Pages

The core strength, and weakness, of Israel’s economy

28 June 2017
No comments
Categories: Afternoon Tea in Jerusalem, Business, Israel, Jerusalem

Yesterday, I was talking to a client in Jerusalem, an expert in mobile and app development. We discussed the importance of the role of leadership – the motivation of teams – when considering the successful outfits he has been associated with.

I contrast this reflection with three pieces of news emanating from Israel this week.

First, the results of a Dan & Bradstreet survey were published. It revealed that there are  just over 300 international r&d centres operating in Israel, which employ around 71,000 people. This is the equivalent to about 25% of the high-tech community. A further 91 multinationals are considering a move into Israel. And there is a considerable positive knock on effect to the local economies, whereever these companies are located in the Holy Land.

A separate survey from the Bank of Israel analysed how:

Israel is the global leader in the proportion of people employed in high tech – 9%, more than double the medial in the OECD countries; in venture capital investments as a percentage of GDP; and in the ratio of the added value of the information technology sectors to GDP – both goods and services.

Around 60% of the high-tech sector, including those overseas corporations are located around Tel Aviv and the costal plain. The problem is that the other 90% or so of workers are employed in relatively low paid occupations.

The question is does this matter to the government? What can it do about the situation in terms of creating long term strategic plans?

For an answer, I refer – with disappointment, if not anger – to the third piece of news. On Monday, the government decided to capitulate to two demands of the ultraorthodox factions in the coalition. The result has caused a swift and wide rift with about a 50% of American Jewry and with the diaspora in general. This is something the country can ill-afford, but the decisions do help to sustain the unity of the government.

Meanwhile, the tragic comedy continues, featuring those children supposedly being treated for cancer in a Jerusalem hospital. Following a dispute between the management and the medical team, the latter have left their posts. The Minister of Health has dismally failed to bring the sides together. And the Prime Minister has shown no ability nor will to interfere, if only because his health minister is from an ultraorthodox party.

And that is called national leadership? And you then expect the government to help traditional sectors of the economy, where most people are employed? Thank goodness that Israeli high-tech is generally kept out of the hands of local politicians.

Israel’s on-going trade with Saudi Arabia

20 June 2017
No comments
Categories: Afternoon Tea in Jerusalem, Business, Israel, Jerusalem

Back in 1973, prompted by the Yom Kippur war, the Arab boycott of Israel really took off. One of the most notable effects were those Japanese car companies, who with the exception of Subaru, refused to do business with the Holy Land.

And today in 2017? BMW, Volkswagen, Toyota et al either have r&d centres in Israel and / or have incorporated Israeli tech into their engines. In other words, the boycott is rapidly becoming irrelevant, as Israeli services and products penetrate the heartlands of the members of the Arab League.

Let us consider Saudi Arabia, the largest country and the richest and arguably the most conservative in that political block. It is common knowledge in Israel that for years the kingdom has accepted Israeli goods. (Quite often they have been repackaged in places like Cyprus.) Secret meetings between the two countries stretch back at least a decade, if not more. Back in February 2017, Bloomberg detailed how Israeli high-tech companies were cooperating with Saudis.

As is to give this a rubber stamp, the London newspaper, the Sunday Times published an article, which claims that these ties are about to become more official. At a first level, El Al could fly their planes over Saudi airspace.

Maybe, but I urge caution. I was more struck by an item in Hebrew by Doron Peskin. He noted that Saudi Arabia really does not consider Israel as a source for widening its economic growth, as the Kingdom looks for new and alternative streams of revenues. In other words, the breakthrough – if and when it is to come – would be more of the political and strategic nature, as opposed to a commercial upheaval.

Certainly, there have been rumours of the Saudis purchasing Israel’s “Iron Dome” system against missiles. And if that is not ironic enough, all these stories come during a period when Saudi Arabia is leading the boycott against Qatar and when Israel is planning to sell some of its gas reserves to Jordan.

Yes, times are a changing in the Middle East. And even the slow moving desert kingdom of Saudi Arabia is signaling that it is prepared to consider playing a role in the revolution.

3 new takeaways on Israel’s culture of innovation

15 June 2017
No comments
Categories: Afternoon Tea in Jerusalem, Business, Israel

Israel, the ‘start up nation’; it is phrase so often repeated that it almost loses its significance. So it was refreshing to read about three pieces of news this week, which illustrate just how dynamic the Israeli economy remains.

  1. We learnt that the Chinese government is setting up the first of three funds, which together will have a value of more than US$1 billion in capitalisation. They will focus on investing in Israeli high-tech.
  2. Peter Thiel, the initial investor in Facebook, returned to the Holy Land. His keynote talk covered a wide range of subjects, in particular stressing the need not to imitate the Zuckerbergs and Gates of the world. What I found interesting is his analysis of what sets Israel apart from the USA. The country’s learning structure ensures that students can mix fields of education if they wish. This approach encourages and enhances entrepreneurship.
  3. Moving further afield, the newspaper “The Calcalist”, translated as “The Economist”, has begun to advertise its next conference in London. Headlined “The next game-changers”, it will consider how industries are transformed. And this is at the essence of what Israeli innovation has been about for the past three decades.

I am reminded of a story told by an Israeli, who is VP in sales in a multi-national. He explained how as a naval officer, he was sent on a course to a British academy. One Sunday evening, the participants were given some time off and they all huddled into a small TV room, which was tuned to a boring wildlife programme. ‘All’ in the sense of all bar the story teller and another Israeli. They simply showed some initiative, snuck out, went next door to another room, and sat in quiet comfort watching something they opted to choose.

