Confessions of a 'start-up junkie'
At 81, high-tech mogul Morris Kahn is passionate about his latest venture: a digital platform designed to boost the performance level of Israeli schoolchildren. In a rare interview, the founder of Amdocs shares his concerns and fears for the future of the country
By the end of the interview, Morris Kahn feels somewhat freer to give his opinion of Israel's leadership. "If Bibi Netanyahu would focus on doing what has to be done, the media would probably take less of an interest in his trips abroad," he says.
The growing polarity between the haves and have-nots in the country make Kahn, the 81-year-old founder of Amdocs and one of Israel's wealthiest people, feel "very bad." A particular source of despair is the educational system and the increasingly dismal performance of local students in international surveys.
"The truth is that the situation is bad, and not only in education," he notes. "Wherever I look in Israel, things aren't working. Not on the highways. Not in infrastructure. The police have their problems. The courts don't work. It takes five years to get a trial here. We have problems in the hospitals. I get up in the morning and read the newspapers, and that puts me in a bad mood. If only I could stop reading."
What would you like Israel's vision to be in the coming years?
"My Israel understands that it has to undergo a dramatic change. I want Israel to begin a peace initiative with the Palestinians. I want to see a less corrupt country. In general, I'm worried. I don't have a good feeling about what's happening here."
Kahn's considered Israel's wealthiest high-tech mogul, but unlike others, who achieved what they did thanks to an inheritance that provided seed money or a swift exit, he created his capital with his own two hands. Fortunately, he always knew the right time to sell his assets. He rode on the crests of financial highs, and was often able to unload his assets and rake in big bucks.
Most of Kahn's energy is now focused on Time to Know (Et Lada'at ), a voluntary educational initiative that operates in several dozen schools. It's also the reason he agreed to this interview, one of the few he has given to local media. His desire to promote his new baby led him to break his silence.
Kahn was born in South Africa in 1930 and immigrated to Israel in the 1950s. "The situation in South Africa looked bad, and as a Jew, it was important to immigrate to Israel, so we came here." Among other pursuits, he tried his hand at manufacturing bicycles and leather gloves, and even tried to get a patent for a device against car thefts. He also started a cattle grazing company, which managed an area of 8,000 dunams (2,000 acres ) near the Hula Valley and Kibbutz Kfar Giladi, and other agricultural ventures.
In 1967, the Ministry of Postal Services issued a tender inviting potential bidders to submit offers for publishing the Golden Pages phonebook for businesses. ITT, which Kahn represented (and which later merged with AT&T ), initially lost the tender. But after he challenged the outcome and insisted the deal was rigged, he got the ministry to issue a new tender, which his company won.
"At ITT, they told me that they wanted to pay me for fighting on their behalf to have that corrupt tender overturned. I told them I wouldn't take anything, that I'm an Israeli citizen and I believe that in Israel, business should be conducted properly. I refused to accept a fee. I thought that the State of Israel hadn't behaved properly in this case. They thought I was crazy, especially after I told them I didn't think publishing the Golden Pages would be profitable. They told me I was strange because, on the one hand, I fought to have the tender canceled, and on the other, I didn't think it would be a profitable venture, so why did I fight for it? They offered me the position of managing Golden Pages, but I wasn't interested. I'm an entrepreneur. I don't like working with managers. I didn't want to lose my independence, but I ultimately agreed because I wanted to gain experience in an international corporation."
Together with other employees at Golden Pages, which was owned by the Aurec Group, Kahn began developing a software program for billing telecom companies. This initiative eventually led to the founding of Amdocs in 1982, under the name Aurec Information. In 1985, SBC acquired 50 percent of Aurec Information, and its name was changed to Amdocs.
Amdocs, which eventually evolved into the leading company in the world in its field, was valued at $2.75 billion in 1998 when it went public. Within two years, Aurec - then owned by Zvi and Shmuel Meitar and Kahn - sold off all its holdings in Amdocs to the tune of almost $1 billion in cash.
In 1999, Aurec made another surprising move when it decided to sell off its holdings in the Arutzei Zahav cable company to its partners, Eliezer Fishman and Yedioth Ahronoth, for $40 million. The deal was finalized during the height of the high-tech and media bubble, when the cable industry was thought to be on the verge of a major financial breakthrough. In 2000, Kahn sold 51.5 percent of the Aurec Group's holdings in Golden Lines (Kavei Zahav ), an international Internet service provider, again to Fishman, for $180 million. That same year, Aurec also divested itself of its 50 percent holding in Netcom, a smaller provider of data communications networks. The value of the transaction was never revealed, but it is thought that Aurec received about $20 million for its shares.
