"Arabs employed at Microsoft Israel rose tenfold"

Yoram Yaacovi Photo: Eyal Yitzhar
Yoram Yaacovi Photo: Eyal Yitzhar

Outgoing Microsoft Israel R&D head Yoram Yaacovi: Why quarrel about bits of land when we have amazing human capital on both the Israeli and the Arab Palestinian side.

It is difficult to believe that the words "free" and "Microsoft" would be juxtaposed in any word association game ever played anywhere in the world. Nevertheless, when I meet Yoram Yaacovi at Microsoft's Tel Aviv accelerator, which takes up an entire floor in the WeWork site on Ibn Gvirol Street, ironically this is the word that springs to mind. At age 60, Yaacovi is a very free man. This is the first time in his life that he is taking time off from his career.

Yaacovi resigned last month from the top technological job in Microsoft Israel - head of its research and development center. He thereby left the company in which he fulfilled himself professionally over the past two decades, with a four-year break at Amdocs Ltd. (Nasdaq: DOX). Yaacovi is leaving exchanging his offices in Redmond and Herzliya for an Airbnb apartment in Colombian capital Bogota. The man who wrote the Shichor guidebook for Cyprus is going on the biggest adventure of his life. His wife, Gali, a travel agent, is joining him with their daughters when he reaches Buenos Aires.

"I drew up a plan I call '10 cities in a year,' he tells "Globes" in his first interview since he left Microsoft. "I think that after a month in a given city, you can know it well. You travel, volunteer, learn the language, go to meetups, and you mustn't leave it. Assuming that you need a two-month break, you have time to get to know 10 cities a year. I'm starting in Bogota, and I'll go from there to Buenos Aires, and then we'll see. I rented apartments with at least two bedrooms, so that friends and relatives can join me."

He sports a prominent earring in his left ear, wears a shirt showing indie rock band Warpaint, and proudly displays the monthly playlist that he put on Spotify. "Some people I work with said, 'Only Yoram and the singer's mother know these bands'," he grins. Afterwards, we talk about the successful season of the Hapoel Haifa soccer team, and about the time he used his programming prowess to win tickets to the World Cup in a lottery.

Microsoft may have surprised everyone by appointing Assaf Rappaport, 34, to replace Yaacovi, but it is clear which of them is younger mentally.

This liberated and life-loving attitude is also reflected in Yaacovi's unorthodox views on the current political climate in Israel. "I tell people that 100 years from now, historians writing the history of this period will say, 'What a bunch of idiots lived here. They quarreled about bits of land when they had amazing human capital on both the Israeli and the Arab Palestinian side.' I know what's happening in Nazareth, and also in Ramallah, and we're missing out on it because of nonsense."

What is happening in Ramallah?

Yaacovi: "Everywhere that's called Palestine, or the West Bank, there may not be the same level of personnel that there is here, but it's developing very nicely there. I have employees in Ramallah with absolutely the same quality as here. We're talking today about importing high-tech workers from India and China, but before we bring Chinese and Indians here, let's first look at what's happening in our back yard."

As far as Yaacovi is concerned, this is a practical operation, not vague declarations. Among other things, he was involved in increasing the number of Arab employees at Microsoft in recent years. "It's embarrassing to say how many Arabs were in the company three years ago, but let's say we increased the number 10 times over, and it's still less than 100." His mention of these two cities is no accident. 18 months ago, Microsoft opened its development center in Nazareth, the first by a major international company, and even before that, Yaacovi began working regularly with engineers from Ramallah. Beyond that, he is an investor in Takwin, a fund for investing in startups founded by Israeli Arabs, and is member in Breaking the Impasse (BTI), an organization that organizes meetings between Israeli and Palestinian businesspeople. He regards this as a human and economic agenda, not a political one. "I stay away from politics like fire," he says.

Why? Technology deals with so many problems; why not harness it to improve the political system we live by?

"I think that politics is based on doing the wrong things because of public opinion. Doing the right things is probably impossible, because it creates a clash with the person who elected you. So when I talk with Jews and Arabs, I don't talk about right and left; I say, 'Let's connect the people.' I bring our engineers sitting in Ramallah, I bring my engineers sitting here, and they are friends."

