Start-up Nation

CHAPTER 3 The People of the Book

THE ELEVATION OF LA PAZ, BOLIVIA, is 11,220 feet and El Lobo is one floor higher. El Lobo is a restaurant, hostel, social club, and the only source of Israeli food in town. It is run by its founders, Dorit Moralli and her husband, Eli, both from Israel.[57]

Almost every Israeli trekker in Bolivia is likely to come through El Lobo, but not just to get food that tastes like it’s from home, to speak Hebrew, and to meet other Israelis. They know they will find something else there, something even more valuable: the Book. Though spoken of in the singular, the Book is not one book but an amorphous and evolving collection of journals, dispersed throughout some of the most remote locations in the world. Each journal is a handwritten “Bible” of advice from one traveler to another. And while the Book is no longer exclusively Israeli, its authors and readers tend to be from Israel.

El Lobo’s incarnation of the Book was created in 1986, Dorit recalls, just one month after her restaurant opened. Four Israeli backpackers came in and asked, “Where’s the Book?” When she looked mystified, they explained that they meant a book where people could leave recommendations and warnings for other travelers. They went out and bought a blank journal and donated it to the restaurant, complete with the first entry, in Hebrew, about a remote jungle town they thought other Israelis might like.

The Book predated the Internet—it actually started in Israel in the 1970s—but even in today’s world of blogs, chat rooms, and instant messaging, this primitive, paper-and-pen-based institution is still going strong. El Lobo has become a regional Book hub, with six volumes: a successor to the original Book started in 1989, along with separate Books for Brazil, Chile, Argentina, Peru, and the northern part of South America. There are other Books stationed throughout Asia. While the original was written only in Hebrew, today’s Books are written in a wide array of languages.

“The polyglot entries were random, frustrating, and beautiful, a carnival of ideas, pleas, boasts, and obsolete phone numbers,” Outside magazine reported on the venerable 1989 volume. “One page recommended the ‘beautikul girls’ [sic] in a certain disco; the next tipped a particular ice cave as ‘a must’ (at least until someone else scrawled a huge ‘NO!’ over that entry). This was followed by a half-page in Japanese and a dense passage in German, with bar charts of altitude and diagrams of various plants. . . . After that there was a full-page scrawl devoted to buying a canoe in the rainforests of Peru’s Manu National Park, with seven parentheticals and a postscript that wrapped around the margins sideways; a warning against so-and-so’s couscous; and an ornate four-color drawing of a toucan named Felipe.”

Though it has become internationalized, the Book remains a primarily Israeli phenomenon. Local versions of the Book are maintained and pop up wherever the “wave”—what Hebrew University sociologist Darya Maoz calls the shifting fashions in Israeli travel destinations—goes. Many young Israeli trekkers simply go from Book to Book, following the flow of advice from an international group of adventure seekers, among whom Hebrew seems to be one of the most common tongues.

A well-known joke about Israeli travelers applies equally well in Nepal, Thailand, India, Vietnam, Peru, Bolivia, or Ecuador. A hotelkeeper sees a guest present an Israeli passport and asks, “By the way, how many are you?” When the young Israeli answers, “Seven million,” the hotelkeeper presses, “And how many are still back in Israel?”

It is hardly surprising that people in many countries think that Israel must be about as big and populous as China, judging from the number of Israelis that come through. “More than any other nationality,” says Outside, “[Israelis] have absorbed the ethic of global tramping with ferocity: Go far, stay long, see deep.”

Israeli wanderlust is not only about seeing the world; its sources are deeper. One is simply the need for release after years of confining army service. Yaniv, an Israeli encountered by the Outside reporter, was typical of many Israeli travelers: “He had overcompensated for years of military haircuts by sprouting everything he could: His chin was a wispy scruff and his sun-bleached hair had twirled into a mix of short dreads and Orthodox earlocks, all swept up into a kind of werewolf ’do. ‘The hair is because of the army,’ Yaniv admitted. ‘First the hair, then the travel.’ ”

But it’s more than just the army. After all, these young Israelis probably don’t run into many veterans from other armies, as military service alone does not induce their foreign peers to travel. There is another psychological factor at work—a reaction to physical and diplomatic isolation. “There is a sense of a mental prison living here, surrounded by enemies,” says Yair Qedar, editor of the Israeli travel magazine Masa Acher. “When the sky opens, you get out.”

Until recently, Israelis could not travel to a single neighboring country, though Beirut, Damascus, Amman, and Cairo are all less than a day’s drive from Israel. Peace treaties with Egypt and Jordan have not changed this much, though many curious Israelis have now visited these countries. In any event, this slight opening has not dampened the urge to break out of the straitjacket that has been a part of Israel’s modern history from the beginning—from before the beginning.

Long before there was a State of Israel, there was already isolation. An early economic boycott can be traced back to 1891, when local Arabs asked Palestine’s Ottoman rulers to block Jewish immigration and land sales. In 1922, the Fifth Palestine Arab Congress called for the boycott of all Jewish businesses.[58]

A longer official boycott by the twenty-two-nation Arab League, which banned the purchase of “products of Jewish industry in Palestine,” was launched in 1943, five years before Israel’s founding. This ban extended to foreign companies from any country that bought from or sold to Israel (the “secondary” boycott), and even to companies that traded with these blacklisted companies (the “tertiary” boycott). Almost all the major Japanese and Korean car manufacturers—including Honda, Toyota, Mazda, and Mitsubishi—complied with the secondary boycott, and their products could not be found on Israeli roads. A notable exception was Subaru, which for a long time had the Israeli market nearly to itself but was barred from selling in the Arab world.[59]

Every government of the Arab League established an official Office of the Boycott, which enforced the primary boycott, monitored the behavior of secondary and tertiary targets, and identified new prospects. According to Christopher Joyner of George Washington University, “Of all the contemporary boycotts, the League of Arab States’ boycott against Israel is, ideologically, the most virulent; organizationally, the most sophisticated; politically, the most protracted; and legally, the most polemical.”[60]

The boycott has at times taken on unusual targets. In 1974, the Arab League blacklisted the entire Baha’i faith because the Baha’i temple in Haifa is a successful tourist attraction that has created revenue for Israel. Lebanon forbade the showing of the Walt Disney production Sleeping Beauty because the horse in the film bears the Hebrew name Samson.[61]

In such a climate, it is natural that young Israelis seek both to get away from an Arab world that has ostracized them and to defy such rejectionism—as if to say, “The more you try to lock me in, the more I will show you I can get out.” For the same reason, it was natural for Israelis to embrace the Internet, software, computer, and telecommunications arenas. In these industries, borders, distances, and shipping costs are practically irrelevant. As Israeli venture capitalist Orna Berry told us, “High-tech telecommunications became a national sport to help us fend against the claustrophobia that is life in a small country surrounded by enemies.”[62]

This was a matter of necessity, rather than mere preference or convenience.

