But if not for Peres, even Agassi might not have dared to pursue his own idea. After hearing Agassi make his pitch for oil independence, Peres called him and said, “Nice speech, but what are you going to do?”

Until that point, Agassi says, he “was merely solving a puzzle” — the problem was still just a thought experiment. But Peres put the challenge before him in clear terms: “Can you really do it? Is there anything more important than getting the world off oil? Who will do it if you don’t?” And finally, Peres added, “What can I do to help?”


Agassi picked up where Peres had left off on another question: Why start with Israel, of all places? The first reason was size, he told Ghosn. Israel was the perfect “beta” country for electric cars. Not only was it small but, due to the hostility of its neighbors, it was a sealed “transportation island.” Because Israelis could not drive beyond their national borders, their driving distances were always within one of the world’s smallest national spaces.


Those who survived had to struggle to thrive in a stagnant economy. “Everything was rationed,” complained one new arrival. “We had coupon books, one egg a week, long lines.” The average standard of living for Israelis was comparable to that of Americans in the 1800s.


Adversity, like necessity, breeds inventiveness. Other small and threatened countries, such as South Korea, Singapore, and Taiwan, can also boast growth records that are as impressive as Israel’s. But none of them have produced an entrepreneurial culture — not to mention an array of startups — that compares with Israel’s.


Israel’s tiny population is made up of some 70 different nationalities.


Even before the global financial crisis that began in 2008, observers of the innovation race were sounding alarms. “India and China are a tsunami about to overwhelm us,” predicted Curtis Carlson. He forecasts that America’s information technology, service, and medical-devices industries are about to be lost, costing “millions of jobs… like in the 1980s when the Japanese surged ahead.” The only way out is “to learn the tools of innovation” and forge entirely new, knowledge-based industries in energy, biotechnology, and other science-based sectors.


We are rapidly becoming the fat, complacent Detroit of nations. We are milking aging cows on the verge of going dry and losing our collective sense of purpose along with our fire, ambition, and determination to achieve.


When entrepreneurs succeed, they revolutionize markets. When they fail, they still keep incumbents under constant competitive pressure and thus stimulate progress. Entrepreneurship is the main engine for economies to evolve and regenerate.


“Excuse me. What’s your opinion on the meat shortage?” The American says: What’s a shortage? The Russian says: What’s meat? The Chinese says: What’s an opinion? The Israeli says: What’s “Excuse me”?


Good people leave traces of themselves on the Internet — digital footprints — because they have nothing to hide. Bad people don’t, because they try to hide themselves. All we do is look for footprints. If you can find them, you can minimize risk to an acceptable level and underwrite it. It really is that simple.


The next thing that struck Thompson was the demeanor of the Fraud Sciences employees during the all-hands meeting at which he spoke. Each face was turned raptly to him. No one was texting, surfing, or dozing off. The intensity only increased when he opened the discussion period: “Every question was penetrating. I actually started to get nervous up there. I’d never before heard so many unconventional observations — one after the other. And these weren’t peers or supervisors, these were junior employees. And they had no inhibition about challenging the logic behind the way we at PayPal had been doing things for years. I’d never seen this kind of completely unvarnished, unintimidated, and undistracted attitude. I found myself thinking, Who works for whom?”


Chutzpah is “gall, brazen nerve, effrontery, incredible guts, presumption plus arrogance such as no other word and no other can do justice to.” An outsider could see chutzpah everywhere in Israel: in the way university students speak with their professors, employees challenge their bosses, sergeants question their generals, and clerks second-guess government ministers. To Israelis, however, this isn’t chutzpah, it’s the normal mode of being. Somewhere along the way — either at home, in school, or in the army — Israelis learn that assertiveness is the norm, reticence something that risks your being left behind.


At the end of the seminar, Ben-Gurion wrote of the men’s confidence in their readiness: “We have to undertake difficult work — to uproot the hears of men who are close to the matter the belief that they have something. In fact, they have nothing. They have good will, they have hidden capacities, but they have to know: to make a shoe one has to study cobbling.”