Do you think that public opinion supports this?

"A lot of public opinion doesn't support it. But what's the difference between me and them? What's the difference between someone sitting now in Ramallah and in China? We're all human beings. I'm sure that if some alien comes here from another planet, we'll all be the same for him. And if I can help to connect people in some way, I'll do it, and I intend to continue doing it."

"To learn the language of startups"

Microsoft's development activity in Israel, which Yaacovi was responsible for until recently, began in the early 1990s. The company currently has 1,100 development employees in three main centers: Haifa, Nazareth, and Herzliya, where Microsoft is currently building a new $500 million campus.

"The center has grown a lot in recent years," Yaacovi boasts. "Today, it is considered Microsoft's best center other than its headquarters in Redmond, near Seattle. We lead a large proportion of the company's cyber security from Israel. In my final week on the job, I was summoned to India by the manager of the center there in order to explain to him how we did this."

It appears that one activity for which Yaacovi was responsible had a special significance for him. Early this decade, he and Tzahi (Zack) Weisfeld, another executive in Microsoft Israel, met with Satya Nadella, then a division manager and currently CEO of the parent company, Microsoft. They persuaded Nadella to establish Microsoft's first startup accelerator outside the US, which got underway in 2012. "There are 18 accelerators worldwide founded on our model, including in Seattle," he says.

For what reason did you found it?

"People assume that it was done in order to invest in startups and make money, but that's not true. We deliberately don't invest in the accelerator's startups. A second answer is that the entrepreneurs might use Microsoft's technologies, and that's partially true, but there are also startups that use the technologies of other companies. So what is the reason? The answer is that we're a 40 year-old company with older people like me, and we have to learn from startups. We have to learn to speak their language. This is the purpose of the accelerators, before anything else, and this is what we have done in recent years."

Why? In order to adopt innovation?

"No, in order to understand what to do in the new world, and not just technologically. We have a lot of innovation at Microsoft, but look at personnel recruitment, for example. We recruited people the same way for years: outstanding Technion graduates who go through a very standard set of interviews, but the world has changed in the past 40 years. Let's say that you have two candidates for recruitment. One option is a science graduate from the Technion who has good grades, say 75-80, and the Technion is a tough place; I'm from there. The second option is a psychology graduate from Tel Aviv University who was the best in his class. Whom would you take?"

The second one.

"Do you realize that you wouldn't have gotten that answer at Microsoft a few years ago? We are doing it today. It isn't hard to learn programming, and if people are really topnotch, it's easy to teach them. This is something that we took from startups. I asked them, 'How do you recruit employees?', and that was the answer. We're in a different world than the one I grew up in. When I studied at the Technion, no one even knew what a software engineer was. I used to talk about this with friends and family, and they looked me like I came from outer space. Today, you can't finish high school without doing something in programming. It's a world in which people are born into our profession."

How many startups do you meet in a year?

"By myself? I don't know, but my team meets hundreds each year - 650 the last time I counted, and all of them face to face. 20 of them are accepted to the accelerator in a year, and I help the others with connections. If a DNA startup that I find interesting comes to me and wants to talk to somebody in Microsoft, I make the connection.

Do you see a common denominator between the entrepreneurs whom you meet?

"Nothing I can think of. There are completely different people."

And between the successful entrepreneurs you meet?

"Yes, these are people who understand business. When you talk about Israel as a startup nation, everybody talks about technology. We're already far beyond that. Even in the development center, today we do a lot of things that are beyond development, such as marketing and business development. This entire ecosystem is quite mature. The reason why our startups succeed isn't their technology; it's understanding the product. Take a company like Wix, for example. Its technology isn't that great, but they know how to make a product out of it. Another characteristic of successful entrepreneurs is that they are not necessarily the smartest people in the world, but they listen, and aren't sure that they know better, even if they do."

