Warren Buffett Invests $4bn In ME Peace Effort

TEL AVIV, ISRAEL (BBC News) July 17, 2002 — One week before a groundbreaking ceremony at a joint Israeli-Palestinian industrial park on the outskirts of the Gaza Strip, the latest Intifada broke out.

“People are dangerous when they have nothing to lose”
Stef Wertheimer

The project – brainchild and long-time dream of Israeli industrialist Stef Wertheimer – never materialised, and the dusty piece of land which once promised to transform the Middle East through economic growth and co-existence now lies barren and deserted.

Jordan would be the first country to receive aid
under Mr Wertheimer's plans  

OMAHA, NEBRASKA (FTcom) May 8, 2006 — The Israeli shekel hit an 11-month high against the US dollar as investors scrambled to take advantage of a surge in confidence after Warren Buffett, the US billionaire, said he was buying a controlling stake in Israel’s Iscar Metalworking Companies for about $4bn.

ISCAR Overview - Metal Working and
Metal Cutting Tools

(see CNN documentary one year ago)

Mr Buffett’s Berkshire Hathaway was expected to consider further Israeli acquisitions, thus widening the spotlight on Israel’s corporate sector and possibly narrowing the risk premium it carries.

Israeli analysts were quick to hail the deal as a boost to Israel although hopes of a fiscal gain were damped by reports that Mr Buffet would be granted strategic investor status in Israel – meaning he would pay no company tax for 10 years and save in excess of $1bn.

Ehud Olmert, Israeli prime minister, welcomed the investment, saying of MrBuffett: “He is not Jewish, nor is he a Zionist. The Israeli economy is such that he believes in it and supports it.”

Israel’s economy has rebounded from the global hi-tech crash and the start of the Palestinian intifada, both in 2000, and is expected to record gross domestic product growth of about 5 per cent this year.

The Wertheimer family will retain 20 per cent in Iscar, a privately run business that guards its privacy but is believed to make profits of about $400m.

Iscar was founded by Stef Wertheimer in 1952 and the business became part of a billion-dollar empire of metalworking companies. Starting in the 1980s, he created four industrial parks in Israel, hosting about 150 companies that employ some 4,000 Jews and Arabs. However, his dream to set up parks in the West Bank failed to materialize.

Disillusioned with a four-year spell in the Israeli Knesset or parliament in the early 1980s, in recent years he had pushed for US support for a mini-Marshall Plan for the region based on his industrial park model.

“I found that the solution to conflict in the modern world is industry; you fight with industry,” Mr Wertheimer told the FT in 2003. “If you look at South Korea today, you’ll find that their real desire is to make better and cheaper cars than the Japanese and they found this was one way to tell Japan that they are equal.”

TEL AVIV (Haaretz) May 8,2006 — Not since Hamas, not since Ahmadinejad, has there been such a threat to Israel.

It came from the last place we expected it. And, perhaps for the first time in Israeli history, the threat was kept a complete secret until it was too late.

What Warren Buffett has done, is to force Israelis to confront a number of their deepest, least examined fears. For starters, there is the fear of the outside world, the real world, the non-Hebrew-speaking world, the world that – to some extent, conveniently for us – doesn’t want that much to do with us.

But that’s only for starters. Deep beyond this is the fear that if we stripped ourselves of our crushing burdens – terrorism, government red-tape, IDF reserve duty, anvil-hat income tax, vestiges of Histadrut socialism, just for starters – we still might be unable to really succeed.

For many Israelis, there is a fairy-tale aspect to the deal struck by the Oracle of Omaha. It seems as amusing and as unreal – and as unconnected to our daily lives – as the average B-film shown on airliners in its specially edited version.

“The Israeli Dream,” gushed Maariv’s blue-white banner headline heralding Buffett’s purchase of 80 percent of Galilee-based Iscar Metalworking from its founder and sole owner, the Wertheimer family.

