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It's important to understand what SoftBank is, and why betting against them is a bad idea. Globally we are going through a period of deflation. Japanese Banks

It's important to understand what SoftBank is, and why betting against them is a bad idea. Globally we are going through a period of deflation. Japanese Banks have been dealing with this problem for 30 years now. BOJ can print money ( yen ) and flood the world and the value of the yen would still go up ! The reason is there is a lot of latent demand for Japanese exports. When Softbank invests in lets say India, ( through Uber drivers ), and suffers losses. The yens released ends ups creating demand for Japanese export. From Softbank's perspective it's a win-win, they get to be owners of really important tech companies and at the same time Japanese companies see a demand surge for their products. It's hard to understand initially - but don't be surprised to see Softbank clones propping up in Europe in 10 years - once the EU has been completely battered by deflation. In the US you might yet see the largest types of these funds in the future once the US govt. decides it wants some fiscal spending.

blankaccount 7y ago
Can you elaborate a bit on the part between Softbank spending on India's uber drivers resulting in an increase of Japanese exports? Is it just that there is a desire for Japanese products in India, but not enough cash?
- vmurthy 7y ago
  Not OP but here's one way: Softbank invests in Uber India pushing up automobile demand[1]. Indian drivers buy cars manufactured by Maruti Suzuki (54% market share [2]). Maruti Suzuki is a JV between an Indian company (Maruti) and Suzuki (Japan) where-in Maruti pays 6% of sales as royalty for design and other facilities. In addition, you have to realize that Japan exports $35b of auto parts and $101b of automobiles [4]. So any lever which pushes up sales of automobiles in any nation is bound to have an impact on exports. [1] https://economictimes.indiatimes.com/small-biz/startups/demand-from-uber-ola-driving-car-makers-sales/articleshow/56633234.cms?from=mdr https://economictimes.indiatimes.com/small-biz/startups/dema... [2] https://auto.economictimes.indiatimes.com/news/passenger-vehicle/cars/maruti-suzuki-regains-54-market-share-in-november/67047159 https://auto.economictimes.indiatimes.com/news/passenger-veh... [3] https://economictimes.indiatimes.com/markets/stocks/news/lower-royalty-payment-could-get-maruti-an-earnings-upgrade/articleshow/62660913.cms?from=mdr https://economictimes.indiatimes.com/markets/stocks/news/low... [4] https://oec.world/en/profile/country/jpn/ https://oec.world/en/profile/country/jpn/
  - 5822130027 7y ago
    Exactly.
    - dzader 7y ago
      lol
  - thrwo132123 7y ago
    +1 Indeed, one of the reasons for the current auto-slowdown in India appears to be the drastic decrease in benefits offered by Taxi aggregators, which is hitting taxi drivers hard. Can't complain, since taxis saturate the roads in Bengaluru already.
    - r_singh 7y ago
      > taxis saturate the roads in Bangalore already In Indiranagar (a popular, hip neighbourhood in Bangalore), you might have to wait for an hour to get an Uber or Ola, on weekday mornings too! Hence a lot of people are using Yulu (India's Bird).
      - vmurthy 7y ago
        Add HSR Layout to that list , too. I’ve started using a combination of Bounce( two wheeler point-to-point rental ) for <2km travel , public transport for longer distance travel and cabs as the last option.
  - navigatesol 7y ago
    Okay, now where does all the demand for these Indian taxi services come from that are actually going to pay for all of these automobile imports? It's not like Uber demand is insatiable. The notion that investing in Uber is going to drive the auto industry (which is completely contrary to the mission of these transportation companies) is an odd one. I can see that, at the margins, a company can spend money where it thinks it it can receive complimentary benefits. But this idea that you can spend your way into riches is a fallacy. So, I think we agree on some things, mainly that Japan is printing money and Softbank is a beneficiary and is using that cash to spread around the tech industry. Cheap money. Except I think it will backfire, eventually.
