700 Club Special
Made in Israel: Technology
By Gordon Robertson & Erin Zimmerman
The 700 Club
“Innovation going on in Israel is critical to the future of the technology business.” -- Bill Gates, 2008
On April 15, 2013, two bombs exploded during the Boston Marathon killing three people and injuring 264 others. For the next three days, investigators reportedly used a high-tech system called BriefCam to analyze local surveillance video. BriefCam condenses hours of video into minutes. According to Israeli defense sources, investigators could then zoom in on suspicious actions, like a backpack being left behind, making BriefCam instrumental in identifying the two bombers. BriefCam’s technology, Video Synopsis, was made in Israel.
“Technology’s going to change all our lives, it already has, and what’s coming down the pike is even more intense,” says Jonathan Medved, one of Israel’s leading high-tech venture capitalists.
Israel has often been called the “start-up nation,” and while Jerusalem may be the spiritual heart of the country, Tel Aviv is the center of its start-up success. Just a century ago, this thriving city was nothing more than a series of sand dunes with a few buildings. Today, it’s been voted the second best high-tech center in the world just after Silicon Valley.
Israel was recently ranked the fourth most innovative nation in the world. From the iPhone to the Playstation, the ideas behind many of your favorite gadgets came from inventors here in Israel.
* Flip-top cell phones
* Keyboards for smart phones
* Intel Pentium chips
* The ability to print straight from your computer
* The flash drive
* The chip in the iPad
* The operating system that runs the Amazon Kindle
* The chip that controls the Sony Playstation.
* The 3D sensor in Xbox Kinect gaming systems
Every year, American companies are shelling out more and more shekels to buy small Israeli start-ups. The latest example is Waze, an Israeli smart phone app that gives live traffic reports based on your location. It warns users about traffic jams, accidents and even sitting police cars.
In 2011, Waze made headlines by helping drivers navigate the Los Angeles traffic jam known as “Carmageddon.” Two years later, Google bought the program for a reported $1.1 billion dollars, making it the most expensive app in history.
“I think the key challenge for Israeli companies now is to go from start-up nation to scale-up nation,” says Medved. “We need to build bigger companies, not just sell them early to American multinationals, but to actually get them bigger, to get them into the sales process, and to create more jobs both here and in America and around the world.”
So what gives Israel its technological edge? We asked some of the country’s most prominent business leaders and the answer is … there’s no single answer.
“Chutzpah is perhaps the most definitive Jewish word,” Medved explains. “It is very, very hard to translate. Gall, you know, unrelenting daring – this ability to try to do something which no one else has done before, to say something which is a little bit out of place, to be in someone’s face. Chutzpah is what allows us to actually break the boundaries and to break the rules and to go out of our comfort zone and create new things.”
Questions and … More Questions
“There is a joke about what is a Jewish answer; it’s a question,” Medved chuckles. “In other words, Jews will answer a question with a question.”
“That culture of challenging, debating and arguing – it’s everywhere in Israel,” adds Dan Senor, author of Start Up Nation. “Arguing is healthy, because it helps you get to better answers, you get to better results. I think that is a key cultural attribute in Israel’s economic success story, in its economic miracle.”
“Our roots, our education – maybe even that it’s coming from the Talmud – is always being skeptical and asking questions,” says Maj. Gen. Aharon Farkash, former head of the Israeli Military Intelligence Directorate. “(We are) always trying to see the reality from a few points of vision. I believe this tradition, this culture – it’s a part of our DNA.”
“Whether you call it the Socratic Method or the Talmudic method, you choose it, that’s a big part of how we learn and how we teach our kids,” echoes Medved.
“If you were looking for a single group to basically make your ideal group of entrepreneurs, you couldn’t ask for a better group than immigrants,” notes Medved. “Immigrants make great entrepreneurs because they already did it in their own lives. They were the CEO of mylife.com. They took risks, they moved to a foreign country, they had to handle legal, facilities and human resources to get jobs, and banking and marketing, and they basically had to scale up.”
“It’s very challenging living in Israel,” says Sara Goldsmith, director of Bio-Tour, a company that provides guided tours of the Sde Eliyahu kibbutz. “I think that the people who live here are a special breed of people. I think that pushes people to be innovative, to be creative, and to do unusual things. It’s our nature, I guess. I don’t know. (laughs) I don’t know how to explain it otherwise.”
