As companies continue to drive digital transformations, finding, attracting, retaining, and training tech talent has become ever more important. In this episode, Adi Soffer-Teeni, vice president and general manager of Meta Israel, and McKinsey senior partner Dana Maor explore these challenges along with a discussion around the emergent “metaverse” and what all of this could mean for Israel’s tech companies.
Matt Cooke: Welcome to the McKinsey Israel on High Tech podcast. My name’s Matt Cooke. I lead communications for McKinsey here in Israel, and I’ll be your host for this and future episodes. It’s great to have you with us.
Today we‘re going to be talking tech talent. This is a hot topic whenever it’s discussed pretty much anywhere in the world—today and across multiple industries—whether it’s attracting, upskilling, supporting, or retaining talent. And yet, what a difference a couple of months makes. Here in Israel, one of the tech hotspots of the world, in the face of rising inflation, geopolitical instability, including the knock-on economic impact of Russia’s war against Ukraine and COVID-19, we’ve seen many companies stop hiring and freezing headcounts—a general chilling, if you like—of the white heat of Israel’s frenetic tech talent market. With me today to discuss the ever-evolving science of tech talent management and development, I’m really excited to welcome Adi Soffer-Teeni, vice president and general manager of Meta Israel. Before joining Meta—then Facebook, of course—over eight years ago, Adi was, and in some cases continues to be, an investor and board member of numerous Israeli businesses and was formerly managing director of the B2C [business to consumer] arm of global online gaming company, 888 Holdings PLC, and also CEO of the Kidum Group, Israel’s largest private education provider. We’re also delighted to have Dana Maor, McKinsey senior partner based here in Israel, former leader of our Israel office, and [now] coleader of McKinsey’s People & Organizational Performance Practice. Welcome to you both.
Adi Soffer-Teeni: Hey.
Dana Maor: Thank you. Great to be here.
Adi Soffer-Teeni: Yes, super cool.
Matt Cooke: Adi, I’m going to start with you if that’s OK. Let’s set a little context. I’d love to hear from you what your role at Meta entails and what it means to be Meta Israel versus Meta in other markets. What’s Meta focusing on here, basically?
Adi Soffer-Teeni: That’s perfect. So first of all, we have two arms of the company in Israel. We have an R&D center—actually the second largest outside of the United States. And then we have our local office here and it is, Matt, as you said, a unique office in some sense, doing very similar things like Meta in Germany or Meta in Brazil, but also very special because it’s probably the only office we have globally that specializes in working with start-ups from very early stage and all the way to unicorns and IPO’d companies. So that’s serving the local ecosystem here, but again, a lot of focus on start-ups from very early on.
I think that in many ways when people ask what a local office is, it’s being the face of Meta in Israel, but at the same time also being the face of Israel at Meta. Representing this country in this amazing global company is something that makes me proud every single day, even in the tough days.
Matt Cooke: Can we go a little deeper on the development of B2C tech in Israel? Twelve years ago, I think this was not really a thing here in Israel. There was deep tech development, but that connection to the end consumer wasn’t here yet. Can you say a little bit more about that?
Adi Soffer-Teeni: You’re absolutely right. This is actually why I took the job. Throughout my career, I’ve been managing and leading companies from traditional industries, like brick and mortar local businesses, all the way to now working in one of the biggest digital tech internet companies in the world. and in between focusing a lot on start-ups and the realization, even back in the days of 888, was that Israel didn‘t have a B2C tech industry at all.
The start-up nation story, until pretty much ten years ago, was very much focused on what we call deep tech. And even when companies went from research and innovation to a more commercialized aspect of the business, it was very much focused on what we called B2E and not B2B—[business]-to-enterprise or B2G, [business]-to-government. This was the go-to-market, [and] the big tech companies were doing B2E or B2G. You could have seen a lot of entrepreneurs starting to build mobile apps and internet services and they couldn’t raise money. Literally, $100,000 was something to celebrate. People couldn’t believe when they got such a check. And the notion at the time was, when talking to the top VCs [venture capitalists] in the country, that it’s simply not our fault. It’s not something that the Israeli’s were good at. we don’t have the right entrepreneurs. We don’t have the right product people. We don’t have the right investors. They didn’t know how to invest. And we almost missed the opportunity because with no investment, it’s very difficult to build an ecosystem. We almost missed the opportunity of becoming of start-up nation. Developing this additional important pillar of B2C and internet. Luckily we didn’t.