Everything seemed fine, when in burst a senior British commander. The gents from Israel began to smell a strong punishment in the offering. However, the local officer burst into a broad smile, and said: “Now I know how you Israelis always win your wars”.

The parallel lives of the brand ‘Jeremy Corbyn’

12 June 2017
No comments
Categories: Afternoon Tea in Jerusalem, Business, Israel

On Thursday night last week, the UK Labour Party under Jeremy Corbyn failed yet again to win a British General Election. However, his jabs at his rival, Theresa May, secured a few broken ribs, despite her starting out the campaign with all the heavy gloves.

What happened and why is this a dangerous case study for the managing of brands?

May fought the battle on two fronts. She determined that she is a better leader and that the managing of Brexit was to be the main issue. However, the proverbial ‘u-turn’ on pensions showed up core elements of incompetence. It also highlighted how for many Brexit was not the pressing matter on people’s minds.

Take the 20 – 35 year olds. Many can neither afford to rent nor to buy. May offered them no hope, none whatsoever. Hope is a key factor in any election in any country. In other words, sections of society felt abandoned.

So, Corbyn, depicted as the lover of terror groups, financially incompetent, and a poor performer in the House of Commons, suddenly found himself in a position where such weaknesses were perceived as secondary. That he has sucked up to brutal dictators like Assad, praised the IRA during its days of murdering British civilians, and is surrounded by anti-semites – all fundamentally spitting in the face of core British values – were factors to be seen as irrelevant. Corbyn was of the hook. he had been transformed into a ‘breath of fresh air’.

Let me be clear. To adapt the words of an old Rowan Atkinson sketch, I would not trust Corbyn to sit the right way on a lavatory seat.

But there is something far worse about Corbyn. I am currently reading a masterful book, written over 20 years ago by Professor Alan Bullock: “Hilter and Stalin – Parallel Lives“. I have just finished the section on 1917 to 1923 in Russia, and I felt that I read it before. Here is why.

First, I refer to Bullock’s review of Lenin and internationalism. When Labour launched a document three weeks ago on how to tackle racism in the UK, including anti-Semitism, it was built on three planks, one of which is internationalism. And what does that long word mean in this context?

Briefly, people should be allowed to practice their religion in freedom. However, when it comes to the Jews, then ‘we’ have a problem. Because 99% of all Jews see themselves as a nation. They pray to Zion and face towards Jerusalem. That individualism is not allowed under internationalism!

And that is why, when the Labour document referred to the evils of anti-Semitism, it could bear to mention even once the connection between hate crimes against Jews and what is happening in the Middle East. This in turn explains how Corbyn is known to encourage talks with Hamas, dedicated to the violent destruction of Israel and in cahoots with ISIS. In other words, terror is better than a democratic country like Israel, which allows all regions to pray openly. That is what Britain wishes to prefer?

Second, Lenin was a Bolshevik. Between the first and second revolutions of 1917, his role was to create disruption. A strategical genius with little grasp of true governance, he fully understood the implications of a weak central authority. And when others were looking in the opposite direction, he seized full power overnight and then wrapped the claws of the party around it tightly.

Note how Corbyn has progressed in the past two years. And observe his actions over the next few months against a badly wounded Prime Minister. Theresa May started out as an all-conquering, smiling brand, accepted (but not worshipped) by many. She opened the door for the ‘other side’ of Corbyn to walk through, and he has not stopped strutting since.

It is not just she who has been warned. This is a message that goes out beyond her own party.

Growing riches, and debts, of the Israeli economy

9 June 2017
No comments
Categories: Afternoon Tea in Jerusalem, Business, Israel

There has been much good news this week about the Israeli economy. Writing in the Financial Times, Sir John Reed observed how the success of  ‘Israel Inc’ has defied isolation.

The OECD’s latest analysis is incredibly optimistic. Growth will remain strong, if a little lower, at around 3.25% in 2017. Unemployment is to remain relatively low at about 4.5%. while inflation will stay under 2%. It is interesting to note that private consumption will be the engine the drives the economy, as stats on the average wage continues to show overall growth.

One sector of the economy that in the past couple of years  has really taken off – pun intended – is aviation travel. The Israeli Aviation Authority has released figures illustrating how average prices for travel have dropped between 12 and 30% over the past three years. In parallel, the number of airports operating flights to Israel has risen from 110 in 2012 to 138 last year.

Judging from the mass of people at Ben Gurion airport yesterday, that pattern is set to continue. This means far more jobs for the travel and local tourism industries.

Where is the catch? Well, I have written countless times about structural problems – vested interest blocking urgent reforms in the ports, Electricity Corporation, import monopolies on food items and cars – to name but a few. I want to concentrate here on something more unusual; the ugly word called ‘debt’.

First, it emerges that banks have been lending so brashly to the home sector that individuals have taken out 23% more in loans than they did just three years ago. These levels are not yet dangerous, and as noted above the economy can bear it. However, the numbers show similar trends to those leading up to the sub-prime collapse of a decade ago.

That is very worrying. The question is why have the banks gone down this path?

Consider the ‘super defaulters’. Since 2010, seven of Israel’s wealthiest individuals have run up massive corporate debt. This is when the banks are forced to wipe off billions form their financial statements. The latest such incident involves Eliezer Fishman.  The current rescue proposal would allow him to walk away from nearly 1.5 billion nis (close to US$0.5 billion) of his debts to the banks, mainly Bank Hapoalim.

