Gaming is very different in Japan than it is in America, but PowerCore is introducing technology that could lead to major changes in both of them.

Toys to Life technology blurs the distinction between the analog and digital worlds by having digital gameplay react to the presence of physical toys. For example, after buying a figuring, that character would appear in the game.

The first generation of this technology is already being used by powerhouses such as Disney and Nintendo, but the real change is yet to come.

Today Jia Shen explains what the future holds for Toys to Life, and why he decided to start his company in Japan.

It seems that the boundary between analog and digital is about to become a lot less clear.

It’s a great conversation, and I think you’ll enjoy it.

Show Notes for Startups

  • Why large companies have trouble crossing the toy-game barrier
  • Why it made sense to build a distributed team from Tokyo
  • The special appeal of physical goods in our digital life
  • How Disney just made a big mistake
  • Why children don’t play with some toys
  • Why Japan gaming might be the future model for the rest of the world

Links from the Founder

Transcript from Japan

 Disrupting Japan, episode 73.

Welcome to Disrupting Japan, straight talk from Japan’s most successful entrepreneurs. I’m Tim Romero and thanks for joining me.

You know, gaming has always pushed the limits of both computer hardware and the interfaces we use to interact with computers. Jia Shen, of PowerCore, is blurring the distinction between the online and offline interaction. Powercore enables video games to react to the presence of physical object. For example, if you owned a figurine of a superhero, that hero could appear in the game.

It’s a simple interaction that radically changes the way we view the digital-analog divide. Of course, as with all technologies, adoption is never smooth, and Jia explains some of the mistakes that burned Disney, and some of the major market players. It seems that, as is so often the case, the secret to introducing innovative technology, is to do only as much as you absolutely have to, and then watch how your users react. It’s a simple idea in principle but there are surprising reasons why some of the most influential companies in the industry have trouble following it.

But Jia tells that story much better than I can, so let’s hear from our sponsors and get right to the interview.

    

Tim: I’m sitting here with Jia Shen of PowerCore. Now, PowerCore does toys to life or sometimes it’s called offline-online business, but why don’t you explain basically what it is and who uses it.

Jia: Sure. The toys to life is a model, that from our perspective, Japan has done a lot of pioneering, but the United States, in maybe the last 5 or 6 years, have made a very large business out of it. So we point to, in the US, Skylanders from Activision, Disney had a big one called Infinity, featuring a lot of the great Disney characters. Nintendo, LEGO, they all have some forays into this. And specifically it’s toys that are collectible, that have a strong interaction with video games. So the guys that do it on a large scale, they usually have console games, and you have different characters, which you can stick into the game, they have different power-ups, they have different game mechanics.

Tim: For example, there would be a figurine, or a trophy, or a sticker of some kind that would activate a character in the game or would activate new levels in the game?

Jia: Skylanders, I think, is the best game design. They really accentuate the collection of individual characters. So imagine a Super Mario game but different levels have different mechanics. For instance, certain ones require you to be able to have wheels as feet, to be able to run faster. Other ones require you to have big hands to be able to crawl up walls.

Tim: So what is the physical tie-in there?

Jia: As a player, you literally have your character in front of it when you’re walking through, and say there’s a specific enemy that you want to defeat that requires a specific characters, you immediately swap the character right on the pedestal, and that person immediately appears out of the game.

Tim: Okay, so you’re swapping physical characters in the real world and that’s impacting the game in real-time, as you play it? Cool. Are most customers taking existing IP and making toys, like Star Wars or Frozen or Angry Birds? Or are they companies that have like a popular game and want to add a layer of physical activity to it?