Eight years ago, I was about to start my own start-up, actually B2C. I had the money, I had the idea, I had the team and then Facebook called, so I decided to put the notebook in the drawer and go and work with hundreds of start-ups instead of just focusing on one. And that’s what we did. We worked with probably more than 1,000 start-ups. The amazing thing is that, fast forward to today, it’s the third start-up nation. So ten years fast forward, the dream became a reality. And one-third of the start-ups here are B2C tech, one-third of the IPOs are B2C tech, one-third of the unicorns are B2C tech and obviously that makes me feel extremely proud.
I think that this is about the industry and having enough VCs that eventually wrote nice checks, not huge ones, but nice at the beginning, and some entrepreneurs that had tons of belief.
Matt Cooke: They’re staggering figures for a decade, but, Dana, let’s bring you in here [to talk about] that period during which B2C tech corresponds with your time in McKinsey and leading our office here from Herzliya, and now in Sarona in Tel Aviv where we’re based, [which] now itself [is] kind of a tech hub within a hub, what are your reflections on B2C tech development and how have the talent needs evolved? Do you want to talk a little bit about that?
Dana Maor: I think that maybe I’ll be more focused on the last couple of years because what happened with COVID-19 is that some of the trends that were already happening before were truly accelerated through COVID-19 and then there are new ones. To mention three of them: obviously there’s tremendous connectivity—much, much more connectivity with than ever with omnichannels that increases the ways to access consumers. The second one is probably the unprecedented automation, which immediately translates to very different patterns in terms of what we look for in talent. And then the third one, with transaction cost going much lower, is we approach consumers in a different way. We are actually free of larger organizations. We have the freedom to now approach these B2C tech start-ups—the applications—different way to procure different way for small companies to think of payments, to think of procurement, to think of supply chain management and that is a virtuous cycle.
So these start-ups actually created an opportunity for other start-ups that in turn created a revolution. But what that also means is that the skills and capabilities that we’re looking for are different. We’re looking for UX [user experience] designers, we’re looking for cloud developers, which would be needed everywhere. We’re looking for a different way of working and programming. So those skills and capabilities that we’re looking for are very different. And there are numbers, staggering numbers, that we have not looked for before, but in parallel, what this talent is expecting is quite different. And so there’s a dual challenge of closing the gap of skills and capabilities that are in need in exponential growth. And at the same time, their expectations and needs are changing radically. So, it creates a very different challenge, I think for tech companies and for traditional companies, as they’re looking to find this amazing talent.
I probably would add one thing. When you go into one of these huge B2C tech or digital companies like Weeks, and Fiverr, and Lemonade, and Monday, and Lightricks, only a portion of their employees are, engineers. So for the first time in the history of start-up nation, when we are talking about the tech ecosystem, the need of talent is not just focusing on engineers. Obviously, strong engineers are always needed, but it’s about designers and data scientists. Data is crucial in B2C, right? It’s a data play. So data scientists and any data type of capability, design, content, business, go-to-market, marketing, sales. You actually go to these companies and they look more like a regular normal company, and not just like, ten hardcore engineers in a basement. So the talent pool and the diversity of talent that are needed for this phase are very different and it’s actually creating tons of opportunities for more people to join this amazing start-up nation success story.
Dana Maor: Absolutely.
Matt Cooke: Dana. Thanks so much for that, both of you. Dana, McKinsey’s authored a couple of recent papers, which I think are super relevant here. The great attrition was one, and tech talent tectonics was the other, but I’m thinking about this phenomena of employees that we’re seeing continuing to leave their jobs at record levels. And yet we still see companies trying to attract and retain those people in the same old ways. I saw a survey recently which showed that just under half of all those working in tech who left their jobs in the last year went to work in a completely different industry altogether. So for data scientists and programmers, it seems the hurdles to changing industries are lower, and evidence suggests that companies are more focused on hiring people for their skills rather than their industry experience. That’s got to be a wake-up call for tech companies, right?
Dana Maor: I think it’s a wake-up call for all companies. And some of what Adi just said, in terms of the fact that any company now is not only ten engineers, but also [filled with] many other skills and capabilities that need to be fluent in what it means to be a B2C tech company, because what happens is with this explosion of need and massive shift, competition is super intense. You cannot hire and fire your way out of it. You have to think about the people that you have in the organization and how you upskill those individuals and help them become more relevant.
