Israel’s Third Founding Moment - with Yonatan Adiri & Michal Lev-Ram

 
 

Today we have a special announcement: Ark Media, which we created as a home for Call Me Back, is launching its second podcast: What’s Your Number? - a weekly show focusing on Israel’s economy through a global lens.

Hosted by Michal Lev-Ram, an Israeli-born Silicon Valley-based tech journalist and contributing editor at Fortune, and Yonatan Adiri, an Israeli entrepreneur and former adviser to Shimon Peres, What’s Your Number? unpacks the latest developments in the Israeli economy. The podcast debuts this Thursday, May 1. Watch the trailer and subscribe here: https://lnk.to/3AQhX5


This episode of Call Me Back is something of a hybrid between our show and a preview for What’s Your Number? It was our pleasure to sit down with our new hosts, Yonatan Adiri & Michal Lev-Ram, to discuss the historic transformation Israel has been undergoing since October 7th, 2023. 


Full Transcript:

DISCLAIMER: THIS TRANSCRIPT HAS BEEN CREATED USING AI TECHNOLOGY AND MAY NOT REFLECT 100% ACCURACY.

YA: If the theory is correct and political ideas and frameworks expire every 20-30 years, it actually means that countries aren't born, you know, one time by founding fathers. It is actually a work of generations. So you have founding fathers and mothers that give birth to a country or a society in a cohesive and coherent way. And you have a generation of sons and daughters. For us, this was 1985, right? The sons and daughters that refounded Israel. It was Israel's second founding, if you will. And right now it's on us, right? It's on us, what we call the founding grandchildren. As we say in Pirkei Avot, you know, the work is never done and it's on you to always continue and you should know you're not gonna be the one finishing it. From that perspective, it's an ongoing work and the rise of the founding grandchildren is, I think, the theme for Israel over the next five years.

DS: It's 3:00 PM on Sunday, April 27th here in New York City. It's 10:00 PM on Sunday, April 27th in Israel as Israelis enter the most Israeli week of the year marking its Memorial Day on Wednesday, followed by Independence Day on Thursday. And as Israelis continue to follow the news about a massive explosion at Iran's most important port, that's a story we will be following closely, still learning details. And of course, on this podcast, we'll be getting into the implications in the days and weeks ahead. In case you haven't heard, Ark Media, which we created as a home for the Call Me Back podcast, is launching its second podcast, which is called What's Your Number? What's your number focuses on Israel's economy through a global lens. We created this podcast because, well, if you wanna understand where the country is headed, where Israel is headed, to paraphrase James Carville, it's the economy, stupid. Now, it's not just the economy, certainly for a country that's in the middle of fighting a multi-front war, but it is an extremely important GPS to help you understand where the country is going, how it'll sustain itself, how it'll continue to defend itself, and how the Israeli people will continue to flourish. So by the time I reach the end of this intro, I hope you'll follow the link in the show notes and subscribe to this new podcast. To be clear, it will be its own feed. What's your number will have its own podcast feed. So in order to subscribe, you gotta subscribe to that feed, even if you only subscribe to call me back. The first episode appropriately drops on Thursday, Israel's Independence Day. On today's episode of Call Me Back, I'll be speaking with Yonatan Adiri and Michal Lev Ram, the hosts of What's Your Number, to discuss whether Israel's current social political system is too broken to fix and needs to be transformed in order to meet the country's internal needs and adapt to a rapidly changing region and a rapidly changing world. This conversation will not be typical of the conversations on What's Your Number, but Yonatan and Michal are both big thinkers about a big topic we've been focused on here on Call Me Back. So I wanted to use this opportunity to both introduce them to our listenership and also dive into this topic. So Yonatan and Michal, with that, thanks for being here. 

MLR: Thank you, Dan. 

YA: Thanks for having me back. 

DS: Alright, so before we dive into the big topic I wanted to get into on this episode of Call Me Back, I just want our audience to learn who you are now. Yonatan, you have been on this podcast before, Michal, you are a long time listener from what I've been told, first time guest.

MLR: Absolutely. 

DS: So I wanted to first give folks an opportunity to hear about your respective backgrounds. Michal, I'll start with you. A word about you and the new podcast. 

MLR: Sure. Well, for starters, I will say it is 12:00 PM in Palo Alto, so that gives you a little indication of-

DS: On April 27th.

MLR: On April 27th. So yes, from Israel originally. Otherwise, I probably wouldn't be sitting here in Palo Alto with an unfortunate unpronounceable name like Michal. But my family left Israel in the late 80s. Both my parents worked in tech, and so it's a very classic Israeli Bay Area story. I came here for two years for the tech industry and you know, here we are all these years later. I personally wasn't interested in working in technology. I always wanted to be a writer, so I became a journalist. And, uh, what I discovered is that while I didn't wanna work in technology, I love covering the tech industry. I've reported on it and, and written about it for a long, long time. Um, primarily at Fortune, where I'm still a contributing editor. I've written quite a bit about Israeli companies and Israeli founders because you know, you can't really be a tech reporter without doing that. And of course I've got my own interest and you know, investment in the area and connection to the area. But it really wasn't until after October 7th that I think things kind of shifted in my perspective, like it did for a lot of us. And I really wanted to focus in on this question that gets us to the podcast, to the new podcast, What's your number? Which is, really about the role that the current and future Israeli economy and its place in the global economy, which is still a thing by the way, despite, you know, what you reading in the news, the role that that plays in the survival of the country, its ability to thrive. I think it’s really the other side of the coin of what you talk about, Dan, the geopolitical risks, the internal strife in Israel. You know, what is the country’s role going forward? It’s already so interconnected, there’s no greater proof of this than, you know, me sitting here in Silicon Valley where those connections, those investments, those collaborations are more integral than ever. We are entering this new reality. We are entering a kind of reshaped Middle East. And so what role does Israel play there? And you know, hopefully we'll get to focus on that a lot. 

