Gaza in the hands of Hamas, with masked militants sitting in the president's chair; the West Bank on the edge; Israeli army camps hastily assembled in the Golan Heights; a spy satellite over Iran and Syria; war with Hezbollah a hair trigger away; a scandal-plagued political class facing a total loss of public faith.

At a glance, things aren't going well for Israel. But here's a puzzle: Why, in the midst of such chaos and carnage, is the Israeli economy booming like it's 1999, with a roaring stock market and growth rates nearing China's?

Thomas Friedman recently offered his theory in the New York Times. Israel "nurtures and rewards individual imagination," and so its people are constantly spawning ingenious high-tech start-ups--no matter what messes their politicians are making. After perusing class projects by students in engineering and computer science at Ben Gurion University, Friedman made one of his famous fake-sense pronouncements: Israel "had discovered oil." This oil, apparently, is located in the minds of Israel's "young innovators and venture capitalists," who are too busy making megadeals with Google to be held back by politics.