The most shocking element of the story is that the common recipe for success, Buffett’s as well as Wertheimer’s, has nothing to do with the modern American and Israeli obsession with shortcuts, hidden-ball tricks, securities and exchange shananigans, gutting companies for cheesy profits, “downsizing”, [Read: summarily destroying the lives of workers and their entire families] or “outsourcing”. [Read: summarily destroying the lives of entire companies and communities].

By far the most shocking element of the story, the most threatening part, in fact, is this:

THEY PLAYED BY THE RULES

Both Buffett and Stef Wertheimer, to an extent inconceivable by contemporary standards of high finance, actually made their money the old fashioned way. They earned it.

Viewed with the diamond-knife cynicism of 21st century business practices, there was always something borderline pathetic about the way the Wertheimers did things, the highly un-Israeli business philosophy that the Wertheimers espoused and that Buffett so heartily endorses, investing so much in their workers, educating them in a work ethic almost unknown in the rest of the country.

The Wertheimers are famous – and often quietly derided – for using their business to help the society at large, working overtime to address issues of co-existence, poverty, and future regional cooperation.

Perhaps most threatening of all is the circumstance that the Wertheimers were offered much more money by other potential buyers, but nonetheless went with Buffett. In these parts, there is nothing quite like the fear of being taken for a ride. Of being taken for a freier, gullible, a sucker.

This is closely associated with the fear of not having gotten the best possible price either as a seller or as a buyer. The Wertheimers, in short, did not take the highest offer. They took the best one. They took the one that assured them that he would not fire any of their employees.

“I can guarantee that that will not happen.” Buffett said in remarks carried on Israel Radio Sunday. “You can broadcast that, you can have me sign it in blood. It doesn’t happen. It doesn’t happen in any of our other companies. We’ve bought dozens and dozens of companies since 1965, 41 years now, and it’s a clear record.”

According to Iscar Chairman Eitan Wertheimer, “We didn’t want someone who would come in and manage us, to show us how to do things differently. He is someone who respects people,” he said of Buffett. “Therefore, the price issue wasn’t the important issue, and for sure not the only issue.”

Even as a second-generation industrialist, Eitan Wertheimer is something of the Abe Lincoln of the Israeli corporate world. He was born in a ramshackle house, a poor kid in the backwater town of Nahariya, a place that even today, to the shiny business jet-set of Tel Aviv’s tony suburbs, can seem much farther from the center of the country than do Paris, Manhattan, Hong Kong.

To the glitterati of Miami-on-the-Mediterranean, there was something threatening in the way Wertheimer spoke of the billions the family stood to gain. “Everyone is equal before God,” he said. “This money is not for buying Swatches. This is money is either to further develop industry, or to do good things for the state.

“You can’t eat more than one sandwich. I have one bed I can sleep on. I have one chair I can sit in.”

To Israel’s economy, the Iscar-Buffett deal is a “certificate of qualification, certifying that that we are part of the global financial playing field, and not some country at the end of the Middle East,” Wertheimer said.

“For Israel, it also certifies that this is a place that one can invest in, and if the most important, the most famous, the most respected investor in the world invests there, then others will certainly come to have a look.”

Among the unexamined fears, alongside the fear of the outside world, there is also the fear of quality control – more accurately, the disdain for quality control. It may be argued, that the lack of quality control in Israel gives rise – by a kind of industrial mutation process – to the phenomenon that all Israeli products come out either better or worse than planned. But the nature of mutation being what it is, one cannot rely on it, and it is more often than not, one more prescription for failure.

This is closely associated with the Israeli corporate fear of commitment, in which head-hunters and job-switching takes preference over the outmoded doctrine of company loyalty.

Outmoded, that is, except where Buffett is concerned. “The people are enormously important,” Buffett said of Iscar. “I mean, it’s like a marriage – and it’s just as important as a marriage. You’re joining up with somebody for life. We are very dependent on them, and I’m very happy to be dependent on them.”

In then end, what Warren Buffett has done, is to suggest that we can be every bit as good as we, deep down, believe we could be, if we had half a chance.

Scary, isn’t it?