Start-up Nation

by Dan Senor, Saul Singer

  More and more American military officers are applying for MBA programs and, like Captain Tice, are going to extraordinary lengths to do so. In 2008, of aspiring MBA applicants that took the Graduate Management Admission Test (GMAT), 15,259, or 6 percent, had military experience. At the University of Virginia’s Darden School of Business, the number of military applicants rose 62 percent from 2007 to 2008. The first-year class in 2008 had 333 students, 40 of whom were from the military, including 38 who had served in Afghanistan or Iraq.

  The Graduate Management Admission Council, which administers the GMAT, has made it a priority to better organize the path from war front to business school. It has launched its Operation MBA program, which helps members of the armed forces find B-schools that waive application fees or offer generous financial aid packages and even tuition deferrals for cash-strapped vets. And the council is even setting up GMAT test centers on military bases, one of which was opened in 2008 at Fort Hood in Texas; another is planned to open at Yokota Air Base in Japan.

  Yet the capacity of U.S. corporate recruiters and executives to make sense of combat experience and its value in the business world is limited. As Jon Medved explained, most American business-people simply do not know how to read a military résumé. Al Chase told us that a number of the vets he’s worked with have walked a business interviewer through all their leadership experiences from the battlefield, including case studies in high-stakes decision making and management of large numbers of people and equipment in a war zone, and at the end of it the interviewer has said something along the lines of “That’s very interesting, but have you ever had a real job?”

  In Israel it is the opposite. While Israeli businesses still look for private-sector experience, military service provides the critical standardized metric for employers—all of whom know what it means to be an officer or to have served in an elite unit.

  CHAPTER 5

  Where Order Meets Chaos

  Doubt and argument—this is a syndrome of the Jewish civilization and this is a syndrome of today’s Israel.

  —AMOS OZ

  ABOUT THIRTY NATIONS have compulsory military service that lasts longer than eighteen months. Most of these countries are developing or nondemocratic or both. But among first-world countries, only three require such a lengthy period of military service: Israel, South Korea, and Singapore. Not surprisingly, all three face long-standing existential threats or have fought wars for survival in recent memory.1

  For Israel, the threat to its existence began before it had become a sovereign nation. Beginning in the 1920s, the Arab world resisted the establishment of a national Jewish state in Palestine, then sought to defeat or weaken Israel in numerous wars. South Korea has lived under a constant threat from North Korea, which has a large standing army poised just a few miles from Seoul, South Korea’s capital. And Singapore lives with memories of the occupation by Japan during World War II, its recent struggle for independence, which culminated in 1965, and the volatile period that followed.

  Singaporean National Service was introduced in 1967. “We had to defend ourselves. It was a matter of survival. As a small country with a small population, the only way we could build a force of sufficient size . . . was through conscription,” explained Defense Minister Teo Chee Hean. “It was a decision not taken lightly given the significant impact that conscription would have on every Singaporean. But there was no alternative.”2

  At independence, Singapore had only two infantry regiments, and they had been created and were commanded by the British. Two-thirds of the soldiers were not even residents of Singapore. Looking for ideas, the city-state’s first defense minister, Goh Keng Swee, called Mordechai Kidron, the former Israeli ambassador to Thailand, whom he had gotten to know while the two men were working in Asia. “Goh told us that they thought that only Israel, a small country surrounded by Muslim countries, . . . could help them build a small, dynamic army,” Kidron has said.3

  Singapore gained independence twice over the course of just two years. The first was independence from the British in 1963, as part of Malaysia. The second was independence from Malaysia, in 1965, to stave off civil war. Singapore’s current prime minister, Goh Chok Tong, described his country’s relations with Malaysia as having remained tense after an “unhappy marriage and acrimonious divorce.” Singaporeans also feared threats from Indonesia, all while an armed Communist insurgency was looming just to Singapore’s north, in Indochina.

  In response to Goh’s pleas for help, the IDF tasked Lieutenant Colonel Yehuda Golan with writing two manuals for the nascent Singaporean army: one on combat doctrine and the structure of a defense ministry and another on intelligence institutions. Later, six IDF officers and their families moved to Singapore to train soldiers and create a conscription-based army.