The goal of a leader should be to maximize resistance — in the sense of encouraging disagreement and dissent. When an organization is in crisis, lack of resistance can itself be a big problem. It can mean that the change you are trying to create isn’t radical enough or that the opposition has gone underground. If you aren’t even aware that the people in the organization disagree with you, then you are in trouble.


When we all emerged from our meeting, red faced after shouting, he asked me what was wrong. I told him, “Nothing. We reached some good conclusions.”


If you can get past the initial bruise to the ego, it’s immensely liberating. You rarely see people talk behind anybody’s back in Israeli companies. You always know where you stand with everyone. It does cut back on the time wasted on bullshit.


The most interesting people here are the company commanders. They are absolutely amazing people. These are kids — the company commanders are 23. Each of them is in charge of 100 soldiers and 20 officers and sergeants, 3 vehicles. Add it up and that means 120 rifles, machine guns, bombs, grenades, mines, whatever. Everything. Tremendous responsibility.

If a terrorist infiltrates that area, there’s a company commander whose name is on it. Tell me how many 23-year-olds elsewhere in the world live with that kind of pressure.


After an event like that, the company commander goes back to the base and his soldiers look at him differently. And he himself is different. He is on the line — responsible for the lives of a lot of people: his soldiers, Palestinian schoolchildren, journalists. Look, he didn’t conquer Easter Europe, but he had to come up with a creative solution to a very complex situation. And he is only 23.


Mr. PM, this individual sergeant is not alone. It was not a mistake. All the soldiers in Unit 8200 must know these things because if we limited such information to officers, we simply would not have enough people to get the work done — we don’t have enough officers.


It’s actually a terrible way to manage an army. But the Israelis are excellent at it because they had no other choice.


Because hierarchy is naturally diminished when taxi drivers can command millionaires and 23-year-olds can train their uncles, the reserve system helps to reinforce that chaotic, antihierarchical ethos that can be found in every aspect of Israeli society, from war room to classroom to boardroom.


Indeed, the IDF’s lack of hierarchy pervades civilian life. It can even break down civilian hierarchies. The professor acquires respect for his student, the boss for his high-ranking clerk. Every Israeli has his friends “from the reserves” with whom he might not otherwise have any kind of social contact. Sleeping in bare huts or tents, eating dull army food, often going without a shower for days, reservists of widely different social backgrounds meet on an equal footing.


There is no protocol about these things. But if you were with American captains and a major walked in, everyone would stiffen. It’s extremely rigid and hierarchical in the US. Ranks is very, very important. As they say in the American military, “You salute the rank, not the person.”


Yaalon believes that this unique feature of Israel’s military is critical to its effectiveness: “The key for leadership is the soldiers’ confidence in their commander. If you don’t trust him, if you’re not confident in him, you can’t follow him.”


Assertiveness versus insolence; critical, independent thinking versus insubordination; ambition and vision versus arrogance — the words you choose depend on your perspective, but collectively they describe the typical Israeli entrepreneur.


There is a sense of a mental prison here, surrounded by enemies. When the sky opens, you get out.


High-tech telecommunications became a national sport to help us fend against the claustrophobia that is life in a small country surrounded by enemies.


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 component 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 last 60 years, in terms of lost market and the difficulties imposed on the nation’s economic development. Estimates range as high as $100B. 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?


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.”


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 20s, 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, many Israelis have visited over a dozen countries by the age 35.


He finds out in advance of each presentation which companies’ executives will be in the audience and is then certain to mention which of their competitors are already in Israel. “The reason that Israel is inside almost everything we touch is because almost every company we touch is inside Israel. Are you?”


The others are always making a pitch for their specific company. The Israelis are always making a pitch for Israel.


While it’s difficult to get into the top Israeli universities, the nation’s equivalent of Harvard, Princeton, and Yale are the IDF’s elite units. The unit in which an applicant served tells prospective employers what kind of selection process he or she navigated, and what skills and relevant experience he or she may have already possess.


