Sunday, November 20, 2011

What Can We Learn from Israel?

One does not change a culture easily. Tom Friedman of the New York Times most recent book was entitled "That Used To Be Us." It is fairly depressing. The Israeli venture capitalist Jon Medved said, "The US needs to regain its mojo."

The US is still the most innovative country on earth. I saw significant potential collaborations between SC researchers and Israeli researchers in nanotechnology, neurology and other areas. There were at least two dozen Israeli companies that can potentially establish some kind of partnership with SC.

The population of the US is a little over 312 million. Israel is 7.5 million. SC is 4.5 million. We can not import culture. We can work to rebuild elements of the Israeli culture that are so successful. Let's look at the success factors and see what can be adopted.

1. Risk Taking. Outside of Silicon Valley and a handful of other entrepreneurial hotbeds, there is still a fear of failure when it comes to entrepreneurship. The Israeli economy suggests to American entrepreneurs, "why not?"

2. Immigration. In my opinion, we are going the wrong direction on this one. Most of the graduate students in engineering at USC are from outside the United States. We should staple a green card to their diploma, but that is not happening.

3. Ability to question authority. That is more in the culture of individual companies, but it should be encouraged.

4. Universal military service. It won't happen, but I for one would vote for two years. It think it would give the government a labor source, and would better prepare young people for college.

5. Government policy. SC has tried to become a business friendly state and for the most part has succeeded. I think that SC Launch can be every bit as effective as the Israeli incubators. We need to consider adding some support services to the effort. Russ Keller from SCRA/SC Launch was on the Mission and all over this idea.

6. Education. Don Herriott and Jim Reynolds, Co-Chairs of the New Carolina Education Task Force, have been exploring ways of improving the education ethos in SC. This should be among our highest priorities, but it is difficult to change someone who doesn't value education.

A great first step in connecting SC with Israel are the collaborations that I have idscussed over the last seven days. A speaker at Technion had a slide with a 2500 year old quote from Confucious. "Tell me and I will forget. Show me and I may remember. Involve me and I will understand."

Thanks again to all of the organizers, trip participants and Israeli hosts. It was a great trip.

Day 6: Coming Home

Day 6 was actually one long night. We left Tel Aviv at 12:40 AM after spending two plus hours winding through security (which given the threats, I actually appreciated.) We arrived in New York 11 hours later, which because of the seven hour time shift, was still dark.

So why is Israel so innovative? Experts such as the authors of Start-up Nation and venture capitalist Jon Medved cite the following reasons:

1. Risk. As a people, the families of Israelis have survived the holocaust, fought eight wars since 1948, and still have heads of nations calling for their extermination. What kind of threat is a business failure? Israelis are very willing to take risks.

2. Immigration. The Israelis opened their doors to Jews from everywhere in 1948. Even though the Jewish immigrants had a common language and common historical memory, they brought the motivation and the cultural interplay that have made first generation immigrants among the most successful entrepreneurs in the US. Shortly after the Israeli Declaration of Independence in 1948, some 687,000 Jews from around the world came to Israel. THEY CAME KNOWING THAT THE ISRAELIS WERE AT WAR WITH THE ARABS. Between 1989 and 2000, more than 950,000 Russian Jews immigrated to Israel. Many of the latter were well educated in science and medicine and immediately contributed to the country's intellectual horsepower.

3. Ability to Question Authority. It is probably not an accident that three of the world's five major religions started in Jerusalem. Jews have been questioning the reigning authority for a long time, and not without consequence. Today, according to venture capitalist Jon Medved, it is not uncommon for 19 year old employees to question a CEO about a decision. It is not uncommon for military privates to question officers. Why not? The junior employee or soldier may know more about a given situation than the Officer or CEO. In Israel, the culture encourages them to speak up without fear of retribution. It is an inherent part of the innovation culture.

4. Universal Military Service. Every 18 year old (both men and women) have required military service. It provides a common experience and a common understanding of the importance of defense for all young Israelis. The best and brightest are selected for elite units. One of the best units requires eight years of participation. In the first year, recruits spend three months rotating and learning about each branch of service. They then spend two years getting the equivalent of a BS in computers or physics. The next five years are spent working on weapon systems, defense strategies and advanced security, while completing other course work. When they leave the military at the ripe old age of 26, the venture capitalists are lined up to grab them as start-up CEOs.