We’ve also just launched McKinsey Global Institute research that looks at the investment in nuMe capital. We learned that those organizations that invest in the people that are in the organization are actually standing to benefit from it, not to mention that people themselves are much happier. And as you think of that, in the context of the great attrition, some are cynical, right? Some are saying, now with increased inflation and Google announcing that they might not be recruiting as many, maybe there’s an end to this great attrition, but what we’re seeing with fresh data, four months old, there is no change yet, because what people are really looking for is a different experience.
The recruiting experience should be thought of as an experience, as opposed to a one-time event, where you have somebody who comes on board and the culture that you have in your company is also going to determine whether you’re going to be able to hold onto these people, because they know by now that their skills and capabilities are relevant across industries, they know that there are organizations out there that are trying to crack the secret formula as to how to create that working environment that excites them. and we also know that those that suffer from burnout typically choose to move on because of the toxic working environment, not because of anything else. So when you put all that together, I think, the wake-up call is for all companies, as they try to think about how to preserve, attract, retain, develop, excite the best talent out there, because we are all tech companies now. And we all need more than just engineers in our companies.
Matt Cooke: So Dana it strikes me as you were speaking [that] differentiation at the recruitment stage is absolutely critical here. So how are you seeing companies doing that in practice? Signaling their culture at recruitment stage?
Dana Maor: So I think that thinking about it in isolation, how do you only signal your culture at the recruiting phase is already part of the issue, because this is a world of transparency. Everybody knows what’s happening within your company. People left your company, people joined your company. And it should be a question of what is the working environment and experience that I create in my company across the board. Not only in that moment where I try to attract someone. It is about how you communicate with the world. It is about where are those places and communities that you engage with? It is about the development and growth experience that you provide when someone is working in your company and in your environment. And it is about development, right?
People who join these companies want to know that they are working with rock stars that they’re growing and that they’re learning. It’s not, HR is sitting on the side, trying to recruit someone and communicate a message that is a certain culture, but rather the business leader, the development professional, those are the ones who should be communicating and exciting you. By communicating an authentic experience that is their lived experience in an organization. Those are some of the things that I’m seeing. I don’t know Adi, if you’re seeing [the same].
Adi Soffer-Teeni: Yes. First of all, I think that the great attrition was a really important moment because [it was] obviously very extreme and thank God, I think it’s behind us. And I agree not all of it, but at least the peak is behind us. But it was a very important peak because in moments like that, you need to go to the whiteboards and rewrite the books. In moments like that, you need to learn new muscles. The reality of understanding that we need to figure out how to retain talent, how to hire talent and how to retain talent in a very extreme moment where people were living every single day, it created a new muscle I think, for the strong companies that will last on good days and bad days. I can say that personally, what we‘ve been focused on in the last eight years was finding talent, based on raw talent, based on capabilities and not experience.
It’s something that took us time to explain to the global company because they worship experience. Everything is based on experience. You look at people and you ask, what did they do before? Where did they work? What was their job? What was their role, and how senior were they? We said, ‘We don’t care.’ For us, experience is a proxy. It’s a good proxy, but it’s only a proxy. So if we can replace the proxy by something else, to be able to predict that someone will be amazing, then you don‘t need the experience anymore. The only thing is to bet on the right talent, on the right super talent, that will become amazing. So every person that joins Meta goes through at least eight interviews—I’m sure that it‘s relatively similar at McKinsey. So eight interviewsand that’s very different, [and] we teach this to start-ups because they do it differently.
The decision is made by the team together, so that [if] one person is not for the hire, we will not hire. It’s the whole team. It‘s actually the colleague that makes the decision. If you hire super talent, that’s a really cool equation. Not managers hiring talent, but talent hiring talent. They look for people they want to aspire to and learn from and feel that they brought someone as strong as them, because strong people want to work with strong people.
Eight interviews is very tough, but the beauty of it is that you get an unbelievable perspective of many views and people that each see something different. Then you get the full picture being drawn, which allows you to skip experience as a proxy because you have really strong people interviewing, and then a lot of people give a lot of feedback on what they’ve learned about the candidate. That allows us to bring very young people, really young, some of them fresh from university, to roles that in other offices, people with 15 years of experience do. Obviously, then taking a year to train them. The ROI [return on investment] is crazy. I can‘t explain how amazing it is to take raw talent, then ‘make’ them during the year, something that in other places they would’ve done probably in three and four.