Although Weisfeld recently unexpectedly resigned as Microsoft's global startup manager at almost the same time as Yaacovi's resignation, he says that activity in Israel will not be affected, and that there is no connection between their resignations ("Tzahi wanted to do something else, like me"). This activity is also reflected in the opening of a local investment arm, the first outside the US, and in the acquisition of five Israeli companies in recent years, three of them in the cyber sector. One of these is Adallom, whose founder, Assaf Rappaport, became the new head of the R&D center - an appointment process in which Yaacovi took part, and which took place far away from the media spotlight, a few weeks after the announcement of Yaacovi's resignation.

Many people thought that this was surprising appointment, both because of Rappaport's age and because he came from outside.

"A good or a bad surprise? Most people I hear are pleasantly surprised. They say, 'Wow, what daring!' and things like that. So as far as public relations is concerned, we probably made the right decision, and that's also important. Beyond that, however, Assaf has already been at Microsoft for two years. He led a very successful startup, and he's a very talented guy. I don't think that fact that he's relatively young makes any difference one way or the other."

What did you tell him during the run-in period?

"One of the things I told him was that the high-tech battle in the next 15 years will be over personnel - not ideas or who can execute them the best way, but who can get the people. There just aren't enough people to do everything. Estimates are that there will be a global shortage of two million cyber exports. You'll want to protect your company, and there won't be anyone to do it. The system in Israel will adjust to this situation 15 years from now. Today, they're studying programming in third grade, and the Open University is opening a cyber faculty. But up until then, the country will have no solutions."

Do you think that's realistic?

"How will they multiply? I really want to know. We've found long-term solutions, but look at the short term. Let's talk about the universities a minute, because this is a subject that's really bugging me. Israel is currently producing 1,900 graduates a year in areas such as electrical engineering, computers, and mathematics. Even if we as a company have to search outside this circle, as I said, these are still the most relevant subjects for us. 1,900 graduates is a drop in the ocean; it's nothing compared with the development centers constantly being founded here.

"Keep in mind that today, banks, car companies, and drug companies are hiring most of these graduates, not high-tech companies. They all need hardware and software engineers. 25 centers were opened by multinationals in Israel in the past year, and they came here to hire engineers. None of these were high-tech; they were companies like Mercedes Benz and JP Morgan. Where will the people working at these centers come from? We were at a meeting with Naftali Bennett, who said, 'Let's see how to increase the number of graduates by 20% in a year.' What's 20%? 400 more people a year? Will that solve the problem?"

"Ballmer stayed too long in his job"

Yaacobi began his technological career in 1983 at Elbit Systems Ltd. (Nasdaq: ESLT; TASE: ESLT), where he designed the communications system for air force planes. He then worked at Intel for nearly a decade, and his affair with Microsoft began in 1993, just when the company began its meteoric rise. "I was one of the developers of Windows 95; it was my first project. It was an amazing time. All anyone spoke about was Windows. I remember seeing the line for the launch at the store in Redmond at midnight."

This was followed by a long descent: anti-trust action early in the millennium, managerial stagnation, less successful versions of Windows, the failure of the Windows Phone mobile phone operating system, and Internet browsers that trailed behind Internet Explorer. All of these made Microsoft seem slow-footed and out-of-date, and the company's share price remained stationary. The appointment of Nadella as CEO, however, changed everything.

"I have a very clear mantra in career counseling," says Yaacovi. "You should stay in a job at most five years. I was in my job for seven years - I crossed the red line - but I notified Microsoft already two years ago that I wanted to leave. How many years was Steve Ballmer, Nadella's predecessor, in the job? A lot. Then along came a new CEO who refreshed the ranks, realized that Windows wasn't the whole world, and that if we failed with Windows Phone, we should try to understand that failure, learn from it, and profit from it."

You have known Nadella for quite a few years. Did you have any idea how high he would go?

"The truth is that no, I didn't think about it, but it's no surprise, either. Satya is an incredible person. Put technology aside for a minute; I'm talking about morally. He understood what we were talking about before, that all people are equal. He understood the need for diversity. His integrity is deeply rooted. It's a pleasure working with him. You know that what you hear from him is what's going to happen.

