Loading summary
Transcript64 lines
- [00:00]
Yonatan Adiri
Foreign.
- [00:04]
Michal Avram
You are listening to an art media podcast. So, Yonatan, what's your number?
- [00:13]
Yonatan Adiri
Well, this time it's not a happy number. It's 5,000. That's 5,000 acres, which are more or less 0.1% of the total land of Israel that was burned to the ground last week. To put it in perspective, this is like one tenth or so of the size of the LA fires we, which consumed roughly 55,000 of acres, but still the largest fire we've seen in 15 years here in Israel. So that's my number.
- [00:36]
Michal Avram
Okay, you are starting us off with a downer. I'm going to do my best to, you know, just balance it out a little bit. My number is 11 million. That's $11 million, which is the size of Israeli defense tech startup Kela's seed round that took place earlier this year. And by the way, it was immediately followed by a $28 million Series A round.
- [00:59]
Yonatan Adiri
Top investors in Kella' round as well. So global investors, Josh Lux Capital, very serious round. So it's not just the capital, it's actually, you know, AAA guys coming in.
- [01:09]
Michal Avram
Yeah, Sequoia as well. Okay, whose number wins here?
- [01:12]
Yonatan Adiri
I go with the optimist number. I go with yours. I'd say there's another number which is zero casualties in these really fires, which I think we can be proud of. We'll talk about it later, but I'm going with your 11 million.
- [01:22]
Michal Avram
I win. Welcome to what's yous, the newest podcast from ARC Media, home of Call Me Back with Dan Senor. Our focus is Israel's economy through a global lens. Before we dive in, let's introduce ourselves. I'm Michal Avram, an Israeli born Silicon Valley based tech journalist and a contributing editor at Fortune.
- [01:50]
Yonatan Adiri
I'm Yonatan Adiri, an Israeli entrepreneur and formerly the CTO and diplomatic advisor to the President of Israel, Shimon peres.
- [01:57]
Michal Avram
It is 9am here in Palo Alto.
- [01:59]
Yonatan Adiri
It is 7pm here in Tel Aviv.
- [02:01]
Michal Avram
Over at Call Me Back, Dan's going to continue to focus on the political news and newsmakers driving conversation in Israel and the Jewish world. And we're going to devote our weekly podcast to discussing the most important economic developments in Israel. For those of you who are invested in or simply interested in the Israeli economy, what's your number will be your one stop shop for the headlines, the deep dives, and of course, the numbers. If you're an early fan, please help us by subscribing, reviewing and sharing our show with others who might find it valuable as we will in every episode. We're going to start by taking the temperature of the Israeli economy with our market signals. Then we'll get to our big shorts, which is a brief analysis of the most interesting news items of the week. Today we're going to talk about the devastating wildfires outside Jerusalem which Yonatan, you just alluded to. We'll also talk about the US Economy contracting, recent GDP numbers and what their impact is on Israel. Then we'll wrap with the long play. This is our deep dive into one vital issue that's impacting the Israeli economy. Today's focus is on the defense tech sector. Lots to say there, so stay with us. Let's kick things off with our market signals. The dollar to Shekel Exchange rate is 3.62 compared to 3.60 last week. Probably an important note here. The dollar has fallen nearly 10% in President Trump's first 100 days because of tariff uncertainty. Of course, the euro to Shekel exchange rate is at 4.11 compared to 4.09 last week. So very slight change there as well. The Nasdaq week on week up 4.1% from its close on May 2 compared to the week before. We're seeing a mixed bag all around, including in the Nasdaq, Apple cut its share buyback program by $10 billion the same time Microsoft and Meta posted strong results. So we are seeing some very bright spots despite of the economic turmoil and uncertainty.
- [04:07]
Yonatan Adiri
By the way, I think yesterday I saw that the S and P recovered all of its collapse, if you will, since Liberation Day, which I think is indicative of where the market is and the suspense that we're all in in terms of where this all goes. So the recovery is amazing. Still down year to date, but recovering the entire collapse is I think an interesting sign as well for sure.