5. Government Policy.

Stan Fisher is the current Governor of the Bank of Israel, a post equivalent to the Chairman of the US Federal Reserve. Fisher is an American born in Northern Rhodesia. He has Bachelor and Masters Degrees from the London School of Economics and a Ph.D in Econonmics from MIT. Before coming to Israel, he was Chief Economist of the World Bank. Fisher recognized that low interest rates were a key to investment, and like the US, he lowered interest rates in 2006 to encourage investment. Unlike the US, he did not lower the requirements for home mortgages. Israel still required up to 50% money to get a home loan. (For that matter, government grants generally require a 50% private match.) As a consequence, Israel did not have the meltdown that affected the US economy.

The questioning of authority makes Israeli government fairly contentious. We heard three speakers with three widely different views on the Palestinian issue. However, on the issue of promoting innovation and start-up companies, of building infrastructure, and in supporting research and the university system, the government seems to be of one accord.

6. Education. There is a culture in Israel that values education. I hope I am not generalizing too much to say that this is a part of the Jewish DNA. It was clearly reflected in the visits we had.

So can it be sustained?

In December, 2005, after only six months in this job, Bill Ward, a Clemson Professor in International Business and a former World Bank economist, invited me to join him to look at the Celtic Tiger in Ireland. Ireland and SC are almost the identical population and identical land area. Ireland was the poster child for the new economy. Bill knew most of the leadership of the major Irish economic development agencies from his tenure at the World Bank, and as a consequence, we met with the heads of all of them. I came away very impressed with what they had done, but I did not see much direct translation to South Carolina. We could not implement a 12% corporate tax rate. We could not provide free four year degrees to those that wanted it. We could not be the English speaking interface between high tech companies in America and the European market. As it turned out, perhaps Ireland could not do that either.

My sense from leaving Israel is different. They are not just hosting American companies like Intel, Google, etc. They are innovating for them. They are not just relying on American superstars, but they are spinning out companies on their own, in fact some 700 per year. They have their own venture capital infrastructure. They have first class educational institutions that are largely focusing on scientific innovations. Those insitutions are providing significant research and development with an ey towards commercialization. I did not have that sense in Ireland.

There was a T-Shirt in a street shop in old Jerusalem that said "We Have Your Back America."

Short of the Iranians lobbing a nuclear device towards Israel, I believe that what they are doing is sustainable.

On the flight from Tel Aviv to New York, I sat next to a man with a craggy face and a pony tail to mid back. He was reading an old book on mathematics (I did not write down the title.) I struck up a conversation. Turns out that he was a Doctor at the Hadassah in Jerusalem, former Department Head and still practicing medicine at 75. He was flying to New York to visit one of his four sons. Two were physicians, one was working on his post doc in physics and one was a banker. A picture of Dr. London Mordechai will be on the blog pictures.

There will be one more blog on what can we learn from Israel.

Saturday, November 19, 2011

Day 5: Incubators and Accelerators

Our last full day in Israel was Thursday, November 19. As usual, we had the superb Israeli breakfast. At this hotel, it was a 100 ft long buffet that from right to left included coffee, juice, various kinds of cheese, fish, salads, fruit, yogurt, breakfast cereal, granola and many kinds of bread. The buffet turned left to the omelet and pancake/Belgian Waffle areas. They are designed to accommodate a range of nationalities. Maybe Israeli breakfasts are part of the reason they are so innovative.

Our first stop today was to Misgav to visit an incubator called The Trendlines Group. The Office of the Chief Scientist supports 26 incubators around the country. Companies in the incubators can receive up to $600,000 from the Government. This particular incubator was private and was one of two that actually invested in the resident companies. They have three facilities. Misgav focuses on medical devices, biotech and pharmaceuticals. The facility in Mofet focuses on agri-tech, green tech and clean tech energy. They also have a business development consulting arm called Signal. Trendlines has in-house staff support for accounting, regulatory requirements, patents, board management and mentoring. Those also provide business development support for resident companies through Signal. As a consequence, they attract some of the most promising companies in Israel. Some examples in medical devices include:

• A device that is an artificial sphincter for colostomy patients, attaching directly to the large intestine and allowing the patient to use throw away bags.

• A blood test for detecting Alzheimer's, Parkinson's and ALS. Currently the only tests are based on symptoms.

• A new approach to sleep apnea that does away with the face mask and continuous low pressure air.

• A new aortic valve that can be inserted through an artery, rather than with open heart surgery

• A new device for childhood scoliosis that requires only minimal surgery to implant the device. It allows the spine curvature to be corrected with stretching and exercise.