Jia: We have 3 categories of customers. The big customers are large toy companies that are trying to unify kind of a merchandising strategy. In Japan, let’s use Naruto as an example. Naruto is kind of licensed out from Shoeisha and they take that and a bunch of other companies do the merchandise, and a bunch of other companies do the games. None of them are the same. So typically, with an IP company, there’s a lot of business units, a lot of companies associated to it, and none of them are really interacting with one another. And that’s really kind of a sweet spot for us, IPs that are doing large launches, that are existing in a lot of different places, but they really should be creating experiences that really unify everything. Marvel’s a good example of doing a good job of that. Marvel and Disney, what they do is they’re creating universes that everything interacts with the TV shows, work with their movies, the movies work with their games, everything kind of feeds into individual aspects to it. But if you look at everybody else outside of Disney, they’re definitely not doing that. A movie launches, it has nothing to do with a TV show. The toys themselves have their own campaigns and whatnot. Our job is to actually create universes among all these different mediums and the users are free to participate.

Tim: Okay. Listen, before we dig down deeper into the market as a whole, let’s talk about you for a minute. So this isn’t your first startup. You actually started up a pretty successful company called RockYou in San Francisco 8 years ago now?

Jia: I officially started 10 years ago.

Tim: 10 years ago. It was a company that was a platform for developing apps on Facebook and social media. What made you decide it was time to move on from that industry and move into toys to life?

Jia: I think one of the other big things was I moved to Japan. Around 2010, I came here because we did a joint venture with SoftBank, so that was a catalyst for me to move here. But I personally always wanted to be in Japan. The reason for me to move on was kind of more of a personal reflection point. RockYou as a company became very, very large. It’s definitely not the sweet spot in which I enjoy operating at. When I left, we were like 350 people or something in the United States office alone. I wanted to come here to basically try and do new stuff. I wanted to focus on becoming somebody that actually created strong content.

Tim: What was your attraction to Japan? Was the industry itself attractive or was just the country attractive?

Jia: The country attracted me. I’ve been coming to Japan since 2003, every year. For me it was like a very strong personal decision. I definitely wanted to live here.

Tim: Okay. Well, gaming in Japan, it’s certainly different than it is in the US. So is Powercore doing most of its current business in Japan, or the US, or do you have customers in both places?

Jia: We’re pretty much evenly split, as far as customers and the team. As far as core game businesses, Japan and Korea is actually the leader for that kind of business. The US, it more interestingly is coming more from the toy side, as well as the IP rights holders. United States’ IPs are more movie driven, so we’re doing a lot more business from kind of the movie IP and marketing launch sides. It’s the same goal that we’re trying to achieve, but because of how businesses and companies are setup, the US and Japan are actually very different.

Tim: With everything being digital these days, more and more of our life is digital. Do you think there’s some special appeal to having a physical object? Do people identify with that somehow more strongly than they do just the digital game or the digital character themselves?

Jia: Absolutely. And there is a difference based on individual IPs and that’s something that we’ve learned a lot about in the last year.

Tim: Like how?

Jia: The original thesis was you take any game that has a large audience with it, and we should be able to merchandise it. That’s absolutely not true because the two ways to look at our business: one is a very practical one, from business—I’ll get to that in a second—and first is actually universe-building. It works for adults and it works for kids, but it’s a lot more easy to see when a child takes a toy, scans it in. When they get it, it completes a fantasy, “Oh my goodness. My Pokémon is a stuffed animal and now it’s in the game.” Once you make that connection, it’s very nice. So the universe-building part is actually a nice part.

Tim: I could actually see how children would pick that up more quickly than adults would.

Jia: Yeah, they super love it. Every time you show a kid our scanning stuff, they just start trying to scan everything around the room and seeing what they can actually put into it and collect it. It’s super compelling when you see a kid do it. It’s really about universe-building. Disney started off doing cartoons and motion pictures and they were like, “We’re going to merchandise this stuff.” There’s no real connection, other than when you see the character from Frozen or whatnot, you do the make believe of that. But what games has done is actually take a make believe and created an interactive narrative where you can do make believe in a game and continue to play it over a long period of time. And that’s where toys to life is really the interesting piece. If you think about when you were a kid, you collect your toys, and you played with them, and you did your make believe thing, and you can now do it in a game. And the game itself can actually dictate more interesting game mechanics.

Tim: Is there a way to make it more interactive, rather than having the physical object, the figurine, scanning it, using it as an input device, and having the input react it, is a one-way process. Is there a way to make it more interactive so there’s a feedback look where somehow the gameplay interacts?

