Start-up Nation (17 page)

The second-phase turnaround began after 1990. Up to that point, the economy had a limited capacity to capitalize on the entrepreneurial
talent that the culture and the military had inculcated. And further stifling the private sector was the extended period of
hyperinflation, which was not addressed until 1985, when then finance minister Shimon Peres led a stabilization plan developed
by U.S. Secretary of State George Shultz and
IMF
economist Stanley Fischer. The plan dramatically cut public debt, limited spending, began privatizations, and reformed the
government’s role in the capital markets. But this didn’t yet generate for Israel a private and dynamic entrepreneurial economy.

For the economy to truly take off, it required three additional factors: a new wave of immigration, a new war, and a new venture
capital industry.

Immigrants are not averse to starting over. They are, by definition, risk takers. A nation of immigrants is a nation of entrepreneurs.

—G
IDI
G
RINSTEIN

I
N
1984 S
HLOMO
(N
EGUSE
) M
OLLA
left his small village in northern Ethiopia with seventeen of his friends, determined to walk
to Israel. He was sixteen years old. Macha, the remote village where Molla grew up, had virtually no connection to the modern
world—no running water, no electricity, and no phone lines. In addition to the brutal famine that plagued the country, the
Ethiopian Jews lived under a repressive anti-Semitic regime, a satellite of the former Soviet Union.

“We always dreamed of coming to Israel,” said Molla, who was raised in a Jewish and Zionist home. He and his friends planned
to walk north—from Ethiopia to Sudan, Sudan to Egypt and through the Sinai Desert, and from Sinai to Israel’s southern metropolis,
Beersheba; after that, they would continue on to Jerusalem.
¹

Molla’s father sold a cow in order to pay a guide two dollars to show the boys the way on the first leg of their journey.
They walked barefoot day and night, with few rest stops, trekking through the desert and into the jungle of northern Ethiopia.
There they encountered wild tigers and snakes before being held up by a band of muggers, who took their food and money. Yet
Molla and his friends continued, walking nearly five hundred miles in one week to Ethiopia’s northern border.

When they crossed into Sudan, they were chased by Sudanese border guards. Molla’s best friend was shot and killed, and the
rest of the boys were bound, tortured, and thrown in jail. After ninety- one days, they were released to the Gedaref refugee
camp in Sudan, where Molla was approached by a white man who spoke crypti-cally but clearly seemed well-informed. “I know
who you are and I know where you want to go,” he told the teenager. “I am here to help.” This was only the second time in
Molla’s life that he had seen a white person. The man returned the next day, loaded the boys onto a truck, and drove across
the desert for five hours, until they reached a remote airstrip.

There, they were pushed inside an airplane along with hundreds of other Ethiopians. This was part of a secret Israeli government
effort; the 1984 airlift mission, called Operation Moses, brought more than eight thousand Ethiopian Jews to Israel.
²
Their average age was fourteen. The day after their arrival, they were all given full Israeli citizenship. The
New Republic
’s Leon Wieseltier wrote at the time that Operation Moses clarified “a classic meaning of Zionism: there must exist a state
for which Jews need no visas.”
³

Today Molla is an elected member of Israel’s parliament, the Knesset; he is only the second Ethiopian to be elected to this
office. “While it was just a four-hour flight, it felt like there was a gap of four hundred years between Ethiopia and Israel,”
Molla told us.

Coming from an antiquated agrarian community, nearly all the Ethiopians who immigrated to Israel didn’t know how to read or
write, even in Amharic, their mother tongue. “We didn’t have cars. We didn’t have industry. We didn’t have supermarkets. We
didn’t have banks,” Molla recalled of his life in Ethiopia.

Operation Moses was followed seven years later by Operation Solomon, in which 14,500 Ethiopian Jews were airlifted to Israel.
This effort involved thirty-four Israeli Air Force and El Al transport aircraft and one Ethiopian plane. The entire series
of transport operations occurred over a thirty-six-hour period.

