Is Israel's Business Model Sustainable? - with Eugene Kendel

Summary

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.

Transcript

[A]

Foreign. You are listening to an art media podcast. So, Yonatan, what's your number this week?

[B]

179,000. Not 180. 179,000 babies were born in Tafshin Pay. Hey, that is the Jewish year that ended a couple of weeks ago. Steady number around 180,000 babies born over the last decade. You can just imagine that means almost 2 million people born in Israel, 20% of the population in the year of constant war. That number just makes me very optimistic.

[A]

My number is 1.4 billion. This is the amount of VC dollars invested in Israeli cyber startups to date this year and that is an impressive number compared to last year. Full year numbers, by the way, which were 780 million. The year before was $1 billion. So this has completely blown away full year numbers for the previous two years. And we've got three more months to go this year. I think cy top of mind for me. But for now, whose number wins?

[B]

Your number wins. It's more consequential for the time the babies will just keep on growing. Yeah.

[A]

Come on, babies.

[B]

We actually have a very interesting guest on the show today that will talk demographics but you know, for the here and now, your number wins.

[A]

I'm not going to push back on a win. I got is 11am here in Palo Alto.

[B]

It is 9pm here. I think the most important hour today is the time in Washington D.C. where President Trump and Prime Minister Netanyahu are meeting at the Oval Office with what may be framework for the conclusion of the war. So I think that's the more consequential time zone as we record the episode today.

[A]

Yeah, for sure. And we are recording on a Monday so by the time this airs we will know a little bit more about the outcome of that meeting. But Yonatan, I know you were at another very consequential meeting meeting the UN General assembly in New York just last week. Any quick takeaways from your time on the ground?

[B]

I think for me, the three most important sessions that taught me a lot and kind of gave me a sense of how we're living in the turbulent times. Governing models, be it in economics or in politics altogether are being rewritten. One was Javier Milei at the week where he got the $20 billion credit. Very interesting to see his profound economic thesis for Argentina, which may fail or not. But this is a person who has a plan, thought it out and is executing on what he thinks is a better future for Argentina.

[A]

Our long play for today I'm very excited about. We are hosting Professor Eugene Kandel, chairman of the Tel Aviv Stock Exchange and former head of the National Economic Council. Eugene has a lot of accolades. He's also the former CEO of startup Nation Central, which listeners will probably be familiar with. And he more recently embarked on a new project called the Israel Strategic Future Institute, which he started with his partner Ron. The project is really bold. They have come out with a blueprint basically for Israel's future which consists of a completely reimagined structure for both Israeli society and government. And the goal here is none other to ensure Israel isn't heading toward economic collapse. Which I know is kind of tough words. So anyways, we will dive deep into that conversation shortly.

[B]

I think this kind of, you know, schizophrenia of being able to look at the current numbers and seeing them positively, but also looking, you know, 10, 15 years out and seeing, well, the clouds that are sort of graying and getting darker over the future of the Israeli economy. If we don't do things right now. When we are prosperous and when we are rich is the theme that I also share and I think is important. A couple of hours ago here in Israel, the chairman of the central bank decided to keep the interest rate at four and a half percent. And reading into that, you actually see the same dynamic. I mean he has very little confidence in the government's ability to do the structural reforms right now. He has very strong confidence in the economy. And so I think this kind of dual track that's going to be with us for this episode.

[A]

Lots to get to there. But first we're going to take a look at some of the week's pressing news, AKA our big shorts, including of course the latest update on the Windex, the what's your number index that tracks the performance of publicly traded Israeli based or founded companies onto our big shorts. Let's kick things off with this week's Windex. Yonatan, how are the numbers looking?