Jia: Yes, there’s absolutely ways to do that and there are companies that spend a lot of time doing that. Our goal, specifically, is to be able to have—and this is really a trend in businesses that I do—is always about making things as accessible as possible. We love these guys. They make great toys that—there’s a toy that you can actually have a robot, and whatever weapon you equip on top of the robot shows up in the game, the game can run basic feedback back into the toy. The problem with that toy is it’s a $500 toy. For us, our main goal is to take the toys that people are already playing with, already collecting, using very simple IOT type of technologies, enable those to have that connectivity. And the funny part is with kids, and with adults too, is that’s good enough.

Tim: It seems like such a natural extension and natural progression of technology but it hasn’t really been smooth. For example, I know that Disney pulled back on its toys to life marketing in mid-2016.

Jia: Yeah, they basically cancelled their whole Infinity line.

Tim: Why did they do that? What was the problem?

Jia: There’s the official answer—

Tim: Well, let’s get the real answer. That’s always better.

Jia: Disney Infinity was a wildly successful franchise for them. The quarter in which they cancelled it, the end of the holiday season of last year, they were number one. They did the most sales; they beat every other guy.

Tim: It would seem like the ideal company running this. They have Marvel, they’ve got the standard Disney line, Pixar. They’ve got the strongest IP in the world for that.

Jia: Yeah, in Q4 holiday season, with Star Wars: The Force Awakens.

Tim: Star Wars, of course.

Jia: Yeah, the Disney Infinity launch they did with that just sold like crazy. It was an epic blowout. I forgot what the exact revenue numbers were—in the 100-million dollars, easily.

Tim: Why on Earth would they back out of it?

    

Jia: A couple reasons. The official stuff is really that it’s too expensive for them. So there are two parts on this one. One is the merchandise, you actually have to do real projections and figure out how many characters you produce, of the individual characters, how many of those you go and produce, and they messed up. They overestimated and they underestimated because the year before Star Wars was Frozen, and that was epic, and they sold a ton of those. But then what they ran into was they had—

Tim: I mean, Disney is as good as anyone in merchandising and projecting these kinds of things, so was the problem that the toys to life interactivity was affecting the demand? Was it increasing it or decreasing it or skewing it in some way?

Jia: They spent a lot of money to beat Skylander and ultimately, they regretted it. Everything from paying for the right shelf space to producing enough products so guys like Toys R Us and Walmart would carry that large amount. They blew a lot of money and they actually had to write it off. And that was just on the inventory side. The other side, the story that is actually more relevant to us, which is on the digital side, they created a very expensive engine to maintain. And the key thing, what Disney and Skylander, everybody, focuses on is the hardcore console development stuff, which is expensive and slow.

Tim: So they went to market with a really high risk strategy of this really rich, complex gaming world, rather than simpler, smaller ones where they could gauge user interest and feedback?

Jia: Yeah, and free to play is much better for toys to life. I’ll give you an example of maintenance and creating new story. Let’s take Puzzles & Dragons here in Japan and let’s take Disney Infinity. Puzzles & Dragons, let’s say next year you want to launch a new IP on it. Putting that content into a free to play game, which is actually a game engine that already has collections and allows you to add additional characters into it very scalably. It’s not a big deal. In Japan, you have to do a lot of planning and whatnot, but you’re not creating a ton of new content. On the other side, what Disney has decided to do is that every version they put out is a huge narrative. The game design you could have done, which was the part that they finally figured out in the end, but it was too late, is you want to go with the toy box model, which is I want my toys, I want to be able to play with my toys, certain game interactions kind of work around with it. But what they did, they created basically another movie, which you could take a character and it’s really, really expensive.

Tim: So the toy box model is just simple play, simple interaction, very simple storylines, and the emphasis is playing with your character in that environment?

