VCinJerusalem

Israel: Both High-Tech Wunderkind and Slave Economy, Go Figure

Two clashing stories flashed across my screen this past week.

The first was the launch buzz surrounding the new book by my friend Saul Singer and his brother-in-law Don Senor, entitled "Start Up Nation ." Essentially tackling the question many have asked over the past twenty years -- how did those guys living in a desert, with no natural resources, cut off from their region, turn their country into an economic power house? Well, part of the answer is most certainly the high-tech wave of the past twenty years, which I have been privileged to ride in and benefit from, and still am immersed in today.  The entrepreneurial  "can-do" spirit of the country, and several other factors, have led to the success of the high-tech sector in Israel and the economy in general.

For a pumped up interview session on CNBC with Dan Senor, see here. I think only living in the US can you remain as excited as Dan seems to be about life in Israel...which leads me to the next issue.

Second major news item is the fight of the Israeli farming community (here read mainly agri-business, not small farms, more on that below) to import more "foreign workers" from Thailand. The farming community is loose coalition of Kibbutzim (theoretically socialist leaning), Moshavim (diluted kibbutz) and some large private farmers. All of these are almost exclusively Jewish controlled. Most non-Jewish Arab (Muslim, Christian, Druze) farmers are small operations that do not import workers from abroad. What are the farmers demanding when they say "foreign workers?" Do they mean highly skilled labor that one cannot find in these parts? NO! They mean CHEAP LABOR, ready to work at wages far below Israeli minimum wage. In fact, so cheap it's worth flying them here, housing them, feeding them, etc., for years on end. Sounds like...yup, pretty close to slavery. Or at least indentured servitude. Certainly not very progressive. How did this happen, only a few short years after great waves of Israelis in the last century built up a major farming industry? Well, one is because there was a flight away from working the land to working the keyboard, or at least working in a room where there are keyboards...farming became seen as passe, low chance for upward social mobility. We drifted away from our roots as a modern society based on self-sustanaibility to one slammed by the wave of globalization. If the profitablity of the Israeli farming community is based on importing 5-10,000 Thai workers.  we have an emergency situation on our hands. Agriculture here, like in many places, is a completely government and God controlled enterprise. God supplies some water, the land, and then lets government mess it up from there. Government decides the price of water, land use, and controls the price of some of the output of the agriculture (milk, bread, vegetables). Perhaps instead of importing workers from Thailand, we should be paying livable wages to Israeli citizens to work in agriculture. Maybe the "profit" would be less, but it's an artificial industry to begin with (OK, so I don't believe any market is truly "free," but this one is very far from free...).

Most Israelis today do not see the agricultural economy first hand, so they really don't think about where their vegetables and milk comes from -- I have started to pay a bit more attention now that I am a member of an agricutural community (and yes, have started to be be physically active, we are in the midst of our olive harvest, if you want to come help out, will get some oil for your labor...). When we brough our first wave of olives into one of the neighboring olive presses a few weeks ago, I looked around, and did not see a single Thai worker. There were families from Kfar Manda, keeping alive an agricultural tradition going back centuries. And us proud few from Hanaton, who picked our olives and will eat our olives (and olive oil), the way it should be. In freedom. Without any "foreign workers."

We Even Make Good Wine

While the usual discussion in these pages is about start-ups, and how Israel is an incredible breeding ground for tech entrepreneurship, we have also gone back to our roots.

I was first introduced to Castel Winery  by my good friend Elie Wurtman, and we actually entertained the thought of opening a winery ourselves. Probably good that we stopped at the drawing board with that one, but Eli Ben Zaken and his peers have blazed a new trail for Israeli wine. Yet another example of the "new Israel," as a center of creativity and a global sense of the aesthetic.

Take a look at this story from this past weekend's Wall Street Journal (thanks to Jules Polonetsky for pointing it out):

Israel's New Revolution in Quality

By WILLIAM ECHIKSON
SPECIAL TO THE WALL STREET JOURNAL
February 22, 2008

It started as a hobby. Eli-Gilbert Ben-Zaken, an Israeli restaurateur and poultry farmer, planted a few grape vines on a hilltop next to his house in the Judean hills in 1988. He chose the name Domaine du Castel after a nearby crusader fortress and, starting with a mere 600 bottles, attempted to make high-quality, French-inspired wines.

In the beginning, Mr. Ben-Zaken's quest looked quixotic. Wine was produced in ancient times in Israel -- archaeologists have found antique wine presses in the Galilee and Judean Hills -- and the Rothschild banking family reintroduced grape cultivation at the end of the 19th century. But for most of the country's history, the Israeli industry was dominated by sweet wines of poor quality that taste like alcohol-tainted grape juice -- tired red wines with cooked, herbaceous flavors.