  Along with compulsory service and a career army, Singapore also adopted elements of the IDF’s model of reserve service. Every soldier who completes his regular service is obligated to serve for short stints every year, until the age of thirty-three.

  For Singapore’s founding generation, national service was about more than just defense. “Singaporeans of all strata of society would train shoulder to shoulder in the rain and hot sun, run up hills together, and learn to fight as a team in jungles and built-up areas. Their common experience in National Service would bond them, and shape the Singapore identity and character,” Prime Minister Goh said on the Singaporean military’s thirty-fifth anniversary.

  “We are still evolving as a nation,” Goh continued. “Our forefathers were immigrants. . . . They say that in National Service, everyone—whether Chinese, Malay, Indian, or Eurasian—is of the same color: a deep, sunburnt brown! When they learn to fight as one unit, they begin to trust, respect, and believe in one another. Should we ever have to go to war to defend Singapore, they will fight for their buddies in their platoon as much as for the country.”4

  Substitute “Israel” for “Singapore,” and this speech could have been delivered by David Ben-Gurion.

  Although Singapore’s military is modeled after the IDF—the testing ground for many of Israel’s entrepreneurs—the “Asian Tiger” has failed to incubate start-ups. Why?

  It’s not that Singapore’s growth hasn’t been impressive. Real per capita GDP, at over U.S. $35,000, is one of the highest in the world, and real GDP growth has averaged 8 percent annually since the nation’s founding. But its growth story notwithstanding, Singapore’s leaders have failed to keep up in a world that puts a high premium on a trio of attributes historically alien to Singapore’s culture: initiative, risk-taking, and agility.

  A growing awareness of the risk-taking gap prompted Singapore’s finance minister, Tharman Shanmugaratnam, to drop in on Nava Swersky Sofer, an Israeli venture capitalist who went on to run Hebrew University’s technology transfer company. The university company, called Yissum, is among the top ten academic programs in the world, measured by the commercialization of academic research. Shanmugaratnam had one question for her: “How does Israel do it?” He was nearby for a G-20 meeting, but he skipped the last day of the summit to come to Israel.

  Today the alarm bells are being sounded even by Singapore’s founding father, Lee Kuan Yew, who served as prime minister for three decades. “It’s time for a new burst of creativity in business,” he says. “We need many new tries, many start-ups.”5

  There is a similar feeling in Korea, another country that has a military draft and a sense of external threat, and yet, as in Singapore and not as in Israel, these attributes have not produced a start-up culture. Korea, clearly, has no shortage of large technology companies. Erel Margalit, an Israeli entrepreneur with a stable of media start-ups, actually sees Korea as fertile ground for his cutting-edge companies. “America is the queen of content,” Margalit said, “but it is still in the broadcast era, while China and Korea are in the interactive age.”6

  So why doesn’t Korea produce nearly as many start-ups per capita as Israel? We turned to Laurent Haug for insight
. Haug is the creator and force behind the Lift conferences, which focus on the nexus between technology and culture. Since 2006, his gatherings have alternated between Geneva, Switzerland, and Jeju, Korea. We asked Haug why there were not more start-ups in Korea, despite the great affinity Koreans have for technology.

  “The fear of losing face, and the bursting of the Internet bubble in 2000,” he told us. “In Korea, one should not be exposed while failing. Yet in early 2000, many entrepreneurs jumped on the bandwagon of the new economy. When the bubble burst, their public failure left a scar on entrepreneurship.” Haug was surprised to hear from the director of a technology incubator in Korea that a call for projects received only fifty submissions, “a low figure when you know how innovative and forward-thinking Korea really is.” To Haug, who has also explored the Israeli tech scene, “Israelis seem to be on the other side of the spectrum. They don’t care about the social price of failure and they develop their projects regardless of the economic or political situation.”7

  So when Swersky Sofer hosts visitors from Singapore, Korea, and many other countries, the challenge is how to convey the cultural aspects that make Israel’s start-up scene tick. Conscription, serving in the reserves, living under threat, and even being technologically savvy are not enough. What, then, are the other ingredients?

