Start-up Nation

Copyright

Copyright © 2009 by Dan Senor and Saul Singer

All rights reserved. Except as permitted under the U.S. Copyright Act of 1976, no part of this publication may be reproduced, distributed, or transmitted in any form or by any means, or stored in a database or retrieval system, without the prior written permission of the publisher.

Twelve

Hachette Book Group

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New York, NY 10017

Visit our website at www.HachetteBookGroup.com.

www.twitter.com/grandcentralpub.

Twelve is an imprint of Grand Central Publishing.

The Twelve name and logo are trademarks of Hachette Book Group, Inc.

First eBook Edition: November 2009

ISBN: 978-0-446-55831-0

To Campbell Brown and Wendy Singer, who shared our enthusiasm for this story.

To James Senor and Alex Singer, who would have marveled at what they worked to create.

CONTENTS

COPYRIGHT

AUTHORS’ NOTE

MAPS

Introduction

Part I: The Little Nation That Could

Chapter 1: Persistence

Chapter 2: Battlefield Entrepreneurs

Part II: Seeding a Culture of Innovation

Chapter 3: The People of the Book

Chapter 4: Harvard, Princeton, and Yale

Chapter 5: Where Order Meets Chaos

Part III: Beginnings

Chapter 6: An Industrial Policy That Worked

Chapter 7: Immigration

Chapter 8: The Diaspora

Chapter 9: The Buffett Test

Chapter 10: Yozma

Part IV: Country with a Motive

Chapter 11: Betrayal and Opportunity

Chapter 12: From Nose Cones to Geysers

Chapter 13: The Sheikh’s Dilemma

Chapter 14: Threats to the Economic Miracle

Conclusion: Farmers of High Tech

ACKNOWLEDGMENTS

NOTES

BIBLIOGRAPHY

ABOUT THE AUTHORS

ABOUT THE TWELVE

AUTHORS’ NOTE

This is a book about innovation and entrepreneurship, and how one small country, Israel, came to embody both.

This is not a book about technology, even though we feature many high-tech companies. While we are fascinated by technology and its impact on the modern age, our focus is the ecosystem that generates radically new business ideas.

This book is part exploration, part argument, and part storytelling. The reader might expect the book to be organized chronologically, around companies, or according to the various key elements that we have identified in Israel’s model for innovation. These organizational blueprints tempted us, but we ultimately rejected them all in favor of a more mosaiclike approach.

We examine history and culture, and use selected stories of companies to try to understand where all of this creative energy came from and the forms in which it is expressed. We have interviewed economists and studied their perspectives, but we come at our subject as students of history, business, and geopolitics. One of us (Dan) has a background in business and government, the other (Saul) in government and journalism. Dan lives in New York and has studied in Israel and lived, worked, and traveled in the Arab world; Saul grew up in the United States and now lives in Jerusalem.

Dan has invested in Israeli companies. None of these companies are profiled in this book, but some people Dan has invested with are. We will note this where appropriate.

While our admiration for the untold story of what Israel has accomplished economically was a big part of what motivated us to write this book, we do cover areas where Israel has fallen behind. We also examine threats to Israel’s continued success—most of which will likely surprise the reader, since they do not relate to those that generally preoccupy the international press.

We delve briefly into two other areas: why American innovation industries have not taken better advantage of the entrepreneurial talent offered by those with U.S. military training and experience, in contrast to the practice in the Israeli economy; and why the Arab world is having difficulty in fostering entrepreneurship. These subjects deserve in-depth treatment beyond the scope of this book; entire books could be written about each.

Finally, if there is one story that has been largely missed despite the extensive media coverage of Israel, it is that key economic metrics demonstrate that Israel represents the greatest concentration of innovation and entrepreneurship in the world today.

This book is our attempt to explain that phenomenon.

Israel. © 2003–2009 Koret Communications Ltd. www.koret.com. Reprinted by permission.

Israel and the region. © 2003–2009 Koret Communications Ltd. www.koret.com. Reprinted by permission.

Introduction

Nice speech, but what are you going to do?

—SHIMON PERES to SHAI AGASSI