[B]

So it's the sixth consecutive week of positive Windex growth compared to the S and P and the Nasdaq. I'm a very happy investor in the Windex, you know, sort of agglomeration of Israeli tech and non tech stocks, to be more exact, the period over the last two weeks because we haven't recorded for a couple of weeks, that's September 15th through the 27th. The Windex rose by 1.95%, beating the S&P 500 by 1.34% and the Nasdaq by 0.87. To me, the interesting bid as a single company is via which is not yet in the Windex is sort of holding ground after the IPO again. Spoke about that a couple weeks ago. Nice to see that a few weeks, you know, pass by. Via is holding strong to very successful ipo. We're not seeing it shoot up or go down. We're not seeing very active sellers or shorts or whatnot. And so I think that to me is a great sign. Sign notable mover on the green this period is what I refer to. It made you laugh a couple of months ago, the Pelosi stock of our Windex, which is Stratasys.

[A]

You have to explain what you mean here by the Pelosi stock.

[B]

I read that there was a whole thing where the spokesperson for the President a couple of days ago actually referred to the fact that she now is worth over $400 million in her portfolio. I mean, that's crazy.

[A]

So Nancy Pelosi, she's got to start her own etf. I think people will be signing up for it.

[B]

It is, it is. Folks, follow her. There's a whole thing about Pelosi following investment strategy. Anyway, so she took a significant position in Israeli company called Stratasys, which is represented in the Windex. It is a 3D printing powerhouse. And ever since Pelosi took stake, this stock is moving. It moved 10.35% in the last two weeks alone, positively. So there you go. That's sort of the Windex green than the Pelosi stock in the red. Actually, two notable movers are lemonade.com, shedding almost 15% in a couple of weeks. This is what Wall street is looking at as a correction over the last 12 trading months. And I think to me, the important one to look at is Mobileye losing about 7%, 7.1% over renewed downgrades both from Goldman Sachs and JP Morgan. So it's another one to watch. And to see the Wall street consensus go against an Israeli Windex company isn' always nice.

[A]

Yeah. You know, you would have thought that all of the growth and attention and optimism for autonomous vehicle, autonomous ride sharing services that we're seeing would help kind of boost things here. But of course, it all depends on, you know, is mobileye in these deals. And if it's not, then it doesn't stand to benefit.

[B]

I think, you know, when I read some of the analyses from J.P. morgan and the short version of today's Goldman Sachs downgrade, what's weighing heavily on Mobilized is Intel. Remember, mobilize an intel owned company while it is majority owned, I should say it is publicly traded. All this shifting hands, the government, the White House taking 10% stake and then suddenly Nvidia taking a stake and, you know, all these things weighing heavily on mobileye, its independence. Does it get to have its own future? I think that's the big question. I think from a tech perspective, it's super solid and I, I totally agree with you. It's very well aligned with some of the themes we're seeing in the global economy.

[A]

Well, let's move along and kind of sticking with the, the big tech theme here. Some news from Microsoft. Microsoft has announced that it is going to stop providing some of its cloud and AI services to Israel's Ministry of Defense after deciding that certain uses of its technology violated its policies. And there are a few important facts or, you know, chronology here that I just want to get out there. So in early August, the Guardian published a piece that claimed Microsoft's Azure cloud platform was being used by Israel's Cyber Unit 8200, which we all know and talk about often to store recordings of cell phone calls by Palestinians. And then later in August, there was a group of protesters that occupied basically broke into unoccupied Microsoft President Brad Smith's office, demanding that the company end its contracts with the Israeli government and military, like completely. This was sort of after a series of protests, but was the culmination here. Microsoft fired a few of the employees for this act, but Brad Smith at the time also said that the company was investigating the allegations. And then again, we have this statement that they just came out with outlining their decision to cease and disable certain service subscriptions. They also said simultaneously that the investigation was still ongoing. So I'm not sure exactly what that means and what's to come, but I have a lot of thoughts and questions here. We'll try to keep it brief. You know, one thing that came to mind for me was maybe Netanyahu was right about his Sparta comments. What do you think?

