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The real reason Israel works? It's in the DNA

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I recently spent some time in Israel. It is an astonishing country, buzzing with energy and confidence, a magnet for talent and investment - a cauldron of innovation. Meeting entrepreneurs and investors there, I was inspired and impressed.

Whether it is in aerospace, cleantech, irrigation systems, software, cybersecurity, pharma or defence systems, Israel is a world-class player. It is an example of how small nations can triumph despite the odds.

Its spending on research and development as a percentage of GDP is the second-highest in the world; it has more scientists and engineers per head than anywhere else; and a booming ecosystem of research institutes and venture capital helps to fuel technology transfer and outside investment - especially from America.

From Teva Pharmaceutical to Elbit Systems to Mobileye, its recent industrial achievements are remarkable. All this derives from brainpower, for Israel has no natural resources and is surrounded by hostile neighbours.

It is proof of the power of technical education, immigration and the benefits of the right sort of military service.

Taking risks has become a way of life

The book Start-Up Nation: The Story of Israel's Economic Miracle, by Dan Senor and Saul Singer, says that another key factor is the cluster effect of having so many high-tech companies, suppliers, researchers and investors concentrated in a small area.

But Israel's economic success is also about the Jewish spirit of enterprise. This was brought home to me by Derek Taylor's book Thank You for Your Business: The Jewish Contribution to the British Economy - a remarkably thorough survey of just how many companies have been founded, co-founded and/or run by Jewish entrepreneurs over the past century or so in this country.

It is an epic list, from Triumph Motorcycles to Granada TV, from Coats Viyella to Bunzl, from Tesco to Lex, from Photo-Me to Ladbrokes, from Hammerson to Odeon, from Sage to St Ives, from Compass to Carpetright, from Glaxo to Reuters, from Harland and Wolff to Kangol, from EMI to Shell… and many hundreds of other significant companies.

A large proportion of the entrepreneurs responsible for these businesses were first or second-generation immigrants, many from modest backgrounds.

I have spent much of my business career in partnership with very able Jewish entrepreneurs, so I can testify as to their capabilities and ambition.

Of course, the question that really fascinates me is this: what is the magic they possess that means so many do well in business? Taylor emphasises the importance of religion and family among the high achievers.

But that cannot possibly be the full explanation; many other ethnic minorities could say the same thing, yet none can claim such an extraordinary economic impact, despite a British population of only about 300,000 Jews.

Education and a desire for self-improvement are seen as characteristic of all prosperous, advancing societies, especially among striving immigrants.

But for most of the 20th century, Jews were under-represented in universities in Britain, suggesting that conventional attainment was not the reason they progressed in the commercial world.

A propensity for self-employment was clearly important, perhaps reflecting the culture of individualism so apparent in modern Israel, as well as the lack of a traditional hierarchy.

Similarly, among many immigrants there is a tendency towards risk-taking as a way of life, because these are self-selecting adventurers who have taken the plunge and moved country - and probably have little to lose, and perhaps no choice.

I wonder if DNA is on their side. The earliest agricultural societies settled in the Levant, in about 10,000BC, during the New Stone Age. By cultivating cereals and domesticating livestock, these Neolithic farmers were probably the world's first entrepreneurs. They established the principle of deferred gratification for greater gain, as opposed to the nomadic lifestyle that was prevalent until then.

So, almost certainly, groups such as the Jews, Armenians and Lebanese have been developing enterprises and trading goods longer than any others. All these ethnic groups have diaspora who exhibit exceptional capabilities in capitalism.

Of course, they have high performers in many other walks of life, but it is business that interests me.

Ultimately I think it is culture and communities that matter most for any cohort of would-be entrepreneurs. Role models, local networks, hard work and a respect for accomplishment are vital. The external environment is crucial too - Jews have done well in Britain as we have the rule of law and strong property rights.

Israel is not a perfect society: I visited the West Bank, thanks to some Jewish philanthropists, and saw some of the challenges faced by the Palestinian community.

Perhaps Israel's ingenious entrepreneurs can also solve the political problems of the Holy Land, and find an outcome in which all religions live in harmony.

Luke Johnson is chairman of Risk Capital Partners and the Centre for Entrepreneurs.

The Sunday Times/News Syndication

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