- [04:27]
Michal Avram
And we also saw much stronger than expected jobs report here in the US So some bright spots for sure. It's not all doom and gloom. Okay, now for our very own what's your number index, AKA the Windex. This is our index of the stock performance of 50 publicly traded companies on U.S. exchanges that are headquartered in Israel and or founded by Israeli founders. This is our week by week measure of where these companies are trending and their cumulative market cap. Yonatan, give us the Windex.
- [05:02]
Yonatan Adiri
So I think it's been a strong week for the Windex at 3.1 growth for the week starting April 28th ending May 2nd. It overperformed the S and P contrary to last week by 0.2%. Underperforming NASDAQ by a full 1%. I think the most interesting one for me was digital cosmetics high flyer Il maage ticker. Odd. Odd that grew 44%.
- [05:23]
Michal Avram
Love it.
- [05:24]
Yonatan Adiri
Exactly. Rising beyond its July 2023 IPO for the first time. I think in terms of market cap, I gave very strong projections for 2025. Just to get a sense of the numbers. This is really great. Company is now aiming at million in revenue and gross margins over 70%.
- [05:41]
Michal Avram
It's a lot of lipstick.
- [05:42]
Yonatan Adiri
A lot of lipstick. And I think, you know, jokes aside, the story of a founder and the family kind of capturing a private company that was underperforming. Taking it all the way through an IPO and Nasdaq and having the chutzpah to be able to direct to consumer cosmetics brand, you know, run and manage from Israel, I think is, you know, one of those things we didn't have in our bingo card a decade ago.
- [06:02]
Michal Avram
Yeah, we don't hear a lot about, you know, the non tech Israeli entrepreneur and innovation story. So this is a really interesting one. What else are you looking at, Yonatan? There's, you know, just like last week, there's a lot going on this week.
- [06:16]
Yonatan Adiri
So I think, you know, our mother podcast is dealing with the geopolitics here. That's Dan it, call me back. But clearly the impact of the first Houthi rocket to escape Israeli air defense is front and center. Airline constellations are back. Last week we discussed, you know, the, your number I think was Ryanair $30. Right. Coming back, EasyJet coming back to Israel. That's still on track. But we have seen a couple of cancellations from the big aviation groups. Those were temporary as opposed to the last cancellation wave which was kind of like up until further notice. We're not seeing that yet. But this is definitely a big deal that's going to have serious macro impact if it does indeed persist. Remember, Israel has only one major international airport and it is a export driven country. We're dependent on the harbors and the airport being open 247 for the sake of the economy. Other than that, I think the suspense is high. There's been even clashes or friction between Israel and Turkey above Syrian air controlled areas. So I think the fog of war is pretty much still here with us. And I think the next couple of weeks are going to be consequential.
- [07:18]
Michal Avram
Yeah, there's never like a slow week, right?
- [07:20]
Yonatan Adiri
Well, a couple of weeks ago we dealt with sharks biting, you know, so people saw that as a semblance of normalcy, but the good old days. Yeah, it's true. And I have to say, we also had a teachers union strike this morning. So, you know, if you have a young family dealing with the rockets, the two casualties in Gaza, the Syria, Turkey issue, and then this Houthi rocket, all within the span of 24 hours, that's the pace of news in Israel.
- [07:45]
Michal Avram
Well, like we said last week, resiliency seems to be the theme and will continue to be because it has to be. Moving on to the big shorts, this is our brief analysis of the biggest headlines of the week, the stories that are driving conversation and sometimes arguments in Israel. First big short is the fires outside Jerusalem. Yonatan, you mentioned this at the very top of the episode. Last week on the eve of Independence Day, we saw wildfires erupt on the outskirts of Jerusalem. Burned about 5,000 acres, as you said, but luckily no fatalities. That said, huge disruptions. This is something we know all too well about here in California, where we've seen a rise in fires. Of course, first and foremost, what we worry about are other consequences, more dire consequences to human life. But let's look at the economic impact, both California and what we're seeing in Israel. It's estimated that total property and capital losses for the recent LA fires out here are around $131 billion.
