The Little Kibbutz That Could

By: Prof. Shlomo Maital, TIM Academic Director 

A moschl, goes the Yiddish saying, iz nischt a derweiz. For instance is not a proof.  

Sorry, Yiddish speakers, but for mathematicians, an example is a powerful proof. A single example proves something is possible. Aristotle said that "one swallow does not make a summer." But if summer is always preceded by swallows, then one swallow does make a summer.  

Consider Kibbutz Sasa. It proves by example that the wolf of capitalism can lie down with the lamb of socialism. It proves that kibbutz industries can compete globally with multinational giants. It proves kibbutz companies can be superbly managed and can develop sophisticated new technologies. And it proves, as Martin Buber once noted, that the experiment of the kibbutz has not yet failed. Indeed, he might have added, in a few places it has hugely succeeded.

Nestled at the foot of Mount Miron, near the Lebanese border, Kibbutz Sasa was founded during Operation Hiram, on January 13, 1949, by HaShomer Hatzair members from North America. Later, olim from France, Italy and Switzerland joined, along with Israelis. The word Sasa is in the Mishna and means the beard on bearded wheat. 

For two decades, until the late 1960's Sasa struggled to make a living. But today Sasa's 100 families and 270 members enjoy remarkable prosperity. One might even say that each is a multi-millionaire. How did this happen?

The turning point came in 1985, when Sasa established a company Plasan, initially to produce plastic dumpsters. When that proved unprofitable, Plasan switched in 1989 to making ballistic protection, such as protective vests for IDF's bomb squads. During the first intifada, the IDF desperately needed vehicles with protective armor. Plasan developed such armor for the IDF's Sufa and Hummer vehicles. R&D investment was expensive and risky, but ultimately successful, built on the hands-on experience of IDF officers for whom armor protection was lifesaving. Plasan's armor plating is transparent, flexible, lightweight and has superior thermal and acoustic properties. 

The wars in Iraq and in Afghanistan created an opportunity. Many American soldiers died when IED's (improvised explosive devices) blew up their vehicles. Senator (now Vice President) Joe Biden's amendment nearly doubled funding for MRAP's (mine resistant ambush protected vehicles), Plasan established subsidiaries in America and in France, built strategic partnerships with US firms (Navistar, Oshkosh) and improbably muscled its way into huge tender competitions for America's Defense Department. Its product proved itself in the fiercely tough testing ground at Aberdeen Proving Ground, Maryland. More important it proved itself in battle. Last year USA Today reported that roadside bomb attacks and fatalities in Iraq were down almost 99% partially due to MRAPs.

In 2008, Plasan won a $200 million contract for armor for US military vehicles in Iraq, and in 2009, a $250-$300 million contract for MRAP vehicles in Afghanistan. Plasan armor will protect US soldiers in 2,247 MRAP's in Afghanistan. And workers in Israel will benefit. Plasan is a major employer in the job-starved Galilee. It employs some 1,100 workers, more than 750 of them in Israel − 50-60 from Kibbutz Sasa itself, the others in Carmiel, and in Maalot. The latest contract will create some 150 new jobs.      
Plasan's veteran founder, CEO and kibbutz member Dan Ziv was born and raised in North Tel Aviv and came to Sasa as a member of a Nachal unit, then studied architecture. He told Channel 10 news that "I am a capitalist." But earlier, he defined for business daily The Marker what that means.

"If you want a million dollars," he said, "make sure you make $200 million -- one million for each kibbutz member." And he has. Is greed a necessary ingredient of capitalist success? Plasan and Ziv prove otherwise.

Ziv says Plasan's 2008 sales will be $700 million, more than double those of 2007.  

How does Plasan defeat its competitors? We're better than they are, Ziv says simply. 

Plasan is a private company wholly owned by Sasa and has resisted the temptation to go public or to sell shares to outsiders, like other kibbutz industries have done. But hypothetically, if it did an initial public offering of shares, my guess is Plasan could attain a valuation of perhaps $5 billion or seven times its revenues. That makes each Sasa member − man, woman and child − worth about $19 million.

As a child, I read the storybook The Little Engine That Could by Watty Piper, about an engine that pulled a long train over a mountain when other bigger and stronger engines refused. The little engine's refrain was "I think I can, I think I can."

Kibbutz Sasa and its company Plasan are, to me, that little engine. Led by CEO Dan Ziv and new R&D head Shuki Yeshurun, Plasan and Sasa said, we think we can, we think we can. And then, like the little engine, they did, and said, we thought we could.

At a time when the world is looking for ways to repair the broken model of capitalism, perhaps Sasa and Plasan can offer the world not only armored vehicles but also new ways to build and sustain businesses fairly and efficiently.

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*This article originally appeared in the Jerusalem Report's Marketplace column, August 31, 2009.