• For asthma patients, a new dry inhaler that monitors whether the pressure and particle size are correct

Like our other meetings at the WATEC, Weizmann Institute, Ben Gurion University, Technion and the Hadassah, we left with contacts and potential business and research opportunities. We finished the day with a one hour debriefing on what the group’s next steps are going to be. Each of the 27 members has specific follow-up responsibilities that we will track on our South Carolina-Israeli website.

We finished the day with a tour of Holy sites around the Sea of Galilee and dinner at an Israeli winery. We then boarded the bus for the return to Tel Aviv and the long flight home.

I have never been on a trip this well organized. There was a wide range of talented people in various fields representing South Carolina. I suspect all of us made lasting friendships. Ford Graham from the Department of Commerce was a great addition.

A major thanks to Mission Chair Jonathon Zucker and to Tom Glaser and his staff from the American-Israeli Chamber for their incredible organization and vision for what this collaboration can do for South Carolina.

My next few blogs will review the culture that makes the Israelis so innovative and what SC can learn from Israel. I hope blogs in the future will discuss the successful results of the South Carolina-Israeli collaboration.

Wednesday, November 16, 2011

Day 4: The Old and the New

We packed and left the Carlton early this morning traveling North to the ancient City of Caesaria. It is on the eastern end of the Mediterranean and has been conquered, destroyed and rebuilt at least 10 times. From recorded history, it was originally built by the Phoenicians. King Herod (a Jew, but with Roman interests) built into one of the world's great harbors in -10 BCE. Subsequently, the site was destroyed and re-established by the Byzantines, Moslems, Crusaders, French, Turks, British and now the Israelis. The site is a UN World Heritage Site and includes an original theater, a chariot race track, an aqueduct, and other ruins at least 2000 years old.

Around Caesaria is a beautiful area on land formerly owned by the Rothschild family. When Israel was formed, they turned the land over to the State, who then leased it back to a Foundation. The Foundation then endowed the area to create a community focusing on education, the arts and the public welfare. What they have created is magnificent.

We then went to Given Imaging at Yokneam. This is the company that invented the pill sized camera that is swallowed and can monitor the esophagus, the small intestine and even the colon. It requires no anesthesia. They have 300 patents, 300 pending patents, and grew from $5 million in sales in 2001 to $175 million in 2011. Their earnings per share have matched the sales growth and they have no debt. We used their building to interview nine other companies for potential collaborations.

The bus then went to Nazareth for a luncheon with the Nazareth and Galilee Chamber of Commerce. Nazareth is the largest Arab city in Israel. It was the home of Jesus, and I was astonished to learn that Bethlehem is more than 100 miles away. It was a long way to go to pay taxes, but I learned why they went. Let me just say that I learned more about the history of three of the five major religions in one week than I had previously learned in a lifetime.

After a quick visit to the Church of the Annunciation, we went to Technion, often called the MIT of Israel. We discussed a potential partnership in nanotechnology. At Technion I saw the same passion for patenting and commercializing new technology that I saw at Ben Gurion University, the Weizmann Institute and the Hadassah. Technion files 100 international patent applications per year.

Dinner was at a restaurant overlooking the magnificent city and Harbor of Haifa.

Tuesday, November 15, 2011

Day 3: WATEC

WATEC is a 20,000 person international convention with representatives from 97 countries. It is primarily a showcase for Israeli equipment and technology. I had the opportunity to participate on a panel in a breakout session called "Doing Business with North America". This particular panel was talking about challenges and opportunities in water.

They come to this conference because Israel may manage their water resources better than anyone. They get 11 inches of rain on average per year. (The Negev Desert in southern Israel that we visted yesterday is lucky to receive a half inch per year.) Every drop of water is used four times. Every roof top has rainwater collection systems.

The agricultural areas are irrigated with treated sewage through an extensive purple pipe system. The pipes are literally purple so that people know not to drink the water.

By 2015, the Israelis have set a goal to not rely on the 11 inches of rain. They are then not hampered as much by drought. By then, they will have two new desalinization plants online and 1/3 of their water will come from desalinization.

The Government owns all the water, and for that matter, all of the land, except for approximately 6% that the Arabs own. The land is leased under long term agreements to individuals and businesses. It is obvious that owning the land makes infrastructure management easier.

After my presentation, we met with at least half a dozen businesses that were interested in collaborating in some way with South Carolina. Some of the ideas appear revolutionary. I took ownership of one that involves using enzymes to improve the disinfection of private swimming pools.