Because Israel was forced to export to faraway markets, Israeli entrepreneurs developed an aversion to large, readily identifiable manufactured goods with high shipping costs, and an attraction to small, anonymous components and software. This, in turn, positioned Israel perfectly for the global turn toward knowledge- and innovation-based economies, a trend that continues today.

It is hard to estimate how much the Arab boycott and other international embargoes—like France’s military ban—have cost Israel over the past sixty years, in terms of lost markets and the difficulties imposed on the nation’s economic development. Estimates range as high as $100 billion. Yet the opposite is just as difficult to guess: What is the value of the attributes that Israelis have developed as a result of the constant efforts to crush their nation’s development?

Today, Israeli companies are firmly integrated into the economies of China, India, and Latin America. Because, as Orna Berry says, telecommunications became an early priority for Israel, every major telephone company in China relies on Israeli telecom equipment and software. And China’s third-largest social-networking Web site, which services twenty-five million of the country’s young Web surfers, is actually an Israeli start-up called Koolanoo, which means “all of us” in Hebrew. It was founded by an Israeli whose family emigrated from Iraq.

In the ultimate demonstration of nimbleness, the Israeli venture capitalists who invested in Koolanoo when it was a Jewish social-networking site have utterly transformed its identity, moving all of its management to China, where young Israeli and Chinese executives work side by side.

Gil Kerbs, an Israeli alumnus of Unit 8200, also spends a lot of time in China. When he left the IDF, he picked up and moved to Beijing to study Chinese intensively, working one-on-one with a local instructor—for five hours each day for a full year—while also holding a job at a Chinese company, so he could build a business network there. Today he is a venture capitalist in Israel, specializing in the Chinese market. One of his Israeli companies is providing voice-biometric technology to China’s largest retail bank. He told us that Israelis actually have an easier time doing business in China than in Europe. “For one, we were in China before the ‘tourists’ arrived,” he says, referring to those who have only in recent years identified China as an emerging market. “Second, in China there is no legacy of hostility to Jews. So it’s actually a more welcoming environment for us.”[63]

Israelis are far ahead of their global competitors in penetrating such markets, in part because they had to leapfrog the Middle East and search for new opportunities. The connection between the young Israeli backpackers dispersed around the globe and Israeli technology entrepreneurs’ penetration of foreign markets is clear. By the time they are out of their twenties, not only are most Israelis tested in discovering exotic opportunities abroad, but they aren’t afraid to enter unfamiliar environments and engage with cultures very different from their own. Indeed, military historian Edward Luttwak estimates that many postarmy Israelis have visited over a dozen countries by age thirty-five.[64] Israelis thrive in new economies and uncharted territory in part because they have been out in the world, often in pursuit of the Book.

One example of this avid internationalism is Netafim, an Israeli company that has become the largest provider of drip irrigation systems in the world. Founded in 1965, Netafim is a rare example of a company that bridges Israel’s low-tech, agricultural past to the current boom in cleantech.

Netafim was created by Simcha Blass, the architect of one of the largest infrastructure projects undertaken in the early years of the state. Born in Poland, he was active in the Jewish self-defense units organized in Warsaw during World War I. Soon after arriving in Israel in the 1930s, he became chief engineer for Mekorot, the national water company, and planned the pipeline and canal that would bring water from the Jordan River and Sea of Galilee to the arid Negev.

Blass got the idea for drip irrigation from a tree growing in a neighbor’s backyard, seemingly “without water.” The giant tree, it turns out, was being nourished by a slow leak in an underground water pipe. When modern plastics became available in the 1950s, Blass realized that drip irrigation was technically feasible. He patented his invention and made a deal with a cooperative settlement located in the Negev Desert, Kibbutz Hatzerim, to produce the new technology.

Netafim was pioneering not just because it developed an innovative way to increase crop yields by up to 50 percent while using 40 percent less water, but because it was one of the first kibbutz-based industries. Until then the kibbutzim—collective communities—were agriculture-based. The idea of a kibbutz factory that exported to the world was a novelty.

But Netafim’s real advantage was having no inhibition about traveling to far-flung places in pursuit of markets that desperately needed its products—places where, in the 1960s and ’70s, entrepreneurs from the West simply did not visit. As a result, Netafim now operates in 110 countries over five continents. In Asia it has offices in Vietnam, Taiwan, New Zealand, China (two offices), India, Thailand, Japan, Philippines, Korea, and Indonesia. In South America it has a presence in Argentina, Brazil, Mexico, Chile, Colombia, Ecuador, and Peru. Netafim also has eleven offices in Europe and the former Soviet Union, one in Australia, and one in North America.

And because Netafim’s technology became so indispensable, a number of foreign governments that historically had been hostile to Israel began to open diplomatic channels. Netafim is active in former Soviet bloc Muslim states like Azerbaijan, Kazakhstan, and Uzbekistan, which led to warmer relations with Israel’s government after the dissolution of the Soviet Union. In 2004, then trade minister Ehud Olmert tagged along on a Netafim trip to South Africa in the hope of forming new strategic alliances there. The trip resulted in $30 million in contracts for Netafim, plus a memorandum of understanding between the two governments on agriculture and arid lands development.

Israeli entrepreneurs and executives, though, have themselves been known to engage in self-appointed diplomatic missions on behalf of the state. Many of Israel’s globe-trotting businesspeople are not just technology evangelists but endeavor to “sell” the entire Israeli economy. Jon Medved—the inventor of the “nickname barometer” to measure informality—is one such example.

Raised in California, Medved was trained in political activism, not engineering. His first career was as a Zionist organizer. He moved to Israel in 1981 and made a small living by going on speaking tours to preach about the future of Israel to Israelis. But a conversation he had in 1982 with an executive at Rafael, one of Israel’s largest defense contractors, burst Medved’s bubble. He was told, unceremoniously, that what he was doing was a waste of time and energy. Israel didn’t need more professional Zionists or politicians, the executive stated flatly; Israel needed businesspeople. Medved’s father had started a small company in California that built optical transmitters and receivers. So Medved began pitching his father’s product in Israel. Instead of going from kibbutz to kibbutz to sell the future of Zionism, he went from company to company to sell optical technology.

Later, he got into the investment business and founded Israel Seed Partners, a venture capital firm, in his Jerusalem garage. His fund grew to over $260 million and he invested in sixty Israeli companies, including Shopping.com, which was bought by eBay, and Compugen and Answers.com, both of which went public on the NASDAQ. In 2006, Medved left Israel Seed to launch and manage a start-up himself—Vringo, a company that pioneered video ringtones for cell phones, which has quickly penetrated the European and Turkish markets.

But his own company is less important. Regardless of what Medved is doing for his enterprises, he spends a lot of time—too much time, his investors complain—preaching about the Israeli economy. On every trip abroad, Medved lugs a portable projector and laptop loaded with a memorable slide presentation chronicling the accomplishments of the Israeli tech scene. In speeches—and in conversations with anyone who will listen—Medved celebrates all the Israeli landmark “exits” in which companies were bought or went public, and catalogs dozens of “made in Israel” technologies.