[B]

Look, in the context of the weapon industry in which it was stated, I think it was totally right. A lot to say here, honestly. First, I think Microsoft made a distinction between 8200 in this specific project and the broader Azure contracts. I don't buy that. And I think if the planners in the IDF will respond with the same acuity and agency that they have to this one, they should totally disavow Microsoft altogether because they can surprise and based on some opaque investigation, do that for other projects. Let's also clarify for our listeners, the claim was that this specific project was listening. I mean, duh, you know, the NSA intelligence organizations are trying to eavesdrop on conversations. This though was considered a blanket sort of eavesdropping technology that supposedly violates Azure because it doesn't have a subpoena, it doesn't say, okay, I'm going to listen to person X or Y. It actually listens to all the conversations and then creates a big data that sits on the cloud with massive compute and then you can kind of track back and if you caught a bomber, you can go back to the calls and see where his smartphone was and track everything back. This is critical modern day intelligence. So welcome Microsoft. I will say it's also hypocrisy. I don't know if Microsoft has contracts for gchq, which is the big NSA and UK facility on UK soil, which listens to our conversation and listens to practically every email sent out and so on with the same aim in mind. So there's nothing unique here. This is a classic practice where you want to be able to rewind first, you want to be able to thwart and if you don't manage, you want to be able to rewind very quickly and catch and capture the infrastructure. I think the IDF was very well prepared. This was not just a statement, this was an abrupt kind of switch off dynamic over the couple of weeks from those early signs and they made a quick decision to double the backup. And so I think that's very, very important. Two more quick points and that's actually in the news. Israel finally funded 120 million shekels worth of an aizar. Remember, we spoke about that with some of our experts and it's good to see that this is happening. Israel, like many other countries, would need its own sovereign cloud. Nations will need sovereign clouds, they will need sovereign compute. And you know, this is going to accelerate that and I think that's great. You know, I don't want to sound facetious, but what's going to happen most likely is that 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.

[A]

Moving on to our long play today we're interviewing Professor Eugene Kandel about some of the systemic problems Israel's economy and broader society government faces and what he says could be a bold new vision for its future. Eugene, welcome to what's yous Number.

[C]

Thank you, Michal. Thank you, Anatan. Good to be here.

[A]

Good to have you. There's a lot to dig into, but I wanted just for starters to ask you a More personal question for those who don't have a deep knowledge of your background. You have such a fascinating life story. Obviously you're academic and you're professional and government work. Give us just like one or two examples of your background that have really shaped your thinking today, if you will.

[C]

Well, first of all, growing up in the Soviet Union and from the age of 14 to 18, being in a refusenik family did leave a mark. I had to grow up very quickly when two KGB thugs beat you up when you were 17. It does leave a mark on you then. Hebrew University, the Army, University of Chicago, all of these made very, very important and deep marks on me. Positive, I hope. And then I had four careers. I'm on my fourth. I was an academic for 35 years. I had six years in the government without any intention to do so, but then enjoyed it very much. Six years in the middle of high tech industry trying to promote it with startup nation central. And then now I'm the chairman of Tel Aviv Stock Exchange. On the one hand. On the other hand, I'm chairing two nonprofits. One of them is focused on creating resilient and sustainable economy in Israel, and the other one is focusing on how to creating sustainable Israel as a country.

[A]

I want to hear from you what was really the first red flag, so to speak, that alarmed you to what you say could be an existential threat to Israel's economy and to the very survival of the country?

[C]