Tonight we had dinner at Deputy Ambassador Tom Goldberger's home. Beautiful house, great dinner, fun day.

Monday, November 14, 2011

Day 2: Startup Nation

Today we headed South and began to visit with companies and research universities that were potentially interested in collaborations. I have no idea how many companies that we met with, but I think all 27 trade mission delegates had follow-up assignments with specific companies.

Israel spins out some 700 companies a year. The companies can get up to 50% funding from the Chief Scientist's office. The office receives 2000 applications and funds approximately one in five companies. The company then has an obligation to match money from the State one to one. There are 70 to 100 venture capitalists that typically invest anywhere from $3 million to $300 million in startups. There are organizations like the National Institute for Health (US), Foundations and other companies that can provide matching money. That is one motivation for the SC collaboration.

At noon, we visited the Weizmann Institute in Rehovot and had an overview of their technology initiatives. Chamir Weizmann was Israel's first President, a Ph.D Chemist and a great believer in research. He perhaps set the tone for the educational and research culture in Israel.

We took a bus from there to Be'er Sheva for meetings with officers and researchers at Ben Gurion University. There were breakout sessions and I went to the Nanotechnology/Robotics section. I will review only one of probably 20 technologies that were discussed. It was a five foot robotic snake probably five inches thick. It moved like a real snake, was painted black and could climb walls. John Warner wanted to take it home with him. One could wreak havoc with such a device. In fact, I could see no other real purpose, except that they could make a fortune selling them on

From there, we headed east to the Negev Desert. Our destination was a Bedouin camp, about 30 minutes from the Dead Sea. This was not a flat desert, but mountainous and mostly devoid of vegetation. The Bedouin's were essentially nomads with an acute sense of nature. They were trekkers that could read the desert like a book. They owned camels for transportation and large tents as mobile homes. The one that we had dinner in was probably 100 ft by 40 ft. We had a lecture from a Bedouin and then a fabulous dinner.

Quote of the Day: "The Life of the Bedouin woman was hard, including cooking, cleaning, child rearing, animal caring, and hosting frequent unannounced guests. If the work got to be too great, the husband would simply find another wife. They could then share the work."

Such generosity could result in a wife #3 as well. Somebody asked about three mother-in-laws. "Not a problem," we were told, "the wives were simply sharing the work."

On the way to the camp, we encountered an unusual desert phenomena: rain. OK, it was only enough to wet the windshield on the bus, but we were told that the desert would turn green in two weeks. There were seeds that had been waiting five years for moisture. More about water tomorrow when I will attend and speak at WATEC, an international water conference with 20,000 attendees.

Good night from Tel Aviv, where there has been a WATEC welcoming rain on and off for the last 24 hours.

Sunday, November 13, 2011

Day 1: Jerusalem, Lift Up Your Gates and Sing

Sunday is the first day of the Israeli work week, and we dutifully left the Hotel at 7:45 AM to drive to Jerusalem, the capital and largest city (750,000) in Israel. Our first meeting of the day was with the Trade Ministry and the Chief Scientist. It was the first time that I truly appreciated what a credible delegation that SC has. Russ Keller with SCRA stayed on after the meeting to try and negotiate a Memo of Understanding. Quote of the meeting. "Israelis are very direct. There is no word in Hebrew for 'tact.'"

Then, we split. I went with Tom Vogt, the Director of USC's Nano Center and Vincent Giurgiutiu, the Interim Dean for Research and Grduate Engineering, to visit 3G Solar. They have accumulated 13 patents on the dye solar cell as an alternative to silicon solar cells. I won't get into technical details, but Dr. Vogt, an expert in electrochemistry, was very impressed. If he were a venture capitalist, he said that he would invest.

We then joined the rest of the group at the Hadassah Medical Organization. This is an architecturally stunning medical school, medical research facility and hospital. In the center is a Synagogue with 12 large Marc Chagall stained glass windows. When I can figure out how to load a picture, I will include it in the blog. The luncheon was hosted by a law firm that specializes in intellectural property.

Our next stop was the Israeli Holocaust Memorial. Words will not adequately describe this experience. The museum winds through the Jewish experience from about 1933 until 1948. Six million Jews were exterminated, including 1.5 million children. Rather than describe it, the following link offers virtual tours.

