The announcement of the bankruptcy of a tiny electric car company called Better Place barely created a ripple in financial circles. The Financial Times noted that while Better Place was once “hailed as a visionary pioneer,” it was now being relegated to history as just another failed attempt to make the leap from internal-combustion engines to batteries in one fell swoop.

The business model was doomed from the start. It was based on the concept of buying miles in a rental car with replaceable batteries similar to the one briefly tried in telecommunications: buying minutes on a cell phone. The idea was that the cost per mile of using electric cars would be about 4 to 5 cents instead of the typical IC vehicle's cost of 10 cents and up. With a network of ubiquitous battery replacement stations every 25 miles or so, a driver could just pull in, swipe his credit card, and his nearly exhausted battery would be automatically replaced in about a minute. He'd be on his way in half the time, at half the cost.

It never came close to working. The cost of each replacement station was estimated to be about $500,000 and special vehicles had to be used. In the five years since its founding, only about 430 of them had been sold. Said the announcement from the company:

This is a very sad day for all of us. We stand by the original vision as formulated by [company founder Shai Agassi] of creating a green alternative that would lessen our dependence on highly polluting transportation technologies.

Unfortunately, after a year's commercial operation, it was clear to us that despite many satisfied customers, the wider public take-up [read: acceptance] would not be sufficient….

If one reads only the headlines, he would be persuaded of two things: one, the concept of electric cars is still largely a dream that will take decades, not years, to catch hold. And two, at least there was no government money involved: just some rich green dreamers who put their own money into the deal, and lost it all as another example of “the triumph of experience over hope.”

Behind the headlines, however, a much different story emerges. And it's worth exploring for the tale it tells of the ideology of the dreamers about how the world ought to work, with their help. Shai Agassi made about $400 million selling his software company, TopTier Software, to SAP in April 2001. He was on SAP's board for a while but when he was passed over to become SAP's CEO, he quit and disappeared from public life for a few years.

He emerged following his attendance at a green gathering called the World Economic Forum in Davos, Switzerland in 2005 where he heard Klaus Schwab, the founder of the WEF, challenge his audience: “How do you make the world a better place by 2020?” Agassi accepted the challenge and, putting up a little of his own money, found other green investors to fund his idea.

He was enormously successful in selling the dream. He raised more than $2 billion from his friends and contacts, including Renault, Nissan, General Electric, UBS Bank, Morgan Stanley, and a company nobody ever heard of: Israel Corporation.

Israel Corporation is one of Israel's largest holding companies, with interests in Zim Integrated Shipping (ZIM), Israel Chemicals, oil Refineries Ltd., Bank Mizrahi, Royal Caribbean International, Tower Semiconductor, and others. And who owns Israel Corporation? The Ofer family, headed up by Sammy Ofer until his death in 2011. Ofer was the wealthiest man in Israel, having gotten there the easy way: by making the most of friends in government who arranged for sweet deals to come his way. His personal wealth was estimated at his death to exceed $10 billion, and the company is now run by his two sons, Eyal Ofer, and Idan Ofer, the company's CEO.

The ties of Israel Corporation go all the way back to its founding in 1968, when its original founder was granted tax exemption for 30 years in exchange for operating in Israel. That was just the beginning of an incestuous crony capitalist relationship with the government. It worked just great for years as any attempt to expose that relationship was successfully silenced by members of the establishment media.

All remained silent, that is, until 2008, when an Israeli journalist, Mickey Rosenthal, decided to make a documentary – The Shakshuka System – which outlined in great and embarrassing detail just how incestuous that relationship was. For his efforts, Rosenthal received anonymous death threats and rejections from anyone in Israel to show the film. It pointed out the hypocrisy inherent in the company's claims to be “green” and its support of various green projects like Better Place, all the while it was polluting the environment with its oil refineries and chemical plants.

Most embarrassing was the revelation that Sammy Ofer got his start with the purchase of ZIM at about one-quarter of its real value from the Israeli government. When his film was finally made public, reviewers claimed it was a “must see.” Movie critic Guy Meroz wrote:

Drop everything and see this movie. You would get a more detailed accurate explanation of how the state steals from us and transfers the gains to the Ofer brothers.

There were other revelations in the film as well, but the point was made: Sammy Ofer, and now his sons Eyal and Idan, continue to ride the crony capitalist wave.

Where does Better Place fit into all of this? Despite its failure, neither Agassi nor Israel Corporation had much more than a modest position in the company, and its bankruptcy will probably end up as merely a footnote to their annual reports and financial statements. What it did do is similar to what John D. Rockefeller's “March of Dimes” program did for him: it cleaned up his image. For Agassi and the Ofer brothers, Better Place served its purpose: “we're true blue believers in green technology. We'll just have to try a little harder next time.”

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Sources:

Electric car group Better Place files for bankruptcy

Ofer Brothers Group

Better Place

Sammy Ofer

The Israel Corporation

Shai Agassi

The Shakshuka System

Carnegie, Rockefeller and Ford and the World They Made