I write this from a hotel room in the Roppongi district of central Tokyo. I’m here for a busy week of meetings with senior executives from some of Japan’s most iconic companies, including the likes of Hitachi and Mitsubishi. Earlier today I attended a ‘CEO Growth Congress’ hosted by the Economist. The word ‘growth’ is key because – at least until the arrival of ‘Abenomics’ – it’s the thing that Japan has been finding so elusive. As to why that is the case, the consensus view goes something like the following.
The Second World War was a watershed in Japanese history. Hiroshima destroyed so much, not just in terms of loss of life, but in terms of the national psyche, that the only response was to start again from scratch. What emerged were some of those famous companies – Sony is another example – even if other major brands such as Toyota, Olympus and Fujitsu were already up and running some time before. The post-war effort led to a golden era of Japanese business that lasted more or less unbroken until the Asian financial crisis of the 1990s. Since then, exacerbated by the West’s own financial crisis of the noughties plus the tsunami of ‘3/11’, the country and its corporates have been in the doldrums. Returning to the growth path is hampered not only by global conditions such as European sovereign debt and slowing growth in China, but by internal factors. Among these are an ageing population and the fact that those large corporates are tired, old-fashioned and inward-looking.
I use the word ‘corporates’ as if such organisations were exclusively commercial entities. But the fact that their fate has been so linked with that of the country as a whole means that they do not exist in a cordoned-off commercial sphere. They are closer in profile to national institutions, even if technically they’re not owned or operated by the state. I’d argue that they are a hybrid of the commercial and the national, so long as by ‘national’ we understand something that is not ‘nationalised’ but that holds deep symbolism for the Japanese nation as a whole. They were, and to some extent still are, part of the national effort, not just a cluster of weighty private enterprises.
The point is that among the Japanese there appears to be an assumed sense of identity with such organisations, and that this is very different from the West, where companies have to prove their social worth. Even if some of those seminal names in Japanese business do bite the dust – and it’s hard to believe that they can all survive – they will be assured of their place in heaven. They will have done good things for the collective effort, and despite their inability to modernise will continue to be thought of well, long after their demise.
Although Western companies want to be thought well of too, most start from a place that lies a considerable distance from the national effort or the needs of society. As if to compensate somewhat, their conscience moves them to engage in ‘corporate social responsibility’, sponsoring community projects, donating to charity, supporting local schools. It’s not completely disinterested, however, because the tacit hope is that such efforts will reflect well on the brand. In the final analysis, company always comes before country. Generally speaking, the Western corporation will not tie its agenda to that of the nation in which it is headquartered. In addition, the globalisation of businesses drives a wedge between company and nation, because becoming global means becoming supranational, floating above national concerns and operating instead in an international economy that has little time for national imperatives – except insofar as these impose tax rules, governance frameworks or export controls.
The net result is that it remains difficult for Western companies to feel they deserve a place in heaven. They’ve made a pact with a commercial world that’s largely separate from the interests of the nation or the society. You could probably mount an argument that capitalism itself is defined by not being constrained by such interests. Or at least you could argue the reverse, i.e. that capitalism’s antagonists, socialism and communism, certainly are tied into the nation and its social priorities.
So what can the Western business leader do? Ironically enough, an answer might yet be found on the islands of Japan. Take Rakuten, the Japanese Internet retailer that has its sights set on unseating Amazon, no less. Currently Rakuten is on the acquisition trail, buying up Internet retailers around the globe, and driving towards the goal advertised so nakedly on its website: to be the world’s leading virtual mall. Rakuten’s differentiator as explained to me this week, however, is that it really cares about both its vendors and its customers. It sees itself as setting up a market in which traders can trade and make a decent living. It sees itself as offering consumers the chance to improve their quality of life, not just shop for stuff. Indeed, its founder and leader, Hiroshi Mikitani, has published a book stressing the importance of the good society.
Although the Rakuten project could hardly differ more on the surface from the post-war reconstruction of Japan, there are some carry-overs. Whether it has a viable economic formula or not, Rakuten’s aim to include the prosperity of both vendors and customers in its own plans reflects that perhaps uniquely Japanese ability to think both commerce and country at the same time. Whether Rakuten will go to heaven or not, I do not know, but the model is an interesting one.
There are other possibilities too for the Western company that wishes to pass through the pearly gates. Even Amazon, which seems so unalloyed an example of supra-national self-interest, has redeeming features. It pioneered the very clicks-and-mortar environment that Rakuten now gleefully exploits, which made it feasible for small traders, previously debarred from the high street by prohibitive rents, to compete against the big guns; a model that could be described as commercial democracy in action. It also allows authors to self-publish, thus reducing the costs incurred in working through an agent; again one can read this as democracy, if not quite as nation-building. Of course, there are plenty of other ways in which it crushes those around it, but in this limited sense it creates a bottom-up version of good society, as opposed to the more top-down Japanese model. Not to mention the mutual, the increasingly fashionable operating form in which employees take a share of the business and/or the profits. Again, it’s a model that stops short of ‘nation-building’ in the Japanese sense, but at least it moderates the notion of profit as the cream taken from the top by a few fat cats who are domiciled not in their home country but wherever the tax regime is most clement.
Naturally, ‘heaven’ is only a metaphor for the social worth of your enterprise. But like it or not, your enterprise will indeed have a social worth, apart from any commercial value. All things considered, it’s better for that worth to be high rather than low.