How Did Israel Become “Start-Up Nation”? | Hacker News Reader

How Did Israel Become “Start-Up Nation”?

freakonomics.com

65 pointsdonohoe42 comments

"...attract[s] more venture capital dollars per person than any country — 2.5 times the U.S., 30 times Europe, 80 times India, and 300 times China."

Guh, could we stop it already with the country-level statistics? Per capita or not, you can't just go comparing a largely urban nation of 7.1 million people with massive nation-states like the US, EU, India & China which have huge rural/agrarian areas. How do you think this would read if he had compared it to the venture dollars per capita for the 7.15 million people living in the bay area?

Exactly. These phenomena are notoriously non-linear.

IMHO, the best way to calculate a good index is to model (usually log-transformed) the relationship between the venture capital dollars and the population (or overall investment, number of degree awarded by year, money invested in R&D, etc.), then take the ratio between the expected value and observed value. The resulting index is less sensible to scale issues.

There is an index that tries to measure innovation called the Global Innovation Index (http://en.wikipedia.org/wiki/Global_Innovation_Index_%28INSE...), interestingly Israel comes in at 14th, you'd think they would be number one if this article is to be believed.

By that same logic, you would say that Israel innovates more than the US since it appears below Israel on that list.

What logic? What are you talking about? The US is above Israel on every sub-index. Besides it is obvious that it is relative to population because in absolute terms the US would far outstrip any competitors.

These phenomena are also highly correlated with particular cities.

Instead of comparing Israel to the US or India, compare Haifa or Tel Aviv to the Valley, NY, Bangalore or Pune. I'd be surprised if Haifa/Tel Aviv came out ahead of the Valley, but I'm definitely interested to know how they compare to NY.

At least without the context of the book, the bit about military service seems like a post facto justification. Had Israel not developed a significant tech sector, I would not be surprised to hear compulsory military service given as a reason for that.

"Compulsory military service teaches young Israelis that they should follow orders instead of thinking for themselves. It promotes a narrow and aggressive world view that sees everything in black and white, friend or enemy, right or wrong. It takes Israelis out of the commercial world at just the time where they are their most innovative.", etc.

Compulsory military service could help the tech sector, or harm it, or not affect it. By considering only the evidence supporting the claim that military service helps, the article leaves open an unknown amount of counter-evidence.

Israel and Korea share many things in common. Yet, Israel has become one of the hottest country for startups. The author attributes the success to leadership and technology training in military. I'd say the biggest reason is immigrants.

It's just like mutation and evolution. I truly believe growth in homogeneous society will be severely limited. When you mix different ideas and perspectives together, you get stronger outcome.

Good for them!

> I'd say the biggest reason is immigrants.

Yes. Israel received top scientists from ex-soviet countries that helped to shape the country. Even in the pre-israel era, many people with science knowledge did agricultural jobs in search of an ideal.

Those ex-soviets are mostly jews who finally seized an opportunity to live somewhere else, outside of iron curtain. Many of them also showed up in US, see Sergey Brin.

I didn't understand your point.

If you are jewish it is straightforward to move to Israel, but it is a lot more complex to move to US legally. So, Israel received a lot of people from the diaspora giving them instantaneous citizenship plus economic incentives to move.

So why the comparison to Korea? Korea has very restrictive immigration policies which prevent almost anyone from gaining actual permanent residency (citizenship is almost impossible for "non-Koreans"). Israel has very liberal immigration and easy access to citizenship. Israel is democratic and has been mostly free since its founding whereas Korea has had a few dictatorships (and serious military crackdowns on civilian freedom).

The main reason Korea isn't a startup hub is capital. Korean banks are incredibly conservative, they won't even lend money for cars or mortgages to most people. Capital is centralized and mainly allocated to existing projects or proven corporate models. Venture capital is non existent. Israel is the opposite of that with lots of investment and decentralized capital. In short, Israel has risk seeking investors, Korea doesn't.

When no one takes even low to moderate risks with money there cannot be a startup boom.

I've been under the impression that Israel only has liberal immigration for certain demographics. Is this not the case?

I would say it is the case.

http://en.wikipedia.org/wiki/Law_of_Return - Allows almost any Jew or relative of a Jew to migrate to Israel and quickly gain citizenship.

http://en.wikipedia.org/wiki/Citizenship_and_Entry_into_Isra... - prevents residents of Iran, Afghanistan, Lebanon, Libya, Sudan, Syria, Iraq, Pakistan, Yemen and areas governed by the Palestinian Authority from automatically gaining residency and citizenship through family reunion and marriage.

Oh, I meant they are similar in terms of limited natural resources and they both have to rely on intellectual capital on their citizens and exports for growth.

Korea is mostly homogeneous society and not very open to immigrants, and thus their growth is limited. So is Japan, and their growth also hit the wall as well.

I also agree on money. So true.

A lot of people seem to be distracted by the emphasis on the military - keep in mind that the authors predicate that causation on the specific culture of the Israeli military.

In the book, they compare Israel to other countries with universal, long-term conscription (such as South Korea and Singapore) which, while economically very successful, have not had start-up success. They ascribe this to the fact that the IDF in particular and Israeli society in general tend to disregard hierarchy and encourage challenges to authority.

If the army's culture were different, its effects on the Israeli start-up scene would likely not be positive.

I've done 7 months of consequences for disregard for authority before getting kicked out. You shouldn't say these things about the IDF, as in my and many hundreds of young men I've met in the reformatories experience they aren't true.

mleh, begging the question. the article is just a book review and interview with the authors.

Kudos for using begging the question correctly, rather than the popular usage as another way of saying raising the question.

