Why Japanese companies do so many different things

Checkout this article that talks about it: https://www.theatlantic.com/business/2010/07/5-lessons-of-ja...

edit: added article.

> Here is the answer I want to suggest: Japanese companies excel in lots of very different domains because it’s inherent in how they’re structured.

Which is then backed by some economists saying something similar (generally), but all of which completely ignores Japan’s specific history.

As a better example Of examining Japan, here’s a look at Japan’s monopolies, how they were broken up, and partly how that effected the future of their industry:

https://m.youtube.com/watch?v=5_-Ac68FKG4

For obvious reasons, the expected rate of return needs to clear the hurdle of the risk-free interest rate. This puts a pretty high floor on activity that is "worth doing". This is a mechanism by which the phenomenon of ZIRP diversifies economic activity.

The other side of this is only new baby firms invest in that thing that makes a little bit of money. But given enough refinement, that thing starts making more and more money as it gets better and better. And soon, that new baby firm outshines the incumbent. The incumbent's wasn't incentivized to invest in the thing that started off worse but eventually became the new model. Think Kodak with film-vs-digital cameras.

This was the thesis of 1997's The Innovator's Dilemma, written by the guy who coined "Disruptive Technology".

Is your experience in the same America where Meta is losing another 4-6 billion $ this year in AR/VR business unit, after losing 19 billion $ last year. Similar with Google's and Apple's AR/VR unit which also consume a lot of money in R&D(funding a lot of high paying jobs) and not make any money, yet.

So sure, there's no risk appetite for things that make little money, except for all the evidence proving the contrary.

EDIT: I forgot about this other thing. He also does describe a mechanism for that culture.

Thank you for explaining this. I was alawys amazed how the japanese would take the cuisine from other countries and make it better in all aspects than the country that originated it.

I think all your examples are terrible (bread) or overpriced (Japanese Whiskey). There are also a lot of places that are pretty crap in Japan like restaurants where they clearly don't really care.

Compare to Italy that wherever you go everything seems really high quality. I was in a gas station in the middle of nowhere and I had a really great cappuccino for example.

That's a bold claim. While I'm sure the average quality in Japan is significantly better than ours, I would put the best pizza places in Jersey, NYC, and CT up against anywhere in the world.

At one point in the 1990s, you could buy a toaster from the same company that makes airplane engines, MRI machines, and produces “Saturday Night Live.” And you may have financed that toaster through their financial arm (GE Capital). Eventually the many lines of business were spun off from companies like this.

What came next was a very different type of consolidation - companies like Comcast, Chevron, and the current “AT&T” who went from being regional players to buying as many other companies just like themselves in order to maximize economies of scale - they’re huge but really just do one or two very closely-related things.

https://en.wikipedia.org/wiki/ITT_Inc.

used to have a big position in hotels and just about everything else and it trained quality movement advocate Phil Crosby

https://en.wikipedia.org/wiki/Philip_B._Crosby

https://commoncog.com/how-to-become-an-asian-tycoon/

https://commoncog.com/the-asian-conglomerate-series/

Reading it now, great read!

That's easy. They have corporate visitors to their corporate offices and the available hotels are insufficient. They decide to just make their own hotel.

There are many corporate campuses with an embedded hotel. Some run by the corporation itself, some with significant management contracting with the corporation, and some independently managed.

Large corporation has a small travel business is very common.

Mumbai Dabbawala Association is a 125-year-old, cooperative-style logistics system that delivers approximately 200,000 home-cooked meals daily to office workers across the city.

How are you defining civil wars such that America has had "plenty" of them? Could you list a few?

The price of a computer chip has been lowered so significantly because of the standard process that is used across millions of chips with materials that are 99.999999999% pure.

You use "zombie companies" as a universal pejorative and suggest we should all be instead worshiping at the alter of economic efficiency, JIT-delivery, and maximizing shareholder value without really considering the critiques there.

Yes, the "zombie company" strawman is paying people to move dirt from one hole to the other and back again which is dumb, but the "efficient company" has its own strawman, one drowning in manufactured debt, peeing in pee bottles in-between amazon warehouse isles, and unable to manufacture its own medical equipment when a black-swan pandemic event hits.

Which one is "better" largely depends on if you value societal stability or shareholder profits.

Or, in the framing of the article (which is summarizing Aoki, Milgrom, and Roberts), J-style companies exceed in periods of moderate volatility where 1) things don't change so much that you need the money-above-all-else incentive that favors strong hierarchical Jobs-like leadership that finds the visionary new solution, but 2) they change enough that the money-above-all-else incentive that favors value-engineering enshittification loses out to competition. The "societal stability" is just a part of the incentive bundle that forces the adaptation called the J-style approach.

Quite the opposite - for me, anyway.

FWIW, as a Westerner, I find the Mondragon Corporation to be fascinating and something I've read a lot about because there's no way we've figured out the ideal sort of setup for a business (or government, or any sort of human organization, given appropriate context) in the year 2026.

We have a lot to learn, and while "different" doesn't always mean "better," I strongly believe being exposed to "different" is necessary for us to devise novel approaches to human organization.