Well, I've spent 12 years working with Haredi society, both in the government and outside, trying to pivot into integration in the Israeli economy. I never thought that you could have an integration of Haredi into Israeli society because there's too many differences. But there were no reason not to expect an integration Israeli economy. And then I realized during CORONA that this society was willing to have its members die rather than change the status quo. And it's not a criticism, it's just a very, very strong conviction that they have to follow the path that they chose. And once I understood that, it also came in understanding that all these little incentives that we're trying to institute to move this society, which is rapidly growing, when I joined the government, it was 7 1/2% of the population. Today it's over 13. So all of these little things are not comparable to the desire to keep the status quo. Now, the status quo in Israel of the Haredi society is not the status quo of the Haredi society in any other place, because consecutive Israeli governments basically created a very, very distorted set of incentives that became like a social norm over the last seven decades. And it dawned on me that we are facing a big problem. And I started thinking about it, started speaking about it, and then came 2023, and we started seeing a huge explosion in the social division. And I joined Ron Tzur, who is my partner in crime, who has also very deep experience in the government, actually much deeper than mine on the organizational side. And we started thinking, why did it happen? Why do we see such an outburst of animosity to be between the two sides when similar moves of restricting the power of The Judicial in 2007 didn't create any uproar? And we realized that the divisions on the social side, on the economic side, were the same roots. So what we are doing is we are trying to frame the issue that Israel is facing most and foremost internal existential 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. We studied experience of other countries and we came to a conclusion that there are three basic components to this existential threat. One component is that Israeli society is very much divided in terms of values and ways of life that they want to lead. And these values and ways of life are completely incompatible. So we basically have the group that says, we want Israel to be the national home of the Jewish people, that every person is free to choose how to express their Jewishness or Judaism. And Israel has to be a liberal democracy that is part of the wider group of similarly inclined countries. This is one legitimate view. Another, no less legitimate view says that Israel is a Jewish country. Jewish means one thing, there's one way to be Jewish. And no liberal democracy can coexist with the Torah law. Because anytime the principles of liberal democracy contradict the Torah law, Torah law has to win every time. For these people within their set of values, there's just no negotiations over there. And they do not see liberal democracies, anything sacred or even advantageous. And they do not really want to see Israel as part of other nations. They want to see Israel as separated, sort of a beacon in the dark. And then there is a third group that says all this Jewish stuff. We don't accept it. Now, I'm not saying that all the Haredi are in one group, all the Arabs are in the other group, and everybody else is in the third group. That's not the case. So you may have Haredi who prefers liberal democracy. You may have traditional person who says, I'm much more comfortable with a Torah nationalistic view of the country, and you can have Arabs in one place and Arabs in another place. So we don't accept the partition that former president Ruby rivlin made in 2015, that there are four camps, and if you have a particular color, kippah, you belong to this camp, and you have particular last name, you belong to that camp, et cetera. That is not the case. But the problem is that unlike what he said, okay, let's all sit around the campfire and figure out how we can coexist, and each one will give up a little bit on their values. We believe that these three groups cannot agree on anything, practically anything that is of crucial importance to each one of them.

[A]

What you're describing amongst these three groups, these three distinct groups are religious, societal, political, all sorts of differences. At the crux of this all, there is an economic problem. So can you explain what that is? I mean, what is Israel's current business model, quote, unquote? And what is it that's so problematic about what's currently going on and unsustainable ultimately?

[C]

So let me do a little detour. Because the problem is not that people have different values. The problem is the combination of that and the system of governance that we sort of chose by accident in late 1940s, early 1950s, which is unitary parliamentary. That unitary parliamentary system gives all the power to the single authority. And that authority passes laws that apply to everybody. The same law applies to somebody who lives in Bnei Brak, who's ultra religious, you ultra religious Muslim, a settler in the most sort of extreme settlement, and the person who lives in Schenkin who is gay and is covered with tattoos. The minute that is forced on them, they have to fight. It imposes the need to fight. Because if there's one law for all of us, that law must represent my values. But if it represents my values, it attacks your values. And so that means that we are constantly going to fight in the demography that is moving in one direction, because the ultra orthodox haredi population grows 3% higher per year than anybody else. We know where it's going. And so if we want to maintain the country, we have to figure out how do we live together, not how do we compromise on our values, but how we maintain our values and compromise on the way to interact with each other. Now, the economic part is exactly the outcome of this, because when we set one law, we fighting for entire domination. If we dominate on the social side, we also dominate on the economic, economic side. And so if the current status of Israeli society continues, basically says there is A large and growing population says we're going to choose how we live and somebody else is going to pay for it. That does not work anywhere. And that does not. That could work when that population was 3% of the population. That cannot work when it's 30 because the smaller and shrinking population is paying more and more for the growing population. Just give you one example that blew my mind. I met a gentleman who is in high tech. He's a Hasid, and he told me that his grandmother has 750 direct descendants. My father, who is about the same age, has 10. Okay, now he said that's nothing because her older sister has 1500. She has, her grandchildren have great grandchildren. Okay, 1500 versus 10. Albert Einstein once said that the strongest force in the universe is compounded interest. Imagine what do you do in three generations when you create that degree of growth and that degree of growth entirely depends on somebody else. That doesn't work. That cannot work.