“Inside Flight 9, the armrests between the seats were raised,” the
New York Times
reported at the time. “Five, six or seven Ethiopians including children crowded happily into each three-seat row. None of
them had ever been on an airplane before and probably did not even know that the seating was unusual.”
⁴

Another flight from Ethiopia set a world record: 1,122 passengers on a single El Al 747. Planners had expected to fill the
aircraft with 760 passengers, but because the passengers were so thin, hundreds more were squeezed in. Two babies were born
during the flight. Many of the passengers arrived barefoot and with no belongings. By the end of the decade, Israel had absorbed
some forty thousand Ethiopian immigrants.

The Ethiopian immigration wave has proven to be an enormous economic burden for Israel. Nearly half of Ethiopian adults age
twenty-five to fifty-four are unemployed, and a majority of Ethiopian Israelis are on government welfare. Molla expects that
even with Israel’s robust and well-funded immigrant-absorption programs, the Ethiopian community will not be fully integrated
and self-sufficient for at least a decade.

“Given the context of where they came from not so long ago, this will take time,” Molla told us. The experience of Ethiopian
immigrants contrasts sharply with that of immigrants from the former Soviet Union, most of whom arrived at roughly the same
time as Operation Solomon, and who have been a boon to the Israeli economy. The success story of this wave can be found in
places like the Shevach-Mofet high school.

The students had been waiting for some time, with the kind of anticipation usually reserved for rock stars. Then the moment
arrived. The two Americans entered through a back door, shaking off the press and other groupies. This was their only stop
in Israel, aside from the prime minister’s office.

The Google founders strode into the hall, and the crowd roared. The students could not believe their eyes. “Sergey Brin and
Larry Page . . . in
our
high school!” one of the students proudly recalled. What had brought the world’s most famous tech duo to this Israeli high
school, of all places?

The answer came as soon as Sergey Brin spoke. “Ladies and gentlemen, girls and boys,” he said in Russian, his choice of language
prompting spontaneous applause. “I emigrated from Russia when I was six,” Brin continued. “I went to the United States. Similar
to you, I have standard Russian-Jewish parents. My dad is a math professor. They have a certain attitude about studies. And
I think I can relate that here, because I was told that your school recently got seven out of the top ten places in a math
competition throughout all Israel.”

This time the students clapped for their own achievement. “But what I have to say,” Brin continued, cutting through the applause,
“is what my father would say—‘
What about the other three?
’ ”
⁵

Most of the students at the Shevach-Mofet school were, like Brin, second-generation Russian Jews. Shevach-Mofet is located
in an industrial area in south Tel Aviv, the poorer part of town, and was for years notoriously one of the roughest schools
in the city.

We learned about the history of the school from Natan Sharansky, the most famous former Soviet Jewish immigrant in Israel.
He spent fourteen years in Soviet prisons and labor camps while fighting for the right to emigrate and was the best-known
“refusenik,” as the Soviet Jews who were refused permission to emigrate were called. He rose to become Israel’s deputy prime
minister a few years after he was freed from the Soviet Union. He joked to us that in Israel’s Russian immigrant party, which
he founded soon after his arrival, politicians believe they should mirror his own experience: go to prison first and
then
get into politics, not the other way around.

“The name of the school—Shevach—means ‘praise,’ ” Sharansky told us in his home in Jerusalem. It was the second high school
to open in Tel Aviv, when the city was brand-new, in 1946. It was one of the schools where the new generation of native Israelis
went. But in the early 1960s, “the authorities started to experiment with integration, a bit like in America,” he explained.
“The government said we can’t have sabra schools, we must bring in the immigrants from Morocco, Yemen, Eastern Europe—let’s
have a mix.”
⁶

While the idea may have been a good one, its execution was poor. By the beginning of the 1990s, when large waves of Russian
Jewish immigrants began to arrive following the collapse of the Soviet Union, the school was one of the worst in the city
and known mainly for delinquency. At that time, Yakov Mozganov, a new immigrant who had been a professor of mathematics in
the Soviet Union, was employed at the school as a security guard. This was typical in those years: Russians with PhDs and
engineering degrees were arriving in such overwhelming numbers that they could not find jobs in their fields, especially while
they were still learning Hebrew.