In his presentations he says only half-jokingly that if Israel followed the lead of “Intel Inside”—Intel’s marketing campaign to highlight the ubiquity of its chips—with similar “Israel Inside” stickers, they would show up on almost everything people around the world touch, and he ticks off a litany of examples: from computers, to cell phones, to medical devices and miracle drugs, to Internet-based social networks, to cutting-edge sources of clean energy, to the food we eat, to the registers in the supermarkets in which we shop.

Medved then hints to the multinationals in the room that they are likely to be missing something if they have not already set up shop in Israel. He finds out in advance of each presentation which companies’ executives will be in the audience and is then certain to mention which of their competitors are already in Israel. “The reason that Israel is inside almost everything we touch is because almost every company we touch is inside Israel. Are you?” he asks, peering into the audience.

Medved has taken on a role that, in any other country, would typically belong to the local chamber of commerce, minister of trade, or foreign secretary.

But the start-ups Medved champions in his presentations are rarely companies in which he has invested. He’s always torn when he prepares for these speeches: “Do I talk up Vringo among the promising new companies coming out of Israel? It’s a no-brainer, right? It’s good exposure for the company.” But he resists the urge. “My pitch is about Israel. My American investors beat me up over this—‘You wind up plugging your competitors but not your own company.’ They’re right. But they’re missing the larger point.”

Medved is in perpetual motion. He’s given the presentation fifty times a year for the last fifteen years. All told, almost eight hundred times, at technology conferences and universities around the world, in over forty countries, and to scores of international dignitaries visiting Israel.

Alex Vieux, CEO of Red Herring magazine, told us that he has been to “a million high-tech conferences, on multiple continents. I see Israelis like Medved give presentations all the time, alongside their peers from other countries. The others are always making a pitch for their specific company. The Israelis are always making a pitch for Israel.”[65]

CHAPTER 4 Harvard, Princeton, and Yale

DAVID AMIR MET US AT HIS JERUSALEM HOME in his pilot’s uniform, but there was nothing Top Gun about him. Soft-spoken, thoughtful, and self-deprecating, he looked, even in uniform, more like an American liberal arts student than the typical pilot with crisp military bearing. Yet as he explained with pride how the Israeli Air Force trained some of the best pilots in the world—according to numerous international competitions as well as their record in battle—it became easy to see how he fit in.[66]

While students in other countries are preoccupied with deciding which college to attend, Israelis are weighing the merits of different military units. And just as students elsewhere are thinking about what they need to do to get into the best schools, many Israelis are positioning themselves to be recruited by the IDF’s elite units.

Amir decided when he was just twelve years old that he wanted to learn Arabic, partly because he knew even then that it might help him get accepted into the best intelligence units.

But the pressure to get into those units really intensifies when Israelis are seventeen years old. Every year, the buzz builds among high school junior and senior classes all across Israel. Who has been asked to try out for the pilot’s course? Who for the different sayarot, the commando units of the navy, the paratroopers, the infantry brigades, and, most selective of all, the Sayeret Matkal, the chief of staff’s commando unit?

And which students will be asked to try out for the elite intelligence units, such as 8200, where Shvat Shaked and his cofounder of Fraud Sciences served? Who will go to Mamram, the IDF’s computer systems division? And who will be considered for Talpiot, a unit that combines technological training with exposure to all the top commando units’ operations?

In Israel, about one year before reaching draft age, all seventeen-year-old males and females are called to report to IDF recruiting centers for an initial one-day screening that includes aptitude and psychological exams, interviews, and a medical evaluation. At the end of the day, a health and psychometric classification is determined and service possibilities are presented to the young candidate in a personal interview. Candidates who meet the health, aptitude, and personality requirements are offered an opportunity to take additional qualifying tests for service in one of the IDF’s elite units or divisions.

Tests for the paratrooper brigade, for example, occur three times each year, often months before candidates’ scheduled draft dates. Young civilians submit themselves to a rigorous two days of physical and mental testing, where an initial group of about four thousand candidates is winnowed down to four hundred future draftees for different units. These four hundred paratroopers can volunteer to participate in the field test and screening process for the special forces, which is an intensive five-day series of eleven repeating drills, each lasting several hours and always conducted under severe time constraints and increasing physical and mental pressure. During the entire time, rest periods are short and sleep almost nonexistent, as is food and the time in which to eat it. Participants describe the five days as one long blur where day and night are indistinguishable. No watches or cell phones are allowed—the screeners want to make the experience as disorienting as possible. At the end of the five days, each soldier is ranked.

The twenty top-ranking soldiers for each unit immediately begin the twenty-month training period. Those who complete the training together remain as a team throughout their regular and reserve service. Their unit becomes a second family. They remain in the reserves until they are in their mid-forties.

While it’s difficult to get into the top Israeli universities, the nation’s equivalent of Harvard, Princeton, and Yale are the IDF’s elite units. The unit in which an applicant served tells prospective employers what kind of selection process he or she navigated, and what skills and relevant experience he or she may already possess.

“In Israel, one’s academic past is somehow less important than the military past. One of the questions asked in every job interview is, Where did you serve in the army?” says Gil Kerbs, an intelligence unit alumnus who—after pursuing the Book—today works in Israel’s venture capital industry, specializing in China’s technology market. “There are job offers on the Internet and want ads that specifically say ‘meant for 8200 alumni.’ The 8200 alumni association now has a national reunion. But instead of using the time together to reflect on past battles and military nostalgia, it is forward-looking. The alumni are focused on business networking. Successful 8200 entrepreneurs give presentations at the reunion about their companies and industries.”[67]

As we’ve seen, the air force and Israel’s elite commando units are well known for their selectivity, the sophistication and difficulty of their training, and the quality of their alumni. But the IDF has a unit that takes the process of extreme selectivity and extensive training to an even higher level, especially in the realm of technological innovation. That unit is Talpiot.

The name Talpiot comes from a verse in the Bible’s Song of Songs that refers to a castle’s turrets; the term connotes the pinnacle of achievement. Talpiot has the distinction of being both the most selective unit and the one that subjects its soldiers to the longest training course in the IDF—forty-one months, which is longer than the entire service of most soldiers. Those who enter the program sign on for an extra six years in the military, so their minimum service is a total of nine years.

The program was the brainchild of Felix Dothan and Shaul Yatziv, both Hebrew University scientists. They came up with the idea following the debacle of the 1973 Yom Kippur War. At that time, the country was still reeling from being caught flat-footed by a surprise attack, and from the casualties it had suffered. The war was a costly reminder that Israel must compensate for its small size and population by maintaining a qualitative and technological edge. The professors approached then IDF chief of staff Rafael “Raful” Eitan with a simple idea: take a handful of Israel’s most talented young people and give them the most intensive technology training that the universities and the military had to offer.