[B]

Eugene, I think your comments and analysis are extremely pertinent because you are known in Israel for being very intellectually honest. And you call this at a time where a lot of other people, you know, are happy about Israel reaching almost $600 billion GDP, whereas when Israel faced a similar dynamic of economic incompatibility in the late 80s, mid-80s, it was on the brink of disaster. So it adapted. How do you kind of get to the radical solutions at a time that most Israelis are, you know, and say, yeah, you know, we've been hearing this thing about the ultra orthodox demographic growth for 20 years and look, you know, wiz exit and this and that and the other. So can you comment on sort of how you and Ron ended up with, I would say, radical depth, much like we had in 85, 87. And how do you drive that forward without a visible crisis happening?

[A]

Maybe this is a good timing also to just briefly explain what is the solution and then tell us, you know, as Yonatan said, how you got there and how we get there potentially.

[C]

First of all, I want to make sure that some people call me like doomsday Sayer. You know, I don't think anybod calls their insurance agent a doomsday sergeant because pointing out that there are risks out there. And so my view on the economy is bullish and bearish at the same time, because like in any institution you have to have a team, including the CEO that drives the business and very bullish. And then there's one guy or several people who are risk managers and they have to be bearish so that the whole thing doesn't blow up. So I'm actually on both sides of the equ because we have basically unlimited potential. But there is this danger of blowing up. And we have to, first of all, in order to change, we have to realize this danger. So the first step in order to understand that you need to insurance is to understand that there is a risk. And the problem is that a lot of people and our entire government is completely lacking strategic focus. It does not deal well with risk management and only in the military some issues are managed well. But as we saw on the October 7, this risk was not managed at all. So given that the government doesn't deal with the risk, doesn't even talk about these risks, somebody has to do it. And we believe that there are several people that talking about the risks. But I believe that our contribution is pointing out to the core problem. The core problem is the system of governance. Changing the system of governance requires us sitting down and figuring out a better system. It's very easy. You don't need approval from un, you don't need to fight wars, you don't need anything. You just need to understand that there is a risk. The problem is our politicians are not strategic because the voters, as usual, do not favor strategic politicians. They favor politicians give them slogans. So we have to explain to voters what they need to demand from politicians. So what we're saying is that we have to run a campaign for the next year, until the next elections that says, look, you have to stop being friar. Friar in Hebrew means sucker. Because listen to these people who are giving you slogans which they think you want to hear. So just wake up, you have agency. Understand that there is a challenge. Understand that there's existential threat that may cost your children the country. Your children may have to immigrate. So if you don't want that demand from your politician as a condition for voting for them, I'm not telling you whom to vote for. Whoever you want to vote for, demand that they commit to a very, very rapid change of the system of governance, the entire system, unitary parliamentary system does not work. It's destructive for us. And so if you can demand that the politicians will respond. That's our goal. We just want to say to voters, talk to your politician and tell them that right after the elections, the first item on any coalition agreement list must be changing the system so that the system satisfies four conditions that will allow us to to live in peace and not being afraid of each other. And these four conditions are a Everybody's values are Protected. Every large group has its value protected by law. So there's no one law for everybody. There's one group can decide this way and another group can decide the other way. And each one will not be able to coerce the other group to adopt its values. Two, if you choose a way of life, you have to be able to pay for your decisions. That doesn't mean that there's no subsidies, but today we have stupid subsidies. We basically say, you make a decision, I pay for it. We have to have smart subsidies, I give you certain subsidy, but you pay for any decision that you make. I don't let you collapse, but you are responsible for the decision. It will change completely the entire set of incentives. Three, we cannot live with a government which is structurally incompetent, structurally non strategic, structurally doesn't manage risks, and structurally cannot execute and structurally sectorial representation. And fourth, we cannot have a situation where every basic law, every basic rule of the game can be changed by a small majority of a coalition. And it just doesn't make any sense. These four conditions, all of them are essential for good system of governance that will allow us to withstand all of the external threats and build a secure and flourishing country.

