Is the start-up nation sustainable? Israeli policy talks in terms of growth, not leadership, and that is no longer enough, argues Roy Keidar

Is the start-up nation sustainable?

Israeli policy talks in terms of growth, not leadership, and that is no longer enough, argues Roy Keidar.

26 February 13 12:59, Roy Keidar

The book “Start-up Nation” is very popular among American Jews. The idea that a small place like Israel, poor in natural resources and facing major security and diplomatic challenges, is number one in the world in start-ups per capita is a source of pride for Jews and Israelis, and an inspiration for other nations. But many people have begun to ask: In view of the processes underway in Israeli society and culture on one hand, and global trends on the other, is the “Start-up Nation” sustainable?

Israel’s success story is interesting and unique. It begins with the need of a society of immigrants to survive in the region. This need gave rise to technological innovations, such as drip irrigation, solar energy, and a slew of defense products developed in Israel. The adage, “Necessity is the mother of invention” was realized in Israel.

But it is not enough. Over the years, we have created a winning combination of scientific ability and an Israeli tendency to take risks. This combination was also the result of high-quality Russian-speaking immigrants, which brought to Israel thousands of scientists, and skilled manpower who were discharged from the army’s technology units.

Following Israel’s economic changes of the 1980s, the opening to the global environment and foreign capital, and access to overseas scientific and technological know-how, the country discovered the formula, which gave rise to the “Start-up Nation” model for the 2000s. And this without even mentioning Israeli genius.

But in the past decade, there have been signs that the model is becoming frayed, especially when global trends and their effect on Israel are examined. The world is competing for innovation and creativity. Multinationals aggressively buy talent, and skilled personnel move from country to country following financial incentives.

Governments provide huge budgets and tax breaks for R&D to create strong national economic clusters. Former growth engines, such as information, computers and telecommunications (ICT) are giving way to new technologies, such as self-production and 3D printers, which require different specializations and preparations to adapt the economy.

Given Israel’s security and economic challenges, it must be the world’s scientific-technological innovation spearhead, since this is the country’s largest resource and the only non-perishable one. The assumption that what worked in the past will also work in the future, and that the market should be allowed to do its thing cannot serve as a working assumption. The world is changing, and Israel must adapt and renew.

How can Israel create the conditions to remain the world’s scientific-technological innovation spearhead? The answer cannot be found in a book or plan, nor can it only depend on the government, the education system, or the private market. The way to be the spearhead of innovation begins and ends with a common vision which sets innovation as the goal and calls on all parties to adapt their operating strategies to achieving this vision, which does not currently exist in Israel.

Israeli policy talks in terms of growth, not leadership, and in the 21st century that is no longer enough.

The author is the CEO of the Reut Institute

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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