Jia: Like Super Mario Brothers, a lot of it is that core gameplay. Running around, hopping around—that’s a fun experience. You’re incentivized to collect coins. That’s like the game mechanics and the game hook that drives people to keep coming back, whereas Disney, being a movie company, really focused on the story. That’s a really expensive endeavor. You have 3D models, you have stories, voice actors, plots. The amount of work is almost 100-fold. You spend a lot of money. To develop one of those games is anywhere from 50 to 100 million dollars annually. And then on top of that, usually those games take years to develop.

Tim: Do you think Disney pulled out too quickly?

Jia: I think so. I don’t know where that’s going right now but a lot of people are trying to pick up that piece. They have the world’s best library of IP.

Tim: Absolutely. They seem to be like the perfect company to pick this up. Well, I guess every company will bring the tools they have to any project. So Disney wanted to create a big, epic Disney game, rather than the small interactive world to play in. But actually, I read both Disney and Wii U Amiibos were having the same problem with the activation rate. People who would buy the toys but wouldn’t activate them, wouldn’t use the game with them.

Jia: Yeah, Nintendo had a bigger with that than Disney did.

Tim: How do you think they can fix that?

Jia: It’s all about gameplay.

Tim: So do you think that in this case, Amiibos didn’t have an interesting enough game? It wasn’t immersive enough?

Jia: Absolutely.

Tim: So they kind of made the opposite mistake Disney did?

Jia: No, the funny piece is both of them made game designs that didn’t require the toy interaction. So I’ll dive into it. Pokémon is the best game and the best example of what we actually want to do here, for a lot of different reasons. The game is literally centered around wanting to collect things. And the story, and everything they do, pushes that type of experience, so Skylander copies it very well. An example is, in Skylander, when you’re walking around, the moment you see a new character, it actually does these cut scenes, like, “This is Bob. Bob can shoot things,” and it accentuates the characteristics, the reasons why you want the character—the whole gameplay model is designed around that. But whereas if you think about it with Disney, they already assume you know the characters, they don’t push it, and then they had a lot of IP issues too. You can read into some of the stuff where certain parts of the studio wanted to make sure a secondary character definitely had a toy to go with it, even though nobody on the planet bought that toy.

Tim: So it seems like they really weren’t making proper use of the technology. They were kind of shoehorning it into their existing business models.

Jia: Only people who know free to play will really be able to do it. And Japan, that’s why Japan is actually the best for it, or Asia in general, because Japan has created the concept of the Gacha inside of the game, and it really comes from Pokémon. Why do you want another Pokémon? Because it’s cute; it’s also because you don’t know what powers they have, so you want to collect them, after you collect the one. This is all very conducive for merchandising. But the narrative guys don’t get it.

Tim: Let me ask you this then: why would toys to life be a stronger driver than simple in-app purchases?

Jia: In-app purchases absolutely make more money, by far. If you are a digital game company, especially with the free to play mobile stuff, merchandise, in general, is a distraction for you. There’s a lot of things that work. The mobile game business is going the same way as console, which is originally they had games, and they had their own individual IP stuff, and they would just create their own universes, but everybody always discovers ultimately story and IP discounts everything. You have Iron Man and Superman in your game, your ability to acquire users is significantly cheaper. Then that’s when those type of businesses start to come into play because all games now have IP inside of them now on the mobile space. You rewind 3 years ago, none of them had IP but now everybody’s got everything from anime, to superheroes—all the big stuff basically has IP associated to it. Those guys are trying to optimize on two numbers: one is just how to acquire users at a cheaper price, because it’s really, really expensive, and the second thing is getting people to pay for the first time. Those are two things that toys to life absolutely helps out with. For instance, imagine every Marvel merchandise out there, which Disney is pushing anyway, actually has an ability to scan that piece of merchandise into your game. That absolutely equals a ton of free user acquisition. And then the second piece is we’re starting to do where you actually buy something on an in-app purchase and you get a real piece of merchandise associated to it. For the company themselves, that actual piece of merchandise isn’t the money piece. They’re not worried about making money on merchandise, but the main thing is that there’s a ton of friction for people to do their first-time purchase.

Tim: Okay. It lowers the barrier if they’re getting a physical good instead of just virtual coins for an in-app purchase?

