The Chutzpah Effect
I was lucky enough to be invited on the recent States of Jersey (SOJ) visit to Israel, organised in partnership with UK Israel Business (UKIB). The main purpose of the trip was to promote Jersey’s amended e-Gaming laws (which permit e-Gaming disaster recovery operations), but as ever, there was also plenty of potential for us to promote our financial services.21 June 2011
I was lucky enough to be invited on the recent States of Jersey (SOJ) visit to Israel, organised in partnership with UK Israel Business (UKIB). The main purpose of the trip was to promote Jersey’s amended e-Gaming laws (which permit e-Gaming disaster recovery operations), but as ever, there was also plenty of potential for us to promote our financial services. When setting out on the trip, there were several reasons why business with Israel seemed particularly desirable; it is a country that is relatively easy to access geographically from Jersey and where English is widely spoken, and the standards of regulation, like our own, are extremely high. Additionally, Israel has also come out of the Global slowdown quickly, experiencing limited impact, and its GDP is now at about 4-5%, 200-300% above European and USA levels. With a population of 7.74 million, its nominal GDP is about $215 billion, about the same as Nigeria’s, with 158 million residents or Egypt’s, with over 80 million. Also, similarly to Jersey, it has experienced no banking stability issues, having a trend for conservative lending.
As our visit progressed however, I began to realise there were other similarities between Jersey and Israel that I had never previously considered. Israel is, effectively, a land-locked island. Surrounded on all sides by hostile, enemy states, with citizens unable to travel across the countries borders, except by sea or by air, it became apparent, that for very different reasons, we had some of the same challenges. Their political situation somehow mirrors our geographic one, and while unlike Jersey, Israel may currently be driven by what I would call an adversity culture, the result of the isolation for both countries can be a sense of “us” and “them” – a Jerseyman travelling abroad would never describe themselves as a “Channel Islander”, or even “British”. Jersey considers itself unique, and apart.
Also like Jersey, partly because of this enforced limitation to travel, Israel has gone through difficulties with industries going into decline, and has been forced to reinvent and develop itself, with little outside help. We have moved from cod fishing, to knitting (and a little privateering!), to agriculture, tourism and finally, (relatively recently,) to financial services. Israel is now focused on High Tech and Bio Medical industries, and Cleantech has also emerged as a major economic activity.
As well as similarities, there were of course, also notable differences. We have the benefit of an 800 year constitution behind us and all the stability that brings, whereas Israel has only existed in real terms for 63 years. It is of course, a country formed on the basis of a shared religion, rather than place of birth, which means it is extremely cosmopolitan, with a large range of people from different backgrounds, who have joined a new country in a leap of united faith.
Israel also has a very strong culture of enforced responsibility for their youth, with the compulsory military service producing young men and women who are already extremely disciplined at an early age, and therefore highly action orientated in their approach to business. As evidence of this, Israel takes entrepreneurial spirit to another level, and has more new business start ups than any country in the world. Many people are serial entrepreneurs, focused on diversifying their expertise and wealth as much as possible. I believe this attitude in particular has contributed to the strong growth in Israel, although as one person there commented to me, “economic success is everywhere, but political progress is nowhere”, with the relations between Israel and its near neighbours continually volatile.
Despite and perhaps because of, the complexities of the political situation, business is booming, and there are now concerns about the potential for the economy to overheat, driving a desire to invest outside of Israel. While traditionally in the past Israel has looked to the US for this sort of opportunity, they are also now beginning to look to Europe, and in that capacity, Jersey would be a useful and ideal partner for corporate business. Additionally, with so many individuals building personal wealth through business start-ups, there is certainly potential for Jersey to secure private client business, where Jersey’s traditional strength in this area could be a real asset.
A small number of Jersey firms have already committed to this market and are seeing returns. Foundations could also be a good differentiating platform given Jersey’s high quality offering, and this in turn could produce Trust, Private Client and Private Banking business. The company formation and funds markets look more challenging given the Israelis have well established patterns of using Delaware companies for listing High Tech companies on NYSE or NASDAQ for capital raising activity. However, the advent of e-gaming and IP capabilities could change this, as companies look at the Jersey offering which may drive spin off establishment, structuring and corporate services provision. Institutional investors in the form of Pension and Insurance Funds are present and have funds available due to the very high savings ratio in Israel and the success of the economy.
In a wider sense, I also believe there is an opportunity for Jersey to learn from Israel, in the way that they have developed to become a centre for research and development, through investment in education. The high standards of their universities have persuaded firms to set up Research and Development centres, simply because of the desire to have proximity to intellectual expertise. Jersey already benefits from a well-educated population, but I would like to see us pursue a similar connection to academic excellence, that would enable us to become a test centre for expert companies.
Finally, there is a saying I learned during the trip, used to describe extreme audacity, which is “chutzpah”, but it was also explained to me in the context of business, as being an attitude of “do it now” – kind of the Jewish, entrepreneurial equivalent of the Nike slogan. It expresses the cultural attitude that trying, and learning lessons from intelligent, imperfect action, is more important than discussing perfect theory, and there are times when I think this could be usefully applied to balance out Jersey’s tendency towards lengthy debate. Especially now, post-recession, it is a time for action, for us to find our own sense of chutzpah, and get on with it.