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Saturday, May 4, 2013

Thoughts From Israel

The particle accelerator at the Weizmann Insti...
The particle accelerator at the Weizmann Institute of Science (Photo credit: Wikipedia)
By Investmet U

Jerusalem, May.5, stock investment .- Israel is a difficult place to live. As it is surrounded by its enemies, military service is compulsory for men and women. The men remain in the reserves, including yearly call-ups until age 40. Taxes are high and so is the cost of living.

And other than a recently discovered natural gas field, the country has no natural resources.

Yet as I sit in my hotel room less than 20 miles from the Syrian border, after meeting with an intriguing Israeli medical diagnostics company, I can't help but be amazed at what this tiny country has accomplished in just 65 years. (The picture below is the view from my room.)

The way the country has done it is so forward thinking... America would be crazy not to use the Israelis' blueprints to shape our economy.

Specifically, we must invest in our people.
According to the Organization for Economic Cooperation and Development (OECD) Israel ranked second in the world in education. And 78% of the funds invested in education came from the government.

With no natural resources to rely on, the Israeli government made a decision decades ago to invest in its people. It made a calculated choice to make science and innovation the cornerstone of its economy.

That's why many of the world's greatest scientists flock to Israel's Weizmann Institute of Science. The group recruits scientists based on their talents and interest in innovation... not on their discipline.

In other words, Weizmann doesn't say, "we need one more chemist and two more biologists."

Rather it looks for the right people regardless of what they study - and then it gives them hefty grants to pursue their innovations.

This setup attracts world-class talent to Israel.

The results?

The Weizmann Institute has spawned numerous breakthrough companies that have added billions of dollars to the Israeli economy (and Weizmann receives a cut of each dollar).

Teva Pharmaceutical's (NYSE: TEVA) Copaxone for the treatment of multiple sclerosis originated at Weizmann. So did Rebif, another MS drug owned by EMD Serono and Pfizer (NYSE: PFE).

These kinds of breakthroughs are what brought me to Israel for this two-week trip. The country is brimming with opportunity.

Unleashing Motivation

Israel's economy is expected to grow nearly 4% this year. Unemployment is low and so is inflation. Everywhere I look there are construction cranes. The amount of building is incredible.

And get this... there are more companies listed on the Nasdaq exchange from Israel than from any other country other than the United States.

It all comes down to having a skilled and motivated workforce.

The Israeli economy hasn't always been this robust. At one point, inflation was extremely high. And wars have clearly disrupted economic progress. But through it all Israel has maintained its focus on training many of its citizens in science.

Compare that to the United States where state governments have slashed higher education spending by 28% (and that was before sequestration).

In the States, education has become a political issue.

Governors routinely slash budgets for schools only to turn around and boost funding during election years. That way they can declare themselves "education" governors.

Rather than encouraging students to learn critical thinking skills that will help them become innovators or at least survive in the real world, our political leaders focus on standardized exams. American students are taught to memorize formulas they'll see on a test rather than how to solve real-world problems.

I've also noticed that Israel, which has strong socialist leanings - socialized medicine and inexpensive college tuition, etc. - has an aggressive workforce. It's unlike the United States where far too many folks are content to rely on their government check.

If the United States shifted its priorities and ensured that today's 5-year-olds will have the skills necessary to compete in the global economy 20 years from now, we'd be able to compete with countries like Israel. It is doing things right.

It's a long-term philosophy that is paying off in a big way for a tiny country.

I'm here and seeing it firsthand.


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