I have heard statistics but do not have a source that the university system in isreal is better positioned to perform tech transfer. The US schools are more focused on research reports where as Israeli schools are more focused on selling and building technology.

This is evidenced by the type of start up out of Israel which is patent style tech over social, web tech.

There are US schools pushing to potentially reward professors not just for research but also selling technology.

The reason that Israeli schools and American schools differ, stem from the fact that originally, Israel needed fast results.

in 1948, Israel started getting boat loads of Jewish immigrants (a lot of them just out of the holocaust and uneducated). Additionally they were at war and trying to build a country fast. So instead of going for liberal arts and such, the college education is much more direct and to the point. So after 3-4 years, these people can go out and help the new county.

This is also seen in the fact that majors are picked in High School also, to further pinpoint what you are going to do for the society, and then get it done.

The weather and the women had nothing to do with it. Nothing at all.

If that's the case why aren't Miami or San Diego big tech startup hotspots?

Uhm, what?

The entire modern biotech lab was practically founded in San Diego. Qualcomm was founded there.

It might as well be Biotech Valley. There are over 400 relevant biotech companies located there.

So I guess cold weather attracts Financial Institutions/MBAs? I guess that explains NYC? /sarcasm

I've read that book, and i can say for sure, its a very worthy read indeed. There are some serious eye openers in there that just cant be covered in a blog post or executive summary.

Countries with small populations are likely to have higher variance than countries with large populations.

We often look at the most "successful" small countries and try to deduce causal effects, when it could just as easily be simply that they're small.

Israel's success with 7 million citizens hasn't been compared with the success of Tajikistan, Serbia, Papua New Guinea ...

Countries with smaller populations would naturally exhibit a larger variance than larger countries that would tend to clump toward the middle. However, no one would say it's just the luck of the draw that papua new guinea is a undeveloped backwater and sitzerland is the center of global banking. With Papua New Guinea for example, I'd imagine that a history of colonial exploitation and lack of contact with the outside world resulted in its present circumstance. Switzerland's tight cultural and economic integration with the rest of europe while staying politically neutral probably greatly contributed to it's current situation.

What did I just read?! Some facts:

- How can you compare venture money per capita with China, India, US etc.?! What kind of logic is this?!

- Yes it's true that they got more venture capitals than other countries, but why? Because hey made kick-ass startups?! Where are these startups? They got because of Jews living outside of Israel invest too much money there. This doesn't mean that they are a startup nation. For example Kuwait invests thousand times more than Israel on national startups but this doesn't mean that they are genius.

- Actually they get daily aid of 8-10 million dollar from only US an Germany. Do you call this aid venture capital?!

For an economy that produces $217 Billion annually, $3 Billion annual military aid is chump change - especially when 75% of that aid is composed of credits that must be spent on American products. So the actual fiscal stimulus from the US amounts to a grand total of about $600 million per year, or about .27% of GDP (no, that decimal point is not a typo)

what are the successful startups in Israel?

tl;dr; 2009.

Apartheid doesn't seem to slow them down.

This is also ignoring the fact that Israel basically owns the US Government with their sympathetic policies and billions of dollars we send them every year.

The article makes it seem like Israelis have balls and that's why they are successful. While its true they have balls, Israel wouldn't even EXIST if it wasn't for US foreign policy.

And half the technology you and I use everyday would not EXIST if there was no Israel. If you like, you could think of Israel as a global R&D facility.

> half the technology you and I use everyday would not EXIST if there was no Israel.

Could you back this up?

I am sure not "half" and not "would not exist". This article gives a good tldr of Israel: http://en.wikipedia.org/wiki/Science_and_technology_in_Israe...

That's a radical exaggeration to put it mildly.

First of all the notion that just because one person didn't develop something, therefore it would not exist (ie someone else would not have done it), is a false premise.

Second, you're flat out wrong. I challenge you to actually publish a list covering that supposed half of technology. If it spans 3% of the global tech super structure, I'd be shocked.

Things Israel did not invent: transistor, microprocessor, software, the router, the hard drive, personal computer, mobile phone, radio, television, laptop, microwave, toaster, washing machine, fridge, fast food tech (hello JR Simplot), RAM, GPUs, satellite communications, airlines, jets, automobiles, human flight, rubber tires, wireless communications, radar, digital sound processing, asprin, the vaccine, the mouse, the keyboard, computer monitors, modern mail delivery, email, telegraph system, automobile engine, steam engine, nuclear power, wind power, hydro power, solar power, oil refining processes, oil drilling, natural gas drilling, pipeline tech, assembly line, the aircraft carrier, stealth anti-radar tech, space travel, modern rocket technology, most of the modern medical technology, smart phones, the digital music player, VHS or CD or DVD technology, and wow the list just keeps going.

It should be noted that Jewish people have contributed a lot (whether in the US or Russia or Germany etc), but that is not the same as Israel having done so.

Well that is quite an exhaustive list you've got there. Did you take the time to actually type all that in off the top of your head or does that list already exist somewhere and this was a copy paste job.

I will leave it as an exercise for the initiated to comb wikipedia, the uspto, nasdaq listings, the historical list of nobel prize winners, academic journals of all flavors, the list of multinational companies that have R&D facilities in Israel, etc. but I think it is clear that when I said "half" it was somewhat tongue in cheek. What if I said "technology you and I use everyday" would that be a bridge too far?

Why don't you defend your points instead of bringing up new ones? Trying to muddy the waters of a losing proposition?

{citation needed}

Without wanting to jump into the middle of a thinly-veiled political argument, I believe the correct line of thinking on this subject is "the technology you use wouldn't exist if it hadn't been invented, and half of it was invented in Israel."

There would have been cars regardless of Detroit's existence.

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