- [08:53]
Yonatan Adiri
That's a big number.
- [08:54]
Michal Avram
It's a huge number. And it's, you know, who knows how accurate and comprehensive it is. As we also know from California, there is a lot of finger pointing that happens when this kind of catastrophe takes place, and we're seeing that in Israel now. So I think first question for you, Yonatan, is just break down a little bit about what do policies and budgets have to do with what we're seeing now?
- [09:19]
Yonatan Adiri
So finger pointing is what we saw last week. I think, you know, in the absence, the lucky absence of fatalities, the debate went from, you know, how are people doing or what happened to property to who's to blame. And much like anything else in Israel these days, you know, it breaks into camps. There was one narrative which was like, oh, we failed. It's Ben GVIR who is responsible for internal security. Among other issues is firefighter core. And on the other side was, look, I mean, we as a country have learned our lessons and you can really see lessons learned compared to the 2010 Carmel Ridge fire. So the last big fire about 15 years ago in the Carmel Ridge with 44 fatalities, it was bigger in size and we had, in essence, a defunct system that was kind of relic from The British mandate, right? Pretty much regional. Every city had a few firefighter trucks, no unified national system and so on and so forth. So back then, a decade and a half ago, an investigative committee by the state controller basically provided guidelines into what has to happen. And the kind of dominant narrative in Israel last week was, look how well we fared. We learned the lessons. We bought 14 airplanes. There's a national kind of hierarchy, there are trainings, there are, you know, processes and standard operating procedures of how to bring down a fire. And what we saw last week was actually a success story, which in many ways you could argue, and it's a fair argument to make, the lessons were learned and the structure was there. On the other hand, there is very damning video from the Knesset financial committee of Minister Benqvir in his first couple of weeks, basically refusing the acquisition of a $50 million worth Blackhawks, which was after a two year work of basically saying this is exactly the nimble missing piece that we need in case of wildfires. Basic numbers at the tail end. Here we went from a non national entity to deal with wildfires into a very well structured one that also has ways of collaborating with the air for budgeted at about $500 million right now. And it seems, and let's see how we're going to fare over the summer because this is just the beginning. Look, this is early May, the jury's still out on that. But you can definitely see the improvement from the 2010 wildfires in the Carmel Mountains.
- [11:40]
Michal Avram
You know, there's naturally such a focus here on politics and policy and budgets. Makes total sense. But what's the role of innovation? Interestingly, there's an Israeli company of course, always is, that is seizing this opportunity. Fire Dome, the inspiration here was from Irondome, obviously works a little bit differently, but it's an Israeli based company founded by two Israeli founders and it connects to detection systems and basically involves a launcher that launches a capsule of fire retardant into the air, forming a protective perimeter. So there are some parallels, at least conceptually to the idea of the Iron Dome.
- [12:18]
Yonatan Adiri
I think with climate change, there's definitely no kind of climate tech. We've seen that theme also in Silicon Valley back in the day. I think what you're seeing is though that, you know, devil's in the details, you know, how much ground do you need to cover? What are the odds, how quickly they would do systems like that respond? These are very tough infrastructure questions. And I think, you know, the jury again, the jury's still out. So this is a bigger Topic how humanity at large is going to deal with climate change. I think what happened in Israel happened in LA are early signs. Overall though, I think at least what we learned last week in Israel is if you're prepared, if you learn lessons from one wildfire to the next and you keep a nimble approach that is, you know, air power that can be shifted, that are cars, that are not the huge trucks that we know from the cities, but rather more compact that can go all the way up on mountains and ridges. Adaptation is the, the key, seems like the key trait that you need in this space.