DS: Alright, Yonatan, our listeners I think know you from having been on the podcast before, but for folks who haven't heard from you before, tell us a little bit about your background.

YA: First of all, it's great to be back and it's a great opportunity, as Michal said, to open up this new feed through What's your number where we're gonna focus on the Israeli economy and what matters most on a weekly basis. My background, I'm 43 years old, a father of four, married to uh, Maureen, who made Aliya here to Israel to Tel Aviv about 15 years ago from Switzerland. Spent the first, uh, decade plus of my career in the public service. In my last role, I had the huge privilege of serving under, uh, president Shimon Peres as his chief technology advisor. And then after a NASA hosted training, went back to serve also as his diplomatic advisor. An incredible opportunity, a great privilege to understand, you know, the behind the scenes of the Israeli geopolitical space when it comes to tech and, uh, diplomacy, and then spent the last, uh, decade in tech. Being a member of the founding team at getaround.com and then founding and then founding can CEO-ing up until about a year and a half ago, um, Healthy IO, which was a global pioneer in AI in healthcare, the first to get an FDA clearance for AI and diagnostics. I'd say over the last year and a half, back in public service writ large, kind of broadly speaking really with my kind of sleeves around the elbow, busy with, you know, getting back to making Israel the best place on earth. And, you know, really what's your number is, is part of that journey from my perspective. 

DS: I will say, first of all, I was amused that Michal, who's also a parent, didn't let us know how many children she had.

MLR: I didn't realize we were supposed to do that. So I would like to say for the record, that I have three children, which in the United States is like having four in Israel.

DS: It was very Israeli, though to start with the number of kids you have. In any event, we, we will include all that, maybe if there's room in the bios of the podcast. Uh, okay. So, I know Ilan and I are very excited about the launch of What's your number, and I am also very excited to be listening religiously and not having to talk. Not only do I think this is gonna be a high quality, very engaging and fun podcast, and actually very important for this period, I think Israel is entering, but I will also enjoy having a, at least most of the time, passive engagement with it. Although from time to time I won't be able to resist, and I'm gonna pop on and force myself as being a guest into your, your guys' conversation. But I wanna jump into today's conversation and Yonatan, before we talk about the transformations Israel has been going through both in the past, in the future, can you start by, and I know this is something you've been putting, giving a lot of thought to. Can you start by explaining what it means for a country to go through a transformational moment? We all use that term all the time. You know, Israel's been going through a transformational geopolitical period. The geopolitics of Israel are more transformed, and I actually believe stronger, at least in the Middle East than at any time in the country's history since the six day war. But so people throw this term around, what does it mean for a country to go through one of these periods?

YA: I think that fundamentally what we need to understand is that political ideas, very much like other ideas, very much like consumer products, have an expiration date. So a transformation period happens, I would say every other decade, every kind of 20 to 30 years. Whereby fundamentally the political idea has expired countries societies have seen that time and time again. Margaret Thatcher and President Reagan in the late 70s, where it takes a while for a political system to differentiate between what may seem like things that are few and far apart, could be inflation, it could be some geopolitical ruptures. And we always tend to, you know, this has been researched heavily, even Nobel prizes have been awarded for Dan Kahneman and others who have discovered these biases, whereby we have this confirmation bias. We always want to fit what we see in reality to the existing idea, business, political or otherwise. Transformative periods are when leaders understand and effectively communicate it also to the public that things are beyond fixing and therefore the country, the society must undergo a transformative period. I think a great example is Margaret Thatcher, who already in 1976, 1977, very effectively communicated in the UK as a member of Parliament, that the reforms the country was going through in education and otherwise were not gonna make the difference that the reformers thought they're gonna make. Because the fundamental issue with the UK is the expiration of the political framework. And she put it in different speeches. And if I kind of paraphrase, there are three things that you gotta go back to in a transformative moment. One is, what's the geopolitical stature, position, posture of the country, of the society. So Thatcher basically said, hey guys, the big issue is Great Britain is not gonna be Great Britain anymore, and the best we're gonna have in the late 70s is to be the best number two to the United States of America. This was a very, like a massive fundamental rupture in how the UK saw itself, the political idea. The second story she brought forward was, what's the nature of our socioeconomic contract? Is it still intact or has that also expired? You know, Thatcher effectively says the model we built, 1910, 1920, whereby, you know, us living on the island have a great public service for free public products. Because India is paying for it, because you know, either colonies are, well, guess what? No India, no one's paying for that. Therefore, she goes through and leads various aggressive market capitalist, if you will, you know, transformation of the UK. And the third piece is in that transformative period. The entirety of the updated political idea that you put forward was the big story. We're no longer the empire where the sun doesn't set. And she kind of put forward this idea of the UK as the Empire of ideas where the dawn of ideas from Liverpool and the Beatles all the way to, you know, the DNA and Oxford, Cambridge, and so on and so forth. Now, Dan, the thing is that when the leadership emerges, that says outside what’s called the overtone window, hey guys, you may think these things are few and far apart, but actually they're not. They actually indicate to us that it's the collapse of an entire expired political idea. You get scolded, you introduce diatribe into the political context, and then people just want to hug and they don't want this kind of person kind of nudging them, right? Because you know, the reform feels nice. And for three years she ended up, you know, defending her thought process, ultimately winning political power and transforming the UK.