Matt Cooke: Adi, that’s super fascinating to hear. Now, can I just ask you, how do you think about retaining your talent? What’s the Meta philosophy in Israel?
Adi Soffer-Teeni: I think that retaining talent is a big one. … At the great attrition, like you called it, different companies looked for different things—from throwing money at employees to throwing crazy parties—to unbelievable compensation. I don’t think these are the elements that keep talent for a long time. It’s fun. It’s great to be well compensated and it’s great to have amazing parties, and it’s great to be spoiled, obviously, but I don’t think that’s what attracts great talent. If someone is staying at your company because of that, you need to let them go.
The issue here is to really have managers that have a growth mindset, that they understand that a big chunk of their role is not the business outcome, it‘s growing their team. Like bigger than the business outcome. If they would grow the team, if they would focus on teams, health and growth and development, the rest will come. So one thing that we do, is really walking the talk of strength-based management. It’s something that a lot of HR people say. I think very few companies actually walk the talk. Not understanding that at the end of the day, no one wins by fixing their [stuff] shit. No one. You may not come last at the race if you‘re going to fix your weakness, but you’re never going to win the race by fixing your weakness. You’re only going to win the race by leveraging strengths. And it’s a wake-up call talking about the great attrition.
We talk strengths. We don’t execute it. And executing it is not caring about what someone is not good at as much as we want to fix it. It’s not important. It’s focusing on what people are brilliant at. And we’ve made a decision that this is going to be our forte, our strength. and I’m proud to say it‘s a language today. It’s embedded, we can talk about this for hours, but really focusing on what each individual is really brilliant at, and then leveraging that strength day after day, role after role, project after project, and holding ourselves accountable, both the employee and the manager, accountable for that process.
Matt Cooke: Dana, this sounds pretty familiar from our own McKinsey feedback and development systems. Can you perhaps give us some international context on this? What are the McKinsey people and organizational growth team seeing globally here when you‘re working with clients?
Dana Maor: I think a lot of what Adi mentioned is consistent with what we’re seeing globally. I would say three things that are probably the most popular trends in those companies that are really trying to do the right thing and create that environment that would excite, retain, and attract the right talent. One is capability building is crucial, and so there’s a massive investment in capability building again, because we know we cannot hire and outsource and fire our way out of this major gap that was created, because we know that people today are looking to continuously develop in any job that they take on. This is what the current generations are looking for.
The second thing is we know that the one single predictor of what keeps a person happy in their job is their direct manager. And this is exactly what you were talking about, Adi, saying we need to teach our leaders or managers how to develop someone, how to have a feedback conversation, an honest, genuine feedback conversation that speaks about what are those things that you‘re doing amazingly well, but also where you should be thinking about doing things differently—not in the spirit of focusing on those: the next level of things you might want to improve, but really what are the few things that you want to do differently and excite them.
The third thing I would say is going back to this working environment, which you’ve talked about as well, because toxic environments lead to burnout. Burnout is the first predictor of attrition. And if we’re trying to create that virtuous cycle of including and keeping exciting diverse talent in organizations, that would be critical. And I just touched on it by mentioning the third one. And that is diversity. Any organization that wants to tap into the full breadth of what the world has to offer has to be thinking diversity, and diversity of all kinds, the different tracks that you came from, whether you were an engineer or a scientist or an artist or whatever, that might be. Different gender, different communities, different experiences in life. Diversity of thought, that is a major source of renewal, excitement, and a predictor of success of a company, to be honest. I ended up mentioning four. Four, actually: capability building, the individual manager and the role in what you’re doing, your culture and the working environment, and of course thinking about diversity and how you make the most out of it.
Adi Soffer-Teeni: Can I ask another question? When you talk about culture, what do you refer to? It’s a big word, right?
Dana Maor: It’s a very good question because culture can be interpreted in many, many different ways, but when we speak of culture, we talk about the way things are done around here. So, what does the working environment feel like? Are we clear on what the collective purpose and ambition of the organizations that we’re a part of is? Do we understand the role that we have in that? Do we understand what our role is in delivering on that? Do we take ownership of that? How do we actually collaborate with each other, make decisions, make things happen—all these things. There’s a long list of things that we would look at. But it’s basically, how does it feel to work in this place, day in day out?