The war was a costly reminder that Israel must compensate for its small size and population by maintaining a qualitative and technological edge. The professors approached then IDF chief of staff with a simple idea: take a handful of Israel’s most talented young people and give them the most intensive technology training that the universities and the military had to offer.

Each year, the top 2% of Israeli high school students are asked to try out — 2000 students. Of these, only 1 in 10 pass a battery of tests, mainly in physics and mathematics. These 200 students are then run through 2 days of intensive personality and aptitude testing.


Providing the students with such a broad range of knowledge is not, however, the ultimate goal of the course. Rather, it is to transform them into mission-oriented leaders and problem solvers.

This is achieved by handing them mission after mission, with minimal guidance. Some assignments are as mundane as organizing a conference for their fellow cadets, which requires coordinating the speakers, facilities, transportation, and food. Others are as complicated as penetrating a telecommunications network of a live terrorist cell.


Talpions may represent the elite of the elite in the Israeli military, but the underlying strategy behind the program’s development — to provide broad and deep training in order to produce innovative, adaptive problem solving — is evident throughout much of the military and seems to be part of the Israeli ethos: to teach people how to be very good at a lot of things, rather than excellent at one thing.


There is something about the DNA of Israeli innovation that is unexplainable. I think it comes down to maturity. That’s because nowhere else in the world where people work in a center of technology innovation do they also have to do national service.


Innovation often depends on having a different perspective. Perspective comes from experience. Real experience also typically comes with age or maturity. But in Israel, you get experience, perspective, and maturity at a younger age, because the society jams so many transformative experiences into Israelis when they’re barely out of high school. By the time they get to college, their heads are in a different place than those of their American counterparts.


Indeed, relationships developed during military service form another network in what is already a very small in interconnected country. “The whole country is one degree of separation. Israeli companies have stoped using help-wanted ads. It’s now all word of mouth. The social graph is very simple here. Everybody knows everybody. Nobody can hide. If you don’t behave, you cannot disappear to Wyoming or California.”


The military gets you at a young age and teaches you that when you are in charge of something, you are responsible for everything that happens and everything that does not happen. The phrase “It was not my fault” does not exist in the military culture. No college experience disciplines you to think like that, with high stakes and intense pressure. When you are under that kind of pressure, at that age, it forces you to think 3 or 4 chess moves ahead.


The military is also much better than college for inculcating young leaders with a sense of what he calls social range: “The people you are serving with come from all walks of life; the military is this great purely merit-based institution in our society. Learning how to deal with anybody — wherever they come from — is something that I leverage today in business when dealing with my suppliers and customers.”


Despite the military leadership’s outreach, too few young Americans today feel any connection to their contemporaries in the military, let alone have actually ever known one who has served. Even after 2 new war fronts, today only 1 in 221 Americans are in active-duty service. Compare that to the end of WW2, when 1 in 10 Americans were serving. After WW2 a young man who had not served would have a hard time getting a good job in business. “There must be something wrong with him.”


And, as in the IDF, today’s junior commanders are also more inclined to challenge senior officers in ways they typically would not have in the past. This is partly from serving multiple tours and having watched their peers get killed as a result of what junior officers often believe are bad decisions, lack of strategy, or lackluster resources provided by higher-ups.


Singaporeans of all strata of society would train shoulder to shoulder in the rain and hot sun, run up hills together, and learn to fight as a team in jungles and built-up areas. Their common experience in NS would bond them, and shape the Singapore identity and character.


But its growth story notwithstanding, Singapore’s leaders have failed to keep up in a world that puts a high premium on a trio of attributes historically alien to Singapore’s culture: initiative, risk-taking, and agility.


America is the queen of content, but it is still in the broadcast era, while China and Korea are in the interactive age.


Israelis seem to be on the other side of the spectrum. They don’t care about the social price of failure and they develop their projects regardless of the economic or political situation.


Explaining away a bad decision is unacceptable. Defending stuff that you’ve done is just not popular. If you screwed up, your job is to show the lessons you’ve learned. Nobody learns from someone who is being defensive.


