Start-up Nation

by Dan Senor, Saul Singer

  While the idea may have been a good one, its execution was poor. By the beginning of the 1990s, when large waves of Russian Jewish immigrants began to arrive following the collapse of the Soviet Union, the school was one of the worst in the city and known mainly for delinquency. At that time, Yakov Mozganov, a new immigrant who had been a professor of mathematics in the Soviet Union, was employed at the school as a security guard. This was typical in those years: Russians with PhDs and engineering degrees were arriving in such overwhelming numbers that they could not find jobs in their fields, especially while they were still learning Hebrew.

  Mozganov decided that he would start a night school for students of all ages—including adults—who wanted to learn more science or math, using the Shevach classrooms. He recruited other unemployed or underemployed Russian immigrants with advanced degrees to teach with him. They called it Mofet, a Hebrew acronym of the words for “mathematics,” “physics,” and “culture” that also means “excellence.” The Russian offshoot was such a success that it was eventually merged with the original school, which became Shevach-Mofet. The emphasis on hard sciences and on excellence was not in name only; it reflected the ethos that new arrivals from the former Soviet Union brought with them to Israel.

  Israel’s economic miracle is due as much to immigration as to anything. At Israel’s founding in 1948, its population was 806,000. Today numbering 7.1 million people, the country has grown almost ninefold in sixty years. The population doubled in the first three years alone, completely overwhelming the new government. As one parliament member said at the time, if they had been working with a plan, they never would have absorbed so many people. Foreign-born citizens of Israel currently account for over one-third of the nation’s population, almost three times the ratio of foreigners to natives in the United States. Nine out of ten Jewish Israelis are either immigrants or first- or second-generation descendants of immigrants.

  David McWilliams, an Irish economist who lived and worked in Israel in 1994, has his own colorful, if less-than-academic, methodology to illustrate immigration data: “Worldwide, you can tell how diverse the population is by the food smells of the streets and the choice of menus. In Israel, you can eat almost any specialty, from Yemenite to Russian, from real Mediterranean to bagels. Immigrants cook and that is precisely what wave after wave of poor Jews did when they arrived having been kicked out of Baghdad, Berlin, and Bosnia.”7

  Israel is now home to more than seventy different nationalities and cultures. But the students Sergey Brin was addressing were from the single largest immigration wave in Israel’s history. Between 1990 and 2000, eight hundred thousand citizens of the former Soviet Union immigrated to Israel; the first half million poured in over the course of just a three-year period. All together, it amounted to adding about a fifth of Israel’s population by the end of the 1990s. The U.S. equivalent would be a flood of sixty-two million immigrants and refugees coming to America over the next decade.

  “For us in the Soviet Union,” Sharansky explained, “we received with our mothers’ milk the knowledge that because you are a Jew—which had no positive meaning to us then, only that we were victims of anti-Semitism—you had to be exceptional in your profession, whether it was chess, music, mathematics, medicine, or ballet. . . . That was the only way to build some kind of protection for yourself, because you would always be starting from behind.”

  The result was that though Jews made up only about 2 percent of the Soviet population, they counted for “some thirty percent of the doctors, twenty percent of the engineers, and so on,” Sharansky told us.

  This was the ethos Sergey Brin absorbed from his Russian parents, and the source of the same competitive streak that Brin recognized in the young Israeli students. And it gives an inkling of the nature of the human resource that Israel received when the Soviet floodgates were opened in 1990.

  It was a challenge to figure out what to do with an immigrant influx that, although talented, faced significant language and cultural barriers. Plus, the educated elite of a country the size of the Soviet Union would not easily fit into a country as small as Israel. Before this mass immigration, Israel already had among the highest number of doctors per capita in the world. Even if there had not been a glut, the Soviet doctors would have had a difficult adjustment to a new medical system, a new language, and an entirely new culture. The same was true in many other professions.

  Though the Israeli government struggled to find jobs and build housing for the new arrivals, the Russians could not have arrived at a more opportune time. The international tech boom was picking up speed in the mid-1990s, and Israel’s private technology sector became hungry for engineers.