This has led to a public outcry. Why? Because the people who will have to take up the slack are those who have been allowed to or encouraged to take out extra small loans, paying lots of unnecessarily high interest. In other words, the banks quietly pass on their mistakes to the average person, and the Bank of Israel appears powerless to stop this evil.

In other words, the Israeli economy is doing well. The problem is that the Israeli economy is being propelled by private consumption, which in turn is fed partially by those troublesome bank loans. That might suit short-sighted politicians, but not the long term prosperity of the country.

Israeli innovation – 46% of the next part of the story

5 June 2017
No comments
Categories: Afternoon Tea in Jerusalem, Business, Israel, Jerusalem

In a series of articles on Israel, CNBC television has noted that “Hightech makes Israel dream of other industries”. Quoting Avi Hasson, the former head of Israel’s Innovation Authority, they reported:

Traditional definitions of high-tech and low-tech are out of date. Everything is getting technologized. There’s not a single sector that’s not being disrupted, or that doesn’t benefit from innovation.

As if to prove the point, CNBC went on to highlight Israel’s move into space tech, a field previously confined primarily to the ‘big nations’. This is after Israel has set the standards in mobile tech, accounts for around 15% of international investment in cyber security, and with some irony – considering the oil price wars of the 1970s and 1980s – is now a pioneer in car technology.

However, Hasson makes a important point. Israelis look for the opportunity to innovate, and this is not restricted to high-tech. Here are three brief case studies to illustrate what I mean.

ITEM 1: Sitting in my office in Jerusalem last week was a team from a small private company, closely involved in social services. Established for some years and with a clear set of revenues, they are trying to create a new strategic plan. To put this another way, they are prepared to rip up their existing business model and start again.

ITEM 2: About a week and a half ago, my son asked for a ‘free consultation’, as I bought him brunch. He wanted to know how he should combine his studies, while also developing the concept of his start up. I encouraged him to look at the bright side.

Over the past 18 months, he has set up an NGO for a subject that he is passionate about. This has involved defining the potential market of the NGO and what content it can provide clients. Further, he has recruited a team of volunteers, who are now motivated and dedicated to the cause. Last month, they held two successful events. As he clearly understands, this process is very similar to that of a start up. In other words, with some patience and a great deal of determination, there is a good chance that he will come through on all levels.

ITEM 3: Israel has a biblical connection to wine. A bunch of grapes is the symbol of the country’s tourist industry. But whisky, well, that is another story. It is now evident that “Milk and Honey” is now longer just another phrase from the time of Abraham. It is the name of the Israel’s first distillery. It was established as the result of a chance conversation between some young entrepreneurs about five years ago.

The factory is located in southern Tel Aviv, which bears few similarities to the glens of Scotland. And yet the team has raised money via a crowdfunding campaign and it had secured the services of one of the industry’s prime tasters. Israel’s first ever single malt whisky – over three years in a cask and released at 46% strength – is soon to hit the shops.

And whilst this latter form of innovation and entrepreneurship may not be to the accord of everyone, these anecdotes go to show how the Israeli economy has emerged. As described above, in Israel even the most traditional of industries are today part of the world of high-tech.

Israel’s economy – 50 years since the 6 Day War

2 June 2017
No comments
Categories: Afternoon Tea in Jerusalem, Business, Israel, Jerusalem

Israel has spent a week marking 50 years since the onset of the 6 Day War. A pre-emptive strike saw a tiny country change overnight. Jerusalem was reunited. The West Bank and the Golan Heights commenced on a period of unprecedented economic growth.

It is difficult to ignore the negative publicity that Israel has encountered since then. Putting that noise to one side, a series of Israeli economists posed the question if the country has benefitted commercially from the military miracle of June 1967. The financial newspaper, ”Calcalist” summarised some of the numbers and the observations.

As a starting point, Israel’s fledgling economy invested 9.9% of its GDP in defense in 1966. A decade later, that number had soared to over 35%. Over the past decade, the ratio has steadied at around 6-7%, of which nearly a quarter is devoted to pensions and similar indirect outlays.

And how were those expenses financed? Simple; badly, via printing money, an exercise that imploded in mid 1985, when prices and wages had to be frozen.

It is worth noting that the immediate period after 1967 was marked by an economic recession and high unemployment. It was only by 1972 that the economy began to see a marked improvement, which was nipped in the bud a year later with the Yom Kippur War. The real boom only followed a remodeling of the economy in 1985, which fortunately was to coincide with the high-tech era.

Israel’s current population is approaching the nine million level, of whom about 400,000 live in the West Bank and the Golan Heights. Around two-thirds classify themselves as religious or observant Jews.

  • Even though there are 14 industrial zones in these areas encompassing about 900 businesses, they contribute less than 1% of the total value of the country’s exports.
  • Per person, the government invests around 3,000 nis in these regions, compared to about 2,00 nis for other peripheral towns in the country.
  • One estimate puts the total government investment in the West Bank and Golan Heights at 826 million shekels in 2016 – about US$225 million – down from 990 million shekels in the previous year.

This is not a judgment paper on what could have been and why. This is not to say where resources could or should have been invested. As every first year economics student learns, economics is the science of making choices – the allocation of resources.

Today, Israel is a full member of the OECD. It hosts over 300 leading multinationals – Porsche is the latest member of that club. There is freedom of worship for all. It shows how much can be achieved, if you concentrate on peace rather than looking for war.