Then, in 2004, Kahn sold his holdings in Golden Pages to the Markstone Fund for about half a billion shekels, equivalent to $110 million at the time.
It seems you always knew just when to sell your holdings and make millions in the process. How did you know?
"The truth is I have no idea. I'm not a good business manager. Shmuel Meitar is the manager. I'm the entrepreneur. When the business succeeds, I lose interest. I'm a start-up junkie."
For years you ran Aurec with Shmuel and Zvi Meitar, without quarreling even once. How is that possible?
"We didn't quarrel. That's true. When we began our businesses and traveled abroad together, we would pool our money. Everyone spent what was necessary. On the way back, we would check how much we had and divide it 50-50. That's it. Nobody ever said: 'Why are you spending more?' We didn't work with a contract; we trusted one another. We reached a point where we didn't have to talk to one another."
As Kahn enjoys pointing out, he also suffered setbacks: "Of course there were failures, and I learned from every one of them." When asked to specify a particular setback, he has difficulty recalling any. Not even when he's reminded of the Alpha credit card fiasco, a partnership with the Safra family. "No," he answers, "I don't really remember it."
Today Kahn devotes most of his time and money to philanthropic causes he believes can spur positive change. His hope is that his Time to Know start-up will revolutionize education in Israel, and even abroad. Kahn and Shmuel Meitar, his right-hand man in Aurec, have invested tens of millions of dollars in the company, which they own entirely, since its establishment in 2004. In February 2010, the TechCrunch blog reported that Time to Know had at its disposal $60 million as of then. How much money has it raised to date? Probably much more; $100 million is not completely out of the question.
Time to Know provides schools with a digital platform for use in classrooms. Students are equipped with laptops connected to the teacher's computer, through which the curriculum is taught. The system is meant to enable teachers to devote more individual attention to students, analyze their performance in real time and determine who is falling behind.Investing in humanity
Kahn and Aurec still own 50 percent of insurance company AIG Israel. In addition, Kahn has interests in various Israeli start-ups through his holdings in the Aurum Ventures investment group. One of the best-known is N-Trig, a high-tech company dubbed "the iPhone of notebook computers." N-Trig's technology uses pen and projected capacitive multi-touch to create onscreen digital input for laptops and other digital products.
Another company in which Kahn has holdings through Aurum Ventures is Atlantium, the maker of a device that uses ultraviolet rays to disinfect water. Aurum Ventures was also invested in Dune Networks, a maker of chips for traffic management, before it sold it in December 2009 to Broadcom for $200 million. Over the years, Aurum Ventures had invested in the following Israeli technology companies: Atrica, Fontik Systems, Power Design and Chromatis.
Kahn says he also seeks out investment options elsewhere: "I'm involved in biotechnology initiatives that I believe will bring about a change in humanity. If at the same time, they're successful commercially, all the better. My business investments have a philanthropic side. I invest in companies that I believe will make the world better and cause humanity to suffer less. My main motivation is not to make money. I've already made enough money. On the other hand, I don't want to toss it in the trash can."
In 2010, Kahn was ranked No. 937 on Forbes Magazine's list of the richest people in the world, with an estimated worth of roughly $1 billion. Today, although Forbes estimates he is not worth any less, he has plummeted to 1,140th place on the list. The magazine ranks Kahn as 15th on the list of Israel's wealthiest people, a place he shares with Marius Nacht, one of the founders of Check Point. Above him are the Strauss family, Shari Arison, Benny Steinmetz, the Ofers, etc.
Known to love the sea, Kahn founded Coral World, which invests in underwater ocean observatories, including the one in Eilat. He also likes diving ("In two days, I'm going to the Caribbean to dive with friends from all over the world. I dive to 30 meters" ), has a yacht named "Jacqueline" (after his wife ), and has ordered another yacht built for himself. Some say Kahn lives in the yacht on the open seas in order to avoid paying taxes in Israel, and it has been reported that he paid very little tax on his divestments.
"Nonsense," he says. "I had a chance to talk to the editor of the newspaper that published those things. He apologized. The next day it was published again, in the exact same way. What can you do? I live in Beit Yanai [north of Tel Aviv] not in the middle of the ocean."
Kahn sees himself as a genuine Israeli, and says he takes an interest in everything that happens here. He travels widely in the country, and his children and grandchildren live here.
He shows no great admiration, however, for Israeli politicians. "I think that they could do much more. We have excellent leaders, but where are they?" he says, laughing. "Our country is beautiful. A kibbutz is a beautiful thing. There are excellent people here. When you fly over Israel and pass over the West Bank and Jordan, you see the green and exactly where it ends ... But something in the system doesn't bring out the best in our people."