While such a total appraisal would not be surprising after a defeat, the Israelis were able to innovate even after victory. The new was not always better than the old, but the flow of fresh ideas at least prevented the ossification of the military mind, which is so often the ultimate penalty of victory and the cause of future defeat.


We’ve lost thousands of lives and spent hundreds of billions of dollars in the last 7 years in efforts to bring stability to 2 medium-sized countries; we can’t afford to adapt this slowly in the future. The problem is that a private who loses a rifle suffers far greater consequences than a general who loses a war.


Ben-Gurion also understood that people would not move to underdeveloped areas, far away from urban centers and basic infrastructure, if the government did not take the lead in settlement and provide incentive to relocate. Private capitalists, he knew, were unlikely to take on the risk of such efforts.


Sanbar also believes that this system could have worked only in a small, striving, and idealistic nation: there was no government transparency, but “all the politicians then died poor. They intervened in the market, and decided whatever they wanted, but at no point did anyone pocket even one cent.”


All countries have problems and constraints, but what’s striking about Israel is the penchant for taking problems — like the lack of water — and turning them into assets — in this case, by becoming leaders in the fields of desert agriculture, drip irrigation, and desalination.


In retrospect, however, it is clear that Israel’s economic performance occurred in part because of the government’s meddling, and not just in spite of it. During the early stages of development in any primitive economy, there are easily identifiable opportunities for large-scale investment: roads, water systems, factories, ports, electrical grids, and housing construction. Israel’s massive investment in these projects stimulated high-velocity growth. Rapid housing development on kibbutzim, for example, generated growth in the construction and utilities industries. But it is important not to generalize: many developing countries engaged in large infrastructure projects wast vast amounts of government funds due to corruption and government inefficiencies.


During this stage of Israel’s development, private entrepreneurs may have not been essential because the largest and most pressing needs of the economy were obvious. But the system broke down as the economy become more complex. Once the government saturated the economy with big infrastructure spending, only entrepreneurs could be counted to drive growth; only they could find “the niches of relative advantage.”


The 20-year period from 1946 to 1966, when most of the large-scale infrastructure investments had been made, was coming to an end. In 1966, with no more frothy investment targets, Israel experienced for the first time nearly zero economic growth. This should have convinced Israel’s government to open the economy to private enterprise. But instead, needed reforms were staved off by the Six-Day War. Within one week, Israel had captured a territory that was equal to more than 3 times the size of Israel.

Suddenly the Israeli government was once again busy with new large-scale infrastructure projects. And since the IDF needed to establish positions in the new territories, massive spending was necessary. It was another giant economic “stimulus” program. The timing of the war reinforced the worst instincts of Israel’s central planners.


While it may no longer have resembled an expanse of sand, swamps, and malaria, visitors during the 1970s might have been excused for thinking they had landed in a 3rd-world country.


The overall mood was dour. The euphoria had come with the stunning 1967 victory — which some likened to first receiving a death-row pardon then winning then lottery — quickly dissipated after the 1973 Yom Kippur War and was replaced with a renewed sense of insecurity, isolation, and, perhaps worst of all, tragic blunder. The mighty Israeli army had bene utterly surprised and badly bloodied. It was scarce consolation that, in military terms, Israel had won the war. Israelis felt that their political and military leadership had badly failed them.


Immigrants are not averse to starting over. They are, by definition, risk takers. A nation of immigrants is a nation of entrepreneurs.


While it was a just a 4-hour flight, it felt like there was a gap of 400 years between Ethiopia and Israel.


I went to the US. Similar to you, I have standard Russian-Jewish parents. My dad is a math professor. They have a certain attitude about studies. And I think I can relate that here, because I was told that your school recently got 7 our of the top 10 places in a math competition throughout all Israel.

But what I have to say is what my father would say — “What about the other 3?”