Israel – The ‘Start Up Nation” in numbers

30 May 2017
No comments
Categories: Afternoon Tea in Jerusalem, Business, Israel, Jerusalem

Israel is known as the ‘start up nation’, a wonderful compliment for a country which is 50% and whose economy was effectively bankrupt back in 1985.

And today? Just look at the news for the past week alone:

A) Hexadite, a cyber company set up in 2014 and which employs 35 people, was bought out by Microsoft for US$100.

B) NSO, which is contracted by governments to protect mobiles, is now valued at around US$1 billion, after several high profile contracts in the past year or so.

IVC Online, which has been tracking investments in Israeli corporates for some years, released in April a fascinating survey of the progress of the ‘start up nation’ over the past decade and beyond.

According to figures prepared by the high-tech research firm for ‘The Marker’ (newspaper), 653 start-ups that had been in business for at least four years closed up shop in Israel in 2014 – the latest year for which there are figures – up from 630 in 2013. By comparison, the number of companies started was 1,290.

Now, it must be said that these ratios are similar to other countries like America. But I would like to summarise some of the other findings:

Just under half of all start ups are located in Tel Aviv. And over 90% of the entrepreneurs are male.

In 2005, 553 starts ups set off on the path to glory, where as 236 closed down. By 2014 as noted above, the respective figures were 1,290 and 653.

Of the approximately 10,000 companies created since 1999, 54% are still in operation. A further 6% have been bought out. Of the later, just under half were sold at a loss.

Looking solely at 2016, 54% of the exits were valued at under US$5 million. A further 9% at over US$100 million.

And where did the money go to in 2016? 35% – software; 18% – telecomm; 17% – life sciences; 16% – internet; Much of the rest went to cleantech.

What are the takeaways from all of these and other statistics? Naturally, everyone has an opinion on what could have been and what still needs to be done better. However, I think there is another way to consider the situation, viewing it as a ‘work in progress’.

Last week, Israel hosted its annual Biomed conference in Tel Aviv. In the first week of June, Geektime will be operating a major Techfest over four days. ISDEF, one of the world’s most prominent HS conferences, will also be held in Tel Aviv. And Techcrunch are hosting a ‘pitchoff’ on 27th June.

In other words, the party is nowhere near over. There is more to come. And it is not too late for others to learn about Israeli society’s box of innovative tools.

Israel’s contrasting economy – not what you may expect from intelligence

24 May 2017
No comments
Categories: Afternoon Tea in Jerusalem, Business, Israel, Jerusalem, Palestinians

“Israel’s economy is a study in contrasts“. Thus headlined “The Economist” magazine a few days ago.

The article is wide in its scope. For example, it highlights the desert city of Beersheva as a world leader in creating cyber technology. And that is just for starters. The economy grew at 4% last year. Unemployment resides at a lowish 4.3%. Public debt at 62% of the GDP is one of the best ratios in the OECD. The shekel currency has appreciated by 13% against a basket of leading global currencies. And so on.

The magazine does feature the weak side of the Israeli economy. Restrictive import and licensing practices keep the cost of food unnecessarily high. Productivity stats are poor. And with boring predictably, the authors cites Israel’s defense policy for the main cause of the a weak Palestinian economy. Thus, in real terms, “Gazans are about 25% poorer today than they were at the time of the Oslo Accords”.

This is an argument that sounds politically powerful. However, it bares up, neither in the numbers game nor against the facts on the ground. First, as I have mentioned in the past, when the World Bank examined the Palestinian economy prior to 1994, when it was governed by Israel, “the annual growth rate (for the period 1968 to 1999) establishes itself at 5.5%.” As the author Sebastian Dessus observed, this was one of the highest rates in global terms, even allowing for substantial population growth.

The point is that this begs the question as to why the Palestinian politicians refuse to allow cooperation with Israel.

And then there is 8200, renowned as Israel’s high-tech unit in the army, whose geeks produce software and hardware that James Bond filmmakers cannot even dream about. In parallel, for some years, many of the alumni of this elite group have struck out in the start up world. And it is no secret that against what might be considered assumeded norms from around the globe, they have been openly seeking cooperation with the Arab sector in Israel.

Well the 8200 “Hybrid Accelerator” has just initiated its latest round of intakes. They include SAF, Brainkos and Shareshipper to name just three of the seven involved. One cardinal condition for acceptance into the programme is that each team must include at least one Arab member on its staff.

It is this form of contrast which sets the Israeli economy apart, especially from those of its neighbours. This approach, embracing the views of all religions and backgrounds, that is one of the key reasons why Israel has become known as the start up nation. And that is why “The Economist” is able to report on such positive economic stats for the Holy Land.

Jerusalem in 2017 – a city living up to its name

20 May 2017
No comments
Categories: Afternoon Tea in Jerusalem, Business, Israel, Jerusalem

May 2017 in Jerusalem – week commencing Sunday 21st – and the city could rarely have been more busy.

President Trump arrives on Monday lunchtime, creating havoc to the traffic for 36 hours. Then on Tuesday night celebration begin, commemorating 50 years since the reunification of the city following the 1967 Six Day War. At the end of the week, the mosques will begin the calls for the month of Ramadan. And a few days after that is the holy festival of Shavout, where Jews flock to the Wailing Wall at 5.00 in the morning, as Christians celebrate Pentecost. Phew.

