Start-Up Nation: The Story of Israel's Economic Miracle [Hardcover]

In recent years the Israeli economy has topped world metrics in the number of business start-ups and value of venture capital investment per head of population. It also has the highest civilian R&D expenditure as a percentage of GDP. This is extraordinary for a country the size of Wales which is only 60 or so years old, has negligible natural resources and has survived wars, terror attacks and incessant political hostility.

`Start-Up Nation' tries to explain the combination of factors and circumstances that have created this unusually strong start-up culture. The title is a play on the words "Upstart Nation". Israelis are no great respecters of status and hierarchy and they prefer to deal with problems and ideas on their merits, even if egos get bruised as a result. They are happy to question conventions and assumptions. A potent mix of natural self-confidence, technological expertise and innovative thinking has served to underpin the calculated risk-taking of hi-tech entrepreneurship.

Thirteen chapters each cover a major contributory factor. Here are a few that I found particularly noteworthy ...

Compulsory military service is cited as having a major formative effect on the `Israeli mentality'. At a young age, many Israelis have to surmount physical and psychological hardship and learn the importance of teamwork and loyalty to unit and comrades. Officers are given serious responsibility at a younger age than in Western armies. Military service also creates valuable social networks, which are preserved and strengthened through annual reserve-duty. Two units in particular, 8200 and Talpiot, are given mention as they produce a high number of eventual start-up pioneers due to the intensive analytical and technological training that recruits undergo.

The Israeli army and Israeli society are characterised by informality and egalitarianism, which have roots in the kibbutzim and the socialist ideology of the pre-State Yishuv and the Labour party which was dominant during Israel's first three decades. The use of nicknames is common, even when referring to senior officers or senior politicians. It's even acceptable for soldiers in combat units to question the decisions of officers if they believe them genuinely to be wrong, as long as that doesn't become overt refusal of orders.

A recurring theme is `necessity as the mother of invention'. Israel has very modest natural resources, just Dead Sea potash and magnesium and some recently-discovered offshore gas. Above all, water is in short supply and Israelis have had to be ingenious to make optimum use. Netafim, the kibbutz-based drip irrigation company, is an example of where an innovation has generated a world-leading company with export markets across the globe.

Israel has survived major wars in 1948, 1967 and 1973 that were either launched or provoked by its neighbours. Prior to 1967, Israel was heavily reliant on France for supply of armaments and aircraft, but de Gaulle's sudden embargo forced Israel to plan its own military industries. This eventually led to production of the Kfir fighter-bomber, the Merkava tank, unmanned aerial vehicles and many other innovative defence systems.

Israeli industries have also had to survive the severe disruption caused by wars. In the first Gulf War in early 1991, Saddam Hussein was peppering the metropolitan areas of Tel-Aviv and Haifa with Scud missiles and Israelis spent long hours in shelters and `sealed rooms' wearing gas masks for fear of chemical attack. In contravention of government directives, but on a voluntary basis, Intel Israel led by Dov Frohman kept its research and chip production facilities going throughout the war. Intel Israel managed to meet all its schedules and thereby showed both the parent company and the wider business world that Israeli subsidiaries could be relied on, even in the most difficult circumstances.

Israel's economy still faces serious threats and challenges such as the Iranian nuclear weapons programme and internal demographics. Only a narrow segment of Israel's 7 million population carries the hi-tech sector on its shoulders. The Haredi population is growing rapidly and owing to its narrow educational focus on religion, it contributes little to the economy. Likewise Israel's Arab minority has lower educational standards and hardly any involvement in this sector. These problems need to be addressed somehow through new initiatives and investment.

`Start-Up Nation' book is a highly stimulating read for anyone interested in the subjects of Israel, business innovation and corporate culture. Despite Israel's many problems, this is a major success story that's well worth telling.

Start-Up Nation is a master piece. I read it from cover to cover within 24hrs of receiving it from Amazon. There is so much developing countries in Africa can learn from that book. The book also inspires with its message of "dare the impossible". Israel is a glowing example of how any country that is willing can overcome nature's short comings. Countries with so much resource, like my country Nigeria, have no excuse for failing to develop. I congratulate Dan Senor and Saul Singer for telling such a wonderful story in a breezy and enjoyable style. I extend my gratitude to Fareed Zakaria, host of CNN Global Public Square for recommending the book to viewers around the world.

Israel is super-competitive because Israeli's are intensely inquisitive, constantly challenge authority and accepted wisdom and remain under imminent threat of annihilation. This is what I take away from this book. There are good examples of innovative companies, mainly in the High Technology, who provide the backbone of innovation in the country. And innovation is the reason I read the book, it's the current magic ingredient which will bring economic growth, which will solve all our problems; so surely the lessons we can learn from the innovative Israeli's will be valuable.
Some lessons were unsurprising - constant experimentation, re-evaluation of results, direct criticism; some were surprising - a significant industrial policy was seen as a good thing, though not fiscal indiscipline. There is some mention of the immigration, however I thought the impact of demographics was insufficiently explored. Imagine your population being expanded by nearly 20%, and that a significant proportion of these people were well educated , though impoverished.
Overall I thought the book was readable, though not very useful. I think waves of immigration have been a spur to economic development throughout history, I don't buy the ` threat of annihilation as the mother of invention' theme, I do agree that Israeli's in general are argumentative, critical and sometimes irreverent; though they are also disciplined and persistent. I though the book was journalistic in the sense of telling stories to illustrate points is useful, but if analysis points to areas where stories are hard to tell, then the book falls down. At the end I thought it told the same story again and again, relentlessly.