Started as a one-year experiment, the program has been running continuously for thirty years. Each year, the top 2 percent of Israeli high school students are asked to try out—two thousand students. Of these, only one in ten pass a battery of tests, mainly in physics and mathematics. These two hundred students are then run through two days of intensive personality and aptitude testing.

Once admitted into the program, Talpiot cadets blaze through an accelerated university degree in math or physics while they are introduced to the technological needs of all IDF branches. The academic training they receive goes beyond what the typical university student would receive in Israel or anywhere else—they study more, in less time. They also go through basic training with the paratroopers. The idea is to give them an overview of all the major IDF branches so that they understand both the technology and military needs—and especially the connection between them.

Providing the students with such a broad range of knowledge is not, however, the ultimate goal of the course. Rather, it is to transform them into mission-oriented leaders and problem solvers.

This is achieved by handing them mission after mission, with minimal guidance. Some assignments are as mundane as organizing a conference for their fellow cadets, which requires coordinating the speakers, facilities, transportation, and food. Others are as complicated as penetrating a telecommunications network of a live terrorist cell.

But more typical is forcing the soldiers to find cross-disciplinary solutions to specific military problems. For example, a team of cadets had to solve the problem of the severe back pain suffered by IDF helicopter pilots from the choppers’ vibrations. The Talpiot cadets first determined how to measure the impact of the choppers’ vibrations on the human vertebrae. They designed a customized seat, installed it in a helicopter simulator, and cut a hole in its backrest. Next they put a pen on a pilot’s back, had him “fly” in the simulator, and used a high-speed camera inserted in the backrest hole to photograph the marks caused by the different vibrations. Finally, after studying the movements by analyzing computerized data generated from the movement information in the photos, they redesigned the chopper seats.

Assuming they survive the first two or three years of the course, these cadets become “Talpions,” a title that carries prestige in both military and civilian life.

The Talpiot program as a whole is under Mafat, the IDF’s internal research and development arm, which is parallel to America’s DARPA (the Defense Advanced Research Projects Agency). Mafat has the coveted and sensitive job of assigning each Talpion to a specific unit in the IDF for their next six years of regular service.

From the beginning, the hyperelitism of the Talpiot program has attracted critics. The program almost didn’t get off the ground because military leaders did not think it would be worthwhile to invest so much in such a small group. Recently, some detractors have claimed that the program is a failure because most of the graduates do not stay in the military beyond the required nine years and do not end up in the IDF’s senior ranks.

However, though Talpiot training is optimized to maintain the IDF’s technological edge, the same combination of leadership experience and technical knowledge is ideal for creating new companies. Although the program has produced only about 650 graduates in thirty years, they have become some of Israel’s top academics and founders of the country’s most successful companies. NICE Systems, the global corporation behind call-monitoring systems used by eighty-five of the Forbes 100 companies, was founded by a team of Talpions. So was Compugen, a leader in human-genome decoding and drug development. Many of the Israeli technology companies traded on the NASDAQ were either founded by a Talpion or have alumni situated in key roles.

So the architects of Talpiot, Dothan and Yatziv, vigorously reject the criticisms. First, they argue that the interservice competition for Talpions within the IDF—which at times has had to be settled by the prime minister—speaks for itself. Second, they claim that the Talpions easily pay back the investment during their required six years of service. Third, and perhaps most importantly, the two-thirds of Talpiot graduates who end up either in academia or in technology companies continue to make a tremendous contribution to the economy and society, thereby strengthening the country in different ways.

Talpions may represent the elite of the elite in the Israeli military, but the underlying strategy behind the program’s development—to provide broad and deep training in order to produce innovative, adaptive problem solving—is evident throughout much of the military and seems to be part of the Israeli ethos: to teach people how to be very good at a lot of things, rather than excellent at one thing.

The advantage that Israel’s economy—and its society—gains from this equally dispersed national service experience was driven home to us by neither an Israeli nor an American. Gary Shainberg looks more like a sailor (of the compact, stocky variety) than a tech geek, perhaps because he is an eighteen-year veteran of the British navy. Now vice president for technology and innovation at British Telecom, he met us late one evening in a Tel Aviv bar. He was on one of his many business trips to Israel, en route to the gulf—to Dubai, actually.

“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.”[68]

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.”[69]

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.”[70]

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.”[71]

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.”[72] 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.”[73]

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.[74]

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.[75]

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.”[76]

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.[77]

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.[78]

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.[79]

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.

Nathaniel Fick was a marine captain who fought in the Afghanistan and Iraq wars, before pursuing a dual-degree program at Harvard Business School and the Kennedy School of Government and penning a book about his experiences called One Bullet Away. He told us that he was trained to think about fighting the “three-block war.” In Iraq and Afghanistan, he said, “Marines could be passing out rice on one city block, doing patrols to keep the peace on another block, and engaged in a full-on firefight on the third block. All in the same neighborhood.”[80]

Junior commanders in America’s new wars find themselves playing the role of small-town mayor, economic-reconstruction czar, diplomat, tribal negotiator, manager of millions of dollars’ worth of assets, and security chief, depending on the day.

And, as in the IDF, today’s junior commanders are also more inclined to challenge senior officers in ways they typically would not have in the past. This is partly from serving multiple tours and having watched their peers get killed as a result of what junior officers often believe are bad decisions, lack of strategy, or lackluster resources provided by higher-ups. As American military analyst Fred Kagan explained it, U.S. soldiers and marines “have caught up with the Israelis in the sense that a junior guy who has been deployed multiple times will dispense with the niceties towards superiors.” There is a correlation between battlefield experience and the proclivity of subordinates to challenge their commanders.

Given all this battlefield entrepreneurial experience, the vets coming out of the Iraq and Afghanistan wars are better prepared than ever for the business world, whether building start-ups or helping lead larger companies through the current turbulent period.

Al Chase advises vets not to be intimidated by others in the job market who have already been in the business world and know the “nomenclature.” Vets, he said, bring things to the table that their business peers could only dream about, including a sense of proportionality—what is truly a life-or-death situation and what is something less than that; what it takes to motivate a workforce; how to achieve consensus under duress; and a solid ethical base that has been tested in the crucible of combat.

Brian Tice, an infantry officer, was a captain in the U.S. Marine Corps when he decided that he wanted to make the transition to business. By that time he was thirty years old and had completed five deployments—including assignments in Haiti and Afghanistan—and was in the middle of his sixth, in Iraq. He wrote his essays for his applications to Stanford’s MBA program on a laptop in a burnt-out Iraqi building near the Al Asad Air Base, in the violent Al Anbar Province of western Iraq. He had to complete his application at odd hours because his missions always took place in the middle of the night. As an operations officer for a unit of 120 marines, Tice had to build the “package” for each operation against insurgents and al Qaeda—determine how much force, how many marines, and how much air support were needed. So the only time he could rest and plan future operations was during the day.[81]

Based over eight thousand miles from Stanford’s campus, he couldn’t meet the school’s requirement for an in-person interview. So the admissions department scheduled one over the phone, which he did between sniper operations and raids, while standing in an open expanse of desert. Tice asked the admissions officer to excuse the blaring noise of helicopters flying overhead, and had to cut the interview short when mortars landed nearby.

