Eli Groner, Director General of the Israeli Prime Minister’s Office, explains how the high value the nation places on innovation and entrepreneurship gives it a unique economic environment and resilience, and offers straightforward advice on how to genuinely encourage creativity and new businesses.
The Israeli economy ranks as one of the best performers among the 37 most advanced economies. The IMF’s projections for 2015 put Israel among the fastest growing advanced economies, behind only Ireland and Singapore, and way ahead of heavyweights such as the US or Germany. What explains both the success and resilience of the national economy?
What has happened in Israel is not normal resilience. If you look at the performance of Israel’s economy and stock market over the last 30, 40 years, you will see a consistent, upward trendline. That’s despite the major economic crises – more than one – and a myriad of security challenges. That resilience, manifested in the upward trend, comes from an entrepreneurial spirit. I can sit here and talk you about the numbers of PhDs per capita we have; I can speak to you about facts, figures and charts; but the core is entrepreneurship and an approach to innovation which is unlike any other in the world save, perhaps, Silicon Valley. In many other developed markets, you see the most ambitious people are the service providers: bankers, consultants, lawyers, brokers, who are all getting a small percentage of a big pie. In Israel, the highest level in the social hierarchy belongs to the entrepreneurs.
Now you can ask, how did Israel come to be this way? Why do we value earth, wind and fire over lawyers? There are a number of reasons. Part is the engineering and technology mindset; part of it is the military training. Part is that at the end of the day, we will always have to defend ourselves. We will always be fewer in numbers; we will always be surrounded by challenges, and therefore we have no choice. It’s been that way for a number of millennia. It certainly seems like it will stay that way for the foreseeable future – even in our own sovereign nation. The need to defend ourselves is a driver of the resilience I’m talking about.
From necessity comes innovation, energy to do new things. Someone said failure was not an option for Israel. Please expand on the entrepreneurial spirit that has always defined Israel.
I wouldn’t say failure is not an option. I’d say that the price you pay for failure is much lower here than in other places. I’ll give you an example: if you look at the most developed, sophisticated and ingenious companies in the world, many of them are based in northern California. You can walk through the hallways there and think “wow”, if I put a foosball table in the hallways or let people throw tennis balls against the wall that will create entrepreneurial innovation. That’s not it. What creates it is acknowledging that people are open to failure. If you take calculated risks, and they don’t work, for whatever reason, that’s fine. What you have too often in big bureaucratic environments is that people are scared to fail. They feel that if they commit a mistake, they will affect their professional advancement. They’d rather pass the buck, rather not take ownership or responsibility, because the downside of failure is much greater than the upside for success. In Israel’s private sector, people are not scared to fail. People want to invest here in entrepreneurs who have already failed.
It’s not that Israelis can’t afford to fail; Israelis are not scared to fail. That’s a huge difference.
Being one of the most innovative economies and with extensive official support for education and R&D activities, Israel has been dubbed as the “start-up nation”. In the Global Innovation Index, Israel ranks 15th of 143 surveyed countries. Many argue this is because of a combination of concentrated tech clusters, a global outlook from the get-go, useful skills gained in mandatory military service, a healthy dose of “chutzpah”. But, up to what extent do you believe it is due to the entrepreneurial spirit that has always defined Israel?
It’s a very apt cliché that the US has 51 states. The state where my mother grew up, Missouri, is called the “Show Me state”. Israel is also a “Show Me” state. We don’t accept things just because we’re told as such; we say “show me”, ”show me why.” When I was working as a consultant with Israeli clients, we would offer to share worldwide best practices. Senior Israeli executives would say, “Who says that best way in the world is better than what I do?” Some people would call that “chutzpah”, and some people would say there is a lot to learn from the world, but we shouldn’t automatically accept worldwide practices as gospel. It’s a very healthy approach in business, politics and in one’s personal life.
Regarding the 30th anniversary of the foreign trade agreement between the US and Israel taking place this year, can you give us your standpoint of the relations between the two countries, and where are they heading to in the forthcoming years?
First I don’t think there is anyone involved in the relationship between the US and Israel who thinks that the relationship is not important. I don’t think there’s anyone in the economic branch, political branch, or intelligence branch who doesn’t feel that it’s an exceptionally strong relationship now. It is really not about politics at any moment in time. The economic partnership is stronger than it has it has ever been. There is an increasing number of manufacturing commercialized developing partnerships. You see more direct investment from the US and vice versa. The world has become not only flatter but much smaller. Israelis don’t flinch at traveling and if there is a commercial opportunity we will go, which makes the world smaller. The cooperation between entities can intensify in ways that were not conceivable 20 years ago. I have no doubt that with technology, the relationship will grow exponentially over the next 30 years.
