Hey Japan, What’s Up With Your Startup Culture?

When Americans hear "entrepreneur," we think visionary young techie out to change the world. When Japanese hear it, they often think "selfish, greedy, untrustworthy criminal." Why? And how can Japanese young people get back the creative spirit of the '50s? Terra Motors, maker of the iPhone-compatible electric scooters which are out to replace gas motorcycles all over Asia, says times are changing.

Where are the Japanese Googles, Facebooks, Twitters, and Apples? Who is Japan's Mark Zuckerberg or Steve Jobs, and why isn't he, or dare I say she, globally successful?

Trying to answer this question, I found some young Japanese entrepreneurs who don't mince words about what they say is wrong with their country's corporate culture.

"All the big work is done by old men," said Tetsuya Ohashi, PR manager of Terra Motors, a young startup that makes trendy electric scooters, now the top seller in Japan. Their "e-scooter," released in July, is the world's first smartphone-connected scooter, which logs the vehicle's route history and battery life data through the phone.

In journalist Yuri Kageyama's recent AP story on Terra, 26-year-old Kohshi Kuwaharu put it even more bluntly: "If you're stuck in a system that promotes by seniority, it's living a slow death, like animals on a farm. I wanted to be in a tough, competitive place."

Terra's founder and CEO, Toru Tokushige, 43, faced a similar frustration working at insurance company Sumitomo when he was 25 to 29. So he left Japan for Stanford Business School, where he met venture-minded entrepreneurs whose energy and vision he brought back to inspire young Japanese to quit following and invent their own careers.

"There are limitations for young people in Japan," Ohashi explains. "Bosses don't take risks. Japanese workers can't challenge the boss. If you give opinions, they don't listen. Bosses don't give young people opportunities: Only old men get to do interesting work."

Why Don't More Japanese Startups Spread Abroad?

So some young Japanese are inspired to leave crusty top-down corporate dinosaurs to join startups. That's awesome. But why is it that so few Japanese startups go global?

Startup-dating.com, a Japanese website tracking tech startups and venture funding, boasts an array of new Japan-produced apps and services, especially for smartphones, but most are targeted to the Japanese market. At the Tokyo SeedStarsWorld last week, an initiative touring 20 cities worldwide to find startup talent for a global competition, the winner was Locarise, a "Japanese" startup based in Tokyo and funded by startup incubator Open Network Lab, but the team, recently featured in a Co.Labs profile, is three French coders. Why don't Japanese entrepreneurs win these competitions? Why aren't more young Japanese motivated to make their own global companies?

Language is no doubt a barrier. Japan ranks famously low among Asian nations, given its high economic status, in English proficiency exams: 22nd out of 54 countries, versus Singapore's 13th, Malaysia's 14th, and South Korea's 21st in this year's Education First global English proficiency test. But Ohashi thinks two other factors are more important.

How Japan's Startup Image Fell From Grace

"Selfish, greedy, untrustworthy: That is the image of the entrepreneur in Japan since around 2000," Ohashi says. Why 2000? Here's why.

Japan did have its own would be Mark Zuckerberg or Steve Jobs, 13 years ago, and his reputation is mythic, too—only his is a "bad, black image," Ohashi says with a sigh.

Horie Takafumi launched Livedoor, a website that became a popular Internet portal and blog platform in Japan, after dropping out of the University of Tokyo at age 23. Takafumi, also known as "Horiemon," after the popular robot cat Doraemon he supposedly looks like, shared American tech pioneers' informal dress style (T-shirts and unbuttoned collared shirts, provoking the typical Japanese salaryman's suit), and having dropped out of ToDai, often called Japan's Harvard. He wore a mohawk at times and flaunted a counterculture image that irked traditional Japanese businesssmen during his heyday. But his site shut down in 2006—after a decadent and public career, buying horses, hostilely taking over companies, running for office—when he was arrested for lying about profits to hide losses at Livedoor, and sent to prison for almost two years.

Aside from this poisoned image of the startup founder, Ohashi says, Japanese people tend to be risk averse. They prefer to follow someone else's example—a bad sign, frankly, if what you want to be is a pioneer. Still, Ohashi uses a baseball analogy to make his point.

