Monday, March 13, 2017

Is the $15BN sale of Mobileye to Intel anything to celebrate?

Earlier today we were told that technology giant Intel is about to purchase one of Israel's largest tech firms, Jerusalem-based Mobileye. The initial reaction in Israel was one of glee. During the afternoon I had the opportunity to talk with a fellow who understands more about the matter than most of us, and he didn't seem unequivocally exuberant. Here's the gist of what he had to say.

The Sale of Mobileye is a Good Thing:
1. Great for the tax man. If you assume balancing the budget is good for everyone, injecting a billion $ into the treasury coffers from somewhere else is fine.
2. Great for the ego. Somebody just forked out $15,000,000,000 for the brainchild of some of our neighbors, what's not to like?
3. A whole bunch of locals are going to get dollops of dollars in their bank accounts.

The sale of Mobileye may not be such a Good Thing.
4. Until this morning, Mobileye was a Jerusalem-based company with hundreds of employees, most of them probably reasonably well-paid. Selling to a foreign firm could mean that down the road the new owners pull out whatever they can, knowledge and talent, and Jerusalem will have one less successful employer.
5. The buyer, Intel, used to be one of the world's top 2-3 tech giants. Then it missed a couple of important developments, such as the rise and spread of smartphones, and nowadays it's still very large but not very-top-tier.
6. More worrisome, Intel does not have a good track record of moving into new fields beyond its original core business; driver-less cars look a lot like a new field beyond its original core business.
7. Most regrettable: until this morning Mobileye was one of the very few Israeli tech firms which was bucking the Israeli tradition of inventing something Really Cool and selling to a larger, non-Israeli firm which then makes long-term profit off the original idea. Many of us think it's time some of these brilliant Israeli start-ups should stick around and become a successful Israeli giant. Mobileye was on our short-list; and now it's off.

The sale of Mobileye is a bit odd:
7. Since 2014 the company has been on the NASDAQ. Moreover, many of the worlds` leading car companies have been beating tracks to its doorstep. Why buy back the stock and sell to some other company? The valuation of the present sale is higher than the NASDAQ value, but still?

So, my interlocutor hazarded the following explanation.
8. The industry of driver-less cars is heating up, and looks like it's on its way to being a multi-trillion $ field; as such it's going to attract everyone and their cousins. Mobileye is well placed at the moment, but with everyone else pouring in, it could be forgiven for being a wee bit apprehensive. Intel is way bigger, and perhaps it's more likely to survive among the giants if it's part of a giant itself.

Which brings us back to the original question: seen from the perspective of Jerusalem and Israel, how good is this transaction. Having rained on my parade for a few minutes, The Fellow then drew an optimistic scenario:
9. Intel already has a large presence in Israel, including one block away from the Mobileye offices. It knows how to make the best of what Israeli tech has to offer. So it won't have any particular incentive to extract what it can and go elsewhere. If acquiring Mobileye proves to be part of a successful strategy to migrate into a new field, and a gigantic one at that, of driver-less cars, Jerusalem may end up a very important center of development for that field. Now that would be something to kvell about!

Postscript: those of us Israelis old enough to remember President Jimmy Carter can tell that Israel once had a car industry of its own - well, sort of. There was a factory which produced local cars called Susita; their defining character was that they were made of cardboard. Honestly. Well, if not cardboard, maybe fiberglass. They were light, cheap, came in two colors (Yellow-ish tan, and dirty yellow-ish tan), they crumpled upon impact with anything sterner than a cat, and they weren't exactly proof of our global industrial significance. We also remember, and will swear to the truth of the legend about the bored camel who once ate one of them in a parking lot in Beer Sheva. Here you can see an article in Hebrew with lots of pictures of the last few specimens, which have survived into the 1980s and beyond because they have crazy owners who feed them chicken soup every evening. The article, from 2013, includes pictures of a camel who was brought to the annual meeting of Odd-Owners-of-Susitas, and the contention is that since the 2013 camel refused to eat any of them, the original story must be false. Hmmpf, I say.