DS:  Okay, so I get Thatcher in the 70s and I get Reagan in the 80s in many respects, where a response to the continuum of FDR to LBJ, that was like one big transformational moment. Are there other examples that you guys can think of? Michal, I don't know if there are any that come to mind in other countries. 

MLR: Yes. I'm gonna jump in here with a few examples of leaders who are still alive, just in case for some of your younger listeners, you know, maybe this one. 

DS: Hey, hey, you have not looked at the call me back survey. That speaks to a very young, vibrant listenership. 

MLR: By the way, you'll also notice that when I said the number of children I have, I didn't say my age 'cause I'm actually older than Yonatan. So all there's that. 

YA: I'm gonna regret my opening of this episode.

MLR: But anyways, all due respect to Thatcher and to Reagan. India and Saudi Arabia, which I know we'll get to a little bit more in depth later on. But both of those are great examples of leadership with, you know, undergoing and leading through some of these huge transformations, difficult transformations and paradigm shifts that Yonatan is talking about. So in the example of India, if you go back about a decade, Modi understood that he's going to have to make some very quick and bold moves in order to compete with China. And he sees a couple of things, at least a couple of major hurdles, and that's both black market activities and corruption. And so he does a couple of things, which were very ambitious and hard. One of those was rolling out the largest ID program, national ID program in the world. India, by the way, has a population nearing 1.5 billion. It surpassed China's and interestingly, very bold move, also takes the largest bills, 500 and 1,000 Rupe bank notes out of circulation. At the time, this accounted for more than 80% of currency and circulation in India. This was hugely unpopular. Back then it really dented the growth for India. But fast forward to today and in just 10 years, GDP has doubled. Not only because of this, obviously population growth and all sorts of other factors have contributed to this as well. Great example there. The other one, like I said, Saudi Arabia, I think we're very familiar with this one. And it's a, it's going to be a, a continued to be a hot topic on both of our podcasts, but Crown Prince, MBS, you know, sees the need to diversify, um, away from oil. This is a very hard thing to do. The thing that comes to mind for me right away is Google for years saying it needs to diversify its revenue stream from search. Easier said than done, right? Still accounts for the vast majority of Google's, uh, revenue. But anyways, back to MBS. He embarks on this insane amount of money that's flowing into all sorts of different sectors, tech and sports, tourism, you know, basically like anything that makes money under the sun. And that's the Vision 2030, uh, program of course, which is still in process. So, you know, we can't call it now, but it is an amazing, amazing, ambitious undertaking. 

DS: And with MBS in particular, one Saudi official told me that when I asked him, this is post-October 7th, if normalization was still on track with Israel. And he said, there will absolutely be normalization. And I was struck by this because I thought, or I was curious as to whether or not October 7th and the heat around the Palestinian issue would upend the path to normalization. And this Saudi official said to me, he said, look, you need to understand, MBS has established these 2030 goals, as you said, that are the goals to reach the modernization of Saudi's economy. We can't meet those goals if there are regional wars in the Middle East, big regional wars like the ‘73 style war, ‘67 war, we can't, it'll just, it could destabilize the region. So normalization with Israel is about many things. Obviously dealing with Iran and dealing with Sunni extremism and co-innovating with Israel. But it's also about just trying to bring the temperature down in the region. Yonatan, when we spoke offline, you described October 7th as Israel's third transformational moment. So you're basically arguing Israel is in one of these moments. It is Israel's third transformational moment. And that was what I was most struck by is like why third? What were numbers one and two? 

YA: So I think you know, as many things in Israel, they go back to the legendary David Ben Gurion. David Ben Gurion, I think the most interesting period in his journey is November 30th, 1947. The day after Israel gets voted, Israel's independence gets voted in the UN General Assembly until the War of Independence. In that period, David Ben Gurion understands that the political idea he put together in the twenties and thirties has effectively expired or is about to expire as Israel's about to embark on its War of Independence. The geopolitical posture, which was focused solely on the United Kingdom, right? That was the last 30 years is about to expire because this is gonna be what Ben Gurion called the Game of Nations. So he understands the transformative period and puts in a new political idea from a geopolitical posture. It sort of pushes out the almost religious focus on the UK and introduces what he calls the Game of Nations. Little did he know this would be later called the Cold War. And when it comes to the national kind of contract, the socialist contract that he used to effectively communicate for the Olim, for the immigrants into Israel in the twenties, thirties, forties, was about to, has effectively expired because you cannot promise people, you know, a life of socioeconomic growth when you're about to enter a pivotal war. My grandfather from Iraq, you know, always said I came to Israel because of a contract that was promised by Ben Gurion saying this is where sovereign Jews will walk proudly with a yarmulke from their home to the synagogue. My grandfather was really traumatized by the Farhud in Iraq, and that's what he wanted. Most of his family were interested in socioeconomic benefits. They didn't come to Israel because that was not the contract Ben Gurion reintroduced. And I think the third piece, what was the big story? 1923 to ‘47, Ben Gurion and the Yeshuv were offering people the story of negation of the diaspora. Come build, you know, a new Jew, a sovereign Jew. I think, again, understanding where the war was going. Tom Segev just wrote an amazing book, A State at Any Cost, in Israel. 