More and more American military officers are applying for MBA programs and, like Captain Tice, are going to extraordinary lengths to do so. In 2008, of aspiring MBA applicants that took the Graduate Management Admission Test (GMAT), 15,259, or 6 percent, had military experience. At the University of Virginia’s Darden School of Business, the number of military applicants rose 62 percent from 2007 to 2008. The first-year class in 2008 had 333 students, 40 of whom were from the military, including 38 who had served in Afghanistan or Iraq.

The Graduate Management Admission Council, which administers the GMAT, has made it a priority to better organize the path from war front to business school. It has launched its Operation MBA program, which helps members of the armed forces find B-schools that waive application fees or offer generous financial aid packages and even tuition deferrals for cash-strapped vets. And the council is even setting up GMAT test centers on military bases, one of which was opened in 2008 at Fort Hood in Texas; another is planned to open at Yokota Air Base in Japan.

Yet the capacity of U.S. corporate recruiters and executives to make sense of combat experience and its value in the business world is limited. As Jon Medved explained, most American business-people simply do not know how to read a military résumé. Al Chase told us that a number of the vets he’s worked with have walked a business interviewer through all their leadership experiences from the battlefield, including case studies in high-stakes decision making and management of large numbers of people and equipment in a war zone, and at the end of it the interviewer has said something along the lines of “That’s very interesting, but have you ever had a real job?”

In Israel it is the opposite. While Israeli businesses still look for private-sector experience, military service provides the critical standardized metric for employers—all of whom know what it means to be an officer or to have served in an elite unit.

CHAPTER 5 Where Order Meets Chaos

ABOUT THIRTY NATIONS have compulsory military service that lasts longer than eighteen months. Most of these countries are developing or nondemocratic or both. But among first-world countries, only three require such a lengthy period of military service: Israel, South Korea, and Singapore. Not surprisingly, all three face long-standing existential threats or have fought wars for survival in recent memory.[82]

For Israel, the threat to its existence began before it had become a sovereign nation. Beginning in the 1920s, the Arab world resisted the establishment of a national Jewish state in Palestine, then sought to defeat or weaken Israel in numerous wars. South Korea has lived under a constant threat from North Korea, which has a large standing army poised just a few miles from Seoul, South Korea’s capital. And Singapore lives with memories of the occupation by Japan during World War II, its recent struggle for independence, which culminated in 1965, and the volatile period that followed.

Singaporean National Service was introduced in 1967. “We had to defend ourselves. It was a matter of survival. As a small country with a small population, the only way we could build a force of sufficient size . . . was through conscription,” explained Defense Minister Teo Chee Hean. “It was a decision not taken lightly given the significant impact that conscription would have on every Singaporean. But there was no alternative.”[83]

At independence, Singapore had only two infantry regiments, and they had been created and were commanded by the British. Two-thirds of the soldiers were not even residents of Singapore. Looking for ideas, the city-state’s first defense minister, Goh Keng Swee, called Mordechai Kidron, the former Israeli ambassador to Thailand, whom he had gotten to know while the two men were working in Asia. “Goh told us that they thought that only Israel, a small country surrounded by Muslim countries, . . . could help them build a small, dynamic army,” Kidron has said.[84]

Singapore gained independence twice over the course of just two years. The first was independence from the British in 1963, as part of Malaysia. The second was independence from Malaysia, in 1965, to stave off civil war. Singapore’s current prime minister, Goh Chok Tong, described his country’s relations with Malaysia as having remained tense after an “unhappy marriage and acrimonious divorce.” Singaporeans also feared threats from Indonesia, all while an armed Communist insurgency was looming just to Singapore’s north, in Indochina.

In response to Goh’s pleas for help, the IDF tasked Lieutenant Colonel Yehuda Golan with writing two manuals for the nascent Singaporean army: one on combat doctrine and the structure of a defense ministry and another on intelligence institutions. Later, six IDF officers and their families moved to Singapore to train soldiers and create a conscription-based army.

Along with compulsory service and a career army, Singapore also adopted elements of the IDF’s model of reserve service. Every soldier who completes his regular service is obligated to serve for short stints every year, until the age of thirty-three.

For Singapore’s founding generation, national service was about more than just defense. “Singaporeans of all strata of society would train shoulder to shoulder in the rain and hot sun, run up hills together, and learn to fight as a team in jungles and built-up areas. Their common experience in National Service would bond them, and shape the Singapore identity and character,” Prime Minister Goh said on the Singaporean military’s thirty-fifth anniversary.

“We are still evolving as a nation,” Goh continued. “Our forefathers were immigrants. . . . They say that in National Service, everyone—whether Chinese, Malay, Indian, or Eurasian—is of the same color: a deep, sunburnt brown! When they learn to fight as one unit, they begin to trust, respect, and believe in one another. Should we ever have to go to war to defend Singapore, they will fight for their buddies in their platoon as much as for the country.”[85]

Substitute “Israel” for “Singapore,” and this speech could have been delivered by David Ben-Gurion.

Although Singapore’s military is modeled after the IDF—the testing ground for many of Israel’s entrepreneurs—the “Asian Tiger” has failed to incubate start-ups. Why?

It’s not that Singapore’s growth hasn’t been impressive. Real per capita GDP, at over U.S. $35,000, is one of the highest in the world, and real GDP growth has averaged 8 percent annually since the nation’s founding. But its growth story notwithstanding, Singapore’s leaders have failed to keep up in a world that puts a high premium on a trio of attributes historically alien to Singapore’s culture: initiative, risk-taking, and agility.

A growing awareness of the risk-taking gap prompted Singapore’s finance minister, Tharman Shanmugaratnam, to drop in on Nava Swersky Sofer, an Israeli venture capitalist who went on to run Hebrew University’s technology transfer company. The university company, called Yissum, is among the top ten academic programs in the world, measured by the commercialization of academic research. Shanmugaratnam had one question for her: “How does Israel do it?” He was nearby for a G-20 meeting, but he skipped the last day of the summit to come to Israel.

Today the alarm bells are being sounded even by Singapore’s founding father, Lee Kuan Yew, who served as prime minister for three decades. “It’s time for a new burst of creativity in business,” he says. “We need many new tries, many start-ups.”[86]

There is a similar feeling in Korea, another country that has a military draft and a sense of external threat, and yet, as in Singapore and not as in Israel, these attributes have not produced a start-up culture. Korea, clearly, has no shortage of large technology companies. Erel Margalit, an Israeli entrepreneur with a stable of media start-ups, actually sees Korea as fertile ground for his cutting-edge companies. “America is the queen of content,” Margalit said, “but it is still in the broadcast era, while China and Korea are in the interactive age.”[87]

So why doesn’t Korea produce nearly as many start-ups per capita as Israel? We turned to Laurent Haug for insight. Haug is the creator and force behind the Lift conferences, which focus on the nexus between technology and culture. Since 2006, his gatherings have alternated between Geneva, Switzerland, and Jeju, Korea. We asked Haug why there were not more start-ups in Korea, despite the great affinity Koreans have for technology.