Seen in this context, today's story about Mobileye is science fiction, no less.

Sunday, March 5, 2017

Matti Friedman's Pumpkin Flowers

Matti Friedman's haunting description of his time in Southern Lebanon, and ours, begins with the daily transformation of night to day, the hour before the world wakes. Armies know this to be a time of grogginess, so they purposefully enact procedures to ensure alertness; in Friedman's day it was called konenut im shachar, which he translates as Readiness with Dawn. Correctly, he opens his memoir by describing how the days began - and how his days, almost 20 years later, are still formed by them:
Sometime first light would reveal that the river valley had filled with clouds, and then the Pumpkin would feel like an island fortress in a sea of mist - like the only place in the world, or like a place not of this world at all. There was a mood of purposefulness at that hour, an intensity of connection among us, a kind of inaudible hum that I now understand was the possibility of death; it was exciting, and part of my brain misses it although other parts know better....
Readiness with dawn ended up being a time for contemplation. Look around: Where are you, and why? Who else is here? Are you ready? Ready for what? So important was this ritual at such an important time in my life that this mode of consciousness became an instinct, the way an infant knows to hold its breath underwater. I still slip into it often. I'm there now.
So the first compelling thing about this book is the report about a strange and almost forgotten time in our history and how it's still present for the men who were there. I read somewhere that war novels or memoirs have a standard format. Innocent young men go to war, kill and watch friends be killed, conquer demons and collect scars that will remain with them forever, and return home wiser. Not long ago I read Karl Marlantes's Matterhorn, about Vietnam, which is a fine specimen of the genre. Then I read Tim O'Brien's The Things They Carried, which fits the template less and was noted by many reviewers for its departure from it. One reviewer of Pumkin Flowers describes it as the Israeli version of Things They Carried. Yes, perhaps.

The second thing about the book is its claim that the odd little war between Israel and Hezbullah in the 1990s, repressed as it was at the time, mostly forgotten ever since, and always unnamed, was actually the harbinger of the larger war which has since overrun the region and sent tentacles across the globe. The IDF generals at the time, he remembers, were still preparing for the big wars with the tank divisions; the civilians were focused on the big peace which was certain soon to arrive.
So civilians in Israel were thinking about the new Middle East, and the army about the real war, but nothing came of either - it turned out that what was happening in Lebanon was both the new Middle East and the real war. Something important was afoot while everyone looked elsewhere, and marginal events turned out to be of the most significance. This is often the case.
Then there's another paradox, which he describes well but never fully spells out. Israel's war in the Security Zone in the 1990s was a stupid war, but the political and military leaderships were committed to it so it took a major effort of sections of civil society to convince the voters to convince Ehud Barak to run in the 1999 elections on the promise to leave, which he and we did in May 2000. By the end that year the pervasive Israeli expectation of peace was destroyed. So the war of the Security Zone ended because Israeli society had had enough of futilely spilling blood, but the stage was now set for what looks to be decades of off-and-on violence and further rounds of war. A dialectic result if ever there was one, compounded, to be honest, by the uncertainty of the wisdom of allowing Hezbullah to assume it had won. If the coming 40-50 years see no further wars between Israel and Hezbullah, we'll be able to say the war of 2006 corrected the false message sent in 2000; if there are, the withdrawal of 2000 will look less justified. Historical perspective takes time.

Until then, Friedman's book is a moving guide to those confusing days, and a poignant memorial to the soldiers that survived it and to those that didn't.

Matti Friedman, Pumpkin Flowers, a soldier's story.

