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Spies, Inc.: Preface Preface I first came across unit 8200 when I wrote a magazine piece chronicling Israel s high-tech boom. It was 2000, and there was a cataclysmic buzz going on about this tiny, defiant nation that had in a very short period of time lept onto the global stage as one of the world s most dynamic technology clusters. At the time, Israeli startups numbered in the thousands, and the country placed third behind the United States and Canada in the number of companies listed on NASDAQ. There was something big going on inside of this small nation. Undeniably, the driving force behind much of this was the Israeli Defense Forces (IDF) and, in particular, its elite technological units. However, there was one that stood out-unit 8200-and although it had remained in the shadows for decades, it seemed to cast the strongest light over much of the dynamism that was happening in Israel. The IDF plays a wide-ranging and singularly exceptional role in Israel, but there was something fundamentally unique and interesting going on in this secretive intelligence unit that has been compared to the National Security Agency (NSA) in the United States. While the list of world-class technologies and companies that could trace their lineage to the unit was certainly remarkable in its own right, it appeared to be just a small thread that was part of a longer string. Israel s particular set of geopolitical and historical circumstances had shaped a very distinctive kind of innovative thinking. The military was its most evident expression, and unit 8200 proved to be its most explicit example. This creative entrepreneurial character that had served Israel so well in war and defense was propelling the nation in a new direction. But the story didn t begin with the high-tech boom, and it didn t end with its crash. Actually, it seemed to me that the story began earlier. What were the forces at play? Here was a young immigrant nation, poor in every conceivable measure and surrounded by hostile neighbors. Yet, it had a deep and rich heritage of innovation. If Israel, under siege, could create world-class universities and research institutions and breakthroughs in the fields of medicine and science and technology, might there be lessons for the rest of us? (After all, in a 2004 Forbes magazine survey of the world s leading companies, broken down by region, the Middle East had nine- eight were Israeli.) I was intrigued, and I found that there was a deeper and broader story to be told about this incongruous nation of innovators. A significant place to begin was with the military, which repeatedly led me to unit 8200. How did it come to pass that an intelligence unit sitting smack dab inside a military infrastructure turned out to be one of the nation s most distinctive schools for entrepreneurs and an incubator for innovative ideas? As the saying goes, business is like war, and in Israel, the unique intersection of surviving in a hostile region and the unrelenting pressure to innovate to defend itself had broader implications. As it turns out, espionage, counterterrorism, and defense had very real business lessons. It was worth examining this connection because innovation is one of the most important parts of business, and here it was found in a military structure. This was not an easy subject to cover. For one, although unit 8200 has been mentioned more publicly in recent years, it remains, for the most part, classified. For years it was forbidden to talk about the unit, and the time it had spent in total secrecy continues to cast a pall over its public image. Although the high-tech boom cracked open the wall of silence that had surrounded this unit for decades, many of its former members remain reluctant to discuss their time in its service. One former soldier told me that one of the reasons so many unit alumni ended up working together after leaving the unit was simply because nobody could talk about what they did there to outsiders. There was a secret language among soldiers, and a resume was not part of it. To research this topic in any detail required the trust of several former members of the unit, and I thank them for handing over their stories to me. The individual cases and stories (or rather, what can be told) are not meant to undermine state security, but rather are to illuminate the machinery, the cog behind the wheel. They are a metaphor for the way innovation has taken root in Israel through circumstance and history, and for a way of thinking and what it says about this place that continues to defy all odds and expectations. Since the subject was a sensitive one, I consulted with Israeli military authorities, and, as a result, some modifications to the manuscript were made. A number of my interviews took place at caf s, others at company offices and boardrooms, and not a few at army bases and the Kirya, the Israeli defense complex in central Tel Aviv. Many individuals requested that only their first names be used, and others asked not to be identified at all. For the purpose of clarification, in the latter case I have given these individuals an assumed name. However, whenever possible, I have identified individuals in full. I spent almost nine months in Israel in 2003 and the early part of 2004 researching open source documents and conducting interviews, nearly 100 of them in all, for this book. It was a surreal time. Suicide bombings continued apace, and Israeli military reprisals were a constant. War with Iraq loomed around the corner. I had my reporter s notebooks and a gas mask ready to go. A friend suggested that we time the sprint between my apartment and the nearest public bomb shelter, should Iraqi SCUDS start falling. Fortunately, they never came. However, in the midst of all the tension, there was a remarkable normalcy and vibrancy to daily life despite the fact that the economy had been decimated by the protracted and deadly conflict, and the gains made during the boom years had all but vanished. Israelis had already shifted gears to the new reality of life at war-again. I was struck time and again at how new ideas were taking shape-ideas that might become products and companies. It was astonishing how this nation refused to get mired in the difficulties of the time. Rather, it sloughed them off like old skin to start anew. The caf s and restaurants were full, and movie theaters and opera houses were packed. There was a fighting spirit that was palpable. Nobody surrendered to the distinct pressures and deficits that piled up each day. It became very clear to me that this was a place where the kinds of challenges and difficulties that would cause most to throw up their hands were perceived quite differently. They were viewed as challenges to be met head on, as opportunities to be uncovered through adversity. This is where innovation begins.