At the end of the historical museum, we went through a special children's area. It is a cave, dark and with stars above. The names of the children, where they were from and how old they were, are being read. I'm not sure there was a dry eye when we came out. We then went to a special monument to a man who had established an orphanage for Jewish children. It lacks one arm, because he was unable to save them. Jonathon Zucker placed a wreath from SC on the statue. Jonathon lost 13 direct family members in the Holocaust and probably hundreds of cousins and other distant relatives. The only one to survive was his grandfather, who lost his wife, but met and married a childhood friend in Israel.

Quote of meeting #1. "It was the most highly educated people in Germany that chose to exterminate the Jews." Quote #2. "We would not be here if Jonathon Zucker's grandfather had not survived. Think of how many other families like the Zuckers never had the chance to succeed." Third quote: "We will never forget and never forgive. However, Germany has become our best business partner on Earth."

An example of the last quote. Israel placed an order for submarines with Siemans in Germany. The Germans decided to give the first two submarines at no charge.

From there, we went to the Old City of Jerusalem, which is divided into four quadrants: Jewish, Christian, Muslim and Armenian. We walked three of the four quadrants and then spent an hour in the Church of the Holy Sepulchre. It is on the site where Jesus was crucified, cleansed and buried. The management of the church is shared by the Armenians, the Greek Orthdox Church and the Roman Catholics. A large "bigger is better" tower by the Muslims is next door. At 5:00 PM, choirs for all three religions sing at prayer services. It was magnificent. Google the church for details.

We closed the day by going to the most holy of all Jewish sites, the Wailing Wall, at Mt. Moriah. It dates to the second century and was originally a magnificent temple some 530 meters long and 130 meters wide. The Wailing Wall is actually a retaining wall. The Jordanians controlled the site and prevented Israeli access until the 1967 war. The original wall was used as a foundation for a Muslim Temple. I suspect all of us prayed at the wall.

We closed the evening with dinner and an expert in current Israeli politics. He said that Israel's great failure has been their inability to attain peace in the Middle East. There are no agreements with any of the Middle East countries and the Arab Spring (a term for the recent uprisings) has created substantial uncertainty.

The Holocaust victims that survived the German concentration camps first tried to return to their homes in Germany, Poland and other parts of Europe. People occupied their former homes and threatened to shoot the Jews if they tried to take over. The British occupied Israel and would not accept Jewish immigrants. The displaced went back to the concentration camps and set up societies. Britain left Israel in 1948 and the United Nations partitioned an Independent Israel. The country was open to Jewish immigrants, only to have the Arabs in Isreal wage war two days after the Israeli Declaration of Independence. The Israelis had no military training, no arms, no fighting skills, but incredible motivation. Less than two years later, they won the war.

Maybe Tom Glaser of the American Israeli Chamber said it best: "To understand the phenomenal success of Israel, you must understand where they came from."

I'm sorry of the length of this blog, but I can't remember a more memorable day.

Saturday, November 12, 2011


I am pleased to be a part of the SC Trade Mission to Israel. Headed by Chairman Jonathon Zucker and the American Israeli Chamber of Commerce, 27 South Carolinians made the 24 hour journey to Tel Aviv. (The actual flight time from New York to Tel Aviv was 10 hours, but increased security, getting from Charlotte to JFK and just international travel add to the time.)

As many of you know, Israel is the second most innovative economy on earth. Significant innovations that came from companies in Israel include: the jump drive, the cell phone, voice over internet protocol, cordless phones, call centers, the desktop pentium chip, the laptop centrino, the DVD, plasma TV, LCD TV, cable TV, data compression, satellite TV, Firewalls, instant messaging and much, much more. Some of these innovations were with Israelis working for American companies like Intel, but they came out of Israel. For a discussion of this incredible success, see the book Startup Nation by Dan Senor and Saul Singer.

Israel has only 7.5 million people, but there is a culture here that rivals Silicon Valley. Tel Aviv is an international city that has been called the capital of cool. It's the second largest city in Israel with a population of 610,000 in the City and 3 million in the County. (Ignore my previous post that said Tel Aviv was smaller than Greenville County. I relied on Wickipedia.) We are at the Carlton Hotel that overlooks the Mediterranean. It has the fastest wireless internet connection I have ever seen.

SC is interested in establish both research collaborations and new business relationships in six key cluster areas. Those areas are:

Sustainable Systems (Agriculture, Water, Energy)
Transportation (Automotive and Aerospace)
Insurance and Health Information Technology
Advanced Materials

This week we will try to connect with the Israelis at different levels. We will try to better understand what made the country so innovative and how SC can benefit both the Israeli companies and ourselves. We will also try to develop opportunities for Israeli companies in SC.

I hope you will follow the daily blog posts.