Lunch with the FT

June 15, 2012 5:57 pm

Hiroshi Mikitani

The entrepreneur talks about the ‘Englishisation’ of his business and why Japan must fight against its ‘pleasant’ decline
illustration of Hiroshi Mikitani©James Ferguson

The Ginza on a crisp spring morning is a dazzling sight. Japan’s economy is said to have been down in the dumps for years, but foreign visitors continue to be taken aback by the wealth and style on display in this high-end swathe of central Tokyo, with its stately streets, department stores tiered like wedding cakes, designer shops and boutique outlets selling kimonos, pottery or hand-sculpted sweets.

I have come here to meet Hiroshi Mikitani, 47-year-old leader of a pack of rebel entrepreneurs that has shaken up business practices in Japan. Confident, internationally minded, brash, even flash, they have founded enterprises and wielded business techniques – the hostile takeover, merit-based pay, cut-throat competition and unapologetic self-promotion – that are alien to Japan’s postwar corporation-as-family culture.

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Lunch with the FT

Many in Japan find this group distasteful, even un-Japanese. Others regard them as role models for a new Japan. Some, like Takafumi Horie, a dishevelled internet entrepreneur whose briefly dazzling career ended behind bars in 2007 when he was sentenced for securities fraud, have fallen by the wayside. But Mikitani, who in 1997 founded Rakuten, Japan’s largest online retailer, has flourished. He owns nearly half the company, a sort of Japanese Amazon and eBay rolled into one, valued at $14bn. According to Forbes’ latest rich-list, Mikitani is Japan’s fourth-wealthiest person, with a net worth of $6.5bn.

The restaurant he has chosen is above the Ginza outpost of the luxury US department store Barneys New York. All sleek lines and pristine wooden surfaces, Kaika is a teppanyaki establishment, where meat is grilled on a heated iron plate. We won’t be sitting at the counter and watching the white-uniformed chef at work, though throughout our meal we can hear the hissing of steam as food hits scorching metal. Instead, we have been assigned a private room with a simple wooden table and walls decorated with rice paper and dark wooden slats like the bars of the world’s chicest prison.

Mikitani arrives. He is tanned, with an expensively casual haircut and an open-necked shirt unusual among Japanese businessmen but in keeping with his well-honed image. He speaks in English, a language he insists his Japanese employees use as part of what he calls, rather disturbingly, the “Englishisation of Rakuten”. It is a policy some in Japan applaud and others condemn as an idiotic charade.

The last time we met was several years ago. As I recall, he was perched on a large ball (in lieu of a chair) in his Roppongi Hills office, a hulking skyscraper complex built during a property boom about 10 years ago. Roppongi Hills was briefly the headquarters of Tokyo’s bad-boy jet-set and the focus of a heated debate about the infiltration of rapacious Wall Street practices.

Mikitani, who in 2005 was beaten back from a hostile takeover of TV station Tokyo Broadcasting System, has since left the Roppongi complex. Not because of embarrassment at its associations with bling but because his business has outgrown the available space.

I ask him whether he feels part of a clan of anti-establishment businessmen, men like Tadashi Yanai, the outspoken founder of the Uniqlo clothing brand, and Yoshikazu Tanaka, the billionaire head of Gree, a mobile-phone gaming company. “Compared with the US, the list of names is very short,” Mikitani interjects as I run out of examples. “We need to create more. What I want to do is set a trend, to be a trendsetter.”

He is quietly spoken and acting ultra-relaxed but I sense he’s a tad nervous about whether he is adopting the correct level of relaxedness for a Lunch with the FT. (This is the cool version of Japanese anxieties about how deep to bow.) I say I’d like a beer, and he says he’d like one too. I take my jacket off. So does he. I wonder how far I can take this.

The restaurant belongs to his brother-in-law. “That’s why I come here quite often,” he says, before adding hurriedly – lest I am thinking nepotism – “but the food is good, the chef is good, the service is good and it has a nice atmosphere.” That is high praise for a city now widely recognised as the world’s culinary capital. Kaika indeed turns out to provide one of the best lunches I’ve had in years.

A black-suit and bow tie-wearing waiter starts by serving each of us a grilled young bamboo shoot with an artistic dab of thick soy sauce: “The bamboo is from Kagoshima,” he says, explaining that in mid-March one can obtain bamboo only from that semi-tropical part of Japan. It’s cooked to perfection so that the delicate flavour of the plant is released with each bite.

One year ago, Mikitani created a stir by quitting Japan’s all-powerful business association, the Keidanren. He accused it of mindlessly backing a nuclear industry that has been under a cloud – fortunately not atomic – since the meltdown at Fukushima after the tsunami in March 2011. That he quit on Twitter, asking his 400,000 followers, “I’m thinking of leaving Keidanren. What do you all think?”, only added flippant insult to injury.