- [13:13]
Michal Avram
I think one thing is clear. These are happening more frequently. They're happening outside of the traditional fire season as we saw both with what happened in Israel now early in the season and of course with the LA fires. Okay, let's move on. The US economy contracts GDP figures released just days ago showed that the American economy shrank at an annual rate of 0.3% in first quarter of 2025. This is the first negative reading since 2022 and we should note it doesn't actually include numbers beyond March, it's first three months of the year. So this is Pre Liberation Day April 2nd. But obviously this factored greatly into what we're seeing. There was a lot of antic changing behaviors. We knew it was coming. There was a pre tariff buying spree. I think the question here, obviously the big one is is the US headed toward a recession? And as we know, when America sneezes, the world catches a cold. I have been very sniffly by the way, the last few days. So I don't know if it's an omen. I actually, I watched one clip of a professor, a pundit, you know, saying there's a 75% chance that the US is headed toward a recession. And I'm like, wow, you're very sure of these numbers. Okay, I have no idea where you pulled that from. But Yonatan, what are you reading into this?
- [14:31]
Yonatan Adiri
Look, this is a big deal for Israel as it is for the rest of the world. America being the leader of the free world in competition with China, which is sort of the big storyboard we're all going to be reading in the next, you know, the foreseeable future. America is a top market for Israeli companies, tech and otherwise non tech. And I think really if you think about Israel, it's a bit in a bind right now. You saw it when Prime Minister Netanyahu visited the White House last time where President Trump made a comment after Netanyahu said we're Going to do everything we can to kind of shrink the surplus. The President said we're already giving you more money. Right. He made like a comment of it's not just about closing. You're getting extra. This is a political issue as well. You're seeing that also in different corridors in Washington. This goes beyond just the economy. A weak dollar, a strong shekel, while, you know, being strong internally for the purchase power is actually very dangerous to Israeli tech and for Israeli exports, clearly. Right. So you can get to a double whammy effect where dollar gets weaker and you get tariffs from Israel and that becomes a big issue for the Israeli economy. The chairman of the bank in Israel gave his concerns about that. We are 60 day left for the 90 day window. So we need to see how Israel navigates. I will say one, one last thing here, which is more on the diplomatic side. While Saudi Arabia engages with China and with the us similarly in Turkey, similarly in Egypt, which last week had a military exercise with the Chinese military. Right. Israel is in a bind because it cannot do anything vis a vis China. Otherwise, you know, you're gonna significantly injure your relationship with Washington. So we have limitations on that. And then on the other side, the dynamic with the US is still unclear and we're waiting for the extra 60 days to go by that calls for Israel, at least from my perspective, to expand and broaden its strategic relationships with countries that are big enough and are within the US umbrella of legitimacy. That's predominantly for me, India and Germany. Germany, with a half a trillion dollar expenditure, some of it into the defense space, is going into bigger government budgets with a very strong industrial base, but with very little to show in silicon, in AI, in software and so on and so forth. Basically a mirror image of the Israeli economy. There's a very, I would say, good case to be made for a reimagined Israeli German alliance. We're going to see the Foreign Minister of Germany flying to Israel's first flight outside of Germany since being appointed. Celebrating 60 years of diplomatic relationship between Israel and Germany. The second one obviously being India, the biggest purchaser of Israeli defense tech. We're going to cover that in a couple of minutes. But also sees eye to eye with Israel on a series of economic issues, a series of regional issues. We discussed last week, the imec, the India Middle east corridor. There are some signs that when President Trump visits here is going to make another step forward there to counter the Chinese Belt and Road Initiative. And basically between India, Germany and the classic alliance and strategic partnership with the U.S. i think that's where Israel reinvents and gets a bit more shock resistant to when America has its flu, it's.
- [17:48]
Michal Avram
Gotta take its Tamil flu asap. You know, that's what I think. I will add that President Trump, for what it's worth, has said that the economy will be okay for the long term, that this is short term pain. I know that's been kind of his talking point and his administration's talking point for a while. But you know what, there's something to it. Perhaps again we'll only know in hindsight.