DS: Biography of Ben Gurion. 

YA: Yeah. In which basically what you understand, he kind of said. This doesn't work anymore. The new idea must be Zionism as an MVP, right? Minimum valid product, as we would say, Michal in the tech industry, right? There would be democratic constraints. We're not gonna be the kind of most pure democracy come 1949. We're gonna do whatever it takes to get this rolling and to bring about prosperity. Just in numbers, we are now 10x population than we were in 1949. We are 430x GDP.

DS: Wow. 

YA: Something worked really well given where that went. Now Dan, you were saying LBJ. Right? So like FDR to LBJ. Very similar timetables here. 1977, Israel, you know, has the political kind of change. Menachem Begin comes into power and instead of understanding that, part of the reason he came to power was the expiration of the old political idea. Kind of pushes the can down the road. 1985 is the second transformation of Israel, if you will, the second founding of Israel. We are at 400% inflation. We are at 140% debt to GDP. 75% of the Israeli economy was state owned in 1985. Right? We are four weeks away from bankruptcy, and so the Unity government, I spent many, many hours with President Peres talking about that. He happened to be the Prime Minister at the time. 

DS: Just for our listeners to understand, so a Likud labor jointly led government, very rare. It happens from time to time and Israel's history, not the least of which is during the six day war for national unity purposes, it would be like Democrats and Republicans coming together and saying, we're gonna populate a cabinet together, we're gonna, I mean, it's not a perfect comparison ‘cause it's not a parliamentary system, but it shows you how dire the situation must be for both parties to agree to do that. 

YA: And, and it's, it's a great point because they realized the hour was so critical, four weeks away from bankruptcy, from default on the debt. And so the answer that they came up with was a fork in the road. Right. Either we go for, you know, like an IMF plan, some kind of reform, or we go back and recognize the fact that what we're looking at here is the expiration of the 1947 political idea. The geopolitical posture has expired, the national contract has expired, and our kind of idea has expired, and they come up with new answers to those three. These three concepts that they put in place in 1985, right? They took out the Game of Nations as a geopolitical posture put in the alliance with the US. This is 1985/86. Very clear who's gonna win the Cold War and Israel sort of bets big on the west, right? The second piece is massive privatization. Israel reinvents itself as the most capitalist social democracy in the world. 20,000 state employees get fired in a number of weeks. The original DOGE was introduced in 1985. 

MLR: Without Musk.

DS: Be careful with the original DOGE, now it's gonna be back to blame the Jews. You know, it's a, we're providing fodder. 

YA: And you know, the third piece there was permanent borders. The state of Israel, after annihilating the Iraqi reactor, made peace with Egypt, had this idea that time has come for that and that served Israel, that political concept, the framework had served Israel really well over the last 40 years, since 1985. But it has effectively expired. I would say a good, some would say in the disengagement from Gaza, others would say around 2010, but we haven't seen that because the Israeli economic system and the society and the growth kind of kept us from seeing that. And so we interpreted everything that happened in Gaza and in the region as you know, what you would call another, another round of hostilities. What happened on October 7th is a wake up call, not just from a geopolitical perspective, it is the expiration of the comprehensive Israeli political idea that was introduced in 1985. 

DS: Okay, so I want to come back to October 7th to now, and like how you're envisioning 2025 and ‘26 and these next couple years fitting into those comparable periods for the first two transformations. Before I do, two things. One, just one historical nitpick. I agree with you that Israel made a strategic bet in the eighties to be on the US side, although it really had been on the US side well before that, and it was not, I mean, in ‘85 it wasn't clear. Three years, three or four years later it was clear. But in ‘85 it wasn't clear that the Soviet Union was gonna come tumbling down. And I think that was as much a bet on, there was strategic interest, obviously for Israel to be on the US' side, but also shared values, shared history. Um, Michal, you, like many Israelis who lived in the eighties, your family was very directly impacted by this crisis of 1985, that, uh, Yonatan is describing, and I think it had a searing, if you will, a searing impact on your own view of Israel and Israeli crises and Israeli history. Can you tell us the story of that crisis in Israel in ‘85 from the perspective of a family that was directly hit by it?

MLR: Yeah, absolutely. So I will say in ‘85 I was five years old, so now you do know how old I am, so I don't remember. 

DS: Well, if I ask the questions just the right way, I'll get to-

MLR: Absolutely. I mean, I think it's a critical piece here, but long story short, my dad, uh, was an engineer for Israel aircraft industries. He worked on the Lavi project, which probably a lot of your listeners will be familiar with. What was an Israeli, very expensive, very costly, but also a huge source of national pride. A program for Israel to design, to engineer, and to ultimately manufacture to produce its own fighter jet. My dad was at Israel Aircraft Industries from ‘74. He ultimately left in the mid eighties, and he left because the program was very painful decision, very unpopular decision was cut. He kind of saw the writing on the wall, so he left before massive layoffs ensued. 

