Think different

At 90, industrialist Stef Wertheimer retains a 20/20 vision of the future.

By SHLOMO MAITAL
Stef Wertheimer (photo credit: REUTERS)
Stef Wertheimer
(photo credit: REUTERS)
I love readers who email me about my columns, even (or especially) when they fiercely disagree. But this particular email was very special.
“I read your column,” [“Getting Ready for the 21st century” The Jerusalem Report, September 19] wrote Stef Wertheimer, founder of Iscar Metalworking Co. and head of Israel’s wealthiest family, referring to the piece in which I cited a study claiming that half of all jobs soon could be done by robots.
“Robots do not frighten me. What frightens me are 350,000 students in universities and colleges, of whom only 5% are interested in technology (compared with Finland, where the proportion is 40% enrolled in technical professions).
“In addition to that, you did not take into account that we are a nation of refugees and that we are in a region with no history of industry. I’d like to speak with you, to exchange views about what can be done to improve Israel’s situation and that of the Middle East, rather than talking about the problems of the whole world.”
Stef, as everyone calls him, turned 90 in July. He was born Stefan Wertheimer in Kippenheim, a small German village in Baden-Wuerttemberg, and made aliya with his parents in 1937. He stubbornly refused to change his German name, despite being mocked by other children. For decades, he has tirelessly worked to change Israel’s policies toward Arabs, manufacturing and education.
I last wrote about him five years ago (“The Right Stuff” The Jerusalem Report, April 17, 2011). Usually, columnists look for ideas that are new. However, Stef has been saying the same things for as long as the State of Israel has existed.
What is new is that in an age when politicians change their positions hourly, nothing is new in Stef’s basic ideas about education, industry, exports and hi-tech. They are unchanged, more valid and modern than ever – and, for the most part, rather ignored, even though he has left no stone unturned and invested a lot of his own money to implement them, and even though the phenomenal success of Iscar, the world market leader in cutting tools he founded in 1952, is proof that his ideas work.
We met in his Tel Aviv offices on Hayarkon St. Stef’s eyesight and hearing are not what they once were, but his vision of the future is 20/20.
At our meeting, I recalled inviting him to address Nobel Laureate Dan Shechtman’s entrepreneurship course at the Technion some 25 years ago and hearing him berate us professors for failing to focus on export-driven manufacturing.
Stef’s views are recounted in detail in his book, “The Habit of Labor: Lessons from a Life of Struggle and Success,” published last year as an expanded version of his Hebrew autobiography released five years ago. Here are some excerpts.
On manufacturing: “We, here in Israel, underestimate the importance of manufacturing as a vital component of any successful country. It is important on the national level, where it helps to ensure a dynamic economy for the nation. It is also significant on the personal level, giving people skills that will make them proud of the products they create and providing jobs that will enable them to raise their families with dignity. We must provide training so that our people, like others in the world, will have the skills to produce products for the export market.”
In his book, Stef recalls how he commissioned a documentary film about Iscar by the late Moti Kirschenbaum.
“In Moti’s films, the mesmerizing beauty of the blade cutting the metal like butter, with great precision – the beauty that has fascinated me since my childhood – was revealed very persuasively. After all, the little tools we manufacture are part of the foundation for the industry of the modern world.”
For many, cutting tools are simply objects.
For Stef Wertheimer, they are precise artifacts of poetic beauty and have been so for him from the earliest drill bits he made on his lathe in Nahariya for the National Water Carrier project.
Manufacturing excellence is not enough, however. You have to sell what you make.
Many years ago, I brought a group of senior Israeli managers to Iscar’s plant in Tefen.
We entered the headquarters building and looked up. Along the second-floor gallery were flags of many countries. Beside each was a marketing expert, who spoke that country’s language: Japanese, Mandarin, Korean, and more.
I’ve always remembered those flags, and the people seated beside them as evidence of Stef’s immense practicality and drive.
On start-up exits: “Almost before a start-up company is formed, it begins looking for someone who might want to acquire it. The ideas are born here in Israel but, unfortunately, all too often the development and manufacturing is conducted in other places where there is a greater quantity of skilled workers. Israel then misses out on the many jobs thus created – jobs that could have helped to foster peace.”
STEF HIMSELF did one of Israel’s largest exits. Iscar was acquired by Warren Buffett’s Berkshire Hathaway Corp., which in May 2006 paid some $5 billion for an 80 percent interest, and in May 2013 bought the remaining 20 percent for another $2.05b. In those seven years, Iscar’s value had doubled.
“The whole transaction with Buffett,” he writes, “is a fascinating story of a buyer who did not want to buy from a seller who did not want to sell.” Buffett had a rule never to buy non-US companies and Iscar was built to last, not to exit.
What is different about this exit is that Iscar continues to manufacture in Israel and 20 or more other countries with no interference from its acquiring company.