At that time, Mozganov, a new immigrant who had been a professor of mathematics in the Soviet Union, was employed at the school as a security guard. This was typical in those years: Russians with PhDs and engineering degrees were arriving in such overwhelming numbers that they could not find jobs in their fields, especially while they were still learning Hebrew.


For us in the Soviet Union, we received with our mothers’ milk the knowledge that because you are a Jew — which had no positive meaning to us then, only that you we were victims of anti-Semitism — you had to be exceptional in you profession, whether it was chess, music, mathematics, medicine, or ballet. That was the only way to build some kind of protection for yourself, because you would always be starting from behind.

The result was that though Jews made up only about 2% of the Soviet population, they counted for some 30% of the doctors, 20% of the engineers, and so on.


Why is it happening on the East Coast or the West Coast of the US? A lot of it has to do with immigrant societies. In France, if you are from a very established family, and you work in an established pharmaceutical company, for example, and you have a big office and perks and a secretary and all that, would you get up and leave and risk everything to create something new? You wouldn’t. You’re too comfortable. But if you’re an immigrant in a new place, and you’re poor. Or you were once rich and your family was tripped of its wealth — then you have drive. You don’t see what you’ve got to lose; you see what you could win. That’s the attitude we have here — across the entire population.


Israel owes much of its success to a deep Diaspora network that other countries, from Ireland to India and China, have also developed. Yet the non-Israeli Jewish Diaspora ties are not automatic, nor are they the key catalysts to the development of the tech sector in Israel. In fact, whereas China’s Diaspora is the source of 70% of FDI into China and India’s Diaspora did much to help build its homeland’s high-tech infrastructure when the country’s economy and legal system were both underdeveloped, Israel’s experience had been different. The vast majority of American Jewish investors historically would not touch the Israeli economy. It was not until much later, when Israel became more successful, that many Diaspora Jews started looking at Israel as a place to do business, not just as a draw for their sympathy and philanthropy.


Warren has been in the insurance business for a long time, and looks at every investment decision through that lens. It’s all about assessing risk like you would in an insurance policy. The things you really worry about are the potential for earthquakes and hurricanes. Warren asks: What kind of catastrophic risk is there, and can I live with it?


Buffett’s view is that if Iscar’s facilities are bombed, it can go build another plant. The plant does not represent the value of the company. It is the talent of the employees and management, the international base of loyal customers, and the brand that constitute Iscar’s value. So missiles, even if they can destroy factories, do not, in Buffett’s view, represent catastrophic risk.


Frohman did what every Israeli manager does during or in advance of war: he drew up contingency plans for the “standard” war scenario, in which employees would be called up for reserve duty. Most Israeli men under 45 serve in the reserves for one month every year. During an extended war, these civilian-soldiers can be called up for as long as the government deems necessary. This exacts a huge economic toll on businesses in Israel — including lost work days and less productivity — even during peaceful time. During a war, employees can be absent for weeks or even months. As a result, some Israeli businesses go bankrupt during war.


With 1 out of 3 Soviet immigrants as a scientist, engineer, or technician, Israel’s high-tech sector seemed to be the best solution. But existing R&D centers alone would never be able to handle that many new employees.


While a technology start-up could attract financing from numerous sources, anyone trying to launch a more conventional business would have a lot of trouble getting a simple small business loan. Israel’s capital markets were highly concentrated and constrained. And a particular industry that seem to be a natural for Israel — financial services — was prevented from ever getting off the ground.


Netanyahu told us, “I explained to people that the private economy was like a thin man carrying a fat man — the government — on its back. While my reforms sparked massive nationwide strikes by labor unions, my characterization of the economy struck a chord. Anyone who had tried to start a [nontech] business in Israel could relate.”


The pension and life insurance funds could meet their commitments to beneficiaries just by buying the earmarked bonds. So that’s exactly what they did — they didn’t invest in anything else. Because of these bonds, there was no incentive for Israeli institutional investors to invest in any private investment fund.


The two real fathers of Israel hi-tech are the Arab boycott and Charles de Gaulle, because they forced on us the need to go and develop an industry.


