TV Interview on BS11's "Inside Out" Program

Getting ready for my first live TV interview in Japan (by @Fujiyo Ishiguro - be nice!) and in Japanese. Hoping for a lively and interesting 1-hour discussion. It's on BS11's "Inside Out" program, from 10 p.m. tonight.

Japan Needs More People with Foreign Experience

As I write this, the Japanese women's soccer team "Nadeshiko" Japan won the World Cup for the first time ever. This was a tremendous accomplishment by a team composed of Japanese women who have studied or played outside of Japan for many years. It was interesting to listen to the sports commentator mention how Japan could comeback (after getting behind on goals) because several of the players had played in the United States and "know" how their opponents think and play. To understand how the world "plays," I feel, is very important to the future of Japan.

Unfortunately, the number of Japanese students going overseas to study has been plummeting in recent years, and this is a serious matter for anyone concerned about the future of Japan. To reverse this trend, a new scholarship fund is needed to encourage students at Japanese universities to spend time overseas. The program would be funded from both private and public sources - generously enough to be noticed and taken seriously, and comprehensive enough that it would be available to a diverse array of students who want to take part, from any field of study. Soliciting funding primarily from private companies would ensure that these firms have a stake in the success of both the program and the students taking part.

The problem
Japan has been in a serious malaise for the last 20 years. In the 1980s, Japan was the envy of the world, an industrial powerhouse set to take over the world No. 1 spot from the U.S. Today things are somewhat different. From "Japan bashing" to "Japan passing" and now "Japan missing," this country's prominence on the world stage is sadly diminished. While the reasons for the deep sense of gloom gripping the nation are many and complex, one this is inarguable - Japan's global competitiveness has suffered.

More specifically, most Japanese products are currently designed and marketed only in Japan and have little global presence or relevance. This is due both to Japanese companies not going overseas for various reasons - among them lack of English-speaking staff and fear of conditions outside Japan. This in turn is directly attributable to employees of these companies lacking overseas experience. In addition, companies are designing products that are not globally relevant - such as $800 cell phones with functions that only Japanese can understand or use. This is due to people not experiencing the real world and understanding what people in Africa, for example, really need, and other "bottom of pyramid" issues. This is also serious from a national security standpoint - Japan's position on the world stage is fading fast.

These two decades of malaise have been accompanied by a growing insularity, in business, academia and other segments of society. And this insularity is spreading to Japanese young people, as evidenced by the decline in numbers studying overseas.

At the core of Japan's problems - sagging academic performance among Japanese students, the declining competitiveness of Japanese industry, and a glaring absence of leadership in every segment of Japan's society - lies this disturbing tendency toward insularity.

Japan can do a lot to fix itself, but if it wants to lay the foundation for a better, more vigorous Japan, it must shuck off this insularity and engage with the world. And the best way to start - the investment in the future with the greatest potential return - is to promote study abroad. Let's learn from the women of Nadeshiko Japan! Your comments are always welcome.

Busy (media) week!

I don't know what happened, but what started as a slow, hot and muggy summer week in Tokyo ended up being a media frenzy for me. Since this is a first for me, I thought I'd blog about it.

On Monday (7/11), The Nikkei Weekly published my opinion piece on "Entrepreneurs: Japan's hidden resource" (pg. 26) where I talk about how governments have an opportunity to encourage innovation and entrepreneurship.

On Tuesday (7/12), McKinsey held the launch party for their book, "Reimagining Japan: The Quest for a Future That Works", in which I contributed a chapter entitled, "Venture and Social Capital: A Vision for Japan" (pgs. 318-323).

On Wednesday (7/13), the Swiss Chamber of Commerce and Industry in Japan (SCCIJ) invited me to speak at their July luncheon where I spoke about "Reigniting the Entrepreneurial Spirit in Japan: Now is the Time."

On Wednesday (7/14), the magazine Think! by Toyo Keizai published my Reimagining chapter in Japanese titled "日本に提案する未来像" (pgs. 90-93).

On Friday (7/15), The Economist quoted me in their print publication about "Innovation in Japan - Samurai go soft: Japan’s preference for hardware over software is fading." Later, I was interviewed on The Today Programme on BBC Radio 4 where I spoke about the future of Japan and the opportunities that abound here. (rescheduled for later due to breaking news)

Today, Monday (7/18), I got interviewed by TV Tokyo's World Business Satellite (WBS) to talk about young (20-something) entrepreneurial ventures and the importance of them going after global markets. This was one of my first long interviews in Japanese so it was definitely not my best performance - need a lot more practice!