Jerusalem has come a long way since 1967. The period preceding that was marked by tension. The Jordanians ruled the Old City of the eastern approaches. They boarded up the gap in Jaffa Gate, one of the main routes to the Wailing Wall. They destroyed vast parts of the cemetery on the Mount of Olives, fortunately missing the tombstone of my great grandfather. In fact, when the Israeli cabinet met during the build up to the war in 1967, the minutes reveal that the participants could hear sporadic shooting in the distance.

The current mayor, Nir Barkat, has released a video ahead of the Trump visit. It is an enlightening explanation, demonstrating how barbed wire has vanished. In its place is a multicultural city that is becoming a leading centre for high-tech in the Middle East. And the proof is readily available:

  • Yarok Food Safety Fast Testing System has just secured a UN Innovation Award. The company enables fresh food producers in developing countries to detect hazardous bacteria within 45 minutes.
  • US Medical device conglomerate, Medtronic, is about to open a r&d centre in the holy city.
  • Last week, Snapchat founder, Evan Spiegel, was in Jerusalem, clearly scouting out more targets for partnerships.

The name “Jerusalem” has disputed origins. Some refer to the word ‘shalom’ or ‘peace’. Others see its meaning in the term ‘complete awe’. And that is just to give a sample of the interpretations.

However you look at it, Jerusalem in 2017 is a vibrant, open city, that welcomes visitors who include President Trump and aging rockstars. It is a united city that has so much to offer the rest of the world. I wish Trump well as he is whisked around the holy sites and more. It is only because Israel is a democracy, the single democracy in the Middle East, that he is able to enjoy such a tour.

Are investor panels biased against the female pitch?

17 May 2017
No comments
Categories: Afternoon Tea in Jerusalem, Business, Israel

Over the past month, I have received some requests from female clients to help them overcome the bias they face from male panelists as they present at investor ‘pitch events’.

I was astounded. Here we are; Israel in 2017. A core assumed fundamental to the successful entrepreneurial sector is transparency – to allow everyone to come through and to have a chance. So why is there a problem?

Let me paraphrase their explanations. It appears that the overwhelming majority of the presenters and the panelists are of the male gender. And in parallel, any pitch event is supported by a number of pretty, youngish-looking females. And, for my clients, the male presenters look their part, many having come through the macho and pushy system of the army.

I am a business coach and mentor. I believe that I have prepared my people well. They are armed with a catchy story. Their business model is reasonably solid. They can explain the salient points of their markets succinctly. In return, they receive excellent, positive feedback all round. And yet with unvarying disappointment, they do not advance to the next stage.

There is a strong whiff of sexism in the air, latent or otherwise. So what can the female protagonist do about it? One of my suggestions is to exploit the tool of endorsements. Seek out opinion leaders or social movers who can vouch for you and / or your product. Their voice will make it very difficult for any chauvinist to play their cards.

I suppose it is an interesting question if these shakers and movers need to be male or female!

The strength (and weakness) of the Israeli economy

8 May 2017
No comments
Categories: Afternoon Tea in Jerusalem, Business, Israel

By all accounts, Israel’s economy is swimming along very handily, despite the complete discord between the Prime Minister and his Minister of Finance.

Israel’s economy has been hailed as one of the most robust in the world. Near-nonexistent inflation and a low unemployment rate of 4.8% have helped propel Israel to the No. 3 spot on a list of the world’s most stable and promising economies for 2016 published by the Bloomberg financial news agency. ………In March, Bank of Israel said the Israeli economy grew by 4% in 2016, exceeding projections by 1.2 percentage points and marking the most solid economic performance for the country since 2012.

Fair enough. That summary did come from a newspaper, Israel Today, that is closely linked to the Prime Minister. But let us give credit where credit is due.

An OECD report, summarizing Israel’s performance since joining the organisation in May 2010, is equally encouraging. It reveals a really strong set of macro economic indicators. For example: –

  • Israel’s debt ratio in relation to GDP stands at 62% and falling, while the OECD average hovers close to 90%.
  • Israel’s economy has grown over 23% in 7 years, about double the OECD average.
  • The average unemployment rate in the OECD is 6.3%. The rate in Israel fell to 4.1% last month.
  • Israel’s public finances have recorded a 4% annual surplus for several years, much healthier than in the rest of the OECD

 So where is the proverbial “but”?

It seems that much of the new stability, should I say additional wealth, is not finding itself to those who could do with it. Consider these numbers.

  • Israel has one of the highest levels of inequality in the world between the top and bottom income earners.
  • At 18.6%, Israel has the highest level of poverty in the OECD.
  • Only 8.6% of the GDP in Israel reaches the ‘have nots’, far below the OECD average of 12.3%.
  • Israel invests less in health and in education than its fellow members of the OECD.

Now, it is possible to argue that Israel is a special case. It has to devote extra resources to defense needs. Internally, the make up of the population is not homogenous. And so the arguments continue.

What cannot be denied is that the government is consistently failing in pulling up the lower economic echelons of society. One day, that socio-economic failure, if it continues, will come to judge us all. That economic price is often very painful.

The value of a 6 line story – ask the investor

7 May 2017
No comments
Categories: Afternoon Tea in Jerusalem, Business, Israel

Much of my work as a business mentor in the past few months has focused around creating presentations for clientele who are looking to place themselves in front of potential investors or new clients. And the key element as a coach is to help them find a hook or a story that can be ‘thrown out there’ right at the beginning of the session.

But just why is this anecdote or narrative so important?

