I never thought I’d say this…

I just finished reading Start-up Nation: The Story of Israel’s Economic Miracle, in which authors Dan Senor and Saul Singer document the unequaled track record of innovation and entrepreneurial accomplishment in Israel since its establishment more than 60 years ago.  They cite facts such as Israel having:

  • The highest density of start-ups in the world, 1 per 1,844 households
  • Venture capital investment that is 2.5 times that in the US, 30 times Europe, 80 times China and 350 times India – indeed, from 2000 to 2006, Israel more than doubled its share of venture capital from 15% to 31% of the world’s VC market
  • The most R&D spending as a percentage of a national economy
  • An economy that has grown 50-fold in 60 years.

Senor and Singer (“S&S”) attribute this unmatched success to 4 primary factors: the attributes of Israeli culture and personality; the government’s immigration and assimilation policy; the government’s policies in support of entrepreneurial start-ups, and the country’s isolation in a hostile region that fueled a critical need to survive and thrive. For now, I’d just like to address the author’s underlying belief that Israeli culture and personality is attributable to almost-universal military service because it changed my thinking radically.

The authors characterize the Israeli ethos as embracing assertiveness, frankness, informality, challenging of authority and questioning everything.  Furthermore, Israel is a nation of connectedness, where there is “one degree of separation” and most people either know and/or accept working with people of every nationality (there are over 70 countries of origin in Israel’s citizenry and many are 1st and 2nd generation immigrants) and socioeconomic status. These are attributes that are at the foundation of either innovation or entrepreneurship, and in many cases, both.

What is the source of this national personality?  S&S argue that innovation has its roots in almost all Israeli youth, both male and female, entering military service at age 18.  With a 2- or 3-year stint, these soldiers function in an environment of near-constant existential threat alongside fellow citizens of every stripe.  In this battlefield environment, improvisation, questioning of plans, informality in dealing with superiors, and tight bonding regardless of socioeconomic status are the norm.  Further, after active duty, those bonds endure in the long-term because military reserve duty lasts decades.

Another benefit of universal military service is that it precedes college; undergraduate students arrive on campus significantly more mature, ready and able to benefit from the opportunity to learn, to apply themselves (much like most US MBA programs in the US prefer applicants who matriculate after several years of post-undergraduate work experience).

The authors’ cogent argument got me to thinking.  I was a participant in the American draft lottery in the early 70’s that marked the end of the Vietnam War era and preceded the end of the draft and the beginning of a volunteer army in the US.  At the time, I was grateful for the high lottery number with which I (and others with the same birth date) randomly received, for it enabled me to avoid military service.  I now wonder if that was, in fact, the great benefit that I perceived it to be.  Perhaps if there had been no student deferments or high lottery picks, if all able-bodied Americans were called to serve, our national economy and social network would benefit in much the same way as Israel’s has.

I’m not advocating that all American youth should be conscripted and sent to the battlefield.  However, my strong personal view is that universal service (both military and community-based) after high school for our nation’s youth could benefit both the individuals and our nation’s economy significantly, growing a more mature, independent population of young adults who would derive more from higher education, emerge with more skills and initiative, be more adept at managing and motivating a work force, and have better decision-making skills to apply to business opportunity.  And besides, a 3-year delay in our young people entering the work force, whether as entrepreneurs or employees, would immediately improve the unemployment situation by making room for older Americans to fill those vacancies.

It’s acknowledged that the future health or our country’s economy is dependent on innovation and new small business start-ups.  One step in the right direction could be to institute universal community and/or military service for all Americans at the age of 18.

Who would have imagined I’d be advocating this?

About Ken Drossman

Ken Drossman is a Managing Director at Oak & Apple Partners, LLC. Ken has spent more than 35 years demonstrating practical financial acumen by leading, advising and guiding privately-owned, small and middle-market companies through financial and operating challenges. He has in-depth experience in all phases of financial, strategic and operating management from hands on cash flow budgeting through acquisition financing, from divestiture of business units to reorganizing and leading newly formed companies. Prior to co-founding Oak & Apple Partners, Ken has been the principal at Lakeview Business Consulting, LLC, which assists entrepreneurial business owners and their companies in achieving their business vision. Ken earned both his undergraduate and graduate degrees from The Wharton School of the University of Pennsylvania. Before founding Lakeview Business Consulting in 2006, he served for 18 years as CEO, COO and/or CFO at several privately-owned companies, in industries including financial services for hospitals; digital document storage and outsourced back-office services for professional service firms; design and distribution of personal business accessories through big-box retailers; capital goods manufacturing for national and regional retail chains; and information services for beverage alcohol manufacturing and marketing companies. Previously, Ken was a Partner at Grant Thornton, LLP, where he provided management consulting services to such companies as AT&T, Baxter Laboratories and GTE-Sylvania, as well as many middle-market companies.
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