Start-up Nation (11 page)

“There is something about the
DNA
of Israeli innovation that is unexplainable,” Shainberg said. But he did have the beginnings of a theory. “I think it comes
down to maturity. That’s because nowhere else in the world where people work in a center of technology innovation do they
also have to do national service.”
³

At eighteen, Israelis go into the army for a minimum of two to three years. If they don’t reenlist, they typically enroll
at a university. “There’s a massive percentage of Israelis who go to university out of the army compared to anywhere else
in the world,” said Shainberg.

In fact, according to the Organisation for Economic Co-operation and Development (OECD), 45 percent of Israelis are university-educated,
which is among the highest percentages in the world. And according to a recent
IMD
World Competitiveness Yearbook
, Israel was ranked second among sixty developed nations on the criterion of whether “university education meets the needs
of a competitive economy.”
⁴

By the time students finish college, they’re in their mid-twenties; some already have graduate degrees, and a large number
are married. “All this changes the mental ability of the individual,” Shainberg reasoned. “They’re much more mature; they’ve
got more life experience. Innovation is all about finding ideas.”

Innovation often depends on having a different perspective. Perspective comes from experience. Real experience also typically
comes with age or maturity. But in Israel, you get experience, perspective, and maturity at a younger age, because the society
jams so many transformative experiences into Israelis when they’re barely out of high school. By the time they get to college,
their heads are in a different place than those of their American counterparts.

“You’ve got a whole different perspective on life. I think it’s that later education, the younger marriage, the military experience—and
I spent eighteen years in the [British] navy, so I can sort of empathize with that sort of thing,” Shainberg went on. “In
the military, you’re in an environment where you have to think on your feet. You have to make life-and-death decisions. You
learn about discipline. You learn about training your mind to do things, especially if you’re frontline or you’re doing something
operational. And that can only be good and useful in the business world.”

This maturity is especially powerful when mixed with an almost childish impatience.

Since their country’s founding, Israelis have been keenly aware that the future—both near and distant—is always in question.
Every moment has strategic importance. As Mark Gerson, an American entrepreneur who has invested in several Israeli start-ups,
described it, “When an Israeli man wants to date a woman, he asks her out that night. When an Israeli entrepreneur has a business
idea, he will start it that week. The notion that one should accumulate credentials before launching a venture simply does
not exist. This is actually good in business. Too much time can only teach you what can go wrong, not what could be transformative.”
⁵

For Amir, as for many other conscripts, the
IDF
provided him with an exciting opportunity to test and prove himself. But the
IDF
offers recruits another valuable experience: a unique space within Israeli society where young men and women work closely
and intensely with peers from different cultural, socioeconomic, and religious backgrounds. A young Jew from Russia, another
from Ethiopia, a secular sabra (native-born Israeli) from a swanky Tel Aviv suburb, a yeshiva student from Jerusalem, and
a kibbutznik from a farming family might all meet in the same unit. They’ll spend two to three years serving together full-time,
and then spend another twenty-plus years of annual service in the reserves.

As we’ve seen, the
IDF
was structured to rely heavily on reserve forces, since there is no way for such a small country to maintain a sufficiently
large standing army. So for combat soldiers, connections made in the army are constantly renewed through decades of reserve
duty. For a few weeks a year, or sometimes just a week at a time, Israelis depart from their professional and personal lives
to train with their military unit. Not surprisingly, many business connections are made during the long hours of operations,
guard duty, and training.

“Every five years Harvard Business School hosts a class reunion,” says Tal Keinan, an Israeli
HBS
grad. “It’s fun. It helps keep your network intact. We spend two days visiting with classmates, sitting in lectures. But
imagine a reunion every year, and that it lasts for two to four weeks. And it’s with the unit you had spent three years with
in the army. And instead of sitting in lectures, you’re doing security patrols along the border. It nourishes an entirely
different kind of lifelong bond.”
⁶

Indeed, relationships developed during military service form another network in what is already a very small and interconnected
country. “The whole country is one degree of separation,” says Yossi Vardi, the godfather of dozens of Internet start-ups
and one of the champion networkers in the wired world. Like Jon Medved, Vardi is one of Israel’s legendary business ambassadors.

