Jerusalem — As Detroit’s Arsenal of Democracy reverted to a long run of post-war prosperity, a desolate backwater on the eastern edge of the Mediterranean became the homeland for a Jewish diaspora scarred by persecution and the Holocaust.
Nearly 70 years later, Israel is widely considered to be one of the most innovative economies in the world. Its risk-taking business culture, forged in one of the world’s toughest neighborhoods, is enriched by Silicon Valley’s money, indigenous venture capital, waves of educated immigrants and attitudes shaped by military service that inform its entrepreneurial ethos.
“Their definition of risk is different than ours,” says Dan Senor, co-author of "Start-Up Nation: The Story of Israel’s Economic Miracle." “Everything they do has a sense of urgency. They’re a very impatient business population.”
What can Michigan business leaders learn from it all? This week, more than 20 of the state’s leading CEOs are on a mission here to meet with Israeli entrepreneurs, venture capitalists and nonprofits for insights into an evolving model that melds a resilient culture with immigration, respect for education and little fear of risk to produce a hot-bed of innovation.
“It’s OK to fail,” Amnon Shashua, founder of Mobileye, a pioneering Israeli company providing driver assistance systems and autonomous car technology to the global auto industry, told the Michigan CEOs Monday. “There’s no shame in failing. The lack of respect of authority — in Israel we don’t respect the prime minister, we don’t respect the Knesset, we don’t respect anything. It’s part of the culture.”
Now is the time to learn. Six years after two of Detroit’s three automakers collapsed into bankruptcy, and five years after a new administration in Lansing tackled budgeting, tax reform and the Chapter 9 restructuring of Detroit, Michigan’s largest city and business decision-makers need to take a big step toward growth.
“We as a state have made amazing progress,” says Mark Davidoff, Michigan managing partner of Deloitte LLP and an organizer of the privately funded “MI CEO Mission 2015” to Israel. “We had lost a million jobs. We had a broken tax system. We had a broken business attraction system. The next focus has to be on economic growth — jobs. Where’s it going to come from?”
Not from the hometown auto industry, whose rich contracts with the United Auto Workers are prompting analysts to mute expectations of more job growth from Big Auto. Not from the public sector, squeezed as it continues to be by rising benefit costs and political resistance to increased spending. And not from the big companies that have dominated the Michigan business landscape for so long.
Think outside the traditional boxes that have defined Michigan business for generations, the big, paternalistic companies that employed thousands and shaped whole communities. They’re playing a smaller overall role in the state’s post-meltdown economy and the emerging civic leadership driving it.
Instead, think the techy boom following the lead of mortgage impresario Dan Gilbert. They’re the young entrepreneurs whose ideas are creating companies in Detroit, reversing its population decline and sparking a development turnaround that shows little sign of abating. They’re the people who are questioning and breaking the traditional rules of a Big Company town — and producing results.
It’s a start, but it’s not enough. Born in 1948, Israel’s early decades produced a rigid social democratic bureaucracy that stifled business, demonized profit, ballooned costs and debt to produce the nation’s own “Lost Decade.” Deepening financial stress and economic necessity sparked reform that steadily reshaped Israel’s image as an economic player, especially after the likes of Google, Intel and Cisco piled into the country to tap its growing talent pool.
The state of the Israeli-Palestinian divide may again dominate newspaper headlines here. But the country’s evolution to a model for innovation and investment is a case worth studying — arguably nowhere more so in the United States than in Detroit, where adversity and resilience often are manufactured in equal measure.
“Israel in 67 years, with 8 million people from 50 different countries and all kinds of complications, has become one of the greatest engines of innovation on the planet,” Davidoff says. “Period. That’s a fact.”
Identifying business opportunities or replicating that national evolution, assuming it’s even possible, are not the point of the mission. The point is better understanding the culture’s values, where they’re rooted, how they influence attitudes to risk-taking and how some of it — any of it — could be extracted by business, even political, leaders back in Michigan is more the point.
Can business leaders gain insight that will help to accelerate dynamic change in the years ahead? How would an Israeli-style public-private partnership to spur venture capital funding or back a business incubator play in Michigan, if at all? Does the Israeli experience of living a complex diversity of language, religion and culture, all ingredients for conflict, offer clues for managing the economic inclusion necessary in post-bankruptcy Detroit?
Maybe. But the anti-hierarchical bent of its business culture, extracted from compulsory training in the Israel armed services, offers a bigger clue to the attitude driving successful innovation. That, and tolerance for failure not generally associated with a corporate town like Detroit, pre-meltdown anyway.
“There’s a complete, utterly different attitude, where the regulatory environment, the education environment, the military environment is interested in new ideas,” says Evan Weiner, chief operating officer of Edward C. Levy Co. The Dearborn-based maker of steel mill services and construction materials’ founder helped build the first quarry in the new state of Israel.
Neither Michigan nor the United States has compulsory national service, and they won’t anytime soon. But Israeli expectation to challenge authority, fostered by a lean command structure that forces responsibility deeper into the ranks, informs a business culture in ways most CEOs could lead their companies — provided they have the guts to let it happen.
Daniel Howes is a Detroit News columnist and associate business editor. Watch for his reports through November on the Michigan CEOs’ Israeli business mission.
Daniel Howes’ column runs Tuesdays, Thursdays and Fridays and can be found here.
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