With more startups on NASDAQ than any country other than the United States, and more patents per capita than any country in the world, Israel has earned a reputation for being a hive of technological innovation. How did a tiny sandy stretch of land, with few resources, accomplish this miracle?
An interesting explanation is provided by Israeli Ambassador Daniel Taub, who proposes what he called “the Davka Principle”. Davka, Taub explains, is a Hebrew word which refers to an unexpected or counter-intuitive development or consequence.
How does this principle apply to the Israeli economy? Ambassador Taub suggests that a series of factors which one would normally anticipate would negatively affected the economy, actually had unexpected positive outcomes.
As an example, Taub, who as Ambassador to the UK between 2011 and 2015 Ambassador Taub succeeded in doubling UK-Israel bilateral trade, cites the fact that Israel had until recently few or no natural resources (in the past few years oil and gas have been discovered). Yet rather than harming the economy, it benefited, since it ingrained in the Israeli psyche the realization that that in the absence of natural resources, efforts would have to be made to develop the intellectual resources which have produced its innovations.
The security threats faced by Israel also produced surprising benefits. In Israel every young man and woman has to spend 2-3 years in military service. In most countries this would be considered a major drain on the economy, but in Israel service in the Defense forces has been a major factor in fostering a generation of young leaders, entrepreneurs and innovators. “It is hard to imagine” Daniel Taub says, “a more effective boot camp for high tech entrepreneurship than military service which requires you to show initiative, to network and to improvise in real time”.
Another factor which had unusual positive impacts is immigration. Throughout the 1990’s nearly one million immigrants from the former Soviet Union arrived in Israel and were absorbed. In most countries the costs of absorbing and integrating such large numbers would be considered a drain on the economy. In Israel’s case however, the influx of educated migrants, many of them with academic backgrounds in engineering and science, provided the critical workforce needed to support a knowledge-based economy.
Taub adds that being a country of immigrants from more than 70 countries carries with it other advantages, including the synergy that arises from bringing different cultures and ways of thinking together.
Another plus has been Israel’s small size. “Every new company knows that it cannot survive on the strength of national sales alone,” observes Taub, “so their thinking is internationally -reoriented right from Day One.”
Even the hostility of Israel’s neighbors has given Israel some surprising advantages. Taub notes that in developing satellite technology satellites are normally launched in the direction of the earth’s momentum. This was not an option for Israel because the satellites would then have flown over hostile sites and been shot down. Israel had no choice but to launch its satellites against the momentum of the earth’s and to this end had to develop extremely lightweight satellites. Only later when the market for microlite satellites developed it become clear that necessity had given Israel a head start.
Taub admits that his theory may be a little unorthodox but concludes by quoting from Israel’s first Prime Minister, David Ben Gurion: “In Israel to be a realist you have to believe in miracles!”