- [18:08]
Yonatan Adiri
Yeah, I think next couple of weeks are going to be very, very consequential. The results of the President's visit here in the Middle east, the dynamic with Iran and how the dynamic with China is going to go by the end of the quarter. And you know, again we spoke about that with Dan a couple of weeks back. Much like the Nixon move to decouple to break the gold standard, had a lot of pain in the first, I would say number of years even. But over the long run is what really enabled through persistence through Paul Volcker and the American victory, the West's victory on communism and the Soviet Union. So I think jury is definitely still out. But there needs to be more persistence and coherency coming out of the White House in this space. Until that happens from an Israeli perspective, there's no substitute for the American partnership. But it needs to expand. I think Germany with its new administration stepping in these days and India are where Israel expands and builds more robust bridges for the scale of its economy.
- [19:08]
Michal Avram
Okay, let's move on to our long play. This is the meatiest part of our show, our deep dive into one significant issue affecting the Israeli economy. We're going to focus on defense tech and what we're seeing new in the picture here. Clearly not a new topic entirely, but there are some wrinkles here that I think add something to the moment. Last week we saw the Hill and Valley Forum take place here in the US in Washington D.C. this is a gathering of Silicon Valley tech leaders from various companies and policymakers in the U.S. capitol. And the big focus was defense tech. Just a few years ago when this event was started, not that many Silicon Valley companies were that interested in participating. It was much, much smaller. But things have changed so drastically in the US when it comes to just more broadly speaking the tech industry and its relationship with dc We've got companies like Anduril Palantir, which has been around for a while, also lots of newcomers and lots of new investment. And we're Seeing that happening in Israel as well. So, Jonathan, I want to start by having you just do a little bit of a compare and contrast of sort of where the US stands with defense tech, with this sector, this booming sector, and what the situation is like in Israel.
- [20:28]
Yonatan Adiri
First of all, I totally agree. We're in paradigm shift when it comes to procurement, when it comes to, I would say, strategic posture of how you build a military force. Right. We've been there before in the late 70s, post Vietnam, what was referred to classically as the RMA, the revolution in military affairs, which gave birth to what we saw, the shock and awe, the very accurate intelligence gathering, satellite based, accurate rockets and air dominance that we saw emerge out of the Vietnam War and the procurement that came with it and the giants and the consolidation around, you know, the big players, the Lockheed Martins, the Boeings and so on. I think what Palantir advocated for quite a while, and I think you're totally right, they've been there, they've kind of paved that road. There are echoes of that in Alex Karp's new book about the tech Republic has now opened the door through also SpaceX in the space domain.
- [21:20]
Michal Avram
And by the way, it was not an easy path to get there. Yes, Palantir has been around for a while, but they actually sued the US military in order to get in on a procurement process that they were effectively locked out of. And they won and then were able to compete later on.
- [21:36]
Yonatan Adiri
And I think that speaks very highly of the US institutional, I would say tools to allow that a private company can sue, the administration can have its day in court. Like this matter of how does the American system adapt is incredible. I remember spending time at NASA in 2009, SpaceX was just launching and was being ridiculed when Elon Musk said we're going to be responsible for north of 50% of launches of humanity by I think it was like 2030. His prediction back then. Well, they're doing 70% right now. I think again, the kind of SpaceX dynamic is very indicative and illustrative of where this is going with the notion of the best way to avoid World War three is to deter. That's kind of the theme that I'm hearing coming out of Washington now in this context. There are two labs where the American Defense Administration has been keeping a very close look, right? Unlucky for us, we're one of them. The Hamas invasion of October 7th has actually provided Israel, not to its liking, unfortunately, with the opportunity to kind of bring forward a set of technologies that were Invested in for decades. That's air interception, you know, air defense. That is long term capacity to assault, as we've seen in Iran. That is tunnels, that is drones, and so on and so forth. I think that when you kind of look into the Ukrainian lab, which what you see there just this week, the ability of unmanned boats to create a, if you will, kind of like a dummy target for Russian airplanes and to destroy a Sukhoi airplane, Sukhoi 30, all autonomously is incredible. This is a lab. Like the stuff they're doing there is really remarkable. The stuff the Russians are doing, it's. This is sort of one lab. If I'm in the Pentagon, I'm like, I'm having a very strong coverage on that space. Kind of what do we need to do? How do we build our force? What's going to happen in Taiwan? What can we learn? That's one kind of space. The other is the Israeli kind of five, six, seven front war. It's the Houthis where you can see a lot of interceptions happening in outer space. Really in outer space. It is Hezbollah where we saw the famous beeper kind of clandestine type warfare going on and so on and so forth. So I think if I'm the Pentagon, I'm keeping a very close look and unfortunately really bad for us. We are, if you will, sort of like a time machine for where this is heading.