DS: Just to provide some historical context, I'm actually obsessed with the Lavi story. We had a chapter on it in Startup Nation. Two things, one, Israel did not have, just just to explain what a big deal it was that Israel pursued the Lavi, it's actually very relevant to today, meaning there's a big debate about whether or not Israel has an independent enough defense sector, industrial base to support a defense sector if there's a, whether or not it does today. It certainly was a serious matter here 40 years ago, that Israel did not, and so the Lavi program was about building that base, right, building that capacity that suddenly Israel's gonna build its own fighter jet. It was, if it had been successful, and I understand that it wasn't, it was a huge development for Israel.

MLR: Yeah, absolutely. I mean, my dad put his, you know, blood, sweat and tears into the project as a lot of other Israelis did. And this ultimately, you know, upon leaving Israel aircraft industries, he looked for a similar job and really the only place he knew he would find it and landed in Moffett Field, in the Bay Area here where he worked on simulation technology for a couple of NASA contractors. If not for that, you know, which ultimately you can debate good, bad. I mean, I certainly feel very blessed to be where I am today, but if not for that, I'd probably be Yonatan’s neighbor in Tel Aviv right now. 

DS: Yeah. Well, but also, I mean, your family wound up in the Bay Area. A lot of Israeli, like avionics engineers who were working on the Lavi wound up ultimately populating parts of the, what was to become the Israeli tech ecosystem.

YA: Yeah. Gen one. 

DS: Gen one. Right. Also for the, just for the historical record, it was canceled because of budget overruns, right? 

YA: Yeah.

DS: It just got so costly. I just want for our listeners to understand what, what actually, why it ended.

MLR: And by the way, I should add, I asked my dad about this just recently, and, to this day, you know, all these decades later, he says it was such a painful time and he really doesn't want to rehash, especially the politics that were so, you know, alive and toxic at the time. Because again, these were massive cuts to really important programs, not just for security, but also a source of national pride. It was a very difficult time and very difficult circumstances.

YA: But I think Israel, you know, again, the GDP went 10x since 1985, right? The privatization, this prepared Israel for the absorption of a million Russian Jews who came from the imploding Soviet Union just a number of years later. And you and Saul, you know, wrote about this and sort of how that, you know, kind of coalesced to create gen one of the Israeli startup companies that ended up in Wall Street and then kind of came back with capital. Then came Gen two. I think the genesis for that was a very brave political administration to admit what we're looking at is not fixable. It is a transformative moment and, and what we're looking at is the expiration of a political framework that worked really well for 30 years, but it's dead and trying to bring it back to life is not gonna work. And we're gonna have to make some tough decisions that are unpopular. 

DS: Okay, so Yonatan with that, what do you think the similarities are between ‘47, ‘85 and today?

YA: There's a beautiful point made by Hannah Arendt many years ago. She calls it the coercive power of truth, right? Like we can sit here and say, oh, Hamas doesn't wanna, you know, it's deterred this or that or the other. And our mindset would be totally offside with reality. At some point, reality will do its thing and, and coerce itself on our mindset, right, on our paradigm. October 7th should be, in my view, that point in time where we say, okay, no more lying. Right? We can't just kinda, you know, lie to ourselves. We are looking at, here's not some few and far apart elements. It is the expiration of the comprehensive, you know, political idea that Israel took with it over the last 30 years. Just to keep it very brief, I think the geopolitical posture that at the core of the Israeli geopolitical posture is a term coined by Ehud Barak, which I think has been detrimental and horrible for the Israeli national security over the last, I would say, 15 to 20 years if it even was relevant at some point in time, which is the villa, the jungle, the idea that Israel is the villa, the jungle, it is the only democracy in the Middle East. It is the forefront, the aircraft carrier of the Western values. It is not indigenous that sort of is implied by that. Therefore, it builds walls, right? It builds fences, it disengages, and the sort of surrounding middle ages, uh, will figure themselves out over the next, you know, century or whatever, and we're just gonna plow forward, and keep the villa safe. That has died, before October 7th, but October 7th should be the signal that this villa, the jungle concept, is dead. My perspective is the next idea, and going back to what Dan, Michal, you mentioned about MBS and what's going on in the Middle East, Israel should see itself as indigenous. It should put in place a brave and forward looking partnership with the United States, as it is right now. And a series of regional alliances that have India in its eastern flank as the core. And Ethiopia at the Southwest. Sort of kind of like in the Migillah Esther, like from India to Ethiopia. There's a lot to unpack. We're not gonna do it here. We're gonna probably touch upon it from an economic angle at what's your number? But I think kill the villa in the jungle. Understand that that's bad posture. Adopt a vision for the Middle East. The second piece here is what's our national socioeconomic contract, right? So we were talking about the contract from 1985, heavy social, democratic welfare state, but with very aggressive free market dynamics. Dan, Michal, we all know the Ultra Orthodox, uh, weren't as big a society as they are today. The world is not the same world. This simply doesn't work anymore. I think the crisis of the welfare state or the social democracy in its European shape and form from like the 1990s is dead. We need to accept that and we need to basically bring forward an entirely new socioeconomic vision for Israel. A contract, if you will. All must go through a radical shift because they've all fundamentally expired. So, go ahead Michal. 