In a talk delivered in Israel last month, branding expert Jonathan Gabay introduced a fascinating infographic. In an average 60 seconds on the internet, he explained that there are 900,000 Facebook logins, 16 million text messages, 1.8 million snaps, and oh so much more. That is a megaload of information.

So, when you come before that investor you have to please or the client whose money you want, they too are being bombarded with stats. The challenge is for you to come up with a concise, succulent and memorable piece ditty that hits an important nerve. However, that task is easier said than done.

Sonya Davidson introduced me to an excellent talk by Professor Jennifer Aaker, entitled the “Power of Harnessing Stories”. Her central theme is that studies have repeatedly shown how “stories are remembered up to 22 times more than facts alone.”

Buried in her brief talk, Aaker hits on two major take-aways

  1. Stories encourage or empower people to act on your behalf.
  2. Your story should be your “signature”. To take that thought one step further, a story will highlight your passion, proving to your audience just why they will want to join you on your journey.

I was reminded of these points over the last few days when I separately engaged in conversation with two CTOs of different start ups, one located in Israel and one in Europe. One of them did not know who I was. Both had no idea what I could potentially offer. However, both had an opportunity over three to five minutes to deliver a “killer elevator pitch”, yet never really managed to climb beyond the first floor.

Now, I do not want to boast that I could have definitely helped either of them, but how often do they repeat those mistakes? And what about many others like them? And all for the sake of having available one golden nugget of a story.

Remember, be it reeling in new business or that investor who you want to talk to, most opportunities only come around once. The solution, be prepared, and start preparing now.

Israel’s independence and the relevance of Zionism today

3 May 2017
No comments
Categories: Afternoon Tea in Jerusalem, Business, Israel, Palestinians

Earlier this week, I wrote how Israel’s 69th birthday party, the celebrations for Independence Day, reflect its amazing economic progress over the decades. In this third and final review, I want to look at one of the lesser known aspects of Zionism – how to relate to Arab minorities.

While pre-state / pre 1948 Zionist leaders fought amongst themselves, many accepted that there must be room for non Jews to play a full roll in the new country. Given geopolitical dynamics, that statement has not been easy to fulfill all the time and there is still much to be done. What can be said is that today, about 25% of the population is not Jewish and this is roughly represented in  the Kenesset, the Israeli Parliament.

How does this outreach manifest itself outside the realms of politics? I want to delve into the complex situation in Syria. The international media, even those outlets known to be hostile to Israel, has often reported and filmed how Israel has been treating thousands of wounded civilians fleeing from the battles in Homs and elsewhere.

I have read an analysis on the activity of the hospital in Nahariya. This is located near the Israeli-Lebanese border and whose managing director is Dr Masad Barhoum, an “Israeli, an Arab and a Christian – in that order“. Since 2013, the hospital has looked after about 1,600 Syrians, roughly 70% of those treated in Israel. The average period of hospitalisation is about 23 days, which reflects the seriousness of the injuries. And the cost of this treatment, estimated in the hundreds of millions, comes out of the purses of the taxpayers.

Remember, from time immemorial, Syria in its various forms has displayed nothing but outright hostility to Israel. And it is difficult to latch on to similar outreach work from Arab countries in the region. In the worst case scenario, Iran is investing its precious oil revenues in strengthening the armies of Hizbollah and Hamas, the very opposite of what Israel is practicising.

My hope is that when there is a Palestinian leadership that comprehends what this form of Zionism can offer them – as per Egypt and Jordan previously – then the path to peace can open up for all.

Israel’s economic independence

2 May 2017
No comments
Categories: Afternoon Tea in Jerusalem, Business, Israel

Yesterday, I wrote about Israel celebrating her 69th year as an independent entity. One of the most notable signs of the change throughout the decades is how the economy has improved. This week’s commercial and financial news is indicative of that progress, and carries positive implications for the global economy.

At a macro level, unemployment is now registered at 4.2%. Few other countries an boast such can achievement in the present economic climate. In parallel, the country’s credit rating remains high. For example, Fitch has recorded it at A+.

Investments remain positive. For example, the American based agro-tech venture capital fund Finistere has announced that it will looking to create an Israeli portfolio, making large sums available. Three more Israeli companies will join 11 others and launch on the Australian stock market. And the French-German government collaboration in Airbus will set up a centre on the Holy Land, concentrating on cyber technologies.

The lesson here is clear. Israel needs to import raw materials. However, its exports to world arena are used by all.

Yet one of the most pleasing aspects of development has been in the hidden sector of the small business community. Now, it is an open secret that such organisations are often the power house of many economies, accounting for over 90% of commercial activity. In Israel, this is as high as 99%.

The number of these businesses in the Holy Land has now reached 520,000. This represents a 12% jump in just one year. They account for 61% of all of those employed in the private sector and over 70% of all new positions created during 2014 and 2015. Not surprisingly, their profitability as a whole is improving.

Looking ahead to the next year, challenges remain. There are many issues relating to infrastructure – ports, privatization, monopolies – that need to be tackled, urgently. That said, the prospects for a bright economic future in Israel remain firm,

Israel at 69 in 2017 – the meaning of numbers

1 May 2017
No comments
Categories: Afternoon Tea in Jerusalem, Blog, Business, Israel

Founded in May 1948, Israel is celebrating its 69th Independence Day this week. It is a national holiday. And the slide shows abound to reveal how much there is to celebrate.

Let me entertain you with a few stats to illustrate what has changed over the decades.

