The Right Stuff

Israeli entrepreneur and Iscar founder Stef Wertheimer's new autobiography, "A Man Alongside a Machine", draws parallels to Tom Wolfe's "The Right Stuff."

By SHLOMO MAITAL
Stef Wertheimer Warren Buffet (do not publish again) (photo credit: Flash 90)
Stef Wertheimer Warren Buffet (do not publish again)
(photo credit: Flash 90)
TOM WOLFE’S 1979 BOOK “The Right Stuff” asks why the seven astronauts selected for America’s first manned space project, Mercury, were willing to risk their lives. His answer: The seven, all test pilots, had “the right stuff” – the desire to serve their country and courage to dare what others feared. Wolfe’s book was made into a successful movie in 1983.
I recalled “The Right Stuff” while reading entrepreneur Stef Wertheimer’s new autobiography “A Man Alongside a Machine” (Hebrew, Yedioth Ahronoth/Hemed, 2011). Wertheimer founded Iscar, which grew from one lathe in a backyard shack in Nahariya to a global giant and market leader that makes sophisticated cutting tools. Some 80 percent of Iscar Metalworking Companies shares were acquired by American billionaire Warren Buffett’s Berkshire Hathaway holding company in May 2006 for over $4 billion. As a result, the recent Forbes magazine listings place Wertheimer (and family) as Israel’s third richest billionaire, after Sami Ofer and Arnon Milchan, and just ahead of Shari Arison.
For over two decades, analysts have tried to define what “the right stuff” is among Israel’s dynamic entrepreneurs. I think Wertheimer’s own account is highly revealing; his attributes resemble those of the Mercury astronauts: boldness, willingness to dare, love of country. There is one more key ingredient: independence of thought. Wertheimer opens his book by recounting how, as a three-year-old, his nanny dragged him through the mud for three kilometers (about two miles) as she raced to meet a boyfriend. “I never again let anyone drag me after them,” Wertheimer recounts.
Wertheimer was born in Kippenheim, Germany, in 1926. His family fled to Palestine in 1937. Wertheimer dropped out of high school at age 16, ending his formal education. He joined the Royal Air Force in 1943 as an optical equipment technician and later fought in the War of Independence with the Palmach and the Hagana, in the famed Yiftah Brigade. After the war, he worked briefly for Rafael (Weapons Development Authority), but was fired because he lacked formal education.
On a bus, in 1952, Wertheimer recalls sitting next to a botanist from Kibbutz Cabri. “What do you do, Stef?” she asked. “I’m going to create an industry!” he said. She broke into gales of laughter, drawing stares from everyone on the bus.
Wertheimer decided to do what he knew best: Machining tools that cut stone and metal. He bought an old lathe and began making cutting tools. Mekorot, the water company, heard about this lathe expert in Nahariya and asked him to make hollow drills, capable of drilling through hard basalt, to be used for the National Water Carrier that would bring water from the Sea of Galilee in the north, to the central region and the Negev in the south. That order ultimately helped create the Iscar giant, whose carbide cutting tools are used by nearly all car manufacturers in the world.
Wertheimer wanted to name his company after his wife Miriam, but ever practical, she said, “Maybe it won’t be successful, so don’t do it!” So he called it Iscar, “Israel Carbide,” instead. Today Iscar is Israel’s sixth-biggest exporter, just after Intel and the Dead Sea Works. Wertheimer also founded Blades Technology, in 1968, which produces precision turbine blades used in many of the world’s airliners.
He recounts how he decided, against all odds and against expert advice, to produce within Iscar itself the hard metal alloy used for its tools, a complex high-temperature process. Iscar was able to expand rapidly once it gained competitive advantage from its unique alloys and innovative tool designs. “This was perhaps my most important decision,” Wertheimer recounts.
Another key turning point was the decision taken by him and son Eitan to sell Iscar to Buffett. Writing in the daily newspaper “Maariv,” Wertheimer noted, “Our partnership with the American Warren Buffett, from my perspective, is aimed at creating more jobs.” Buffett has steadfastly left Iscar alone to grow and to prosper, true to Buffett’s patient long-term business policy. (“Our favorite holding period [for shares] is forever,” Buffett once said.)
Eitan, who ran Iscar for years, says they sold Iscar to Buffett because “we just wanted to solve problems before we get to them years from now – mainly funds for expansion. We wanted to secure our customers and our people for another 50 years or more.” Unlike most acquisitions the Buffett purchase has actually strengthened Iscar’s Israeli operations.
Wertheimer has shown “the right stuff” in his efforts as a peacemaker, too. In 2002, he presented a visionary plan for a Mideast Marshall Plan to the US House of Representatives. He sought to use industry to build peace, just as the US Marshall Plan did for post-World War II Europe. His vision is to build 100 industrial parks in which Israelis and Palestinians collaborate and grow wealthy together. But mutual suspicion between the two groups persists and Wertheimer has had bad luck. A week before groundbreaking for an industrial park in Rafah, Gaza, in September 2000, the second intifada broke out and the plan was shelved.
Wertheimer is particularly proud of his industrial park in Arab Nazareth, where Jews and Arabs toil together. He sees industry as a force against terrorism. “When people work together,” he claims, “they have no time for nonsense. They’re too tired at night to commit terrorist acts. They work together, not against each other.” As always, his sweeping vision is solidly pragmatic and focuses on industry and exports.
Wertheimer “right stuff” includes a dose of down-to-earth common sense. I once brought a group of managers to visit Iscar headquarters, in Tefen, Galilee. We looked up at the second-floor gallery where the country marketing managers sat. Each desk represented a different country. It had the flag of that country and sitting at that desk were natives: Koreans, Thais, Chinese, etc. No lesson in marketing could have been more effective. If you want to sell cutting tools to Koreans, then use Koreans who sell in Korean. The selftaught Stef believes that common sense trumps economic theories.
As co-organizer of a large Technion – Israel Institute of Technology course on entrepreneurship, I used to invite Wertheimer to speak to our undergraduates. He was always sharply focused: Launch factories, make tangible things for export, don’t work abroad, you have endless opportunities at home. Fiercely independent, he berated the Technion for financing its buildings with foreign gifts, saying the buildings should be more modest but paid for by Israelis. He did not like services, believing like Karl Marx that services don’t create real value. (Iscar’s lathes are today controlled by software, which is a valuable service). For years, I taught in a program Wertheimer funded, headed by Tel Aviv University Prof. Zeev Hirsch, which imparted entrepreneurship skills to Israeli Jews and Arabs. Many start-ups resulted from the program, but Wertheimer was unhappy, because many were service businesses, which he felt were not “real.”
Wertheimer and his son Eitan both believe in the old-fashioned notion that a modern nation has to have advanced factories that produce goods for export and generate well-paying jobs – something America forgot long ago, to its detriment.
In today’s digital word, computer bits and bytes are replacing drill bits. While I found Wertheimer’s book inspiring, it also saddens me, because I doubt we will ever see anyone like him again, with the same right stuff.
The writer is senior research associate, S. Neaman Institute, Technion.