Vardi says he knows of Israeli companies that have stopped using help-wanted ads: “It’s now all word of mouth. . . . The social
graph is very simple here. Everybody knows everybody; everybody was serving in the army with the brother of everybody; the
mother of everybody was the teacher in their school; the uncle was the commander of somebody else’s unit. Nobody can hide.
If you don’t behave, you cannot disappear to Wyoming or California. There is a very high degree of transparency.”
⁷
The benefits of this kind of interconnectedness are not limited to Israel, although in Israel they are unusually intense
and widespread.

Unsurprisingly, the IDF has many things in common with other militaries around the world, including equally grueling tryouts
for their elite units. However, most of the other militaries’ selection processes differ in that they must choose from among
volunteer recruits. They are not able to scour the records of every high school student and invite the highest achievers to
compete against their most talented peers for a few coveted spots.

In the United States, for example, the military is limited to choosing only from among those potential recruits who express
interest. Or as one U.S. recruiter put it, “In Israel, the military gets to select the best. In the U.S., it’s the other way
around. We can only hope that the best choose us.”
⁸

The American military goes to great lengths to seek out the best and hope that they may be interested in serving in the U.S.
military. Take the United States Military Academy at West Point’s freshman class each year. The median grade point average
hovers around 3.5, and the admissions department can rattle off all sorts of statistics to quantify the leadership aptitude
of its student cadets, including the number who were varsity team captains in high school (60 percent), who were high school
class presidents (14 percent), and so on. And the admissions department keeps an extremely comprehensive database of all inquiring
prospective applicants, often going back to elementary school. As author David Lipsky writes in his book about West Point,
Absolutely American
, “Drop a line to West Point in the sixth grade and you’ll receive correspondence from admissions every six months until you
hit high school, when the rate doubles.” Approximately fifty thousand high school juniors open West Point prospective files
each year, which culminates in a freshman class of twelve hundred cadets. At the end of the five-year program, each graduate
has received an education valued at a quarter of a million dollars.
⁹

But even with extraordinary outreach efforts, like West Point admissions, a number of the senior leaders of the U.S. armed
forces are frustrated that they cannot gain access to the academic records of a broad cross section of Americans. And without
that access, they cannot target a tailored recruitment pitch.

A conversation with an American military man underscores the economic value of the Israeli system. Colonel John Lowry, a marine
infantry officer, joined the Marine Corps after high school and has been in active duty or reserves for the past twenty-five
years. He earned an
MBA
from Harvard Business School and went on to climb the corporate ranks at Harley-Davidson, the multibillion-dollar premium
motorcycle manufacturer. He did so while fulfilling his commitment to the reserves, serving stints in the Horn of Africa,
the Persian Gulf, and, prior to his business career, Operation Desert Storm. Lowry commands one thousand marines and travels
to various reserve bases across the country for two weekends each month, in addition to annual month-long call-ups. Lowry
also helps oversee a number of Harley factory plants and manages about one thousand employees.
¹⁰

By day he is a senior business executive, but by night he trains marines preparing for tours in Iraq. He transitions seamlessly
between these two worlds. He only wishes that the kind of military experience he had was as common in the American business
world as it is among Israeli entrepreneurs.

“The military gets you at a young age and teaches you that when you are in charge of something, you are responsible for everything
that happens . . . and everything that does not happen,” Lowry told us. “The phrase ‘It was not my fault’ does not exist in
the military culture.” This comment sounds a lot like Farhi’s point from chapter 2 about company commanders taking ownership
of whatever happens in their territory. “No college experience disciplines you to think like that . . . with high stakes and
intense pressure,” says Lowry, a graduate of Princeton. “When you are under that kind of pressure, at that age, it forces
you to think three or four chess moves ahead . . . with everything you do . . . on the battlefield . . . and in business.”