Thursday, March 2, 2017

Michael Herzog dissects John Kerry having a go at Israel-Palestine peacemaking

Michael Herzog is a serious fellow. A retired brigadier general in the IDF intelligence corps. The son of Chaim Herzog, commander of the IDF intelligence corps and eventually President of Israel; nephew of Yakov Herzog, a top-tier official in the 1960s who died young after besting Arnold Toynbee in a discussion about Jews and their place in history; also a nephew of Abba Eban, Israel's legendary foreign minster in the 1960s. He's the older brother of Yitzchak Herzog, the current leader of the Labor Party. He's been involved in just about all the rounds of Israeli-Arab negotiations over the past 20 years or so, in one capacity or another. So when he describes the most recent failed attempt to forge peace between Israelis and Palestinians, of which he was part in an advisory role, he's worth listening to. He knows Israel from its center to its edge; he's been observing Israel's Arab neighbors for 50 years; and he has as much experience of dealing with putative American peace-makers as any Israeli.

John Kerry's chapter of the decades-old off-on Israeli-Palestinian negotiations garnered much less attention than some of its predecessors, such as the Camp David negotiations run by Bill Clinton in 2000 or their Hail-Mary-pass edition in December 2000, or even the Olmert-Abbas negotiations of 2008. Most observers on all sides seem to have resigned themselves, some more and others less, to the futility of such attempts, and anyway the minutiae involved doesn't easily lend itself to Twitter-style reporting. Yet in Herzog's telling, Kerry's chapter was as serious as its forerunners, and its failure is as instructive.

Herzog doesn't tell us who offered exactly what and what was extracted in return. Rather, he tells about the dynamics. They're not that surprising to seasoned observers of the genre, but they're instructive; I think they're important.

The Palestinians first. It's well known they regard their acceptance of Israel in its borders of 1967 to be their final offer; they've made all the compromises required for peace, and the purpose of negotiations is to bring them sovereignty in the entire West Bank,Gaza, East Jerusalem, along with a resolution to their Right of Return, and Historical Justice. It's the historical justice which you've got to keep in mind, as according to Herzog, in the Kerry negotiations as in all earlier attempts the Palestinians put immense weight on being accorded justice as they define it.

The demand for justice is unusual in the annals of international peace negotiations, which usually focus on more concrete issues; also, negotiations generally involve give-and-take; when one side insists it has finished giving and is at the table only to take, negotiations won't succeed.

The story Herzog tells about Netanyahu is a bit surprising, though not earth-shattering. As he tells it, Netanyahu actually demonstrated seriousness and eventually also flexibility towards reaching an agreement. Herzog quotes him once as telling Kerry that a compromise must hurt both sides, and he was willing to accept hurt. The Palestinians, not: see above. Herzog cites American negotiators who agree that Netanyahu eventually showed significant flexibility.

Which raises an interesting question. The Netanyahu and Obama governments didn't get along so well, as we all noticed, even up until the final days of Obama's administration. If Netanyahu had actually moved significantly towards where Kerry wanted him, what was that final bitter speech in the State Department in January 2017 all about? I pose this question for future investigation. Something doesn't add up.

The pattern of end-run Israeli flexibility and Palestinian recalcitrance is not new ; it has actually been the norm for at least 16 years. Which makes the American part of the story so odd. Herzog credits Kerry with investing endless time in the negotiations, including daily conference calls from whatever country he might be in. Man, was he serious about this! Serious, but inept. He missed details of major destructive power, such as not noticing the distinction between an Israeli willingness to free convicted Palestinian murders from prison, to the Palestinian insistence they be sent back to their hometowns, where the Israelis expected them to stir up trouble. He also missed things that weren't details at all, such as being in constant touch with Netanyahu to ensure he didn't backtrack, while not being in similar touch with Abbas, not realizing he wasn't on board, and eventually watching him jettison the process for yet another empty agreement with Hamas. Most damning, in my reading, was the apparent American assumption that it was Netanyahu whose positoins needed eroding, while Abbas was taken for granted: if we deliver Netanyahu Abbas will make the deal and won't need cajoling of his own. Or, as Herzog puts it: Kerry felt his positions were closer to those of Abbas.

Except, of course, the Palestinian positions were never what Kerry thought they were, which is why irrespective of how much Netanyahu grudgingly moved, no agreement was within reach at any moment. If you read too much of the New York Times and not enough of the Palestinian sources, you'll end up believing in a reality which doesn't exist.