When people think about the main threats Israel faces they typically think about Iran’s nuclear ambitions, ISIS taking over the neighboring countries, militant group Hezbollah building a large missile arsenal aimed at Israeli cities, the rockets which started flying again from Gaza, or perhaps Hamas rebuilding the tunnels that cross the Gaza boarder. And indeed, when you watch the news the geopolitical situation in the region seems terrifying.
Israel has always faced existential threat from its neighboring countries. But even though the outside threats seem to be increasing, the Israeli Defense Force (IDF) keeps getting stronger over time. New cutting edge technologies in intelligence gathering, air defense (such as the Iron Dome and Arrow missile), aircraft, cyber security, drones, and satellite ensure the IDF stays ahead and even increases the gap over time. Therefore, even though every few years a new large conflict emerges, the local economy and tech ecosystem are rarely affected and continue to deliver through the toughest times. Some even suggest that the constant threat and uncertain future drives many Israelis to be both paranoid and optimistic at the same time, which is a great trait for successful entrepreneurs. This never-ending conflict also pushes the relatively lean Israeli Defense Force (IDF) to constantly reinvent itself and develop cutting edge technologies in order to stay ahead and is another driving factor for the growth of the local startup environment.
But Israel faces another kind of existential threat, at least as a technology hub. This threat is rarely in the news since it is less exciting and requires a long term view – the large and growing divide between the different education systems. Not long ago, the large majority of Israeli children attended Hebrew state schools. A quick look at the data provided by the Central Bureau of Statistics shows that there is constant decline in the proportion of students attending Hebrew state schools and a constant growth in the Ultra Orthodox (Haredi) and Arab schools. This phenomenon is mostly due to the demographic changes since the Orthodox and Arab tend to marry earlier and have more children. But this trend is also intensified by the decline in immigration and the growing number of non ultra-orthodox that send their kids to country-sponsored private schools run by the religious “Shas” party. In 1990 only 7.6% of the Hebrew population went to Haredi school, in 2006 this number was already 26.5%, and in 2013 ~50% of first graders attended the Arab or Haredi schools and not a Hebrew state school.
Now this becomes a real problem for the local economy since ultra-orthodox and Arab citizens are underrepresented in the workforce. The Haredi schools lack mainstream education, and mostly ignore core subjects such as math and English since ultra-orthodox are not encouraged to join the workforce. Therefore, even the ones that eventually decide to work find it almost impossible to get high skill jobs. The quality of the Arab school system lags the Hebrew one for a variety of reasons, and half of the Israeli Arab population, the Arab women, rarely join the workforce. The result is that more and more Israeli students don’t have any foundation of knowledge, any basics — not in math, not in English, not in general. And this is the future generation that will drive the technology sector and the overall economy.
Now imagine the difficulty of sustaining the quality of Israeli technology when such a large portion of the population is under-educated or doesn’t join the workforce.
While the demographic trends have somewhat reverted in the past few years this is still an existential threat to the economy. The country must work hard to improve the quality of the Arab school system to ensure they are on par with the rest of the population. In addition, Arab women should be encouraged to work. Getting ultra orthodox into the workforce should be a top priority for the country and Haredi schools must teach core subjects so that ultra orthodox can find quality jobs instead of being doomed for a life of poverty. While this might seem obvious for an outside observer, the local political system makes it almost impossible to implement any of these reforms.
With the constant growth of external threats it is easy to disregard the internal ones. But the internal threats are the ones that will most likely determine the country’s future.
Venturing Startup Nation 