“Innovation has a direct correlation to diversity,” adds Medved. “Because if you all think alike, and you all act alike, I’m sorry, it’s not going to be a particularly creative place.
“In Jewish life, parents always advocated to the kid that he has to learn and also that he has to venture if you want to succeed,” shares Yossi Vardi, Chairman of International Technologies. “I always say that the secret sauce of Israeli hi-tech is the Jewish mother, who asks her son at the age of seven, after all that we have done for you, asking you for one Nobel prize, is it really too much?”
Vardi is known as the godfather of Israel’s high-tech industry. He has invested in more than 80 Internet start-ups including a company started by his son.
“He came with three of his friends,” Vardi remembers. “I gave him the money; I didn’t have much of an idea of what they were going to do. But still, I gave them the money. They created this unbelievable product and the rest is history as they say.”
That “unbelievable product” was ICQ, the world’s first instant messaging service. Less than a year later, America Online (AOL) bought the company for $400 million dollars and ICQ became known as AOL Instant Messenger.
“It’s very hard to extract the DNA of success,” Vardi says. “You have to understand, if you venture, you cannot do only successes. Because if you are trying to be involved in an area where there are only successes you’re not taking risks. And if you are not taking risks, then this is not this type of industry. So failure comes with the territory.”
The Upside of Failure
“Failure is not a four-letter word,” says Medved. “The last time I looked failure is part of the process. Not every team wins every game but you have to try, and if you fail, you learn from your mistakes, pick yourself up, and do it right again.”
“Are the failure rates in Israel lower than they are in the rest of the world?” questions Senor. “They’re not. Israelis don’t fail any less. The difference is, they keep on trying.”
“People don’t understand, for example, if you’re presented the choice of investing in two entrepreneurs – one who’s actually never tried it before, one who’s tried and failed,” Medved explains. “Always take the guy who’s tried and failed. Your statistical odds of getting a return on your investment are far better with that person.”
If you’re looking for the next generation of start-up success stories in Israel, you won’t find them in business school. In most job interviews, the big question isn’t where you went to college but where you served in the military.
“When I get a resume, the first thing I do is (look for) what did this kid do in the army?” Medved says. “I don’t look at the university, I look at the army unit because that’s going to tell me a lot about who that person is.”
“In Israel, almost every single Israeli serves in the military,” Senor adds. “Almost every single Israeli is put through this training in how to lead, how to manage, how to make very difficult decisions with very little information under enormous pressure. They’ve been trained on how to lead people and these skills hardwire people for being entrepreneurs, and launching and running – or helping to run startups.”
“We give the chance for every soldier, for every officer to express himself and to say what he really believes without punishing him because his rank is a lower rank,” Maj. Gen. Farkash notes. “I have to tell you that sometimes listening to these officers, these lower rank officers, there arise a lot of stupid ideas, in my point of view. Forty, 50, 60 percent, but 20, 30, 40 percent are wonderful ideas.”
Once they’re out of the army, soldiers take the same skills they learned tracking terrorists and use them to make life safer for civilians. Israelis have developed everything from bomb-sniffing mice to software that prevents identity theft. There is a special scanner that lets you keep your shoes on during security checks at the airport.
Many leading Israeli IT (information technology) companies are founded by alumni of an elite military intelligence unit known as 8200, a highly secretive group that specializes in cyber-warfare. Unit 8200 is widely believed to be the brains behind the Stuxnet and flame viruses that targeted Iran’s nuclear and oil facilities.
“In my company in the R&D (research and development) team, 80 percent of the engineers are coming from Unit 8200,” Gen. Farkash adds.
Major General Farkash was the commander of Unit 8200 for four years. When he retired from the army, he used that experience to help design a security system known as Safe Rise. It acts as a “virtual doorman” using both voice and facial recognition to protect offices and apartment buildings.
Israelis are proud to say that many of their high-tech ideas come from their experience in the army an idea some say could also benefit American companies.
“American businesses have a lot to learn with how Israel has integrated their military people when they’re coming out of the military, into the economy,” Senor says.
“It’s really got to be a part of everyone’s culture,” Medved concludes. “Certainly the heroes who are coming back to America from Iraq and from Afghanistan – they need to be the first guys to get the jobs because they have actually taken leadership and led, and they’re the kind of people that you want to hire.”
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