Are you presently a businessman or a philanthropist?
"I balance between business and philanthropy. Many of my businesses have a philanthropic angle. I enjoy creating, being creative, investing in innovative initiatives. That was not always the case: When I had to put food on the table and worry about survival, I did so. When I was young, I worked to achieve financial security. But now I want to change a lot of things. Not only in Israel, but all over the world. But I don't want to make myself out to be one of these spiritual types who only want to do good for the world. I'm flesh and blood."'Change the paradigm'
How did you actually come to Time to Know and to investing in it?
"My relationship with Shmuel Meitar began in the 1960s. We were partners for many years. We did a lot of business together. At a certain point, each of us started to work on separate things. Shmuel became very involved in Time to Know. Before that, he supported an academic program that helped underprivileged students living in the periphery until they received their bachelor's degrees. But he understood that support for a single program - even though 2,000 students participated in this one - was not the way to bring about change. That's how he came to Time to Know.
"I, meanwhile, continued with my projects, but saw that Shmuel was very active and was investing a great deal of energy in the company. I decided to see what he was doing. We share offices, so I got familiar with Time to Know and it's vision. I thought it was really a contribution that we could make to Israel, and to the world. I believe that we can change the paradigm of the Israeli school system. So I decided to join him and to invest in the company."
What do you want to achieve through it?
"The future of Israel lies in its education. Israel's only asset is its human resources. The value of these human resources is a function of the level of education of those being educated here. I believe that Time to Know can make a significant contribution to raising the level of education of people in Israel, and pushing communities and sectors that are falling behind to move to a higher plane. When I see the grades Israeli students receive on international exams, despite the large amounts of money invested here in education, I think that something else has to be done. The results are bad. My impression is that the level of education is going from bad to worse. The percentage of Jewish Nobel Prize laureates is the highest in the world. This nation has a lot of potential, and yet, the results are so abysmal. Why? Because the Israeli school system is in need of repair. The potential exists - we simply have to cause it to be fulfilled."
Why doesn't the government invest in initiatives such as Time to Know, as you do?
"Education is a conservative field and it's hard to revolutionize it. The school system is conservative, and changes in Israeli education won't happen overnight. Before the government makes a commitment to Time to Know, it will want to see what is happening with the company. The government has to do more than invest in education. It has to invest wisely, not just throw money at the school system. Around the world, school systems are based on the same 200-year-old model: There's a teacher, there's a blackboard, the teacher lectures but has no idea who understands the material and who doesn't. After the students are tested, it takes the teacher time to check the exams and to understand who is having difficulties. With Time to Know you can test every child in the class and receive instant feedback."For the grandchildren
Perhaps instead of more technology, what we need is to go back to the old, traditional education of your days: to forbid students to play around with their phones during class, to force them to listen, to make education stricter.
"When I grew up there were no distractions, there was no television. I learned from books and teachers. Some of the students in my generation succeeded and some didn't. But the children of today are different. They're very technological, and it's impossible to teach them differently. Time to Know provides children with material the same way they get it from the computer, interactively. The teacher receives a report from each of the computers and sees immediately who understands the material and who doesn't, and then helps whoever didn't succeed. The moment you're able to prevent weak students from falling behind, you haven't lost them.
"As a child I studied Latin, but I wasn't good at languages. I fell behind in the material and started to hate it. The teacher didn't know that I was falling behind. I found that it was impossible for me to continue to study Latin. With Time to Know, that wouldn't have happened. I had difficulties studying economics, because the language of study was Afrikaans. Luckily, one of the teachers took pity on me. Had this teacher understood already from the start that I had a problem with the language, and had I received the necessary support, the situation might have been different."
Why do you want to change the educational system? Why not just enjoy the money you made?
"I have grandchildren, and soon great-grandchildren, growing up in Israel. I'm an Israeli citizen. Just as Golden Pages brought about a revolution and turned into a big company after starting out as a small one - I want the same to happen in Israel. Saul Singer, one of the authors of 'Start-up Nation: The Story of Israel's Economic Miracle,' said Israeli companies are trying to change paradigms. For example, Better Place is fighting air pollution. Time to Know will try to change the education paradigm the world over."
Maybe the problem is the teachers rather than the method?
"Everyone blames the teachers, but teachers are part of the population. They're as good as the rest of the population in Israel. The teachers in our school system have to receive better tools, and Time to Know provides them. You have to see how a Time to Know lesson is conducted. The teacher doesn't have to shout or waste half the time disciplining the class."
