It is 14 years since founder Benny Landa sold digital printing company Indigo to HP for $830 million, and since then, "Israeli exit" has become a familiar recurring term. No month goes by without at least one Israeli company being sold to a foreign company, but exits on the scale of Indigo are still no routine matter. Even 14 years later, the sale of Indigo is one of the 10 largest exits in the history of Israeli high tech. It is therefore no wonder that a feeling of nostalgia made "Globes" select Benny Landa as its entrepreneur of the decade.
The rapidly approaching year 2017 will be the year of Landa Digital Printing's commercial breakthrough. The value of the company, Landa's second digital printing company, is already estimated at $1 billion. Following last May's quadrennial Drupa Exhibition, the world's leading printing solutions exhibition, the company received orders worth over €450 million for the machines it developed, the first of which it will begin supplying next year.
"Globes": How does it feel to see another of your companies succeed? Do you get up in the morning, pat yourself on the back, and say, 'I did it again'?
Landa: No, not yet, because Landa Digital Printing is only getting started. We achieved technology and commercial milestones, but we're not supplying the machines yet, and we haven't posted revenue from them yet. Indigo is responsible for 0.5% of Israel's GDP. I want Landa Digital Printing to be responsible for at least 1%, and that will take time."
So you measure success only according to revenue?
"According to accomplished facts, and for me, accomplished facts mean revenue, employment, and production."
What about your income? Isn't that a factor in success for you?
"No, not really."
Maybe that is because your previous success, Indigo, gave you an income and enabled you to go forward.
"No, and even when I made progress, and even when I sold Indigo, I didn't regard wealth as a factor. How many meals can you eat in a day, and how many homes can you live in? Maybe if I had been hungry and worried about my family's survival, it would have been different. When you pass the minimum threshold of economic security, money isn't a factor."
What is the minimum?
"When your children won't starve. That's all. My parents were Holocaust survivors. I don't think anyone in my family dreamed about big things - only about survival. I know my children, and none of them would have been less happy had they had less money. Each one of them could have handled the biggest difficulties."
But your children have a feeling of security because they have financial backing, so they can do whatever they want, even if they don't succeed.
"That won't affect them. Each of them went his own way, with his passion, and I'm very proud of that. None of them based the choice on how much money they would make out of it."
During the last Drupa Exhibition, you said that it would be remembered as a turning point in the printing industry's transition from analogue to digital. What did you mean?
"During the exhibition, we screened a 40-minute movie in which you see me 39 years ago preaching a transition from analogue to digital printing. For almost 40 years, I was the only one pushing for it. I tried to explain to customers why they should switch to digital. At the last Drupa, for the first time in 40 years, I didn't have to push. The world's biggest brand names fell all over me, saying, 'We need digital.' Even Indigo has a part in this event, because it cooperated in 2013 with the global Coca Cola company in printing names on the company's bottles and cans, and that gave Coca Cola's sales a big boost. It's called 'mass customization' - personalization for the mass market, and that can be done only with digital printing."
So Indigo is indirectly responsible for Landa Digital Printing.
"Obviously, and not indirectly. First of all, I couldn't have founded Landa Digital without having built Indigo first. Secondly, Indigo created the concept of digital printing, and did the spadework for the transition from analogue to digital."
"It makes me sad"
Will Landa Digital Printing be bigger than Indigo?
"I very much hope that Indigo continues its success and growth - and however much it succeeds, that Landa Digital Printing overtakes it. I want to be as big as possible, but not in order to be bigger than Indigo. Growth is a good thing, and without it, Israel and the high-tech industry can't succeed."
Back to your definition of success in terms of revenue, employment, and production. Do you think that the current generation of high-tech entrepreneurs thinks in the same way?
"To my great regret, no. I and the others of my generation regarded ourselves as industrial exporters. Our ambition was to be exporting industrialists, not serial entrepreneurs. Not to build something and sell it, but to manufacture, to generate jobs, to change society. If you ask the young people today whom they admire the most, those employing thousands of workers or those who made millions, they'll answer, 'those who made millions.' That makes me sad."
Maybe you are being nostalgic, like many of your generation who say, "People are not what they used to be," when that is not necessarily true.
"There are still a few entrepreneurs I meet who are motivated by a desire to leave their mark on society, the economy, and the country. When I meet them, I don't let them go. I hire them, I invest in them, or do something with them, because they're rare. There are two things in life which if you find them, you never leave them: true love and real talent. When I meet someone who's very talented, who wants to do something beyond money, I don't leave him. Money isn't forever; it circulates and goes from generation to generation, and from person to person."
Young entrepreneurs will read this and say, "He can talk like this because he already has money and position."
