High-tech entrepreneurs aren’t the only Israelis who can achieve billion-dollar buyouts, according to Israeli industrialist Stef Wertheimer, himself responsible for what has so far turned out to be Israel’s biggest exit ever, tech or otherwise.
While there’s nothing wrong with making money from technology, the state should be encouraging more entrepreneurs to open manufacturing firms, like ISCAR, the tooling company he built from the ground up, Wertheimer believes.
In an exclusive interview with The Times of Israel, Wertheimer bemoaned what he said were government policies that encouraged high-tech development at the expense of the industrial and manufacturing sectors.
“Tech is important, but if you look at even the successful tech start-ups, you see they employ only dozens of people at most. Tech is never going to have the impact on the job market that manufacturing has,” he said.
Wertheimer was speaking on the sidelines of the 33rd annual Israeli Conference on Mechanical Engineering (ICME 2015) – the kind of conference that has become an anomaly on the Israeli business agenda, which is much more enamored with high-tech topics like mobile tech and software development than with manufacturing.
But at a typical mobile tech conference, it’s unlikely that any of the hundred-some companies that are likely to be represented employs anywhere near the 3,000 people ISCAR employs in the Tefen Industrial Park in northern Israel – much less the 12,000-some workers the company has in a dozen other locations around the world.
And with more non-tech than tech workers in the Israeli economy, the industrial sector is likely to remain a much stronger factor in job creation than the Israeli tech sector ever will, said Wertheimer.
“I see a lot of tech companies developing technology here and selling it abroad, but I don’t see new factories being built, and that worries me, because it means we are not creating the jobs that will guarantee a good life for Israelis.”
Wertheimer started the ISCAR Metalworking Company in 1952 and remained its principal shareholder until 2006, when American billionaire Warren Buffett, via his Berkshire Hathaway investment firm, bought 80% of the firm for $5 billion. In May 2013, Buffett bought the rest of the company for an additional $2.05 billion. Stef Wertheimer is head of the wealthiest family in Israel, which is estimated to be worth about $5 billion.
Times were different when Wertheimer started ISCAR, he said; the pull of Zionist ideology was much stronger in those days, and people were willing to work much harder. “We had Israelis working the fields out of ideology in those days, and academia, government and industry were all involved in supporting that and the other nation-building activities we were engaged in,” said the octogenarian Wertheimer, who at 88 is significantly older than the State of Israel.
As time went on and things got better, Wertheimer said, Israelis abandoned the hard work and reverted to “traditional” Jewish work – business, the work that they had grown used to during the 2,000 years of diaspora life, when they were generally forbidden to own land in Christian and Muslim countries. Academia and government followed suit, training people for those disciplines. When Israel discovered high-tech, entrepreneurs flocked to the various technologies, universities began training for those disciplines, and government instituted programs to assist them.
Lost in the shuffle was industry and manufacturing. Policymakers, when asked about the evaporation of manufacturing jobs, were prepared with a stock answer: China. Israel, like the US, they argued, couldn’t possibly compete with the low wages and economies of scale in the Far East, so there was no point in even trying. The best option for the “masses” was to retrain for high-tech, where Israel could have an advantage because of its higher levels of education and skills.
But that reasoning was based on a false premise, said Wertheimer; a country doesn’t have to become a second China in order to compete in manufacturing.
“Some countries were able to turn their manufacturing operations into advanced technology areas,” he said. “South Korea is a great example of this, and manufacturing there is done using advanced technological methods,” with the support of academia and government, which respectively train people for those jobs and support them with subsidies, loans, and other financial incentives.
Other countries that have done this successfully, said Wertheimer, include Finland, Switzerland, and Germany – none of them third-world countries, and all of them with quite comfortable standards of living and social benefits.
“We have a lot to learn from them,” said Wertheimer.
Marrying industry and tech was a major theme of ICME 2015, with presentations by engineers, academics, and policymakers. Among the speakers was Professor Alon Wolf of the Technion, who led the team that developed the Robotic Snake, a miniaturized robot that slithers along, snake-like, into disaster areas where humans dare not tread. The snake, equipped with cameras and sensors, can be used to lay out a path for rescuers to enter a damaged structure, and to determine exactly where the survivors are. Wolf presented the system to US President Barack Obama on his visit to Israel in 2013.
At ICME 2015, Wolf discussed “bionic people” – how machine technology is being used to enhance human capabilities and help people live longer.
Chairing the event was Dr. Amir Ziv-Av, head of a premier Israeli engineering firm that bears his name. The firm has designed dozens of products, such as a complete automated airport baggage handling system, innovative lifts and transport equipment for semi-trailers and train cars, improvements on armored Hummer vehicles, as well as numerous medical devices.
Improving Israel’s ability to compete in manufacturing, he said, is “critical for the economy. Many companies transfer their manufacturing to the Far East in order to save money, but this is not a good solution for the country – and it is often not the best solution for manufacturers, either. There’s a lot of room for efficiency improvement in Israeli manufacturing, and that would go a long way to reducing costs.”
For example, said Ziv-Av, Israel, a leader in robotics, could develop a policy that would increase the use of robots in manufacturing – a move that would reduce costs and enable Israel to compete in manufacturing, even in consumer product manufacturing, an area where China is considered “untouchable. For Europe, shipping from Israel is a lot cheaper than shipping from Europe, and if high-tech manufacturing methods are implemented, we will find that the cost of labor falls significantly – with more factories opening to provide more jobs. Competition requires optimization and efficiency, and Israel has the technology that can be applied to manufacturing that can make this country a manufacturing powerhouse.”