Traster 7y ago
I'm really not understanding this. What you seem to be saying is that when Softbank succeeds they get to own a load of tech companies. That's great, that's the upside of any VC. Where I'm not understanding is you're saying when they fail, the money they've lost has gone into stimulating demand for japanese goods and kept the currency low. But firstly, that's still them failing - the company will fail, ROI will be low. It might help the domestic japanese manufacturing industry, but it's not going to help softbank. But also to take your example, Softbank blows a load of money in India on Uber, those Indian Uber drivers go out and buy japanese cars. But it's not like 100% of the cash you're putting into Uber goes to Japanese car companies. It's probably not even 5% - the vast majority of the money will be going to stimulate the Indian economy. I just don't understand, because what you seem to be saying is that for a primarily export based economy, you should just print money always, that doesn't seem correct to me - but I really don't know enough about it. Surely there must be downside? Normally I'd say this maps to inflation and squeezed living standards- but are we just no longer seeing those effects?
- 5822130027 7y ago
  If you want a full comprehensive understanding of what is going on I highly recommend : - https://www.amazon.com/Princes-Yen-Central-Bankers-Transformation/dp/0765610493 https://www.amazon.com/Princes-Yen-Central-Bankers-Transform... There is a huge overlap here with MMT ( Modern Monetary Theory ), but the book was published way before MMT become more widely read. Richard studies what happened in Japan from an economic history prespective. ( I will do a dis-service to the whole topic trying to explain everything in a few sentences, but I will try to answer specific point raised ). > I just don't understand, because what you seem to be saying is that for a primarily export based economy, you should just print money always. As an exporter you cant help but accumulate FOREX. so the value of the yen would always head north, if you want to stay a top exporter you have to constantly print money to balance out your FOREX accumulation. > Surely there must be downside? Nope, no downside when you build capital goods that everybody else wants. > Normally I'd say this maps to inflation and squeezed living standards- but are we just no longer seeing those effects? inflation happens when aggregate demand > aggregate supply. If you are not supply constrained then inflation wont happen regardless of how much money you print. Japan specifically could print unimaginable amount of money and use it to create whatever technology they want. Technology acts as an accelerator to this deflation doom loops, since these technology products further increase supply or reduce cost. You might have hard limits due to physical commodities like oil. But technology has been able to squeeze even more value out each unit. > Where I'm not understanding is you're saying when they fail, the money they've lost has gone into stimulating demand for Japanese goods and kept the currency low. But firstly, that's still them failing - the company will fail, ROI will be low. It might help the domestic Japanese manufacturing industry, but it's not going to help softbank. Japanese banks are very much interwoven with their state, softbank might get certain lending quota from BOJ that they must lend out. Remember if Japan doen't print yen and spread it around then their deflation problem gets worse. My personal opinion is Japan should pay attention to their domestic proverty problem, they could just implement UBI, but having too much Yen domestically wont solve their deflation problem. The last time they tried helicopter money, everybody just bought government bonds, making the problem worse ! So they might prefer to figure out to create demand in foreign markets. > It's probably not even 5% - the vast majority of the money will be going to stimulate the Indian economy. I do not think Japan really cares if the Indian economy is stimulated or not, they just want there to be healthy demand for Japanese products, printing money and lending it out and then suffering some loss might even be preferable to having a large marketing and advertisement industry like we do in the West.