- [23:51]
Michal Avram
So talk a bit about the procurement process. Let's go back to that because again in the US there was this dual issue. One was a reluctance on the part of the innovation, the tech sector to work closely with the government, especially when it came to defense and national security. That I think has shifted. We are seeing that in process. The procurement process too though clearly was a huge obstacle. And by the way, VCs venture capitalists didn't want to touch this sector.
- [24:16]
Yonatan Adiri
Yeah, rightly so.
- [24:17]
Michal Avram
To begin with, it wasn't just the engineers. Right. Because of the issues. Well, Palantir, I think again, you know, Anduril as well is proving that this can be overcome and that actually these, you know, really hefty multi year contracts can be quite lucrative. What's the situation been in Israel? Very, very different history, obviously a long time. Intense collaboration between the private sector and the government by default. But on the procurement side and when it comes to competing with the incumbents, because we've got incumbents in Israel too, right?
- [24:47]
Yonatan Adiri
Yeah, yeah, yeah, it's a great point.
- [24:49]
Michal Avram
What does this look like?
- [24:50]
Yonatan Adiri
One important thing is when we are looking at militaries, counting vehicles, doesn't make sense, right, that people look at the People's Liberation army of China and they count airplanes and submarines and you know, aircraft carriers and so on and so forth. Fighting a war is a system effect, so you can have all of those, but if you haven't put them together and activated, then it's really hard to tell how effective your system is. I think Russia demonstrated some parts of its military technology to being incredibly system effect and efficient. In others, complete failures. Ukraine has proven their kind of system adaptation. And so when you look at the Israeli Defense Administration, it's not just how many bits and pieces out there, people don't know it, but the second largest F15 squadrons in the world outside of the US is not Israel, it's not Germany, it's not the UK it's actually Saudi Arabia. But when did Saudi Arabia fight a war employing all of those F15 squadrons in tandem with technology that allows them to choose targets and be efficient? I don't think ever in history. So having them in inventory is one thing. Having them in active combat again, unfortunately, as Israel had to do in a variety of scenarios, builds a different dynamic. Now how do you look at the Israeli kind of procurement dynamic and who's playing here? I think the way to look at it is through three categories, right? You have the flag carriers. One is fully owned, the other is partially fully owned but state owned companies that Israeli Aviation Industries, IAI and Rafael. IAI makes the Aero system. It has the highest rate of interception in the world, intercepting in outer space when it does. So I think that's an important piece of where IAI is very strong drone capability and UAVs, radars, 6.1 million in revenue dollars, 6.1 billion in revenue and now very strong local demand. So the government is not. Remember last week we spoke about the budget going into 30 plus billion dollars. Procurement budgets for the Israeli long term play are kind of meeting the local suppliers first and foremost. So that's 25 billion in backlog globally for IAI alone. Rafael famous for Iron Dome and David Sling plus what we call Trophy. Trophy has been an incredible success in Israel fighting in Gaza. These are the iron domes of tanks. So you don't have a ballistic kind of like 60 second flight. This is an RPG being, you know, being fired from one or two kilometers and it has to be identified and intercepted on the tool itself. Super effective. Some of the scenarios assuming active tank warfare, having seen what happened in Ukraine, were, you know, assuming 10x, some 20x casualties than we actually had in combat thanks to the trophy system. So.
