Wednesday, February 16, 2011

Middle East Turmoil & Entrepreneurship: What I Learned from My Trip to Israel


With the uprising in Egypt and the Middle East this analysis of Israel offers a timely insight to the region.

I had just returned from Israel when the rebellion in Egypt took place. In an odd way, I wasn’t surprised that it happened, nor that the name Israel was barely invoked during the revolt. Where once Israel was the rallying cry of the Arab street, they were now a mostly forgotten bystander.

 I remember thinking at the time just how calm was this new Israel. How long could this last I wondered? This was not the same Israel I saw 25 years ago: the once nervous, ramshackle outpost of world Jewry and the lightning rod of Arab animus had grown into a secure, wealthy nation state. Time Magazine even had a cover story in September 2010 observing much the same thing (“Why Israel Doesn’t Care About Peace”).

After the 2000 Intifada, Israel put up a controversial wall separating them from the Palestinians in the West Bank. At the same time, Israel’s lively mix of chaotic politics, citizen army, advanced education and pure chutzpah had met the technology revolution and liked it. The country took off. This is no longer the resource-starved country of old living off handouts from the Diaspora or gifts from Uncle Sam. The Israeli side of the wall – clear as day – is the showcase of a vibrant, self-sustaining knowledge economy that can fill highways with fancy cars running on $8 a gallon gas, glittering skycrapers and a bountiful middle class.

On the other side of the wall lies the hardscrabble Arab world brimming with its own chaos, dilapidation and poverty.

Thanks to this parallel showcase of socio-economies the differences between the two competing world views are stark and unambiguous. Thanks to Al Jazeera, every Arab with a TV has seen this and one way or another, they know.

For years, the PC party line of the left was Israel had sucked the wealth out of the Palestinians. There are plenty of arguments to show that Israel took first dibs of the resources. However, the Egyptian uprising showed that peoples’ conditions under the autocratic regimes of the Middle East weren’t that different from the Palestinians. So maybe it wasn’t just the Israelis. If anything, it made the Israel look pretty good, especially when looking at the Arabs living on the Israeli side of the wall. Regardless of Israel-US politics and their hankering after Mubarak as keeper of the peace - in terms of lifestyles - Israel stopped looking like the devil and more like an island of aspiration.

There ought to be a way they can trade on that because the future of the Middle East will be nothing like the past. The turning point is not just democracy or that the Internet and satellite TV have opened the eyes of downtrodden. There is also a changing of the energy guard. Israel is now sitting on one of biggest gas reserves in the world. You can assume there will be innovations that only a scrappy, inventive, barrier-breaking country like Israel can come up with. At the same time, we in the US are also awash in natural gas yet are deeply reluctant to make full use of it. Put that together with our need to migrate from oil and you can see why an influential source in the middle east with nothing but gas on their hands and an innovative will to use it across the board will open up new possibilities.

Israel’s influence has also grown due its population boom which is unusually sophisticated for the region thereby adding value more than the resources they devour. In the 70’s there were about 3 million Israelis. Now, it is closer to 9 million. Nevertheless, they will need space and my guess is they will eventually reach out to the Mediterranean in the same way Dubai did with its artificial islands in the Persian Gulf. Advances in water desalination combined with their own low-cost energy sources is likely to drive hydro innovation and once ntractable deserts may suddenly bloom. The Negev is still Israel’s biggest land mass. Going forward, peace negotiations may have less to do with land – there is plenty of idle, arid kind – and more to with hydration. In effect, the conversation will move more toward innovation than real estate.

To give you an idea of what I mean by an entrepreneurial country consider this: my host had recently taken his software company public on the NASDAQ with a $500 million cap and $187 million in annual revenues. They had invested some of that money with another relative who had developed and artificial bone biotech company. At some point in my trip I met an old employee of mine who had moved to Israel, used her experience with our parent company, TECHmarketing to get a job in a start-up that also went public on the NASDAQ and then married a colleague who went on to sell his company to IBM. Nowhere did oranges, real estate or kibbutzes play a part – except that a pioneering, collectivist state of mind probably molded a culture with a will to work and overcome.

The highways glitter with flashy high rises sporting Micorosft, Intel, IBM, Texas Instrument and other well known logos. Teva Chemicals has becomes a huge generator of biotech and pharma start-ups and so on. If Facebook is credited as the enabler of Egypt’s uprising’s, then it is worth noting that social media as a technology probably began in Israel – with Yossi Varid’s ICQ (now AOL’s AIM) while the proto-social media site, sixdegrees.com was itself invented by a homesick Israeli in New York. They may not celebrate this in Cairo or Teheran but somewhere it is known that the Facebook they cherish bears the imprint of the chosen people. In any case, Israel is a dramatically clear example of a free market knowledge economy vs. a repressive oil-and-religion economy.

More to the point this polarized vision of parallel universes has become clear enough to the Arab masses that it has raised the bar on their governments. Even the old revolutionary movements will have to take note: Hamas can chant and Hezbollah can hiss but thanks to Al Jazeera the Arab world knows what a tech paradise looks like and the young, I believe, will want them to match it or get out of the way. You can pray and innovate but when prayer bans it and progress it brings, the theorcrats will lose.

While Mid-eastern utopia is a long way off it is not impossible. There may be historical grievances that cannot be solved overnight but when people share a common goal, they can begin the process of forgiving if not forgetting. When the future is about creating abundance you no longer have to fight over vanishing resources.

When you talk to historians they will tell you that Jews and Arabs have always gotten along. They have had their tragic moments but it was nothing like the fate Jews suffered under the crusaders, Rome or central Europe. So there is hope. Perhaps Israel, rather than being the enemy can be reinvented as a kind of Dubai of creative technologists, brainpower, guts and a certain outlaw attitude. Remember, entrepreneurs are usually rulebreakers and apparently, the UN and the liberal West’s approbrium of Israel have, in a peculiar way inspired the country. Even Apple’s developers, for years, worked under a pirate flag. (So take note Microsoft, RIMM, Dell etc. loosen the ties get a little chaotic….)

While no one knows how the Middle East uprising’s will play out – the bottom line is that Israel is no longer its bogeyman but a silent exemplar of 21st Century possibilities. Tech innovation and entrepreneurialism will have a huge role to play, the China card is rarely discussed but as I will discuss in Part 2, it lurks – as it does in Israel – in provocative ways. Most importantly, this extraordinary moment of flux there are clear opportunities where we can influence the future and settle, with honor, some age-old differences.
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