"There will always be cynics. I don't hire cynics, and I don't invest in cynics. You know what the difference between successful and unsuccessful companies is?"
We think we know what you're going to say.
"It's all people. Have you ever heard someone say, 'I want to hire bad people.'? Anyone can build a building, raise money, and fill the parking lot with workers' cars. Not everyone can select the right people - those who are motivated by the desire to do something big, not by a big salary. There's a concept called work-life balance, meaning that life is divided between work and home, and the goal of work is only to pay for the home, which is the family, hobbies, and things like that. I don't think that way. Work is one of the most abundant sources of satisfaction in life - doing something that you like the best. That's no less satisfying that having children. "
Is that what you thought 40 years ago?
"I've thought that all my life."
Nevertheless, is there something in the current generation of entrepreneurs that you would take?
"Don't get me wrong. There's nothing like Israeli entrepreneurship, but when I see which companies succeeded, they didn't succeed because their entrepreneurs wanted an exit, but because they had a passion to do something big. Financial success is a byproduct. Those going into high tech to make money shouldn't be there. They won't succeed."
It depends on how you measure success. When a young entrepreneur sells his company when it is just beginning and gets tens of millions of dollars for it, maybe for him that's success.
"Success is looking back at your life and saying, 'I'm proud of what I created, my children, how much I had an influence, and how the world is a better place because I was in it.' A bank account isn't part of that equation."
So the current generation of entrepreneurs' philosophy worries you.
"Yes, it worries me. A country can't make a living from being the world's laboratory. There's something called a trickledown economy, but when you're talking about a high-tech company that only does research and development, it's only partly true, because it is directly responsible for the living of only a few people. Take Indigo, for example - for each worker it directly employs, four others indirectly make a living from it. Why? Because it manufactures here. It employs 3,000 people directly, but it's indirectly responsible for the livings of 14,000-15,000 people.
"So the companies that hurry to sell themselves and have only their R&D centers in Israel - it's respectable, and it's better than nothing, but it's a pity. It's a missed opportunity. Israel's not suitable for mass production for the consumer market, but there are many other things you can manufacture here, and thanks to automation, the per-hour price of a production worker isn't a critical factor. Look at the US, which is trying to bring back to the country as much production as possible.
"Israel's birth rate is among the highest in the Western world, and there's a generation here that's unprepared for working in a modern society, that's not studying the core curriculum. You have to keep and produce jobs in Israel, because lack of employment is the problem that will put the country at risk. In every healthy Western country, 50-55% of the population works. In Israel, it's 40%. In a few years, we'll have a very, very serious problem."
Are you sure that studying the core curriculum is the problem? Someone who knows how to figure out the Talmud can finish studying the core curriculum in a year.
"In a year? A year to study English, mathematics, and the other hard sciences? No way. The social fabric, including the differences in educational systems, is the biggest danger to Israel, not the security threat."
A young entrepreneur who sells his company will tell you, "On the contrary: by selling, I'm bringing a major international company with deep pockets to Israel, and after the acquisition, it will enlarge the R&D centers and hire more workers."
"I also sold Indigo to HP, and I'm not saying that selling's wrong. It's wrong in many cases, mainly those in which with a little more patience, the company can be brought to the manufacturing stage."
Maybe it's the Israeli bureaucracy that is stopping entrepreneurs from manufacturing.
"Giving up isn't in my vocabulary. I didn't sell Indigo to make money. The negotiations on the sale terms were easy - it took a few days, or even only a few hours. The negotiations on the intangible assets, on the other hand, took weeks, because I demanded that HP continue both development and production in Israel."
What will this promise be worth in three or four years?
"You can ask what it's worth after 10 years. 14 years have passed, and HP has no obligation to Israel, but it's still here, because it has proved to itself that it's worthwhile manufacturing in Israel, and we proved to them during the sale that Israel was preferable to China. HP considered whether it was worthwhile manufacturing Indigo machines in China during the sale."
"Israeli culture is an advantage"
At this point, Landa mentioned the cultural differences between Israeli and other people, using the Japanese as an example. "One of the suppliers to Landa Digital Printing is a Japanese company named Komori. Landa Digital's screws closet has labels on every drawer, and the labels aren't always straight. In contrast, when we get equipment from Komori, every label is straight to the millimeter."
Would you want us to be like the Japanese? A Japanese may put a label on straight, but he is less creative than an Israeli.
