THE BLOG
11/04/2014 11:57 am ET Updated Dec 06, 2017

Amid Levantine Quagmires, Business Not Quite As Usual

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On Thursday, October 30, the Council on Foreign Relations hosted an Israel-US Business Forum at its vaunted estate in the Upper East Side, filled during a long afternoon with dozens of participants across several industries between the countries. Gideon Rose, the editor-in-chief of Foreign Affairs, introduced the opening plenary with perhaps a Freudian slip by announcing, "One of the great things that the early 19th century classical liberals understood and has proved to be true is that economic engagement and capitalist development is a good thing not just for individuals and countries, but for peace and prosperity, and it's zero-sum -- it's a positive-sum game, not a zero-sum game." And although the diplomatic relationship between the United States and Israel is "at one of its low points," Rose added, "the fact that Israel is such a thriving and dynamic economy" working "in tandem" with the US means business ties are strong.

Joshua Kram, the director of Turkey and Middle East Affairs at the US Chamber of Commerce, referenced the recent Atlantic article Jeffrey Goldberg wrote right away: "I think it's an amazing thing that this establishment of foreign policy [the Council on Foreign Relations] is having a conference on US-Israel business. For a long time, US-Israel business and commercial relations has really been the underprofiled third leg of the US-Israel relationship." And if Goldberg is right about there being a "crisis" in US-Israel relations, Kram deadpanned, "We're all in trouble," at which point laughter broke out: "As if tomorrow the relationship is done and we're wasting our time. And this is the ongoing saga on the political level between our two countries. But I'm delighted that we're here to talk about something besides what the White House called the prime minister or didn't call the prime minister."

Politics aside, more than two hundred "multinational companies have R&D facilities in Israel. Forty-two of the 50 leading technology companies have centers in Israel," including Intel and Hewlett-Packard. "More start-ups per capita than anywhere else in the world," Kram declared. "More venture capital going into Israel than all of Europe combined. More companies on Nasdaq than anywhere besides the United States and China. It's a hotbed of innovation. How many of you have read Start-Up Nation?" he asked. A handful of hands shot up.

"Which was produced as a Council on Foreign Relations book!" Rose exclaimed. "If you haven't read the book" -- co-authored by former Bush administration official Dan Senor in 2009 -- "it's a fantastic primer that looks at the secret sauce of how Israel has been able to become this entrepreneurial giant." Kram went on to say that the US Chamber of Commerce is so deeply involved in Israel "not because the Chamber is a Zionist organization, but because the Chamber represents business and business is interested in Israel. And I think that link to the United States has been a critical driving factor for the growth of the start-up nation." What he left unmentioned is that Washington gives three billion dollars annually in military aid, and that the Israeli military and its innovative high-tech sector are tightly linked. "Israel's success is even more remarkable given what's not going in its favor. You know, I think within Israel there are huge gaps in its economy and huge gaps in terms of economic progress with various sub-sectors of the economy," citing the ultra-Orthodox as an example. "The Middle East, if you've read the newspaper today, is a mess! Right? ISIS, Syria, Hizballah, war in Gaza, it's a huge mess. Israel is in a neighborhood that is incredibly fragmented, politically, economically, and otherwise." Kram added that he wants to "leverage" the technological innovation in Israel "to pursue regional integration."

Adam Shwartz works at the Technion-Cornell Innovation Institute and was an IAF pilot. "We are trying to do something as out of the box as possible," Shwartz said. Referring again to Start-Up Nation, he approvingly observed that one of its arguments is "Israelis have a resistance to structure and to authority." A facet of Israeli culture, Shwartz noted, "is getting things done and forget what the regulations say." Kram asked Idit Harel, the other panelist, if that's the case. Harel, CEO and founder of Globaloria, was raised by "parents in Holocaust-surviving families, they were educators." In other words, Harel said, she grew up in a start-up. "After serving in the army and doing my undergraduate work at Tel Aviv University, I also came [to the US] to study, like Adam, and do a Master's degree at Harvard in education" and found herself in another "start-up environment, in academia," as the PC revolution took off. Harel's mission was to "use technology as a tool and not just as an information system." She now works with schools in distressed communities across the States. "Everything we do is scalable," Harel added.

Her optimism seemed infectious. Yet the matter of scale came up repeatedly throughout the forum. As Harel pointed out, there are roughly 55 million students in the US and about 1.5 million in Israel, who both face the same problem of failing to "engage" the youth with interesting material. Neither country is "preparing our kids equally, in the same way," Harel said. "There are pockets of excellence, innovation, beautiful projects, but 'start-up nation' is not there yet." Kram, the representative of the US Chamber of Commerce, jumped back in, declaiming that "the mood music around Israel is not great." Shwartz, the director of the Technion-Cornell joint project, said that his country "has been under some sort of threat for the last hundred years," and that what now worries people is "not the external threats but the internal threats," such as the problem of inequalities among social groups which is rivaled only by the US.