Nomo Hideo was the first Japanese baseball player to make it in the American Major League, in 1995—but he was followed by a flood of players, like Ichiro Suzuki and Daisuke Matsuzaka—more than 50 in all so far. Baseball had been huge in Japan since it was introduced there in 1872 by American professor Horace Wilson, but it was not until a century and a quarter later that Japanese pros started competing internationally. Terra Motors hopes to be the Nomeo Hideo of Japanese startups—the startup of startups, pioneer of pioneers.

"There is no model case yet," Ohashi says. "We have no Facebook, no Google, no Twitter, so young people don't believe Japanese startups can succeed. Our CEO's vision, what he wants to do, is to change that culture."

Terra Motors leads Japan's market in electric scooters. But Chinese knock-offs still dominate Asia, which makes up 80% of the world's motorbikes, Ohashi says. India has 13 million gas-powered bikes, Vietnam 3 million, versus Japan's 400,000—and China's got 20 million motorbikes. Most are imitations of Japanese models by companies like Honda, which tend to be "broken," Ohashi says—and lacking maintenance, spare parts or service; those markets, along with Thailand, the Philippines, and Indonesia, which is full of motorbikes, are some Terra hopes to penetrate soon.

When Did the Sun Quit Rising In The Land of the Rising Sun?

Japan is a rich country, with one of the best education systems on Earth. Yet what service do you use regularly, made by a Japanese startup? Sure, we love Japanese electronics—the Nintendo and Sony Playstation games we grew up on in the '80s; cars by Toyota or Honda, and clothes by UNIQLO or Rakuten, maybe. But those are old companies. My new Onitsuka sneakers may look sweet and modern, but the guy who stitched the first pair in his Kobe living room, Kihachiro Onitsuka, opened shop in 1949—yup, four years after Hiroshima and Nagasaki. In 1977 his shoe company became ASICS and spread to the U.S., in time for the running boom that swept up my parents and many other twentysomethings in those days.

Japan's inspiring revival after World War II, as told by MIT historian John Dower in his Pulitzer-winning book Embracing Defeat, was spurred by demand from America's army, stationed at Japanese bases while waging war in Korea and Vietnam. That's when the famous giants got their start: Honda, the world's largest motorcycle manufacturer by 1964, sold its first "Dream" bike in 1949, during the Allied Occupation; Sony started in the war's wake, when Panasonic transformed as well: its big product before the war had been bike lamps; after the war, radios and TVs sold all over the world.

"We Are All Different Than Usual Japanese. Everyone Has Been Abroad"

Internationalism is the most striking difference between Terra Motors' employees and most of their contemporaries in Japan. Kuwahara worked for Panasonic in Tanzania before joining Terra; another employee came from French tire maker Michelin; and Ohashi studied abroad in Pakistan, traveled to India, Myanmar, Russia, and elsewhere. Among Japanese young people, who are well known for their shy reticence to speak openly to foreigners, in the historically closed island nation, this is an adventurous crowd.

Ohashi, like most of Terra's 15 employees in their mid-twenties, ditched the prospect of working for a famous company to take a risk at a job where he'd be challenged. Ohashi was recruited by Mitsubishi from Hitotsubashi University, one of Japan's best, but he decided against the job when he heard of Terra through a venture capital recruiter.

"I quit because there is no chance to go abroad when you are young, or to do big work. Young people aren't given interesting chances. Maybe every young person in Japan has this frustration." This is ironic, he points out, because "the people who want to try the hardest are the young ones."

Japanese Dreams Deferred: An Old Road Rapidly Fading

American young people often think of youth as the time for taking risks, a time when we're curious, ambitious, and restless. So many Americans, especially in New York, make a stab at starting a business or doing creative work, like music or writing, in our twenties.

"Japanese young people are also restless," Ohashi told me, "but we have no successful examples." Not many recent Japanese startups have succeeded on a global scale, he stressed again. And few Japanese students go abroad. When Ohashi's friends hear about the time he spent in the Middle East, their usual reactions are "You've got guts"; an envious "sounds interesting"; and fear: "Why do you go to such dangerous places?"