  • The population has grown ten fold from around 800,000 to 8.6 million, 75% of whom are Jewish
  • Imports and exports were calculated at US252 million and US$29 million in 1949. The equivalent numbers in 2016 were US$65 billion and US$52 billion.
  • GNP has leapt forward by a factor of 46.
  • In 1961, there were about 0.5 million salaried workers. Today, there are about 3.5 million. And for the record, unemployment is at about 4.2%.
  • 12 Israelis have won a Nobel Prize.

Independence Day is always preceded by a day of mourning, Memorial Day, for those who fell in battle or other attacks. And here the numbers make depressing reading. 23,544 have lost their lives in the services. A further 3,117 have been killed by terrorists.

And that is where we must leave the numbers. Because each victim has a story to tell. They are part of a family that has been brutally wounded. And these families together make up the nation.

In a sense, the numbers that describe the growth and improvement are a testament to those no longer with us. It is not just revenge. They represent what can be achieved when a nation focuses on peace.

And that is Israel’s message to its enemies in the region and beyond. The modern state in the Holy Land has not just shown it is here to stay. It shows others how great things can be attained by ordinary citizens whatever their background or religion.

Jerusalem and Holocaust Day – a reminder we all need

24 April 2017
No comments
Categories: Afternoon Tea in Jerusalem, Business, Israel, Jerusalem

Holocaust Day in Israel is usually held towards the end of April. The exact date each year recalls the Hebrew day of the desperate and tragic uprising of the Warsaw Ghetto. The BBC posted today that:

Israel’s Holocaust memorial, Yad Vashem (“A Memorial and a Name”), has been working to recover the names of all the victims, and to date has managed to identify some 4.7 million…. (and) has collected 2.7m Pages of Testimony.

Jerusalem is the home of Yad Vashem. Located towards the south west of this special city, the museum looks westwards, directly and deliberately towards the former wastelands of Europe.

You always know when it is Holocaust Day in Jerusalem. The weather closes in. The evening, when the services of remembrance begin, is almost invariably chilly. (The previous day had seen a heat wave!) Throughout the main parts of the city there is a delicate quiet, which cannot be described as peaceful. And when the sirens ring out at 10.00am sharp each year, it takes the birds and wind to break the silence.

Approaching Holocaust Day, you always wonder what more is there to learn about this horrendous event. It is over 72 years since the camps ceased to function. Isn’t it just a matter for the historians. And yet, fascinating stories never cease to emerge from the ashes, and many are to found in Jerusalem.

The Parliamentarian Rachel Azaria lives in Israel’s capital city. She recently discovered a letter from her great-grandmother. In 1933, as Hitler was sweeping to power, the lady wrote to the ailing President Hindenburg: “Is incitement against Jews a sign of courage or cowardice, while Jews are only one percent of the German people?”

If that was not brave enough – call it chutzpah – what is more incredible is the response.

Hindenburg responded to Friedman two days later saying he was opposed to violence and even included a handwritten response from Hitler on the letter, who claimed, “The claims of this woman are ridiculous lies. There was never any call for pogroms.”

Azaria owns the original letter, signed by the future dictator himself.

Not far from Azaria lives Daniel Schwab. He grew up in South Africa and moved to Jerusalem many years ago. His Facebook post today is chilling, as he details at least 12 members of his family who were murdered during World War Two. (Names can be located at the Yad Vashem registry).

Last week, Daniel’s Facebook page detailed how:

In May 1933, a young man named Rudolf Schwab (my grandfather) fled Nazi-occupied Germany. His departure came at the insistence of a close friend who later joined the Nazi Party. Schwab eventually arrived in South Africa, one of the few countries left where Jews could seek refuge, and years later, resumed a relationship in letters with the Nazi who in many ways saved his life.

“From Things Lost: Forgotten Letters and the Legacy of the Holocaust” is … an extraordinary collection of letters discovered in a forgotten trunk. (A near unique story).

(However,) here’s one of the craziest parts of the Schwab family story: Rudolph’s father Max was a loyal and proud German who served in the German army in WWI and was decorated for bravery and distinction. His commendation was signed by none other than…Hitler. Blows the mind.

And today, what do we see in Europe? Yesterday’s election result was a triumph for the right wing National Front Party of Marine le Pen. This force is riddled with anti-semites. Meanwhile, in London, Jeremy Corbyn’s attempt to gain power in Downing Street will be supported as ever by the Momentum, which the local Jewish community found many of its members to be equally loathing of Jews and / or Israel. Unfortunately, but for the wrong reasons, this too blows the mind!

And that is why Holocaust Day, especially when launched from Jerusalem, is so important. It offers a chance to remember that mankind has spent thousands of years intentionally picking out Jews and inflicting frightening horrors upon them. And that is why the phrase ‘never again” is so appropriate, when retelling and retelling and retelling these facts.

The business of the Israel business boycott

20 April 2017
No comments
Categories: Afternoon Tea in Jerusalem, Business, Israel, Palestinians

Boycotting Israeli businesses has been a policy of Arab nations since May 1948, when the State of Israel was founded. Just how effective is it today, nearly 70 years on, in a period of globalisation?

The boycott has seen many forms. Initially, the Arab League simply adopted the methodology of the Nuremberg Laws from Nazi Germany. And for decades, most Japanese companies stayed away from the Holy Land. Since the year 2000, the BDS campaign has taken up the call, demanding a disassociation from anything to do with Israel, including overseas players who visit the country.

