Cartel Nation / The Country That Forgot Its Start-ups

The annual list of the 50 best companies to work for in Israel is full of monopolies and subsidiaries of American giants.

It's hard not to swell with pride. Right at the entrance to the huge Barnes & Noble store at Fifth Avenue and 46th Street in New York, on the table next to the stairs leading to Starbucks, stands a small sign announcing "The Top 20 Business Books." Prominently displayed beneath it is the book "Start-up Nation," which has an Israeli flag on it.

There are quite a few books by Israelis on the international shelves in business, scientific and cultural sections, but until now we haven't had a book about the Israeli economy become a bestseller.


Hundreds of thousands of businesspeople, statesmen and just plain interested readers have been exposed this past year to the amazing wonder of the Middle East: Israel, the start-up nation.

Of course there is a disturbing thought pecking away at the back of one's mind: The shelf of business books is one of the few purporting to relate information, methods and ways of managing businesses, companies and economies in a better, happier, more effective way - and anyone who is involved in and knowledgeable about the industry knows that a large share of the insights in these books are junk or recycled and battered ideas.

And then along comes an e-mail about the annual survey by TheMarker and BDI of the 50 best companies to work for in Israel. Start-up nation? The list consists entirely of gigantic, veteran firms, monopolies, cartels and subsidiaries of American giants that are themselves veteran monopolies.

In first place, as it has been for several years, is Intel: For the past 30 years it hasn't been a start-up but rather a branch of a huge American concern. In second place is Partner Communications and several notches after it are Pelephone and Cellcom - the three companies in the Israeli cellular cartel.

The monopolistic takings there are divvied up at the rate of 80% to the shareholders and 20% to the employees. And for whom is there nothing left? The consumers, of course. Maybe we've exaggerated.

And of course there is the Israel Electric Corp. - one of the most nepotistic companies in Israel, into which fathers bring their sons and their brothers-in-law. And there are the big banks, which split among themselves a huge vat of fat. And there are many more subsidiaries of American giants like HP, Microsoft, IBM, SAP and Motorola.

It's natural that there aren't many start-up companies on this list: The ranking is based on a survey, and start-ups are usually small and it's hard for them to enter the working public's awareness. But how many of the companies on this list were small start-ups during the past 10 or 20 years? Very few. The handful of companies founded in the past 20 years are mostly of the sort that have been awarded government franchises.

There are causes for optimism on the list: Some of the most successful and innovative companies in the world have chosen to set up development centers here in order to benefit from high quality Israeli manpower. Intel and HP, which employ thousands of workers here, would not be doing this had the Israeli engineer, scientist and employee not had a clear relative advantage over his American, Indian, German, Irish or Chinese counterpart. And there are also two Israeli high-tech companies on the list that are successfully competing in the international markets: Amdocs and NICE.

But at the list's core are banks, cellular companies, insurance, fuel, government companies and huge firms that have been active for decades and have tremendous market strength based on monopolistic power.

The number of companies on the list that need to put up a fight every morning in the market, reinvent themselves and attract the best manpower is small. Very low.

We have nothing against large and established companies, which constitute a desired workplace in the job market. This is excellent. But are they big, successful and desirable because they are efficient and innovative, create value for their customer and the economy and increase productivity as a whole? And maybe it's something inherent: Are the big, violent and connected players the best workplaces in any free economy? This is not a certainty.

Look at Fortune magazine's American list. The American magazine's methodology is different but the differences between the lists are astounding. The 20 American companies most desirable to the workforce are, for the most part, super-competitive and innovative. They simply do things in a way completely different from their competitors. Some of them were founded during the past 10 or 20 years. Start-up nation.

Several blocks north of the Barnes & Noble branch on Fifth Avenue stands a large H&M store. This is not a start-up - it is one of the largest retailers in the world. It is not American, nor is it British or German. This is a company that originates in a country where the population is larger than Israel's by about 1.6 million - Sweden.

H&M has about 90,000 employees and thousands of branches in most countries of the world, and its sales cycle is about $20 million. Except for its management, this company has no advantage. No American, Briton, German, Chinese, Indian, Finn, Bahraini, Czech, Hungarian or Greek who goes into one of its stores does this because he has no alternative or because he has simply become habituated. The second time he is disappointed with the price, the experience or the quality - he will never go back there. Sweden, Switzerland, Singapore, Holland - all these small economies do not call themselves start-up nations and they have hundreds and thousands of gigantic, large and middle-sized companies that sell products and services worldwide.

True, we are a small country surrounded by enemies, everything that happens here is tantamount to a miracle and in every generation they rise up to destroy us. But the moment is approaching when we will have to get in line with the developing and developed countries and not ask for exemptions and breaks. And this is the moment we will be entitled to demand of ourselves that, on the list of the 50 companies most worth working for in Israel, there will be fewer satiated and non-competitive giants and more companies in which not only the owners, the employees and the shareholders are proud of their success but also the entire community, the taxpayers, the consumers and the citizens. This too is a kind of independence.