Jia: Yeah, so like if you’re in a Contest of Champions, which is a fighting game, and you buy Iron Man, you’re like, “I got Iron Man digitally,” but you’re like, “I feel really bad buying a not-real thing,” and then you also get an Iron Man T-shirt and you’re like, “Oh, okay, whatever,” and then that’s when you get hooked. So the conversion from the first-time purchase, to multiple purchases, it’s an epic correlation.

Tim: So how small is this technology? How small a toy could this be embedded into?

Jia: We do a combination of NFC and QR. So if you look on this guy, the little sticker at the bottom is the NFC chip. You can put it on a little rice ball.

Tim: You could put it on a sticker; you could do anything with it.

Jia: The limitations are just like what materials you’re working with. So if it’s metal, then you have to shield it.

Tim: Do you see this core technology as having applications beyond gaming?

Jia: Absolutely. And we do that now.

Tim: What kind of applications are you looking at?

Jia: The main pieces, if you abstract it out, we’re taking physical product and creating virtual economies and virtual demand on top of them.

Tim: What do you mean by that?

Jia: An example is today you have a collection of toy cars. When you look at it as a person, you’re like, “I’ve got a Ferrari, I’ve got a Civic,” you convey certain human values on top of it. Once you take that car and scan it into a racing game, there’s actually a virtual value that the game itself conveys on top of that car. Let’s say the same Ferrari and Civic, but maybe you play the Civic and you level it up more. Now that car is way more valuable than the Ferrari. That’s ultimately what we look at, which is when you take a piece of merchandise and start assigning virtual value into it.

Tim: I see.

Jia: So the easy parallel to it is things like gift cards, but it really is an online-offline business model, which is that is it in its most simple for. For us, it’s really about toys converting into digital goods, and they can actually exchange in a lot of different ways. People always think about Mario becomes Mario in the game, but for us, actually, all we want is users to look at something and say, “I want to scan this into something, it becomes something else. I don’t know what it is.” Now that becomes really, really interesting because you are the game designer and an event designer can create all sorts of interactions.”

Tim: Right, and since these are just unique keys, the functionality could be changed on the fly.

Jia: And that’s the fundamental IP that we provide. Our platform allows you to manage this stuff at a really high level and you can change it, because to us, we think of it as advertising actually. So you can change where things go, what they exchange for, and what the incentives are.

Tim: Excellent. Before, we were talking about that importance and that kind of visceral reaction, and that kind of bridging that gap between the physical world and the digital world. Do you think augmented reality is something that will be used in conjunction with this technology, or do you see it as kind of a competitor to the technology on a very high level?

Jia: We’re spending a lot of time on AR.

Tim: Are you? To be used in conjunction with the existing technology? How would you use them together?

Jia: The story that we try to portray is very straightforward. I want somebody to look at their toy and I want them to feel like it came alive. And however that experience is accentuated, via NFC or AR, or other technologies that we haven’t explored or talked about, that’s absolutely where we will end up.

Tim: That makes a lot of sense. Powercore is still small, relatively young, you’ve got about half the team here in Japan, half the team in San Francisco. What are some of the pros and cons of trying to make that work, splitting the city between two cities like that?

Jia: We’re actually in many places. We have a lot of people in Manila, we have some people in China. The last few companies I’ve done, one of the things I’ve been working really hard on is to be able to distributive workforce. It’s hard but once advents of better internet, more technology, things like Slack being disciplined in certain aspects of process, it has been very, very helpful for us.

Tim: I hear that a lot in theory. But in practice, do you have, for example, the programming team in one location or is it truly distributed with a couple of programmers in Manila and a couple here in Tokyo and designers scattered around? How do you work it?

Jia: There is some method to our madness, but there are, for us, it’s actually optimizing who has the talent and who we think would work really best with what we do, but what I like to do is bring people in that are really passionate about what we do. For me, time zone is really important. Physical location not necessarily as much.

Tim: Okay, so you find the right person and then you make the time zones work out somehow?

Jia: So all of our developers are in Asia. The only time it gets messy is right about now, the holidays are all like—everybody has one set of holidays—

Tim: The last week of December, the first week of January, nothing gets done on this planet anywhere.