[A]

So first of all, I should say I think this sounds really bold and out there, shall I say? But I think it's important to remember that Israel has gone through massive transformation, structural transformations in the past. Right. Can you just give us a little bit more of a sense though, of what this looks like? You know, you outlined these pillars. What system is this modeled after? What examples are there out there for something that works that's akin?

[C]

Well, first of all, we're not insisting on any specific system. What we are insisting is the coalition agreement has to include the process that within 18 months from the establishment of an expert group that will bring three solutions, three possible solutions that satisfy these four conditions. And this solution will be put to a referendum and this referendum will become a law. And that law will come into effect for the elections following the 2026 elections. That is the goal. What we also did is to say, look, Israelis are impatient. You cannot sell an Israeli a proposition. Let's sit down and think. So we said, okay, let us give you an example of how it works. We're not insisting on this example. Let us take a country that we might want to emulate. Certain features of this country exist in almost every developed country in the world. United States, Canada, uk, Italy, Spain, Germany, Switzerland, Australia, India. They all have three layers of government. There's a federal layer, there's intermediate layer, there is a local layer. But we chose to look at the example of two countries. One country is Belgium. Belgium was unitary monarchy, parliamentary monarchy for 140 years with a constitution. And then in 1970, they said it doesn't work for the same reason, because there were shifts in the population, in the relative power of different groups. They said, we're either going to break up or we're going to become a much more federal state. And they did it. They didn't do it well because they did it in small steps. And so they had to. Every 20 years they had to go through a constitutional crisis. So we're saying if you do it, do it once and forget about it and then start living, because otherwise it's going to be continuous bickering. But the country that we want to emulate is Switzerland. Switzerland works completely differently from how Israel works. Israel, Israeli voters give all the power to the Knesset and the Knesset determines everything. There's a bunch of 120 people which many of them wouldn't want to do any business with, and they are the sovereign. But there is another way. The Swiss way is say the people are the sovereign, and so you delegate power up only to the extent that it's needed. So what? Everything that I want to do at the local, most local level, like the town or the village level, I'm going to do at the village level. I'm not going to ask anybody, I'm going to do it. And the villages will be different. One village will do A, another village will do B. As long as it's within certain set of global rules, that's fine. Some things I cannot do at the village level because it doesn't make sense. So I move it up to a canton level. In the canton level, I do education system I do, taxation I do. And that only things that I cannot do in a canton level I bring up, for example, the military, the foreign policy and the environmental policy. So the power instead of being given up and then percolating down at the will of the people, and the fight is all the time for that power. Instead you give the power only for things that you are willing to relinquish. Which means that there are seven ministers in Swiss government and the prime minister rotates once a year. And nobody really knows the name of the Swiss prime minister because it's immaterial. People say sometimes that we're too small. Well, actually, Switzerland is exactly the same.

[B]

Size as Israel and has double the gdp.

[C]

They have double the GDP because they figured out a good way to Live in collaboration without fear of each other, even though they fought each other for 500 years prior to that.

[B]

I want to challenge a bit the thought process on the theory of change. Not so much the idea, as you guys know and our listeners know, I advocate very much for a radical shift in Israeli structural reform in Israel. And I'm very much aligned with Eugene on the notion that the next episode must fundamentally be distributed. Right? So not concentrated at more of a distributed type of government like the Swiss model, but the notion that it's the Israeli politicians or the Israeli public that, you know, doesn't like this strategic type of dynamic. I'm seeing the same with intel, right? Smart people, et cetera. This kind of fundamental change, resistance. You saw it now in France. Four governments in 24 months, because they are resisting to accept reality that the Fifth Republic is practically not working anymore. And they can't just fix it. They need the sixth Republic.

[C]

They should jump right to the seventh.

