Israel 2.0: Land of Milk, Honey and VC-Backed Start-Ups (EXCERPT)

Agassi’s solution was infrastructure: wire thousands of parking spots, build battery swap stations, and coordinate it all over a new “smart grid.” In most cases, charging the car at home and the office would easily be enough to get you through the day. On longer drives, you could pull into a swap station and be off with a fully charged battery in the time it takes to fill a tank of gas. He’d recruited a former Israeli army general—a man skilled at managing complex military logistics—to become the company’s local Israeli CEO and lead the planning for the grid and the national network of charging/parking spots.

By isolating Israel, Agassi told us with an impish smile, Israel’s adversaries had actually created the perfect laboratory to test ideas.

The key to the model would be that consumers would own their cars, but Agassi’s start-up, called Better Place, would own the batteries. “Here’s how it works,” he later explained. “Think cell phones. You go to a cell provider. If you want, you can pay full price for a phone and make no commitment. But most people commit for two or three years and get a subsidized or free phone. They end up paying for the phone as they pay for their minutes of air time.”

Electric vehicles, Agassi explained, could work the same way: Better Place would be like a cellular provider. You would walk in to a car dealer, sign up for a plan based on miles instead of minutes, and get an electric car. But the buyer wouldn’t own the car battery; Better Place would. So the company could spread the cost of the battery—and the car, too—over four or more years. For the price consumers are used to paying each month for gas, they could pay for the battery and the electricity needed to run it. “You get to go completely green for less than it costs to buy and run a gas car,” Agassi said.

Agassi picked up where Peres had left off on another question: Why start with Israel, of all places? The first reason was size, he told Ghosn. Israel was the perfect “beta” country for electric cars. Not only was it small but, due to the hostility of its neighbors, it was a sealed “transportation island.” Because Israelis could not drive beyond their national borders, their driving distances were always within one of the world’s smallest national spaces. This limited the number of battery swap stations Better Place would have to build in the early phase. By isolating Israel, Agassi told us with an impish smile, Israel’s adversaries had actually created the perfect laboratory to test ideas.

Second, Israelis understand not only the financial and environmental costs of being dependent on oil but also the security costs of pumping money into the coffers of less-than-savory regimes. Third, Israelis are natural early adopters—they were recently number one in the world in time spent on the Internet and have a cell phone penetration of 125 percent, meaning lots of people have more than one.

No less importantly, Agassi knew that in Israel he would find the resources he needed to tackle the tricky software challenge of creating a “smart grid” that could direct cars to open charging spots and manage the charging of millions of cars without overloading the system. Israel, the country with the highest concentration of engineers and research and development spending in the world, was a natural place to attempt this. Agassi actually wanted to go even further. After all, if Intel could mass-produce its most sophisticated chips in Israel, why couldn’t Renault-Nissan build cars there? Ghosn’s response was that it would work only if they could produce at least fifty thousand cars a year. Peres didn’t blink, and committed to an annual production of one hundred thousand cars. Ghosn was on board, provided Peres could make good on his promise.

This is an opinion piece. The views expressed in this article are those of just the author.

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