Jia: The funny part is like where China does work during that time, but then Chinese New Year is at the end of January, so they’re all gone. The holiday season for our business especially is difficult because we have some engineering in China, but more importantly, all of our product is made in China. So for us, right now, we’re doing all this preparation, all the sales, making sure that things are going to get designed and shipped properly with Chinese New Year in mind. So that does become difficult.

Tim: What do you think of the gaming industry in Japan in general? So I mean, back in the console era, Japan was incredibly innovative. They ruled the market. There was a period of about 10, 15 years, maybe longer, they’ve been just kind of coasting. Do you see a lot of new creativity here? Do you think Japan has a chance of regaining dominance in gaming around the world?

Jia: That’s a tough one. The industry here talks about it a lot. If you look at the console stuff, there hasn’t been many new IPs that have been created. All the games are sequels, everything from Street Fighter to Pokémon to Mega Man to Metal Gear Solid.

Tim: To Mario, if you really want to go old school.

Jia: There’s a problem there. To accentuate that problem, gameplay and cultural tastes have greatly changed or greatly progressed globally. If you think about the game styles and stuff that are really popular in Japan, game design stuff here just got more and more hardcore, in the card battle, card collection stuff, that’s all like, monster hunter. It’s very much a Japanese style of gameplay and that’s the stuff that they like. Me being here long enough and getting too acclimated, so I like it too, but it’s not anything that anybody else plays.

Tim: It’s over-focused on a particular niche?

Jia: The hardcore get more hardcore. I think the best story is—

Tim: There’s like card battle games in the US too, right?

Jia: Those are from Japan.

Tim: Are they?

Jia: Yeah, basically. They’re from Asia. They get pushed into the United States, and some people perceive them as popular, but they’re not popular. They’re just popular in the rankings because those games make so much money and then companies like Gree and DeNA can pour a lot of money into marketing, and you can make it look big, but the question is are those games still around? How long do they sustain? Are they truly engaging with the consumers? We see a lot of that stuff on the merchandising side, which is what we’ve learned. You’re like, “Oh, game looks big, lots of users. It’s mostly because people tried it out but ultimately they’re not really tied into the IP and the game. In relationships with things like Mario and Street Fighter, that stuff lasted a lifetime. That’s very different. To give you an idea, first person shooters don’t perform. None of the popular games in the entire world work in this country. The story I used to tell is Angry Birds—big everywhere, huge in China. Not big here, at all. It’s a casual game but they just never figured out how to properly market it here. The only exception is if you figure out how to do proper user acquisition. So Clash of Clans is a good example of it. Clash of Clans took a year and a half to break into Japan. It’s not like the game has changed that much since the beginning, but why is it all of a sudden Japanese people are playing it? That’s because they properly hardcore went out and marketed the crap out of it.

Tim: How did they do it? How do they do user acquisition here?

Jia: Japan, user acquisition is very different from the rest of the world. In the US, or everywhere else, you actually do very much performance marketing. Here, it’s very much brand marketing with TV buys, train buys, station buys. That’s the only way to do Japan. You have to start there, create that, “Hey, this is a big game, everybody is playing it,” and then you do the performance stuff. But it’s really interesting if you think about, if you talk to anybody in the TV industry. 5 years ago, TV advertising, their budgets were dominated by car companies. Now, the top spenders are game companies. When you turn on the TV, every fourth commercial is like a game.

Tim: Looking at the success of Clash of Clans in Japan, do you think that first person shooters, other types of games would be popular here if market correctly? Or do you think there is underlying cultural preferences for one type of game or another?

Jia: I think games like Clash would do better. The key emphasis is actually it’s mobile—that’s the big thing. Clash is cool because they started off as games, but they’re now investing heavily in developing the universe, the story. So Clash, before, they were just really about making games that highly engage the user, but the story behind the characters was not something they cared about for like the first 4 years of the company. Now they’re developing TV shows, they put out YouTube animated shorts. The commercials themselves are really about building up the characters so that people really want to participate in that universe.

