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Explaining Israel's high-tech success: Another view

The conventional story relies a lot on myth. But the fuller explanation has to take into account the spillover effect from the nation's rapid military build-up in its first decades of existence.

KIBBUTZ YIRON, Israel--"Znnnnnnnnng!"

The mechanical whine overhead forced every picker in the apple orchard to crane their heads toward its source. I didn't know it at the time, but we were watching Israel's high-tech future play out a couple of thousand feet above us.

A reconnaissance drone not much larger than your garden variety model airplane, a television camera strapped to its underside, was creeping through the sky to photograph military installations in Lebanon.

That was 26 years ago.

The "mazlat," as it was known in Hebrew, was a joint project between a government-run aeronautics branch and an Israeli electronics firm called Tadiran. This unmanned aerial vehicle later played a role in helping Israel neutralize Soviet antiaircraft and radar systems deployed by Syria in Lebanon's Bekka Valley during the 1982 war between the two nations.

But when they seek explanations for Israel's contemporary success in the technology field, chroniclers of the story often underplay the military's part in helping to lay the groundwork for the nation's high tech ecosystem. Instead, journalists more often focus on the network of personal connections that Israel entrepreneurs initially forge in the military. As if certain special individual qualities honed in the army prepared them for business success later on.

It's a cute story, one that public relations reps love to play up. But it misses a lot of context.

To be sure, graduates of the army's elite technology units do acquire valuable experience in optics and communications. And they do make valuable connections that can come in handy afterward in civilian life. But the "army brats-turned-entrepreneur" angle is more of a romantic cliche than a useful depiction of how it all went down.

The fact that companies in Israel are built by former soldiers isn't remarkable. High school age Israelis get drafted at 18 and enter university or business after being discharged. By definition, then, you're going to find a lot of ex-military in the Israeli business world.

"I don't think it is much different than any university alumnus when it comes to the same bond," said Isaac Levanon, a former fighter pilot who is now CEO of 3DVU, a Tel Aviv-based provider of 3D photography navigation. "Obviously, the intensity of serving and sometime fighting together is more then the average sorority events. One knows his friends better through these greater challenges than (because of) a beer party or preparation for a test."

Former Israel Defense Minister Moshe Arens Israel's Knesset

When I was a kibbutz volunteer in the early 1980s, Israel's high-tech industry was negligible. A lot of history has taken place since then. High-tech services now comprise about half of the country's total industrial exports. What's more, the country boasts the highest number of publicly traded companies on the Nasdaq outside of the U.S. and Canada. Some, like Teva Pharmaceutical Industries, are in the health or scientific fields but the list is tech-heavy, featuring the likes of Check Point Software and Aladdin Knowledge Systems. Israel's ratio of engineers to population is noteworthy: there are about 135 engineers per 10,000 employees. The comparable ratio in the U.S. is 80 per 10,000 employees.

The list of tech advances developed in Israel runs the gamut from digital signal processing to antivirus technologies, encryption, and data security. More people likely are familiar with ICQ, the predecessor to AOL's Instant Messenger, or M-Systems, which developed USB-flash drives as well as the design for Intel's Pentium processor.

Looking back on that history, former Defense Minister Moshe Arens said recently that projects like the unmanned aerial vehicle underscored the symbiotic relationship that he said nurtured Israel's military and its high technology sector over the following decades.

"That was a starting point," he said.

(For more on more modern applications of the technology, here's a recent 60 Minutes piece on the United States "Predator." Although the Predator was developed by a joint U.S. Army-Navy program, there also is an Israeli connection. Following the 1982 Lebanon war, which demonstrated the UAV's surveillance and reconnaissance capabilities, the U.S. began to purchase Israeli unmanned systems, such as the Pioneer, as the American military started to develop its own capabilities.)

The nexus between the military and the country's subsequent high-tech growth obviously consists of many strands. But when it comes to understanding the roots of Israel's subsequent high-tech prowess, Arens said it is "impossible" to see Israeli high tech without also considering the special role played by the military.

He should know. Through the decades, Arens played a close role helping to develop the Israeli army's high-tech skills as both an academic and a politician closely identified with defense issues.

For the many private sector technologists in Israel who later went on to fame and fortune, the development of the mazlat and other defense projects was a boon in that it fed demand for a talent pool that they could later tap. The Israeli political-military establishment was keen to build up a qualitative edge in weaponry to compensate for Israel's tiny population and small size and to adequately equip itself in the face of conflict with its Arab neighbors.

A few examples:

In the 1950s, RAFAEL, the Hebrew acronym for the Armament Development Authority, was part of the Israeli army. It built the country's first computer, nicknamed "Itzik" in 1956. RAFAEL also sponsored degree study for employees, both in Israel and abroad at overseas universities. It subsequently helped create the army's computer unit and developed the country's first sea-to-sea radar guided rocket

Regional conflicts prodded the army to accelerate the expansion of its technological prowess. In 1961, for instance, Israel's military mobilized a major engineering effort after learning about Egyptian attempts to build medium-range missiles. That scramble ultimately led to the creation of Israel's Arrow ballistic missile interceptor.

Another turning point came after the 1967 war, when France declared an arms embargo. France had been Israel's major military supplier, and Israel was left cut off from its major aircraft provider.

IAI Chairman Yair Shamir Israel AerospaceIndustries

"At the time," Arens recalled, "there was considerable doubt about Israel's engineering and scientific community." He noted that there were questions at the time whether Israel would come up with the product that could compare with the U.S. and Soviet aircraft industries. "It took some time before the government's ministers, the army generals, and the general public believed that that capability was here. But we did it."

The country poured millions of dollars into military development and launched its own aircraft industry. That again had a spillover effect as technologies and processes mastered in the defense labs would later trickle into the civilian sector.

"The idea was to build and design everything that we needed to defend ourselves," said Yair Shamir, the chairman of Israel AerospaceIndustries, (IAI), which has since developed a range of UAVs. (Some that can travel as far as Iran.) The company also developed Israel's first spy satellite; eight of them currently circle the globe.

On a recent visit to IAI, I had an opportunity to tour the plant. Unfortunately, security restrictions bar outsiders from bringing cameras onto the facility's premises.

"When we began our activities--especially after Israel's withdrawal from the Sinai--the emphasis was on our need to recover strategic depth," said Shamir.

Reflecting on the growth in the country's IT industry, Shamir agreed that the cross-fertilization between Israel's high tech and defense industries had worked out beyond even the boldest expectations.

"This has been a way for people to contribute their technical talents. And whatever skills they pick up, they can then apply later in civilian life," he said. "For our country, where we don't have billions to spend, high tech has helped provide the differentiation between the armed forces of Israel and our neighbors."