When a little chutzpah goes a long, long way

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As many economies teeter on the brink, one small state continues to lead the world. So what has Israel got that others haven’t?

Innovation is this season’s must-have. The economy may have avoided a double dip but consumer demand is taking longer to lift. The patient seems to have lost his appetite. Fresh, tasty morsels are what’s needed, not yesterday’s re-heated leftovers.

Cue the arrival of a bulk serving of freshly-prepared insights and provocations from the world’s academic hothouses. Top of the pile is Start-Up Nation by Dan Senor and Saul Singer from the Council on Foreign Relations. This is a refreshing offering, as it doesn’t purport to be a how-to manual, nor is it merely a collection of case studies.

Instead, it’s an analysis of one of the biggest innovation success stories of the past 50 years. A country in which per capita venture capital investments are 2.5 times greater than the US. A nation that boasts more companies listed on the Nasdaq than any state outside the US. Any guesses yet? I’ll put you out of your misery. It’s Israel.

It’s not difficult to think of reasons why this country might be an entrepreneurial golden boy. It has a tiny land mass, and much of it is desert.

Salt desert at that. A lack of natural resources tends to focus the imagination. It also forces a country to concentrate on its human resources.

And yes, Israel has one of the highest-performing educational systems in the world.

However, Singapore also boasts a small, resource-poor land mass and an over-achieving school and college population. And, I’m told, it’s a very good place to build a business. But Singapore’s growth, Asian Tiger though it may be, isn’t a patch on that of Israel.

Perhaps the reason for Israel’s success is that it looks far from its own borders for inspiration. After all, when you’re the Millwall of the Middle East, it’s no use looking too close to home. The People of the Book were global citizens a long time before the phrase was invented.

However, the same point could be made about many diasporic cultures. New York is an especially good place to have an Irish name. Yet being the birthplace of one of the world’s greatest diasporas doesn’t seem to have done Ireland much good of late.

Some point to the benefits of compulsory military service, which again is a feature of the Israeli state, in forging unlikely connections among succeeding generations of young people. These connections are all the more intense when the bloke in the next bunk could well be going into battle with you next week.

However, South Korea has had compulsory military service for nearly 50 years. And its closest neighbour isn’t likely to be popping round for tea and cake any time soon, either. Despite this, South Korea’s record of entrepreneurship isn’t a patch on Israel’s.

The point about military service is not too wide of the mark, however. According to authors Senor and Singer, it is the unique culture of the Israeli military which is perhaps the most influential factor at play in the country’s economic miracle.

Like the Indian and Austro-Hungarian armies before it, the Israeli Defence Force has been vastly significant in shaping its country’s culture, as well as its history. The uniqueness of the IDF is that its culture combines both collectivism and individualism: exactly the same melded qualities you will find in any successful start-up.

I believe now more than ever that innovation isn’t a process or a job function. It’s the product of a very particular culture. One which demands that senior people don’t merely invite challenge, but feel an existential terror at the lack of it.

It used to be said that the best way to stop a Warsaw Pact army in its tracks was to shoot anyone with more than one stripe on his shoulder.

Control economies breed centralised authority. Which means that anyone under the rank of Major is incapable of making a decision.

The IDF has always adopted the reverse approach. Decision-making responsibility is pushed down to the most junior personnel. The result is that everyone gets leadership experience, often in the most taxing of circumstances. Everyone thinks, not just the higher-ups.

This has a fascinating consequence. In other militaries, challenges to authority are punished. In the IDF, they are positively encouraged. In this regard, Israel’s secret weapon is Chutzpah. Both militarily and economically. Because this attitude transfers directly from the battlefield into the office. Everything is challenged. Nothing is accepted just because it’s always been like that.

Nowhere is this better exemplified than in the IDF’s culture of after-action review. Most modern militaries practise this, but only the Israelis go at it with a merciless intensity. Successful operations are analysed as painstakingly as failed ones, the aim being to spot what could have gone wrong.

Nor does the Israeli after-action review pay much respect to rank and seniority. As one US commentator is quoted as saying, “In our military, a private who loses a rifle is punished harder than a general who loses a war.” In the IDF, both defaulters can expect equally firm treatment.

Whatever your point of view on the politics of the Middle East, Start-Up Nation makes a fascinating and provocative read. Its authors deliberately don’t include any trite generalisations or, “Why don’t you try this at home?” take-aways. So neither will I.

Suffice to say I believe now more than ever that innovation isn’t a process or a job function. It’s the product of a very particular culture. One which demands that senior people don’t merely invite challenge, but feel an existential terror at the lack of it.

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