"People want to stay at a big company," Ohashi's roommate added, in the background over Skype—11 p.m. in Tokyo, 10 a.m. here in New York. Safety is the priority; they think "'We will succeed if we follow this company'. But Japanese companies can't continue this [generous lifetime employment system] much longer."

The cozy security of Japan Inc. is bound to crumble soon. In the meantime, though, "Young people don't have incentives to take risks."

"After World War II," Ohashi said, "40 years ago, [Japanese] people took risks. But Japan is almost a developed country now," and many have grown complacent.

Okay, but what about the incentive of personal curiosity? Hunger for a challenge, a taste of adventure, or the natural restlessness a creative person feels? What happens to a dream deferred? In America, we're told that it explodes. So when will Japan's youth catch fire?

If Terra’s idealists are any indication, what we're seeing may be just the first spark of a coming inferno.

[Image: Flickr user Jesse Freeman]

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  • derekdj

    While you make some valid points, I think your post ignores some major factors and differences between Japan and the US that lead to both booms.

    First off you need to look at what led to Japanese innovation in the 1950's. In post war Japan you had the American occupation forces that greatly affected the youth culture, coupled that with the profound sense of lost identity, the young people at the time was full of bravado and to a big extent had no choice but to build businesses out of the ashes. Akio Morita the cofounder of Sony often talked of the post-war years as a huge driver for his generation to create and build. Secondly, the boom of the 50's was based largely on the semiconductor revolution and the Japanese expertise in miniaturization and skilled manufacturing. Fast forward to the 70's and 80's when Japan became a world economic power, the culture shifted again. Instead of looking outwards, Japan turned inwards, resting on their newly gained confidence. Leading to terrible immigration policies and a closed culture. You can see the results of this as semiconductors and manufacturing became cheap, easily replicable commodities, and Japanese products became too Japanese centric.

    On the flip side if you remember America was in Japan's shoes during their rise, during the 70's and 80's American manufacturing was terrible, innovation was non-existent. There was a period where the US was looking to overseas for ideas. It wasn't until the late 80's when software engineering offered a window into the next phase of innovation; ex-defense industry engineers from Grumman and Fairchild, research centers at MIT and Xerox all contributed to the birth of Jobs, Gates to today's Zuckerberg's and Brin's. Additionally, the US is a melting pot of cultures and ideas, we're constantly changing as a society, which is a major factor in invention.

    Innovation is cyclical, the US did not always have silicon valley. And as we off shore and open more training centers overseas, you can already see big innovations happening in Sweden, Germany and China. The software/service industry will plateau at some point (there's only so many Social Networking sites). The next boom might not be in services or even lead in the US, and then you'll be writing "Hey US, what happened to your startup culture".

  • Ken Gai

    Sadly seems that Horiemon was the "only" Japanese entrepreneur to be found here? Using baseball analogies, how about this; the Google, FaceBook and Twitter examples are like grand-slam homers at the bottom of the ninth in game seven of the World Series. While countless 10's (hundreds) of thousand strike-out, thankfully nobody is keeping score on those losers. While in Japan, like Ichiro, hitting solid +300 with singles and doubles may not be as 'glorious' for the highlight reels but that steady calculated approach wins over-all with better odds of bringing home the bacon.. see World Baseball Classic page via Wikipedia.. 8-)

    The author 'missed' noting Mrs. Tomoko Namba at DeNA who built a great company now pulling several $Billion a year, while the Twitter impending IPO filing indicates revenue their at under $1 Billion. Also strange, no mention of Masayoshi Son and SoftBank who just bought Sprint for $20Bn. I've spent enough time in the U.S. to see "start-ups" there are also laser focused on the domestic market, and generally lack multiple language skills, apparently some serious double-standards at play here ._.

  • Ken Gai

    This is really a shame, from
    someone who apparently lived here no less, arbitrary comparisons cherry-picked
    from a single source in order to suit a per-determined position. You forgot to
    mention they drive on the 'wrong' side of the road too.

    Perhaps Japanese people might
    wonder (cough) about the American approach to start a new company with big bold
    noise - which fails, oh well - soon after while the founders claim victory and
    move on to the next attempt leaving certain carnage in their wake. Maybe
    FastCo would pay me to (easily) write such an article.. but kinda doubt it.