Surely, over the years, there has been an unmeasured level of success of the messages of such policies entering the minds of neutral thinking people. The result is an increased distrust or worse of Israelis for some. But more than that?

My wife was recently talking to a leading techie in one of Israel’s premier IoT companies. He frequently travels to exhibitions, where Israeli companies are sought after. Any talk of a boycott is simply a joke. Business is business, and political vicissitudes have no place. And that is good for all of us.

As proof of that, look at today’s announcement by SAS to relaunch its flight schedule between Sweden and Israel. Now the Scandinavian country is no friend of Israel’s on the diplomatic scene, to say the least. However, the combination of tourism and business disrupts those paths towards hatred.

To quote from today’s announcement coming out of Israel’s Ministry of Tourism:

The following companies (have also) announced the opening of new routes(to Israel): WOW, Ryanair, Wizz Air, Hainan Airlines and Air India………..Incoming tourism increased 24% in the first quarter 2017 on the same period in 2016.

“Boycott” was a term born in violence in the 1880s. It was hijacked by the revolting racism of the Nazis. It is now employed by the enemies of Israel, hatred wrapped in politically platitudes. Ironically, BDS has a lot of support amongst leading Swedish politicians.

Let us hope the new trade and transport agreements show the way forward for all towards peace for all.

The conflicting trends of the Palestinian economy

18 April 2017
No comments
Categories: Afternoon Tea in Jerusalem, Business, Israel, Palestinians

For years, the Palestinian economy has been a dominant theme on the minds of international politicians and diplomats. Ironically, in an era of ‘fake news’, it seems to have fallen down in the pecking order of world issues. Is that because the champions of the Palestinian cause like Presidents of Syria and North Korea are more demanding, or has the reality on the ground changed?

There is no doubt that there is increasing evidence that the Palestinian economy has been on the up for some time.

And so the list goes on. However, in the opposite corner, there are plenty of downers, not helped by the insistence of Hamas in Gaza to devote resources to war rather than basic human development. For example: –

And meanwhile, in defiance of American law and European directives, the PA continues to fund the families of Palestinian martyrs and the welfare of cell mates in Israeli prisons. Officially, this was valued at US$180 million in 2016 alone. And it should be pointed out that much of the PA budget comes from overseas donations, which means the pockets of Western taxpayers.

In truth, the average Palestinian is still very poor. The official GDP is less than that of Egypt. And yet, the weaponry of Hamas becomes more sophisticated by the month. Leaders of the PA and Hamas live a life of luxury. Corruption is never far away from the talk of the day.

It is sad to see. The Palestinian economy, that could be so vibrant as its nascent high-tech industry is testing, continues to be doomed by leaders concerned with violence rather than people.

How doves have inspired generations of Israeli techies

16 April 2017
No comments
Categories: Afternoon Tea in Jerusalem, Business, Israel

A recent article in the Israeli newspaper highlighted how Israel has learnt how to prevent the actions of  “lone wolf terrorists’. This subject has become pertinent across the globe, when you consider the recent attacks in Nice, Berlin, London and elsewhere. My question is what does it teach us about the world of technology and innovation.

Israel security services have developed an operations model that not only demands enhanced cooperation between the various forces. They have “built profiles of participants in the demonstrations and then, using the social networks, we follow them and carry out arrests.”

Poke that simple sentence and you will drill down into a world of geeks in military green, fighting a cyber war on behalf of their country. These people will eventually make their way into civilian life and become the founders and core teams of new start ups.

Wishful thinking?  A report from “New York data firm CB Insights lists the nine most influential sectors of cyber-security innovation in 2017 and the 30 startups that have pioneering technology and the potential to shape the future of cyber-security.” Three are from Israel. As one article recently surmised, Israeli companies are in the forefront of protecting billions of IoT devices.

Where did the impetus for this technology whiz come from? The modern state of Israel was created in May 1948. Its neighbours rejected this accomplishment and invaded immediately, the only time an official UN motion has been discarded in return for war. Jewish communities were cut off in a terrain the size of Wales. What to do?

The nascent Israel turned to its communications corps, which resorted to the most up-to-date technique available. It trained a whole squadron in doves – 3 bases, 60 soldiers and about 1,000 birds. (I would love to have seen the morning parade). They included a special “regiment”. 200 strong, they were donated by the American Jewish community of Pennsylvania, having seen prior service in World War II. With no telephone lines (and no internet), an enterprising spirit invoking a technology of old saved the day.

Although the unit was gradually disbanded during the 1950s, Kibbutz Givat Brenner has spent the past decade raising a new crop of doves. My point is that this cute, fascinating story, written up in the Ha’aretz newspaper, enables us to learn a great deal about Israel and its innovation.

When people ask me how Israelis have come to be known as a start up nation, a good part of my explanation is that it is inherent. Innovation is in their blood. Israelis have always moved ahead by being entrepreneurs. To invoke a biblical phrase at this season of both Passover and Easter, Israelis see a ‘stumbling block’ as something to go around and not a halt sign.

Client Feedback

"Michael transformed the way I think and approach working, and also how to monetize my social media and communal projects."

CEO of digital media company

"Michael helped my high tech company take off."

CEO of clean energy start up

"Michael has been an invaluable resource to me throughout all of the steps of starting up my business."

Art Studio owner

“Working with Michael Horesh is like having root canal treatment, marriage counselling and business coaching all rolled into one, successfully.”

CEO of digital media company
CEO of clean energy start up
Art Studio owner