MLR: Sometimes when Yonatan talks I have this image of him being like this balloon that's like floating in the air. You have all these incredible, well thought out, lofty ideas, and I'm like this little kid who's holding the string that's attached to the balloon, and I'm gonna pull on it every once in a while. Okay. So 1985, we talked about how painful that was from an economic perspective and how Israel's back was against the wall. We're not in that. You know, you talk about the, the piggy bank, the $220 billion piggy bank that Israel is currently sitting on. And despite the war, despite the tragedies, and this is ongoing, of course, you know, the relative resilience of the economy. So how do you push for this in a real way, given all that? 

YA: Michal, I think you hit the nail on the head. That's the main question. That's what I'm busy with here in Israel with colleagues, with friends and political movements and so on. Is it even possible to drive radical political shifts, right, to get the public to understand that what we're looking at is an expiration of political ideas, before the calamity, economically speaking on the daily level. I was naively thinking on October 10th, 11th, when I started talking to Israeli politicians, people in the media that everybody understands that what happened, this invasion, on October 7th is that warning signal that we need to understand, recognize there's been an expiration of the entire political framework, and you're totally right. I think that hasn't been the case in Israel. So I think to keep it kind of simple, if you imagine, you know, countries competing geopolitically into sort of the deep ocean, right? It's dark. 200 submarines competing with each other. What determines which submarine wins? So three variables, right? It's the quality of the submarine itself, what it's made of, its radar, its missiles, its engines, the people down there. Then there's variable number two, who's the admiral, right? Who's at the bridge? Who's conducting the submarine? Those are the two key parts of the Israeli national conversation about, what's wrong. Parts would say, oh, the submarine is shitty. We you know, the police is rotten, this and that, and the other. And everybody has a theory about how badly the submarine is doing. Or actually I would argue that, you know, as of, you know, the last, uh, sovereign Jew to have to be so wealthy and so strong in Jerusalem, it was King Solomon, right? The submarine is actually in very good shape. The second argument in Israel, the theory of, of sort of what's wrong, and, and then you had Ari Shavit on the show. You've had some of Israel's top politicians over the last couple of months, is Bibi, right? It's about the admiral. Get him out of there and then it's all gonna work out. My argument is, it might be part of the submarine, it might be part related to the admiral. It is fundamentally about the periscope. That's what's really broken in Israel right now, and I think that if the conversation shifts in that direction, then we can kind of start creating our own path into the future. Because evidently we had a government without Netanyahu. So we had some more or less, the same submarine without the admiral, and we didn't really sail into different directions fundamentally. And until that realization is there that the political idea and framework have expired to an extent that we're looking at through a periscope that's broken, I think that's a kind of step number one for the transformation, the third transformation of Israel. 

DS: If you come back to Michal’s point about the, I guess to paraphrase, uh, Rahm Emanuel, you know, never let a good crisis go to waste. That there was this crisis in ‘85 that forced things. There are so many crises now, one of which, and you said it's not about the ultra orthodox, but I do think that if Israel is now in a world in which, well, it may not be, you know, the villa in the jungle. It is a country that will probably have to be in a position to not only deter threats, but remove them. Actively remove them, which means being able to fight in multiple places on multiple fronts, often simultaneously. It calls for a much different army than existed in much different military doctrine that existed through almost all of Israel's history and it's only now changing given the length of this war and given the kind of resources, the kind of human resources that are being called upon to sustain this war effort. And that's where, say the issue of the Haredim, and their exclusion for military service comes into sharp relief. Before October 7th, yeah you know, you talk to Israeli decision makers and planners, they'd say, yeah, this problem's a problem with them not serving, but it's manageable and we'll deal with it at some point. And then suddenly you have these fissures right now, even in the current Israeli government, where you have ministers from the national religious parties, regardless of what people think of them. A big part of their base is serving in the army or serving in milluim. Many of them are getting killed and they're looking at the Haredim and saying, you know, where are you? And so that forces or has the potential to force a resolution and ultimately a massive reform effort. I don't know if it will, I may not be as optimistic as you are, but of course, these are the things that bring these issues into focus.

YA: No doubt. But let me just give you like 60 seconds or sort of maybe a different perspective. When you look at policy, right, it's always a trade-off. You're not looking at absolutes, you're looking at trade-offs. I visit a lot of European heads of state or ministers or stuff that I do on the business side or the investment side these weeks. What you're looking at in Europe is zero birth. So it's either you have a problem with a very healthy, you know, the best in the OECD, organic demographic growth that is in Israel. The in part is ultra orthodox in era, but also kind of mainstream Israelis Michal, you were making the point about the four kids. Totally right, right. And there's a question of exactly as you put it, Dan, how do you make, how do you kind of create a modus vivendi, bring those people into these Israeli dreams? Very tough challenge, but these people, as Netanyahu's Minister of Finance, proved in 2003 are amenable to economic shifts, and if there's a strong political coalition over the next three to five years that drives the right incentives, I think it's doable. Whereas in Europe with almost zero babies, I would much rather have the Israeli challenge, which I agree with you as a grave challenge, but I'd much rather be in the seat in Jerusalem with that as opposed to how do we convince people to, to give birth and manage, you know, the macroeconomic dynamics. You know, France is at 115% debt to GDP with heavy pensions. I mean, I would not kinda shift into zero or near zero growth. I would rather have these Israeli challenges of Arab and Ultra Orthodox, you know, birth rates and how do you create a thriving society outta that? 

