Israel Catches the Internet Bug

TEL AVIV–January is not the high time here, not even in the year 2000. The Mediterranean air is cool, the sun sets early and the lines are short. The Pope, wisely, is waiting for warmer weather.

Driving me in from the airport, the cab driver spoke in broken English about the peace talks between Syria and Israel. He was not excited about the possible surrender of the Golan Heights. Taken in the 1967 Six-Day War, the Golan is internationally known as a vital security buffer between Syria and Israel. But Israelis tend to focus on the Golan’s lesser-known strategic value: It is a vital source of water in an arid land.

“It is the stuff of life,” said the cab driver. “You can’t give back the water.”

He grumbled as we rolled past a horizon dotted by construction cranes and the boxy buildings more familiarly found in Asian boomtowns like Hong Kong. Like many developing hot spots, Tel Aviv screams functionality.

Israel’s greatest accomplishment has been that of turning this dry land into an agricultural miracle. The Israelis are irrigation magicians. But water, even though it is the stuff of life, is no longer the centerpiece of Israeli thought.

Israel has caught the Internet bug. Badly. In the bar at a local hotel, the talk was less of the peace process and the recent political scandal involving the President, but of overnight Internet millionaires and the wonders of high technology. The new greed has made the trip from Silicon Valley to Silicon Wadi. The romantic notion of the kibbutz seems quaint at best. “In the last seven years, things have changed dramatically,” said one man at the bar. “It’s no longer a place where people pull together to get something done. Instead everyone’s racing to become the next stock-rich success story.”

In Tel Aviv in winter, there aren’t many tourists, but there are plenty of visitors. Investment bankers, venture capitalists and others seeking to mine the growing technology boom here have taken over the town. American firms are everywhere. The 10-hour “shuttle” to and from New York is packed. Continental Airlines added a flight to Tel Aviv only last fall.

The thrill of the technology explosion ripples through the area just north of Tel Aviv. But that excitement focuses on only a portion of the Israeli economy. Outside of technology, the scene is not as bright. The Kibbutz slice is ailing, heavy industry is struggling, and unemployment is at 9.2 percent. A massive (and successful) war against the once triple-digit inflation has brought broader growth to a standstill. But the dismal scientists believe the economy will start picking up steam this year.

Regardless, the growing legion of Internet millionaires don’t really notice the ailing piece of Israel. One local journalist groused that the United States had successfully exported the get-rich, go-go aspects of the New Economy, but it had failed to send over the charitable elements.

A glance at the daily newspaper Ha’aretz ‘s listing of Israeli stocks in New York turns up a host of new names, like ECI Telecom and Gilat Satellite, along with old hands like Koor Industries. Most curious: the listing of Applied Materials. The American semiconductor equipment company has been acquisitive in Israel, and many Israeli technology professionals hold AMAT stock, making this monster of the Nasdaq an adopted Israeli stock trading in the United States. America Online has also shopped in Israel

The success of the high-technology sector helped drive the Tel Aviv stock exchange to a more than 50 percent gain in 1999, in local currency terms. And the wild ride continues in stocks like Internet Gold, a local Internet service provider, and Comverse, a maker of Internet firewall software.

Much of the Israeli high-tech boom flows from the military. Intense technology training programs turn out brilliant technologists. After their release from full-time service, they become entrepreneurs, encouraged by the words and funds provided by the Americans who are crawling around the country looking for investments that will help them leapfrog the competition.

The technology boom here has overshadowed the peace talks with Syria. Could a bad outcome to the talks hurt the technology explosion? The answer is always the same, a scoffed “No way.” It is a familiar refrain to those who have listened to the Silicon Valley crowd airily dismiss its skeptics. Technology and money are bigger than politics, even here in Israel, perhaps the most political region in the world.

Dave Kansas is editor-in-chief at The Street.com