October 17, 2021

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Israel’s Tech Sector is Booming, But Not for Everyone – Tech News Briefing

This transcript was prepared by a transcription service. This version may not be in its final form and may be updated.

Zoe Thomas: This is your Tech News Briefing for Monday, September 27th. I’m Zoe Thomas for the Wall Street Journal.
We’ve seen tech booms in cities around the world lead to economic development and prosperity, but they can also create divides between those who benefit from the new industries and those left out. What happens when a country with divides so deep they’ve led to war has its own tech boom?
On today’s show reporter Dov Lieber who covers Israel and the Palestinian Territories for the Wall Street Journal joins us to discuss Israel’s tech boom, and the impact it’s having on some longstanding tensions there. That’s after these headlines.
For nearly three years, the Chief Financial Officer of Huawei, Meng Wanzhou, has been detained in Canada on behalf of the U.S. The Justice Department has accused her of violating American sanctions and has been seeking to have her extradited to face charges in the U.S.
The arrest of a major Chinese telecom executive put Canada in the middle of rising tensions between Washington and Beijing. But a new deal reached on Friday has allowed Meng to fly home to China. As part of the deal, she’ll be required to admit some wrongdoing in exchange for prosecutors deferring and later dropping the charges.
Speaking of China, the nation’s central bank is banning all cryptocurrency transactions there. The bank said the move would prevent risks surrounding crypto trading, and the ban would help maintain national security and social stability. China’s already had strict rules in place for digital currencies. The country banned crypto exchanges from operating within its borders several years ago, though individuals have found ways around that. The new rule also makes it illegal for overseas exchanges to provide services for residents in China, through the internet.
The European Union is in a standoff with Apple over phone chargers. Authorities are developing new rules that would require all electronics sold there to use the so-called USB-C format. Those chargers are already widespread among laptop computers and Android phones, but Apple would effectively be barred from using the lightning charging port it builds into all its smartphones. Apple opposes the proposal saying this kind of mandate would stifle innovation.
All right, coming up, tech bro fashion has made its way to Israel, but what does the tech sector’s growth mean for those who’ve been left out of the tech boom? That’s after the break.
Israel has had a robust tech scene for decades, but in the last few years, it’s really taken off. Five years ago, the country had just one private company with a valuation of at least $1 billion. As of June, it had 13 of these so-called unicorns. Like other places that have experienced tech booms, some people are benefiting from an influx of money while others are only seeing their struggles grow.
Our reporter Dov Lieber has been looking into how the rise of Israel’s tech industry has been exacerbating the nation’s cultural, political, and religious fault lines. And he joins me now to discuss.
Thanks for joining us Dov.

Dov Lieber: Thank you, Zoe.

Zoe Thomas: Paint me a picture of what cities like Tel Aviv look like. I’m in San Francisco, you can literally see some of the tech money being put to use in these new skyscrapers and in the way people dress. What is it like there?

Dov Lieber: So let’s put it this way. Five of the city’s tallest towers are currently being built. Every block, something is being built. Every block there’s a new cafe selling fancy cheeses. I’d say Israelis are not, generally speaking, not into lavish dress. There is much more of a so-called tech bro fashion style, the regular t-shirt to jeans if it’s winter time. I think people in San Francisco wouldn’t feel out of place in terms of what they’re wearing.

Zoe Thomas: I imagine if Israel’s having this tech boom, and it’s got a lot of new startups, it also has a lot of tech workers. Is this a sector that the country has purposely worked to develop and nurture?

Dov Lieber: Yes. From the point of view of the Israeli government, the tech sector is the engine of its economy, it really keeps it going. Even though a small slice of the Israeli labor force works in the tech sector, it’s a huge part of the country’s GDP. It provides much tax revenue to the national government and to the municipalities that have a lot of tech workers. And not only that, the municipality makes the bulk of its revenue from taxing commercial real estate. And these commercial real estate towers and offices would likely have been empty if it wasn’t for the tech sector that just keeps plugging away during the pandemic.
Many companies would have struggled had tech not succeeded so well during the pandemic. The success of the tech industry can help all kinds of independent business people who wouldn’t really have had any way to make money, ended up making more money. For example, caterers who were catering the IPO parties or creating gift baskets for the tech employees or musicians and artists who were invited to work at tech events. In this way, the tech sector not only was a boon for tech workers but for all the different satellite industries that orbit it.

