- Israel, with an estimated 6,000 startups
has the largest number of startups per capita
in the world by far.
It ranks third on the list of countries
with the most companies on the NASDAQ
only surpassed by the US and China.
And these aren't some two-bit companies either.
Israeli startups like Wix and Fiverr
are killing it out there.
Waze sold to Google for $1.3 billion
and more recently, Mobileye to Intel for $15.3 billion,
among many others.
So, how did Israel,
a tiny country, with a population
of only around eight and a half million people
become known as the startup nation,
all while fending off near constant war
and without any natural resources to speak of?
(lively upbeat music)
Israeli high tech is booming.
The country produces more startup companies
than India, Japan,
Korea, Canada and the UK.
It's a research and development powerhouse
with Apple, Amazon, Facebook,
Google and Intel, among the many companies
relying on Israel's more than 300 R&D centers
to keep them on the cutting edge.
In fact, Israel was just named fifth
on Bloomberg's annual list of most innovative countries
and number one for research and development.
Now, throw into the mix the barrage
of international boycotts and violent conflicts,
and you're left scratching your head,
how did this wave of Israeli innovation come to be?
Was it always like this?
Not even close.
Ever since its founding in 1948,
all the way up to the early 90s,
Israel was not in the best economic shape.
With very few resources, the newly established state
was a semi-socialist backwater
and was basically out of money from the get-go,
and resources were spread even thinner
when nearly 700,000 Holocaust survivors
and Jews from Muslim countries immigrated,
basically doubling the country's population.
Israel managed to scrape by financially
by accepting controversial reparation payments
from Germany in 1953.
Still, the decades that followed
didn't bring much in the way of economic improvement.
In the 1970s and 80s saw Israel fall victim
to a terrible recession and hyperinflation
which rose as high as 445% by 1984.
So, how did Israel pull a complete 180,
earning the nickname of start-up nation,
in a little more than a decade?
Well, first, we have to back up a century.
Now, Jewish tradition had always valued education,
so naturally, the early Israelis
invested in knowledge and brainpower
establishing the Technion Institute of Technology in 1912,
Hebrew University in 1925,
and the Weizmann Institute of Science in 1934.
Okay, but Israel isn't exactly
the only country with universities,
so what was different about Israel?
Well, the answer might just lie
within the unique challenges the country has faced.
Israeli culture from its earliest inception
needed to think outside the box
in order to survive.
Israel won its 1948 War of Independence
in spite of a tremendous lack of resources and power,
thanks to more than a bit of scrappiness.
In that war, Arab forces placed the siege
on the main Tel Aviv-Jerusalem highway
barring the entry to Jerusalem
from all shipments of food and supplies.
To bypass the blockade,
the Israelis came up with an ad-hoc alternative,
the secret construction of a makeshift path
along the Judean mountains
that they dubbed, the Burma Road.
This early example
it just shows the entire m.o. of Israeli innovation.
Time and time again,
when faced with one obstacle or another,
Israel would have to blaze an alternate path,
a proverbial Burma Road.
So, what were these obstacles?
Well, there was the country's tiny size and economy.
Oh, and the small problem of being
totally surrounded by enemy states.
But one of Israel's greatest challenges was survival
without resources like water and oil.
Israel had to become an expert in innovative water
and energy conservation just in order to survive.
Simcha Blass was the best-known water engineer
in Pre-State Palestine.
Early in his career,
a farmer drew Blass' attention to a big tree
growing in his backyard seemingly without any water
while all the surrounding trees were stunted.
Blass dug below the dry surface and discovered why.
Dripping water from a leaky pipe
was reaching the roots of this one tree.
Blass became engrossed in the concept of drip irrigation,
and by the early 1960s,
he created an extremely efficient irrigation device
that used friction and water pressure
to leak drops of water at regular intervals.
Half a century later,
this innovation is revered by scientists
and environmentalists alike,
but back in the 60s,
it was simply the only way water-starved Israel
could afford to irrigate crops.
Blass was motivated to help other countries
struggling with water resources,
ultimately helping to feed the populations
of over 110 countries worldwide.
But, back to high tech.
What launched Israel's game-changing
high-tech boom of the 1990s?
Would you believe it if I told you
a failed military program
likely had something to do with it?
After years of relying heavily
on arms imported from other countries
only to be slapped by embargo after embargo,
Israel decided to invest in the manufacturer
of its own arms.