  Walk into an Israeli technology start-up or a big R&D center in Israel today and you’ll likely overhear workers speaking Russian. The drive for excellence that pervades Shevach-Mofet, and that is so prevalent among this wave of immigrants, ripples throughout Israel’s technology sector.

  But it was not just an obsession with education that characterized the Jews who arrived in Israel, from wherever they came. If education was the only factor explaining Israel’s orientation toward entrepreneurialism and technology, then other countries where students perform competitively on math and science standardized tests—such as Singapore—would be start-up incubators as well.

  What the Soviet émigrés brought with them is symptomatic of what Israeli venture capitalist Erel Margalit believes can be found in a number of dynamic economies. “Ask yourself, why is it happening here?” he said of the Israeli tech boom. We were sitting in a trendy Jerusalem restaurant he owns, next to a complex he built that houses his venture fund and a stable of start-ups. “Why is it happening on the East Coast or the West Coast of the United States? A lot of it has to do with immigrant societies. In France, if you are from a very established family, and you work in an established pharmaceutical company, for example, and you have a big office and perks and a secretary and all that, would you get up and leave and risk everything to create something new? You wouldn’t. You’re too comfortable. But if you’re an immigrant in a new place, and you’re poor,” Margalit continued, “or you were once rich and your family was stripped of its wealth—then you have drive. You don’t see what you’ve got to lose; you see what you could win. That’s the attitude we have here—across the entire population.”8

  Gidi Grinstein was an adviser to former prime minister Ehud Barak and was part of the Israeli negotiating team at the 2000 Camp David summit with Bill Clinton and Yasir Arafat. He went on to found his own think tank, the Reut Institute, which is focused on how Israel can become one of the top fifteen wealthiest nations by 2020. He makes the same point: “One or two generations back, someone in our family was packing very quickly and leaving. Immigrants are not averse to starting over. They are, by definition, risk takers. A nation of immigrants is a nation of entrepreneurs.”

  Shai Agassi, the founder of Better Place, is the son of an Iraqi immigrant. His father, Reuven Agassi, was forced to flee the southern Iraqi city of Basra, along with his family, when he was nine years old. The Iraqi government had fired all its Jewish employees, confiscated Jewish property, and arbitrarily arrested members of the community. In Baghdad, the government even carried out public hangings. “My father [Shai’s grandfather], an accountant for the Basra port authority, was out of a job. We were very scared for our lives,” Reuven told us.9 With nowhere else to go, the Agassis joined a flood of 150,000 Iraqi refugees arriving in Israel in 1950.

  In addition to the sheer numbers of immigrants in Israel, one other element makes the role of Israel’s immigration waves unique: the policies the Israeli government has implemented to assimilate newcomers.

  There is a direct connection between the history of immigration policies of Western countries and what would become the approach adopted by Israel’s founders. During the seventeenth, eighteenth, and nineteenth centuries, immigration to the United States was essentially open, and, at times, immigrants were even recruited
to come to America to help with the settlement of undeveloped areas of the country. Until the 1920s, no numerical limits on immigration existed in America, although health restrictions applied and a literacy test was administered.

  But as racial theories started to influence U.S. immigration policy, this liberal approach began to tighten. The U.S. House Judiciary Committee employed a eugenics consultant, Dr. Harry H. Laughlin, who asserted that certain races were inferior. Another leader of the eugenics movement, author Madison Grant, argued in a widely selling book that Jews, Italians, and others were inferior because of their supposedly different skull size.