[B]

Exactly. And so how do you reconcile. So distributed nature of government is clear. I think it makes a lot of sense. But the theory of change, Eugene, it's not happening because voters don't know or because government officials are making them elect less strategic people. It's just because it's fundamentally very, very hard. And there are so many people earning money from the status quo that they would always prefer to sell some kind of reform that's incremental. So how do you tackle that?

[C]

So my view is that after October 7th, and even more so on October 8th, people realized that the government didn't exist. It was nothing. It was complete chaos. And so people stood up, realized that nothing works and it's up to them to save the day. And they did. Hundreds of thousands of people, from volunteers to rescuing people, to running into the battle. Whatever you did, you did it because you felt that it was your responsibility, because there's nobody else. And so I believe that today a lot of people are completely disillusioned, regardless of their political views. Disillusioned that something doesn't work. What we're saying, we have three part strategy. One part is awake, people. We got to make people aware that the danger is existential. And it's not in three generations, it may be when your child is going to a high school, it may happen. That is the problem. So that is the crucial part. Second part is that you can fix it. You, you, Mrs. Coyne in Kadera, you can fix it. Because if you care about your children, and in my case, grandchildren by now I want them to have a secure Prosperous country. But we have agency, just like as we had agency on October 8 and after that and we saved the day. We, I mean world, we. All these people that volunteered and took initiatives, we can do it again. We just need to sit down and say to the people who are sitting and making decisions, it's either you do it or I will choose somebody else to do it. That is the second, third. We have to talk to the leaders of communities, whether it's haredic community with, by the way, similar proposals to what we're saying are coming out of haredi community. They've been coming out of haredi community for the last 30 years because they want to protect their values from external inference. They're not going to go anywhere. They know we're not going to go anywhere, hopefully. So we have to sit down and work it out. The third part of the theory of change, given the awareness, given the sense of agency, we have to tell people, it's you or nobody. And if we can create 2, 300,000 people group, we don't need 4 million, we need 3, 400,000 people group that says, I want a country for my children. If you do that, you create a political competition before the elections and then we may have a chance to do that. And so I'm very, very concerned that if we miss this opportunity for these elections, I don't know whether we're going to have another opportunity. Remember that we are living in a country which is very wealthy relative to all of our history. So we have the possibility to do this. We have the agency to do this. Imagine that you have to do it when you are half as wealthy. That is completely different. We're going to have a fight over resources that we don't have to have today.

[A]

Eugene, before we wrap, can you share some examples of some of the cracks, Cracks that you're starting to see? Because I mean, as you just alluded to, this is a wealthy country. Yonatan and I talk often about, you know, whiz deals and the Tel Aviv stock exchange, which you know well, of course, and these numbers that are showing this, you know, in the face of extreme challenges, immense growth still. So where are the cracks that you're seeing? I understand, of course, the long term, the demographics and where this is going. I think that's, you know, for people who do think long term and more strategically great. But for those who need to see, like, what's the evidence today that there are cracks? What are they?

[C]

Unfortunately, I don't think you want to see cracks. You know, you can look at all kinds of numbers. And I don't play this game where I see something goes a little bit up and then say, wow, this is great, and something goes a little bit down. Now, this is a disaster. 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, and you don't want to see the iceberg on your hull already in order to start taking action. Okay? The designer of Titanic was on Titanic because he said that this ship is unsinkable, because he compartmentalized the ship into several parts. And he said that even if they if three parts breached, it still cannot sink. And statistically it's impossible that more than three parts will be breached. Five parts were breached, five compartments, and it happily sank together with its design. So we definitely don't want to start seeing the cracks. We need to change the operating system. That's it. We don't have to integrate. We don't have to capture the lands or return the lands. These are all things we can discuss later. We have to sit down and upgrade our operating system to Israel 2.0. Once we do that, we're going to start huge increases. The markets today see those increases and they price them because we removed huge security risks in the last year. We have to acknowledge that if we were in a normal situation where there was no internal fighting, we would be three times the level of the market. I am optimistic that we get back to our senses and instead of fighting with each other, we sit down and say, I don't want to fight you. I don't agree about anything that you say, but I know that you are going to stay here and I'm going to stay here. So let's figure out how to coexist internally.