The issue is there is too much innovation going on in Israel nowadays that it is difficult to scale it, Harel commented, plus the fact that "we do have certain zipcodes, certain geographies and certain populations in Israel that maybe are being funded $100 per student per year rather than $1,100 per student per year. It's documented. We have in Israel four school systems": the secular public track, "the religious public, and then there is the Haredi sector and the Arab sector. Arabs, I think, are eighteen percent of our population. And you can find the same kind of school systems in the United States," Harel said. Imagine what is possible "if we network everyone -- everyone, everyone -- and we give opportunities for everyone."

Children learning STEM, a recent acronym for Science, Technology, Engineering, and Mathematics, will apply the start-up mentality to revolutionize education by making games and other apps. As far as issues with non-Jewish citizens of the Jewish state, "The percentage of Arab students at the Technion, the leading technology institution in Israel, is twenty percent," Shwartz said. "It's higher than their percentage of the population." He hopes that the Technion in partnership with Cornell will become "a catalyst" for widespread social change. "There is talent everywhere," Harel declaimed, her eyes opened wide. Change the environment, as Buckminster Fuller said, and there's suddenly genius. Both Israelis and Americans, Harel said later on, "are part of that change mindset, that growth mindset, that innovation mindset."

An Israeli in the audience brought up the elephant in the room: BDS, the Boycott, Divestment, and Sanctions movement. "Some people see it as pushing Israel towards a peace process, others see it as hindering peace," as she described it. Yet this question was entirely deflected by Shwartz and Harel, who suggested that people around the Eastern Mediterranean "can learn physics and create apps for social change." Cooperative projects are already happening, but people are not yet networked together.

David Bratslavsky works with private investors who are doing business in the Holy Land. "Politics and economics overlap, and in many respects they don't," he said, "in the sense that business and investment is a cold-hearted decision based on the opportunities at hand, and investors continue to find opportunities to invest in Israel." Bratslavsky thinks the most exciting opportunity right now is cybersecurity: "With each break-in to a major global bank, companies big and small are looking for solutions. Israel has a wealth of experience in that industry and the solutions they're coming up with are really leading edge."

In the breakout session on water and food security, Seth Siegel, a bespectacled figure expounded at length about the wonders of the Israeli water system. But at the outset he conceded he came late to the game. "I didn't know there's a global water crisis coming," Siegel said, and became very impressed with what the Israelis are doing about their water situation. In the 1930s, during the pre-state period, he said, the Zionist pioneers had to devise a way to make sure everyone had enough water, a particularly acute problem because Palestine was a desert.

"Scarcity is an intensifier of conflict," said Albert Cho, who moderated the session. Cho, a former State Department fellow, currently works for Xylem, Inc., a global water management firm. "By helping address scarcity of vital resources like water, and the other resources that depend on it like agriculture, food, and energy, we can remove some of that intensification in conflict and create some of the conditions for more cooperation and peace." One key theme throughout was desalinization is going to free up so much water that it will be an "economic input," to quote Siegel. Cho believes that wastewater will be a growing boon to all humanity as the technology needed to tap "this unmined natural asset" keeps accelerating.

Richard Penn, a lawyer with Greenberg Traurig LLP, which has a Tel Aviv office, thinks people are seeing the world "through rose-colored glasses." Penn refers to the historical sweep: "Throughout the centuries, it is difficult to be hopeful. Technologically, things will improve tremendously, but it is how that technological advance will be used. Oftentimes it's simply used to make better weapons." He mused that the surrounding countries "might be jealous" of Israel's technological superiority. "It enhances the hatred," Penn said. Aomar Benslimane, an independent consultant, is confident that boosting business relations between Israel and the United States will "foster a diplomatic process." Benslimane added that the promise of scalable initiatives will "help the conflict." Israel is now "one of the best flourishing democracies in the Middle East," he said. If only the business people took over from the politicians, Benslimane added.

Mark Lambert is the CEO of the American division of IDE Technologies, an Israeli-based water firm. Lambert serves as their gruff, down-to-earth Iowa-born water man, logging long hours on flights around the world. Israel, for him, "is the most fascinating place on the planet, because you have, in this small little community, the subject of conflict elsewhere, all peacefully exists in this little city called Jerusalem," he said with a chuckle. "I don't want the diplomats involved," Lambert said. "What they'll do is they'll create some policy initiative and then it will take years to get it done, and what we do at the ground level is just get it done." After all, he said, "there's no boundaries in industry."