As our second course arrives – cold mushroom soup in a chilled glass – Mikitani tells me about his move, in the mid-1990s, from banking to internet start-up. He had been one of 120 people – 117 of them men – recruited to the fast-track team of the Industrial Bank of Japan, then the crème de la crème of Japanese finance. The bank had sent him to study at Harvard Business School, where he encountered brash new American ideas. “I didn’t even know the word ‘entrepreneurship’,” he says, sounding it out phonetically the way Japanese do when discussing an alien concept. “The first time I heard it I thought: what is this ‘entrepreneurship’?”

Though he began to think of striking out on his own, he felt a strong obligation to the bank that had sponsored his Harvard studies and the place where he had met his wife. The final nudge came in January 1995 with the Kobe earthquake. “I was sitting in front of the TV for, like, 12 hours and then finally they started to show the names of those who had passed away,” says Mikitani, who was brought up in the port city. “And I saw the name of my uncle and aunt and many of my friends.” After helping as a volunteer, he was resolved: “I realised anything could happen. Nothing is eternal,” he says. He decided to take the plunge – or, in his rather quaint phrase, to “jump off the bridge”.

The waiter slides open the wooden door and enters with the third course and another precise explanation. It is, he tells us, a small slice of tongue, with mustard, miso and salt from Okinawa. (The Japanese are particular about where their salt comes from.) I’m not normally big on tongue but this is fantastic, delicately textured and perfect with cold Japanese beer.

Mikitani says he set up his company with “no VC, no grey hair”, which I take to mean no venture capital and no seasoned management. He cultivated a lean team of fresh graduates, all internet-savvy and hungry – possibly literally. The idea evolved of an internet shopping mall, and within a few years Rakuten had established itself as the go-to place in Japan to buy or sell goods online. More than 35,000 merchants now crowd the site.

The model is not to link customers to a single big store like Amazon but rather to provide what Mikitani calls individual “shopping experiences”. That creates the same sense of connection as “buying fish from your neighbourhood fish shop,” he says. “I think shopping is about the experience. It’s not just purely about price or convenience.” Even Kyoto kimono businesses, some hundreds of years old, have been revived by reconnecting with customers through the site, he says.

A beautiful lightly seasoned green salad (from the Miura peninsula) appears, served on a rough slab of white ceramic. The courses are stacking up like aircraft. Mikitani is talking about Rakuten’s big flurry of foreign acquisitions. The company has recently bought US online retailer Buy.com for $250m, and the Jersey-based online retailer Play.com for $39m, while establishing a presence in Brazil, France and Russia among other countries. At the end of last year, it splashed out $315m on Canadian e-reader Kobo, a challenger to Amazon’s Kindle.

Japanese companies have a pretty patchy record when they venture abroad, I say, mentioning a string of deals gone awry. That’s because they act like Japanese companies abroad, not like global businesses, he retorts. His Englishisation push is part of his attempt to build an international corporate culture. Rakuten’s Monday morning meeting must now be conducted in English. It has even been shifted to Tuesday morning to facilitate teleconferences with other time zones. Lift signs are in English. Documents are in English. So are menus in the cafeteria, obliging less proficient staff to mouth out their options lest they confuse their “grill-ed ma-cker-el” with their “fri-ed to-fu in li-ght so-ya bro-th”.

“I think we changed the trend,” he says, dabbing sweat from his forehead with a hot towel. “After our announcement, almost all English lessons are fully booked,” he adds, referring to the language schools dotted around Japan. “Now younger people know they need to speak English.”

The waiter starts serving our main course. The beauty of Japanese food is that, however much you eat, there still seems to be room for more. There’s a generous portion of sirloin and fillet steak, again from Kagoshima, cooked medium-rare and cut into bite-sized strips for convenient chopstick use. Then there’s asparagus from Aichi in central Japan, potato from Saga in Kyushu, white rice and pickles. Each dish is served on a separate piece of exquisite ceramic or lacquer ware. There’s barely room on the table.

“If all the employees of Panasonic or Sony could communicate in English, they could be far better than Samsung,” Mikitani says, popping a piece of beef into his mouth and savouring the flavour. “A language will open your eyes to the ‘global’, and you will break free from this conventional wisdom of a pure Japan. English is a tool to globalise you, to make you change.”

I’m reminded of something the writer Pico Iyer told me about the Dalai Lama. Whenever the head of Tibetan Buddhism visits Japan he is asked how the country can improve. His devotees expect an answer along the lines of deeper spiritual contemplation or a stronger commitment to peace. According to Iyer, the Dalai Lama consistently deflates his audience with the practical admonition: “Learn English.”

Mikitani says his push at Rakuten has broader ramifications for the country. “Japan is so pleasant. There’s no crime. The food is great. Everything is getting so cheap. You don’t need to learn another language,” he says, spreading his arms in metaphorical acknowledgement of the comfortable lifestyle the Japanese have created. “My point is: this is very pleasant long-term decline.” He draws out the last word to emphasise the point.