[A]

I think a lot of people are probably going to be skeptical that massive transformation will come about without hitting the iceberg. But I want to end on a hopeful note here. You've talked about how Israel is different, right? That this isn't Venezuela, this isn't Russia. We don't have the luxury of this not working. And as the song goes, I have no other country, right? I have no other land. So can you talk a little bit about what gives you hope?

[C]

First of all, two years ago when we started talking about changing the system, people were just shrugging this off. Today, we have a coalition of organizations that are starting to understand it and working towards it, moves in that direction because they understand that without the change Just hoping to sit down next to the campfire and sing Kumbaya is not going to cut it. That's one thing. The second thing is that people get tired of fighting. It sometimes reminds me of an autoimmune disease. What's happening in Israel. Who cares if the white cells or the red cells won when the body is dead? We are in autoimmune moment. We have to understand, get some, you know, some sense into ourselves and say, well, you actually not the enemy. People are asking us whether we are optimistic or pessimistic. And what I'm saying is that we are saying is that we are committed. We're committed to try and as a person who grew up in a country where you understood what does it mean to be a minority that is discriminated against, but seriously discriminated against and you sort of grow up understanding that you have less rights than others when people beat you up just because you Jew or people do not accept you to university or to a job. We have to understand that we, you know, God Almighty given us third chance to have a country, an independent country. We've done an amazing job, much better than in the past of building an incredible 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. And that cost us 2,000 years of exile. And we don't want want. The minute we stopped being puritans, the minute we stopped wanting our way or nothing, then we can figure out how to do that. But the important part is not to think that we can compromise on values. We cannot. What we can do is to compromise on process that will allow us to keep our values and yet live together without fighting. By the way, the same problem is Europe, entire Europe facing exactly the same problem. And they may need similar solutions.

[A]

Thank you so much for speaking with us today.

[B]

Thanks, Eugene.

[C]

Thank you so much.

[A]

Okay, with that, we are going to end on another note of optimism. We began our show with the numbers of the week and we will end with the words of the week. And this week we've got some words from President Prabojo of Indonesia, which Yonatan, you mentioned earlier. He delivered a powerful speech at the UNGA in which he referred to Israel with a lot of courage, I would say, positioned himself as a moral authority among the speakers. And here's what he said. To close, I would like to reiterate again Indonesia's complete support for the two state solution. Israel must be safe and secure from threats and terrorism. I repeat, the only solution is two nations, two descendants of Abraham living in reconciliation, peace and harmony. Arabs, Jews, Muslims, Christians living together. Indonesia is committed to being part of making this vision a reality. And then he ended it with shalom.

[B]

This is such a graceful act from the head of the biggest Muslim country in the world. And in doing that, to me, the piece where he says two different nations, two descendants, right? This is not a two state solution that ends up with one Arab country that supersedes the Jewish country 50 or 100 years from now. Israel's distinct security needs, its identity as a Jewish state, are understood and recognized by such a brave leader. There's not just Saudi Arabia, there's Indonesia, there are other partners. We spoke about India. So that once Israel emerges out of this conflict and the system starts aligning itself, it's a world of opportunity.

[A]

And I hope everybody stayed in the room for his words.

[B]

It was a packed assembly.

[A]

Good. All right, that is it for today's show. Thank you for tuning in to ARC Media's what's yous Number? We hope you found it interesting and if you did, please be sure to like, subscribe Rate review. You know the drill. But most importantly, please, please share it 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 numberarkmedia.org.

[B]

What'S yous Number is produced by Adam James Levine. A Reddy sound and video editing is by Martin Juergo. Our theme music, for which we always get great feedback from our listeners, is by Midnight Generation. I'm Yonatan Adiri.

[A]

And I'm Michal Avram. See you back here next week.

[B]

I'm going to check in and see what happened in the White House.

[A]

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.