  “I’ll give you an analogy from an entirely different perspective,” Tal Riesenfeld told us matter-of-factly. “If you want to know how we teach improvisation, just look at Apollo. What Gene Kranz did at NASA—which American historians hold up as model leadership—is an example of what’s expected from many Israeli commanders in the battlefield.” His response to our question about Israeli innovation seemed completely out of context, but he was speaking from experience. During his second year at Harvard Business School, Riesenfeld launched a start-up with one of his fellow Israeli commandos. They presented their proposal at the Harvard business plan competition and beat out the seventy other teams for first place.8

  After graduating from HBS at the top of his class, Riesenfeld turned down an attractive offer from Google in order to start Tel Aviv–based Eyeview. Earlier, Riesenfeld had made it through one of the most selective recruitment and training programs in the Israeli army.

  While he was at HBS, Riesenfeld studied a case that compared the lessons of the Apollo 13 and Columbia space shuttle crises.9 The 2003 Columbia mission has a special resonance for Israelis. One of its crew members—air force colonel Ilan Ramon, the first Israeli astronaut—was killed when Columbia disintegrated. But Ramon had been an Israeli hero long before. He was a pilot in the daring 1981 air force mission that destroyed Iraq’s nuclear facility, Osirak.

  HBS professors Amy Edmondson, Michael Roberto, and Richard Bohmer spent two years researching and comparing the Apollo and Columbia crises. They produced a study that became the basis for one of Riesenfeld’s classes, analyzing the lessons learned from a business-management perspective. When Riesenfeld first read the HBS case, in 2008, the issues it presented were immediately familiar to the ex-commando. But why had Riesenfeld mentioned the case to us? What was the connection to Israel, or to its innovation economy?

  The Apollo 13 crisis occurred on April 15, 1970, when the spaceship had traveled three-fourths of the way to the moon. It was less than a year after Neil Armstrong and Buzz Aldrin had stepped off Apollo 11. NASA was riding high. But when Apollo 13 was two days into its mission, traveling two thousand miles per hour, one of its primary oxygen tanks exploded. This led astronaut John Swigert to utter what has by now become a famous line: “Houston, we’ve had a problem.”

  The flight director, Gene Kranz, was in charge of managing the mission—and the crisis—from the Johnson Space Center in Houston. He was immediately presented with rapidly worsening readouts. First he was informed that the crew had enough oxygen for eighteen minutes; a moment later that was revised to seven minutes; then it became four minutes. Things were spiraling out of control.

  After consulting several NASA teams, Kranz told the astronauts to move into the smaller lunar extension module, which was designed to detach from Apollo for short subtrips in space. The extension module had its own small supply of oxygen and electricity. Kranz later recalled that he had to figure out a way to “stretch previous resources, barely enough for two men for two days, to support three men for four days.”

  Kranz then directed a group of teams in Houston to lock themselves in a room until they could diagnose the oxygen problem and come up with ways to get the astronauts back into Apollo and then home. This was not the first time these teams had met. Kranz had assembled them months in advance, in myriad configurations, and practice drills each day had gotten them used to responding to random emergencies of all shapes and sizes. He was obsessed with maximizing interaction not only within teams but between teams and NASA’s outside contractors. He made sure that they were all in proximity during training, even if it meant circumventing civil service rules barring contractors from working full-time on the NASA premises. Kranz did not want there to be any lack of familiarity between team members who one day might have to deal with a crisis together.