DS: I completely agree. And by the way, high fertility rates, high birth rates are a sign of optimism in one's country and in one society. And the fact that Israel, this is something Saul and I wrote about in our most recent book, we had a whole chapter on this, that the fact that Israel outperforms in this area tells you something going on about the attitude towards their country, not just in the ultraorthodox community, but across the religious spectrum. Secular Israelis are having lots of children. Michal, I wanna, before we wrap, I know you and Yonatan will be getting into this more in what's your number, but you've been covering the tech industry for two decades now. Just briefly ticking off what you see as some of the threats and the opportunities for Israel's tech sector, because it’s obviously what you guys will be covering quite intensively on what's your number, but it also relates to this conversation because the vibrancy of Israel's tech sector is indispensable to the growth of Israel's economy. And as we've said, the growth of Israel's economy is indispensable to Israel's position in the region and the world, and it's continued, you know, success and flourishing.

MLR: Yeah, absolutely. I mean, I think it's interesting because Yonatan is proposing this paradigm shift, and as Israel is facing all these multiple crises, you know, we've got one of the largest, the biggest, um, most impactful technological transformations underway. And that of course is AI, what we're all talking about. I think that presents a real opportunity, a challenge too, for Israel of course, but we've had such dominance in cyber for so long. We talked about Wiz's huge success story, the biggest, but there are others of course, over time, and the Israeli tech sector, and this is the next thing you know, can Israel parlay that success, that dominance into AI? Clearly right now the US and China are the leaders. They're duking it out. But there are other smaller countries that have the ability or the, the possibility, I guess, of becoming a viable third option. And Israel is definitely one of those countries, could be one of those countries. That's huge. Another challenge that I would say, and this feeds into the challenge of becoming a major player on the AI side, is are we looking at a brain drain? Because that is going to be really detrimental for the Israeli tech sector and ultimately the overall economy, of course in the future of the country. We talked about all of the, you know, you just brought up the Haredi bill, and everything that's going on internally, this is having a big effect. It's hard to know just how much at this point, 'cause there's a lot of anecdotal numbers. It is really hard to tell what the brain drain looks like. But I would say anecdotally, we are seeing signs of it. And earlier on, few years back, like during COVID, there were a lot of families I knew Israeli families who were going back to Israel. The war happened, everything kind of came to the judicial reforms, you know, all this stuff. I'm kind of seeing the opposite now. You know, I, I know this is not a, a real scientific barometer here, but my kids' Jewish Day school enrollment is up and it's mostly Israelis. 

DS: The question is whether or not it's like past patterns, 'cause it's not just during Covid, but even in periods before that where we, we wrote about this in Startup Nation that, that there was this concern even back then when we wrote the book about brain drain, but we argued that it was more brain circulation than brain drain, that Israelis leave Israel, rhey go to the Bay Area where you are Michal, they work for a few years. They actually develop incredible experience working for large companies, which they wouldn't get back then at least work in, in Israel. And then they move back to Israel when they're, you know, to raise their family. So is this a moment of brain circulation or are we really in a brain drain moment?

MLR: Yeah, I think it's really hard to tell. And you know, the irony is that actually the way it used to be is that if you raise money from, you know, one of the big VCs out here on Sandhill Road, Kleiner Perkins, or Sequoia or whomever. The prerequisite for that funding was that you as an Israeli founder, had to relocate to Silicon Valley. That's actually no longer the case, and Covid played a big role in sort of the redistribution of tech hubs and tech power. It's different today, I think, arguably, you know, yes, you still need to have a presence in Silicon Valley for sure, but you don't necessarily need to relocate. But I do think that what we're seeing, and again, it's anecdotal and who knows where things actually net out, I do think there's an issue here. I do think it's growing and it is not, you know, all about October 7th at all. It predates that. If you look at who was really leading a lot of the powerful, most vocal, most kind of well-resourced movements against the judicial reform and some of the internal strife in Israel, there were a lot of tech leaders involved in those movements. And they're still very unhappy. 

DS: They're still very unhappy, and yet they're still very engaged though. 

YA: Yeah. And I think, you know, you can look at it the other way around, looking at where tech industries and old indu, older industries that were critical for growth in countries ended up actually siding, uh, with the status quo. I think the, it's a badge of honor for the Israeli tech industry for being active, for going out there for, you know, making their voice heard. I actually see that as a sign of engagement, involvement. I don't wanna kind of belittle that. I think Michal, I think you're totally right. It's a risk that, uh, we should keep our eye on. We're gonna talk about that a lot, uh, over on what's your number and kind of try to decipher the data from time to time. I would say though, that the overall sense is that the output is very strong. You were mentioning Wiz, and we've had another record, you know, quarter in terms of capital raise. Again, I don't wanna say it's a parallel track, but I think the robust nature of the Israeli knowledge economy is proving itself. Once again, I'm very upbeat, but, but I think you're right. There's a, there's a red alert there to keep an eye on.

