Why Israel is a tech capital of world? - Everything explained

You, the brave, dare devil you open Google Maps, throw your mouse into the air, and land here.

There are palm trees, lots of 20-somethings talking into their AirPods, and everywhere you look, a familiar logo: Apple, Amazon, Intel, Yahoo, Microsoft, Google. 

All within a few blocks of each other.

Where are you?

Your first guess might be San Jose, may be Palo Alto, or Mountain View.

That is, unless you noticed the lack of Teslas,or smell of Humus, or, the title of this article.

This place is Silicon Wadi, a cluster of cities in Israel with one of the highest concentrations of tech companies and startups on Earth.

It’s home to Waze, Wix, Soda Stream, and Fiverr, files more patents per capita than all but 4 countries, and is ranked the 4th most startup friendly nation overall, behind only Canada, the UK, and the U.S.

The difference is, those countries aren’t next door to the Syrian Civil War.

30 members of the UN still don’t recognize the existence of Israel, including most of its neighbour's.

In fact, any evidence of traveling there, on any passport, prevents you from visiting eight of those countries.

Because of this, Israeli customs stamps not your passport but a separate piece of paper. But despite all of this, Despite the constant threat of terrorism, Despite being only slightly bigger than Fiji and having just two and a half percent the population of the U.S.,

Israel creates some of the most successful tech companies and entrepreneurs in the world.

Why? 

As one of the very important world leaders who consult my blog for advice, you want to know how to start your very own Silicon Valley. 

Well, you’re in luck. The recipe is actually quite simple: First, buy some ping-pong tables, throw down a couple of bean bags, and, within minutes, a cavalcade of Soylent-drinking, smartwatch-wearing CS-grads will assemble at your door. Even it.better if, why you not build some apartments, a grocery store, and, while you’re at it, a pharmacy. Then they’ll never leave! Work-life what? Just kidding!

Mostly. More than a few countries and cities have tried charming tech companies with tax breaks, grants, free 21-foot cacti, and other totally normal things, but almost as many have failed.

On the other side of the Arabian Peninsula, Dubai built what it calls “Free Zones”, areas with special incentives to attract certain types of companies, like Biotech firms, movie studios, and tech companies.

At first glance, Dubai Internet City looks like a great success. And, to some degree, that’s true. It convinced Microsoft, Cisco, IBM, HP, and Canon to invest millions of dollars in the middle of the desert, at a time when the future of Dubai was much more uncertain. But having beautiful buildings with famous logos on them is not the same as creating an environment of innovation.

You’ll find plenty of the former in the Cayman Islands, but it’s not exactly the first place that comes to mind when you think “cutting-edge research”. 

Meanwhile, Silicon Valley is, despite its very high cost of doing business. In other words, tax breaks may bring companies, but not necessarily innovation. Corporations come to Dubai largely for its promise of no income or corporate tax for 50-years, but often only for marketing, support, and sales, while hiring most of their engineers in the U.S., India, and Israel.

So, what do those countries have that others don’t? 

There are three basic ingredients to a successful tech scene.

The first is Talent. One of the best predictors of which is, unsurprisingly, education.

In the words of Scott Galloway, “Find the universities that are gaining the most traction in engineering or STEM and you’re going to find an ecosystem that can produce a unicorn.”

Basically, put a bunch of smart, ambitious people in a small, contained space, sprinkle-in some idealism, ideas will collide and good things will happen. At the level of a nation, universities are about proximity, and hey, if you also learn something along the way, that’s a bonus!

Which is great news for Israel, one of the most educated countries in the world. About 47% of those over 25 have a college diploma.

The Hebrew University of Jerusalem, Tel-Aviv University, and the Israel Institute of Technology are all globally competitive schools. And because the country is just so small, and its population so highly-concentrated in just a few regions, it has the same fertile ground for entrepreneurship as a college campus, at a much larger scale.

About 92% of Israelis live in urban areas, almost entirely in the Northern half of the country. Startups, therefore, are surrounded by their customers, business partners, and competitors. The other aspect of Talent that’s often overlooked, but just as important, is demographics.

Not just how big a population is, but also what it’s like. For example, it’s misleading to say only that Japan has 126 million people and Ethiopia, 98.

What those raw numbers hide are their age and background, which can either act as a free economic multiplier or a bleak and costly undoing.

Japan’s population may be large, but it takes an unfortunate shape - far too many old people for not enough young.