Turning Lemons into Lemonade

Turning Lemons into Lemonade

The driving force behind Israel’s economic growth

What drives Israel’s economic success? It’s a fair question given Israel’s objective reality: a sovereign Jewish democracy in a hostile neighborhood, with a limited land mass and a dearth of natural resources.

Simply put, Israel’s growth is spurred by an existential imperative to turn lemons into lemonade. (Lemonade is even the name of an Israeli insurance start-up now valued at >$2Bil.) Imbued with the strength of its innovative and resilient citizens, Israel evolves not despite its challenges but as a direct result of them. This determination permeates Israeli society primarily to ensure Israel’s welfare and survival, but also to promote the capabilities and pride of the Jewish State.

Consider, for example, the precedents to Israel’s incredible (and completely outsized) accomplishments in the technology arena:

• A requirement for weapons technology to constantly defend itself from dangerous neighbors

• The responsibility to absorb large numbers of immigrants

• The need for alternative sources of fresh water, energy, and conservation measures

What became of these “lemons?”

• Israeli entrepreneurs adapted the knowledge they gained in the military to make Israel a global leader in cybertechnology and other software and hardware applications.

• In just one of its immigration waves, in the 1990’s Israel quickly settled 900,000 new immigrants from the former Soviet Union, many of them engineers, professors and scientists who fed Israel’s nascent tech scene with much needed professional skills.

• Israeli scientists pioneered the use of desalinization and drip irrigation, making Israel the global expert in water technology.

So too, the rise of major Israeli corporations has mirrored these challenges, with Israel Aerospace Industries, Teva Pharmaceutical, and Dead Sea Works among Israel’s prominent success stories.

How will the expertise Israel has forged continue to produce above-average growth in the future?

I asked Eran Nitzan, Minister of Economic Affairs, The Embassy of Israel to the U.S.: “Israel could not ask for a better situation [in which] to flourish”, according to Nitzan. “If you want to survive the data revolution you need to be partnering with Israeli innovation.”

It is basic supply and demand: the world wants what Israel is good at. Increasingly, the value-add segments of global economies are technology focused - witness the growing emphasis on STEM curriculums for students around the world. Furthermore, the challenges that Israel has faced have proliferated elsewhere, and global leaders are turning to Israel for solutions:

• In 2018, Israeli startups received almost 20% of global venture capital investments in cybersecurity (>$1Bil.)

• Agricultural producers in drought-hit regions like California have partnered with Israeli drip irrigation leader Netafim; Watergen is pulling water out of the air in Africa and around the world.

And while technology is a backbone of Israel’s growth, other factors are fueling its economic expansion as well. Israel’s population is growing >2% annually, creating real estate and infrastructure demands that are transforming both Israel’s major cities as well as the North and South – and employing skilled and unskilled workers to construct housing, roads, etc. Israel’s growing population will require more doctors and hospitals, along with teachers, merchants, lawyers and other service providers. And all of this growth will require myriad new municipal workers.

In addition, Israel’s natural gas finds will lead to an industrial complex (and jobs) to extract, transport, utilize and export the gas – not to mention explore advancements in clean resource technology. And Israeli tourism “Hasn’t scratched its potential,” according to Nitzan.

Ultimately, what can propel Israel into an even higher economic orbit is to leverage its strengths to benefit a broader base of its population. This is one of the challenges facing Israel, which we will dive into in our next post.