- [27:30]
Michal Avram
And by the way, we should mention also that these are all evolving dynamic systems. I know there was a big update to Iron Dome just recently. So there's constant work being done to perfect these and evolve as the enemy evolves.
- [27:42]
Yonatan Adiri
Yeah, exactly. So, you know, warfare is in many ways learning competition. Right? Who learns faster and who kind of implements faster. So this learning competition is very, very clear and it's multifaceted, right? It's Iran, it's on the ground, it's Hezbollah, it's, you know, for nine months it seemed like Hezbollah had its upper hand, right? They systematically, through guided missiles every other day, took down Israeli intelligence on the border with very nice social media videos that terrified Israelis showing us, well, all your technology and all your bravado, you're shit. You're worthless. You're a spider web society. Right? So going back to Rafael, so it's the second biggest company here. 5 billion in revenue and almost $18 billion in backlog. Again, International India is a big procurer. The German commander of the Air Force was here over the weekend signing off a $4 billion deal to buy the Arrow system. Three big systems to defend Germany as it considers its evolving ballistic missile threat on the east. So I think these are the big players, right?
- [28:42]
Michal Avram
These are the flag carriers.
- [28:44]
Yonatan Adiri
Exactly.
- [28:45]
Michal Avram
Okay, what's the next category then?
- [28:47]
Yonatan Adiri
We had a number of, I would say national champions, Elbit, Elop and others. Elbit is now a big behemoth. They bought all the other ones, more or less. And they are a privately held company, publicly traded, and again, 6.8, 6.9 billion in revenue, 22 billion in backlog, and they're competing with IAI in the drone space in electronic warfare. I think it's important to understand that Elbit and Rafael are now, to your point, Michal, are building the next episode. And the next episode is Iron Beam, which is the laser system. So this is Elbit and Rafael. So these are the, I would say the big guys. Now what's interesting is the high flyers. In less than 48 months, 160 companies, according to startup nation Central Intelligence, have been built. These are startups. And I think the interesting bit about procurement is for a lot of the innovation in drone warfare and so on and so forth that happened throughout the war. It happened through procurement by nonprofits, by parent organizations that bought for the platoons of their kids in the first few weeks because the procurement system was so heavy and so busy that we had containers of consumer drones come into Israeli ports in the service of military units. So the procurement process was completely broken on one end, but on the other end allowed for maximum adaptation, I think Three interesting companies. You mentioned Kela at the opening Regulus, it's an electronic warfare anti drone system, has been flying high extend tactical drones. If you go on their website, you'll see and you'll kind of be able to see them also on the ground. And smart shooter, which for me is very interesting, kind of going all the way down to the actual assault rifle held by the soldier. You know, not a big system, no drones, no missiles. It actually, when you fight in the trenches, in the tunnels, whoever has the most lethal rifle wins. And I think, you know, they managed to create something that is unparalleled worldwide. So these are the startups coming up and, and we'll see, we'll see where the next couple of years go. Definitely a lot more money locally and globally with Germany, with uk, France and others. Increase the defense budget. Going back full circle to Donald Trump and the American approach to Europe telling them, you gotta invest, you gotta be good partners. We can't continue being the ones covering all this cost.
- [31:02]
Michal Avram
Well, by the way, Kela, going back to Kela and this coming full circle, that was started by ex Palantir founders.
- [31:10]
Yonatan Adiri
Correct.
- [31:10]
Michal Avram
And we are seeing there's like the PayPal mafia, like perhaps a Palantir mafia, including some people in Israel who are innovating.
