A paradox: Israelis chase away needed American investors?
See the introductory blog post for more information about Israel Win Win. The post below summarizes recent market conditions in Israel and discusses why Israel needs to find ways to encourage new and expanded American investment. The next blog post will explore USA trends and how they will affect Israeli investors who are streaming to America, particularly for investments in US real estate.
There’s a story told about the Chinese student who when asked to mention the largest countries in the world answered China, America, Russia and Israel. When asked why he included Israel in the list of world powers, he answered it was based on how often it was mentioned in the press. In fact, in most physically measurable terms, Israel is a small country.
In the last two weeks on twitter posts, I provided links to news reports which highlight the positive business momentum in Israel, including the recent rises in the Tel Aviv Stock Exchange and the Israeli Government’s ability to raise money at cheaper rates due to Israel’s relatively strong economy. At the same time, venture capital funding into Israel was reported to be down by 40%.
Israel’s socialist roots:
For the first fifty plus years of its modern existence, the State of Israel was largely socialist with a completely insular and protectionist approach to its economics. The country was famous for its often astronomical rates of inflation, currency devaluation, government controlled businesses, lack of efficiency in the provision of services of all kinds, labor strikes and the like. Institutional investments were largely mandated to be directed into Israeli government securities.
Israel becomes a market driven nation:
Within the last decade, Israel embraced globalization and has been completely transforming into a market driven economy. This, in combination with other factors like the huge success of its high tech industry, has brought prosperity. During the current worldwide recession, Israel has fared better than most countries and is showing signs of an early recovery. The New Israeli Shekel strengthened vis-à-vis the dollar, although it has given back a good portion of those gains based in large part on an Israeli central bank program to buy US dollars. Nevertheless, the Shekel is still trading some 20% stronger against the dollar than it was at the initial reporting of the US sub-prime mortgage crises in early 2007.
In recent years, Israeli companies and institutions invested tens of billions of dollars outside of Israel. One of the reasons for this turn-around is that the Israeli government no longer needs Israeli institutional money to be invested in its bonds. With greatly improved credit ratings, Israel can borrow abroad at lower rates. Also, as a small country, there are relatively limited options for local investment and the competition for the better investments often means lower rates of return. As a country constantly in a state of aggression with the many enemies surrounding her, investing all of its wealth internally is not the most secure strategy either. For these reasons and others, Israeli institutional and private investors have been encouraged to and opted to diversify their holdings globally.
However, one market where many Israeli investors have suffered significant loses over the last two years is in the global real estate market, including heavy losses in US based real estate. This will be explored on the next follow-up blog post relating to Israeli opportunities to invest in the USA.
Israelis chase away needed American investors:
As stated in the last blog post, in my “American” way of looking at things, Israeli’s should be bending over backwards to attract American and other foreign investment. Through the years, foreign Jewish business people have been the most likely and motivated investors in Israel. However, my sense from speaking with many such people is that a good percentage of those who have done so regret their investments and refuse to even try again because of their experiences. Language differences can be overcome as most Israeli professionals and business people can communicate well in English. Also, there are some governmental programs and incentives in place to encourage foreign investment. For sure, there have been high profile investments in recent years like those by many of the American high tech companies and Warren Buffet, for example.
However, there are cultural differences and a different approach to doing business that are often harder to overcome. In dealing with foreign investors, Israeli’s often first display an undercurrent of mistrust and suspicion and can be opinionated and blunt. All of these characteristics are not necessarily bad for doing business, but they don’t always work well with American’s who base their business relationships on mutual best interest, mutual trust and respect and who may often be more diplomatic than blunt.
The Israel Win Win Answer:
Jewish and other Americans should be greatly encouraged to invest in Israel. Of course, this is good for the Israeli economy. However, successful investment in Israeli assets and ventures by Americans is great for Israel politically; in building its global reputation and in expanding the number of Israeli stakeholders and supporters. Fortunately, there are many Americans and other Anglo Israelis who have made aliya and now live and work in Israel. Many Israelis have also lived in the USA for a period of time or have worked for or done business with American companies and are more atuned to an American Win-Win approach. There are also Israeli companies managed by Americans. So the options for American businessman to invest in Israel with those that understand the Win-Win philosophy are expanding, especially among the younger Israeli generation. The future is brite for the Israel Win Win approach to take root and grow.
Thursday, July 23, 2009
Thursday, July 16, 2009
Introduction
Welcome to Israel Win Win, the initiative to promote new and expanded business connections and networking opportunities between Israeli and North American business people. If you are interested in such business opportunities please join us and get actively involved in making this initiative successful. Follow this Blog or on twitter for more details.
Your probably asking - Why Israel Win Win?
The good: By way of introduction, as an American, Jewishly observant business person, I am simply in love with the Land of Israel and the people of Israel. Being born in Israel and immigrating to the USA at 5 yrs old, I not only have dual citizenship, I consider both my home. My Holocaust survivor parents both journeyed to Israel after being liberated from concentration camps. My father fought for the Israeli army in 1947, until an eye injury ended his military career. To this day some half a century after leaving, he loves the country and follows every bit of news as if he never left.
My wife and I have visited Israel dozens of times. Our nine children have studied and/or attended camps in Israel at different times and one of my sons even volunteered, serving in the IDF. We have had a second home in Jerusalem and a couple of years ago I invested in and became Chairman and CEO of a public Israeli company which has raised institutional money in Israel and invested in US real estate.
The bad: My father started a business in Israel but left in 1960 mainly because he couldn’t adjust to the Israeli way of doing business. Generally, our circle of friends are also orthodox Jews. They strongly identify with the land of Israel, visit Israel often, spend freely, send their kids to Israel to study and sometimes to live.