I don’t question his assertion about Japan being cheap – it may just be the billionaire in him talking, but I do ask whether decline is such a dreadful thing. After all, Britain has been in relative decline for the best part of 100 years but the quality of life for most people has continued to rise. “I cannot comment on the UK, but we need to become more competitive,” he says. “We don’t need to become a dominant player but we do need to have a healthy economy in order to keep all this going.”

For business, that means becoming less inward-looking, shaking off what some Japanese call their “Galapagos syndrome”, where society evolves in isolation, and adopting international norms. “Of course, I respect the old companies but if you think about what happened to the electronics companies Sony and Panasonic, versus Samsung and Apple, they are obviously not challenging enough. They don’t have a global strategy.”

I’ve finished every last scrap of food but Mikitani has left about half his beef. If I were braver, I’d reach over and grab some. The waiter intervenes by clearing the dishes and substituting them with cherry-blossom ice-cream (to denote spring) and black coffee served in doll-sized cups.

Mikitani tells me a story. Some time ago, Norio Ohga, former president of Sony and subsequently chairman of the Tokyo Philharmonic Orchestra, called him up. He wanted Mikitani to succeed him as chairman of the orchestra. Mikitani thought he was joking. “I told him the only music I do is karaoke,” he laughs. “He said, ‘Oh, karaoke is great music. It’s fine.’”

Not long after the conversation, Ohga passed away and Mikitani was indeed made chairman of the Tokyo Philharmonic. “What I found is that even the orchestra, the players, are on lifetime employment. Once they join at the age of 22, whether they’re good or bad, their employment is guaranteed.” His conclusion: “If you are too protective to labour, you lose competitiveness.”

“We need to be more fluid. Keeping extremely expensive older people when there are lots of very competent, capable young people, this as a system is wrong.” He drains his coffee.

He’s not pessimistic, he assures me. With better English, more flexible labour laws, relaxed immigration policies and more investment in science, Japan can bounce back. “We need to fix just a couple of simple things and we’ll have a bright future.”

The billionaire sweeps off to shake things up. I am left to settle the bill.

David Pilling is the FT’s Asia editor

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Kaika

4F Kojun Building, Ginza, Tokyo

Kobushi Course x2 Y10,500

Bamboo shoot with soya butter

Chilled mushroom soup

Tongue with mustard, miso and salt

Green salad

Half sirloin/half fillet of beef

Potatoes and asparagus

Cherry blossom with ice cream

Rice with pickles

Coffee

Beer x2 Y1,000

Total (including service) Y11,500 (£93)

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Bosses’ orders: Lucy Kellaway on toilet cleaning and quality control

When Shigenobu Nagamori set up in business 30 years ago as a manufacturer of small motors, he hit on a novel way of training staff. Each new hire at Nidec Corp was ordered to clean the company toilets – not with a loo brush and bottle of bleach, but with their bare hands. In a book issued to employees he explained the thinking behind this unusual scheme: “I firmly believe that toilet cleaning actually polishes the heart of each [member of] staff and is, so to speak, the original starting-point of quality control.”

Nagamori is a fine example of a boss whose edicts go beyond what is usually thought necessary to get the job done. This sort of leader is prone to writing books of rules telling employees precisely how to behave – and how not to. The Nidec boss also ordered his staff to do other things not normally considered within a boss’s remit – indeed, not normally recommended at all, such as eating quickly and talking loudly.

Ray Dalio, boss of Bridgewater, the successful hedge fund, recently distributed an even more prescriptive guide to staff that listed 300 of his own life principles. Employees are expected to read them, and some get tested on how much they’ve absorbed. One of these principles tells managers to think of their underlings like baseball cards. Another forbids gossip.

George Steinbrenner©Corbis

George Steinbrenner (right)

Such blanket bans are a common feature of extreme boss behaviour. George Steinbrenner, who bought the New York Yankees baseball team in 1973, was a micromanager who implemented a partial ban on hair, allowing moustaches and sideburns but outlawing beards and mullets. Offenders were made to sit on the bench.

Bosses are sometimes motivated by an excessive care for their workforce’s wellbeing. John Patterson, who founded the National Cash Register Company in 1884, became so obsessed with the health and cleanliness of his staff that he forced them to take a weekly shower at work and banned the eating of such unhealthy foods as bread and butter.

Alan “Ace” Greenberg’s edicts were more about the bottom line. As chairman of Bear Stearns he forbade the buying of paper clips, making staff harvest them from old documents instead. Alas, such penny-pinching didn’t stop the bank from losing hundreds of millions of dollars. Ace and two colleagues are now being made to repay $275m to the bank’s investors.

Lucy Kellaway is the FT’s management columnist

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