While innovation is in principle an unlimited resource, and one that spreads on its own, almost every company wants to obtain the maximum benefit from this process. The world’s major companies learned long ago that the simplest way to benefit from Israeli innovations is to buy an Israeli start-up, set up an Israeli R&D center, or both. With our increasingly global world and the movement toward open sourcing, there is little need for multinational companies to try to duplicate the business environments of countries that have a comparative advantage in manufacturing, innovation, or regional market access.
That said, most major companies understand that in a global market where change is the only constant, innovation is one of the foundations of long-term competitiveness. Further, while it is possible for countries and companies to take advantage of innovation that originates elsewhere, there are also corporate and national advantages to being the source of innovation.
For this purpose, it may be possible to simulate an “Israeli” environment. Intel Israel’s Dov Frohman, for example, found it necessary to do this even in Israel itself. His original guiding slogan for Intel Israel was that it would be “the last Intel plant to close in a crisis.” When his employees found this description to be too negative, he changed his slogan to “survival through success”—meaning that the goal was success but the motivation was survival, which could never be taken for granted. For Frohman, the key to the success of a large company was “maintaining the atmosphere of a precarious start-up.”5
Further, while other democracies have no reason to institute a military draft like Israel’s, a mandatory or voluntary national service program that is sufficiently challenging could give young college-age people—before they begin college—something like the leadership, teamwork, and mission-oriented skills and experience Israelis receive through military service. Such a program would also increase social solidarity and help inculcate the value of serving something larger than oneself, whether a family, a community, a company, or a nation. And when U.S. military men and women, for example, are transitioning to civilian life, they should not be advised to deemphasize their military experience when applying for a job.
For any nation and, indeed, for the world, the stakes of increasing innovation are tremendous. Paul Romer, considered one of the leading economists of “new growth theory,” points out that the average annual growth rate of the United States between 1870 and 1992 was 1.8 percent—about half a percent higher than in the United Kingdom. He believes that this competitive edge has been maintained by America’s “historical precedent for creating institutions which lead to better innovation.”6 Romer suggests that subsidizing graduate and undergraduate studies in science and engineering could boost economic growth. In addition, a system of “portable fellowships,” which students could bring to any institution, would encourage lab directors and professors to compete over meeting the research and career needs of students, not just their own.
Romer points out that the biggest leaps in growth and productivity were produced by “meta-ideas” that increased the generation and spread of ideas. Patents and copyrights were a critical meta-idea invented by the British in the seventeenth century, while Americans introduced the modern research university in the nineteenth century and the peer-reviewed competitive research grant system in the twentieth century.
“We do not know what the next major idea about how to support ideas will be. Nor do we know where it will emerge,” writes Romer. “There are, however, two safe predictions. First, the country that takes the lead in the twenty-first century will be the one that implements an innovation that more effectively supports the production of new ideas in the private sector. Second, new meta-ideas of this kind will be found.”7
About an hour and a half into our meeting with President Peres, we ran out of time. His next scheduled appointment had arrived, and we prepared to say our good-byes. But as we stood to do so, he paused for a moment and said, “Why don’t you come back in half an hour and we can continue?” So we did, and he previewed what his message would be for Israel’s entrepreneurs and policymakers in the coming years: “Leave the old industries. There are going to be five new industries. Tremendous—new forms of energy, water, biotechnology, teaching devices—there’s a shortage of teachers—and homeland security to defend against terrorism.” Nanotechnology research, for which Peres has also been instrumental in establishing funding, he predicted, would cut across all of these new industries and others as well.
We don’t know whether Peres has picked the right industries, but that’s not the point. At eighty-five, he still has the chutzpah to think up and advocate new industries. As they do in Israeli society (and have throughout Israel’s history), the pioneering and innovative impulses merge into one. At the heart of this combined impulse is an instinctive understanding that the challenge facing every developed country in the twenty-first century is to become an idea factory, which includes both generating ideas at home and taking advantage of ideas generated elsewhere. Israel is one of the world’s foremost idea factories, and provides clues for the meta-ideas of the future. Making innovation happen is a collaborative process on many levels, from the team, to the company, to the country, to the world. While many countries have mastered the process at the level of large companies, few have done so at the riskiest and most dynamic level of the process, the innovation-based start-up. Accordingly, while