The article's thesis statement isn't "the Japanese approach is better," but that business practices like these bundle together, that they're very difficult to change, and that each bundle has different advantages and disadvantages.

Ironically, you've proved a deeper point about how amusing HN is: we all tend to project our fantasies onto the articles we're discussing, even if we didn't fully read or understand the article.

The interesting question in all of these kinds of things is "are there ideas we can take to gain the strengths of other systems or patch the weaknesses in ours?". Looking at Japan specifically, I think I speak for most westerners in saying that if we could get a little more stability and less financial-quarter-driven behavior without taking the whole kit of lifetime employment and zombie companies, that would be a good thing. The author points out just how bundled that is, so it's a tough nut to crack.

One model that does give us that is the 'Untouchable visionary CEO' of Jobs and Musk, but I think the popularity of that approach is also limited, partially because of all the not so visionary CEOs trying to be Jobs, and partially because working for those guys is terrible. They inevitably seem to become tyrants.

Most Americans I know are familiar with the unending work culture of Japanese white collar workers (if only a parody version of it), and want no part of it.

HN has had posts romanticizing them, maybe check those

https://news.ycombinator.com/item?id=32622140

https://news.ycombinator.com/item?id=41438060

> it created a massive 'zombie company' problem—a heavily discussed issue in Korea and Japan that the West seems largely blind to

Zombie companies in the west are mentioned as a low/ZIRP phenomena. But the west shouldn't have as big an issue with those because companies, when less diversified, get killed off more often by interest rate hikes.

In Japan the corporation primarily provides stable income and employment for society, and secondarily returns on capital invested. In America, corporations primarily provide returns on capital invested and secondarily provide stable income and employment.

This shows up in the data too. Japanese corporations are less likely to go out of business but provide worse investment returns. American corporations provide better investment returns, but the citizens have to deal with layoffs.

Most citizens would prefer stability to growth, but I think the tradeoff has a lot of downstream consequences.

Westerners are taught by the media and education to idealize Japan and hate China almost everywhere. They present cherry-picked aspects of both countries that make China look bad and Japan look good. In reality every country has its good and bad aspects.

This is just part of the propaganda machine and what politicians want you to believe, in an effort to align their populations to be supportive of their foreign policy and military motives. That ultimately trickles down to things like this. When people come to HN, or any place, with rose-colored glasses of Japan, they will seek confirmations of that rose color everywhere.

Related: In most of the world, carmakers separate out a luxury brand from their other products: Honda with Acura, Toyota with Lexus, etc. In Japan, they don't. The explanation I usually get is that the culture primarily associates luxury with "being attached to the big-name corporation". So you don't really improve on that by introducing another smaller brand, even one you build up as luxury.

See also the patio11 comment:

>>My salary was $30k, but there is some tangible value in having a pocket full of business cards which practically read "Attention, person who has just been handed this card: give the bearer whatever he wants. We're good for it. If you don't, we will remember." That status is very much not the same as the one you get if you combine two part-time jobs into the same level of income.

https://news.ycombinator.com/item?id=8576008

this theory is typically mentioned when introducing the Theory of the Firm, i.e. why do companies exist at all? why not everyone just freelances, and when you need a marketing/finance/legal/coding person, you just contract one on the free market? the idea is that there are always frictions when doing business with someone new (is this person good? trust worthy? how do i find out?), and how much friction there is determines how big the firm will grow (to incorporate functions in-house, or expand to other industries).

in a perfect frictionless economy, it could indeed be true that business transactions all happen at the smallest unit, i.e. the individual. at the other extreme, there would just be one firm that coordinates all economic activities. all real world economies sit some where in between.

Speaking for myself, I'd find that very interesting! I just stumbled over an article about it a few days ago, and don't think it's weird that different parts of the world would be interested in a regional business phenomenon.

I'd be pleasantly surprised, very impressed and it would make me reach out to have an offline chat. Not exaggerating.

Lack of mobility across companies (no price discovery on wages), lack of specialization (no focus), age based hierarchy (anti-meritocratic). None of these sound good for a well-tuned system.

I suspect much of Japan's stagnation is due to this system.

There are people who romanticize Japan/Asia because they never were there and it is not attainable for them.

There are people who romanticize Japan/Asia because they have direct business interests to do so like selling dreams to the first group.

It's not at all like in the article, it's not horizontal, and very much hierchcal and rigid.

And it can be seen in japanese software, it looks like it was designed from request sheet without actually understanding why. It's often nonsensical and extremely convoluted.

Most of the good japanese software is actually developed in the west by subcontractors. For example Sony games

Western Japanophiles, especially from the US, and even if they speak the language and have lived there, are mostly ignorant and their idea of Japan is a full phantasy.

This particular article was decently nuanced though.

If HN was Brit-dominated, while less romanticised perhaps we probably would seem oddly fascinated with say France, to our minority members elsewhere.

IMO, the tight-knit division of labor between Toyota and its subcontractors is a slightly different story from the broad diversification within a single corporation. While the latter was historically bolstered by strong industry-academia ties (often driven by university cliques), we rarely see this kind of broad diversification happening in recent years. That said, Japan's traditional "membership-based" employment system, combined with a cultural reluctance to shut down unprofitable business units, is likely what has allowed this diversification to persist for so long.