Adi Soffer-Teeni: I agree with you. I think that one challenge and again, working with start-ups for many years now, is seeing that building a culture when you are ten, it’s easy. And then when you are 100, gets a lot more difficult. Then when you are 1,000 and you have teams all over the world, it’s a lot more difficult. And we see it in the global company. And I would probably say that I think that the number one reason for people to leave is most of the time will be internal and not external. And it’s something that we need to remember. It’s not the challenges outside. It’s not that the market goes down. It’s not that there’s not enough opportunities in the company you work for. It’s internal and in many times, [it’s] culture and in many times, [it’s] political stuff or frustration from how the internal company is operating. And when it’s not working, we fail. So I agree with you. I think culture is probably one of the most important things we should focus on. It’s the individual strengths and then the team they work at, the organization they work at, and the environment that they are part of.
Matt Cooke: Adi, I think many people will be fascinated to hear what you had to say about the recruitment of people based on their potential rather than their experience. How do you promote that? [Let’s say] you’ve got someone who perhaps thinks ’I would love to work at Meta Israel, but I don’t have the experience.’ This person has extraordinary potential and that person potentially wouldn’t think of applying. So how do you tackle that? How do you promote this culture and this way of thinking?
Adi Soffer-Teeni: The cool thing is that once you have enough people that joined when they were very young or that are very young in experience, they bring their friends. So I think that when you have a really strong working environment and a really strong culture, and people that feel that they work with the best talent out there, they would be the best marketing machine to bring the next generation of talent.
So that‘s one. And then, the second thing is go to where young people are. Go to universities and make sure that the different kind of communities that have relatively young talent hear about it, and again, obviously there are specific roles, especially on the engineering side, that experience really matters both academically as well as work experience.
But I think that if we would develop a muscle of identifying talent and allowing ourselves to count less on experience, we will be able to bring amazing people on board and it’s happening.
Matt Cooke: It just strikes me. It seems like [you] actually had a wonderful opportunity to reach outside of the Tel Aviv bubble to perhaps, different areas in Israel, beyond the sort of traditional networks that often, provide the funnel for employment in the country. Do you have a specific approach to the kind of nontraditional areas where you might look to recruit?
Adi Soffer-Teeni: Diverse talent?
Matt Cooke: Yeah.
Adi Soffer-Teeni: So again, I think that being a global company makes it easier. It’s more difficult for smaller start-ups, but being a global company, you have so many methodologies that were put in place to make sure that we are focusing on diverse talent that allows you to do that without the price, because focusing on diversity without managing it well, you can end up with women having a role that others say they got just because they’re a woman. We don’t want that. The issue is not just to come and say, we have a KPI [key performance indicator] of how many women we have in specific, all or how many people we have from the periphery, but actually focus on sourcing in a different way.
I think that’s the goal. Sourcing in a different way means that our sources have got to work harder and go to places they normally don’t go, not just wait for referral, and not just wait for people to come to us, but find them. That’s one. And then when we are opening a role you’re going to have, let’s say five people that will go through the full circle of the recruitment of these eight interviews. Make sure that we have enough diverse people in that process, and then may the best men or women, center of periphery, Arabs, ultraorthodox, or secular win, but to make sure that we have enough. Are we there? Not yet. I would say we have a long way to go. Are we on the way? Absolutely. And in some places, winning big time. Periphery is not an issue. So really from all over the country. Periphery is less of an issue, but we don’t have enough Arabs. We don’t have enough ultraorthodox, and it’s definitely a topic.
Matt Cooke: Interesting.
Dana Maor: Matt, maybe just adding something that goes to the previous question. In addition to all the things that Adi mentioned as ways to identify and attract potential and skills, rather than experience and education, we are seeing an increasing trend of injecting analytics into that, and it is still growing and it is still learning, but learning what to look for in someone‘s profile to be able to see that they have some of the ingredients to be successful in a certain role, hopefully over time, that will help us identify the potential that’s out there, the skills that would be helpful for us outside the organization, and also in the organization.
So that’s one other thing that we are seeing increasingly being considered as part of the recruiting process.
Matt Cooke: Dana, one super interesting area here of course is the investment companies now need to make in upskilling and career path planning. Can you say a bit more about that, including perhaps whether this is a space where, given the current economic environment, we might see even more focus than we have before?
