19 ms·

Japan Must Let Zombie Companies Die

117 points by tmlee 11y ago

mempko 11y ago
> If Japan wants to generate long-term growth... Does Japan want this?
- deleted 11y ago
  [deleted]
- deleted 11y ago
  [deleted]
- bedhead 11y ago
  Their population is declining, so no, I guess.
  - cJ0th 11y ago
    Your comment may is tongue in cheek but I'd say that if that is indeed what they want then that's fair enough, isn't?
  - tonyedgecombe 11y ago
    I guess you can have declining or stable national GDP and per-capita GDP growth at the same time.
jzelinskie 11y ago
>you decide to leave your job and start a business with your college buddies I know the point they were trying to make in the article, but the primary reason this doesn't happen in Japan is the cultural fear of failure rather than the system being broken. Once you're in, the nanny corporation will take care of you for the rest of your life. Once those corporations are in, the government will take care of them for the rest of their life. Risk mitigation is what's most highly valued; because of this fact, not all capitalistic logic can be applied, despite the system appearing fairly capitalist.
- tmlee 11y ago
  The corporations can't take care of their employees forever, so does the government can't take care of the corporations forever.. Wouldn't they not want this to hit a dead end?
  - ihsw 11y ago
    The rationale is that the more successful divisions of corporations support the existence of less successful divisions, and more successful corporations support the existence of less successful corporations. This is socialism -- social ownership of risk. The rising tide lifts us all. There are fewer winners and fewer losers, and it's only sustainable when everybody buys into it and nobody gets greedy or envious. Such success is only seen in homogeneous societies, and Japan is largely homogeneous. Conversely, this is the reason for Europe's clinging to socialism for the better part of the last century (homogeneous society), and it will most definitely change over the next one. Europe will start to look more like Canada and the US -- a melting pot of sorts -- and maintaining a Euro-centric identity will be far more difficult as many scramble to align themselves with a nation-centric identity. A strong EU that leans to the right is inevitable, and national identity will fall by the wayside as they come to the crushing realization that national identity doesn't put food on the table or keep the lights on when you have already given up so much.
    - mattlutze 11y ago
      > Conversely, this is the reason for Europe's clinging to socialism for the better part of the last century (homogeneous society) Europe is a continent with 50ish countries and dozens of widely spoken languages. It is in no way a homogeneous landmass. > a melting pot of sorts Which it has been since folks started invading, warring and immigrating across the continent thousands of years ago. > maintaining a Euro-centric identity will be far more difficult as many scramble to align themselves with a nation-centric identity. There hasn't been a dominant Euro-centric identity across Europe, however. Current trends in politics favoring the messages from conservative (or very conservative) parties is interesting news for the pundits to discuss. Different countries in Europe have been quite conservative and quite liberal over the last century, but they all are nations first (as is evidenced by how difficult it can be to effect change through the European Council/Parliament. > A strong EU that leans to the right is inevitable Unfortunately I'm not sure this can be concluded from the preceding arguments.
freewizard 11y ago
Well, wonder how much it costs Japan to do this, and might be fun to compare with what China has put into its stock market.
mc32 11y ago
Abe and Koizumi to a lesser degree keep wanting to change business in Japan, but it just does not happen. Economists have been "telling" Japan to let Zombie companies die for over 25 years and little has changed. Brokers intermediaries too, they have not been made redundant through efficiencies. On the one hand it's interesting to see a society buck the trend towards working out inefficiencies, on the other hand, they are not a closed market so they can't just keep on going like this and hope things get better.
lkrubner 11y ago
The above article is best understood as a political piece, rather than a business story. Every single sentence in this article can be picked apart, but doing a line-by-line critique would miss the larger problems with the article. The author assumes that more productivity is always good, even though Japan has been suffering a lack of economic demand for most of the last 26 years. Big gains in productivity would only make the lack of demand worse. If the goal of Japanese policy makers is to boost demand, and that does seem like a wise goal, then keeping 50,000 workers employed at Sharp seems like a smart bet, compared to keeping 100 people employed at some nimble, fast-moving startup. More so, Japanese electronics firms still hold great global market share, so there is reason to think that their productivity is more than adequate to compete in the global markets. And this sentence can only be understood if your political beliefs align with the political beliefs of that author: "If Japan’s bailouts remind you of the U.S.'s rescue of its auto companies, you’re not alone. There is a strong argument that the auto bailouts only delayed the day when General Motors and Chrysler lose out to nimbler competitors like Tesla Motors." Right, but the USA bailout of the auto companies seems to have been a good bet. Hundreds of thousands of jobs were saved, and the companies bounced back and paid off their debts, and the USA was able to sell its stake in GM at a profit. So it was win-win-win all the way: the taxpayers won, the workers won, and the economy won.
- gizi 11y ago
  It is not 50,000 versus 100 but 50,000 versus 500,000 or even 5,000,000. Most people (in advanced economies) work for family businesses. The government would never bail them out. It only bails out large interests. That is unfair, because the government also collects the same taxes -- if not more -- from these small and medium sized companies and their employees, but it will only bail out large companies with that very tax money.
  - jsprogrammer 11y ago
    At least ownership of larger corporations is typically more spread out. Bailing out family businesses, who typically offer no ownership to their employees, only really serves to enrich a particular family and maybe helps them afford to use others for labor a bit longer.