  The Immigration Act of 1924 set new numerical limits on immigration based on “national origin.” Taking effect in 1929, the law imposed annual immigration quotas that were specifically designed to prevent entrance of eastern and southern Europeans, such as Italians, Greeks, and Polish Jews. Generally no more than one hundred of the proscribed nationals were permitted to immigrate each year.10

  When Franklin Roosevelt became president, he did little to change the policy. “Looking at Roosevelt’s reactions over the full sweep of 1938 to 1945, one can trace a pattern of decreasing sensitivity toward the plight of the European Jews,” says historian David Wyman. “In 1942, the year he learned that the extermination of the Jews was under way, Roosevelt completely abandoned the issue to the State Department. He never again dealt really positively with the problem, even though he knew the State Department’s policy was one of avoidance—indeed, obstruction—of rescue.”11

  With the onset of World War II, America’s gates remained barred to Jews. But the chief problem that faced Jews seeking refuge in the 1930s and the early 1940s was that America did not stand alone. Latin American countries opened their doors in only limited ways, while European countries, at best, tolerated only for a time the many thousands who arrived “in transit” as part of unrealized plans for permanent settlement elsewhere.12

  Even after World War II ended and the Holocaust became widely known, Western countries were still unwilling to welcome surviving Jews. The Canadian government captured the mood of many governments when one of its officials declared, “None is too many!” British quotas on immigration to Palestine became increasingly tight during this period, as well. For many Jews, there literally was no place to go.13

  Deeply aware of this history, when Britain’s colonial term in Palestine expired, on May 14, 1948, “The Declaration of the Establishment of the State of Israel” was issued by the Jewish People’s Council. It stated, “The catastrophe which recently befell the Jewish people—the massacre of millions of Jews in Europe—was another clear demonstration of the urgency of solving the problem of its homelessness. . . . THE STATE OF ISRAEL will be open for Jewish immigration.”14

  Israel became the only nation in history to explicitly address in its founding documents the need for a liberal immigration policy. In 1950, Israel’s new government made good on that declaration with the Law of Return, which to this day guarantees that “every Jew has the right to come to this country.” There are no numerical quotas.

  The law also defines as a Jew “a person who was born of a Jewish mother or has become converted to Judaism.” Citizenship status is also granted to non-Jewish spouses of Jews, to non-Jewish children and grandchildren of Jews, and to their spouses, as well.

  In the United States, an individual must wait five years before applying for naturalization (three years if a spouse of a U.S. citizen). U.S. law also requires that an immigrant seeking citizenship demonstrate an ability to understand English and pass a civics exam. Israeli citizenship becomes effective on the day of arrival, no matter what the language spoken by the immigrant, and there are no tests at all.

  As David McWilliams describes it, most Israelis speak Hebrew plus another language, which was the only language they spoke upon arrival. In some Israeli towns, he says, “there is a Spanish-language paper published every day in Ladino, the medieval Spanish spoken by Sephardic Jews kicked out of Andalucia by Ferdinand and Isabella in 1492. . . . In Tel Aviv’s busy Dizengoff Street, old cafés hum with German. The older German immigrants still chat away in Hoch Deutsch—the language of Goethe, Schiller, and Bismarck. . . . Further down the street, you are in little Odessa. Russian signs, Russian food, Russian newspapers, even Russian-language television are now the norm.”15

  Like Shai and Reuven Agassi, there are also millions of Israelis with roots in the Arab Muslim world. At the time of Israeli independence, some five hundred thousand Jews had been living in Arab Muslim countries, with roots going back centuries. But a wave of Arab nationalism swept many of these countries after World War II, along with a wave of pogroms, forcing Jews to flee. Most wound up in Israel.

  Crucially, Israel may be the only country that seeks to increase immigration, and not just of people of narrowly defined origins or economic status, as the Ethiopian immigration missions evidence. The job of welcoming and encouraging immigration is a cabinet position with a dedicated ministry behind it. Unlike the U.S. Citizenship and Immigration Service, which maintains as one of its primary responsibilities keeping immigrants out, the Israeli Immigration and Absorption Ministry is solely focused on bringing them in.

  If Israelis hear on the radio at the end of the year that immigration was down, this is received as bad news, like reports that there was not enough rainfall that year. During election seasons, candidates for prime minister from different parties frequently pledge to bring in “another million immigrants” during their term.