Dana Maor: I think that there’s no doubt [that] organizations have to invest more and, by the way, it doesn’t mean that they need to invest everything at home, it means that they need to be very thoughtful about what is it that they would need in terms of skills and capabilities, internally or externally, and where they could build that. So we are seeing organizations thinking about the lifelong learning of employees, how learning becomes a journey rather than a one-off event that happens when you’re promoted to a new role or when there’s a change in your career. And they’re thinking about an ecosystem.
Some of it will be in-house, but some of it can lean on exciting opportunities out there. It’s not only the hard skills, right? It’s the leadership skills. It’s the management skills. It’s the functional skills. Those could be learned anywhere. You don’t have to be in a classroom learning some specific, technology, but we’re seeing everybody investing more hours, more money and more thoughtfulness. Not only in what it is that needs to be learned, but also the different career paths one can take over their lifetime. You don’t want to force an engineer to be a manager as their only way to grow and advance. They may have three other exciting roles that they could take in the company.
Adi Soffer-Teeni: And maybe to add that growth within the role, and not just focusing on moving from one role to another. How companies and leaders create massive growth opportunities within the role in a way that when someone is ending his few years doing the role, the role is actually different. So you need to hire someone different for the role now. If you think about that and create for top talent opportunities to grow massively within the role in a way that actually redefines the role, think that‘s a huge win.
Matt Cooke: Adi, we’ve talked about the development of the space in which you currently operate as Meta over the last 12 years. And we’ve talked about how you‘re evolving your talent offer in the company today. Now, can we turn to the future? I guess the clue is in the name or the name change, right? But does the metaverse really matter?
I hope it will really matter.
Adi Soffer-Teeni: So I can share a funny story. When I was actually at 888, on one day, this was back in 2008 or nine, one day we were in the leadership meeting, management meeting. There was a knock on the door, and someone came in with a package. It was really nicely wrapped. We opened it [and] there was an iPhone inside. We were one of the biggest Internet companies in the world. One of the biggest digital companies in the world. The iPhone was going around the room and everyone was looking at it, taking it up, down, finished the round. And there was a consensus, literally a consensus by one of the biggest Internet companies in the world that this is a gimmick.
I tell that story, because I think that, in many ways we look at the metaverse right now and Web 3.0 a little bit as a gimmick. And it’s okay because this is how it looks at day one. It‘s not even day one. It’s hour one of day one. It’s really the beginning. It will take probably ten years before it’s going to be as massive and as big in our life the same as Web 2.0 is, and mobile and, the same as Web 1.0 and desktop was. But if you think about the metaverse as the next phase of the Internet and that phase one was desktop and home Internet, home connection, very slow, even though we thought it was fast, every software was very locally stored. So it was very heavy. Our ability to communicate with the world existed, but really poorly compared to what it is today. and then Web 2.0, suddenly taking this internet communication and desktop and putting it in our hand, being everywhere with us, as mobile as we could imagine, with ability to consume content and software and to communicate, everywhere, and every single minute of the day. And that was Web 2.0.
We need to hold it in our hand, which is a bizarre experience. We got used to it but it’s not the best experience. And then we watch it from the outside, right? So it’s a 2D dimension. We watch the internet from the outside. The present experience is very lagging compared to what it could be in the future. And the question is can the next phase of the Internet and can the metaverse change that and allow us to have a present experience that doesn’t exist today in the 2D dimension, watching the screen from the outside, but actually being a lot more present in it? I think the answer is yes. I actually think that when you think about AR [augmented reality] and VR [virtual reality], thinking that’s not going to be a big chunk of how we’re going to live our life, is similar to thinking that iPhone was a gimmick at the time. But as Bill Gates said, we always overestimate what we can do in a year or two, and we always underestimate what will happen in the next ten years. So I think the metaverse will be a big part of our life.
Matt Cooke: That’s fascinating. I think the scale point that you make about us being in the first hour of this is a brilliant one. There’s a question I think I you’ll appreciate, I have to ask, given the kind of nascent point at which the technology is, and given the issues that Facebook, now Meta, have wrestled with in the recent past—privacy, online behavior, monitoring and policing of content, child protection, political interference claims, et cetera—how are you thinking about the evolution of the metaverse in the context of those issues?
