Podcast Summary: "Is Israel's Business Model Sustainable?"

Podcast: What's Your Number? (Ark Media)
Episode Date: October 1, 2025
Hosts: Yonatan Adiri & Michal Lev-Ram
Guest: Professor Eugene Kandel (Chairman, Tel Aviv Stock Exchange; Former Head, National Economic Council)

Overview

This episode of “What’s Your Number?” explores the sustainability of Israel’s current “business model” — economically, socially, and politically — through a candid and comprehensive conversation with Professor Eugene Kandel. The discussion traverses Israel’s striking economic successes, looming internal threats (especially demographic and governance challenges), and Kandel’s bold proposal for a systemic national overhaul inspired by successful multinational models such as Switzerland and Belgium.

Key Discussion Points & Insights

1. Numbers of the Week & Opening Context

Timestamps: 00:10–02:38

• Yonatan: 179,000 babies born last year in Israel, nearly 2 million in the past decade.
  “That number just makes me very optimistic.” (00:24)
• Michal: $1.4 billion in VC invested in Israeli cyber startups so far this year — already surpassing the previous two years’ totals.
• Global and regional turbulence: Ongoing war, high-stakes meetings in Washington D.C., and the UN General Assembly spotlight the uncertainty.

2. Market & Economic Snapshot (The Windex Update)

Timestamps: 04:13–07:58

• The Windex (index of publicly traded Israeli companies) outperformed US indices for six consecutive weeks.
• Notable movers:
  • Stratasys (Pelosi “green” stock): Up 10.35%, tied to reports of Nancy Pelosi taking a position.
  • Lemonade: Down nearly 15%.
  • Mobileye: Down 7.1% amid downgrades and questions about its autonomy from Intel and exposure to government portfolio shakeups.
  • Commentary on Microsoft pulling cloud/AI services from Israel’s Ministry of Defense in response to surveillance allegations (08:00–12:07).
    • Yonatan: “Nations will need sovereign clouds, they will need sovereign compute... we’re going to develop our own and, in seven years, we’re going to sell it back at a massive exit of $25 billion to Microsoft.” (11:53)

Deep Dive: Professor Eugene Kandel Interview

Timestamps: 12:07–43:46

Personal Background & Perspective

Timestamps: 12:27–14:00

• Kandel: From Soviet refusenik to Israeli academia, army, government policy (economic and innovation), and leadership roles.
• “When two KGB thugs beat you up when you were 17, it does leave a mark on you.” (12:56)

Identifying Israel’s Existential Internal Threat

Timestamps: 14:00–19:33

• Experience with Haredi integration: Worked for 12 years on the issue; COVID-19 revealed staunch resistance to change in ultra-Orthodox (Haredi) society.
  • “This society was willing to have its members die rather than change the status quo.” (14:31)
• Demographic Reality:
  • The Haredi population has grown from 7.5% to over 13% in ~15 years, with much higher birth rates.
  • Example: “His grandmother has 750 direct descendants... her older sister has 1,500. My father... has 10.” (21:12)
• Three incompatible “value groups” identified in Israeli society:
  1. Liberal, Jewish-democratic vision.
  2. Torah-centric theocracy, opposed to liberal democracy when it conflicts.
  3. A secular group rejecting the centrality of Judaism altogether.
• “We believe these three groups cannot agree on anything... that is of crucial importance to each one of them.” (18:41)

Diagnosing the 'Business Model' Breakdown

Timestamps: 19:33–23:55

• The core issue: Unitary parliamentary system creates winner-takes-all governance, forcing value conflicts.
• The growing ultra-Orthodox population relies on a shrinking sector for economic support — a model untenable at scale.
  • “When you create that degree of growth and that degree of growth entirely depends on somebody else, that does not work. That cannot work.” (22:14)

The Case for Radical Systemic Reform

Timestamps: 23:55–33:12

• Kandel: Simultaneously bullish and bearish — Israel’s potential is huge, but the window to avert catastrophe is closing fast.
• Reform must focus on changing governance, not just economic or social tweaks.
  • “You have to stop being friar. Friar in Hebrew means sucker. Stop listening to people giving you slogans...demand a very, very rapid change of the system of governance.” (24:56)
• Four Pillars for New Governance:
  1. Protection of group values: No one law for all; large groups have legal protection for their values, cannot coerce others.
  2. Financial responsibility: You pay for your community’s decisions (smart subsidies, not blanket).
  3. Competent, risk-managing government: End structural incompetence.
  4. Strong constitutional rules: No more basic rules changed by fleeting coalitions.

