Dan Senor and Saul Singer, the authors of the new, best-selling Start-Up Nation, have done the impossible: They've written a book that doesn't examine Israel through the prism of its conflict with the Arabs. Instead, they've produced a fascinating and illuminating look at the reasons Israel has become one of the world's prime incubators of technological innovation. This is a story about Israel, of course, but it's a story with universal implications. "Start-Up Nation" is, among other things, an indispensable business book. I wish I had thought to write it. I spoke with Dan Senor by phone last week, and here is an edited version of our discussion.
Jeffrey Goldberg: This book is a reminder that Israel, despite its many problems -- many of them inflicted from the outside, some self-inflicted -- is a remarkable success story, and I'm wondering what sparked your curiosity about Israel's technological achievements.
Dan Senor: Originally the idea was not to do a book -- when I was in my second year of Harvard Business School in 2001, I took a group of thirty students to Israel, three of them were Jewish, twenty-seven were not, and had no connection to Israel. The idea was to look at the economic opportunities in Israel and also study the history and the politics. It was at a pretty depressing time -- there was a good entrepreneurial economy story there, but it was during the Second Intifada. And I took all these students - to their credit, none of them pulled out even though literally the day we were leaving things were blowing up -- and my classmates were all saying to me, "I get it. There's huge economic opportunity here for people who are willing to invest here and do business here." But even more than that, I was struck by the question of how they pulled it off. It's a very young country, very difficult environment, there are no natural resources, no access to regional capital or regional markets. If you were to paint a picture of the circumstances under which you're not going to have a successful economic developing country, it would be Israel.
JG: One thing about the book that's interesting to me is that it seems that you're trying very hard not to say, 'Well, of course if you put a bunch of Jews in a room, that weird Jewish brain will create something."
DS: We were very self-conscious about that.
JG: Because it's wrong? Because it's stereotypical? Because you don't believe it?
DS: We believe that there are lessons that developing and developed economies can learn from Israel, and that there are prescriptions for the U.S. that can be taken from Israel, and if it is simply about the fact that Jews are smart, well-educated and good at business, it completely undermines the notion that there is anything transferable. We really believe that. We're not naïve; there are certain dynamics that are unique to Israel that cannot be, and should never be, tried elsewhere.
JG: Judaism: Don't try this at home.
DS: Exactly, but we think that's only part of it. There are many elements that absolutely are prescriptive and the moment it becomes about 'Jews are smart,' no one's going to pay attention to the other part. And the other parts are extremely important. For example, we're writing the book, it's September of last year, Lehman blows up, and there's a big debate among economists about productivity gains and how all our economic growth over the last five or ten years was not at all about productivity gains -- it was all about speculative credit, near-zero interest rates -- and we were watching a reversion back to a discussion on the need for basic innovation as the juice for economic growth. And, by the way, the only way you get true innovation into the economy is if it's dominated by small enterprises. And we were struck by this debate, because that's exactly what we were writing about.
JG: One of your arguments is that it's not necessarily Jewish culture that created this, but Israel Defense Force culture, that many of the great entrepreneurs and innovators come out of the Air Force, out of the technical branches of the IDF. And that this is replicable. Is that fair to say?
DS: One, we believe in an anti-hierarchical tolerance for self-criticism -- not only tolerance, almost encouragement.
JG: By the way, it's a well-known Jewish trait.
DS: Shimon Peres told us that Jews have a tendency throughout our history to be dissatisfied. That's a big theme, so this is obviously a big part of IDF culture. I'm of two minds on how applicable this is to the American military. On the one hand, I feel that the Israeli military is just a more entrepreneurial military than any military I know of or that we've studied. I mean, it's just so much more built around improvisation. The fact that when you're being promoted in the Israeli military, your subordinates have input, or can have input, in those decisions. So it's a very entrepreneurial, start-up military. There are very few bosses. The only way you can cultivate that culture and ethos is if you have very few bosses, because the moment you have a lot of bosses, you have a lot of people who need to justify their existence, and they justify their existence by giving commands. I saw this on military bases I've worked on and when I've been in government -- the U.S. military is top-heavy, and you have a lot of people standing around giving orders to sort of justify their existence. We do believe, though, that the American military is changing, it is becoming more entrepreneurial -- not nearly as much as the Israelis, and quite frankly it should never be as entrepreneurial as the Israelis because the Americans have to fight different kinds of wars than the Israelis. Israelis fight all their wars in their own neighborhood, it's a different dynamic. You really need Fed-Ex logistics more than you need Fraud Sciences, which is one of the start-ups we profiled.
JG: We know that Israel excels at innovation, but why is there no Nokia in Israel, a huge manufacturer of hi-tech products?
DS: This is a big debate within the Israeli business world, where's our Nokia?
JG: Why can't they seem to scale-up?
DS: Some people say it's a real problem in Israel, that they've created this sort of radical, very experiment-oriented business community, but they're not training serious, senior, high-level managers who can build not just start-ups that pop into Nasdaq or get bought by some American company, but can actually become an institution over the long run. Some people argue, who cares? Why do we need it? We're doing well. If you do what you're good at it--
JG: From your personal perspective, which is better for Israel? To have the thousand little innovators?
DS: Absolutely. You're in a constant mode of creative destruction and it's such a perfect fit for the Israeli culture.
JG: Spontaneity is an appropriate word. You tell the joke in your book about the Israeli who asks a girl out, and she says, "'What time?" The assumption in Israel is that everything is meant to happen today.