Israeli winemaker Eli-Gilbert Ben-Zaken in his cellar

Today, Mr. Ben-Zaken and a small group of other Israeli pioneers are creating world-class reds and whites that are gaining increasing recognition from critics both at home and abroad. Ever more-prosperous Israelis are demanding better drinking choices, while connoisseurs in the U.S. and Europe in search of something different are intrigued enough to taste these "new" world wines from an ancient land.

"We were real pioneers -- the Israeli market used to be a prisoner market for poor-quality kosher wine," Mr. Ben-Zaken, 63 years old, recalls. "It's different these days. Everybody is trying to make something good."

Traditionally, Jews drank mostly for Shabbat blessing and this wine was made sweet because a bottle had to last for several days and still be drinkable. In modern Israel, winemakers had a captive market that demanded kosher wines and little in terms of quality. Israelis traditionally put little emphasis on gastronomy.

The country's economic boom over the past two decades has changed that, creating more of a market for the finer things in life. Israel's reduction of travel taxes prompted a wave of visits to Europe and exposure to good food and good wine. Import taxes were lowered and many of the world's most famous international wines finally began to become available in the country. Annual per capita consumption of wine has doubled in the past two decades to about seven liters.

A new generation of wineries and winemakers has emerged to satisfy Israelis' new appreciation for quality wines. Before 1980, Israel counted only about 20 wineries. One company -- Carmel -- dominated the industry, vinifying about 70% of the country's total grape harvest. Today, more than 200 smaller wineries are spread across the country, from the Golan Heights in the far north to the Negev Desert in the far south. Sweet wines now represent a minority of the market.

In Europe, supermarkets still tend to stock the mainstream Israeli brands. But increasingly specialty wine stores or Jewish stores are carrying a wider selection of highly rated Israeli wines. (For details on some stores in Europe and tasting notes on some wines, see accompanying article.)

In addition to Castel, some of the best names to look for include Margalit, Tzora, Chateau Golan and Clos de Gat. Even Israel's largest and oldest wineries, led by Carmel, have invested in new production of high-quality, European-style wines. Carmel has launched the well-respected wineries Ramat Daltan, Zichron and Yatir.

Mr. Ben-Zaken's Domaine du Castel was the first winery to plant vines in the Judean hills, in the center of the country. Now, more than 30 wineries flourish there. The Judean's Mediterranean-style hillsides -- where olive groves also flourish -- benefit from relatively cool summers, which make them suited to quality winemaking. For his wines, Mr. Ben-Zaken has given the hills a French name: Haute-Judée.

Domaine du Castel regularly ranks among the best Israeli wines in international tastings. Its wines are exported to the U.K., Netherlands, Belgium, Luxembourg, France, Switzerland, Italy, Japan, the U.S., Canada and Mexico. Bottles sell for €30 or more. Mr. Ben-Zaken often shows off his wines in St. Emilion during the Bordeaux region's annual primeur tastings, and he recently traveled to Brussels.

"Castel is the king of Israeli boutique wineries," says Philippe Weinberger, an Antwerp-based importer and wine-shop owner who sells a wide range of top-ranked kosher wines. "He was the first one to do this and he pushed the big guys -- the big companies such as Carmel -- into making better wine." At his Antwerp shop, Mr. Weinberger says, he sells top-flight Israeli wines to Jews "who want to taste great kosher wine" and non-Jews "who just want to try something new."

The diminutive, bearded Mr. Ben-Zaken grew up in Alexandria, Egypt, having no experience with wine. In the 1960s his family moved to Italy, where he acquired a taste for fine food and wine. Both he and his wife Monique, also from Egypt, attended the University of Geneva, which nurtured his Francophile tendencies.

In 1970, the Ben-Zakens settled in Israel, on a small farm with a chicken coop about 17 kilometers from Jerusalem, where Mr. Ben-Zaken opened a restaurant called Mamma Mia. "It was the first restaurant serving fresh pasta in Israel," he says. The restaurant required a wine list. He began to taste seriously, traveling often to French and Italian wine regions, and was inspired to plant his initial vines.

During a 1985 trip to Burgundy, Mr. Ben-Zaken was staying in Puligny-Montrachet and asked for a bottle of the local wine at the hotel's restaurant, not knowing the village was home to one of the world's most famous Chardonnays. When the wine was served, it proved a revelation -- "the first time I tasted a white wine aged in oak that was not just fruity but had much more complex flavors."

