Opinion |

Why Israeli High-tech Has Such an Embarrassing Billionaire Shortage

Sure, innovation pays. But it doesn’t pay nearly as much as being a monopolist, UBS' billionaires list shows

David Rosenberg
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UBS listed only 19 Israelis among the world's 2,189 billionaires in its 2020 report
UBS listed only 19 Israelis among the world's 2,189 billionaires in its 2020 reportCredit: Arnd Wiegmann/ REUTERS
David Rosenberg

Where have Israel’s billionaires been these past months, when there’s been so much money to be made?

For the great mass of humanity, the coronavirus pandemic has been an economic disaster involving double-digit unemployment and poverty. But according to  the Swiss bank UBS' Billionaire Insights 2020 report released on Wednesday, the world’s 0.001% have made out like bandits: Between April 2019 and July 2020, their combined wealth grew by 27.9% to a record $10.2 trillion.

Israel billionaires saw their wealth grow by a mere 18.1% to $56.1 billion. But it’s even more embarrassing than that: Over the last three years the combined wealth of the world’s billionaires has grown 18.6% (in 2019 their combined fortunes took a dip), while in Israel billionaires saw their wealth decline 8.3%.

In fact, Israel is a laggard when it comes to creating billionaires in the first place. The UBS survey found only 19 Israelis among the world's 2,189 billionaires, which is slightly less than our 0.11% share of the world population. In money terms, Israeli billionaires’ billions amounted to less than 0.6% of the world total.

At first glance, this stunning failure of Zionist dream seems unfathomable. Israel is Startup Nation, the high-tech envy of the world, and the UBS report says that it was the high-tech billionaires  who have led the growth in fortunes over the last decade.

Moreover, the coronavirus has accelerated the trend, leaving all those masters of the universe in industries like real estate, financial services, retail and the media way behind. Tech billionaires’ saw their fortunes climb 41.1% from April 2019 to July 2020 while no other billionaire category exceeded 29%. Some saw their assets grew by less than 13%.

UBS attributes this to the fact that tech billionaires – as well as those in health care and the most cutting-edge manufacturing industries – as “innovators and the disruptors, the architects of creative destruction in the economy.” In other words, they’re not amassing their billions by collecting dividends or building luxury golf courses and then not paying their taxes, they are changing the way we live. Presumably, that’s for the better and therefore the rewards are entirely explainable.

Fulminating over internet

Some people will argue that tech is not an unmitigated good, even if they compose their screeds on a laptop, make their views known over social media and write books that are sold over Amazon.

We’ll leave that argument aside and instead turn to UBS’ follow-on thesis, which is that it is successful innovation that produces wealth of the size that would make Croesus blanch. “Scientists, computer programmers and engineers are revolutionizing industries at a pace never seen before,” UBS explains. “As they apply emerging technologies to drive change, some of them are becoming billionaires.”

The fact that only a few hundred of them around the world actually do so is prima facie evidence that the path from a good idea to a giant fortune is pretty narrow. That explains the paucity of Israeli billionaires.

UBS doesn’t identify by its Israeli billionaires by name or by industry, but TheMarker’s list of the country’s wealthiest does. It counts 57 Israeli billionaires, a lot of whom are dual nationals and/or people who made their fortunes overseas, which may explain why it counts so many more than UBS does.

Of the 57, just 12 trace their billions to high-tech. Three are co-founders of Check Point Software Technologies and two more co-founders of Mobileye, two of Israel’s biggest tech success stories ever.

In any case, even the biggest Israeli tech titans’ fortunes are at the bottom of the world’s league tables: Teddy Sagi, who leads the list, had an estimated net worth of $5.3 billion. Compare that with the world’s top 12 tech titans, of whom the lowliest is Michael Dell, with a net worth of $36.8 billion.

Teddy Sagi
Teddy SagiCredit: ניק קלארק

Make no mistake, a successful Israeli startup entrepreneur doesn’t need to ask his or her parents for help to get through the month. But the kind of fortunes that they do make are typically in the millions, tens of millions and in a few lucky cases the hundreds of millions of dollars. We should be proud of the fact that they don’t do better than that.

The payback for true innovation isn’t ordinarily that enormous; where the biggest fortunes in tech come from dominating giant national and global markets; from killing off the competition, which is made easier by the fact that much tech benefits from so-called network effects. At that stage, innovation often ceases to come from inside the organization and is acquired outside by buying startups.

In the most perverse cases, innovation is even discouraged since it might threaten the company’s current and highly profitable existing products.

This week, the U.S. Congress was addressing the problem of tech monopolies. No Israeli tech company has ever come close to achieving that level of market dominance. We’re Startup Nation because we start up companies but rarely go beyond that. Our tech entrepreneurs innovate, sell to the highest bidder and make their millions from our intellectual property. They don’t make the UBS rankings and that’s to their credit.   

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