiG-17’s on the ground. Within fifteen minutes, Squadron 107 disabled the Egyptian airfield of El-Arish. Within three hours the Israeli Air Force destroyed four Arab air forces. As Richter headed home and descended over the orange groves of Rehovot, landing at Lydda airport, he knew that in its very first hours the war was already won. Israel was now a regional power, the strongest nation in the Middle East.

  In 1968 Kobi Richter trained as an intercept pilot. From 1969 to 1973 he participated in a series of dogfights, shooting down eleven enemy planes. He was now one of the leading combat pilots of an air force that gave Israel air supremacy. Yet while he was still in the service he earned his Ph.D. in biology and biochemistry, and from 1979 to 1982 he did his postdoctoral research at MIT in artificial intelligence. A few years later, Colonel Richter left the air force and established his first high-tech company, Orbot, which he founded with four other graduates of the security and military system. Orbot developed an innovative automated optical inspection (AOI) system to aid in the manufacturing of printed circuit boards, with speed and resolution previously unseen in the field. In 1986, Orbot brought its first product to market. In 1989 it controlled 60 percent of the worldwide AOI market. After it merged with its Israeli rival Optrotech, Orbotech was born, which now controls nearly 80 percent of the AOI market. In the second decade of the twenty-first century, Orbotech employs more than fifteen hundred people and has an annual revenue of more than $400 million. In 1992 Richter himself resigned from the company, ready to move on to new things, though he continues to be Orbotech’s biggest shareholder.

  Richter founded Medinol in December 1992. He realized that the next big thing in cardiac medicine was the stent, a tiny device composed of wire mesh tubes inserted into an artery to keep it open and allow blood to flow as it should. The stents of the early 1990s were problematic—some were too rigid and difficult to insert, while others were too flexible and collapsed after insertion. What was needed was a new kind of stent that would be flexible during insertion and rigid afterward. Richter developed this new kind of stent, the rigid-flex, with the Russian tank engineer Grisha Pinchasik, who had recently immigrated to Israel. In the Richters’ Ramat Hasharon kitchen, the first models of the revolutionary stent were carved from empty cottage cheese containers. Five years later—after signing a partnership and distribution agreement with Boston Scientific—Medinol sold a hundred thousand stents a month, and its annual revenues were over $200 million. By mid-1999 the tiny Jerusalem-based company controlled 35 percent of the international stent market.

  What made Medinol’s success even more dramatic was the unique production method Kobi Richter developed. Consequently, Medinol’s after-tax profit was 86 cents on the dollar. In the late 1990s, Kobi and Yehudit Richter owned one of the most profitable companies in the world.

  In 2000, a bitter legal battle erupted between the Richters and Boston Scientific, and production and distribution came to a standstill. But after five years of courtroom skirmishes, the Richters won the case. The $750 million they were awarded made the daughter of a Mengele twin who grew up in the Bizaron housing estate and the son of the soldiers of Zionism who grew up on Kibbutz Ramat Yohanan one of Israel’s richest couples.

  I’ve known Kobi for years. He is a friend. As always, I meet him in his seaside villa in the prosperous suburb of Arsuf, north of Tel Aviv. Standing in his living room, he pushes an unseen button that summons a hydraulic dumbwaiter for fine wines. He uncorks a 1964 Bourgogne and pours it into a decanter, waits awhile, then pours it into glasses. He asks me what I think of it and then tells me what I should think of it. He gives me a long lecture about Bourgogne and about the specific vineyards and winery from which this wine came, and about how local inheritance laws shaped Bourgogne’s wine tradition. Then, after tasting the wine, he gives his final verdict: superb. He raises his glass in a toast to fine wines and fine books and all work that is finely done.

  I ask Kobi what I asked Michael Strauss: “What is Israel’s contribution to his success? What is Israeli about Orbotech and Medinol?” Richter answers that the secret is “to beat swords into plowshares”—not because it is good for peace, he says with a laugh, but because it is good for the plowshares. Beating swords is not only the sound prophecy of Isaiah and Micah, it is also a sound business plan. What made Orbotech and Medinol p
ossible, and what made the Israeli high-tech boom a reality, were the immense resources invested over decades by the state in sophisticated military production. The military-industrial complex is for Israel what the space program was for the United States. It generates astounding human capital and develops cutting-edge technologies that eventually trickle down to the high-tech industry and push it forward. It is no accident that Orbot was founded by three pilots and two Israel Security Prize recipients. It is no accident that Medinol’s breakthrough was made possible by Israel’s laser and missile production technology. What the nation invested in defending itself for half a century paid off with the surprisingly bounteous dividend of the great high-tech boom.