The best way to understand Israel’s watershed moment is through a shock to Americans that had a similar effect. During the postwar boom years, America’s global status was suddenly punctured when the Soviet Union upstaged the US by launching the first space satellite — Sputnik 1. That the Soviets could pull ahead in the space race stunned most Americans. But in retrospect, it was a boon for the US economy.

Sputnik was a wake-up call, and America answered it. We revised school curricula to emphasize the teaching of science and math. We passed $900M National Defense Education Act (about $6B in today’s dollars), providing scholarships, student loans, and scientific equipment for schools. NASA and the Apollo program were created, as was a new powerful new Pentagon agency dedicated to galvanizing the civilian R&D community.


Israel had its own Sputnik moment, 10 years after America’s. On the eve of the Six-Day War, Charles de Gaulle taught Israel an invaluable lesson about the price of dependence.


But there was more to de Gaulle’s decision than trying to defuse a Middle East war. New circumstances called for new French alliances. By 1967, France had withdrawn from Algeria. With his long and bitter North African war behind him, de Gaulle’s priority was now rapprochement with the Arab world. It was no longer in France’s interest to side with Israel.


Even though the program was cancelled, the Lavi’s development had significant military reverberations. First, the Israelis had made an important psychological breakthrough: they had demonstrated to themselves, their allies, and their adversaries that they were not dependent on anyone else to provide one of the most basic elements for national survival — an advanced fighter aircraft program.


If most air forces are designed like a F1 race car, the Israeli Air Force is a beat-up jeep with a lot of tools in it. On a closed track, the F1’s going to win. But if you’re going off-road from day one, the race car is just not going to work in our environment.


Unlike the US Air Force, the IAF does not send up a special formation to defeat enemy radars. “You do it yourself. It’s not as effective, but it’s a hell of a lot more flexible.” Finally, in a typical Israeli strike package, about 90% of the aircraft are carrying bombs and are assigned targets. In a US strike package, only the strikers in the final wave are carrying bombs.


Like Singapore, it is an extremely orderly society, and there are no outlets for protest — even peaceful ones — against the government. Many of the founders of Dubai’s first human rights organization are also employed by the government and are dependent on Sheikh Mohammed’s largesse.


With only 0.5% of the oil and gas reserves of neighboring Abu Dabi, and even tinier fraction of Saudi Arabia’s, Dubai’s reserves could run out as soon as 2010. As Sheikh Rashid once famously said, “My grandfather rode a camel, my father rode a camel, I drive a Mercedes, my son drives a Land Rover, his sone will drive a Land Rover, but his son will ride a camel.”


In DIC you will not find any R&D or new innovation-based companies. Dubai opened its doors to innovative global companies, and many have come. But they have come to spread innovations made elsewhere to a particular regional market. Dubai, therefore, has not created any thriving innovative clusters; rather, it has built large, successful service hubs.


Attracting new members to a cluster by offering a less expensive way to do business might be sufficient to create a cluster, but not to sustain it. If price is a cluster’s only competitive edge, some other country will always come along to do it more cheaply. The other qualitative elements — such as tight-knit communities whose members are committed to living and working and raising families in the cluster — are what contribute to sustainable growth. Crucially, a cluster’s sense of shared commitment and destiny, which transcend day-to-day business rivalries, is not easy to manufacture.

The obstacles for Dubai, in this sense, are profound. Foreign nationals are there to make money, period.. Once they’ve done so, they have typically returned home or moved on to their next adventure.


With all its problems, Israel has one commanding advantage: a sense of purpose. Israelis may not have affluence or the quiet life. But they have what affluence tends to smother: a motive.


When economic times are difficult, as has bene the case in Dubai sine late 2008, or security becomes dicey, those not committed to building a home, a community, and a state are often the first to flee.


So what are the barriers to an Arab “startup nation”? The answer includes oil, limits on political liberties, the status of women, and the quality of education.