With your enviable success in advancing Israeli economic interests with the US treasury and the American Department of Energy, to name a few, how do you intend to maximize the commercial ties during your tenure?
There are a number of huge opportunities, first of all in the energy space. Undoubtedly you have heard we have one of the greatest natural gas findings in the world. We are building an upstream industry. There’s also a huge opportunity in downstream. We are developing a new industry and looking to welcome new investors. There are huge infrastructure investment opportunities.
On the other side, there’s a lot going on in cyber here in Israel, We are right now – I’m trying to say this without sounding presumptuous – a global power in cyber security. If you look at the absolute capital invested in cyber in Israel compared to the world, we are China. The opportunities there are unlimited.
Cyber security is one of the most fascinating industries I have ever come across. It’s an industry that not only changes more rapidly than any other industry I can think of, but it’s also an industry that without question will be around as far as the eye can see. There is always going to be a need for cyber security; the need will intensify. The opportunities here are at all dimensions of cyber, including those not yet public, are limitless. Investors are interested in that space.
There are other interesting spaces: medical devices, health care; 3D printing, which is going to be a huge industry and we are planning to build an ecosystem around 3D printing. There are a lot of tremendous opportunities here.
We saw the US Treasury Secretary, Jack Lew, assuring that the relations between two countries are very important for global security, at a global scale. The next G20 summit in Turkey will tackle inclusion, implementation and investment. From your point, of those three, which would be the most important?
They are all critical. The politically correct answer would be “inclusion.” My job requires that I say “investment.” But I’m going to tell you that the most important is “implementation.” At the end of the day, what differentiates the good from the bad and the great from the good, and the truly distinctive from the great, is implementation. I have lot of great ideas I need people to execute. You can quote me on this: the politically correct answer is inclusion, what my superiors expect me to say is investment, and the truth is implementation.
Please expand on your first reactions when receiving the news on your appointment and how does such an important challenge influence your motivations to serve the Israeli nation?
I understood the magnitude of this position, which is really unlike any other in Israel. It was a combination of excitement, opportunities to have real impact, and hesitation regarding the responsibility on my shoulders. Anyone who would come into this position without having certain reservations about the magnitude of the responsibility doesn’t really understand what this job is about.
Having said that, the opportunity of impacting Israel’s economic, political, defense and every single front is unlike any position in this country. I spoke to a lot of people who sat in that chair before me and there’s unanimity that you can do a lot of things, but none of them felt that until they sat here.
From your background, what would you like to improve or change from previous strategies within this position?
I don’t want to talk about changing previous things; I will talk about a few very big ideas which are very important. The first is on the energy front, where implementing the natural gas findings is critical. We had these findings five years ago, but we haven’t implemented them yet. So focusing on getting that gas out of the ocean is crucial. Another thing is cyber. The fact that we are a world power now doesn’t guarantee that we will be a cyber power 10years from now. We are doing everything possible, from tax benefits and government incentives to moving the military to the south to build a huge ecosystem which will turn Beersheba into the world capital of cyber. We will be focusing on other commercial opportunities, such as the ecosystem for 3D printing, and employment for Arabs and ultra-orthodox who are becoming an increasingly large percentage of the population. We want to include them more broadly into society. I feel blessed I have the opportunity to deal with these challenges.
How would you assess the present situation in terms of defense cooperation with the US?
There’s defense cooperation at all levels. Military exercises, intelligence sharing, etc. The relationship is deep and open. We share information regularly. If you think about different contacts, people in different countries around the world, obviously you look at things on multiple levels. I would go so far as to guess that the number of US business cards that Israelis have in the prime minister’s office is double that of many countries larger than us, and I suspect that the number of Israeli business cards in the rolodexes of US officials in Washington is disproportionate to our size.
Being born in US, what is your opinion regarding the perception of the American community in general about Israel?
I lived in the US for 22 years. I think it is misleading to speak generally, because any good market knows that you have to segment your audience. Different people see things differently. I don’t know of any successful company that doesn’t have a marketing department. America is a big place, with millions of people. You have to segment how the Americans look us; some of them look at us very favorably and others do not. If I may be so bold, I would go so far as to say that there is a very strong correlation between perception and familiarity. The more people know us, the more they see us favorably. The less familiar they are, the more they see us as out-of-date stereotypes of two or three decades ago.
What final message you would like to convey?
Judge for yourselves; don’t take my word for it. Come here and take a look. I guarantee if you have never been here before, you will be blown away by the innovation and you will want to come back again.