Start-up Nation (14 page)

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.”
¹⁴

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,”
¹⁵
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.”
¹⁶

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.
¹⁷
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).
¹⁸

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.
¹⁹

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.”
²⁰

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.

It was not simple to convince people that growing fish in the desert makes sense.

—P
ROFESSOR
S
AMUEL
A
PPELBAUM

T
HE STORY OF HOW
I
SRAEL
got to where it is—fiftyfold economic growth within sixty years—is more than the story of Israeli
character idiosyncrasies, battle-tested entrepreneurship, or geopolitical happenstance. The story must include the effects
of government policies, which had to be as adaptive as Israel’s military and its citizens, and suffered as many turns of fortune.

The history of Israel’s economy is one of two great leaps, separated by a period of stagnation and hyperinflation. The government’s
macroeconomic policies have played an important role in speeding the country’s growth, then reversing it, and then unleashing
it in ways that even the government never expected.

The first great leap occurred from 1948 to 1970, a period during which per capita
GDP
almost quadrupled and the population tripled, even amidst Israel’s engagement in three major wars.
¹
The second was from 1990 until today, during which time the country was transformed from a sleepy backwater into a leading
center of global innovation. Dramatically different—almost opposite—means were employed: the first period of expansion was
achieved through an entrepreneurial government that dominated a small, primitive private sector; the second period through
a thriving entrepreneurial private sector that was initially catalyzed by government action.

The roots of the first period of economic growth can be traced to well before the country’s founding—all the way back to the
late nineteenth century. For example, in the 1880s, a group of Jewish settlers tried to build a farming community in a new
town they had founded— Petach Tikva—a few miles from what is now Tel Aviv. After first living in tents, the pioneers hired
local Arab villagers to build mud cabins for them. But when it rained the cabins leaked even more than the tents, and when
the river swelled beyond its banks, the structures melted away. Some of the settlers were struck by malaria and dysentery.
After just a few winters, the farmers’ savings had been exhausted, their access to roads washed out, and their families reduced
to near starvation.

In 1883, though, things began to look up. The French-Jewish banker and philanthropist Edmond de Rothschild provided desperately
needed financial support. An agricultural expert advised the settlers to plant eucalyptus trees where the river’s overflow
created swamps; the roots of these trees quickly drained the swamps dry. The incidence of malaria dropped dramatically, and
more families came to live in the growing community.
²

Beginning in the 1920s and continuing through the decade, labor productivity in the Yishuv—the Jewish community of pre-state
Palestine—increased by 80 percent, producing a fourfold increase in national product as the Jewish population doubled in size.
Strikingly, as a global depression raged from 1931 to 1935, the average annual economic growth for Jews and Arabs in Palestine
was 28 and 14 percent, respectively.
³

The small communities established by settlers, like those of Petach Tikva, would never have been able to achieve such explosive
growth on their own. They were joined by waves of new immigrants who contributed not only their numbers but a pioneering ethos
that overturned the charity-based economy.

One of those immigrants was a twenty-year-old lawyer named David Gruen, who traveled from Poland in 1906. Upon arrival, he
Hebraized his name to Ben-Gurion—naming himself after a Jewish general from the Roman period of 70
c.e.
—and quickly rose to become the uncontested leader of the Yishuv. The Israeli author Amos Oz has written that “in the early
years of the state, many Israelis saw him as a combination of Moses, George Washington, Garibaldi and God Almighty.”
⁴

Ben-Gurion was also Israel’s first national entrepreneur. Theodore Herzl may have conceptualized a vision for Jewish sovereignty
and begun to galvanize Diaspora Jews around a romantic notion of a sovereign state, but it was Ben-Gurion who organized this
vision from an idea into a functioning nation-state. After World War II, Winston Churchill described the United States Army
general George Marshall as the Allied Powers’ “organizer of victory.” To paraphrase Churchill, Ben-Gurion was the “organizer
of Zionism.” Or in business terms, Ben-Gurion was the “operations guy” who actually
built
the country.