Israel has delivered far more technological innovation in recent decades than has Singapore; yet over the same time period, Singapore has become a far more productive nation. From this seemingly strange, yet true, observation, there are tremendous lessons for life and business.
Almost eight years ago, I wrote an article for Forbes in which I described the shocking results of a study performed by Google that examined the impact of a nation’s technology industry on its overall economic success, and which compared and contrasted the impact of technological innovation with that of delivering universal access to technological resources. Over the past year, as COVID-19 has forced societies around the world to deal with all sorts of issues emanating from students and workers being forced to telecommute, our collective failure to learn important lessons from the results of the aforementioned study have become glaringly obvious. A such, I am republishing the 2013 piece today along with several updates – hopefully, now, after the pandemic ends, we will learn from the success of others, and implement necessary changes. The following is the article written in 2013, with 2021 updates noted in italics:
A study recently commissioned by Google examined the impact of Israel’s renowned technology industry on the country’s overall economy. The results – shocking to many – should serve as a mind-opener to both entrepreneurs and policymakers in the United States and around the globe.
Over the past couple decades, Israel has emerged as a major player in the technology sector, producing many firms that have enhanced productivity around the globe. Checkpoint, Waze, NDS, and ICQ are all Israeli exports. Technological innovation has allowed the nation of under 8-million people to list a significantly disproportional number of firms on the NASDAQ – at one point the country even boasted the highest number of firms on the exchange after the United States.
Yet, as noted in the Google-funded study, despite its disproportional success in producing new technologies that seemingly should enhance efficiency, Israel ranks only 24th among the 34 members of the OECD (Organisation for Economic Co-operation and Development) in terms of productivity, way behind many countries whose technology industries seem dramatically inferior. (2021 Update: Similar rankings remain true now as well – some lists ever have Israel demoted from 24th place to 25th.)
How can a technology leader like Israel be so relatively unproductive? How can a nation boasting disproportionate innovation lag economically behind less creative societies?
The answer is a lesson from which we all can learn: Effectiveness in leveraging technology is a much greater determiner of economic success than technological innovation.
Israel’s private firms create amazing technologies, but its government has not implemented sufficiently comprehensive plans to boost national productivity by maximally leveraging information and communication technology. While Israelis participating in the so-called “start up nation” economy produce wealth and create productivity-enhancing inventions, they still encounter unnecessary inefficiencies, and many of their compatriots remain technologically challenged. The benefit of Israeli innovation, and of the Internet era in general, remain under-realized on a nationwide level.
Contrast Israel with Singapore. Thirty years ago, the two nations reported similar productivity per capita. But, while Israeli companies were creating new technologies, Singapore was establishing and implementing national technology plans in an effort to boost national efficiency. The result: While Israeli innovation has created wealth, Singapore has created far more – with Singapore’s per capita GDP today reaching levels approximately double those of Israel’s. (2021 Update: Even after Israel’s dramatic technological and medical successes over the past 8 years, including becoming one of the world’s leading providers of cybersecurity technology, it continues to dramatically lag Singapore’s performance – as of 2019, the last year for which figures are currently publicly available, Singapore continues to deliver both much higher GDP per capita than does Israel, and produces almost double the GDP per hour worked than does Israel.)
While there are certainly numerous other factors that impact per capita GDP – Israel, for example, spends somewhat more per citizen on national defense than does Singapore, and also has a significant number of citizens who, for religious reasons, do not work – none of the other factors adequately account for the dramatic difference in economic performance between the two countries over the past few decades. (2021 Update: It should also be noted that while Singapore’s GDP per capita was less than 1/4 that of the USA’s in 1965 when the former became independent, by 2013 it had a higher GDP per capita than the USA.)
In fact, the disconnect between innovation and economic productivity should not be surprising. In the modern age, new technologies proliferate rapidly. While the nation in which a particular technology originates may derive some wealth from its innovation, the invention and its associated productivity-benefits quickly become available globally. Hence, the ultimate benefit from a new efficiency-enhancer is likely not to belong to whomever creates it, but rather to the party that most widely and effectively utilizes it.
Entrepreneurs should take note and direct resources accordingly. Likewise, governments must develop coherent, comprehensive plans for establishing and maintaining information infrastructures that enable twenty-first century populations to be maximally productive. As Singapore has shown, implementing such plans on a widespread scale can dramatically enhance wealth. Having recently submitted my business’s tax return on paper since my state still cannot accept such returns electronically, and having waited in line for hours to renew my driver’s license because the local motor vehicle commission’s computer systems failed for the umpteenth time, I know that we still have significant room for improvement.
America is the most successful economic power in human history. Improving our technological infrastructure to ensure widespread productivity benefits will help keep it that way.