Zoe Thomas: We’re talking about the people who’ve benefited from this, the restaurants, the tech workers, the people building skyscrapers, but there’s another class of people. So who’s been left out of this tech boom?

Dov Lieber: Well, it happens to be that the two communities who suffer from the lowest socioeconomic status that is Israel’s ultra-Orthodox Jewish community that make around 12.5% of the population. And Israel’s Arab community that makes around 20% of the population. These two populations have the least connection to the tech sector whilst also being the sectors that have the lowest socioeconomic status. This only exacerbates those pre-existing inequalities.

Zoe Thomas: We know in other cities that have had tech booms, there are these economic tensions. It sounds like there are these economic tensions there, but of course, Israel has other violent tensions that can break out. So how is the tech boom playing into that?

Dov Lieber: Let’s quickly talk about, first of all, the nonviolent tensions. It’s a struggle to find a place to live in Tel Aviv these days. If there’s a couple or a family where neither breadwinner doesn’t work in tech, it could be very difficult. That creates a lot of tension there, to be honest, a lot of feeling left out essentially, and we saw how those economic disparities can manifest violently as well.
There was a war between Israel and Gaza in the spring and uncharacteristically and to the surprise of many Israelis that also engendered internal racial violence within the country in mixed Jewish and Arab cities. Many people were surprised that Jaffa, which used to be its own town but is now part of the Tel Aviv municipality, a place where many considered a shining beacon of coexistence between Jews and Arabs in the country, turned out to be one of those places where that violence erupted.
Part of the reason for that is because the Arab community in Jaffa, which has lived there for many generations and has deep roots there, they come generally from a lower socioeconomic status. And at the same time, most of them do not have any connection at all to the tech sector. Not only that, the tech sector it brings in all kinds of other competition, the best quality lawyers, doctors, and they have to compete with those people as well. And that’s very difficult.

Zoe Thomas: You mention that it’s the ultra-Orthodox community and the Arab Israeli community who are really missing out from this tech boom. Why is it that those communities are not being included in this boom?

Dov Lieber: Firstly, they are the communities that have the highest unemployment. Ultra-Orthodox men, the majority of them study rather than work and Arab Israelis, it’s Arab women who often go unemployed. However, this disparity is also caused by the fact that the Israeli military is a engine for the tech industry. It trains tech workers, and it creates an excellent network for them as well. And it happens to be that both Arab Israelis and ultra-Orthodox people largely do not enter Israel’s military, which is obligatory for the rest of the population. And so in many ways, they are kind of outside of the normal ways in which to enter into this lucrative sector.

Zoe Thomas: Are there efforts or plans to address those disparities?

Dov Lieber: Right, so this current Israeli government and previous Israeli governments have all made it a priority really to try to get the Arab community and the ultra-Orthodox community into the tech sector. This could solve a lot of problems for the Israeli government. It could help fill a whole lot of open positions in tech companies and at the same time spreading the wealth around, across Israel’s different populations, but progress on that has been slower than the Israeli government would have wanted. And so the threat of these inequalities increasing is still there.

Zoe Thomas: One player we haven’t talked about yet is the U.S. It plays a big role when there are military conflicts in Israel. Does it play any role in the tech sector and its boom?

Dov Lieber: It’s hard to say if there would be a boom without the United States, most of the investments are coming from the U.S. All the money sloshing around the U.S. investors looking for places to park their money, looking for returns that’s making its way to Israel too. It’s almost as if Israel is another state of the United States in this sense, it’s directly impacted by the economic policies and economic state that’s happening in the U.S.

Zoe Thomas: All right. That was our reporter Dov Lieber. Thanks for joining us, Dov.

Dov Lieber: Thank you for having me Zoe.

Zoe Thomas: That’s it for today’s Tech News Briefing. You can always find more tech stories on our website, wsj.com. And if you like our show, please rate and review it. You can do that wherever you get your podcasts.
I’m Zoe Thomas for the Wall Street Journal. Thanks for listening.

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