Start-up Nation (9 page)

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 picked 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.

One example of this avid internationalism is Netafim, an Israeli company that has become the largest provider of drip irrigation
systems in the world. Founded in 1965, Netafim is a rare example of a company that bridges Israel’s low-tech, agricultural
past to the current boom in cleantech.

Netafim was created by Simcha Blass, the architect of one of the largest infrastructure projects undertaken in the early years
of the state. Born in Poland, he was active in the Jewish self-defense units organized in Warsaw during World War I. Soon
after arriving in Israel in the 1930s, he became chief engineer for Mekorot, the national water company, and planned the pipeline
and canal that would bring water from the Jordan River and Sea of Galilee to the arid Negev.

Blass got the idea for drip irrigation from a tree growing in a neighbor’s backyard, seemingly “without water.” The giant
tree, it turns out, was being nourished by a slow leak in an underground water pipe. When modern plastics became available
in the 1950s, Blass realized that drip irrigation was technically feasible. He patented his invention and made a deal with
a cooperative settlement located in the Negev Desert, Kibbutz Hatzerim, to produce the new technology.

Netafim was pioneering not just because it developed an innovative way to increase crop yields by up to 50 percent while using
40 percent less water, but because it was one of the first kibbutz-based industries. Until then the kibbutzim—collective communities—were
agriculture-based. The idea of a kibbutz factory that exported to the world was a novelty.

But Netafim’s real advantage was having no inhibition about traveling to far-flung places in pursuit of markets that desperately
needed its products—places where, in the 1960s and ’70s, entrepreneurs from the West simply did not visit. As a result, Netafim
now operates in 110 countries over five continents. In Asia it has offices in Vietnam, Taiwan, New Zealand, China (two offices),
India, Thailand, Japan, Philippines, Korea, and Indonesia. In South America it has a presence in Argentina, Brazil, Mexico,
Chile, Colombia, Ecuador, and Peru. Netafim also has eleven offices in Europe and the former Soviet Union, one in Australia,
and one in North America.

And because Netafim’s technology became so indispensable, a number of foreign governments that historically had been hostile
to Israel began to open diplomatic channels. Netafim is active in former Soviet bloc Muslim states like Azerbaijan, Kazakhstan,
and Uzbekistan, which led to warmer relations with Israel’s government after the dissolution of the Soviet Union. In 2004,
then trade minister Ehud Olmert tagged along on a Netafim trip to South Africa in the hope of forming new strategic alliances
there. The trip resulted in $30 million in contracts for Netafim, plus a memorandum of understanding between the two governments
on agriculture and arid lands development.

Israeli entrepreneurs and executives, though, have themselves been known to engage in self-appointed diplomatic missions on
behalf of the state. Many of Israel’s globe-trotting businesspeople are not just technology evangelists but endeavor to “sell”
the entire Israeli economy. Jon Medved—the inventor of the “nickname barometer” to measure informality—is one such example.

Raised in California, Medved was trained in political activism, not engineering. His first career was as a Zionist organizer.
He moved to Israel in 1981 and made a small living by going on speaking tours to preach about the future of Israel to Israelis.
But a conversation he had in 1982 with an executive at Rafael, one of Israel’s largest defense contractors, burst Medved’s
bubble. He was told, unceremoniously, that what he was doing was a waste of time and energy. Israel didn’t need more professional
Zionists or politicians, the executive stated flatly; Israel needed businesspeople. Medved’s father had started a small company
in California that built optical transmitters and receivers. So Medved began pitching his father’s product in Israel. Instead
of going from kibbutz to kibbutz to sell the future of Zionism, he went from company to company to sell optical technology.

Later, he got into the investment business and founded Israel Seed Partners, a venture capital firm, in his Jerusalem garage.
His fund grew to over $260 million and he invested in sixty Israeli companies, including Shopping.com, which was bought by
eBay, and Compugen and Answers.com, both of which went public on the NASDAQ. In 2006, Medved left Israel Seed to launch and
manage a start-up himself—Vringo, a company that pioneered video ringtones for cell phones, which has quickly penetrated the
European and Turkish markets.

But his own company is less important. Regardless of what Medved is doing for his enterprises, he spends a lot of time—
too much
time, his investors complain—preaching about the Israeli economy. On every trip abroad, Medved lugs a portable projector
and laptop loaded with a memorable slide presentation chronicling the accomplishments of the Israeli tech scene. In speeches—and
in conversations with anyone who will listen—Medved celebrates all the Israeli landmark “exits” in which companies were bought
or went public, and catalogs dozens of “made in Israel” technologies.

In his presentations he says only half-jokingly that if Israel followed the lead of “Intel Inside”—Intel’s marketing campaign
to highlight the ubiquity of its chips—with similar “Israel Inside” stickers, they would show up on almost everything people
around the world touch, and he ticks off a litany of examples: from computers, to cell phones, to medical devices and miracle
drugs, to Internet-based social networks, to cutting-edge sources of clean energy, to the food we eat, to the registers in
the supermarkets in which we shop.