Adi Soffer-Teeni: First of all, these are very important issues and in many ways, we have a very unique opportunity. The internet revolution, and definitely the first chapter and the second chapter, desktop and mobile, were a big surprise, right? They became such a big part of our life over a very short period of time. The people that were the builders of the internet that created the big companies, the infrastructure, the experiences, I don’t think really anticipated being entrepreneurs and very optimistic entrepreneurs never anticipated also the bad that would come with it.
The important opportunity we have right now is that we are on the first minute of the first hour of the first year of a probably ten- or 20-year revolution and we have all this experience now. So we understand the internet better today. We understand the good, the bad, and the ugly. We understand the amazing use cases. We can imagine how education will be in the metaverse. We can imagine how this can be the revolution that we were looking for. From consuming content in ways that we never could before. We can imagine the revolution. We can’t still execute on it because the technology is not here, but we can imagine it.
And at the same time, we can also imagine the abuse and already now start to plan for it and have the right partners to do it with us. So all these companies that will build the metaverse, and Meta will be only one out of many, now have the opportunity to collaborate on day one with regulators, with policy makers, with professionals, and all these important topics you mentioned, Matt, before, and have them be part of this journey already from day one and build it together.
And that’s what we’re doing. So we have all these amazing consultants on every dimension, people that know about those things way better than we do. That’s not our profession. Joining the ride, basically having a seat at the table at the decision-making table on how we actually want to build it. in many ways, similar to how you think about AI, right? It’s obviously going to be, and it is, one of the biggest revolutions. Does it come with bad elements in it? Of course it does. But when you think about the two together, on day one, you can plan the good and you can mitigate the bad, in the best possible way. That’s the opportunity we have right now.
Matt Cooke: Very final question to you now. Let’s go from the metaverse back to the start-up nation, right? What does the metaverse mean for Israel? Many people talk about the metaverse leveling the playing field. What does it mean for Israeli B2C companies?
Adi Soffer-Teeni: This is where I get really excited. We almost missed Web 1.0 and Web 2.0. And Dana said before, to be honest, without COVID-19, I don’t know if we would’ve managed to close the gap, so COVID-19, the massive digital acceleration that happened [then], and the fact that we had already some companies or many companies that moved really fast, allowed the Israeli entrepreneurship ecosystem and start-ups to close some of the gaps compared to American companies. But the United States is so ahead of us. When you look at US entrepreneurs and start-ups, they’re ahead of us when it comes to B2C companies. We celebrated different start-ups here reaching $10 billion evaluation, $5 billion evaluation. We really celebrated it. But the equivalent in the United States is a $100 billion evaluation, a $200 billion evaluation. It’s huge, massive companies.
The gap is not because we can’t—it’s not because we sit in Israel. It’s because we started late, and because we were not there on the first day of the race. We’ve caught up now.
Now we have the opportunity to be there on day one. When the race starts … we can have Israeli entrepreneurs, both from the deep tech side of building the infrastructure of the metaverse, but also from the B2C side, building the experiences for people. So the idea here is that, think about the travel vertical [and] how it‘s going to be on the metaverse, how people will choose where to travel. I’m traveling to Paris in a few days [and] it was hell to find a hotel. Okay. How easy would it be to find a hotel or a restaurant or a street I want to go and see when you think about who will be the leading company in travel on Web 3.0. I don’t think it‘s going to be the leading companies in Web 1.0 and 2.0—the current leading companies. I don’t think so. The innovator dilemma will happen.
The big companies that exist today in the internet will not be the big companies of Web 3.0. Can that be an Israeli start-up? Yes, it can. We just need to make sure that we are there on day one when the race starts and build amazing B2C experiences on top of building the deep tech side of it. It‘s a massive opportunity for Israel. We have the entrepreneurs, we have the product, we have the creativity, we have the knowledge, [and] we have the funding right now. Everyone believes in B2C, I hope by now. I think the next phase of the internet will allow us to grow the ecosystem way faster and build much bigger companies.
Matt Cooke: Adi and Dana, Thank you so much. I think we’re going to have to dedicate a whole other episode at some point, perhaps in a year’s time we’ll come back and we‘ll be in hour [one] or two of the metaverse and we can see how things have developed over time. Thank you so much. We’ve really enjoyed talking to you today.
Adi Soffer-Teeni: Same.
Dana Maor: Thank you.
Adi Soffer-Teeni: Thank you.
Comments and opinions expressed by interviewees are their own and do not represent or reflect the opinions, policies, or positions of McKinsey & Company or have its endorsement.