Israel's hi-tech success threatened by storm of internal conflict - opinion

The Israeli hi-tech industry emerged out of a perfect storm in the early 1990s. In the early 1990s, a few forces combined to jumpstart Israeli hi-tech at an unprecedented pace.

Almost a million immigrants from the former Soviet Union; the rise of software and the internet as the era’s General-Purpose Technology in that decade was especially fitting to Israel’s academic and army capabilities in ICT (Information and communication technologies). And the golden era of government-industry collaboration allowed the Office of the Chief Scientist to launch seminal programs like Yozma, Incubators and Magnet that ignited the fire of the Israeli tech industry.

Thirty years later, Israeli hi-tech is a global tech powerhouse that has endured a financial crisis in 2008, multiple security clashes, COVID-19 and four years of political instability. But we would be foolish to assume it is totally bullet-proof. During a big enough storm, even the sturdiest of ships can crack and sink.

And Israeli hi-tech indeed might be heading towards a perfect but not-so-positive storm that could drag us to the bottom. In fact, the waves that have helped us before may be turning against us now.

The global macroeconomic conditions are likely to be harsh in the near future, while the global tech sector is experiencing a particularly tough period. Even the almighty tech giants, like Amazon, Google, Meta, Intel and Microsoft, are laying off thousands of workers and look more vulnerable than ever.

Technology-wise, we’re in the last stages of the current innovation cycle, which has revolved around connectivity (internet) and mobility (smartphones). It is gradually being replaced by AI and smart machines (and no, this article wasn’t written by ChatGPT). Can tiny Israel be a tech leader in a technology era based on big data? Maybe but it will take every bit of effort and smart policies to keep us as a leader in the fierce global technological race.

Internal strife within Israel sets the government and tech industry on a collision course

But most alarming are the breaking of social cohesion and the fear that the government and the tech industry are set on a collision course. Friction around the government’s judicial reforms is just a symptom of the rift between the mostly secular and liberal tech industry and the largely right-winged, religious and conservative government (Is it a coincidence that after many years there is now a plan to cancel the discount on municipal-tax to software companies?).

In his 2016 book The Politics of Innovation, Prof. Mark Taylor offers the following explanation to the question of why some countries are better at science and technology than others. He claims that creative insecurity – defined as feeling more threatened by external hazards than by domestic rivals – is the main driver that makes countries like Israel, Taiwan and South Korea tech leaders.

We indeed believe that Israeli hi-tech grew in the last 30 years not just on the basis of investments and skills but also on the belief that ideas wrapped as tech products are our only shot, as a country, to punch above our weight. It drove Israelis to be proud of their success as a Start-Up Nation rather than jealous and spiteful. It was us against the world.

Unfortunately, in our fragmented, polarized Israeli society of 2023, it is all about “us” against “them” from within. It took us 30 years to build a thriving tech industry. If we don’t prepare for the perfect storm that might be heading our way and if the ship’s crew continues to fight each other, Israel’s tech miracle can be over in less than 30 months.

The writer is the CEO of Start-Up Nation Policy Institute (SPNI).