Do you believe that you'll succeed in changing the Israeli school system with Time to Know?
"I believe we will. At Golden Pages, we learned to run large systems. We'll be able to apply the experience we've accumulated there to introduce changes in large systems here, too. It's true that the forces working against us are very strong, forces that oppose change. But the world is changing ... Technology is changing. We're riding the technological wave, and if we don't change and go with it, we'll lose out. It's already happening. Students today are involved with technology all day long. They always have something in their hands. I have a driver who needed an injection in his palm because he couldn't move his thumb properly. In the end, it turned out that it was because he sends a lot of text messages."
In 2015, 50 percent of Israeli children will be Arabs and ultra-Orthodox. Maybe Time to Know won't be able to solve the problem because it won't be able to influence the ultra-Orthodox and the Arabs?
"That's what's so nice about Time to Know: Participation doesn't depend on language. It's a platform, a system, which can work in Chinese, too. As far as the ultra-Orthodox are concerned, they understand that they have to integrate into the work force, and if not, they're doomed to poverty. They have to learn math and English, and in that sense, Time to Know can help them. I hope ultra-Orthodox leaders will accept this solution. The same is true for the Arab sector. It has to work differently."No money from home
What's your understanding of the social gaps in Israel?
"I feel very bad about them. In Netanya, there's a school with Ethiopian children. They told me that some of the children come to school hungry. A hungry child can't learn. I arranged a kitchen for them. The school chose a sophisticated solution so as not to embarrass the students who arrive hungry: It started a club, and anyone accepted to the club got food, too. I also gave them money to set up a computer room. These children not only lack food, they don't have computers like children in Savyon and Herzliya ... There's no question that there are gaps in Israel. At least in terms of education, Time to Know helps teachers to ensure that their students are on the same page."
The gaps also manifest themselves in the work world. Senior executives in public companies earn a fortune, which does not always have anything to do with their business capabilities. What do you think about the salary gaps between executives and workers in this country?
"Gaps are not a healthy thing. They create jealousy. Executives are getting paid a lot here regardless of their performance. The result is gaps that are dangerous to society. Should the government intervene? I don't think so. Letting the government intervene is dangerous. I don't have a solution to this problem, but there's no question that when I hear about the huge salaries received by some of the executives I'm shocked. They cost the economy billions of dollars. Investment banks recently destroyed the banking industry, but despite that. Goldman Sachs gives bonuses of millions of dollars. It's a scandal. There has always been greed. Once people wanted to earn money for financial security. Today it's different."
People talk about corporate accountability. There are organizations that don't behave responsibly toward the environment or their employees, but they give a few donations and spend on public relations. How do you feel about that?
"I personally try to refrain from publicity as much as possible. The only reason I'm giving this interview is to promote Time to Know. As far as all the companies that publicize themselves and declare that they take care of their employees, I find that embarrassing. I've never asked for a favor from the government. In fact, I fought against the government, for example in the battle to have the fish cages removed from the Gulf of Eilat."
Maybe you're making a mistake. Today there's no businessman or tycoon without a PR agent or a lobbyist. Maybe you should also hire lobbyists to promote Time to Know? Maybe it's not possible to succeed in Israel without connections?
"I've always kept my distance from the establishment, and every time the establishment interfered with what we did, I gave up. Are you referring to the ties between business and government? I'm fighting this. I'm the main supporter of the Movement for Quality Government in Israel. I have no ties to politicians. I'm not built for that and it disgusts me to operate in that way."
In the ongoing debate over whether to allocate the budget to security or to education, where do you stand?
"We need money to survive, but our money is limited. That's why we have to make sure that the money spent on education is invested wisely. I believe that Time to Know is the solution for investing when the budget is limited. The resources are limited, so at least let's invest in education optimally."
Many entrepreneurs who read this article will want to understand the secret to success. Is it money from home? Hard work?
"Money from home definitely helps. I had no money from home. My father was a gold miner. I immigrated to Israel without any capital. I was afraid of the situation in South Africa because of the tension between blacks and whites. I thought that the right place to bring up children was Israel. I was a member of the Habonim [Zionist youth] movement, and I liked the idea of participating in building the State of Israel. I didn't aim to be rich, but I always tried to do something. I had a jewelry store. I was a communist. There's no question that you have to be willing to work hard. One of my characteristics is perseverance. You always have to persevere. There will always be failures, but you can't let that discourage you."
To what extent are you yourself a technology person and gadget lover?
"I'm from a different generation, but I have an iPhone, a computer at home and an iPod."