primrosepath 11y ago
> The U.S. auto bailouts were undertaken in the middle of a deep recession, and are highly unlikely to be repeated. Except Chrysler was bailed out before and has now been merged/bought by a foreign auto company for the second time in 20 years.
- gozur88 11y ago
  I had to laugh at that, too. US auto companies will be bailed out or forced into mergers exactly as often as they fail. The government can't afford to assume pension obligations for all those retirees.
patio11 11y ago
Meanwhile, you manage to secure venture-capital funding and even a bank loan. The interest rate is high, but with your rapid growth, you should be able to pay it back. Meanwhile, in the Japan some of us actually live in: 1) Very few 26 year olds will be successfully able to convince their 26 year old co-workers to leave Sharp, because that is a once-in-a-lifetime mistake. I am literally related to a $ANONYMOUS_FOR_SAKE_OF_RELATIVE employee who is presently miserable and cannot leave because that means an end of economic stability for his family forever and his family makes no secret of how unhappy they would be in that situation. 2) If you are a 26 year old startup founder and you ask for a bank loan ^H^H^H^H business checking account, be prepared to get told "Oh hell no.", but very politely. The first variant of "Oh hell no" is "Hmm, well theoretically speaking we do have business checking accounts available as a product. Can we see your articles of incorporation, business plans, office rental contract, orders from customers, etc etc?" Upon which you say "Well we're making LCDs so we don't have orders yet because we need a bank account to e.g. purchase machinery" at which point "We regret to inform you that we cannot accept your business." Not a theoretical concern: I'm presently 2 weeks into the fun with a large Japanese bank trying to get an account issued, which shakes fist at a personal bugbear is not exactly the easiest thing to accomplish for a Western tech entrepreneur in Tokyo at the moment. (I've been asked about Bitcoin three times already.) If I manage to get the account, it will because I rounded up 123 pages of documentation (not an exaggeration, that's a count) from previous work to convince the bank that I was not a ML nor fraud nor credit risk. 3) Venture capital: you will not successfully receive sufficient-to-create-a-physical-product venture capital as a 26 year old in Japan. It's difficult to raise what would be "trivial by Valley standards" just to build software products: prepare for 6 months of All The Fundraising Fun You Can Imagine to get an A round sized like a modest seed round in St. Louis. You need substantial industry connections here to convince a corporate VC to give you the corporation's money. The high-percentage way to "compete" with Sharp is to spend 30 years in it, get recognized internally as a very competent performer who is not management track, "quit" to "run a startup" which makes a product that Sharp definitely needs but would have difficulty making without you, receive money from Sharp's affiliated VC vehicles, and "exit" by taking the buyout order from your single customer, which will naturally be Sharp. ("What would incentivize Sharp to do that?" Because all salarymen at Sharp of a given age are equal but some are more equal than others. M&A is allowed to make decisions regarding compensation that HR is not. This incentivizes folks who are internally indispensable but not managers who show up in the Nikkei/WSJ by name to do a bit of revolving-door. Think like Google but amped to 11.)
Animats 11y ago
Bailing out GM and Chrysler seems to have been a win. Bailing out Goldman Sachs, not so much. The US had a lot of zombie investment banks in 2008, and only a few were allowed to fail.
- adventured 11y ago
  The critical difference is, all the zombies were actually dealt with in the US. Goldman Sachs is back to being fully functional and very profitable, it's entirely capable of standing alone today. There are no big banking zombies wandering around the US landscape now. Most were consumed, forced into mergers. Their balance sheets were cleaned up, via the Fed (Citi and Bank of America for example).
  - jsprogrammer 11y ago
    Kind of amazing how some billions and trillions will just stand you right up on your feet in a few years. Maybe the Fed is now the zombie?
tim333 11y ago
A couple of flaws in the article: >That will keep the market flooded with artificially cheap Sharp products -- mobile phones, solar panels, air conditioners, printers, microwave ovens Sharp doesn't dominate any of those markets. If it went bust people would buy them as cheap pretty much from other Asian manufacturers. >The bank bailout does nothing to improve Sharp’s corporate strategy Sharp seems about to be bought by Foxconn which is quite a change of strategy. It wouldn't have happened if the government had let it go bust years ago. The main effect of letting Sharp go bust would be to throw 50000 people on the labour market who in efficient market fantasy land might all be snapped up by more efficient employers but who in reality would probably have been mostly unemployed.
- unscaled 11y ago
  >That will keep the market flooded with artificially cheap Sharp products -- mobile phones, solar panels, air conditioners, printers, microwave ovens Besides, as a domestic consumer, sharp products are not necessarily cheaper than competitor's offers. Nor do they seem less innovative. This is all from a consumer perspective, but while the bailouts are real, the "stop innovating and flood the market with cheap products" strategy the author describes just isn't there. Sharp is keeping the same Kaizen-style innovation, slightly improving their models every year. It's debatable whether these small improvement warrant buying a new model, but the same could be said for all of their competitors as well.
free2rhyme214 11y ago
I was in Tokyo in 2013 and 2014. I remember seeing lots of salarymen all dressed the same, also government workers all dressed the same with their little badges on their sleeves and I couldn't help thinking about the lack of individuality in their culture. It doesn't surprise me that Japan is mimicking the U.S. by bailing out failing local companies. The real issue with Japan is their lack of entrepreneurship. They used to be fierce competitors but are now more of an afterthought.
EGreg 11y ago
So because of a fictitious story, a company employing 50,000 should die so a startup employing 100 people can grow into the next big company. If your concern is about Japan's welfare, how about instead selling your startup to the large company?