Phew ... what a week. I wonder how long this will keep up! For those who read, saw or listened to any of this, please feel free to send me any comments.

Preparing for my speech at the Swiss Chamber of Commerce tomorrow on "Reigniting the Entrepreneurial Spirit in Japan" http://bit.ly/p7GJzD

The "Stop Ten" Steps to Entrepreneurial Growth in Japan (cont.)

Continued from last week, I discuss government programs and actions that should be "stopped" versus started to encourage entrepreneurial growth in Japan. (The first five can be found here.)

Six: Stop mindless paperwork and regulation - If the same attention to process efficiency that has driven Japan's manufacturing success were focused on government bureaucracy, the country's business environment might change overnight. While its competitors move rapidly to adopt streamlined, paperless process, Japan remains mired in a legacy of mindless paper-shuffling. This is reflected in Japan's ranking in a World Bank measure of the ease of starting a business. Out of 183 countries, Japan is ranked 91, behind Mexico and not far ahead of Zambia.

Areas where process reform might usefully stimulate entrepreneurship include requirements for guarantors, bankruptcy procedures, privacy laws and hiring/firing practices.

Seven: Stop wasting women's energy and talent - Facing serious demographic challenges posed by an aging society, Japan has no excuse for wasting the tremendous untapped capacity of its working-age women.

Perhaps because they face barriers to advancement in the mainstream corporate world, Japanese women are already among the nation's most dynamic and creative entrepreneurs. If gender-specific barriers were lowered, we could expect to see women spearheading even more ventures. While social safety nets are not an ideal solution, if Japan is to produce new generations of children and at the same time care for a vast population of retirees, we need to support working mothers with enhanced child-care options and opportunities to return to the workforce as the workload of parenthood decreases.

Going one step further, we need to create frameworks for women to start new businesses that are flexibly compatible with the other roles they must fill.

Eight: Stop holding Japan's door closed - Faced with a dearth of home-grown entrepreneurs, one obvious solution is to import. And Japan has many attributes that foreign "knowledge workers" prize: safe, efficient and cosmopolitan major cities; highly dependable infrastructure and services; proximity to key Asian markets and production bases.

Foreign talent can meanwhile fill key gaps in the skill-sets of home-grown start-ups: global perspective and communications skills; lateral-thinking skills neglected by Japan's education; and more.

In fact, the lack of diverse global skills threatens to "hollow out" Tokyo's role as a global head-office hub. In many key functions, such as marketing and public relations, monocultural head office staffs effectively devolve work to overseas subsidiaries simply because they are incapable of managing it. This puts Tokyo at risk of becoming "Asia's Delaware," an empty city of corporate shells where little actual business takes place.

To reverse this trend and attract a new wave of overseas talent, Japan's immigration authorities need to shift from grudging acceptance of foreign knowledge workers and entrepreneurs to an active welcome. One key measure to signal a change in attitude would be the repeal of "re-entry permits" - the cash grab by government that forces all resident foreign passport-holders to pay every time they leave and re-enter Japan.

A more substantive measure would be to eliminate the crushing burden of school costs imposed on foreign-resident families and their employers. Although foreign residents pay local and national taxes that support public schools, in practical terms it is impossible for a 14-year-old moving from Silicon Valley to Tokyo to fit into a standard local middle school.

At present, the only alternative is for families or employers to pay 2.5 million yen or more to send that child to an international school. The government should institute a system that provides any foreign resident who pays "ward tax" with educational vouchers for use at international schools.

Nine: Stop ministerial "silo mentality" - Having been involved in the start-up of several ventures in Japan, I can testify that one fate any entrepreneur should fear is getting trapped among a web of competing ministerial bureaucracies. Depending on the business involved, you many find yourself running between MIC, MOF, METI, MLIT, MLHW and a surfeit of agencies in search of permits and "case-by-case" approvals. The demand you receive from one will inevitably conflict with the requirement posed by another.

The only possible solution I see to this problem is an office of "Innovation & Entrepreneurship" at the level of the prime minister's office. This would be a "one-stop-shop" where new ventures could take inter-ministerial snafus for quick and painless resolution. It could also encourage "cross-pollination" among the various ministries.

Ten: Stop Ageism - Japan's customary system of automatic promotion on the basis of seniority exacts an enormous toll on both public and private-sector organizations, breeding complacency and sapping ambition. The government needs to lead the way by instituting merit-based promotion across the board. Competition and meritocracy are not antithetical to Japan's working world. The problem is that university entrance examinations are currently the last time in life that most Japanese are foced to compete to get ahead.