Mozganov decided that he would start a night school for students of all ages—including adults—who wanted to learn more science
or math, using the Shevach classrooms. He recruited other unemployed or underemployed Russian immigrants with advanced degrees
to teach with him. They called it Mofet, a Hebrew acronym of the words for “mathematics,” “physics,” and “culture” that also
means “excellence.” The Russian offshoot was such a success that it was eventually merged with the original school, which
became Shevach-Mofet. The emphasis on hard sciences and on excellence was not in name only; it reflected the ethos that new
arrivals from the former Soviet Union brought with them to Israel.

Israel’s economic miracle is due as much to immigration as to anything. At Israel’s founding in 1948, its population was 806,000.
Today numbering 7.1 million people, the country has grown almost ninefold in sixty years. The population doubled in the first
three years alone, completely overwhelming the new government. As one parliament member said at the time, if they had been
working with a plan, they never would have absorbed so many people. Foreign-born citizens of Israel currently account for
over one-third of the nation’s population, almost three times the ratio of foreigners to natives in the United States. Nine
out of ten Jewish Israelis are either immigrants or first- or second-generation descendants of immigrants.

David McWilliams, an Irish economist who lived and worked in Israel in 1994, has his own colorful, if less-than-academic,
methodology to illustrate immigration data: “Worldwide, you can tell how diverse the population is by the food smells of the
streets and the choice of menus. In Israel, you can eat almost any specialty, from Yemenite to Russian, from real Mediterranean
to bagels. Immigrants cook and that is precisely what wave after wave of poor Jews did when they arrived having been kicked
out of Baghdad, Berlin, and Bosnia.”
⁷

Israel is now home to more than seventy different nationalities and cultures. But the students Sergey Brin was addressing
were from the single largest immigration wave in Israel’s history. Between 1990 and 2000, eight hundred thousand citizens
of the former Soviet Union immigrated to Israel; the first half million poured in over the course of just a three-year period.
All together, it amounted to adding about a fifth of Israel’s population by the end of the 1990s. The U.S. equivalent would
be a flood of sixty-two million immigrants and refugees coming to America over the next decade.

“For us in the Soviet Union,” Sharansky explained, “we received with our mothers’ milk the knowledge that because you are
a Jew—which had no positive meaning to us then, only that we were victims of anti-Semitism—you had to be exceptional in your
profession, whether it was chess, music, mathematics, medicine, or ballet. . . . That was the only way to build some kind
of protection for yourself, because you would always be starting from behind.”

The result was that though Jews made up only about 2 percent of the Soviet population, they counted for “some thirty percent
of the doctors, twenty percent of the engineers, and so on,” Sharansky told us.

This was the ethos Sergey Brin absorbed from his Russian parents, and the source of the same competitive streak that Brin
recognized in the young Israeli students. And it gives an inkling of the nature of the human resource that Israel received
when the Soviet floodgates were opened in 1990.

It was a challenge to figure out what to do with an immigrant influx that, although talented, faced significant language and
cultural barriers. Plus, the educated elite of a country the size of the Soviet Union would not easily fit into a country
as small as Israel. Before this mass immigration, Israel already had among the highest number of doctors per capita in the
world. Even if there had not been a glut, the Soviet doctors would have had a difficult adjustment to a new medical system,
a new language, and an entirely new culture. The same was true in many other professions.

Though the Israeli government struggled to find jobs and build housing for the new arrivals, the Russians could not have arrived
at a more opportune time. The international tech boom was picking up speed in the mid-1990s, and Israel’s private technology
sector became hungry for engineers.

Walk into an Israeli technology start-up or a big R&D center in Israel today and you’ll likely overhear workers speaking Russian.
The drive for excellence that pervades Shevach-Mofet, and that is so prevalent among this wave of immigrants, ripples throughout
Israel’s technology sector.