- [31:18]
Yonatan Adiri
Yeah. And I think the last bit here is the Israeli darpa, right, Mafat, it's led by Danny Gold, really a legend, one of those people that in, in hindsight we're going to talk about them like we spoke about the Kalashnikovs of the world or the Mikoyans of the world, or you know, the American giants in development. He's really the brain behind Iron Dome, the person who invented it back in 2006, 7, 8, who fought really hard for its adoption, really against the world of naysayers, and has been leading the Israeli DARPA for I think now almost over a decade. And last but not least, what's called Mantak, which is the builder of the best tank in the world, the Merkava number four, that is fully owned, state owned by the army. So that if you will, gives you the full 360 of how the defense tech ecosystem looks like. And I think it has quite a number of interesting dynamics ahead of it. Challenges, but also great opportunities. Would I rather having all these technologies not being in full display and not having the opportunity to engage? For sure. But now that it's been a year And a half of war. And again, seven fronts with all these technologies and all these capacities at full display. I think, you know, where the world is going is not up to our choice. And we have to, you know, make the best out of it for sure.
- [32:36]
Michal Avram
And I think going back to what we discussed on the last episode, the cost of the war has been enormous, 70 billion. But obviously, obviously has also led to an increase of innovation that we're seeing coming out of Israel. And I think it's important to go back to a point that Palmer Luckey and others in the defense tech space make consistently, and that is that this is meant to be a deterrent, that the investment and the innovation. Obviously, right now what we're seeing in Israel is that it's out of a necessity. Right. But that ultimately, long run, these technologies are really meant to promote more peace in the world and meant to be a deterrent.
- [33:14]
Yonatan Adiri
There was an adage in international relations. What are the four things that make America invincible? They are ocean, ocean, Mexico and Canada. Right. Basically, the American position is such that it's very hard to see America innovating out of necessity. It's always kind of looking into the future, into preserving and progressing its global dominance and being, if you will, the leader of the free world. And there's a big argument right now in Washington between sort of more isolationist view. You just saw that with a bit of a reshuffle around President Trump and his national security advisor. I think that's also kind of philosophically where this is heading.
- [33:51]
Michal Avram
Well, one thing Israel does not have is ocean, ocean, Mexico, Canada. So we'll just leave it there.
- [34:00]
Yonatan Adiri
That's true. That's true.
- [34:07]
Michal Avram
Well, we began our show with the numbers of the week and we are going to end with the words of the week week. And here it is. I really support free speech. So the part where you get up and say what you think, I'm 100% on your side. This is Palantir Alex Carp, the CEO and co founder of the company, which we've talked about quite a bit on today's episode. And he was responding to basically a heckler, a pro Palestinian activist who was yelling at him, I will say, at the Hillen Valley Forum and accusing him and his company of using AI to kill Palestinians. Now, the reason I bring it up, and I realize that we've brought up some very heavy topics on this show, but you know, it is about Israel, is that I think it was very unique for a CEO of Alex Karp's stature to engage and he really engaged with this person. Most CEOs would not. They would wait for security to remove the person. They wouldn't say a word. They would try to shut it down right away. And I was really struck by the fact that he engaged. So, Jonathan, what did you think?
- [35:11]
Yonatan Adiri
Well, I mean, I saw the full bit. Not only did he engage, he actually said what he thought and he wanted the crowd to hear. And one of his points was if you can defend your position, you shouldn't be shy. Right? If you're shy and you're not interacting, then you're kind of exposing the weakness of your argument. And I'm fully in line with that.
- [35:31]
Michal Avram
All right, that is it for today's show. Thank you for tuning in to ARC Media's what's your number? We hope you found it interesting and valuable use of your time. If you did, please be sure to like, subscribe, rate, review. You know the drill. But most importantly, please share this episode with others who you think will find it interesting. If you want to make suggestions or share your feedback, please reach out to us at what's your Number? At R media.org.
- [36:08]
Yonatan Adiri
What'S yous Number is produced by Ilan Benatar and edited by Michalev Ram, sound and video editing by Martin Juergo. Our theme music is by Midnight Generation. I'm Yonatanadiri.
- [36:18]
Michal Avram
And I'm Michal Avram. See you back here next week.
- [36:21]
Yonatan Adiri
See you next week.
- [36:27]
Michal Avram
This podcast offers general business and economic information and is not a comprehensive summary for investment decisions. It does not recommend or solicit any investment strategy or security.