    On the flip-side;
    "Hey America, What's Up With Your Lack of Long-Term Corporate Viability".
    Considering this list of Oldest Companies in the World: 5,586 were older than
    200 years, from these 3,146 are located in Japan: http://en.wikipedia.org/wiki/L...

    Trust the "Fish can't climb
    trees" line is clear from my equally inconvenient comparison?

    Anyway, seems that selfish, greedy,
    untrustworthy Horiemon was the "only" Japanese entrepreneur to be
    found here. Surely none of those types wandering the halls of Enron back in the
    day, but hey; greed is good right - cash exit before honor my granny always
    said.. God Bless America. Using baseball analogies, how about this; your
    Google, FaceBook and Twitter examples are (all good) like grand-slam homers at
    the bottom of the ninth in game seven of the World Series. While countless 10's
    (hundreds) of thousand strike-out, thankfully nobody is keeping score on those
    losers. While in Japan, like Ichiro, hitting solid +300 with singles and
    doubles may not be as 'glorious' for the highlight reels but that steady
    calculated approach wins over-all with better odds of bringing home the bacon.. like the
    World Baseball Classic.

    Maybe the author would like to ping
    Reid Hoffman at LinkedIn and ask him how helpful Joi Ito was in the founding
    days to get that platform off the ground, or note Tomoko Namba from DeNA who
    built a great company now pulling several $Billion a year, just for some appearance
    of balance. God forbid he would bother to mention Masayoshi Son and SoftBank
    who just bought Sprint for $20Bn. I've spent enough time in the U.S.to
    see "startups" there now are also laser focused on the domestic
    market, and generally lack multiple language skills, some serious double-standards at play here. Simply put this article screams Yellow Journalism as it makes zero
    effort to discover and describe the true nature of this environment in the best interest of the facts and in consideration of your readers.

  • NotBallmer

    This article seems to start with the conclusion, and then pick data that it thinks will support that.  Like almost everything written about Japan by westerners, it draws some questionable conclusions.

    For example, it suggests that part of the cause is Japan's unimpressive English proficiency score, 22nd of 54 in Asia, while South Korea is apparently doing better -- in 21st place.  They literally could not be any closer.  Is this supposed to be evidence of a difference between the countries?

    You say the image of the entrepreneur in Japan is "selfish, greedy, untrustworthy", and then try to contrast Zuckerberg and Jobs, but neglect that these two are also infamous (even in America) for being selfish and greedy and untrustworthy.  Apparently Japan's most famous tech entrepreneur has spent time in jail, but so have many of America's entrepreneurs, so that on its own is not necessarily evidence of anything (unless, for example, jail has an even higher stigma in Japan -- does it? -- but the article makes no mention of any such factors).

    You ask what "services" we use made by a Japanese startup, observing that all of the big international Japanese names are 50 years old.  But you fail to point out why the "stability" extreme is any worse than the "startup" extreme which America has.  (Do you know a single person who owns an American car today?  Detroit has utterly failed.  Do you know a single person who owns an American-made TV or home entertainment system?  America has failed at home electronics, too.  American manufacturing is dead.)

    Finally, you ignore the biggest factor of all: money.  You try to throw the blame on the Japanese people's supposed "shy reticence", or clumsy baseball analogies, and ignore the elephant in the room.  It's really expensive!  I can register a new LLC in California for literally $20.  Is it any wonder so many graduates and drop-outs are doing it?  In Japan, registering an LLC costs thousands of dollars (around $5000 for the filing fees, it looks like, plus a couple thousand in associated costs).  You don't need to go analyzing the 1940's occupation of Japan or the (western view of) Japanese business culture to figure this out.

    Across the globe, governments that charge a lot more to start companies see far fewer new companies established.  If California charged $5000 to register an LLC, you'd see a lot fewer there, too.  Maybe that's bad for Japan, and if so, the Japanese government should make it cheaper to found a new company.  That's the real story here.  Not some hand-waving about cultural differences.

  • narimasu99

    I lived in Tokyo, and IMHO the problem is the group society. Wa (和) is a Japanese cultural concept usually translated into English as "harmony". It implies a peaceful unity and conformity within a social group. US entrepreneurs Bill Gates or Steve Jobs (or name your favorite), had they lived in Japan, would have been ostracized agitators.

