OpinionReviving Israel’s AI edge requires strategic investments and attracting top talent
Opinion
Reviving Israel’s AI edge requires strategic investments and attracting top talent
"We must act swiftly to prioritize AI and leverage our unique strengths to remain competitive on the global stage," writes lool Ventures' Managing Partner Yaniv Golan
In recent months, a troubling trend has emerged in Israel's tech landscape: a noticeable decline in AI investments. This shift, highlighted in a recent Calcalist article describing how investments in the United States surged tenfold and in Europe quadrupled while Israel's AI investments dropped to 2018 levels, signals a potential weakening of Israel's position as a global technology leader. Understanding the factors contributing to this downturn is crucial as we strategize our path forward.
From 2020 to 2023, AI investments in the United States surged tenfold, and in Europe, they quadrupled. In stark contrast, Israel's AI investments in 2023 dropped to 2018 levels. This alarming decline underscores the urgency to address several key issues.
Global Competition and Rapid Advancements
The rapid advancements by global AI giants, particularly OpenAI, have been a significant factor. Israel, like many other nations, was caught off guard by the speed and scale of these developments. However, our geographic and operational distance from the main AI hubs such as the US and China exacerbated this challenge. The fast pace of AI innovation requires constant engagement and agility, something that has been difficult for us to maintain given our current focus and resources.
Domestic Challenges
Domestically, Israel has been preoccupied with a range of political and social issues, as well as war raging on in two different fronts. These distractions have diverted attention and resources away from technological advancements, including AI. This preoccupation has hindered our ability to respond swiftly and efficiently and allocate resources towards AI innovation. While other countries rapidly advanced their AI capabilities, Israel was and still is grappling with internal challenges that limited our capacity for rapid innovation.
Skill Gap and Talent Shortage
Moreover, there is a critical skill gap that we must address. AI development demands top-tier expertise in computer science and data science. While Israel boasts a strong tech talent pool, we lack a sufficient number of experts at the forefront of AI research and development. Our educational institutions and training programs need to produce more experts to compete globally. The shortage of skilled AI professionals hampers our ability to develop cutting-edge AI technologies and solutions. Currently, Israel ranks first globally in AI human capital concentration but struggles with a significant shortage of advanced degree holders in AI-related fields.
Financial Constraints and Infrastructure
Financial constraints also play a significant role. Competing with AI powerhouses like OpenAI requires substantial financial resources. The investment needed for developing competitive AI models, including the costs of hardware and training, is far beyond what most Israeli startups and investors can manage. This financial barrier limits our ability to scale AI innovations and compete with heavily funded international counterparts.
Additionally, the necessary infrastructure for AI development is another hurdle. Building sophisticated AI models requires cutting-edge hardware and extensive computational resources, which are costly and often inaccessible to many Israeli startups. Without adequate investment in these areas, our ability to develop and train competitive AI models is severely limited.
Impact on the Job Market
One of the most profound implications of AI advancement is its potential impact on the job market. As AI technologies become more capable, the demand for many traditional professions that generate a significant portion of our GDP may drop dramatically. This shift presents both challenges and opportunities:
- Job Displacement: AI and automation are likely to displace certain jobs, particularly those involving routine tasks. Professions in manufacturing, customer service, and even some aspects of tech could see reduced demand.
- New Job Creation: Conversely, AI will also create new job opportunities in areas like AI research, development, and maintenance. Roles that require a combination of AI expertise and domain-specific knowledge will become increasingly important.
- Reskilling and Upskilling: To mitigate job displacement, it is imperative to invest in reskilling and upskilling the workforce. Educational institutions, in collaboration with the government and private sector, must develop programs that equip workers with the skills needed for the AI-driven economy.
Rethinking Education for the Younger Generation: We need to fundamentally rethink how we educate our young generation. The education system must evolve to include AI literacy, coding, and data science as core components from an early age. Emphasis should be placed on critical thinking, problem-solving, and adaptability—skills that will be invaluable in an AI-dominated future.
Strategic Initiatives for Reversing the Trend
To reverse this trend and ensure Israel remains a leader in AI, several strategic initiatives are essential:
- National Priority for AI: AI must be elevated to a national priority. The government needs to recognize the strategic importance of AI and allocate resources accordingly, including funding for research, development, and infrastructure. Policies that encourage innovation and investment in AI are crucial for our growth.
- Attracting and Retaining Talent: We must attract and retain top AI talent in order to be a leader in AI. Our talent is being poached by companies outside of Israel and by countries that recognize the opportunity. The offers they receive are very generous, especially when Israel offers so little lately in terms of quality of life and prospects for a better future. We need to create programs that offer competitive salaries, research opportunities, and a supportive ecosystem for AI professionals. This will help retain the talent we have and attract more specialists to Israel, ensuring we have the expertise needed to lead in AI development.
- Develop Hebrew-Specific AI Models: With this talent, we must focus on developing Hebrew-specific AI models. English-centric models dominate the global AI landscape, and there is a significant gap in AI understanding and processing of Hebrew. Without proper Hebrew support, as the world migrates to smart chatbot-based interfaces for many services, commercial and otherwise, Hebrew speakers will not benefit. The government should incentivize tech companies to focus on creating AI that understands and processes Hebrew effectively, ensuring our linguistic and cultural needs are met.
- Boosting Financial Support and Infrastructure: Both the private sector and the government should boost their financial support for AI ventures, providing funding, mentorship, and fostering partnerships with international AI leaders. Enhancing our AI infrastructure, such as high-performance computing facilities and advanced research labs, will enable startups to develop and train sophisticated AI models locally. Without combined efforts we will continue to lag, further expanding the gap between us and them, and making it hard to retain the talent needed to advance our standing in the AI landscape.
The decline in AI investments in Israel is a wake-up call. We must act swiftly to prioritize AI and leverage our unique strengths to remain competitive on the global stage. By making AI a national priority, attracting and retaining talent, developing Hebrew-specific AI capabilities, preparing our workforce for future changes, and rethinking education for the younger generation, we can ensure that Israel continues to be a beacon of innovation in the AI era.
Yaniv Golan is Managing Partner of lool Ventures, a VC that invests in Israeli startups
