A Chat with Veteran Israeli Businessman and Tech Insider Yosi Lahad

The whirlwind days of T-EDGE 2019 are behind us, yet the stories and insights shared continue to resonate.

It is T-EDGE's sixth year in Beijing. Previous years' meetings here gathered top minds from over 30 countries and regions that have helped to shape global narratives on the mutual impacts of different technologues, the general human- tech coevolution, and the benefits for and concerns of increasingly tech- dominated societies.

China has had to weather some tough moments in 2019, with China-U.S. tensions impacting on almost every industry in the country. As new trade talks with the U.S. loom, the technology sector has been experiencing turbulence both in capital flows and global expansion.

Besides panel discussions specifically convened to address the impact of China-U.S. tensions, this year's event also managed to slip outside of this suffocating frame in order to showcase some of the most exciting aspirations in the world of technology from a country on the other side of the world.

It welcomed a group of speakers from Israel, the country whose population of less than 9 million has been coined the 'startup nation', and dove deep into the present-day realities and future prospects for the country's high-tech sector.

During a break between panel discussions, TMTPOST had a quick chat with Yosi Lahad, Chairman of the International Cooperation Committee at the Israeli Robotics Association (IRob) and CEO of Nextwave Robotics, a man with extensive experience in both technology and business.

Yosi Lahad speaking at T-EDGE 2019

TMTPOST: Some people say that under Israel's model, though there are a large number of startups, few actually go on to scale up into that kind of mega-huge company. What is your opinion on this? Does it indicate a real limitation or is it, in fact, a kind of choice?

Yosi: It is not a choice. It is a reality. There are very few large Israeli companies, not to talk about conglomerates like Alibaba, but large companies. The reasons are several. First, we don't have a large market. In China, the U.S., Europe, there are big markets. In Israel, the market is negligible. We are less than 9 million people. It's an island with very few neighbors.

Second, it's a cultural reason. We are impatient. We don't have long-term strategies. People are trying to make their profits and exit pretty fast. It's very difficult when a large company offers you a few tens or hundreds of thousands, or millions, of dollars after a few years of working, it's very difficult to resist. Because for some people, after working several years, including myself, it's very difficult when someone puts US$100 million on the table to resist.

Third, it probably also relates to our [Israeli] culture. We don't obey very easily. Hierarchy and structure are not part of our behavior. This allows, on the one hand, the creation of a lot of startups. There are about 7,000 startups in Israel, every year more than 1,000 startups, which is more than any other country in the world. The advantage of being creative and disorganized, I would say chaotic, which is very good for creating new companies and new ventures, is counter-productive when you have to have long, sustainable, organized companies which focus on the market.

So our advantage is in innovation and creativity, but not in production, and definitely not in marketing itself. I would assume that this will not change in the future.

TMTPOST: From your point of view, what is the number one reason why startups fail?

Yosi: There is no one reason. Surveys all around the world say that the main reason relates to marketing in the wide sense. The main reason is the product/market fit - if the product, in terms of cost, design, etc., fits the market.

The second reason is also related to marketing. It is the channels, or the way in which to introduce a product to market - which channel you choose, which partner you use, which kinds of promotion you use. So statistically, those are the main reasons. And the second level of that is the product quality, compared to the price, which you can relate also to the product/market fit. So if the product is too expensive, it doesn't fit the market.

That's why such things are the main reasons for the failures of startups. I don't think there is one [reason], but I can say quite definitely that it is related to the marketing aspects of the products. It is not to the specific functionality of the product but how it fits the market, how it is introduced to the market, how it is sold and supported in the market.

TMTPOST: A large amount of tech money from China has been moving to Israel, to invest in cutting-edge tech startups. But now, influenced by the U.S.-China tensions, some companies are starting to shy away from Chinese capital, especially those ones which have branches operating in Silicon Valley. Do you have any thoughts on this phenomenon?

Yosi: Unfortunately, we as a small country, are caught between this tension, the war or whatever is the right name for what is going on now between the U.S. and China, which is against globalization. But as it happens, we have to face the reality.

Yes, it is true that many U.S. investors, customers, which are quite influential in Israel, a lot of U.S. multinational, U.S. companies, they apply the pressure, some delicately and some less delicately, even bluntly. I went to New York last month and I was told by investors very clearly that if there is a major Chinese investor in a company, they will not invest in that company. So this creates a major dilemma because in some cases, the big market is in China, in some cases, it's in the U.S. In some cases, it's in both. So it kind of forces us to take a side, which we don't want, because we appreciate very much the U.S. market and we appreciate very much the Chinese market. So probably what will happen - and we face it in some of my companies - is that we have to take a side, either this one, or that one, at least for the coming future, which is very unfortunate for everybody and definitely for Israel.

