Can Israel's High-Tech Sector Make America Great Again?

Dome of the Rock, Jerusalem. Pixabay/Public domain

Why America can't afford to jeopardize its business relationship with Israel.

Here, in Israel, a joke is making the rounds. How does a Saudi do business with an Israeli?

Very quietly.

Like all the best jokes, it contains an essential truth: that in the face of mounting criticism and the spread of Boycott Divestment Sanctions (BDS) campaign on campuses across western Europe and the United States, Israeli business—notably its high-tech sector—is going from strength to strength. The “start-up nation” is living up to its name, and its benefits are being felt most strongly in the United States.

Donald Trump has entered the presidential office vowing to make “America Great Again.” It is hard to discern what this woolly statement—reminiscent of Obama’s “Yes We Can!” in its triumphant yet nebulous tone—means, or indeed what most of his policies actually entail. But it is clear that, as a businessman (albeit one of questionable success), his political ideology is largely economically based.

Trump has said he wants to bring jobs back to the United States and to impose tariffs on imports, but this is twentieth-century economic thinking in a twenty-first-century world. As automation will increasingly come to dominate manufacturing and associated industries, technology and innovation will be the true drivers of economic growth. And nowhere are these two areas more prevalent than in the United States and Israel.

Jerusalem is cold. There is a biting February wind. Nonetheless, thousands have descended on the 2017 OurCrowd Global Investor Summit near the city center. With five thousand attendees, it’s the world’s largest equity crowdfunding conference. Investors looking for everything from artificial intelligence to robotics have made the trek to Israel’s capital.

And it soon becomes clear why. Last year, Eric Schmidt, formerly the chief executive of Google and now executive chairman of its parent company, Alphabet, told an audience at Google’s offices in Tel Aviv that “for a relatively small country, Israel has a super role in technological innovation. I can’t think of a place where you could see this diversity and the collection of initiatives aside from Silicon Valley . . . That is a pretty strong statement.” He also noted that several Israeli technology companies were on their way to being worth $1 billion.

Israel, with a population smaller than that of New York, has long punched above its weight in a variety of arenas—and there are reasons for that. Israel is surrounded by a mass of mostly hostile nations, many of which have tried repeatedly to defeat it. The country has had to fight—literally (and the word is used correctly here)—for its survival from its birth. It is also a Middle Eastern country without oil or an abundance of natural resources (though that somewhat changed with the discovery of the Leviathan and Tamar gas fields in the Mediterranean Sea, just off Israel’s coast). These factors have forced the nation to be innovative—in everything from the military to medicine. It is innovation born of scarcity.

And it is innovation that is now bearing ripe and timely fruit. According to Jonathan Medved, a serial entrepreneur and venture capitalist, as well as the founder and chief executive officer of the OurCrowd Global Investor Summit, “Israel high-tech is raising capital like nowhere else. Globally, venture-backed exits declined 26 percent in 2016. Israel, however, was the outlier—seeing record growth and a record year with $4.8 billion invested—up from $2.2 billion in 2013; 120 percent growth in three years.”

Medved is a large and imposing man. Gregarious and charming, he wore a kippah and a bushy beard at the summit. He spoke with a broad American accent. I asked him about the effect of the BDS campaign, which has sought to exert political—and especially economic—pressure on Israel, lobbying international firms to cease doing business with the country. It’s all the rage in Europe and the United States, especially amongst the youth. Isn’t this, I asked, a huge problem, for Israeli-American cooperation?

His reply was as swift as it was unequivocal. “Israeli business is not like Israeli politics,” he said. “In India, China, Japan, Israel is a top brand—BDS is important on college campuses, NGOs and some part of the church, but not in business. And the trend is an upward one. Ten years ago, there was a fear that Asian companies would not do business with Israel because of pressure from Arab states. That no longer exists.”

He continued: “I was sitting at my Shabbos table with one of [the] top U.S. hedge fund managers and an Israeli MK—and I asked him about BDS. His response? ‘What is BDS?’”

“Look,” he concluded: “Anyone with a brain cannot support BDS. If you do: get off Google, Facebook, your laptop, anything with an Intel chip.”

What does this boom in Israeli tech mean to the United States? The answer, according to David Goodtree, who sits on the Board of Directors of OurCrowd, is simple: it creates jobs; it creates wealth.

He takes the state of Massachusetts as a case study. “There are over 200 Israeli-founded companies in the state alone,” he said. “In 2015 those companies brought $9 billion in revenue and $18 billion in economic impact to the state, representing almost 4 percent of its GDP. They also brought twenty-seven thousand jobs and $400–500 million dollars of venture capital.”

“Israeli companies drive the mass economy in the U.S.,” he continued. “Similar influence can be found in NYC and Florida. Last year, thirty state governors visited Israel, and they came for economic—not political—reasons.”

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