"No, I wouldn't want to change Israeli culture, because that's our advantage. Take the Israeli driver, for example. I hate to say it, but I like him, and here's why. I was at a lecture by the founder of Waze. He explained that Waze had no maps, because the app traces the cars' routes and assumes that if there are cars, there's a road, and if cars are going in a circle, there's a circular road, and if cars are going in one direction, the road is one-way, and so forth. For me, when the Israeli driver overtakes another car, it's impolite, and that gets me mad, but passing means he's thinking outside the box, and that's what I like about the Israeli inventor. It's no wonder that Waze is an Israeli invention."
Do you encourage your managers and the entrepreneurs you invest in to "overtake"?
"Of course! I encourage what is called 'a healthy disrespect.' In US companies, all the workers are trying to figure out what the managers wants, because there's no way any of them is going to argue with the CEO. The Israeli is like a Chinese standing in Tiananmen Square in Beijing, the capital of China, in front of a tank, and saying, 'This isn't the right direction'."
Do you allow your employees to disagree with you?
"And how! I encourage it. Let the walls shake! But they have to do it respectfully."
What if they tell you you're wrong?
"No problem. Still, it's not a democracy. In the end, it’s the CEO who decides."
You or the CEO?
"When there's a CEO, as in the case of Landa Digital Printing, he decides. When I was the CEO, I decided."
Have you ever come to the conclusion that you were wrong, and the other person was right?
"Often. Someone who sits on the side and doesn't express his opinion doesn't count. The CEO doesn't know everything. I don't have any supernatural powers. A CEO need people to argue with him. If employees only do what their managers want, the company will fall off a cliff. This quality of Israelis is what made us a startup nation. Still, it's important to me for it to be what I called it - 'healthy disrespect'. I hate hearing students at school calling their teachers by their first names. That doesn't happen anywhere outside of Israel."
Do you expect a kid in first grade or 12th grade to call their teacher "Mrs. Cohen," for example?
"Yes. It's like the Israeli driver, for better and for worse. When I'm on the road, I hate being passed, but the result of this kind of thinking in Israeli high tech is fabulous."
In the same context, you didn't bring venture capital funds into Landa Digital Printing. Why? Because the funds interfere too much in management of the companies they invest in? Because you were afraid they would argue with you too much?
"Entrepreneurs don't always see the added value of good venture capital funds - those that don't push for an exit, and want to build large companies. In my case, I didn't bring in venture capital for the same reason I didn't take money from the Chief Scientist. If I can't finance the company by myself, I don't want the state or anyone else to finance it, because I don't need them.
"The Chief Scientist is an excellent thing, but someone who doesn't need the money shouldn't take it. In the early days of Indigo, I knew an entrepreneur who got everything he asked for from the Chief Scientist - double what he needed. He asked me what he should do with the money. I told him, 'Tell the Chief Scientist you want only half'. He answered, 'I can't. It's such cheap money. Help me figure out what to do with it.'
"That's only one example. The Chief Scientist's money comes from the taxpayers, and if I don't have to take from the public, I won't."
How much should the state help the high-tech industry? Is aid like this is likely to become harmful at some stage?
"A country should help, mainly by providing incentives for building a manufacturing industry, so that it gets a return on its investment. And yes, an incentive means a policy of low taxes, and Israel is still not competitive enough in providing tax benefits to both Israeli and foreign investors. The manufacturing industry has gone to outsourcing in Mexico, India, and the like. No one outsources to Israel, because its tax policy isn't competitive enough."
It turns out that Teva Pharmaceutical Industries Ltd. (NYSE: TEVA; TASE: TEVA) paid something like 8% tax in Israel last year, and only 0.3% in 2012, and Israeli citizens feel they're being taken advantage of.
"All the hooha about Teva, and all the hooha about the natural gas plan, is a result of the same problem. When the state signs an agreement, it has to keep it; otherwise, who will make agreements with it? If a mistake is made in the law or in an agreement, complaints should be directed at the one who made the law or signed the agreement. The people who decided 20 years ago that Teva would get tax benefits under the Law for the Encouragement of Capital Investment are the ones responsible. The country should keep its agreements."
We spoke of dynamism. Laws have to be changed sometimes. What was right 20 years ago might not be right in the present or the future.
"True, you have to change the law, but there's no retroactive legislation. Any change in the Law for the Encouragement of Capital Investment should be right for the country for another 20 years."
MA in cinema
Amazingly enough, Landa does not have an academic degree in any of the hard sciences. When his family was living in Canada he began studying physics and engineering, and did not finish. Then he tried literature and psychology, and again did not finish. Finally, he completed an MA in cinema at the London Film School.
You did not study the hard sciences, but you succeeded anyway. What lesson does your example give to a 17 year-old thinking about is future?
"I was lucky. This isn't a recommendation. I don't recommend that anyone do what I did. I'm not proud of leaving almost everything I tried to study, except for cinema. That's not a path I'd recommend to anyone else. For me, it was a deadly combination of impatience and pathological curiosity."