mrep 7y ago
> Globally we are going through a period of deflation. What? Pretty much every country has inflation [0]. > BOJ can print money ( yen ) and flood the world and the value of the yen would still go up ! That is definitely not true. If they were to print 518,755,944,000,000 Yen (2017 estimate for their gdp) and flood the market with it (say by giving every citizen an equal share as a lump sum a la helicopter money [1]) the value would certainly drop. > From Softbank's perspective it's a win-win, they get to be owners of really important tech companies and at the same time Japanese companies see a demand surge for their products. So you're saying Softbank doesn't actually care about their return on investments and is really in it to boost Japanese exports? Softbank is big but there's no way any secondary effects from their vision funds investments will return more money to them than the initial investments. Not only that, but your also effectively saying that they were able to swindle 40 billion dollars from the Saudis and I say swindle because the Saudis don't care 1 bit about Japanese exports and are 100% in it for the initial return on investment. [0]: https://en.wikipedia.org/wiki/List_of_countries_by_inflation_rate https://en.wikipedia.org/wiki/List_of_countries_by_inflation... [1]: https://en.wikipedia.org/wiki/Helicopter_money https://en.wikipedia.org/wiki/Helicopter_money
- 5822130027 7y ago
  > That is definitely not true. If they were to print 518,755,944,000,000 Yen (2017 estimate for their gdp) and flood the market with it (say by giving every citizen an equal share as a lump sum a la helicopter money [1]) the value would certainly drop. Are you sure about that ? What if there is no demand ? Japan did try helicopter money, and all their citizens just purchased bonds increasing public debt, without creating any inflation or causing the yen to drop. BOJ has been actively trying to make the yen fall. I agree if BOJ hands everybody in the world a large amount of Yen, then the yen would drop ( initially ), but suddenly every Japanese factory would have to start churning out all types of Japanese widgets - it would roar Japan back into 6% growth, and at the same time cause a world wide collapse of demand for European / American / Chinese / Korean exports ( cars, electronics. toys ). So do you see why other industrialized countries might not allow Japan to just hand Yen out to foreigners ? Japan would be "exporting" deflation to other industrialized countries. Over time as the world absorbs Japanese imports / standards and abandons everything else - there would be no demand for lets say FCC approved electronics. American students who now have access to yen might go to Japan to study programming instead of American colleges and learn Prolog. Take this to it's logical conclusion and in a decade the value of the Yen goes up in relation to the Korean Won, Euro, USD. Of course this is a fantasy, but since you started with a hypothetical, I had to point out how your conclusion might be wrong. Especially since this is exactly what the Japanese have been doing post WW2, the Americans post Bretton Woods with euro dollars, and now the Chinese are flooding the world with the RMB. > but your also effectively saying that they were able to swindle 40 billion dollars from the Saudis and I say swindle because the Saudis don't care 1 bit about Japanese exports and are 100% in it for the initial return on investment. The Saudis have been swindled already when they bought US treasuries, with QE and low yields. They could have owned assets that when up in value due to QE but guess what ? all of it was owned by Americans. This is why the Saudis have abandoned the treasuries market, so have the Chinese ( they are spending it on the Belt and Road ).

