Dan Singer: Start-up Nation

Agassi founded TopTier when he was twenty-four. Fifteen years later, he headed two SAP subsidiaries, was the youngest and only non-German member of SAP’s board, and had been short-listed for CEO. Even if he missed the ring at thirty-nine, he could be pretty confident that someday it would be his.

Yet here Agassi was, with the next president of Israel, trying to instruct an auto executive on the future of the auto industry. Even he was beginning to wonder if this entire idea was preposterous, especially since it had begun as nothing more than a thought experiment.

At what Agassi calls “Baby Davos”—the Forum for Young Leaders—two years before, he had taken seriously a challenge to the group to come up with a way to make the world a “better place” by 2030. Most participants proposed tweaks to their businesses. Agassi came up with an idea so ambitious that most people thought him naive. “I decided that the most important thing to do was to figure out how to take a single country off of oil,” he told us.

Agassi believed that if just one country was able to become completely oil-independent, the world would follow. The first step was to find a way to run cars without oil.

This alone was not a revolutionary insight.

He explored some exotic technologies for powering cars, such as hydrogen fuel cells, but they all seemed like they would forever be ten years away. So Agassi decided to focus on the simplest system of all: battery-powered electric vehicles. The concept was one that had been rejected in the past as too limiting and expensive, but Agassi thought he had a solution to make the electric car not just viable for consumers but preferable. If electric cars could be as cheap, convenient, and powerful as gas cars, who wouldn’t want one?

Something about coming from an embattled sliver of a country—home to just one one-thousandth of the world’s population—makes Israelis skeptical of conventional explanations about what is possible. If the essence of the Israeli condition, as Peres later told us, was to be “dissatisfied,” then Agassi typified Israel’s national ethos.

But if not for Peres, even Agassi might not have dared to pursue his own idea. After hearing Agassi make his pitch for oil independence, Peres called him and said, “Nice speech, but what are you going to do ?” 1

Until that point, Agassi says, he “was merely solving a puzzle”—the problem was still just a thought experiment. But Peres put the challenge before him in clear terms: “Can you really do it? Is there anything more important than getting the world off oil? Who will do it if you don’t?” And finally, Peres added, “What can I do to help?” 2

Peres was serious about helping. Just after Christmas 2006 and into the first few days of 2007, he orchestrated for Agassi a whirlwind of more than fifty meetings with Israel’s top industry and government leaders, including the prime minister. “Each morning, we would meet at his office and I would debrief him on the previous day’s meetings, and he’d get on the phone and begin scheduling the next day’s meetings,” Agassi told us. “These are appointments I could never have gotten without Peres.”

Peres also sent letters to the five biggest automakers, along with Agassi’s concept paper, which was how they found themselves in a Swiss hotel room, waiting on what was likely to be their last chance. “Up until that first meeting,” Agassi said, “Peres had only heard about the concept from me, a software guy. What did I know? But he took a risk on me.” The Davos meetings were the first time Peres had personally tested the idea on people who actually worked in the auto industry. And the first industry executive they’d met had not only shot down the idea but spent most of the meeting trying to talk Peres out of pursuing it. Agassi was mortified. “I had completely embarrassed this international statesman,” he said. “I made him look like he did not know what he was talking about.”

But now their second appointment was about to begin. Carlos Ghosn, the CEO of Renault and Nissan, had a reputation in the business world as a premier turnaround artist. Born in Brazil to Lebanese parents, he is famous in Japan for taking charge of Nissan, which was suffering massive losses, and in two years turning a profit. The grateful Japanese reciprocated by basing a comic-book series on his life.

Peres began to speak so softly that Ghosn could barely hear him, but Agassi was astounded. After the pounding they had just received in the previous meeting, Agassi expected that Peres might say something like, “Shai has this crazy idea about building an electric grid. I’ll let him explain it, and you can tell him what you think.” But rather than pulling back, Peres grew even more energetic than before in making the pitch, and more forceful.

Oil is finished, he said; it may still be coming out of the ground, but the world doesn’t want it anymore. More importantly, Peres told Ghosn, it is financing international terrorism and instability. “We don’t need to defend against incoming Katyusha rockets,” he pointed out, “if we can figure out how to cut off the funding that launches them in the first place.”

Then Peres tried to preempt the argument that the technology alternative just didn’t exist yet. He knew that all the big car companies were flirting with a bizarre crop of electric mutations—hybrids, plug-in hybrids, tiny electric vehicles—but none of them heralded a new era in motor vehicle technology.

Just then, again about five minutes into Peres’s pitch, the visitor stopped him. “Look, Mr. Peres,” Ghosn said, “I read Shai’s paper”—Agassi and Peres tried not to wince, but they felt they knew where this meeting was heading—“and he is absolutely right. We are exactly on the same page. We think the future is electric. We have the car, and we think we have the battery.”

Peres was almost caught speechless. Just minutes ago they’d received an impassioned lecture on why the fully electric car would never work and why hybrids were the way to go. But Peres and Agassi knew that hybrids were a road to nowhere. What’s the point of a car with two separate power plants? Existing hybrids cost a fortune and increase fuel efficiency by only 20 percent. They wouldn’t get countries off oil. In Peres and Agassi’s view, hybrids were like treating a gunshot wound with a Band-aid.

But they had never heard all this from an actual carmaker. Peres couldn’t help blurting out, “So what do you think of hybrids?”

“I think they make no sense,” Ghosn said confidently. “A hybrid is like a mermaid: if you want a fish, you get a woman; if you want a woman, you get a fish.”

The laughter from Peres and Agassi was genuine, mixed with a large dose of relief. Had they found a true partner for their vision? Now it was Ghosn’s turn to be worried. Though he was optimistic, all the classic obstacles to electric vehicles still remained: the batteries were too expensive, they had a range less than half that of a tank of gas, and they took hours to recharge. So long as consumers were being asked to pay a premium in price and convenience, clean cars would remain a niche market.

Peres said that he’d had all the same misgivings, until he had met Agassi. This was Agassi’s cue to explain how all these liabilities could be addressed using existing technology, not some miracle battery that wouldn’t be available for decades.

Ghosn’s attention shifted from Peres to Agassi, who dove right in.

Agassi explained his idea, as simple as it was radical: electric cars seemed expensive only because batteries were expensive. But selling the car with the battery is like trying to sell gas cars with enough gasoline to run them for several years. When you factor in operating costs, electric cars are actually much cheaper—seven cents a mile for electric (including both the battery and the electricity to charge it) compared to ten cents a mile for gas, assuming gas costs $2.50 a gallon. If the price of gas is as high as $4.00 per gallon, this cost gap becomes a chasm. But what if you didn’t have to pay for the battery when you bought the car and—as with any other fuel—spread the cost of the battery over the life of the car? Electric cars could become at least as cheap as gasoline cars, and the cost of the battery with the electricity to charge it would be significantly cheaper than what people were used to paying at the pump. Suddenly, the economics of the electric car would turn upside down. Furthermore, over the long run, this already sizable electric cost advantage would be certain to increase as batteries became cheaper.