DS: Before we wrap and, and I have one more question for you, Yonatan, and then we will wrap one thing, Michal, just the, another sector that I hope, uh, at what's your number, you guys will look at, but you know, I, I may have to get it under my little boutique, you know, niche podcast, but is the whole defense tech sector, which I think after October 7th, you could basically point to two laboratories in the world that are the laboratories of the future of warfare, which is Ukraine, and now Israel in the Middle East, or you know, Israel in, on its various borders, and we're watching the future of warfare as it relates to AI, as it relates to drone warfare, as it relates in the Israel's case to tunnel warfare. This is the future. Everyone's watching. I hear this from American officials and American planners and American investors. The future of warfare is playing out in Ukraine and Israel. In Israel, you have this ecosystem, there's some tech talent in Ukraine, but in Israel you have this critical mass of technologists who not only are technologists, but many of them have been called up to fight in the war. So they have this unbelievable experience of fusing their tech talent with their war fighting experience. And I think, you know this organization, Startup Nation Central, that has this tracker of startups by sector, some tracks, I think something north of 150 defense tech startups already in a country of six to 7,000 startups. And that's only growing. And so that I think will be a big part of Israel's future tech story. And also, back to a previous part of our conversation deepens Israel's relevance and indispensability globally. 

MLR: First of all, I agree completely, there are huge opportunities there for Israel, and we're starting to see glimmers of that, including VC money coming from the US into Israel to defense, tech startups. This is all happening as Europe's undergoing, you know, the largest re-armament since World War II. So still TBD. Where are those, you know, euros going to be going to companies from which countries? Is it gonna be more of a protectionist kind of strategy and is it going to cutting edge technology? So a lot of questions.

DS: And will they be comfortable buying Israeli armaments? 

MLR: Absolutely. That's a big political issue. 

DS: Alright, before we wrap Yonatan, I've heard you speak of the need for the grandchildren of the founding fathers to become founders themselves. 

YA: Yep.

DS: Which is relevant not only for the conversation we're having, it's especially relevant as we approach Israel's Independence Day. So can you tell me what you mean by that? 

YA: If the theory is correct and political ideas and frameworks expire every 20-30 years, it actually means that countries aren't born, you know, one time by founding fathers. It is actually a work of generations. So you have founding fathers and mothers that give birth to a country or a society in a cohesive and coherent way. And you have a generation of sons and daughters. For us, this was 1985, right? The sons and daughters that refounded Israel. It was Israel's second founding, if you will. And right now it's on us, right? It's on us, what we call the founding grandchildren. As we say in Pirkei Avot, you know, the sages say the work is never done and it's on you to always continue and you should know you're not gonna be the one finishing it. From that perspective, it's an ongoing work and the rise of the founding grandchildren is, I think, the theme for Israel over the next five years.

MLR: Can I just say real quick that I found out here about a whole other side to Yonatan Adiri, rabbi Yonatan, I should say, he is now quoted from Magillat Esther and Pirkei Avot. Well done. I'm looking forward to what's your number?

DS: Yeah, exactly. 

YA: I'll quote from numbers. I'll quote from the book of numbers. That's my, uh, that's my contribution.

DS: By the way, not to pile on here Michal, but I was also amused that Yonatan kind of managed to weave into a mid part of the conversation that his grandfather came to Israel from Iraq, therefore giving him another opportunity to revisit his bio, which he didn't get enough detail out in the front end. So if we want to explore Yonatan’s family tree, e'll, we'll, we'll do that in answers to certain questions.

YA: in the notes. We'll add it into the notes. 

DS: The notes! Show notes.

MLR: Can I give a shout out to my grandfather?

DS: Yeah, that's what I was thinking. What about parity here? 

MLR: He had a market in Jerusalem, both Yonatan and I, by the way, you know, we talk about a lot about the American dream here. This is the Israeli dream, so we may not have, uh, created Wiz, but you know. 

YA: That's right. 

MLR: Success stories. 

YA: Who knows, life is long. 

DS: Alright, Michal and Yonatan, thank you for this conversation and again, I am very much looking forward to what's your number and I strongly encourage our listeners and subscribers to go subscribe right now. Again, the instructions for how to do that are in the show notes. It will be a separate feed from Call Me Back, so you do have to subscribe separately. I'm excited for the first episode guys. 

MLR: So are we. 

YA: Thank you very much, Dan. 

DS: Thank you guys. That's our show for today. If you or your organization are interested in sponsoring, call me back, we'd love to hear from you. You can reach us at Callmeback@arkmedia.org. That's callmeback@arkmedia.org. If you found this episode valuable, please share it with others who you think may appreciate it. Time and again, we've seen that our listeners are the ones driving the growth of the call me back community. So thank you. To offer comments, suggestions, sign up for updates, or explore past episodes, visit our website, arkmedia.org. That's arkmedia.org where you can also find transcripts with hyperlinked resources, which will hopefully help you deepen your own understanding of the topics we cover. Call me back is produced and edited by Ilan Betar. Additional editing by Martin Huergo. Ark Media’s executive editor is Yardena Schwartz. Research by Gabe Silverstein. Our music was composed by Yuval Semo. Until next time, I'm your host, Dan Senor.

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The Echoes of Israel’s Founding Fathers - with Yossi Klein Halevi

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Is Israeli Society Descending into Madness? - with Ari Shavit