  Three days into the crisis, Kranz and his teams had managed to figure out creative ways to get Apollo back to earth while consuming a fraction of the power that would typically be needed. As the New York Times editorialized, the crisis would have been fatal had it not been for the “NASA network whose teams of experts performed miracles of emergency improvisation.”10

  It was an incredible feat and a riveting story. But, we asked Riesenfeld, what’s the connection to Israel? Fast-forward to February 1, 2003, he told us, sixteen days into the Columbia mission, when the space shuttle exploded into pieces as it reentered the earth’s atmosphere. We now know that a piece of insulating foam—weighing 1.67 pounds—had broken off the external fuel tank during takeoff. The foam struck the leading edge of the shuttle’s left wing, making a hole that would later allow superheated gases to rip through the wing’s interior.

  There were over two weeks of flight time between takeoff—when the foam had first struck the wing—and the explosion. Could something have been done during this window to repair Columbia?

  After reading the HBS study, Riesenfeld certainly thought so. He pointed to the handful of midlevel NASA engineers whose voices had gone unheard. As they watched on video monitors during a postlaunch review session, these engineers saw the foam dislodge. They immediately notified NASA’s managers. But they were told that the foam “issue” was nothing new—foam dislodgments had damaged shuttles in previous launches and there had never been an accident. It was just a maintenance problem. Onward.

  The engineers tried to push back. This broken piece of foam was “the largest ever,” they said. They requested that U.S. satellites—already in orbit—be dispatched to take additional photos of the punctured wing. Unfortunately, the engineers were overruled again. Management would not even acquiesce to their secondary request to have the astronauts conduct a spacewalk to assess the damage and try to repair it in advance of their return to earth.

  NASA had seen foam dislodgments before; since they hadn’t caused problems in the past, they should be treated as routine, management ruled; no further discussion was necessary. The engineers were all but told to go away.

  This was the part of the HBS study that Riesenfeld focused on. The study’s authors explained that organizations were structured under one of two models: a standardized model, where routine and systems govern everything, including strict compliance with timelines and budgets, or an experimental model, where every day, every exercise, and every piece of new information is evaluated and debated in a culture that resembles an R&D laboratory.

  During the Columbia era, NASA’s culture was one of adherence to routines and standards. Management tried to shoehorn every new piece of data into an inflexible system—what Roberta Wohlstetter, a military intelligence analyst, describes as our “stubborn attachment to existing beliefs.”11 It’s a problem she has encountered in th
e world of intelligence analysis, too, where there is often a failure of imagination when assessing the behavior of enemies.

  NASA’s transformation from the Apollo culture of exploration to the Columbia culture of rigid standardization began in the 1970s, when the space agency requested congressional funding for the new shuttle program. The shuttle had been promoted as a reusable spacecraft that would dramatically reduce the cost of space travel. President Nixon said at the time that the program would “revolutionize transportation into near space, by routinizing it.” It was projected that the shuttle would conduct an unprecedented fifty missions each year. Former air force secretary Sheila Widnall, who was a member of the Columbia Accident Investigation Board, later said that NASA pitched Columbia as “a 747 that you could simply land and turn around and operate again.”

  But as the HBS professors point out, “space travel, much like technological innovation, is a fundamentally experimental endeavor and should be managed that way. Each new flight should be an important test and source of data, rather than a routine application of past practices.” Which is why Riesenfeld directed us to the study. Israeli war-fighting is also an “experimental endeavor,” as we saw in the story of Israel’s handling of the Saggers in 1973. The Israeli military and Israeli start-ups in many ways live by the Apollo culture, he told us.

  Connected to this Apollo culture, certainly in Nava Swersky Sofer’s estimation, is a can-do, responsible attitude that Israelis refer to as rosh gadol. In the Israeli army, soldiers are divided into those who think with a rosh gadol—literally, a “big head”—and those who operate with a rosh katan, or “little head.” Rosh katan behavior, which is shunned, means interpreting orders as narrowly as possible to avoid taking on responsibility or extra work. Rosh gadol thinking means following orders but doing so in the best possible way, using judgment, and investing whatever effort is necessary. It emphasizes improvisation over discipline, and challenging the chief over respect for hierarchy. Indeed, “challenge the chief” is an injunction issued to junior Israeli soldiers, one that comes directly from a postwar military commission that we’ll look at later. But everything about Singapore runs counter to a rosh gadol mentality.