Tim: So is that really driven more by customer retention, making the world rich and inviting, or is it also driven by new customer acquisition?

Jia: It’s all of it. It’s a practical decision but it’s a lot more fun to make a product that people can care about. So I think that’s part of the fun part about it.

Tim: All right, well, listen, before we wrap up, you’ve been coming back and forth between the US and San Francisco for number of years here, you’ve run startups in both cities, so I’m going to ask you what I call my magic wand question. And that’s if I gave you a magic wand and I said you could change one thing about Japan, anything at all—its education system, people’s attitudes towards risk, the willingness towards trying new things—anything at all, to make it better for startups here in Japan, what would you change?

Jia: The biggest piece for me is the culture of distributing success. Japanese companies, when they succeed, few people participate in that success, and it’s all about building on an ecosystem for it. So what I’ve seen with successful IPOs, that I know the people who have done them, is that a handful of people become wealthy, and then they just hold onto the money.

Tim: Do you mean more granting of stock options or more investing in mentoring later on?

Jia: All of it but the biggest thing is distributing the equity more. Because right now, if you go hire somebody and you’re like, “Hey, I want to give you equity,” they’re like, “I don’t care.” They don’t even understand the value of it. Nobody has ever heard of a story of somebody getting stock and becoming wealthy off of it.

Tim: Yeah, it’s definitely true. Japanese employees greatly prefer salary over equity.

Jia: But there’s a huge ripple effect associated to it. If you spend enough time in Silicon Valley, Google IPO, 5 years down the line, it has changed the world. Thousands of people became millionaires. And there’s a culture of taking the money that they’ve earned and re-investing it.

Tim: PayPal famously so, yeah.

Jia: Every single IPO has created a generation of more, whereas you don’t see that here. You actually don’t because only a few people become wealthy, they just become very insular with their own network and they just don’t.

Tim: I also think it changes the dynamic of the team as well. If you’ve got a team where everyone feels like they have a piece, even if it’s a small piece of it, it’s a very different dynamic than if you have maybe 2 founders that have equity and then employees.

Jia: Yeah, to me that’s the one thing I would change. What I want is like we become huge, everybody that works here basically becomes much more independent financially, but from there they can actually go and foster the next generation; they go do their own company. And they take that culture and convey it on. And the startups that become successful there, they create their own generation of people that become—that’s what’s important. If you change one thing, that doesn’t foster a whole lot of change, but that stuff would actually create huge ripple effects for stuff, right?

Tim: I think so too. And I think with the amount of influence that foreign VCs are having here in Japan, I think we’re going to see more and more of it. We’re already starting to see more of it.

Jia: It takes a lot of time though. It takes a ton of time.

Tim: Well, excellent. Hey, listen, thanks so much for sitting down. I really appreciate it.

Jia: Cool. Thanks, man.

    

And we’re back.

One of the things I found most interesting about trying to gain traction with toys to life was the toy box concept, keeping the mechanics and keeping the play as simple as possible. It’s understandable that this seems a bit counterintuitive, at this age of escalating budgets in both movies and games, but to me, it seems to indicate that there’s something real here. I mean, when you strip away the complex storytelling, high end graphics, professional acting, and everything that game reviewers usually rave about, and what you have left is the most engaging kind of gameplay, then I think you really have something.

It’s particularly interesting that children take to this so quickly. It would seem that the online-offline distinction is not something that’s intrinsic and real, but something that we have learned, and children today will grow up with a very different understanding of where that boundary between the two worlds lies. If they perceive that as a boundary at all.

If you’ve got experience with physical or digital gaming, Jia and I would love to hear from you. So drop by DisruptingJapan.com/show073 and when you do, you’ll find all the links and resources that Jia and I talked about and much, much more in the resources section of the post.

And, I know you’ve been meaning to do this for a while now, but when you get the chance, please leave us an honest review on iTunes. It’s really the best way that you can help us get the word out and help support the show.

But most of all, thanks for listening, and thank you for letting people interested in Japanese startups know about the show. I’m Tim Romero and thanks for listening to Disrupting Japan.