Start-up Nation

by Dan Senor, Saul Singer

  When we asked Major General Farkash why Israel’s military is so antihierarchical and open to questioning, he told us it was not just the military but Israel’s entire society and history. “Our religion is an open book,” he said, in a subtle European accent that traces back to his early years in Transylvania. The “open book” he was referring to was the Talmud—a dense recording of centuries of rabbinic debates over how to interpret the Bible and obey its laws—and the corresponding attitude of questioning is built into Jewish religion, as well as into the national ethos of Israel.

  As Israeli author Amos Oz has said, Judaism and Israel have always cultivated “a culture of doubt and argument, an open-ended game of interpretations, counter-interpretations, reinterpretations, opposing interpretations. From the very beginning of the existence of the Jewish civilization, it was recognized by its argumentativeness.”11

  Indeed, the IDF’s lack of hierarchy pervades civilian life. It can even break down civilian hierarchies. “The professor acquires respect for his student, the boss for his high-ranking clerk. . . . Every Israeli has his friends ‘from the reserves’ with whom he might not otherwise have any kind of social contact,” says Luttwak. “Sleeping in bare huts or tents, eating dull army food, often going without a shower for days, reservists of widely different social backgrounds meet on an equal footing; Israel is still a society with fewer class differences than most, and the reserve system has contributed to keeping it that way.”

  The dilution of hierarchy and rank, moreover, is not typical of other militaries. Historian and IDF reserve officer Michael Oren—now serving as Israel’s ambassador to the United States—described a typical scene at an Israeli army base from when he was in a military liaison unit: “You would sit around with a bunch of Israeli generals, and we all wanted coffee. Whoever was closest to the coffee pot would go make it. It didn’t matter who—it was common for generals to be serving coffee to their soldiers or vice versa. There is no protocol about these things. But if you were with American captains and a major walked in, everyone would stiffen. And then a colonel would walk in and the major would stiffen. It’s extremely rigid and hierarchical in the U.S. Rank is very, very important. As they say in the American military, ‘You salute the rank, not the person.’ ”12

  In the IDF, there are even extremely unconventional ways to challenge senior officers. “I was in Israeli army units where we threw out the officers,” Oren told us, “where people just got together and voted them out. I witnessed this twice personally. I actually liked the guy, but I was outvoted. They voted out a colonel.” When we asked Oren in disbelief how this worked, he explained, “You go and you say, ‘We don’t want you. You’re not good.’ I mean, everyone’s on a first-name basis. . . . You go to the person above him and say, ‘That guy’s got to go.’ . . . It’s much more performance-oriented than it is about rank.”

  Retired IDF General Moshe “Bogey” Yaalon, who served as chief of staff of the army during the second intifada, told us a similar story from the second Lebanon war. “There was an operation conducted by a reserve unit in the Lebanese village of Dabu. Nine of our soldiers and officers were killed, and others were injured, including my nephew. And the surviving soldiers blamed the battalion commander for his incompetent management of the operation. The soldiers at the company level went to the brigade commander to complain about the battalion commander. Now, the brigade commander, of course, did his own investigation. But the battalion commander was ultimately forced to step down because of a process that was initiated by his subordinates.”13

  Yaalon believes that this unique feature of Israel’s military is critical to its effectiveness: “The key for leadership is the soldiers’ confidence in their commander. If you don’t trust him, if you’re not confident in him, you can’t follow him. And in this case, the battalion commander failed. It might be a professional failure, like in this case. It might be a moral failure in another case. Either way, the soldier has to know that it is acceptable—and encouraged—for him to come forward and to talk about it.”

  Former West Point professor Fred Kagan concedes that Americans can learn something from the Israelis. “I don’t think it’s healthy for a commander to be constantly worrying if his subordinates will go over his head, like they do in the IDF,” he told us. “On the other hand, the U.S. military could benefit from some kind of 360-degree evaluation during the promotion board process for officers. Right now in our system the incentives are all one-sided. To get promoted, an officer just has to please more senior officers. The junior guys get no input.”

  The conclusion Oren draws from displays of what most militaries—and Fred Kagan—would call insubordination is that the IDF is in fact “much more consensual than the American army.” This might seem strange, since the U.S. Army is called a “volunteer” army (not unpaid, but in the sense of free choice), while the IDF is built on conscription.

  Yet, Oren explains, “in this country there’s an unwritten social contract: we are going to serve in this army provided the government and the army are responsible toward us. . . . The Israeli army is more similar, I would imagine, to the Continental Army of 1776 than it is to the American army of 2008. . . . And by the way, George Washington knew that his ‘general’ rank didn’t mean very much—that he had to be a great general, and that basically people were there out of volition.”

  The Continental Army was an extreme example of what Oren was describing, since its soldiers would decide on an almost daily basis whether to continue to volunteer. But it was a “people’s army,” and so is the IDF. As Oren describes it, like the Continental Army, the IDF has a scrappy, less formal, more consensual quality because its soldiers are fighting for the existence of their country, and its ranks are composed of a broad cross section of the people they are fighting for.