blankaccount 7y ago

Can you elaborate a bit on the part between Softbank spending on India's uber drivers resulting in an increase of Japanese exports? Is it just that there is a desire for Japanese products in India, but not enough cash?

vmurthy 7y ago
Not OP but here's one way: Softbank invests in Uber India pushing up automobile demand[1]. Indian drivers buy cars manufactured by Maruti Suzuki (54% market share [2]). Maruti Suzuki is a JV between an Indian company (Maruti) and Suzuki (Japan) where-in Maruti pays 6% of sales as royalty for design and other facilities. In addition, you have to realize that Japan exports $35b of auto parts and $101b of automobiles [4]. So any lever which pushes up sales of automobiles in any nation is bound to have an impact on exports. [1] https://economictimes.indiatimes.com/small-biz/startups/demand-from-uber-ola-driving-car-makers-sales/articleshow/56633234.cms?from=mdr https://economictimes.indiatimes.com/small-biz/startups/dema... [2] https://auto.economictimes.indiatimes.com/news/passenger-vehicle/cars/maruti-suzuki-regains-54-market-share-in-november/67047159 https://auto.economictimes.indiatimes.com/news/passenger-veh... [3] https://economictimes.indiatimes.com/markets/stocks/news/lower-royalty-payment-could-get-maruti-an-earnings-upgrade/articleshow/62660913.cms?from=mdr https://economictimes.indiatimes.com/markets/stocks/news/low... [4] https://oec.world/en/profile/country/jpn/ https://oec.world/en/profile/country/jpn/
- 5822130027 7y ago
  Exactly.
  - dzader 7y ago
    lol
- thrwo132123 7y ago
  +1 Indeed, one of the reasons for the current auto-slowdown in India appears to be the drastic decrease in benefits offered by Taxi aggregators, which is hitting taxi drivers hard. Can't complain, since taxis saturate the roads in Bengaluru already.
  - r_singh 7y ago
    > taxis saturate the roads in Bangalore already In Indiranagar (a popular, hip neighbourhood in Bangalore), you might have to wait for an hour to get an Uber or Ola, on weekday mornings too! Hence a lot of people are using Yulu (India's Bird).
    - vmurthy 7y ago
      Add HSR Layout to that list , too. I’ve started using a combination of Bounce( two wheeler point-to-point rental ) for <2km travel , public transport for longer distance travel and cabs as the last option.
- navigatesol 7y ago
  Okay, now where does all the demand for these Indian taxi services come from that are actually going to pay for all of these automobile imports? It's not like Uber demand is insatiable. The notion that investing in Uber is going to drive the auto industry (which is completely contrary to the mission of these transportation companies) is an odd one. I can see that, at the margins, a company can spend money where it thinks it it can receive complimentary benefits. But this idea that you can spend your way into riches is a fallacy. So, I think we agree on some things, mainly that Japan is printing money and Softbank is a beneficiary and is using that cash to spread around the tech industry. Cheap money. Except I think it will backfire, eventually.

Traster 7y ago

I'm really not understanding this. What you seem to be saying is that when Softbank succeeds they get to own a load of tech companies. That's great, that's the upside of any VC. Where I'm not understanding is you're saying when they fail, the money they've lost has gone into stimulating demand for japanese goods and kept the currency low. But firstly, that's still them failing - the company will fail, ROI will be low. It might help the domestic japanese manufacturing industry, but it's not going to help softbank. But also to take your example, Softbank blows a load of money in India on Uber, those Indian Uber drivers go out and buy japanese cars. But it's not like 100% of the cash you're putting into Uber goes to Japanese car companies. It's probably not even 5% - the vast majority of the money will be going to stimulate the Indian economy. I just don't understand, because what you seem to be saying is that for a primarily export based economy, you should just print money always, that doesn't seem correct to me - but I really don't know enough about it. Surely there must be downside? Normally I'd say this maps to inflation and squeezed living standards- but are we just no longer seeing those effects?

5822130027 7y ago
If you want a full comprehensive understanding of what is going on I highly recommend : - https://www.amazon.com/Princes-Yen-Central-Bankers-Transformation/dp/0765610493 https://www.amazon.com/Princes-Yen-Central-Bankers-Transform... There is a huge overlap here with MMT ( Modern Monetary Theory ), but the book was published way before MMT become more widely read. Richard studies what happened in Japan from an economic history prespective. ( I will do a dis-service to the whole topic trying to explain everything in a few sentences, but I will try to answer specific point raised ). > I just don't understand, because what you seem to be saying is that for a primarily export based economy, you should just print money always. As an exporter you cant help but accumulate FOREX. so the value of the yen would always head north, if you want to stay a top exporter you have to constantly print money to balance out your FOREX accumulation. > Surely there must be downside? Nope, no downside when you build capital goods that everybody else wants. > Normally I'd say this maps to inflation and squeezed living standards- but are we just no longer seeing those effects? inflation happens when aggregate demand > aggregate supply. If you are not supply constrained then inflation wont happen regardless of how much money you print. Japan specifically could print unimaginable amount of money and use it to create whatever technology they want. Technology acts as an accelerator to this deflation doom loops, since these technology products further increase supply or reduce cost. You might have hard limits due to physical commodities like oil. But technology has been able to squeeze even more value out each unit. > Where I'm not understanding is you're saying when they fail, the money they've lost has gone into stimulating demand for Japanese goods and kept the currency low. But firstly, that's still them failing - the company will fail, ROI will be low. It might help the domestic Japanese manufacturing industry, but it's not going to help softbank. Japanese banks are very much interwoven with their state, softbank might get certain lending quota from BOJ that they must lend out. Remember if Japan doen't print yen and spread it around then their deflation problem gets worse. My personal opinion is Japan should pay attention to their domestic proverty problem, they could just implement UBI, but having too much Yen domestically wont solve their deflation problem. The last time they tried helicopter money, everybody just bought government bonds, making the problem worse ! So they might prefer to figure out to create demand in foreign markets. > It's probably not even 5% - the vast majority of the money will be going to stimulate the Indian economy. I do not think Japan really cares if the Indian economy is stimulated or not, they just want there to be healthy demand for Japanese products, printing money and lending it out and then suffering some loss might even be preferable to having a large marketing and advertisement industry like we do in the West.

