Why can't Israel's economy compete like its basketball teams?
Team sports like football and basketball are a metaphor for business. Success in both business and sport requires skill, teamwork, superior management, organization, talent, and vision.
- On April 13, underdog Hapoel Jerusalem defeated Real Madrid 83-72 to win the Union of European League of Champions (ULEB) cup. The salary of Real Madrid star Kambala, $1.2 million, equaled the combined salaries of Hapoel's starting five players.
- On May 1, Maccabi Tel Aviv destroyed Skipper Bologna 118-74 to win the Euroleague final. Even before the season began, Maccabi built a strategic plan to reach the Final Four -- and implemented it flawlessly. It was Maccabi Tel Aviv's fourth European championship; previously, they won in Belgrad (1977; Tal Brodie's "we are on the map!"), Strasbourg (1981) and Paris (2001).
- On April 28, Swiss business school I.M.D. published its annual rankings of global competitiveness for 60 countries. Israel did not finish in the top final four. It ranked 33rd, behind Chile (#26), Estonia (#28), Thailand (#29) and France (#30). Among countries with fewer than 20 milion people, Israel ranked 20th.
(IMD measures competitiveness by benchmarking countries on 323 variables, with experts from each country, and then combines them into a single competitiveness score.)
Why do these rankings matter? Economists have shown there is a direct correlation between jobs, income, wealth and exports, and countries' competitiveness. Besides, there is national pride. Why, for heaven's sake, is Israel far less competitive than tiny Estonia ?
What do Israelis - industry, labor, academia, government - need to do, to reach the Global Final Four? Here are IMD's 10 Commandments of Competitiveness, along with some suggestions:
- Create a stable legislative environment. Maccabi Tel Aviv stuck with the same team all year, building it into a cohesive powerhouse. Constant talk of rebuilding Israel's coalition government, like Lego pieces, hurts foreign investment and damages Israel's image. There is enough instability caused by terror - why add to it?
- Build a flexible, resilient economic structure. A benchsitter all year, David Bluthenthal came off the bench in the final to lead Maccabi Tel Aviv. Israel has far too many virtual monopolies - in banking, for example. Take them apart, and let aggressive "bench players" come forward to excel.
- Invest in infrastructure. Maccabi Tel Aviv invests in young 'infrastructure' players, like Halperin, who spend years learning and improving, before they make the starting five. Economists show investment in infrastructure pays very high returns. Israel's communications and transportation infrastructure is shabby; Israel ranks close to last among small countries in 'basic' infrastructure.
- Promote savings & investment. Israel's net saving rate is near zero. Give Israelis IRA (independent retirement accounts) as in the US, where taxes can be deferred until the money is drawn.
- Develop aggressiveness in global markets, and attractiveness for foreign investment. Maccabi Tel Aviv won games with aggressive offense, and, in the final, with equally aggressive defense. Israeli entrepreneurs invent creative products, but fail to organize to market them abroad aggressively.
- Focus on quality, speed, and transparency in government and administration. The press scrutinized every Maccabi hiccup all season. But when the State Comptroller reveals bad government, rarely is the problem fixed, and even more rarely is the responsible minister still in office to explain. Investment will not flow to countries whose government is perceived as corrupt or inept.
- Maintain the right balance between taxes, wages and productivity.
It is said that a significant part of Maccabi players' salaries are bonuses, tied to performance (productivity). Wages, too, should directly reflect workers' output. And taxes on labor should be lowered, so that workers keep the fruits of their labors.
- Reduce wage disparity. Real Madrid had one star who got an enormous salary. Hapoel Jerusalem had five players paid roughly similar sums. The current 21 to 1 ratio between the lowest 5% of salaries and the highest 5% is an abomination, unjustified, and destroys Israel's team spirit.
- Invest in education. Maccabi Tel Aviv assistant coach David Blatt invests time and effort to study Maccabi's opponents intensely. He knew Real Madrid, it is said, as well as its own coach. Few investments pay higher social returns than investment in education. In recent years, Israel has partly privatized higher education, because private colleges don't get government money. The result is to cripple the research universities, who produce the brains that drive Israel's economic future. This must stop.
- Balance proximity and globality. Maccabi Tel Aviv balanced its Euroleague campaign and its local league and cup campaigns. Real Madrid and Skipper stumbled in their local leagues this year. Israel, too, must restructure its domestic economy - especially the tens of thousands of small businesses - while building global competitiveness. Successful, wealthy countries, and teams, do both.
Oh, yes, one more thing, the 11th commandment: luck. You need luck. Derek Sharp's desperation long three-pointer at the buzzer to tie a key game and create overtime was crucial.
A postscript for soccer fans: Two teams from Arab towns and cities were elevated to Israel's Premier League last year. One, Ahi Nazareth, stumbled and will be relegated to the National League. The second, Bnai Sakhnin, succeeded, remained in the Premier League, and became the first team from an Arab city to win a Cup Final. Ahi Nazareth spent NIS 12 million this year; Bnai Sakhnin spent only NIS 9 million, the lowest budget in the Premier League. Sakhnin, without a home stadium, was well managed, played with enthusiasm, motivation, aggression, and spirit, and beat teams with budgets many times theirs. Their fans' support was outstanding.
Israel, like Sakhnin, can reach the Final Four of global markets. We can do far better than the Final Forty.
Prof. Shlomo Meital is the academic director at the Technion Institute for Management (TIM) in Tel Aviv
Published by Globes [online] - www.globes.co.il - on June 30, 2004