Israel was not supposed to be an economic success story. Beyond gas deposits only recently discovered, it is a country completely devoid of natural resources. Its regional trade is limited due to its infelicitous neighbors, and much of its politics is dominated by the perennial Palestinian Question.

The early state had never quite expected to do well, it seems. Terrified of future Egyptian attacks, in 1977 the country was all too eagerly willing to hand over the Sinai Peninsula in return for peace. What a laughable bargain it seems now, losing two-thirds of one’s territory to pacify a dysfunctional garbage-state such as Egypt! But obviously, things looked very different back then.

The country’s fortunes began to take off in the 1990s. I remember this as a kid. Where previously restaurants had been mostly kabab shops adjacent to gas stations, there suddenly was a culinary scene. I remember discovering that pasta can come with white sauce! And in shapes other than spaghetti! You could suddenly get a good steak, with fancy French toppings, instead of burnt meat strips shoved into a pita. Trips abroad, which had been an absolute luxury back in the day, suddenly became a common feature, a rite of passage to be marked alongside one’s bar mitzvah. The state’s one and only TV channel had become two channels, then exploded into the endless cacophony typical of contemporary media markets.

Naturally, much of this was the now famous “Start-up Nation” effect. You see, old Israel had been poor in cash but not in know-how. Israeli minds had been studying math and physics and computer science, much of it solely for the benefit of the military until suddenly these things could be translated into cash. This pent-up knowledge, much of it previously used for the design of jet controls and the aggregation of military intelligence, could suddenly be put into much profitable use in the form of store management systems, online chat software, video compression, and much more.

Fast forward to today, and Israel is ranked 14 in the world in GDP per capita, and 29 if you go by purchasing price parity (which takes into account Israel’s high cost of living).

GDP per Capita by Country, IMF Calculation, Wikipedia
GDP per Capita, PPP Adjusted, IMF Calculation, Wikipedia

So not bad at all.

However, walking around Israel, some of this doesn’t seem to pass the smell test. Spending 90 minutes trying to close a bank account, I was left with some doubts about the country’s status as a place more developed than England or Japan. Trying to get a rental car while waiting for all sorts of forms to print and signatures to be collected I was once more made to wonder whether this was a country richer than New Zealand.

And then there are the Israeli media that are simply unwatchable. Most panel interviews and news shows quickly devolve into screaming matches like this one or this one. It doesn’t have an African vibe perhaps, but definitely a Latin American one. Maybe it’s fun and refreshing, but this kind of histrionics is negatively correlated with economic success elsewhere.

So what is going on?

I believe it has to do with Israel’s cognitive-economic profile. Given that Israel’s economic success is concentrated in one field, technology, that field pays much more than any other professional persuasion. While the average monthly salary in Israel is about 12,000 NIS, in tech it is 30,000. In R&D it is 40,000 NIS. Lawyers, by comparison, only make an average of 18,000 NIS per month.

These gaps are so enormous, that they are life-changing. In tech, you will cruise through Israeli life with ease, making 2.5-3 times the national average. Outside of tech, you will feel the brunt of Israel’s notoriously high cost of living. No other profession pays as much! Granted, CEOs and banking execs make great money, but such positions are few and far between. If you wish to secure a high income, you go into tech.

This is an anomaly unique to Israel. In America, there are many professional avenues into the upper middle class and its lovely perks. Pretty much any big consulting, big law, big finance, big corporate job. In Israel, there is only one such avenue.

And so, anybody who can, even if deep in their hearts they had wished to be in marketing or finance or advertising, goes into tech. The financial rewards are simply too great. In turn, due to the high demand, it is very competitive to get into tech. The most selective university departments are the ones teaching computer science and engineering. Not law. If you manage to score highly on the Israeli SATs (the “Psychometric Exam”), you’ll go into tech.

Meaning, everybody (by and large) wants to get into tech, yet tech selects by intelligence, and so ALL THE SMART ISRAELIS ARE IN TECH.

The smart Israelis are not in banking, not in car rentals, not in the media, not in advertising – they are in tech. Tech jobs are only about 11% of the Israeli professional market yet they hoover up all the smart people. Now, naturally, you may find the occasional smart person elsewhere. Some people truly and adamantly prefer to do something else. But by and large, by the law of large numbers, the smart set is in tech.

Is it a healthy professional distribution? Probably not. When the Israeli engineer leaves the office, after an espresso-loaded day of devising world-class algorithms for self-driving cars, he may get stuck waiting at the same car rental agency, waiting for the forms to print out.

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