When 95% of high-tech employees use AI regularly and 1% of construction firms do, the question is not whether AI raises productivity — but whose?

There is a number that ought to keep Israeli policymakers awake at night, and it is not a casualty figure or a debt-to-GDP ratio. It is 95% — the share of Israeli high-tech employees who now use AI tools regularly, 78% daily, per a November 2025 survey by the Israel Innovation Authority and the Myers-JDC-Brookdale Institute. The global comparator, from Microsoft and LinkedIn, sat at 75%. Israel is not catching up to the AI frontier. Israel is the frontier.

And yet, walk a few kilometres from the Tel Aviv glass towers to a construction site in Bnei Brak or a hotel kitchen in Eilat, and the numbers collapse. The Central Bureau of Statistics reports that just 1% of Israeli construction firms made paid use of AI in June 2025. In trade and commerce, 11%. In services and hospitality, 16%. The high-tech sector reports 55% paid plus 5% free. The gap between Israel’s leading sector and its lagging sector is not a gap. It is a chasm.

This is the global productivity paradox in microcosm — but Israel exhibits it in the most extreme form on the planet. An NBER survey of nearly 6,000 senior executives across the US, UK, Germany and Australia found 69% of businesses actively use AI, yet 89% report no detectable impact on productivity and 90% no impact on employment over three years. PwC’s 2026 AI Performance Study of 1,217 executives across 25 sectors found 74% of AI’s economic value is captured by just 20% of organisations. The distribution is not flattening. It is sharpening.

Three financial-economic frameworks make sense of what is happening, and why Israel sits at the epicentre of all three.

First, real options. Adopting AI at scale is not a single decision. It is a sequence of irreversible investments — data infrastructure, workflow redesign, governance, training — each of which only pays off if the preceding ones were made. The 20% of firms capturing 74% of the value are not luckier or smarter. They exercised their options earlier, when premia were lower, and hold the complementary assets that make further exercise profitable. The remaining 80% are holding out-of-the-money options on a depreciating clock. Every quarter they wait, the strike price effectively rises as leaders pull ahead and the talent pool shrinks. The rational response is not patience. It is exercise — even at apparently uneconomic terms — because the alternative is option expiry.

Second, fat tails. Controlled trials are starting to map where AI’s........

© The Times of Israel (Blogs)