117 points by tmlee 11y ago

mempko 11y ago

> If Japan wants to generate long-term growth... Does Japan want this?

deleted 11y ago
[deleted]
deleted 11y ago
[deleted]
bedhead 11y ago
Their population is declining, so no, I guess.
- cJ0th 11y ago
  Your comment may is tongue in cheek but I'd say that if that is indeed what they want then that's fair enough, isn't?
- tonyedgecombe 11y ago
  I guess you can have declining or stable national GDP and per-capita GDP growth at the same time.

jzelinskie 11y ago

>you decide to leave your job and start a business with your college buddies I know the point they were trying to make in the article, but the primary reason this doesn't happen in Japan is the cultural fear of failure rather than the system being broken. Once you're in, the nanny corporation will take care of you for the rest of your life. Once those corporations are in, the government will take care of them for the rest of their life. Risk mitigation is what's most highly valued; because of this fact, not all capitalistic logic can be applied, despite the system appearing fairly capitalist.

tmlee 11y ago
The corporations can't take care of their employees forever, so does the government can't take care of the corporations forever.. Wouldn't they not want this to hit a dead end?
- ihsw 11y ago
  The rationale is that the more successful divisions of corporations support the existence of less successful divisions, and more successful corporations support the existence of less successful corporations. This is socialism -- social ownership of risk. The rising tide lifts us all. There are fewer winners and fewer losers, and it's only sustainable when everybody buys into it and nobody gets greedy or envious. Such success is only seen in homogeneous societies, and Japan is largely homogeneous. Conversely, this is the reason for Europe's clinging to socialism for the better part of the last century (homogeneous society), and it will most definitely change over the next one. Europe will start to look more like Canada and the US -- a melting pot of sorts -- and maintaining a Euro-centric identity will be far more difficult as many scramble to align themselves with a nation-centric identity. A strong EU that leans to the right is inevitable, and national identity will fall by the wayside as they come to the crushing realization that national identity doesn't put food on the table or keep the lights on when you have already given up so much.
  - mattlutze 11y ago
    > Conversely, this is the reason for Europe's clinging to socialism for the better part of the last century (homogeneous society) Europe is a continent with 50ish countries and dozens of widely spoken languages. It is in no way a homogeneous landmass. > a melting pot of sorts Which it has been since folks started invading, warring and immigrating across the continent thousands of years ago. > maintaining a Euro-centric identity will be far more difficult as many scramble to align themselves with a nation-centric identity. There hasn't been a dominant Euro-centric identity across Europe, however. Current trends in politics favoring the messages from conservative (or very conservative) parties is interesting news for the pundits to discuss. Different countries in Europe have been quite conservative and quite liberal over the last century, but they all are nations first (as is evidenced by how difficult it can be to effect change through the European Council/Parliament. > A strong EU that leans to the right is inevitable Unfortunately I'm not sure this can be concluded from the preceding arguments.

