Israel: Second only to Silicon Valley

Microsoft Israel R&D Center located in Haifa.

When the Silicon Valley is imagined by most people, images of a sunny upper-middle class corner of Northern California come to mind. Nice cars, casual attire, rolling green hills, fresh air and people working for companies that are changing the way the world operates. Mention Israel and all of a sudden these images are often replaced by middle eastern stereotypes. Truth be told though, while Israel does not top Silicon Valley, it does manage to at least reach second-best. Donna Rosenthal even points out that few Israelis "know that engineers at Motorola-Israel developed the first cell phone and that most of Windows NT was created at Microsoft-Israel" (Rosenthal, 93).

In 2011, Emma Barnett from UK-based Telegraph notes that Israel has the highest number of high-tech start ups, next to the United States. Even more impressive, it is only beat by the US and China when it comes to the number of companies listed on the NASDAQ. The Telegraph does note that unlike Silicon Valley, Israel doesn't focus on consumer products such as Apple's iPhone. Overall though, Barnett paints Israel as a major player in the tech industry. Barnett is reliable enough as she did some research and even learned something new:

"Additionally I was surprised to learn many technology companies, including Google, Microsoft and Intel, choose to have their major research and development (R and D) centres inside this small state"

Barnett brings up a point that seems to be Rosenthal's overall thesis in the chapter Swords into Stock Shares from her book The Israelis. Essentially, what may have contributed to the growing tech industry is the mandatory military service. BRM Technologies co-founder Eli Barkat (Rosenthal, 79) is quoted in the book discussing how his experiences in the military more or less shaped his problem-solving skills. Equipment shortages in Lebanon were solved by Israeli soldiers taking apart broken abandoned Jeeps (Rosenthal, 81).

With that said, Israel still has a few things to learn from Silicon Valley. Amir Efrati from the Wall Street Journal covered the 100% private start-up accelerator UpWest Labs which helps Israeli tech companies learn from the likes of Facebook, Google and Zynga. UpWest's co-founder Gil Ben-Artzy was an Israeli who found success in Silicon Valley working for Yahoo. Impressed by Israeli technology he sought to give them the same opportunities he feels are available in Silicon Valley. One problem Israelis have that is noted is that they may come off as being negative in the way they handle business. Rosenthal relates in a way, quoting Eli as stating that with Israelis, "you close the door on them and they jump through the window" (Rosenthal, 81). Efrati undoubtedly has high hopes for this start-up accelerator, as the Wall Street Journal article is beaming with support for UpWest.

With Israelis being excellent at problem solving and Americans great at consumer-end products, it is no surprise that companies such as Microsoft do place their R&D centers within Israel. This sort of cooperation is a great example for free trade enthusiasts as the division of labor allows for Israelis to do what Israelis do best and Americans to do what Americans do best with little or no interference.