The Real Israel: Innovation Central
By Sherwin Pomerantz

A few weeks ago Cisco Systems agreed to buy NDS, a company which originated in Israel and still has a large R&D facility in Jerusalem, for $5b. That purchase then became the largest buyout of an Israel company since the 2006 purchase of 80% of Israel’s Iscar Ltd. by Warren Buffett for $4b. Could anyone have believed just 30 years ago that Israeli tech companies would rise to such lofty levels of market value? Not likely, but this is the Israel the headlines don’t cover.

Over the past two weeks we have had visits here by both New Jersey Governor Chris Christie and Indiana Governor Mitch Daniels. Both men were touted earlier this year as Republican challengers to US President Obama and both declined to pursue that opportunity for personal reasons. So even though they are not active participants in the Republican presidential nomination sweepstakes and, therefore, are not simply seeking to establish their Israel or Jewish credentials for their constituents, why did they come to Israel and why now? I should add, by the way, that neither of them came on “official” Israel government sponsored visits, both came on their own with parts of their families in tow.

The firm that I was privileged to found 20 years ago with three other partners, Atid EDI Ltd., and which I continue to serve as president, was involved in both visits. For Governor Christie we set up business appointments for some of the people traveling with him as well as ensured a representation of high level captains of industry at a reception he held in their honor just a week ago. For Governor Daniels, even though he is here during the Passover holiday when businesses are traditionally closed, we set up a business roundtable on Monday with half a dozen leaders of the high tech community in Israel, held at the Israel headquarters of Indianapolis-based Eli Lilly & Co.

Interestingly enough what both governors came to Israel to do was as much about learning the secret of Israel’s high tech success as it was about selling the benefits of their own states. As a matter of fact, during yesterday’s roundtable, while a former Indiana Secretary of Commerce was extolling the virtues of doing business in Indiana, the Governor interrupted the conversation in order to redirect it. In a word, he said that while he appreciated the willingness of the Israeli audience to hear about why it is good to do business in Indiana, he really wanted to know what Israel did to make itself the world’s most efficient center of innovation. And indeed what has made this so?

Israeli innovation traces its roots to 1918, 30 years before the founding of the state when Prof. Chaim Weizmann, who was later to become the country’s first president, participated in the inaugural ceremonies of the Hebrew University in Jerusalem. At the time he said:

It seems at first sight paradoxical that in a land with so sparse a population, in a land where everything still remains to be done, in a land crying out for such simple things as plows, roads, and harbors, we should begin by creating a center of spiritual and intellectual development.

92 years later Israel’s creative energy was nicely summed up by Warren Buffett when he stated: "If you go to the Middle East looking for oil, you don't need to stop in Israel. But if you go looking for brains, energy and integrity, it is the only stop." Truly an encomium nothing short of amazing.

But why shouldn’t these two governors have zeroed in on Israel’s technological success? America is going through a crisis the likes of which it has not seen in 80 years. Manufacturing has gone offshore and, with it, much of the innovation as well as innovators tend to want to be close to where their ideas will be put into practice. So if America wants to re-learn what it takes to become an innovation greenhouse Israel is the natural place to look.

In 2011 Newsweek’s Daily Beast ranked Israel as the 4th most innovative country in the world. Bloomberg Business Week hastened to add that “Israel has one of the most dynamic high-tech industries in the world and is a hub for venture capital as well.” The greatest testimony to its success however, is the results: more patents filed per capita than any country in the world and the second highest number of start-ups anywhere.

This of a country of just 7.6 million people, only 64 years old, surrounded by enemies, in a constant state of war since its founding, and with few natural resources – yet produces more start-up companies than large, peaceful, and stable nations like Japan, China, India, Korea, Canada, and the UK. Israel has, per capita, attracted over twice as much venture capital investment as the US and thirty times more than Europe.

Gary Neill, the head of Johnson & Johnson’s Innovation Research Unit summed it up best on a recent visit to Israel when he said: “There’s an Israeli working on every insoluble problem.”

94 years after the founding of the Hebrew University of Jerusalem, the remarks of then Prof. Chaim Weizmann established the vision of a country for which innovation would be its singular most important characteristic when he uttered those famous words “we should begin by creating a center of spiritual and intellectual development.” The resulting intellectual development has manifested itself into a dynamic, spirited and challenging innovative environment, orders of magnitude beyond what anyone could have possibly dreamt of in 1918.

Harvey Firestone, the founder of the Firestone Tire & Rubber Co, once said: "Capital isn't so important in business. Experience isn't so important. You can get both these things. What is important is ideas. If you have ideas, you have the main asset you need, and there isn't any limit to what you can do with your business and your life."

Israel is a perfect example of Firestone’s theory. Small in size, lacking in natural resources, with a population fewer than 8 million, the wellspring of ideas has given the country the ability to be by far one of the world’s largest sources of innovative technologies and start-up companies. It is, in a word, the innovation platform writ large. And that is the real Israel.