mrep 7y ago

> Globally we are going through a period of deflation. What? Pretty much every country has inflation [0]. > BOJ can print money ( yen ) and flood the world and the value of the yen would still go up ! That is definitely not true. If they were to print 518,755,944,000,000 Yen (2017 estimate for their gdp) and flood the market with it (say by giving every citizen an equal share as a lump sum a la helicopter money [1]) the value would certainly drop. > From Softbank's perspective it's a win-win, they get to be owners of really important tech companies and at the same time Japanese companies see a demand surge for their products. So you're saying Softbank doesn't actually care about their return on investments and is really in it to boost Japanese exports? Softbank is big but there's no way any secondary effects from their vision funds investments will return more money to them than the initial investments. Not only that, but your also effectively saying that they were able to swindle 40 billion dollars from the Saudis and I say swindle because the Saudis don't care 1 bit about Japanese exports and are 100% in it for the initial return on investment. [0]: https://en.wikipedia.org/wiki/List_of_countries_by_inflation_rate https://en.wikipedia.org/wiki/List_of_countries_by_inflation... [1]: https://en.wikipedia.org/wiki/Helicopter_money https://en.wikipedia.org/wiki/Helicopter_money

5822130027 7y ago
> That is definitely not true. If they were to print 518,755,944,000,000 Yen (2017 estimate for their gdp) and flood the market with it (say by giving every citizen an equal share as a lump sum a la helicopter money [1]) the value would certainly drop. Are you sure about that ? What if there is no demand ? Japan did try helicopter money, and all their citizens just purchased bonds increasing public debt, without creating any inflation or causing the yen to drop. BOJ has been actively trying to make the yen fall. I agree if BOJ hands everybody in the world a large amount of Yen, then the yen would drop ( initially ), but suddenly every Japanese factory would have to start churning out all types of Japanese widgets - it would roar Japan back into 6% growth, and at the same time cause a world wide collapse of demand for European / American / Chinese / Korean exports ( cars, electronics. toys ). So do you see why other industrialized countries might not allow Japan to just hand Yen out to foreigners ? Japan would be "exporting" deflation to other industrialized countries. Over time as the world absorbs Japanese imports / standards and abandons everything else - there would be no demand for lets say FCC approved electronics. American students who now have access to yen might go to Japan to study programming instead of American colleges and learn Prolog. Take this to it's logical conclusion and in a decade the value of the Yen goes up in relation to the Korean Won, Euro, USD. Of course this is a fantasy, but since you started with a hypothetical, I had to point out how your conclusion might be wrong. Especially since this is exactly what the Japanese have been doing post WW2, the Americans post Bretton Woods with euro dollars, and now the Chinese are flooding the world with the RMB. > but your also effectively saying that they were able to swindle 40 billion dollars from the Saudis and I say swindle because the Saudis don't care 1 bit about Japanese exports and are 100% in it for the initial return on investment. The Saudis have been swindled already when they bought US treasuries, with QE and low yields. They could have owned assets that when up in value due to QE but guess what ? all of it was owned by Americans. This is why the Saudis have abandoned the treasuries market, so have the Chinese ( they are spending it on the Belt and Road ).