Question: What do America’s premier investor, Warren Buffett, and Iran’s
toxic president, Mahmoud Ahmadinejad, have in common? Answer: They’ve both
made a bet about Israel’s future.
Ahmadinejad declared on Monday that Israel “has reached its final phase
and will soon be wiped out from the geographic scene.”
By coincidence, I heard the Iranian leader’s statement on Israel Radio
just as I was leaving the headquarters of Iscar, Israel’s famous precision
tool company, headquartered in the Western Galilee, near the Lebanon border.
Iscar is known for many things, most of all for being the first enterprise
that Buffett bought overseas for his holding company, Berkshire Hathaway.
Buffett paid $4 billion for 80 percent of Iscar and the deal just happened
to close a few days before Hezbollah, a key part of Iran’s holding company,
attacked Israel in July 2006, triggering a monthlong war. I asked Iscar’s
chairman, Eitan Wertheimer, what was Buffett’s reaction when he found out
that he had just paid $4 billion for an Israeli company and a few days
later Hezbollah rockets were landing outside its parking lot.
Buffett just brushed it off with a wave, recalled Wertheimer: “He said,
‘I’m not interested in the next quarter. I’m interested in the next 20
years.’ ” Wertheimer repaid that confidence by telling half his employees
to stay home during the war and using the other half to keep the factory
from not missing a day of work and setting a production record for the
month. It helps when many of your “employees” are robots that move around
the buildings, beeping humans out of the way.
So who would you put your money on? Buffett or Ahmadinejad? I’d short
Ahmadinejad and go long Warren Buffett.
Why? From outside, Israel looks as if it’s in turmoil, largely because
the entire political leadership seems to be under investigation. But Israel
is a weak state with a strong civil society. The economy is exploding from
the bottom up. Israel’s currency, the shekel, has appreciated nearly 30
percent against the dollar since the start of 2007.
The reason? Israel is a country that is hard-wired to compete in a
flat world. It has a population drawn from 100 different countries, speaking
100 different languages, with a business culture that strongly encourages
individual imagination and adaptation and where being a nonconformist is
the norm. While you were sleeping, Israel has gone from oranges to software,
or as they say around here, from Jaffa to Java.
The day I visited the Iscar campus, one of its theaters was filled
with industrialists from the Czech Republic, who were getting a lecture
— in Czech — from Iscar experts. The Czechs came all the way to the Israel-Lebanon
border region to learn about the latest innovations in precision tool-making.
Wertheimer is famous for staying close to his customers and the latest
technologies. “If you sleep on the floor,” he likes to say, “you never
have to worry about falling out of bed.”
That kind of hunger explains why, in the first quarter of 2008, the
top four economies after America in attracting venture capital for start-ups
were: Europe $1.53 billion, China $719 million, Israel $572 million and
India $99 million, according to Dow Jones VentureSource. Israel, with 7
million people, attracted almost as much as China, with 1.3 billion.
Boaz Golany, who heads engineering at the Technion, Israel’s M.I.T.,
told me: “In the last eight months, we have had delegations from I.B.M.,
General Motors, Procter & Gamble and Wal-Mart visiting our campus.
They are all looking to develop R & D centers in Israel.”
Ahmadinejad professes not to care about such things. He was — to put
it in American baseball terms — born on third base and thinks he hit a
triple. Because oil prices have gone up to nearly $140 a barrel, he feels
relaxed predicting that Israel will disappear, while Iran maintains a welfare
state — with more than 10 percent unemployment.
Iran has invented nothing of importance since the Islamic Revolution,
which is a shame. Historically, Iranians have been a dynamic and inventive
people — one only need look at the richness of Persian civilization to
see that. But the Islamic regime there today does not trust its people
and will not empower them as individuals.
Of course, oil wealth can buy all the software and nuclear technology
you want, or can’t develop yourself. This is not an argument that we shouldn’t
worry about Iran. Ahmadinejad should, though.
Iran’s economic and military clout today is largely dependent on extracting
oil from the ground. Israel’s economic and military power today is entirely
dependent on extracting intelligence from its people. Israel’s economic
power is endlessly renewable. Iran’s is a dwindling resource based on fossil
fuels made from dead dinosaurs.
So who will be here in 20 years? I’m with Buffett: I’ll bet on the
people who bet on their people — not the people who bet on dead dinosaurs.
The New York Times. Published: June 8, 2008
Russian version