“The fear of losing face, and the bursting of the Internet bubble in 2000,” he told us. “In Korea, one should not be exposed while failing. Yet in early 2000, many entrepreneurs jumped on the bandwagon of the new economy. When the bubble burst, their public failure left a scar on entrepreneurship.” Haug was surprised to hear from the director of a technology incubator in Korea that a call for projects received only fifty submissions, “a low figure when you know how innovative and forward-thinking Korea really is.” To Haug, who has also explored the Israeli tech scene, “Israelis seem to be on the other side of the spectrum. They don’t care about the social price of failure and they develop their projects regardless of the economic or political situation.”[88]

So when Swersky Sofer hosts visitors from Singapore, Korea, and many other countries, the challenge is how to convey the cultural aspects that make Israel’s start-up scene tick. Conscription, serving in the reserves, living under threat, and even being technologically savvy are not enough. What, then, are the other ingredients?

“I’ll give you an analogy from an entirely different perspective,” Tal Riesenfeld told us matter-of-factly. “If you want to know how we teach improvisation, just look at Apollo. What Gene Kranz did at NASA—which American historians hold up as model leadership—is an example of what’s expected from many Israeli commanders in the battlefield.” His response to our question about Israeli innovation seemed completely out of context, but he was speaking from experience. During his second year at Harvard Business School, Riesenfeld launched a start-up with one of his fellow Israeli commandos. They presented their proposal at the Harvard business plan competition and beat out the seventy other teams for first place.[89]

After graduating from HBS at the top of his class, Riesenfeld turned down an attractive offer from Google in order to start Tel Aviv–based Eyeview. Earlier, Riesenfeld had made it through one of the most selective recruitment and training programs in the Israeli army.

While he was at HBS, Riesenfeld studied a case that compared the lessons of the Apollo 13 and Columbia space shuttle crises.[90] The 2003 Columbia mission has a special resonance for Israelis. One of its crew members—air force colonel Ilan Ramon, the first Israeli astronaut—was killed when Columbia disintegrated. But Ramon had been an Israeli hero long before. He was a pilot in the daring 1981 air force mission that destroyed Iraq’s nuclear facility, Osirak.

HBS professors Amy Edmondson, Michael Roberto, and Richard Bohmer spent two years researching and comparing the Apollo and Columbia crises. They produced a study that became the basis for one of Riesenfeld’s classes, analyzing the lessons learned from a business-management perspective. When Riesenfeld first read the HBS case, in 2008, the issues it presented were immediately familiar to the ex-commando. But why had Riesenfeld mentioned the case to us? What was the connection to Israel, or to its innovation economy?

The Apollo 13 crisis occurred on April 15, 1970, when the spaceship had traveled three-fourths of the way to the moon. It was less than a year after Neil Armstrong and Buzz Aldrin had stepped off Apollo 11. NASA was riding high. But when Apollo 13 was two days into its mission, traveling two thousand miles per hour, one of its primary oxygen tanks exploded. This led astronaut John Swigert to utter what has by now become a famous line: “Houston, we’ve had a problem.”

The flight director, Gene Kranz, was in charge of managing the mission—and the crisis—from the Johnson Space Center in Houston. He was immediately presented with rapidly worsening readouts. First he was informed that the crew had enough oxygen for eighteen minutes; a moment later that was revised to seven minutes; then it became four minutes. Things were spiraling out of control.

After consulting several NASA teams, Kranz told the astronauts to move into the smaller lunar extension module, which was designed to detach from Apollo for short subtrips in space. The extension module had its own small supply of oxygen and electricity. Kranz later recalled that he had to figure out a way to “stretch previous resources, barely enough for two men for two days, to support three men for four days.”

Kranz then directed a group of teams in Houston to lock themselves in a room until they could diagnose the oxygen problem and come up with ways to get the astronauts back into Apollo and then home. This was not the first time these teams had met. Kranz had assembled them months in advance, in myriad configurations, and practice drills each day had gotten them used to responding to random emergencies of all shapes and sizes. He was obsessed with maximizing interaction not only within teams but between teams and NASA’s outside contractors. He made sure that they were all in proximity during training, even if it meant circumventing civil service rules barring contractors from working full-time on the NASA premises. Kranz did not want there to be any lack of familiarity between team members who one day might have to deal with a crisis together.

Three days into the crisis, Kranz and his teams had managed to figure out creative ways to get Apollo back to earth while consuming a fraction of the power that would typically be needed. As the New York Times editorialized, the crisis would have been fatal had it not been for the “NASA network whose teams of experts performed miracles of emergency improvisation.”[91]

It was an incredible feat and a riveting story. But, we asked Riesenfeld, what’s the connection to Israel? Fast-forward to February 1, 2003, he told us, sixteen days into the Columbia mission, when the space shuttle exploded into pieces as it reentered the earth’s atmosphere. We now know that a piece of insulating foam—weighing 1.67 pounds—had broken off the external fuel tank during takeoff. The foam struck the leading edge of the shuttle’s left wing, making a hole that would later allow superheated gases to rip through the wing’s interior.

There were over two weeks of flight time between takeoff—when the foam had first struck the wing—and the explosion. Could something have been done during this window to repair Columbia?

After reading the HBS study, Riesenfeld certainly thought so. He pointed to the handful of midlevel NASA engineers whose voices had gone unheard. As they watched on video monitors during a postlaunch review session, these engineers saw the foam dislodge. They immediately notified NASA’s managers. But they were told that the foam “issue” was nothing new—foam dislodgments had damaged shuttles in previous launches and there had never been an accident. It was just a maintenance problem. Onward.

The engineers tried to push back. This broken piece of foam was “the largest ever,” they said. They requested that U.S. satellites—already in orbit—be dispatched to take additional photos of the punctured wing. Unfortunately, the engineers were overruled again. Management would not even acquiesce to their secondary request to have the astronauts conduct a spacewalk to assess the damage and try to repair it in advance of their return to earth.

NASA had seen foam dislodgments before; since they hadn’t caused problems in the past, they should be treated as routine, management ruled; no further discussion was necessary. The engineers were all but told to go away.

This was the part of the HBS study that Riesenfeld focused on. The study’s authors explained that organizations were structured under one of two models: a standardized model, where routine and systems govern everything, including strict compliance with timelines and budgets, or an experimental model, where every day, every exercise, and every piece of new information is evaluated and debated in a culture that resembles an R&D laboratory.

