Far too many people, including many of the Japanese themselves, consider Japanese society as inflexible and unable to change. This is simply wrong.
In this kickoff episode we look at what was behind the two disruptive, transformative really, changes that Japanese society has been through in the past, and examine the groundwork that is being laid for the coming startup boom.
We talk about the birth of modern Japanese entrepreneurship in the 50’s and discuss how the events of that generation impact startup founders today.
Naturally, there are forces in Japan that certainly do not want to see this transformation come, but the disruption has already begun and cannot be stopped.
Join me and see why.
Welcome to Disrupting Japan, straight talk from Japan’s most successful entrepreneurs. I’m Tim Romero and I’m here to introduce you to the start-ups that are changing Japan from within and are beginning to change Asia and the rest of the world.
The men and women you’re going to meet here are probably unfamiliar to you. They’re the founders of companies you’re probably hearing about for the very first time, but I guarantee you that within a few years, at least one or two of these people are going to become household names. You see, Japan is changing yet again. It’s being disrupted in ways in which the government doesn’t completely approve of and in ways in which outside observers and sometimes even the Japanese themselves don’t completely understand.
Japan has been my home for more than two decades and in that time I’ve started four companies here and some successful and some well, less so. The changes that I’ve seen in that time have been astounding, but even then, they’re nothing compared to the groundwork that’s being laid today. The changes we are going to see in Japan in the coming decades are going to be astounding. I’m lucky in that I get to work with some of the most innovative and creative people in Japan as an investor and advisor or often just a friend.
Japan is not exactly a Western media darling these days. China is bigger, certainly more dynamic and growing faster. Singapore is simpler and it’s easier to understand, it’s accessible. But Japan—Japan is more important and far more interesting and I’ll tell you why.
Many people, sometimes even the Japanese themselves view Japanese society as somehow uncreative or inflexible, but this is wrong. That Japanese start-up scene is far richer and more dynamic than those in the West imagine and in the coming weeks and months you’ll hear directly from the people from who are disrupting Japan right now.
But if you really want to understand the myth of Japanese inflexibility, let’s step back about 150 years, before the Meiji Period. At that point, Japan had spent hundreds of years in isolation as a feudal economy. It was almost completely closed to foreign influence and technology. The nation existed in sort of a virtual static time capsule and that capsule was broken open in 1853 by Commodore Perry and four rather large American warships.
A few years later in 1868, the Japanese government saw the writing on the wall and it made the decision to fundamentally transform everything about their society and economy in order to modernize it, and I mean everything. The education system, the legal system, the military, the government, the whole power structure was changed. Even a lot of Japanese history was, if not rewritten, altered somewhat.
As you can imagine, many who had benefited from the hundreds of years of the traditional power structure didn’t take to these changes very kindly and the government spent the next 10 years fighting a series of insurrections from the Samurai who previously ruled this country.
Despite this internal descent and basically starting from scratch over the next few decades, there was massive growth in Japanese education, economy, and military power, which resulted in Japan not only winning a steady stream of victories over China, but eventually in the utter and decisive defeat of Russia under Czar Nicholas in 1905. The significance is really incredible. This was not some counter insurgency or guerilla war, this was Japan, newly modernized, going head to head against one of the great powers of their time, against Russia, and winning.
I don’t tell this story to glorify or justify Japan’s military actions. The militarism and nationalism that grew out of this economic expansion was responsible for untold and unimaginable suffering. It’s something that even now, almost 100 years later, Japan and the rest of Asia still finds challenging to come to grips with.
The point I’m trying to make here is that at about the same amount of time it takes most people to pay off their mortgage, Japan transformed herself from a technological, diplomatic, educational backwater of a society, one that was literally hundreds of years behind the times into a nation that defeated one of the world’s super powers. Now think about that. This is not a culture that is incapable of change when it’s needed, a country completely reinventing itself in this way and becoming a global super power in a matter of decades had never happened before in the history of the planet, but something very much like it would happen again.
