“Why does such a small country need such a large computer?”
Albert Einstein’s question at a Princeton meeting in the early 1950s drew laughter, but the decision behind it was no joke. The Weizmann Institute was being asked to spend roughly 20% of its budget to build a computer as part of an effort to recruit a Princeton mathematician, Chaim Pekeris, to Israel.
“You had to build it from scratch. You couldn’t just buy one,” Meir Valman, author of The Network Effect: The Origins of Israel’s High Tech, told The Media Line.
Valman, a historian by training who has also worked as a journalist, analyst, researcher for start-up Nation Central, and in finance, draws on official documents, secondary sources, and around 150 interviews to trace the networks behind Israel’s high-tech rise.
The computer debate was an early expression of a history often reduced to elite military units, cybersecurity firms, and young start-up founders. Israel’s high-tech rise did not emerge from a single institution or moment. It developed through the interlocking work of prestate universities, military problem-solving, private enterprise, multinational companies, global experience, and returning Israelis.
“The Israeli tech story is very, very unique,” Valman said.
The foundations of Israeli high-tech were being laid before Israel existed. In response to a question about the country’s early academic institutions, Valman said that “you had three world-class universities that were established in what was then mandatory Palestine, before there was a State of Israel.”
The Technion’s cornerstone was laid in 1912, though it did not open until the 1920s. The Hebrew University followed, and the Weizmann Institute opened in the early 1930s.
“This is a full 15-20 years before there’s a state,” Valman said.
Immigrants from Europe shaped the institutions, bringing education and scientific knowledge and seeing research as integral to building the land. “What was important to them was that this was going to be a land of scientific advancement,” Valman said.
Weizmann Institute attempts to poach Pekeris from Princeton
That ambition was tested in the early 1950s, when the Weizmann Institute sought to recruit Pekeris from Princeton’s Institute for Advanced Study. Pekeris was “a strong Zionist,” Valman said, and was keen to move to Israel. But he had one condition: that he should have access to a computer as good as the one he had access to at Princeton.”
His position was clear: “Unless you can give me a computer like that, I’m not coming over. This is my life’s work, using this computer,” Valman said.
Pekeris enlisted senior Princeton scientists to support his case, and the Weizmann Institute ultimately agreed to his demand, bringing over the entire team from Princeton “lock, stock, and barrel” to build it.
But he didn’t have it to himself for long. “There was a fight for the time,” Valman said. At David Ben-Gurion’s direction, the army was given access “between 2 a.m. and 4 a.m.”
The army later bought its own computer, but some of its first personnel learned on the Weizmann machine. The army saw applications in “ballistics measurements, things like that,” and began teaching people how to program computers.
“This was the first program in Israel teaching computer programmers,” Valman said. “That eventually led to Mamram in the late 1950s, which was a dedicated computer unit in the army.”
Asked whether institutions could foresee the eventual impact of new technologies, Valman said they typically began by trying to solve an immediate, practical problem: “They have a certain need, and they look for the right type of hardware or software to try and solve that need.”
The initial problem was not always the technology’s most enduring application. “Eventually, those skills or that piece of technology can be used for many more things than the actual problem they were trying to solve,” he said.
Israel’s first start-up, a company called Elron, began in an apartment in Haifa, according to Valman. Its founder, Uzia Galil, had served in the navy, worked on radar, and later studied in the United States.
There, Galil saw a model that Israel did not yet have: a working partnership among the military, universities, and private firms. “This is something that doesn’t exist in Israel,” Galil said, according to Valman. “All those three arms are acting independently. If we can get them to work together, we can achieve so much more.”
Galil returned to Israel to build the country’s first private high-tech company and work with the military. He started with a partner in a single small room in his apartment. The two worked on electronics, “fixing things, building things, trying to come up with new products,” Valman said.
Eventually, the business outgrew the apartment. Today, Elron is a multi-million-dollar company.
IDF’s Unit 8200 not sole source technological developments
In response to a question about how the military became a pipeline for technological talent, Valman said its influence developed gradually. Israel’s military has long contributed to the country’s technological talent pool, but Valman said it would be too simple to credit Unit 8200 alone.
The unit – an Israeli military intelligence organization known for signals intelligence and cyber-related work – has roots reaching back to the War of Independence, yet its early predecessors were small. “Most people who were in the engineering field didn’t really join these units,” Valman said. “There simply weren’t enough places.”
A more consequential change came through the Atuda program, which enabled gifted students to earn degrees financed by the army before beginning their service. “When they joined the army, they already had advanced knowledge of their particular fields, often in electronics, engineering,” Valman said.
The army gave them challenging assignments, and they learned how to solve them and lead teams. At the end of their service, many had little interest in conventional jobs. “They weren’t willing to join some boring organization and just be an employee,” Valman said. “They wanted to run things, and they wanted to use that advanced knowledge that they had.”
Valman said the Atuda program became a pathway for many of Israel’s early technology entrepreneurs.
For all the attention paid to military units, Valman believes academia deserves more credit.
According to him, the Technion’s electrical-engineering department – particularly its microelectronics laboratory – trained much of the talent that went into Israel’s microchip industry. The lab, established in the late 1960s, was “a world-class lab.”