In my “American” way of looking at things – we are the kind of tourists and potential investors which the Israeli’s should be bending over backwards to attract. However, when I speak with many American Jewish business people about investing in Israel, pretty much each one has a story of how they were involved in a business deal in Israel which didn’t work out quite as they would have liked. No Loshon Harah (evil tongue) is intended here, it’s just the way that it is.
Defining the problem: Since my business now straddles the US and Israel, I have gained some new insight into this. Often business practices, philosophy and approaches have been very different in Israel, as a Middle Eastern country, then they are in the West. In recent decades, many Israeli’s have left Israel and come to the USA. Some, like my family, have stayed permanently while others have stayed for varying periods of time and then returned to Israel. A very large number of Israeli nationals continue to live in North America and many are coming all the time.
Some Israeli business people make the transition to an “American way of doing business” and many haven't. These differences are not only about business. Given Israel’s and the Jewish people’s always precarious position in the gentile world, these differences may eventually have long-term, significant political repercussions for Israel as a Jewish state and for relations between Israelis and the Jewish Diaspora, who are ever dependant on each other.
The Israel Win Win vision: The American approach to business is often referred to as “Win-Win”. In this approach, each side in a business transaction benefits from the “deal” and the best deals are those where both sides perceive that they are winners. In my experience, the Middle Eastern approach to business is often different (not worst - just different), let’s call it a “Win-Lose” approach, where every business deal by definition has one winner and one loser and the goal of negotiating a transaction is to be the winner – or to make sure that your counterpart is the “loser”. This approach works in Israel and elsewhere in the world, but in the US, a win-lose approach is really a guaranty of a long-term “lose-lose” result. Simply, American business people will usually take their business elsewhere if they believe that there is a chance of “losing” in a business transaction.
The consensus opinion in the US and in Israel is that great and historic opportunities are coming for investors in US real estate and other assets. Of course, the current economic woes started in the US, but now they are global. There is a general feeling that it is the US real estate market which will recover first (although there is definitely uncertainty about the exact timing for this.) More and more Israelis are looking to North America as the next investor frontier. To succeed financially, politically and for the entire Jewish nation these Israeli businessmen will need to adopt the “Win-Win” approach to doing business with Americans. The Israel Win-Win initiative is about helping them insure that they do.
Your probably asking - Why Israel Win Win?
The good: By way of introduction, as an American, Jewishly observant business person, I am simply in love with the Land of Israel and the people of Israel. Being born in Israel and immigrating to the USA at 5 yrs old, I not only have dual citizenship, I consider both my home. My Holocaust survivor parents both journeyed to Israel after being liberated from concentration camps. My father fought for the Israeli army in 1947, until an eye injury ended his military career. To this day some half a century after leaving, he loves the country and follows every bit of news as if he never left.
My wife and I have visited Israel dozens of times. Our nine children have studied and/or attended camps in Israel at different times and one of my sons even volunteered, serving in the IDF. We have had a second home in Jerusalem and a couple of years ago I invested in and became Chairman and CEO of a public Israeli company which has raised institutional money in Israel and invested in US real estate.
The bad: My father started a business in Israel but left in 1960 mainly because he couldn’t adjust to the Israeli way of doing business. Generally, our circle of friends are also orthodox Jews. They strongly identify with the land of Israel, visit Israel often, spend freely, send their kids to Israel to study and sometimes to live.
In my “American” way of looking at things – we are the kind of tourists and potential investors which the Israeli’s should be bending over backwards to attract. However, when I speak with many American Jewish business people about investing in Israel, pretty much each one has a story of how they were involved in a business deal in Israel which didn’t work out quite as they would have liked. No Loshon Harah (evil tongue) is intended here, it’s just the way that it is.
Defining the problem: Since my business now straddles the US and Israel, I have gained some new insight into this. Often business practices, philosophy and approaches have been very different in Israel, as a Middle Eastern country, then they are in the West. In recent decades, many Israeli’s have left Israel and come to the USA. Some, like my family, have stayed permanently while others have stayed for varying periods of time and then returned to Israel. A very large number of Israeli nationals continue to live in North America and many are coming all the time.
Some Israeli business people make the transition to an “American way of doing business” and many haven't. These differences are not only about business. Given Israel’s and the Jewish people’s always precarious position in the gentile world, these differences may eventually have long-term, significant political repercussions for Israel as a Jewish state and for relations between Israelis and the Jewish Diaspora, who are ever dependant on each other.
The Israel Win Win vision: The American approach to business is often referred to as “Win-Win”. In this approach, each side in a business transaction benefits from the “deal” and the best deals are those where both sides perceive that they are winners. In my experience, the Middle Eastern approach to business is often different (not worst - just different), let’s call it a “Win-Lose” approach, where every business deal by definition has one winner and one loser and the goal of negotiating a transaction is to be the winner – or to make sure that your counterpart is the “loser”. This approach works in Israel and elsewhere in the world, but in the US, a win-lose approach is really a guaranty of a long-term “lose-lose” result. Simply, American business people will usually take their business elsewhere if they believe that there is a chance of “losing” in a business transaction.
The consensus opinion in the US and in Israel is that great and historic opportunities are coming for investors in US real estate and other assets. Of course, the current economic woes started in the US, but now they are global. There is a general feeling that it is the US real estate market which will recover first (although there is definitely uncertainty about the exact timing for this.) More and more Israelis are looking to North America as the next investor frontier. To succeed financially, politically and for the entire Jewish nation these Israeli businessmen will need to adopt the “Win-Win” approach to doing business with Americans. The Israel Win-Win initiative is about helping them insure that they do.
Subscribe to:
Posts (Atom)
Posts