  But there is a second factor, Richter says. Orbot had a small interdisciplinary team of outstanding individuals. “We were the very best in artificial intelligence, in hardware, and in fine mechanics. This team could have done anything. That’s very Israeli, too—having a small elite unit of highly qualified professionals who work together day in and day out to achieve a common goal. Medinol was a variation on the same theme; in that case one person contained within him all that the company dealt with: biology, medicine, engineering, computer science, and fine mechanics. In large American corporations, it is almost impossible to find a programmer who understands the biology of blood vessels or a doctor who understands materials engineering. So decisions are made by consensus, which is a cumbersome and imprecise process. But at Medinol, it was all integrative, just as at Orbotech it was all interdisciplinary. Time was saved, efficiency was tripled. The business enterprise functioned as a cohesive organism: focused, strong, healthy, and able to achieve the best results. In different shapes and forms this is what happens in many Israeli start-ups. Their small, unified teams have the single-mindedness, expediency, and creative drive that are scarcely found in corporate America or Europe.”

  The third factor was immigration, Richter says. “A million Russians came to Israel in the 1990s, among them hundreds of thousands of fantastic workers—engineers, technicians, programmers. This benefited us both at Orbotech and at Medinol. At one point, 85 percent of our employees were Russian immigrants. A Russian immigrant was both the co-inventor of the rigid-flex and co-owner of the company. This wave of immigration benefited the entire Israeli industry. The encounter between Israeli creativity and Russian thoroughness was exceptionally productive. If you ask me what made my success and the success of the Israeli high-tech revolution, my answer is fourfold: the infrastructure of the defense industry, Israeli innovation and improvisation, Russian skill, and the integration of different fields of knowledge in small, daring groups. The unique combination that enabled my companies to succeed is the very same one that saved Israel by making it a start-up nation.”

  As he drinks his wine, Richter tries to connect the dots. “In the twenty years that Israel was about the kibbutz, I was on a kibbutz. In the twenty years that Israel was about the military, I was in the military. In the twenty years that Israel is about high-tech, I am in high-tech. I happened to be in every nexus of Israeli advancement. My life took me from one Israeli myth to the next.

  “In the kibbutz we felt like the sons of gods,” Kobi says. “We were athletic and handsome and suntanned, like proud Jewish Bedouins walking barefoot in the fields and driving tractors and chasing girls. We were the new strong Jew rising from the death of the old weak Jew. We despised the Diaspora and looked down upon decadent Tel Aviv urbanites. We were the real thing, the fulfillment of the Zionist dream, the core of Israeli existence. In 1960 the myth was us and we were the myth. I was exactly what Bruno Bettelheim wrote about me when he studied our kibbutz in the 1960s: a child of a dream.

  “In the air force I was Top Gun. The Arab Israeli dogfights of 1969–70 were a theater of war in which the United States and the USSR were fighting each other by proxies. So my intercept team was equipped with the very best technology America had to offer. But my team had more combat experience than the Americans did. I found myself teaching American air force intercept teams and American navy intercept teams. I was really Top Gun. It’s not that I played Tom Cruise; Tom Cruise played me. Ten years after becoming a combat pilot I was one of the very best in the West. I was a world champion. Once again I found myself personifying the myth. When the kibbutz began to wane, the air force was the epitome of Israeli excellence. My peers and I were the flesh-and-blood embodiment of Israel’s ability and superiority.

  “But by the late 1980s,” Kobi says, “the military myth was waning. Although the Israeli Air Force maintained its might, I realized that the era of absolute Israeli domination of the skies was about to end. I understood that no military power and no military victory would solve Israel’s fundamental problems. But just as the second myth was crumbling, the third emerged: high-tech. First there was Scitex, then Orbotech, then another hundred new start-ups. A thousand start-ups. Tens of thousands of start-ups. There were venture capital funds, research and development centers, telecommunications, biotech, meditech, clean-tech. An astonishing geyser of innovation erupted out of this barren land. So per capita Israel has the largest number of medical-device patents in the world. We have more start-ups than France does. Every international corporation wants a subsidiary here because they all acknowledge our extraordinary creativity—all these young Israelis with all these brilliant ideas. After the kibbutz faded and the military faded, a third Israeli wave has risen. And this third wave of technological innovation is now keeping us above water. It enables us to prosper in spite of the occupation and the settlements and the decay of the state. It is the new incarnation of Israeli vitality.”