    Sony Corp. was at the vanguard of tech toys with their Walkman in 1979. They have yet to respond to Apple's iPod with innovation. They should have built a music platform around the USB flash drive, but didn't. Why pay Apple for music storage when it's already available as a much cheaper USB?

  • vseow

    Being risk averse is common not just in Japan, but Asia in general. I come from a little island, Singapore, that suffers the exact same predicament you wrote about here. It's not for the lack of effort or brains, but that there's too much government intervention in every aspect of life here - from personal to business to corporate levels, that anybody trying to step out of line will face dire consequences. Young people here have mostly been brainwashed to take the safe route - study hard, get a degree, get a steady job, get married, have kids (as many as possible), work harder so you can pay for our house and car and a domestic helper who takes care of the kids (or elderlies), retire from your job when you reach 62 and live off our remaining lives with the meagre pension where we are only allowed to draw a little at a time. House ownership is as high as 88% among local citizens (used to be even higher before the flood of immigrants), and a Ford Focus cost more than USD120,000. Yep, you didn't read it wrong. It's one-hundred-and-twenty-thousand US dollars! Little wonder most young people fear going into the unknowns because they have a house and car and a family to feed. And so the vicious cycle continues, because the next generation of young people have no role model to emulate.

    I have stepped out of line by leaving this island 10 years ago and lived in China. I not only survived the pollution and food safety scandals, I started a family and a company there, and made many good friends there, both Chinese and from anywhere around the world. When I returned to Singapore for good last year, I was so depressed by the pessimism the young people here exude. Yet, many still live in their little bubble, thinking they have the world anyway - they own million-dollar condos, drive a car that cost as much as a beach house in US, and have maids that do their housework. It's sad. But I'm paying the price for being "out of line". I don't have a roof over my head, since I can't afford a million-dollar apartment while growing a company at the same time. I find it hard to relate to my old friends, none of whom are entrepreneurs. They don't understand why I gave up "the good life" to pursue something  risky. We didn't have any mentors until recently, after a looooong search through our connections in (surprise surprise) China. I can totally relate to what the young Japanese feel. I can relate to Ohashi. It's the same here in Singapore.    

  • TaylorBeck

    PhasmaFelis, I agree with your point that there are plenty of greedy American CEOs, Jobs among them, and that Zuckerberg's privacy policies at Facebook often suck for users.

    Those two are mentioned in my article as successful and innovative entrepreneurs, not role models. The point is not to hold up any specific American innovator as ideal, just to note that Japan's startup scene was bleak--but, happily, seems now to be reviving.

    Thanks for pointing out the need for clarification.

  • PhasmaFelis

    It's worrying that the article tries to set up a contrast between the image of the entrepreneur in Japan ("selfish, greedy, untrustworthy") and America ("Steve Jobs and Mark Zuckerberg"). Mark Zuckerberg fights constantly to block undermine his users' privacy decisions and feed more personal information to advertisers; Steve Jobs lied to Wozniak's face to cheat him out of $2150, refused to acknowledge his own daughter for years while she grew up on welfare, and didn't allow Apple to give to charity during his life.

    Japan's stagnant corporate culture needs shaking up, but Jobs and Zuckerberg are not good role models for how to do so responsibly.

  • Tamagawa_D9

    The point is that America's entrepreneurial leaders are admired, respected and emulated while Japan's are vilified, disdained and marginalized. In other words, the people used to illustrate the trend are irrelevant.

  • Jerry Hilburn

    Fukushima as bad as it is, represents a huge opportunity for new startup's to evolve in solving almost every aspect of the problems the crisis created. Given the nature of the event, the cleanup, and the recovery of the environment over the next 100 years provides ample opportunity for new technology to evolve.

    The amount of money that will be required over a 100 year period to fix Fukushima is staggering. Yes it is a terrible disaster, but it does offer a fertile ground for seed ventures to create the machines, biological advances, and new science that will be required to recover from this disaster.

    However, policy changes will be required to get the funding flowing for small startups to tackle big problems. Perhaps a Ycombinator approach to nuclear cleanup startups is in order...

    Hope springs eternal...