During the Columbia era, NASA’s culture was one of adherence to routines and standards. Management tried to shoehorn every new piece of data into an inflexible system—what Roberta Wohlstetter, a military intelligence analyst, describes as our “stubborn attachment to existing beliefs.”[92] It’s a problem she has encountered in the world of intelligence analysis, too, where there is often a failure of imagination when assessing the behavior of enemies.

NASA’s transformation from the Apollo culture of exploration to the Columbia culture of rigid standardization began in the 1970s, when the space agency requested congressional funding for the new shuttle program. The shuttle had been promoted as a reusable spacecraft that would dramatically reduce the cost of space travel. President Nixon said at the time that the program would “revolutionize transportation into near space, by routinizing it.” It was projected that the shuttle would conduct an unprecedented fifty missions each year. Former air force secretary Sheila Widnall, who was a member of the Columbia Accident Investigation Board, later said that NASA pitched Columbia as “a 747 that you could simply land and turn around and operate again.”

But as the HBS professors point out, “space travel, much like technological innovation, is a fundamentally experimental endeavor and should be managed that way. Each new flight should be an important test and source of data, rather than a routine application of past practices.” Which is why Riesenfeld directed us to the study. Israeli war-fighting is also an “experimental endeavor,” as we saw in the story of Israel’s handling of the Saggers in 1973. The Israeli military and Israeli start-ups in many ways live by the Apollo culture, he told us.

Connected to this Apollo culture, certainly in Nava Swersky Sofer’s estimation, is a can-do, responsible attitude that Israelis refer to as rosh gadol. In the Israeli army, soldiers are divided into those who think with a rosh gadol—literally, a “big head”—and those who operate with a rosh katan, or “little head.” Rosh katan behavior, which is shunned, means interpreting orders as narrowly as possible to avoid taking on responsibility or extra work. Rosh gadol thinking means following orders but doing so in the best possible way, using judgment, and investing whatever effort is necessary. It emphasizes improvisation over discipline, and challenging the chief over respect for hierarchy. Indeed, “challenge the chief” is an injunction issued to junior Israeli soldiers, one that comes directly from a postwar military commission that we’ll look at later. But everything about Singapore runs counter to a rosh gadol mentality.

Spend time in Singapore and it’s immediately obvious that it is tidy. Extremely tidy. Perfectly manicured green lawns and lush trees are framed by a skyline of majestic new skyscrapers. Global financial institutions’ outposts can be found on nearly every corner. The streets are free of trash; even innocuous litter is hard to spot. Singaporeans are specifically instructed on how to be polite, how to be less contentious and noisy, and not to chew gum in public.

Tidiness extends to the government, too. Lee Kuan Yew’s People’s Action Party has basically been in uninterrupted power since Singaporean independence. This is just the way Lee wants it. He has always believed that a vibrant political opposition would undermine his vision for an orderly and efficient Singapore. Public dissent has been discouraged, if not suppressed outright. This attitude is taken for granted in Singapore, but in Israel it’s foreign.

Israeli air force pilot Yuval Dotan is also a graduate of Harvard Business School. When it comes to “Apollo vs. Columbia,” he believes that had NASA stuck to its exploratory roots, foam strikes would have been identified and seriously debated at the daily “debrief.” In Israel’s elite military units, each day is an experiment. And each day ends with a grueling session whereby everyone in the unit—of all ranks—sits down to deconstruct the day, no matter what else is happening on the battlefield or around the world. “The debrief is as important as the drill or live battle,” he told us. Each flight exercise, simulation, and real operation is treated like laboratory work “to be examined and reexamined, and reexamined again, open to new information, and subjected to rich—and heated—debate. That’s how we are trained.”[93]

In these group debriefs, emphasis is put not only on unrestrained candor but on self-criticism as a means of having everyone—peers, subordinates, and superiors—learn from every mistake. “It’s usually ninety minutes. It’s with everybody. It’s very personal. It’s a very tough experience,” Dotan said, recalling the most sweat-inducing debriefings of his military career. “The guys that got ‘killed’ [in the simulations], for them it’s very tough. But for those who survive a battle—even a daily training exercise—the next-toughest part is the debriefing.”

Dotan was an IAF formation commander flying F-16 fighter jets. “The way you communicate and deconstruct a disagreement between differing perspectives on an event or decision is a big part of our military culture. So much so that debriefing is an art that you get graded on. In flight school and all the way through the squadron . . . there are numerous questions regarding a person’s ability to debrief himself and to debrief others.”

Explaining away a bad decision is unacceptable. “Defending stuff that you’ve done is just not popular. If you screwed up, your job is to show the lessons you’ve learned. Nobody learns from someone who is being defensive.”

Nor is the purpose of debriefings simply to admit mistakes. Rather, the effect of the debriefing system is that pilots learn that mistakes are acceptable, provided they are used as opportunities to improve individual and group performance. This emphasis on useful, applicable lessons over creating new formal doctrines is typical of the IDF. The entire Israeli military tradition is to be traditionless. Commanders and soldiers are not to become wedded to any idea or solution just because it worked in the past.

The seeds of this feisty culture go back to the state’s founding generation. In 1948, the Israeli army did not have any traditions, protocols, or doctrines of its own; nor did it import institutions from the British, whose military was in Palestine before Israel’s independence. According to military historian Edward Luttwak, Israel’s was unlike all postcolonial armies in this way. “Created in the midst of war out of an underground militia, many of whose men had been trained in cellars with wooden pistols, the Israeli army has evolved very rapidly under the relentless pressure of bitter and protracted conflict. Instead of the quiet acceptance of doctrine and tradition, witnessed in the case of most other armies, the growth of the Israeli army has been marked by a turmoil of innovation, controversy, and debate.”

Furthermore, after each of its wars, the IDF engaged in far-reaching structural reforms based on the same process of rigorous debate.

While the army was still demobilizing after the 1948 War of Independence, Ben-Gurion appointed a British-trained officer named Haim Laskov to examine the structure of the IDF. Laskov was given a blank check to restructure the army from the ground up. “While such a total appraisal would not be surprising after a defeat,” Luttwak explained to us, “the Israelis were able to innovate even after victory. The new was not always better than the old, but the flow of fresh ideas at least prevented the ossification of the military mind, which is so often the ultimate penalty of victory and the cause of future defeat.”[94]

The victory in the 1967 Six-Day War was the most decisive one Israel has ever achieved. In the days before the war, the Arab states were openly boasting that they would be triumphant, and the lack of international support for Israel convinced many that the Jewish state was doomed. Israel launched a preemptive attack, destroying the entire Egyptian air force on the ground. Though the war was called the Six-Day War, it was essentially won on that first day, in a matter of hours. By the end, the Arab states had been pushed back on all fronts.

And yet, even in victory, the same thing happened: self-examination followed by an overhaul of the IDF. Senior officials have actually been fired after a successful war.

It should not be surprising, then, that after more controversial wars—such as the 1973 Yom Kippur War, the 1982 Lebanon war, and the 2006 Lebanon war, which most Israelis perceived as having been seriously botched—there were full-blown public commissions of inquiry that evaluated the country’s military and civilian leaders.