"At the technological level, I remember that several years ago, we produced in Israel a version of Cortana (Microsoft's virtual assistant), which was designed for Android. In the company back then, it was absolutely forbidden to talk about such a thing, but we did it anyway, because we're Israelis, and we don't care if they shout at us sometimes, and let it be clear - they did shout at us. Six months later, Satya stood at the podium at Microsoft's biggest conference, and the first thing he presented was Cortana for Android. That's Satya: the realization that what went before is not what is needed now. Today, Windows is maybe 8% of Microsoft. He didn't think about the feelings around it; he thought about it as a business, and it worked. Look at the rise in the share price. Microsoft is now perceived as a company that is much 'cooler'."

"Why are Israelis entrepreneurs? Because we're on borrowed time"

Other than the upcoming trip to Bogota and neighborhood soccer games ("I've played less in the past year"), Yaacovi says that he has not yet decided what his next move will be. When he get enthusiastic about the development of gene editing during the conversation, I wonder whether he means to get involved in it. "Now that we're talking, maybe I really will do it. I'm not joking," he answers.

A professional direction he is considering a little more thoroughly is getting into the venture capital industry. "I never thought in this direction before, because I don't think I'm good about deciding where to invest money. After I announced my resignation, however, they started contacting me, and explained that there were positions there in which you could work closely with startups and help them progress. I think that venture capital funds have matured in the character of their investment, and they have more money to invest. This year, we saw for the first time that some of the Israeli venture capital funds had grown at the expense of the foreign funds. This is happening simultaneously with the maturing of entrepreneurs who sold a company on their first try, and on the second try want the company to grow instead of selling it."

Meanwhile, he has already made a connection with the investment committee of Alumot Investment House's high tech fund ("not full-time"). The fund operates in the framework of the new government venture that enables the general public to invest in both public technology companies and private startups, while providing incentives for funds and partial protection against losses. In contrast to former Microsoft Israel CEO Aryeh Skop, who was also recruited to the fund, Yaccovi does not believe that there is a financing crunch in Israeli high tech. "I think that there's money, but more won't hurt," he says.

So why is the program needed?

"I think that it's trying to give a private citizen the option of profiting from the success of Israeli high tech. Money from financial institutions accounts for about 6% of high-tech investments in Western countries, and only 2% in the startup nation. Up until now, financial institutions didn't like startups, so I think that the government is doing the right thing. If the funds manage to raise money, and this has not yet been proven, will this result in investments in inferior startups? I don't know. The truth is that I don't see many inferior startups in Israel. I think we're at a point at which the artificial intelligence and cloud computing technologies can expedite progress in many fields."

Today, we see more entrepreneurs and startups in other places in the world. Do you think that Israel is still unique in this sense?

"Yes, we're special, and I think we'll be special for a long time. I think that we were never unique in innovation, which is an expression I don't like. Innovation is ideas, and everyone has ideas: both Jews and Chinese have ideas. What we need is people to take these ideas and say, 'I'm going to do something with this. It's not just an idea I thought of in the morning and forgot about at noon. I want to do something, and I have the audacity and daring to do it, and I know how to sell it.' This combination exists here in a higher concentration than anywhere else in the world."


"Because people here came from different homes and different cultures. I had great parents; somebody else's parents weren't so good, and we were educated completely differently, although we're both white Jews. We bring different things to the table. This ingathering of exiles is significant for high tech: most countries in the world are homogeneous - we and the US are exceptions. Other than that, there's an existential matter: we always fee that we're on borrowed time here, and want to do as many things as possible. There's also the advantage of being small. We're small; I don't know of a single startup that makes something for the Israeli market. It's not a market; we're eight million people - that's a small city in China. So we think globally, and that's an enormous advantage that not many countries our size take advantage of. I think that this advantage is guaranteed for us for many years."

Published by Globes [online], Israel Business News - www.globes-online.com - on February 11, 2018

© Copyright of Globes Publisher Itonut (1983) Ltd. 2018

Yoram Yaacovi Photo: Eyal Yitzhar
Yoram Yaacovi Photo: Eyal Yitzhar
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