For his own wine, Mr. Ben-Zaken has adopted a similar French style. His reds blend the five Bordeaux grape varietals led by Cabernet Sauvignon and Merlot. His whites are 100% Chardonnays and are crafted to resemble Burgundies. One of his two sons, Ariel, joined the winery after studying oenology in Burgundy. His son-in-law also works at the winery. All Domaine du Castel wines are aged in French oak barrels.

The winery now has 15 hectares under cultivation and produces about 200,000 bottles each year. Mr. Ben-Zaken has stopped raising poultry and turned the old chicken coop into a modern cellar and winemaking facility. When in 2002 the intifada put his Mamma Mia restaurant on the front lines of the Israeli-Palestinian conflict, forcing him to hire security guards and chasing away many of his customers, he closed it and concentrated full-time on making wine.

Mr. Ben-Zaken is a secular Jew, and at first, he didn't make kosher wines. But many of Domaine du Castel's customers began asking for wines that respect Jewish dietary laws, so Mr. Ben-Zaken changed his production process to get rabbinic approval. Although much debate continues to swirl about what makes a wine kosher, most insist on rabbis or their assistants supervising the wine's production and prohibit the use of animal byproducts such as gelatin, which is used to clarify wine.

The domaine's wines are intriguing -- impressive but not always successful. At a recent tasting in Brussels, the 2005 Chardonnay, which costs €39 a bottle, seemed crisp and cool, with a nice buttery finish. But one of the tasting participants, Brussels wine-seller Paul van Dievoet, said too much oak masked the fruit's full flavors. "It's hard to justify such a high price," he said.

The reds received similarly mixed reviews in Brussels. Both the 2005 Petit Castel at €32 a bottle and the 2004 Grand Castel, at €54, are clean, impressive wines, with full flavors -- from floral violets to fruity cherries -- with licorice, clove and other spices in the finish. "These are more Bordeaux than real Bordeaux," said a surprised Mr. van Dievoet. Despite the high quality, he remained dissuaded by their high cost.

None of the criticism matters much to Mr. Ben-Zaken. His wines' high prices reflect the low output and strong demand for top Israeli wines. Most of his vintages are sold out and he has begun mimicking Bordeaux growers in selling them en primeur -- before bottling, while still aging in barrels.

Accolades continue to pour in. Wine author and expert Hugh Johnson awarded the domaine his highest four star rating and named the red Castel Grand Vin one of his 200 favorite wines in his 2008 pocket wine book. Robert Parker's Wine Advocate magazine gave the domaine many of the best notes in its December, 2007, Israeli tasting. Mr. Parker grades on a 100 point scale, with anything over 90 considered superb. The red 2005 Grand Castel received a 92, the Petit Castel received 90 points, and white 2005 "C Blanc du Castel" won 91 points, with the Advocate reporting "generally good balance, some brightness, some depth, and a respectable finish that lingers and has some intensity."

When German Chancellor Angela Merkel visited Israel last year, Prime Minister Ehud Olmert served her Castel. She liked it -- and placed an order for several cases that are now being delivered to Berlin.

Traditions Are Slow to Break (Thank God)

Front Page of Yediot Achranot (most widely read daily newspaper in Israel) on Pesach (Passover) Eve: Over 80% of Jewish Israelis Do Not Eat Hametz (leavened dough: bread) On Holiday. Close to 100% of Jewish Israelis participate in a Seder (ritual feast commemorating exodus from Egypt thousands of years ago).

And this in the face of so many other statistics, real and anecdotal, that Israel is losing its Jewish identity, after having absorbed over a million mainly secular Russians (in the 90s), with the "native" Jewish population itself identifying itself overwhelmingly as "secular."

Beyond the statistics, the headlines in the newspaper on Pesach eve were full off holiday puns, only understandable with a relatively deep knowledge of the holiday and what it stands for...not so secular if you ask me.

Tradition is an interesting thing...very difficult to get started (how many new successful religions were created recently) but even more difficult to die out.

Something for start-ups to remember as they challenge the way people do things...tradition has a strong hold on us. For example, newspapers and books, themselves promoters of tradition, have been called many times over relics of history, but many of us still like to read a book, made of real paper. Call me a traditionalist, I am proud to be on. While I also critique many parts of my/our tradition, I also acknowledge the deep positive values in it, and as a political reality, the strong hold tradition has over the people.

OK, back to the holiday, a few days left of eating matzo and contemplating the exodus. May you all be enjoying true liberation as well connection to tradition.