  It’s easy to imagine how soldiers unconcerned with rank have fewer qualms about telling their boss, “You’re wrong.” This chutzpah, molded through years of IDF service, gives insight into how Shvat Shaked could have lectured PayPal’s president about the difference between “good guys and bad guys” on the Web, or how Intel Israel’s engineers decided to foment a revolution to overturn not only the fundamental architecture of their company’s main product but the way the industry measured value. Assertiveness versus insolence; critical, independent thinking versus insubordination; ambition and vision versus arrogance—the words you choose depend on your perspective, but collectively they describe the typical Israeli entrepreneur.

  PART II

  Seeding a Culture of Innovation

  CHAPTER 3

  The People of the Book

  Go far, stay long, see deep.

  —OUTSIDE MAGAZINE

  THE ELEVATION OF LA PAZ, BOLIVIA, is 11,220 feet and El Lobo is one floor higher. El Lobo is a restaurant, hostel, social club, and the only source of Israeli food in town. It is run by its founders, Dorit Moralli and her husband, Eli, both from Israel.1

  Almost every Israeli trekker in Bolivia is likely to come through El Lobo, but not just to get food that tastes like it’s from home, to speak Hebrew, and to meet other Israelis. They know they will find something else there, something even more valuable: the Book. Though spoken of in the singular, the Book is not one book but an amorphous and evolving collection of journals, dispersed throughout some of the most remote locations in the world. Each journal is a handwritten “Bible” of advice from one traveler to another. And while the Book is no longer exclusively Israeli, its authors and readers tend to be from Israel.

  El Lobo’s incarnation of the Book was created in 1986, Dorit recalls, just one month after her restaurant opened. Four Israeli backpackers came in and asked, “Where’s the Book?” When she looked mystified, they explained that they meant a book where people could leave recommendations and warnings for other travelers. They went out and bought a blank journal and donated it to the restaurant, complete with the first entry, in Hebrew, about a remote jungle town they thought other Israelis might like.
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br />   The Book predated the Internet—it actually started in Israel in the 1970s—but even in today’s world of blogs, chat rooms, and instant messaging, this primitive, paper-and-pen-based institution is still going strong. El Lobo has become a regional Book hub, with six volumes: a successor to the original Book started in 1989, along with separate Books for Brazil, Chile, Argentina, Peru, and the northern part of South America. There are other Books stationed throughout Asia. While the original was written only in Hebrew, today’s Books are written in a wide array of languages.

  “The polyglot entries were random, frustrating, and beautiful, a carnival of ideas, pleas, boasts, and obsolete phone numbers,” Outside magazine reported on the venerable 1989 volume. “One page recommended the ‘beautikul girls’ [sic] in a certain disco; the next tipped a particular ice cave as ‘a must’ (at least until someone else scrawled a huge ‘NO!’ over that entry). This was followed by a half-page in Japanese and a dense passage in German, with bar charts of altitude and diagrams of various plants. . . . After that there was a full-page scrawl devoted to buying a canoe in the rainforests of Peru’s Manu National Park, with seven parentheticals and a postscript that wrapped around the margins sideways; a warning against so-and-so’s couscous; and an ornate four-color drawing of a toucan named Felipe.”

  Though it has become internationalized, the Book remains a primarily Israeli phenomenon. Local versions of the Book are maintained and pop up wherever the “wave”—what Hebrew University sociologist Darya Maoz calls the shifting fashions in Israeli travel destinations—goes. Many young Israeli trekkers simply go from Book to Book, following the flow of advice from an international group of adventure seekers, among whom Hebrew seems to be one of the most common tongues.

  A well-known joke about Israeli travelers applies equally well in Nepal, Thailand, India, Vietnam, Peru, Bolivia, or Ecuador. A hotelkeeper sees a guest present an Israeli passport and asks, “By the way, how many are you?” When the young Israeli answers, “Seven million,” the hotelkeeper presses, “And how many are still back in Israel?”

  It is hardly surprising that people in many countries think that Israel must be about as big and populous as China, judging from the number of Israelis that come through. “More than any other nationality,” says Outside, “[Israelis] have absorbed the ethic of global tramping with ferocity: Go far, stay long, see deep.”

  Israeli wanderlust is not only about seeing the world; its sources are deeper. One is simply the need for release after years of confining army service. Yaniv, an Israeli encountered by the Outside reporter, was typical of many Israeli travelers: “He had overcompensated for years of military haircuts by sprouting everything he could: His chin was a wispy scruff and his sun-bleached hair had twirled into a mix of short dreads and Orthodox earlocks, all swept up into a kind of werewolf ’do. ‘The hair is because of the army,’ Yaniv admitted. ‘First the hair, then the travel.’ ”

  But it’s more than just the army. After all, these young Israelis probably don’t run into many veterans from other armies, as military service alone does not induce their foreign peers to travel. There is another psychological factor at work—a reaction to physical and diplomatic isolation. “There is a sense of a mental prison living here, surrounded by enemies,” says Yair Qedar, editor of the Israeli travel magazine Masa Acher. “When the sky opens, you get out.”