  The Strauss and Richter stories represent two facets of Israel’s economic success story. Whereas Strauss is all about the innovations of the solid traditional Israeli industry, Richter embodies the innovations of Israel’s dazzling new high-tech industry. In the 1990s and 2000s, while Israeli politics failed and the hopes for peace were dashed and an Islamic nuclear threat emerged, the Israeli economy was booming. In the twenty-first century, enterprises like those of Strauss and Richter and a thousand others have made Israel one of the most nimble economies in the West.

  To understand how this came to be, I turn to Stanley Fischer. The sixty-nine-year-old economist was born in Rhodesia, educated in London, and achieved his professional renown in the United States. From 1994 until 2001, he was first deputy managing director of the International Monetary Fund. From 2002 until early 2005, he served as the vice chairman of Citigroup. For eight years (2005–13) he served as the governor of the Bank of Israel, and he became the high priest of Israel’s economy. In his Herzliya home he receives me in moccasins, tan Bermuda shorts, and a green Lacoste shirt.

  As he describes the economics of contemporary Israel, Fischer prefers hard data to frothy superlatives. Sitting in a large red armchair that dwarfs his small frame, he utters the relevant figures in slow, measured, Anglo-Saxon Hebrew. In the years 2004 to 2008, Israel’s average annual growth rate was 5.2 percent. While the world was in crisis in 2010–11, Israel’s average annual growth rate was 4.7 percent. “That doesn’t make Israel a Chinese tiger,” he tells me, “but it is a performance far better than America’s or Europe’s.” It is indeed an extraordinary economic accomplishment.

  Fischer tells me there are four reasons for this success: reducing government spending dramatically (from 51 percent of GDP in 2002 to 42 percent in 2011); reducing the national debt significantly (from 100 percent of GDP in 2002 to 75 percent in 2011); maintaining a conservative and responsible financial system; and fostering the conditions required for Israeli high-tech to continue to flourish. “Israeli high-tech is truly phenomenal,” he says. “It is the locomotive of Israel’s growth. Because of the high-tech industry, we export as much as we import, and we attract considerable direct foreign investments. Israel has really become a start-up nation. Investment in research and development is higher than anywhere else—4.5 percent of GDP, compared with an OECD average of 2.2 percent. The ratio of start-up
s to population is by far the highest in the world. The number of inventions Israelis come up with is astounding. No wonder Israel has more companies traded on the NASDAQ than Canada or Japan. No wonder that venture capital investments in Israel are larger than in Germany or France. Time after time I am amazed. There is innovation here, and there is daring, and there is exceptional ambition. Israelis are willing to take risks, and they believe nothing will stop them. So there is a unique entrepreneurial spirit in Israel. And this spirit makes the nation a powerhouse of technological ingenuity. One mustn’t get carried away. We are still a small country with a small marketplace facing incredible challenges. But the high-tech revolution combined with a prudent macroeconomic policy has made Israel a hub of prosperity.”

  When I ask Fischer about the perils the country faces, he speaks cautiously. “We have four problems,” he says. “Our education system has deteriorated, and it endangers our ability to sustain technological excellence. The employment rate among ultra-Orthodox men is only 45 percent. Most Arab women do not work. Fewer than twenty business groups control much of the local market and thus restrict competition. Right now the high-tech miracle helps to conceal these four problems that are weighing down the wider economy. But in the long term, these problems endanger Israel’s ability to remain prosperous and successful.”

  Dan Ben David is less cautious than Fischer. I drive up from Herzliya to the Jerusalem think tank he heads to hear the economics professor say explicitly what the governor of the central bank will only hint at. “Israel’s real economic miracle took place in the years 1955 to 1972,” Ben David tells me. “During those years, the Israeli GDP grew twice as fast as that of Western countries, while Israel remained one of the most egalitarian nations in the West. Although it absorbed millions of immigrants and fought three wars, it succeeded in raising the standard of living of its citizens and the productivity rate of its workers. At the same time, it promoted educational excellence, social solidarity, and military might.