in a high-technology cluster

 

"Start-Up Nation: The Story of Israel's Economic Miracle" By Dan Senor and Saul Singer

 

Dan Senor and Saul Singer provide incisive explanations for how 7.1 million Israelis, surrounded by enemies and with no natural resources, produce more start-up companies than large, peaceful nations such as Japan, China, India and the United Kingdom.

 

Senor and Singer describe in captivating detail examples of Israel's innovative strength. They interviewed global business and political leaders, who offer insights on Israel's unique combination of innovative and entrepreneurial expertise. The authors make a very interesting point: While much has been written about the Middle East, little has been written about Israel's economic miracle.

 

In forming their conclusions, Senor and Singer highlight several factors:

 

1. Israelis at all levels question established wisdom and seniority. Senior leaders encourage novel approaches.

 

2. Israel emphasizes education, from day-care centers to higher education.

 

3. Israel has by far more high-tech start-ups per capita than any other nation on earth. It leads the world in civilian research-and-development spending per capita. It ranks second only behind the U.S. in the number of companies listed on the Nasdaq. Moreover, failure on initial attempts is regarded as a positive for future backing, because subsequent innovations do well. They learn from first-time failures.

 

4. Israel has made long-term army service into a good thing. The army helps assimilate Jews from many countries. Relationships built in the army over 20 years provide a strong network. Experienced army professionals are welcomed as top-level executives by Israeli companies. Israel's need to improvise quickly and aggressively to subdue their antagonists has provided fruitful ingredients for the "survival of the fittest" environment of our global businesses.

 

James Glassman, a senior economist with JPMorgan Chase & Co., wrote an essay titled, "Where Tech Keeps Booming." It shows that there are more new innovative ideas coming out of Israel than out of Silicon Valley, and that it does not slow during economic downturns.

 

Intel recently opened a $3.5 billion factory to make sophisticated 45-nanometer computer chips. In 2006, Warren Buffett paid $4 billion for four-fifths of an Israeli firm that makes high-tech cutting tools for cars and planes. Steve Ballmer, CEO of Microsoft, calls his company "as much an Israeli company as an American company" because of the importance of its Israeli technologists. One of eBay's executives said, "The best-kept secret is that we all live and die by the work of our Israeli teams."

 

In a New York Times op-ed piece, "The Tel Aviv Cluster," David Brooks wrote, "Israel is 'the strongest recovery story' in Europe, the Middle East and Africa. ... The country was not founded so stray settlers could sit among thousands of angry Palestinians. It was founded so Jews would have a safe place to come together and create things for the world. Silicon Valley and Tel Aviv are created by a confluence of cultural forces, not money."

 

"The surrounding nations do not have the tradition of free intellectual exchange and technical creativity. For example, between 1980 and 2000, Egyptians registered 77 patents in the United States. Israelis registered 7,652."

 

Jews are a famously accomplished group. They make up 0.2 percent of the world population, but 54 percent of the world chess champions, 27 percent of the Nobel physics laureates and 31 percent of the medicine laureates.

 

The tech boom also creates a new vulnerability, however.

 

Israel's long-standing antagonism with its neighbors and the growing economic gap impedes reconciliation. As Jeffrey Goldberg of The Atlantic has argued, innovators are the most mobile people on earth. According to the Israel Central Bureau of Statistics, as of 2005, 650,000 Israelis had left the country for more than a year and not returned. American Jews used to keep a foothold in Israel in case things got bad here. Now Israelis keep a foothold in the U.S.