  Until recently, Israelis could not travel to a single neighboring country, though Beirut, Damascus, Amman, and Cairo are all less than a day’s drive from Israel. Peace treaties with Egypt and Jordan have not changed this much, though many curious Israelis have now visited these countries. In any event, this slight opening has not dampened the urge to break out of the straitjacket that has been a part of Israel’s modern history from the beginning—from before the beginning.

  Long before there was a State of Israel, there was already isolation. An early economic boycott can be traced back to 1891, when local Arabs asked Palestine’s Ottoman rulers to block Jewish immigration and land sales. In 1922, the Fifth Palestine Arab Congress called for the boycott of all Jewish businesses.2

  A longer official boycott by the twenty-two-nation Arab League, which banned the purchase of “products of Jewish industry in Palestine,” was launched in 1943, five years before Israel’s founding. This ban extended to foreign companies from any country that bought from or sold to Israel (the “secondary” boycott), and even to companies that traded with these blacklisted companies (the “tertiary” boycott). Almost all the major Japanese and Korean car manufacturers—including Honda, Toyota, Mazda, and Mitsubishi—complied with the secondary boycott, and their products could not be found on Israeli roads. A notable exception was Subaru, which for a long time had the Israeli market nearly to itself but was barred from selling in the Arab world.3

  Every government of the Arab League established an official Office of the Boycott, which enforced the primary boycott, monitored the behavior of secondary and tertiary targets, and identified new prospects. According to Christopher Joyner of George Washington University, “Of all the contemporary boycotts, the League of Arab States’ boycott against Israel is, ideologically, the most virulent; organizationally, the most sophisticated; politically, the most protracted; and legally, the most polemical.”4

  The boycott has at times taken on unusual targets. In 1974, the Arab League blacklisted the entire Baha’i faith because the Baha’i temple in Haifa is a successful tourist attraction that has created revenue for Israel. Lebanon forbade the showing of the Walt Disney production Sleeping Beauty because the horse in the film bears the Hebrew name Samson.5

  In such a climate, it is natural that young Israelis seek both to get away from an Arab world that has ostracized them and to defy such rejectionism—as if to say, “The more you try to lock me in, the more I will show you I can get out.” For the same reason, it was natural for Israelis to embrace the Internet, software, computer, and telecommunications arenas. In these industries, borders, distances, and shipping costs are practically irrelevant. As Israeli venture capitalist Orna Berry told us, “High-tech telecommunications became a national sport to help us fend against the claustrophobia that is life in a small country surrounded by enemies.”6

  This was a matter of necessity, rather than mere preference or convenience.

  Because Israel was forced to export to faraway markets, Israeli entrepreneurs developed an aversion to large, readily identifiable manufactured goods with high shipping costs, and an attraction to small, anonymous components and software. This, in turn, positioned Israel perfectly for the global turn toward knowledge- and innovation-based economies, a trend that continues today.

  It is hard to estimate how much the Arab boycott and other international embargoes—like France’s military ban—have cost Israel over the past sixty years, in terms of lost markets and the difficulties imposed on the nation’s economic development. Estimates range as high as $100 billion. Yet the opposite is just as difficult to guess: What is the value of the attributes that Israelis have developed as a result of the constant efforts to crush their nation’s development?

  Today, Israeli companies are firmly integrated into the economies of China, India, and Latin America. Because, as Orna Berry says, telecommunications became an early priority for Israel, every major telephone company in China relies on Israeli telecom equipment and software. And China’s third-largest social-networking Web site, which services twenty-five million of the country’s young Web surfers, is actually an Israeli start-up called Koolanoo, which means “all of us” in Hebrew. It was founded by an Israeli whose family emigrated from Iraq.

  In the ultimate demonstration of nimbleness, the Israeli venture capitalists who invested in Koolanoo when it was a Jewish social-networking site have utterly transformed its identity, moving all of its management to China, where young Israeli and Chinese executives work side by side.

  Gil Kerbs, an Israeli alumnus of Unit 8200, also spends a lot of time in China. When he left the IDF, he pi
cked up and moved to Beijing to study Chinese intensively, working one-on-one with a local instructor—for five hours each day for a full year—while also holding a job at a Chinese company, so he could build a business network there. Today he is a venture capitalist in Israel, specializing in the Chinese market. One of his Israeli companies is providing voice-biometric technology to China’s largest retail bank. He told us that Israelis actually have an easier time doing business in China than in Europe. “For one, we were in China before the ‘tourists’ arrived,” he says, referring to those who have only in recent years identified China as an emerging market. “Second, in China there is no legacy of hostility to Jews. So it’s actually a more welcoming environment for us.”7

  Israelis are far ahead of their global competitors in penetrating such markets, in part because they had to leapfrog the Middle East and search for new opportunities. The connection between the young Israeli backpackers dispersed around the globe and Israeli technology entrepreneurs’ penetration of foreign markets is clear. By the time they are out of their twenties, not only are most Israelis tested in discovering exotic opportunities abroad, but they aren’t afraid to enter unfamiliar environments and engage with cultures very different from their own. Indeed, military historian Edward Luttwak estimates that many postarmy Israelis have visited over a dozen countries by age thirty-five.8 Israelis thrive in new economies and uncharted territory in part because they have been out in the world, often in pursuit of the Book.