The falcon logo on the Gulf Airlines Boeing 767 tail waved goodbye
to the Bahrain landscape below. I pondered the fact that Bahrain,
the most 'liberal' of Arab countries, still placed restrictions on
using the Internet. The 'new economy' does not condone restrictions
on use or dissemination of information. In the past eight hours I
had traveled from Israel through the Jordanian deserts, and was now
headed to Singapore to talk about the Israeli 'high tech miracle'.
Quixotically, I was to offer advice on its replication, in one of
the world's smallest and most industrious nations.
The only solace in the economy section of a wide body
jet, is the ability to lean back in one's cramped space, put on the sleeping
mask, and reflect on the commencement of the journey and its conclusion.
In Rosh Ha'ayin, Kiryat Atidim, Jerusalem, Kiryat
Weizman, and a host of other Israeli localities, high tech and biotech
industries have replaced citrus groves and the hospitality industries,
as the country's economic pillars. Upon my departure form Israel, after
a brief discourse on the 'state of the state' with my driver, I watched
our progress through the busy streets of the Herzliya Pituach Industrial
Zone. The newly-erected steel, aluminium, and perspex towers stood proudly
emblazoned with the logos of Formula, National Semiconductor, Motorola,
3Com and other international symbols.
Where are the giants of Israel's economic evolution?
What happened to the mighty construction monoliths erected by the country's
unions and socialist visionaries? Where was Solel Boneh, Mekorot, Dead
Sea Works? Was there to be no rebirth or transfer of know-how between
the old economy and the new?
The reality is that after 50 years of nation building,
the basic tenets of market economies had to be met. Out went the 'tea
ladies', the tie-less attire, and subsidized construction. The 'selling
concept' of marketing was replaced by 'customer needs and satisfaction'
and the admonition that 'competitive advantage' was the raison d'?tre
of legitimacy as a startup and justification for continued survival. It
became obvious that the 'old' industries could not meet the challenge
in a marketplace of only six million an certainly the new economy would
have to compete in the 'brave new world', where competitive advantage
lay in a 'first to market', a first algorithm, or a go-for-broke philosophy.
The changed paradigm was possible because several
global drivers were at work propelling Israel to the world's second position
in the high tech startup roll call. First and foremost, was the immigration
of over a million citizens from the former Communist empire - a society
chronically short of cash for computers but rich in focus on dialectical
thinking in the physical sciences and mathematics.
Much of Israel's technological superiority in software
and Internet products can be directly attributed to mathematical models
developed by this entrepreneurial segment.
Second, the Israeli government - through its dependence
on advanced military technology and logistics - encouraged creative thinking
and trial in its intelligence and MIS sections, followed up by encouragement
by the chief Scientist's Office in the form of policies incorporating
grants and incubators.
Third, but not less important, was the recognition
by the venture capital funds and the local financial oligarchy, that risk
taking was the most important legacy the 'old economy' bequeathed to the
new.
We were passing Kerala State, the tip of the Indian
subcontinent at 38,000 ft. India and Israel both gained independence from
the UK in the same year. Despite many similarities in the software industries,
the differences are glaring. India uses its inexpensive labor as a source
for data input for foreign clients, since its governmental policies still
discourage penetration of the India market place.
I looked over my note. In the 1960's, 70% of Israeli
exports were oranges; today, over USD 25 billion are high tech exports
with agriculture contributing les than one billion. Evidence of the importance
of Israel's high tech was plastered all over the NASDAQ with over 100
listings. Recognizable names of instant millionaires like Arik Vardi,
and his friends at Mirabilis/ ICQ and companies like Chromatis and Babylon.com,
with its more than 4 million loyal users; data communications and biotech
innovations, seemingly endless technologies and products in search of
markets and strategic alliances. Israel ranks second after the US with
an average of 1000 new startups every year.
Why were only two to five percent of the initiators
successful? Could the answer lie within us? Is the tactical approach necessary
to survive early risk taking counterproductive in advanced information
economies? Do we need more strategic thinking, more planning, less action,
more management, in-depth market planning, less technology, more products?
While these questions were not new, they were a constant nag.
"Ladies and gentlemen, we are 158 miles from
Changi Airport", chortled the loudspeaker. I tried to think of the
similarities between us and our Singaporean allies. We were both far from
our major markets, Europe and the US, we both aspire to technological
superiority. Neither Israel nor Singapore had a home-grown multinational
to count among its assets. Both were surrounded by hostile economic and
political neighbors and both countries use Israeli weapon systems and
subscribe to democratic principles.
Yet, Singapore, with the same GDP as Israel, half
its population, double its growth rate, and 20% greater per capita GDP,
had no more than a handful of NASDAQ listed companies.
My reverie was interrupted by the announcement that
we were about to land and an admonition that: "the importation into
Singapore of banned drugs or firearms is punishable by death". Eureka,
yes that was it. Having lived in Singapore for several years, I remembered
that although Singapore had a democratic structure, it was very authoritarian.
Not only was political dissent greeted with economic sanctions, non-conformity
was rewarded with social exclusion. In this environment, it was highly
unlikely that entrepreneurs would risk disapprobation and derision, which
often accompanies risk taking. In fact, risk aversion is an integral part
of Singaporean culture, pervading all levels of the predominant Chinese
lifestyle, and the very anathema of the successful startup profile.
The technopreneur, the Singaporean government's term
for a high tech entrepreneur, is often faced with daunting problems, not
least of which are the locating of startup capital, suitable location,
and coping with government regulations which make Israeli bureaucracy
seem positively benign. If the technopreneur survives the establishment
gauntlet, he is then faced with the provincialism of his cultural environment.
Like the Israeli entrepreneur, he is neither acquainted with the necessary
tools for cultural interface in the 'big time', nor does he have the contacts
in the Western world that allow him to leverage his idea or product into
a winning strategic alliance based on financing, production or marketing.
Assuming that he has negotiated all the obstacles,
the Chinese family business model sees only limited exit strategies, primarily
family oriented, as opposed to IPO or buyout. Consequently, even successful
startups rarely flourish into global companies unless they form strategic
alliances though marriage.
I listened to deputy Prime Minister, Tony Tan, opening
the entrepreneurial conference, recounting the Singapore government's
various programs to encourage entrepreneurship and knew what I was going
to say.
On my return, as my plane landed at Ben Gurion Airport
from Amman, I was still chuckling to myself as I remember my opening lines:
'No more Kiau Sou (cover your ass), no more thought police!' The audience
sat stunned, and then roundly applauded.