Breaking Down Walls Beats Building Ladders
To even entertain the notion of doing less-not-more, of ceding control to unseen forces, may cause Japanese government bureaucrats to break out in a cold sweat. The notion is antithetical to their historical modus operandi. But if increased entrepreneurial activity is the objective, breaking down walls will beat building ladders every time.

The Japanese people are, by nature, creative, clever, hard-working and socially adept at forming highly competitive teams. The challenge is not to change their essential nature - but to set it free. Your comments are always welcome.

The "Stop Ten" Steps to Entrepreneurial Growth in Japan

As I have mentioned in the past, the reflexive bureaucratic approach - proactive efforts to cultivate entrepreneurs - amounts to trying to grow seedlings in the artificial environment of a greenhouse. These will never survive transplanting.

The more effective approach is to simply stop practices that impede the emergence of entrepreneurs and create a fertile environment in which they can naturally grow. To that end, Japan's government could usefully embrace the following series of measures to stimulate real and sustainable entrepreneurship. To hammer home the message that the government's role needs to be "stopping" not "starting," I call these ...

The "Stop Ten" Steps to Entrepreneurial Growth in Japan

One: Stop propping up dead trees - By artificially prolonging the existence of enterprises that would otherwise disappear, the government actively prevents the emergence of new growth. Quick dispatch of the remains of failed companies would free up capital, labor and customers. Importantly, this would clearly signal commitment to a level playing field and that Japan looks forward not back.

Even where corporate failure is not a factor, government policy needs to address the bureaucracy's strong tendency to favor entrenched interests over new market entrants, home-grown or foreign. This actively hampers the emergence of new entrepreneurial ventures.

Two: Stop trying to pick winners - Any effort by bureaucrats to determine which ventures or industries merit government support is doomed to failure. Given that even savvy venture capitalists expect two out of three ventures to fail, no amount of bureaucratic scrutiny is going to be any more accurate. Worse, direct grants are prone to what economists refer to as "regulatory capture," which means that the lion's share of any funding goes to the favored clients of political interests. Government grants create a moral hazard that distorts entrepreneurial activity.

Three: Stop stifling entrepreneurial energy in infancy - Japan's mandatory school curriculum, implemented nationwide without deviation, is designed to produce a uniform product. Learning centers on rote memorization and the pursuit of one right answer. The underlying lessons that creative problem-solving and risk-taking (the core skills of entrepreneurship) are wrong and counter-productive. Thus, anyone who survives a Japanese education with his or her entrepreneurial instincts intact represents a failure of the system.

Therefore, the most profound step government could take to stimulate entrepreneurial energy is to stop systematically squeezing it out of the nation's youth. Given that, in the U.S., many successful entrepreneurs started in their mid-20s, an effective Japanese effort that began with high-school students could produce an initial crop of entrepreneurs within a decade.

Realistically, though, any meaningful change to Japan's education system would likely take a decade, if it succeeded at all. A more certain route would encourage diversity, allowing private schools to follow alternative curricula without sacrificing graduates' ability to enter university.

Four: Stop stigmatizing failure - As mentioned in an earlier post, entrepreneurship is about the ability to accept the fear, the reality and the lessons of failure. But despite its celebration of gambare spirit (battling against all odds) Japanese society imposes a heavy stigma on failure. From university-entrance exams through loan applications and the bankruptcy process, any record of failure is a black mark. By contrast, lack of ambition seldom attracts criticism.

The government could usefully lead the way in "changing the atmosphere" around this issue. For starters, bureaucrats might well review all governmental procedures and criteria to weed out instances where those who have "tried-and-failed" face discrimination. Beyond that, the nation's leaders could usefully articulate the message that "trying and failing is okay; failing to try is not."

Five: Stop penalizing risk - Instead of tasking bureaucrats with deciding which ventures deserve government funding, stop penalizing private investors who support entrepreneurs. Angel investors in the U.S. can write off losses on failed investments, those in Japan cannot. While this may diminish tax revenues in the short run, over the long term we can expect such provisions to generate increased economic activity and thereby a net gain in tax revenue.

Angel investors have a key role to play in any new venture. Their decisions to participate are typically based on an informed appraisal of the entrepreneurs' character, skills and motives. They are often motivated by skills and experiences that give them informed insight into the business opportunity. And as their own funds are at stake, angels are concerned to see that funds are spent wisely. The tax system should stop penalizing them.

Next week, I will post the remaining five government roles that should be stopped. In the mean time, your comments are always welcome.