TMTPOST: We are now talking about artificial intelligence, IoT, 5G every day. Do you think it is a tech bubble or not?

Yosi: So every slogan has something real and something less real. 5G is becoming a reality. It's very important because there are many computing items on each of us, in the environment, in the room. Look at each of us, we have a lot of computing items. So 5G is a necessity because the current network will not absorb anything. IoT, the Internet of Things, basically a lot of sensors, a lot of computing power and connectivity, is real. In some cases, it is used in small cities, things like that which do not need a lot [of computing power]. But in reality, there are a lot of computing devices, which are around us, in our home, in our car, in every place we are. So IoT is reality, it is not a slogan.

AI is essentially not a product, not a system. AI is a technology, a technology that goes into almost every industry - cars, manufacturing, education, health, transportation and so on, so forth. So, talking about AI, we should be more specific, on which industry. In some industries, it has really created a change. In marketing, in finance. It has its social aspects too. However, AI should be… is, actually, the ability to learn from a situation, to personalize the situation. Personalization doesn't always mean a person. It can be a machine which is personalized, and [programmed] to act accordingly.

This is only the beginning. The future is very promising. As with every new technology, it will have ups and downs. In some cases, we will succeed. In some cases, we will fail.

The major challenge, I believe, is in the human-robot-computer interaction where you have to understand a human person - the motion, the behavior, the gestures, thinking and so on. This is very complex, because humans are complex and each of us is different. In different cultures, the reaction is different. So this is a challenging thing. I'm pretty sure it will come. Will it take a few years or 20 years? It's hard to predict.

One example is… everybody was talking about autonomous cars five years ago, and everybody thought it will be 20 to 25 years until [the widespread use of] autonomous cars became a reality. It won't happen then. It will probably take another 10 or 15 [on top of that].

It may become reality in some special lanes, or in some special areas, but not in the streets of Beijing or in New York or wherever. So this is not a bubble, but [something that] will just happen much further [down the track] than anticipated because of the complexity of humans, [of the relationship] between humans and machines, so we will concentrate on that.

I believe it will be on a small scale in the beginning, one by one, not [develop quickly] from one to many, [but] it will come. But still, it is very difficult to understand and predict the behavior of a person based on what we see, what we hear and what we predict.

TMTPOST: From your point of view, what are the most overhyped sectors in tech this year?

Yosi: It's difficult to say. It's IoT or AI. Probably both. AI is probably more overrated because it is used in everything [but] it does not fit everything. In some places, it fits. In some places, it's not really AI because it's not a learning process, not personalization and not prediction, so probably AI is a bit overhyped. And you will see a lot of companies coming down in the next three years because they use the slogan [but] don't deliver enough.

TMTPOST: Can you name one of the most promising tech trends in 2019? Can you also perhaps predict one of these for 2020?

Yosi: I would say a lot of online or e-commerce retail, so we will see more and more, and Alibaba is a very good example of that, based on technology, based on the ability to understand and deliver in short time. So that's definitely a growing sector. I believe that in health we are going to see more and more technology, because in most of the world, people are living longer. They need more support. There are not enough doctors, not enough nurses. So you need technology. So I would say that maybe not in 2020 but in the next few years, health, wearable health will become a very strong trend.

TMTPOST: Some products are of high innovation value, but when they go to market, they fail. How can we increase the mass-market acceptance of high-tech products?

Yosi: People don't like change. People resist change. And they know that to change, they either need to have a major problem, with change as the only way to resolve it, or there is something new that gives them a lot of benefits. If you recall 10 years ago when the smartphone first came out - I think it was the iPhone - people didn't buy a lot of them. It took two, three, four years before it became a situation in which almost everybody used it. So any change needs some [early] adapters in the beginning of any industry. Some of the products did not deliver on what they promised. Some were not good enough. Some were hard to accept because [the level of] interaction with the user was not good enough.

I believe in most cases that you mentioned, the second, third or fourth round will make it better. If you look at the car industry, 100 years ago, 120 years ago, in the U.S., you had [something like] 1,000 car producers. Everybody was doing it. Today we have maybe 20, which means most of them failed. That's typical to every industry. [There are] a lot of [players] in in the beginning. Some of them are good enough. Some of them don't have enough power or money or technology, industries are converging. So that's what will happen here. A lot will fail, and some will emerge.

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This article was written by @Dido Pang.

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