But the Arab world’s oil economy has stymied high-growth entrepreneurship. Distributing oil wealth largesse to the masses has insulated governments in the Persian Gulf from pressure to reform politically and economically. Oil wealth has cemented the power of autocratic governments, which do not have to collect taxes from their citizens and therefore do not need to be terribly responsive to their complaints. As historians of the Muslim world have put it, in Arab countries “the converse of a familiar dictum is true: No representation without taxation.”


The number of books translated annually into Arabic in all Arab countries combined was one-fifth the number translated into Greek in Greece. In 2003, China published a list of the 500 best universities in the world; it did not include a single mention of the more than 200 universities in the Arab world.


Focusing on the number of teachers has particularly harmful implications for boys in the Arab world. Many government schools are segregated by gender: boys are taught by men, girls by women. Since teaching positions have traditionally been less appealing to men, there is a shortage of teachers for boys. As a result of the smaller talent pool, boys’ schools often employ lower-quality teachers.


The best barometer of an economy’s growth potential lies in the legal rights and status of its women. To deny women is to deprive a country of labor and talent and to undermine the drive to achievement of boys and men. Nothing is more dilutive to drive and ambition than a sense of entitlement. Every society has elites, and a number of them were born into their upper-echelon status. But there is no more widely dispersed sense of entitlement than ingraining in the minds of half of the population that they are superior, which reduces their need to learn and do.


The Israeli economy is still in its infancy. The startup scene that seems so established today was born at roughly the same time as the Internet economy itself, just over a decade ago.


While much of the international focus is on the potential threat of an Iranian nuclear missile strike on Israel, the political and security leadership of Israel warns against the effect of an Iranian nuclear capability on the region even if it is never directly used. As Netanyahu told us, “The first-stage Iranian goal is to terrify Israel’s most talented citizens into leaving.”


But the point that Israel can, should, and must grow its economy faster is crucial. Of all the threats and challenges facing Israel, an inability to keep the economy growing is perhaps the greatest, since it involves overcoming political obstacles and giving attention to neglected problems. Israel has a rare, maybe unique, cultural and institutional foundation that generates both innovation and entrepreneurship; what it lacks are policy fixes to further amplify and spread these assets within Israeli society. Fortunately for Israel, it is probably easier to change policies than it is to change a culture, as countries like Singapore demonstrate. As Thomas Friedman put it, “I would much rather have Israel’s problems, which are mostly financial, mostly about governance, and mostly about infrastructure, rather than Singapore’s problem because Singapore’s problem is culture-bound.”


The most careful thing is to dare.


People don’t realize this, but agriculture is 95% science, 5% work.


As deputy minister of defense, he pumped money into defense R&D, to the dismay of the military leadership, which, perhaps understandably, was more concerned about chronic shortages of weapons, training, and manpower.


Today’s entrepreneurs feel the tug of this thread. While the founders’ milieu was socialist and frowned on profit, now “there’s a legitimate way to make a profit because you’re inventing something. You’re not trading in goods, or you’re not just a finance person. You are doing something for humanity. You are inventing a new drug or a new chip. You feel like a farmer of high tech.”


Indeed, what makes the current Israeli blend so powerful is that it is a mashup of the founders’ patriotism, drive, and constant consciousness of scarcity and adversity and the curiosity and restlessness that have deep roots in Israeli and Jewish history. “The greatest contribution of the Jewish people in history is dissatisfaction. That’s poor for politics but good for science. All the time you want to change and change. Every technology that arrives in Israel from America, it comes to the army and in 5 minutes, they change it.”


Romer points out that the biggest leaps in growth and productivity were produced by “meta-ideas” that increased the generation and spread of ideas. Patents and copyrights were a critical meta-idea invented by the British in the 17th century, while Americans introduced the modern research university in the 19th century and the peer-reviewed competitive research grant system in the 20th century.


And he previewed what his message would be for Israel’s entrepreneurs and policymakers in the coming years: “Leave the old industries. There are going to be 5 new industries. Tremendous — new forms of energy, water, biotechnology, teaching devices — there’s a shortage of teachers — and homeland security to defend against terrorism.”