Israel, however, initially had too few suitable jobs. “Many of them went off to Silicon Valley, got experience there,” he said. “And that was really the only way they could do it at that particular time.”
Intel’s arrival in Israel in 1974 changed the options available to engineers and researchers. It also taught a lesson beyond chip design. “It’s not simply about designing chips,” Valman said. “Success in the industry is about so many other things as well.”
Success depended on market research, finding and serving clients, testing products, and mastering mass production. “There were almost no world-class exporting companies in Israel that understood the competitive marketplace, how to win share in world markets,” he said.
That tension still runs through the sector. “We’re great on the engineering side. That’s really our strength,” Valman said. Israel is strong at creating technologies and adapting existing ones. Its traditional weakness has been “sales, marketing, customer support, all those kinds of areas.”
Israeli technology pioneer and businessman Efi Arazi understood that earlier than most. He never finished high school but talked his way into MIT, and later founded Scitex Corporation. “He went to America, and he got it,” Valman said.
Arazi recognized that a successful high-tech company needed more than a strong product: it also required effective marketing, sales, and design. The central lesson, Valman said, remains uncomfortable for many founders: “It isn’t necessarily the best technology that always wins in the marketplace.”
Israelis move from engineering to management
Valman’s story about Dadi Perlmutter, then head of Intel Israel, captures the evolving role of Israelis within global companies. When Intel considered a new chip architecture that could have made existing chips obsolete, Perlmutter bypassed managers in the United States and wrote directly to Intel CEO Andy Grove.
“So, he just sent a fax straight to the CEO in typical Israeli chutzpah fashion,” Valman said.
His warning was direct: “You’re going to destroy the goose that lays the golden eggs. This product is strong. It’s got your market dominance. Don’t give it up so quickly. We think we can adapt the existing system to be much better.”
Intel did not change the system, though Valman said broader discussions were already taking place. The episode showed that Israeli employees could contribute beyond engineering. “They also could be good managers,” he said. “And they could get involved in corporate decisions.”
Israelis began going to Silicon Valley in the 1970s because there were too few chip-industry jobs at home. Although multinational companies later expanded in Israel, senior experience often still requires work abroad. “At the very top levels, you don’t get the same experience unless you go to HQ,” Valman said.
But he does not view this movement as a straightforward brain drain. “Out of all the foreigners who come to Silicon Valley, Israelis go back home in much larger quantities than the others do,” he said. When they return, “they provide a great source of knowledge and connections and networking, which is very valuable to the industry here.”
That movement is the central idea behind the book’s title. “It was actually more about the international movement between Israel and abroad,” Valman said. “About the sharing of information, the experience gains both abroad and here, the money and the capital that was used to fund the Israeli universities and later Israeli start-ups.”
“That is what I feel is kind of the secret ingredient,” he said.
Capital was critical to the sector’s growth. Valman said the government’s Yozma program had “a huge impact” in the 1990s, when its $100 million investment more than doubled the size of Israel’s venture-capital industry overnight.
The risks are real. “The general figure given in the industry is that 9 out of 10 start-ups fail,” Valman said.
When the conversation turned to women’s representation in biotechnology, Valman pointed to the sector’s alternate route into the industry. The difference, he said, is that life sciences draw more from academia than from army networks. In many life-science disciplines, women had already become the majority in Israeli universities by the 1990s, Valman said, and their representation has continued to grow.
Many life-science jobs require a doctorate, Valman said, and women make up much of the pool of researchers earning those advanced degrees. Engineering remains “somewhere around 70% to 80% male-dominated,” he said, a contrast that continues to shape the gender balance across the industry.
New tech companies continue emerging despite war
Israel’s technology sector has faced war, international pressure, and the reduction or closure of some multinational operations. Yet Valman said new companies keep emerging. “Overall, I would say the tech sector is unaffected because a lot of new Israeli companies have sprung up,” he said.
He does not think the start-up nation has peaked. “If you’re measuring by number of employees, number of start-ups, contribution to GDP, it’s still only increasing,” he said.
Valman believes the next major opportunity should be in life sciences – biotechnology, medical devices, and pharmaceuticals – rather than relying mainly on cybersecurity, fintech, and defense technology.
The PillCam story illustrates the kind of adaptation Valman sees as an Israeli strength. While on sabbatical in the United States, Gabi Iddan was challenged to find a way to see inside the stomach with a sufficiently small device. “He just couldn’t get that out of his mind for the next few years,” Valman said. He continued searching for a suitable technology until a miniature camera developed elsewhere offered the missing piece.
The challenge, Valman said, is often to find the right application for the technology being developed. “Once they find a use case where it can really be effective, then that’s when the start-up really begins, and it can start to become effective.”
Israel has “a very, very strong workforce here in terms of biotech, medical devices, pharmaceuticals,” he said. “I think we could be doing a lot more there given the expertise that we have and given the number of years we’ve been in that business.”
When the discussion turned to the role and relative importance of brainpower, luck and timing, Valman did not separate them. “I’d say it’s all three.”
Life sciences may be where that combination is tested next.