Modeling Solutions: Switzerland & Belgium

Timestamps: 29:31–33:15

• Switzerland’s model: Extreme federalism, local autonomy, power is only delegated upwards when necessary.
  • “Everything that I want to do at the most local level, like a village... I’m going to do at the village level.” (31:04)
  • Seven ministers; prime minister rotates every year, reflecting distributed power.
• Belgium as a cautionary tale: Gradual, crisis-driven shifts; better to design change once, not in piecemeal fashion.
• Switzerland = Israel’s size, but double the GDP.

The Theory of Change & Overcoming Resistance

Timestamps: 33:26–38:03

• Resistance to change is deep because many benefit from the status quo; but October 7–8 (referring to the 2023 Hamas attacks and aftermath) shattered trust in the state.

  • “People realized that nothing works and it’s up to them to save the day.” (34:48)

• Three-part strategy:

  1. Awaken awareness: Make people see the crisis is near-term.
  2. Empower agency: Citizens can make change — as shown in national crises.
  3. Community leadership: Dialogue across groups; much of the Haredi community wants value protection too.

• “If we can create a 2-, 300,000-people group that says ‘I want a country for my children’, you may have a chance to do that.” (37:32)

Where Are the ‘Cracks’ Today?

Timestamps: 38:03–40:50

• Kandel argues against waiting for clear disaster signals:
  • “Economy is like a huge ship. It’s going in one direction, it starts slowing down slowly until, unless, it hits the iceberg; and the iceberg is not a good thing to hit.” (38:52)
• The “cracks” may be hidden, so change must come before a destructive crisis.

What Gives Hope?

Timestamps: 41:15–43:46

• Growing realization and organizational coalition forming around need for change.
• Fatigue with endless internal ‘autoimmune’ fights — need for structural not just surface agreement.
• Commitment over optimism or pessimism:
  • “God Almighty has given us a third chance to have a country... Let’s not repeat the same mistakes that we made twice in our history for the same exact reasons because we fought each other instead of sticking together.” (41:55)
  • “What we can do is compromise on process that will allow us to keep our values and yet live together without fighting.” (43:32)

Notable Quotes

• Eugene Kandel (on Israel’s threat):

  • “This threat is imminent. We maybe have 10, 15 years to address it. And if we don’t address it, we might not survive as a country.” (16:58)
  • “Just hoping to sit down next to the campfire and sing Kumbaya is not going to cut it.” (41:18)
  • “Who cares if the white cells or the red cells won when the body is dead? We are in an autoimmune moment.” (41:25)

• Yonatan Adiri (on structural reform):

  • “I advocate very much for a radical shift in Israeli structural reform…at more of a distributed type of government, like the Swiss model.” (33:26)

• Kandel (on hope/not repeating history):

  • “Let’s not repeat the same mistakes that we made twice in our history for the same exact reasons because we fought each other instead of sticking together. And that cost us 2,000 years of exile.” (42:39)

Closing

Segment: Words of the Week (43:55–45:37)

• Closing on a note of regional optimism with a quote from Indonesia’s President at the UNGA, calling for a secure, two-state peace and living together in harmony.

Structure

• Numbers and market news provide the present context
• Interview with Kandel explores:
  1. Personal background
  2. Identification of core demographic and value-driven existential threats
  3. The unsustainability of the status quo (“business model”)
  4. Structural reform proposal — details and inspirations
  5. Challenges and strategies around public and political buy-in
  6. Why change now, not after a crisis
  7. End with reasons for hopeful commitment

For New Listeners

This episode offers clarity for those unfamiliar with Israeli demographics, government structures, or internal divides. Kandel delivers a frank assessment and a radical, yet actionable, roadmap for national renewal — grounded in comparative international models and Israel’s own history of transformation. For anyone interested in the long-term sustainability, identity, and resilience of Israel (economically, socially, and politically), this is an essential listen.