  In addition to the Ethiopian airlifts, this commitment has been repeatedly, and at times dramatically, demonstrated. One such example is Operation Magic Carpet, in which, between 1949 and 1950, the Israeli government secretly airlifted forty-nine thousand Yemenite Jews to Israel in surplus British and American transport planes. These were poverty-stricken Jews, with no means of making their way to Israel on their own. Thousands more did not survive the three-week trek to a British airstrip in Aden.

  But perhaps the least-known immigration effort involves post–World War II Romania. About 350,000 Jews resided in Romania in the late 1940s, and although some escaped to Palestine, the Communist government held hostage others who wished to leave. Israel first provided drills and pipes for Romania’s oil industry in exchange for 100,000 exit visas. But beginning in the 1960s, Romanian dictator Nicolae Ceaus¸escu demanded hard cash to allow Jews to leave the country. Between 1968 and 1989, the Israeli government paid Ceaus¸escu $112,498,800 for the freedom of 40,577 Jews. That comes out to $2,772 per person.

  Against this backdrop, the Israeli government has made the chief mission of the Ministry of Immigrant Absorption the integration of immigrants into society. Language training is one of the most urgent and comprehensive priorities for the government. To this day, the ministry organizes free full-immersion Hebrew courses for new immigrants: five hours each day, for at least six months. The government even offers a stipend to help cover living expenses during language training, so newcomers can focus on learning their new language rather than being distracted with trying to make ends meet.

  To accredit foreign education, the Ministry of Education maintains a Department for the Evaluation of Overseas Degrees. And the government conducts courses to help immigrants prepare for professional licensing exams. The Center for Absorption in Science helps match arriving scientists with Israeli employers, and the absorption ministry runs entrepreneurship centers, which provide assistance with obtaining start-up capital.16

  There are also absorption programs supported by the government but launched by independent Israeli citizens. Asher Elias, for example, believes there is a future for Ethiopians in the vaunted high-tech industry in Israel. Elias’s parents came to Israel in the 1960s from Ethiopia, nearly twenty years before the mass immigration of Ethiopian Jews. Asher’s older sister, Rina, was the first Ethiopian-Israeli born in Israel.

  After completing a degree in business administration at the College of Management in Jerusalem, Elias took a market
ing job at a high-tech company and attended Selah University, then in Jerusalem, to study software engineering—he had always been a computer junkie. But Elias was shocked when he could find only four other Ethiopians working in Israel’s high-tech sector.

  “There was no opportunity for Ethiopians,” he said. “The only paths to the high-tech sector were through the computer science departments at public universities or private technical colleges. Ethiopians were underperforming on the high school matriculation exams, which precluded them from the top universities; and private colleges were too expensive.”

  Elias envisioned a different path. Together with an American software engineer, in 2003 he established a not-for-profit organization called Tech Careers, a boot camp to prepare Ethiopians for jobs in high tech.

  Ben-Gurion, both before and after the state’s founding, had made immigration one of the nation’s top priorities. Immigrants with no safe haven needed to be aided in their journey to the fledgling Jewish state, he believed; perhaps more importantly, immigrant Jews were needed to settle the land, to fight in Israel’s wars, and to breathe life into the nascent state’s economy. This is still seen as true today.

  CHAPTER 8

  The Diaspora

  Stealing Airplanes

  Like the Greeks who sailed with Jason in search of the Golden Fleece, the new Argonauts [are] foreign-born, technically skilled entrepreneurs who travel back and forth between Silicon Valley and their home countries.

  —ANNALEE SAXENIAN

  TODAY,” JOHN CHAMBERS SAID AS HE TOOK LARGE sideways steps across the stage to illustrate his point, “we’re making the biggest jump in innovation since the router was first introduced twenty years ago.” He was speaking into a cordless microphone at a 2004 Cisco conference.1 Though he was in a business suit, the fifty-four-year-old chief executive of Cisco—which during the tech boom had a market value higher than General Electric’s—looked like he might break into a dance routine.