The Marine Corps network is important to Lowry. His military peers are a built-in board of advisers for him. “It’s another
world of friendships, outside of work, but many of them are connected to my line of work,” he notes. “Just the other day I
spoke with one fellow officer who is in management at Raytheon, based in Abu Dhabi. Many of these guys I’ve known anywhere
from five years to twenty-five years.”

The military is also much better than college for inculcating young leaders with a sense of what he calls social range: “The
people you are serving with come from all walks of life; the military is this great purely merit-based institution in our
society. Learning how to deal with anybody—wherever they come from—is something that I leverage today in business when dealing
with my suppliers and customers.”

If all this sounds similar to our description of the IDF’s role in fostering Israel’s entrepreneurial culture, it should.
While a majority of Israeli entrepreneurs were profoundly influenced by their stint in the
IDF
, a military background is hardly common in Silicon Valley or widespread in the senior echelons of corporate America.

As Israeli entrepreneur Jon Medved—who has sold several start-ups to large American companies—told us, “When it comes to U.S.
military résumés, Silicon Valley is illiterate. It’s a shame. What a waste of the kick-ass leadership talent coming out of
Iraq and Afghanistan. The American business world doesn’t quite know what to do with them.”
¹¹

This gulf between business and the military is symptomatic of a wider divide between America’s military and civilian communities,
which was identified by the leadership of West Point over a decade ago. In the summer of 1998, Lieutenant General Daniel Christman,
the superintendent of West Point, and General John Abizaid, commandant at West Point, were driving on the New Jersey turnpike
and pulled off at a roadside food and gas station mall for a quick meal at Denny’s. Despite the clearly visible stars on their
Class B green army uniforms, the hostess smiled and enthusiastically expressed her gratitude to Generals Christman and Abizaid
for the cleanliness of the public parks. She thought they were staff of the parks department.
¹²

Despite the military leadership’s outreach, too few young Americans today feel any connection to their contemporaries in the
military, let alone have actually ever known one who has served. Even after two new war fronts, today only 1 in 221 Americans
are in active-duty service. Compare that to the end of the Second World War, when 1 in 10 Americans were serving. Tom Brokaw,
author of
The Greatest Generation
, told us that after World War II a young man who had not served would have a hard time getting a good job in business. “There
must be something wrong with him” was how Brokaw characterized a typical reaction of employers back then to nonvets looking
for private-sector jobs.
¹³

But the way David Lipsky describes it, when the draft ended in 1975, after the Vietnam War, an opposite climate began to settle
in: “Civilian culture and military culture shook hands, exchanged phone numbers, and started to lose track of each other.”

The economic implications of this drift were driven home to us by Al Chase, who runs an executive recruitment firm focused
on the placement of U.S. military officers in private enterprises ranging from small start-ups to large Fortune 100 companies
such as PepsiCo and GE. Having placed hundreds of vets, he knows what kind of entrepreneurial acumen is formed by battlefield
experience. According to Chase, the Cold War military was different. Young officers could go an entire career without acquiring
real battlefield experience. But the Iraq and Afghanistan wars have changed that. Almost every young officer has served multiple
tours.
¹⁴

As we’ve seen firsthand in Iraq, the post-9/11 wars have largely been counterinsurgencies, where critical decisions have been
made by junior commanders. General David Petraeus’s counterinsurgency strategy in Iraq, for example, was predicated on U.S.
troops’ not just being present and patrolling local Iraqi residential neighborhoods in order to provide security for Iraqi
civilians but actually living in the neighborhoods. This is different from the way most U.S. military troops have fought in
earlier wars, including in the early years of the Iraq war. Back then, U.S. soldiers and marines lived in forward operating
bases (FOBs), enormous self-contained complexes that roughly replicate bases back in the States. A typical
FOB
could house tens of thousands of troops—if not more. But the soldiers and marines in neighborhood bases in Iraq since 2007
have numbered in only the tens or low hundreds. This alone gives smaller units much more independence from the division in
their daily operations, and the junior commander is given more authority to make decisions and improvise.