In any case, Japanese companies are currently struggling with the friction between their traditional corporate culture and the superficial adoption of Western concepts like DX, Agile, meritocracy, job-based employment, and a startup-centric mindset. I suspect Korea might be facing similar structural clashes, though perhaps you are adapting at a much faster pace.

Most HNers tend to be in their mid-30s to 50s so a lot of Japan-philia does appear to stem from an older mental image from the 1990s to 2010s.

> This essay on Japan's corporate diversification and physical tacit knowledge is an interesting read. However, as an East Asian, my assessment is that this system is heavily driven by Japan's unique, subtle classism. It's a highly collectivist society with strict age-based milestones and immense pressure to secure traditional employment. In Japan, your corporate affiliation often dictates your social standing...

The Japanese Keiretsu and later Trust Bank model is the norm in South Korea, Taiwan, China, and other Asian countries as well due to a mix of colonial, financial, and policymaking ties.

Car culture. We're a very car-centric society, and the Japanese auto makers have been a part everyday life to 3 full generations of Americans now. Even most Baby Boomers are too young to remember a world without Honda or Toyota. Across all age groups, a lot more Americans grew up with a fondness for their family's Toyota than their family's Hyundai.

I grew up in middle America. Both my grandfathers were "GM Men" if you will. Partly by vocation, partly by culture. On both sides of my family, every car was either a Chevy or a Buick. When my folks bought a Honda in 2007, it was treated like a scandal. But yknow what? Now one of my cousins has a Hyundai, and nobody batted an eye. Things are changing, even for the "raise hell praise Dale" crowd.

Japan's car makers, and their other industrials have a 40-year head start on embedding themselves in the American zeitgeist. Sony, Panasonic, Canon, Yamaha, they've all been here a really long time. They're loved because they're familiar. That's a bias, and I think that bias colors the way we talk about east Asian businesses more broadly.

Oh, we're getting there. It's just a bit fringe right now, but Meta's $90 billion loss on VR and *gestures at various aspects of the Gamestop situation" and a few other incidents have people asking questions that are uncomfortable for the passive investmend fund crowd. Forget zombie companies; by many measures, America has a zombie economy.

I’ve been promoting it and its organizational structure for a decade on this website and I’m one of the oldest members on HN

https://news.ycombinator.com/item?id=41438060

Have never heard about it until now, but just looking through it, sounds great!

Where does it not? As in which countries are not like this?

Are they successful?

Japanese culture reflects certain western attitudes which make it stand out.

Do I detect resentment?

In his science fiction novels, Kim Stanley Robinson frequently incorporates the Mondragon economic model to explore post-capitalist, worker-owned, and cooperative societies. I'd say KSR is a decently well-known S/F writer, so at least some westerners (and I'd assume many in this site) have already some idea of it. But I'd say it's true that it's easy to romanticize these kinds of singular situations and brush over the problems they might have.

I think HN'er are smart enough to not idealize everything about Japan.

For example you can be in awe about how clean and safe the country is and how precisely on time all subways train are without idealizing toilet that stream water up your arse.

I will say that it often goes beyond "idealizing". I'd use the word "fetishizing".

I've wondered how much of this stems from being disaffected by the modern (particularly Western) world. I worked with an ethnically Chinese guy who was a massive weebu and that always struck me as odd given the Japan-China history.

Japan has always rubbed me the wrong way: misogyny, racism and denial about Japanese war crimes in WW2 mostly. Also the salaryman work culture. I see videos from Japanese workers and life honestly looks miserable. It's also a country that is dying. The samurais, ninjas, Ronin, shoguns, etc are cool though. Japanese history is fascinating.

My hot take here is that China is actually what people idealize Japan to be. China has the most competent government in the world and it's not even close. It's not problem-free. Nowhere is. But the transformation in the lives of ordinary Chinese people over the last few decades is unbelievable. China pulled ~800 million people out of extreme poverty.

It could be worse than Japan too. I think South Korea is that. As a non-Korean from the outside looking in, South Korea looks like a dystopian run by aristocratic (chaebol) families where the birth rate is the lowest in the world and it's in fact so low that if nothing changes, South Korea simply won't exist in 3 generations.

Huh? I thought Agile was dead (it is) and we were going back to waterfall in the West already...

Replace 'Westerners' with Americans and you are spot on.

I have never met any European that glorifies any part of Japan (I'd see Asia as a whole), most of them will tell you how the tall buildings make them feel little and how the society is beyond oppressive.

Whatever meritocracy exists in capitalism is ironed out by those rigid hierarchies.

I am not sure what is appealing about Japan, Korea or any of these parts of the world, to me they are full of plastic, sugar and late stage capitalism that makes the Americans look as socialists.

I do strongly suspect that a certain type of male likes these places for reasons I cannot even hold in my mind for more than a few seconds.

This is absolutely true in the US as well, by the way. People will treat you differently if you work for a FAANG company. People take a lot of pride in telling others they work for one. And we even have a word for someone who used to work for Google, for instance.