For years, Israelis have comforted themselves with a familiar story: we may be small, but we know how to win in technology. We built a world-class cybersecurity sector, turned military experience into startups, talent, and exits at a scale wildly disproportionate to our size. So the assumption follows naturally: when it comes to artificial intelligence, Israel can simply do what it did in cyber.

That assumption is wrong.

AI is not cyber. It is not another software category waiting for Israeli ingenuity to carve out a respectable niche. It is a fundamentally different technological phenomenon, one that is rapidly becoming the base layer of all other industries.

In cyber, one could build point solutions in specific verticals around a large and durable market. In AI, many of those margins are temporary. The intelligence itself increasingly absorbs them.

To understand the problem, one must first understand the progression of AI itself. We began in the era of artificial narrow intelligence: systems built to do specific tasks. Image recognition. Recommendation systems. Fraud detection. Translation. Chess. Go.

Narrow systems were impressive, useful, and commercially valuable, but they were bounded. They did one thing, or a small number of related things, and did not generalize far beyond that.

Then came the modern large language model era, popularized globally by ChatGPT. Whatever one’s preferred technical definition of artificial general intelligence may be, the world undeniably crossed into a new epoch: AI systems are no software tools with one function, but flexible intelligence engines capable of performing an expanding range of cognitive labor.

From there, the center of gravity shifted again. We moved from chatbots to agents. A chatbot answers. An agent acts. It can use tools, browse, write code, make plans, call software, execute tasks across steps, and increasingly pursue goals with limited supervision. The importance of this shift cannot be overstated. Once AI becomes agentic it starts directly inserting itself into the economy in all verticals.

And with agents, we are now approaching the next threshold: recursive........

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