Japan’s defeat in World War II was total and complete. Several of the economists that were working with the American Occupation Forces thought Japan would never be able to recover. There was a general feeling that the economic devastation was too great and that the nation’s experience with modern trade just too limited for Japan to ever become a modern economy.
Now of course today, we know how ridiculously wrong those economists were. Japan turned away from militarism, almost as quickly as it turned towards it and it focused on building a democracy and economic growth. Once again, in a period of only about 40 years, Japan transformed itself from a country with almost no functioning infrastructure and no economic markets to speak of into the second largest economy on the planet. This is not a country that is unable to change.
This post-war period is where we see Japan’s first true global entrepreneurs. People like Soichiro Honda of Honda and Akio Morita of Sony. Japan at that time was not conducive to start-ups at all. The government largely decided what the economic policies would be, they decided which companies would receive funding for research and to a very large extent, they decided which companies would be allowed to compete in the domestic market. So Honda and Sony decided they had to go global.
The story of Honda’s market entry into the US, maybe we’ll do another podcast on that, but it’s fascinating, this is a true start-up where they continue to pivot until they can find distribution for their product. In fact, their motorcycles, they couldn’t distribute through traditional motorcycle dealerships, they ended up basically reinventing the sport off off-road motorcycle racing and getting distribution through sporting goods stores.
Sony, some of our younger listeners might not realize what an incredible powerhouse this company was. Morita was every bit the visionary of Steve Jobs and every bit the strategic street fighter as Richard Branson, only a generation earlier. This is the company that first commercialized the transistor radio, that invented the Trinitron tube, invented the digital audio tape, the Walkman, the 3.5” floppy disk that’s become the standard—well, became the standard.
Again, these companies became successful overseas first before becoming huge successes in Japan and these men defined the blueprint for generations of Japanese entrepreneurs that followed, and that was go global. Become a success outside Japan before they became a success inside Japan. That’s exactly what this generation of Japanese entrepreneurs is doing.
Which brings us back to today where once again Japan finds itself in need of drastic change, so here at the start of the 21st century, Japan is looking for change that’s every bit as comprehensive and sweeping as the post-war reconstruction of the 20th century, or the Meiji restoration of the 19th century.
There really is a nationwide consensus that the future lies in small, innovative, independent companies and that large conglomerates are a thing of the past. But in pulling off their third economic miracle, Japan faces a challenge that they didn’t have in the past two. This time, innovation has to come from the bottom up. Japan’s past two economic miracles were largely the result of top-down policies designed by the central government and executed through the social and industrial hierarchy. That strategy just won’t work in the coming boom. This change has to come from the bottom up, from people you’ll be meeting on this show.
Now of course old habits and old hierarchies for that matter, die hard. Many of the old guard don’t want to step out of the limelight. I’ll frequently see start-up events here with almost no entrepreneurs in discussion or judging panels. In fact, last year there was even an article that listed the most important entrepreneurs in Japan, but not one person on their list had ever actually founded a company.
Like the Samurai 150 years ago, many of today’s VCs, bureaucrats, and academics do not want to give up their power willingly. They view these young, uncredentialed, poorly-funded, start-up founders with extreme suspicion. But just like the Samurai 150 years ago, these people are fighting a losing battle. The disruption has already begun. Japan is already starting to change.
In the shows to come, you’ll be meeting with the men and women—yeah, women, too—who are changing Japan today. Successful founders who are expanding their businesses overseas, the next Hondas and Moritas and they’ve agreed to do it in English, so there will be alcohol involved with some of these interviews. You’ll get a chance to learn what makes them tick, to hear their direct, frank, and unfiltered opinions about the Japanese and international markets and the start-up scene here in Japan. You’ll be able to ask them follow-up questions or contact them directly via the website.
So please, join me in the coming weeks and months and meet some of the most innovative entrepreneurs in the world and see how they’re disrupting Japan. I’m Tim Romero, thank you for joining me.