Heisenberg’s Theory of Uncertainty states that at the atomic level measurements cannot be made of both the particle’s position and momentum. It does not necessarily mean that the particle does not have a specific position and momentum at the time, it’s just that those two qualitative attributes cannot be measured together. It also implies that the observer making the measurements has some effect on the outcome of the experiment, but that’s kind of beside the point here. Actually at the atomic and subatomic levels the rules of Newtonian Mechanics are no longer sufficient to explain all experimentally measured phenomena. Without going into deep discussion into Quantum Physics theories (on which I’m not an expert anyway), Quantum Physics adds the notion of Probability to the world-view of atomic level. However, if you take a physical object the rules of Newton due apply. If you take a brick for example and place it on somewhere isolated you can very well measure both it’s position and momentum and you don’t really need to know much about Probability to explain anything on the brick’s internal working. It’s quite interesting actually, on the atomic level one needs to have very deep understanding of Differential Equations and Advanced Physics, but if you take a more complex structure that includes billions of atomic particles any 6 six years old can very well describe the physics of the brick. Think about it, you need a PhD to understand behavior of a single entity, or small number of entities, but you don’t need to learn anything to to understand the behavior of a much complex structure. So somewhere, dependent on distance between elements we move from a probabilistic nature to a more subtle nature.

I worked for SAP for four years, at the time the company was around 40,000 employees. While you could very much know on daily bases what the company was doing it was very hard to measure the position and momentum of a single employee. I recall that I was amazed by the fact that the company was doing so well, when people where “somewhere” doing “something”, most of it not always related to the main focus of the company. Yet the company survives and was doing well. The parallelism between the two systems is quite striking when you think of it. Obviously if you put a person under the microscope you could ascertain the person’s position and momentum, but to clearly understand the person’s role in the company, the inter-relations with peers and to be able to predict what the person is going to do next is nearly impossible, you’ll probably need a PhD is psychology and your answer is likely to be probabilistic. It is much simpler though to analyze the entire complex, even though it’s made of 40,000 employee, most of which you can hardly understand.

The first Israeli Venture Capital firm emerged somewhere in the 80’s and it was mostly government backed. It all started upon realizing the potential of turning academic ideas into business solutions as well as harvesting the improvisation mentality of the Israeli society. This pulled more and more money into the growing Israeli Hi-Tech industry which today is one of the major drivers of the Israeli economy (if not the first). The start-up industry flourished in the 90’s till today, but there are warning signs for some time now which I think are overlooked.

There are more than a few warning signs, in my mind, which I think that unless attend to will have big impact on this industry in two to ten years time from now. My observations are based on comparison to other history of other Israeli promising industries, looking at the well from which this industry sprang from, missing evolution of the hi-tech industry, last but not least, observing the global world around us.

My first observation is historical in nature; Israel is 60 years old, virtually an infant in nation-years (kind of the opposite, I hope, to dog-years) but for me the first warning sign should be other industries which flourished here for two or three decades and are basically extinct now like textile and agriculture. They too where the forerunners of the Israeli economy, they too were based on local ingenuity and dedication and they are both dead in the water. We live today and we think we’re very different from our forefathers, but as much as my generation try to distinguish ourselves from our resent history, it will come back to hunt us – unless we have clear understanding of the current situation and the potential of what our industry may turn into. Don’t forget that the fact that we currently make a good living does not by itself guaranty it’s future.

My second observation goes to the source (in more than one way actually), the Israeli Academy from which previously many company sprang is slowly, but surly dying. I will not go into all the reasons for that, mostly because I don’t really know, but fact of mater is that faculties are being closed, curriculums are being amended and colleges now exists where it’s much easier than  before to acquire an academic degree. 10 – 15 years ago there were a handful of universities that could grant Bs.c. in Computer Sciences, it was hard to get in, and it was even harder to stay in. There was very strong emphasis on mathematics and the science behind Computer Science. It seems that in the last decade or so, studies and students shifted from Computer Sciences to Software Engineering, this change has been conscience and did not happen by chance.  It was done because industry leaders were thinking we need more people punching keyboards and people drawing on the board. When I look at people around me today, I see less and less science and more and more engineering. I think that’s wrong. Israel can not compete in quantity, even if we flood the industry with software engineers, all the colleges and universities in Israel will always create less the amount of engineers as couple of equivalent institutes in China or India. We’re just too small. I have no objection to having schools train software developers, obviously it’s important and needed, but that does not mean it has to come from the academy. It should have been kept separate, and there should be greater focus on the academic side which generates the future of the hi-tech industry.

My third observation relates to the evolution of the hi-tech industry, and I think that the best explanation to that is the fact that when people talk about the hi-tech industry the actually reference to the hi-tech start-up industry. Assuming there were great start-up companies 10, 15 years ago, there should have been great, mature companies in the Israeli hi-tech industry by now. But there aren’t, they were all acquired, or went away and only a handful turned into mature Israeli companies. I suppose that has a lot to do with the short-sighted-ness of the Israeli mentality which is base on political and security reasons. You never know what’s going to happen next when you live in Israel, so you become more focused on the near future than the long run. People just want to cash out and live their lives, rather than  build a work place for the next 10 – 20 years. But as many of us know, when things don’t move forward, they move backwards: when the industry does not ascend, it will eventually descend.

My fourth and last observation relates to the world around us, Chinese outsourcing capabilities are growing stronger by the day. Not only that, if Israel was the second or third place in the world in quantity of start-up companies, these places are now occupied by China and India; I suspect that other places in Asia (and South America) are soon to follow. It is not cost effective to hold engineering in Israel when prices are ten times lower in China and productivity is higher. You get things done quicker and cheaper in China and their quality of project management constantly improves.  

I don’t think we’re doomed yet, and there’s still an opportunity to make things right – if we plan them correctly. Our area is called ‘Middle East’, but we’re not in the middle of any east. We’re actually more of Middle West than East. Many battles were fought over this place and a lot of blood was shed because we are the bridge between East and West. We are more dedicated to hard work than most of the Western world, and we’re more free thinkers than most of the eastern world.  We should try and leverage. Here’s what I think we should do:

1. Harden the criteria for receiving academic degrees and separate between Engineering and Science. Create enough incentives for people to study and theorize. Identify the scientific segments where further research is required and make sure universities are well funded to research in those areas such as bio-technology, nano-technology and micro electronics, advanced energy sources etc. Make sure the well does not go dry.

2. Create engineering levels and certificates backed by government standards, create school and criteria’s for engineers to grow and improve. Not everybody will turn to academic life if there’s enough place in the engineering world. Make sure quality if maintained at the highest possible levels.

3. Create incentives for building long lasting companies verses quick exists. Change the Taxation system as well as government based backing to support the change. Create funds that back companies long term and turn the funds into grants if the company becomes solid and mature. Educate people and create the proper atmosphere where people understand they gain more if they plan their moves longer term, than short term. Make sure the hi-tech industry ascends.

4. Create more relationships between Asian and Israeli companies. Create direct flight routes between Israel and Asian capitals. Educate Israeli on cultural differences, bring more of the Asia culture to Israel. Create joint ventures and trading routes. If  we can’t beat them, we should join them.

Amichay