Betting on Brains or Oil

Thomas Friedman has an editorial in the NY Times "People vs Dinosaurs" where he brings to our attention the scenario of two opposing foes who bet on the future of Israel. Iran's Ahmadinejad bet that Israel “has reached its final phase and will soon be wiped out from the geographic scene.” But America's Buffet thinks the contrary and has invested lots of money in this tiny country of 7 million. What he has invested in is the brain power of Israel.

...So who would you put your money on? Buffett or Ahmadinejad? I’d short Ahmadinejad and go long Warren Buffett.

Why? From outside, Israel looks as if it’s in turmoil, largely because the entire political leadership seems to be under investigation. But Israel is a weak state with a strong civil society. The economy is exploding from the bottom up. Israel’s currency, the shekel, has appreciated nearly 30 percent against the dollar since the start of 2007.

The reason? Israel is a country that is hard-wired to compete in a flat world. It has a population drawn from 100 different countries, speaking 100 different languages, with a business culture that strongly encourages individual imagination and adaptation and where being a nonconformist is the norm. While you were sleeping, Israel has gone from oranges to software, or as they say around here, from Jaffa to Java.

...Iran has invented nothing of importance since the Islamic Revolution, which is a shame. Historically, Iranians have been a dynamic and inventive people — one only need look at the richness of Persian civilization to see that. But the Islamic regime there today does not trust its people and will not empower them as individuals.

...Iran’s economic and military clout today is largely dependent on extracting oil from the ground. Israel’s economic and military power today is entirely dependent on extracting intelligence from its people. Israel’s economic power is endlessly renewable. Iran’s is a dwindling resource based on fossil fuels made from dead dinosaurs.

So who will be here in 20 years? I’m with Buffett: I’ll bet on the people who bet on their people — not the people who bet on dead dinosaurs. READ