How to build wealth, how to sustain it

I read an article about one of the places I visited when I was in Dubai on a business school trip almost exactly a year ago. A massive man-made hotel complex, designed to appear as though it were under water, despite being above water, on a man made island designed to appear as though it were a giant palm tree. It was called the Atlantis.

http://www.economist.com/blogs/gulliver/2008/09/even_in_the_holy_month.cfm

I'm just across the desert from Dubai and it's glittering hotels now -- in sunny Tel Aviv for my first project back with McKinsey. It's funny to think that despite being so close to the UAE this place has so little to do with it. Both places are small at the edge of vast deserts with little resources of their own, yet they could not be more different. Tel Aviv is prosperous and has had it's own building boom, yet clearly nothing on the scale of Dubai. Both places have benefited greatly from globalization but in very different ways -- Dubai from the riches of the regions energy assets and Israel from the arbitrage between its exports of increasingly valuable high-end goods and services and its imports of increasingly cheap low-end manufactured goods.

Photo on left is of the new Atlantis in Dubai, at right is Tel Aviv's beach, taken today directly outside my hotel. The purpose was to show that the Dubai beach was "nicer", although I must admit they both look pretty good.


The article above makes an interesting point about the security situation -- Dubai is indeed free from the security encumbrances of Israel and the rest of the region, so far. Despite this ostensible freedom, it still feels remarkably more constricted. In Dubai, the myriad fine restaurants and nightclubs are all aligned in an orderly fashion in the dozen massive glittering hotel-complexes that line the main road along the beach. Each complex was carefully planned -- they are well executed, but they are sterile.

As a model for development, authoritarian planning may be tough to beat. I've seen this and written about it from Bhutan, Central Asia, China, and elsewhere -- Dubai is no exception. The powerful Sheikh has made a great city appear literally out of nothing. but as a model for enjoying the fruits of that wealth, it is surely flawed.

Israel, a nation which has undergone a similar transformation as Dubai; from sandy villages to hotels with sandstone bathrooms has no well-executed hotel complexes. Last week I stayed in the Azrieli Center, one of Israel's finest developments. It was no Dubai. A chintzy at best affair, it had a mall haphazardly planned and a hotel crammed into an office building as a clear afterthought. Planning is not Israel's strong suit -- yet in Israel's chaos it's charms are found. It's a difficult case to make, but it's hard to imagine the art and technology that Israel has produced emerging from anything well-planned, no matter how fine the restaurants on offer.

Israel has many issues -- uneven infrastructure, precarious security, loud children, etc. Yet there is no question of where I would rather be working now -- and there is, in my mind, no question of where I think there will be greater wealth in the long run. There will come a day when oil and gas are made irrelevant by some new technology. And I am willing to wager that the technology will come from Israel, not Dubai.