Israel Aerospace Industries develop the Lavi fighter jet,
a wildly advanced Israeli innovation
but also crushingly expensive.
The huge project was abandoned in 1987
leaving 5,000 of the most brilliant scientists
and engineers looking for work.
Suddenly, a combination of creative energy
and cutting-edge knowledge was let loose
in the emerging high-tech market.
It was just at this moment in time,
the turn of the decade,
when the iron curtain fell at last,
and Soviet Jews were free to leave
the former Soviet Union.
This included a huge influx of scientists and engineers
not to mention over 700,000 new consumers
entering the country at the perfect moment
just when the high-tech sector began to take off.
Another big push towards hi-tech
was the YOZMA program
initiated by the Israeli government in 1993
which aims to attract foreign investments
in new startups that were in the incubator stage.
This was one of the ways Israel took advantage
of the all-new engineering talent from the Soviet Union.
It formed an incubator that nurtured startups
and created huge incentives for entrepreneurs
to take a chance and launch new companies.
And, in just a few years,
Israel had become one of the world's largest
and most advanced tech hubs.
Many believe that there is another element
to Israel's culture of innovation.
Yossi Matias, founder of Google's R&D center in Israel
categorizes it as Israeli Chutzpah.
No matter what you call it,
Israelis have been known to be assertive and audacious
with little respect or tolerance for the status quo.
They refuse to accept situations as they are
if they need improvement.
"This type of chutzpah seems to view every obstacle
"as simply another thing to work around.
"Not an impassable problem,
"but rather a solution waiting to emerge."
This has been true of Israeli solutions
to mundane issues like traffic navigation
or simplifying web design,
thank you Waze and Wix,
but it has also been true
when addressing larger humanitarian problems.
In 1997, Dr. Amit Goffer,
already a successful inventor,
was in an ATV accident that left him quadriplegic.
Having experienced the results of a spinal cord injury,
he wanted to help others in similar situations,
so he invented ReWalk,
something out of a Ridley Scott movie.
The ReWalk is a powered wearable exoskeleton
which enables people with lower limb paralysis
to walk again.
When he introduced his invention,
doctors were convinced it was a sham
until they saw their paralyzed patients walk again.
Since that old Burma Road,
challenging the norm
has become the norm for Israeli society,
no matter how discouraging that norm may be.
But there's another maybe less obvious factor
that plays a major role in Israel's success with innovation,
army service.
Israel requires 18-year old men and women
to serve in the military and defend the country
for up to three years.
So, what is it about compulsory military service
that could help boost Israeli technologies?
If anything, doesn't it
just set potential entrepreneurs back three years
while they wait to get on with their lives
in the private sector?
Not really.
Imagine a workforce that gains advanced know-how
at an early age, using the highest technology available
and in scenarios where the stakes aren't financial success
but rather life and death.
They regularly practice decision making
in an environment where failure is just not an option.
Young soldiers learn to be self-reliant and resourceful.
Superiors often tell their subordinates to go figure it out,
giving the soldiers the freedom to think differently
and to own the situation.
These young adults become natural leaders
with maturity and perspective
gained at a much earlier age than in other countries.
Nowhere are these traits more evident
than the crack cyber intelligence team
known as unit 8200,
attaining almost mythical status,
the highly secretive 8200 recruits the best of the best.
Hackers, programmers, would be engineers.
It's like the Avengers of tech wizards
and these wizards go on to accomplish
some pretty amazing things.
8200 recruit Avishai Abrahami
was hacking into the systems of enemy countries in the 90s
before he founded Wix.
Gil Shwed was decrypting code
before he invented the first ever commercial firewall
and VPN in 1993.
And there are hundreds of other stories just like these.
Unit 8200 alumni have founded more than a thousand startups
and have an alumni network that fuels
and nurtures new startups all over.
So many factors have played a part
in Israel's development as a start-up nation.
From early innovation vital to survival,
to immigration, to Israeli and Jewish culture,
to IDF service. And, Israeli startups are still mixing it up
and breaking new ground.
Until now, the Israeli model has been,
create an amazing startup and then sell it off
to one of the giants for millions or even billions.
But now, many startups are instead choosing
to continue their growth on their own
with the aim of becoming giants themselves.
Israel seems to be on the verge of graduating
from start-up nation to an industrial global powerhouse.
But, this creates a new challenge.
How will Israel manage to scale up
without losing the scrappy, innovative nature
that led to its success to begin with?
Thanks for watching, see you guys next week.
(intense techno music)