freewizard 11y ago

Well, wonder how much it costs Japan to do this, and might be fun to compare with what China has put into its stock market.

mc32 11y ago

Abe and Koizumi to a lesser degree keep wanting to change business in Japan, but it just does not happen. Economists have been "telling" Japan to let Zombie companies die for over 25 years and little has changed. Brokers intermediaries too, they have not been made redundant through efficiencies. On the one hand it's interesting to see a society buck the trend towards working out inefficiencies, on the other hand, they are not a closed market so they can't just keep on going like this and hope things get better.

lkrubner 11y ago

The above article is best understood as a political piece, rather than a business story. Every single sentence in this article can be picked apart, but doing a line-by-line critique would miss the larger problems with the article. The author assumes that more productivity is always good, even though Japan has been suffering a lack of economic demand for most of the last 26 years. Big gains in productivity would only make the lack of demand worse. If the goal of Japanese policy makers is to boost demand, and that does seem like a wise goal, then keeping 50,000 workers employed at Sharp seems like a smart bet, compared to keeping 100 people employed at some nimble, fast-moving startup. More so, Japanese electronics firms still hold great global market share, so there is reason to think that their productivity is more than adequate to compete in the global markets. And this sentence can only be understood if your political beliefs align with the political beliefs of that author: "If Japan’s bailouts remind you of the U.S.'s rescue of its auto companies, you’re not alone. There is a strong argument that the auto bailouts only delayed the day when General Motors and Chrysler lose out to nimbler competitors like Tesla Motors." Right, but the USA bailout of the auto companies seems to have been a good bet. Hundreds of thousands of jobs were saved, and the companies bounced back and paid off their debts, and the USA was able to sell its stake in GM at a profit. So it was win-win-win all the way: the taxpayers won, the workers won, and the economy won.

gizi 11y ago
It is not 50,000 versus 100 but 50,000 versus 500,000 or even 5,000,000. Most people (in advanced economies) work for family businesses. The government would never bail them out. It only bails out large interests. That is unfair, because the government also collects the same taxes -- if not more -- from these small and medium sized companies and their employees, but it will only bail out large companies with that very tax money.
- jsprogrammer 11y ago
  At least ownership of larger corporations is typically more spread out. Bailing out family businesses, who typically offer no ownership to their employees, only really serves to enrich a particular family and maybe helps them afford to use others for labor a bit longer.

primrosepath 11y ago

> The U.S. auto bailouts were undertaken in the middle of a deep recession, and are highly unlikely to be repeated. Except Chrysler was bailed out before and has now been merged/bought by a foreign auto company for the second time in 20 years.

gozur88 11y ago
I had to laugh at that, too. US auto companies will be bailed out or forced into mergers exactly as often as they fail. The government can't afford to assume pension obligations for all those retirees.