Is it unpleasant for you to be taken as an example?
"No, not really. When someone wants to engage in science, he has to study exact sciences. What could I do in science with a degree in cinema?"
You could be a movie director
(Laughs) "I was a bad director!"
Why do you say that the combination was deadly?
"Because I wanted something new every day. Because every time I understood something, I wanted to move on to the next thing, and in academic studies, that's not always a good characteristic. You need more patience. Imagine what I could be doing now had I studied higher mathematics."
Maybe you talk this way now because you are a father and grandfather.
"No. Each of my children followed his desire. I wouldn't tell any child, 'Rely on your talent and luck, instead of studying at university.' It's like playing roulette. Today, you can't get a job interview without an academic degree or some kind of higher education."
Would you interview someone with no degrees?
"He wouldn't even apply. His CV would disqualify him in the selection by the project head. It doesn't matter how original and talented you are as an inventor. Get a degree just to gain an entry ticket to the club. The rest is up to you, but you have to have that entry ticket.
"At Indigo, for example, dozens of technicians have been promoted to senior management positions over the years - technicians, not engineers - but they were hired by the company because they had a technician's certificate."
Is there a shortage of good hard sciences people in Israel?
"Yes, there's a shortage. We find them, but there's unquestionably a shortage."
"I call it social investment"
Other than Landa Digital Printing, the Landa group includes the Landa Ventures venture capital fund, Landa Labs (laboratories working on various inventions), and the philanthropy fund of Landa and his wife, Patsy. The Landa Family Foundation was set up 13 years ago, and has since donated over NIS 200 million.
In recent years, the foundation has focused on equal opportunity through education, with the goal of bringing children "both those with great abilities and those with few abilities" to university. The foundation's activity is divided between the universities and educational NGOs, such as Atidim, with an emphasis on children from outlying areas: 50% Jews and 50% Arabs. Today, the fund is focusing on promoting civic equality between the Jewish and Arab communities.
The foundation is also encouraging the study of Arabic in Israeli high schools, and supports NGOs such as Kav Mashve, Merchavim, and Sikkuy. Patsy Landa, incidentally, received an award for this activity in 2005.
"I don't call it philanthropy," Benny Landa says, referring to the foundation. "I call it social investment. The return on it is not in money; it is in equality between Jewish and Arab citizens in the country."
What is the difference between philanthropy and social investment? Is the first passive and the second active?
"That's how I feel. We're following the results of our social investment, and we invest more in the more profitable and successful investments."
How do you measure the success of a social investment?
"The student dropout rate, their degree of success in exams, and things like that. The problem of an immigrant woman from Ethiopia living in Yeruham, or of an Arab woman from a Galilee village is not only that they don't have enough money to study at the university. They grew up in a family and/or environment in which no one went to university and they are unable to visualize themselves as being successful. They need the support, the encouragement, of someone looking after them. That's a lot more than money.
"Jewish-Arab relations are the heart of the threat to the country's future stability. 20% of the population feels more and more alienated. Society won't succeed if such a large minority feels alienated."
What about equal rights within the Jewish population? Between the outlying towns and the central cities? Between secular people and haredim (ultra-Orthodox Jews)?
"It worries me just as much. There's no doubt that the state of Tel Aviv differs from the outlying areas, but the solution, as I said, is employment. Employment means encouraging foreign investment, and that means a competitive taxation policy. The tax benefits that Israel offers are not as much as in Ireland or Singapore, and that's the problem. How do companies choose where to build plants? They take a consultant, who composes an Excel table. The bottom row of the table tells them where it pays them to build a plant, and the tax criterion is crucial. We therefore have to lower every possible barrier in order to bring foreign investors here. Just let them come and invest - period."
So all these companies will be in the Ramat Hahayal Tel Aviv industrial zone.
"Wrong, because Dimona is cheaper, and when there's a train to Dimona, it will be easy to get there. Landa Digital Printing has quite a few employees from the Kiryat Gat and Beer Sheva area who travel here on the train. The state is capable of creating infrastructure for jobs further and further from the center, and should do so, but its job isn't to interfere in the economic considerations of commercial companies."
So you can create employment, but a large proportion of the employees will be paid the minimum wage. What does that accomplish?
"It accomplishes a lot! We have given a living to people without education who can only get work for the minimum wage."
Have you met the Minister of Finance? Are you trying to influence him?
"No, I tried and was disappointed, so I'm not trying to have an influence any more. I'm doing my job: developing technologies and employing people. I'm not avoiding getting involved, but I can't fight the system."
Published by Globes [online], Israel business news - www.globes-online.com - on September 29, 2016
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