“The American military does after-action reports inside the military,” military historian and former top U.S. State Department official Eliot Cohen told us. “But they are classified. A completely internal, self-contained exercise. I’ve told senior officers in the U.S. military that they would well benefit from an Israeli-like national commission after each war, in which senior ranks are held accountable—and the entire country can access the debate.”[95]

But that’s not going to happen anytime soon, much to the frustration of U.S. Army Lieutenant Colonel Paul Yingling. “We’ve lost thousands of lives and spent hundreds of billions of dollars in the last seven years in efforts to bring stability to two medium-sized countries; we can’t afford to adapt this slowly in the future,”[96] he said in a lecture at the marine base at Quantico, Virginia. The problem, he wrote in a controversial essay in 2007, is that “a private who loses a rifle suffers far greater consequences than a general who loses a war.”[97]

The Israelis, on the other hand, have been so dogmatic about their commissions that one was even set up in the midst of an existential war. In July 1948, in what Eliot Cohen described as “one of the truly astonishing episodes” of Israel’s War of Independence, the government established a commission staffed by leaders from across the political spectrum while the war was still going on. The commission stepped back for three days to hear testimony from angry army officers about the government and the military’s conduct during the war and what they believed to be Ben-Gurion’s micromanagement.[98] Setting up a commission amid the fighting of a war was a questionable decision, given the distraction it would impose on the leadership. But, as Yuval Dotan told us earlier, in Israel the debrief is as important as the fighting itself.

This rigorous review and national debrief was in full public display as recently as the 2006 Lebanon war. Initially, there was almost unanimous public backing for the government’s decision to respond massively to the attack by Hezbollah from across Israel’s northern border on July 12, 2006. This public support continued even when civilians in northern Israel came under indiscriminate missile attack, forcing one out of seven Israelis to leave their homes during the war.

Support for continuing the offensive was even higher among those living under the missile barrage than in the rest of Israel. This support presumably came from an Israeli willingness to suffer in order to see Hezbollah destroyed for good.

But Israel failed to destroy Hezbollah in 2006, and was unable to weaken Hezbollah’s position in Lebanon and to force the return of kidnapped soldiers. The reaction against the political and military leadership was harsh, with calls for the defense minister, IDF chief of staff, and prime minister to step down. Six companies of troops (roughly six hundred soldiers) were able to kill some four hundred Hezbollah fighters in face-to-face combat while suffering only thirty casualties, but the war was considered a failure of Israeli strategy and training, and seemed to signal to the public a dangerous departure from the IDF’s core ethos.

Indeed, the 2006 Lebanon war was a case study in deviation from the Israeli entrepreneurial model that had succeeded in previous wars. According to retired general Giora Eiland, who has headed both the prestigious IDF Planning Branch and the National Security Council, the war underscored four principal IDF failures: “Poor performance by the combat units, particularly on land; weakness in the high command; poor command and control processes; and problematic norms, including traditional values.” In particular, Eiland said, “open-minded thought, necessary to reduce the risk of sticking to preconceived ideas and relying on unquestioned assumptions, was far too rare.”

In other words, Israel suffered from a lack of organization and a lack of improvisation. Eiland also noted that soldiers were not sufficiently instilled with “the sense that ‘the fate of the war is on our shoulders.’ ” Commanders “relied too much on technology, which created the impression that it was possible to wage a tactical land battle without actually being in the field.”

Finally, Eiland leveled a criticism that is perhaps quintessentially Israeli and hardly imaginable within any other military apparatus: “One of the problems of the Second Lebanon War was the exaggerated adherence of senior officers to the chief of staff’s decisions. There is no question that the final word rests with the chief of staff, and once decisions have been made, all must demonstrate complete commitment to their implementation. However, it is the senior officers’ job to argue with the chief of staff when they feel he is wrong, and this should be done assertively on the basis of professional truth as they see it” (emphasis added).

Large organizations, whether military or corporate, must be constantly wary of kowtowing and groupthink, or the entire apparatus can rush headlong into terrible mistakes. Yet most militaries, and many corporations, seem willing to sacrifice flexibility for discipline, initiative for organization, and innovation for predictability. This, at least in principle, is not the Israeli way.

Eiland suggested that the IDF should consider drastic measures to reinforce its classic antihierarchical, innovative, and enterprising ethos. “Is it correct or even possible,” he asked, “to allow lower-ranking officers to plan and lead current security operations with less control from above in order to prepare them better for a conventional war?” (emphasis added).[99]

The 2006 war was a very costly wake-up call for the IDF. It was suffering from an ossification and hollowing out that is common among militaries that have not been tested in battle in a long time. In Israel’s case, the IDF had shifted its focus to commando-style warfare, which is appropriate when pursuing terrorist groups, but had neglected the skills and capabilities needed for conventional warfare.

Yet the Israeli reaction was not so much a call to tighten the ranks as it was to loosen them: to work harder at devolving authority and responsibility to lower levels and to do more to encourage junior officers to challenge their higher-ups. This radical push, moreover, was seen as one of restoring the “core values,” not liberalizing them.

What does all this mean for a country like Singapore, trying not just to emulate Israel’s military structure but to inject some of Israel’s inventiveness into its economy, as well? As noted above, Singapore differs dramatically from Israel both in its order and in its insistence on obedience. Singapore’s politeness, manicured lawns, and one-party rule have cleansed the fluidity from its economy.

Fluidity, according to a new school of economists studying key ingredients for entrepreneurialism, is produced when people can cross boundaries, turn societal norms upside down, and agitate in a free-market economy, all to catalyze radical ideas. Or as Harvard psychologist Howard Gardner puts it, different types of “asynchrony . . . [such as] a lack of fit, an unusual pattern, or an irregularity” have the power to stimulate economic creativity.[100]

Thus, the most formidable obstacle to fluidity is order. A bit of mayhem is not only healthy but critical. The leading thinkers in this area—economists William Baumol, Robert Litan, and Carl Schramm—argue that the ideal environment is best described by a concept in “complexity science” called the “edge of chaos.” They define that edge as “the estuary region where rigid order and random chaos meet and generate high levels of adaptation, complexity, and creativity.”[101]

This is precisely the environment in which Israeli entrepreneurs thrive. They benefit from the stable institutions and rule of law that exist in an advanced democracy. Yet they also benefit from Israel’s nonhierarchical culture, where everyone in business belongs to overlapping networks produced by small communities, common army service, geographic proximity, and informality.

It is no coincidence that the military—particularly the elite units in the air force, infantry, intelligence, and information technology arenas—have served as incubators for thousands of Israeli high-tech start-ups. Other countries may generate them in small numbers, but the Israeli economy benefits from the phenomena of rosh gadol thinking and critical reassessment, undergirded by a doctrine of experimentation, rather than standardization, wide enough to have a national and even a global impact.