patio11 11y ago

Meanwhile, you manage to secure venture-capital funding and even a bank loan. The interest rate is high, but with your rapid growth, you should be able to pay it back. Meanwhile, in the Japan some of us actually live in: 1) Very few 26 year olds will be successfully able to convince their 26 year old co-workers to leave Sharp, because that is a once-in-a-lifetime mistake. I am literally related to a $ANONYMOUS_FOR_SAKE_OF_RELATIVE employee who is presently miserable and cannot leave because that means an end of economic stability for his family forever and his family makes no secret of how unhappy they would be in that situation. 2) If you are a 26 year old startup founder and you ask for a bank loan ^H^H^H^H business checking account, be prepared to get told "Oh hell no.", but very politely. The first variant of "Oh hell no" is "Hmm, well theoretically speaking we do have business checking accounts available as a product. Can we see your articles of incorporation, business plans, office rental contract, orders from customers, etc etc?" Upon which you say "Well we're making LCDs so we don't have orders yet because we need a bank account to e.g. purchase machinery" at which point "We regret to inform you that we cannot accept your business." Not a theoretical concern: I'm presently 2 weeks into the fun with a large Japanese bank trying to get an account issued, which shakes fist at a personal bugbear is not exactly the easiest thing to accomplish for a Western tech entrepreneur in Tokyo at the moment. (I've been asked about Bitcoin three times already.) If I manage to get the account, it will because I rounded up 123 pages of documentation (not an exaggeration, that's a count) from previous work to convince the bank that I was not a ML nor fraud nor credit risk. 3) Venture capital: you will not successfully receive sufficient-to-create-a-physical-product venture capital as a 26 year old in Japan. It's difficult to raise what would be "trivial by Valley standards" just to build software products: prepare for 6 months of All The Fundraising Fun You Can Imagine to get an A round sized like a modest seed round in St. Louis. You need substantial industry connections here to convince a corporate VC to give you the corporation's money. The high-percentage way to "compete" with Sharp is to spend 30 years in it, get recognized internally as a very competent performer who is not management track, "quit" to "run a startup" which makes a product that Sharp definitely needs but would have difficulty making without you, receive money from Sharp's affiliated VC vehicles, and "exit" by taking the buyout order from your single customer, which will naturally be Sharp. ("What would incentivize Sharp to do that?" Because all salarymen at Sharp of a given age are equal but some are more equal than others. M&A is allowed to make decisions regarding compensation that HR is not. This incentivizes folks who are internally indispensable but not managers who show up in the Nikkei/WSJ by name to do a bit of revolving-door. Think like Google but amped to 11.)

Animats 11y ago

Bailing out GM and Chrysler seems to have been a win. Bailing out Goldman Sachs, not so much. The US had a lot of zombie investment banks in 2008, and only a few were allowed to fail.

adventured 11y ago
The critical difference is, all the zombies were actually dealt with in the US. Goldman Sachs is back to being fully functional and very profitable, it's entirely capable of standing alone today. There are no big banking zombies wandering around the US landscape now. Most were consumed, forced into mergers. Their balance sheets were cleaned up, via the Fed (Citi and Bank of America for example).
- jsprogrammer 11y ago
  Kind of amazing how some billions and trillions will just stand you right up on your feet in a few years. Maybe the Fed is now the zombie?

tim333 11y ago

A couple of flaws in the article: >That will keep the market flooded with artificially cheap Sharp products -- mobile phones, solar panels, air conditioners, printers, microwave ovens Sharp doesn't dominate any of those markets. If it went bust people would buy them as cheap pretty much from other Asian manufacturers. >The bank bailout does nothing to improve Sharp’s corporate strategy Sharp seems about to be bought by Foxconn which is quite a change of strategy. It wouldn't have happened if the government had let it go bust years ago. The main effect of letting Sharp go bust would be to throw 50000 people on the labour market who in efficient market fantasy land might all be snapped up by more efficient employers but who in reality would probably have been mostly unemployed.

unscaled 11y ago
>That will keep the market flooded with artificially cheap Sharp products -- mobile phones, solar panels, air conditioners, printers, microwave ovens Besides, as a domestic consumer, sharp products are not necessarily cheaper than competitor's offers. Nor do they seem less innovative. This is all from a consumer perspective, but while the bailouts are real, the "stop innovating and flood the market with cheap products" strategy the author describes just isn't there. Sharp is keeping the same Kaizen-style innovation, slightly improving their models every year. It's debatable whether these small improvement warrant buying a new model, but the same could be said for all of their competitors as well.

free2rhyme214 11y ago

I was in Tokyo in 2013 and 2014. I remember seeing lots of salarymen all dressed the same, also government workers all dressed the same with their little badges on their sleeves and I couldn't help thinking about the lack of individuality in their culture. It doesn't surprise me that Japan is mimicking the U.S. by bailing out failing local companies. The real issue with Japan is their lack of entrepreneurship. They used to be fierce competitors but are now more of an afterthought.

EGreg 11y ago

So because of a fictitious story, a company employing 50,000 should die so a startup employing 100 people can grow into the next big company. If your concern is about Japan's welfare, how about instead selling your startup to the large company?