Stef told me that Berkshire Hathaway has continuously relied on the quality of Iscar management without interfering – rare for a wholly owned subsidiary. Iscar has leveraged its new identity as a Berkshire Hathaway company to expand globally, while maintaining its Israeli home base.
In one of Buffett’s iconic letters to Berkshire Hathaway shareholders, he wrote: “...
exceptional company, we are with the right people, the right business and the right country.”
Key success factors: “To launch a successful firm: follow your heart and invest your time and resources in a product you love; be stubborn. Be frugal when you begin; don’t think you have to invent something entirely new; once you have a good product, make sure that it is delivered when promised; show up on time for meetings; study your competition; listen well to your good customers; take some risks, recognize you will endure some failures; be honest in your dealings, with staff, clients and subcontractors.
I think Stef’s own secret of success is evident in the story he recounts about when his car skidded on a rain-slicked road and he was seriously injured on January 4, 1983. While in the hospital, he constantly tried to get up; exasperated, he relates in his book, “The nurses tied me to the hospital bed. One time, still unconscious, I got up on my feet, with the bed tied to my back. My desire to return to work and home was so strong that it gave me the power.”
Innovation: “Research and Development is not the whole story. During the first 30 years at Iscar, we did not produce a new product of our own. We specialized and became more technologically advanced and competed with existing products until we were good enough to begin the second stage of R&D and then to aggressively pursue international markets.”
Benchmarking: “Let’s take the example of the Republic of Ireland… its government decided to establish modern industry that would export products globally… [established] vocational schools, lowered corporate taxes, changed the direction of education... From one of the poorest to one of the most prosperous countries in Europe.”
Switzerland is, I believe, another strong example. Despite its strong currency (the Swiss franc is worth more than the US dollar) and high wages, Switzerland exported $290b. in 2015, mostly manufactured goods, or 60 percent of its gross domestic product.
The secret? Very high productivity and high-quality precision branded goods. Stef explained that in his own Iscar plant in the Galilee, where robots zip along magnetic strips to carry parts to the assembly line, automation negates China’s advantage in low wages.
Education: Stef’s early schooling gave little clue he would build a global business empire.
“I was expelled from school because of discipline problems,” he recounts, “and so I set out to learn a vocation. I fell in love with metal and metalworking.” That career path barely exists today.
He was later dismissed from Rafael (today’s Advanced Defense Systems) because he lacked formal education.
Stef laments the Education Ministry’s decision to downgrade vocational high schools, which for years provided skilled technicians and practical engineers for Israel’s factories, and recalls his own “failure to put vocational education in Israel on an equal footing with academic education to create the skilled reserves we so urgently need for a high-quality export industry.”
In our conversation, he repeatedly stressed that Israel must act urgently to provide jobs for young people who otherwise migrate abroad. The numbers support him. A Central Bureau of Statistics study showed that for those young Israelis who graduated between 1981 and 2009 in science and engineering, fully 15 percent have lived and worked abroad for three or more years (hence, probably permanently).
This is a major loss to the country. The brain drain will continue unless attractive employment is created for our talented youth.
Industrial parks and Middle East peace: “I count some major failures. Failure so far in implementing industrial parks as a model and solution, in Israel and internationally.”
Stef founded six industrial parks in Israel and an additional one in Gebze, Turkey, including the ones in Tefen, Galilee and Nazareth, where Jews and Arabs work side by side. In the 1990s, his plan for such a park in Rafah, Gaza, was approved by both the Israeli government and the Palestinian Authority, but the intifada broke out a week before groundbreaking and scuttled the plan.
In 2002, he spoke to the US House of Representatives about his new Marshall Plan for the Middle East, which involved building 100 industrial parks throughout the region. That sweeping vision has not been implemented.
“When people work together,” he said in 2011, “they have no time for nonsense.
They’re too tired at night to commit terrorist acts. They work together, not against each other.”
Stef even tried politics. He was among the founders of the Democratic Movement for Change, which won 15 Knesset seats in the 1977 election and made him an MK. He resigned from the Knesset in 1981.
When we met in Tel Aviv, he spoke about the next stage of Zionism. He echoed the views of A.D. Gordon, the spiritual force behind Labor Zionism. Gordon felt that all Jewish suffering stemmed from the parasitic state of Jews in the Diaspora, who did no creative labor. “The Land of Israel is acquired through labor, not fire and blood,” Gordon wrote.
Gordon preached “return to the soil.” Today, Stef preaches “return to manufacturing” – to making high-value products for export with advanced technology. He has hammered home that simple message for 65 years, since 1952, when he founded Iscar in a shack in Nahariya. I wish our leaders would listen.
The writer is senior research fellow at the S. Neaman Institute, Technion and blogs at www.timnovate.wordpress.com


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