Question of the Day: Why Are the Japanese So Smart?

by Jonny Lieberman

July 16th, 2008 7:47 AM

question of the day why are the japanese so smart

Maybe I should put "smart" in quotes. But then again, maybe I shouldn't. I was commiserating with a friend of mine the other night how are respective 401k plans lost a third of their value last quarter. In his case, it was actual money. He commented that he had a lot of money in Blue Chips. I told him that GM's stock is worth less than two gallons of (Los Angeles) gas. He asked why. And I explained that the General had made billions of dollars selling trucks, bought Saab and then redesigned their trucks while losing over 30 percent of their market share in a decade and that Mr. Wagoner got paid $14,000,000 for his troubles, pre-bonus. My friend was incensed. "How is that American? That sounds like some third world, nepatistic despot shit?" He has a point. And what of the Japanese, he asked. Well, I began, Honda now makes the best-selling car in the country, Mazda and Subaru sales are up and Toyota has the ability to shift gears (and production) when they sense a looming [s]great depression[/s] crisis. He asked me why, what is it about Japanese culture that lets them succeed where Detroit just falls flat on its face? I have my suspicions. But, I'd rather just ask you.

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4 of 87 comments

Gforce on Jul 17, 2008

Gee, I thought the people in the US would be more team-oriented than individualzed. Perhaps I confuse US with "us".

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IllinoisAutobahn on Jul 17, 2008
Altoids: This doesn't make Japan better than the US. The insistence on hand-made quality makes most things really expensive and inefficient. The group-mentality stifles talent and innovation. But for car manufacturing, it seems to work well. I think that this is a good insight. When the Japanese system works, it works well. But it doesn't work well much of the time. The Japanese economy still hasn't recovered from the crash of 1989 (the collapse of a real estate bubble that makes our own look insignificant). Many of the big, export-oriented firms do well, but if it weren't for the Blu-Ray, even Sony would be in serious trouble now. When we compare Toyota to GM, we are comparing one of Japan's best to one of America's worst. What are parts of the Japanese system? In Japan, there are complex stock share cross-holding schemes, where companies all buy into each other. When it works, it promotes a long-term focus, rather than one on short term quarterly profits. When it doesn't work, it results in a cluster-group of zombie corporations all trying to prop each other up (and tying up money in nonperforming loans) when the assets and the money could be much more efficiently used if the companies went bankrupt and had the useful parts bought out by profitable companies. Another part of the Japanese system is that the profit motive is not considered socially acceptable. There is less downside to this, because it leads to profits being re-invested in the company. But it can lead to immense amounts of money being spent on technological dead ends. Remember the '80s, when high tech Japanese ceramics were going to be the wonder material of the future? Well, it turned out that the actual wonder material of the future was carbon fiber composites (for certain applications). Since Japanese shareholders almost never object to how companies spend their money, some have gone on Roger Smith style spending sprees, and others have acquired vast empires of operations totally unrelated to their core business. These almost never turn a profit, and serve largely as perk-getters for executives and as a place to park excess managers. Japanese executives are paid less because power and position rather than money determines social status in Japan (again, viz the social unacceptability of the profit motive). High-level executives and bureaucrats have power, and everyone else does not. This is why big Japanese companies, regardless of what they do, can always attract top talent for entry-level management, even if they paid less than they do. However, after they retire, these top executives and bureaucrats make oodles of money through lucrative "consultancies". In return to treating their employees with politeness, if not always exactly with respect, Japanese employers demand a level of work and commitment that many of us would find abusive. The 12-hour workdays and staggering amount of unpaid overtime worked by the white-collar salaryman are famous, but conditions at second-tier companies like auto parts suppliers can be brutal. The Japanese birth rate has fallen off drastically because women realize that they can have a career or a family, but not both, or else they don't want to be married to a husband whom they will see only for a few hours on Sunday. Japan is dying for Toyota's sake. In return, Japanese consumers get many good products (most of which we also get), but at very high prices. The products are good because they have to be for the export market; at home, complex retailing laws protect each company's market share from competition. I don't know car prices in Japan, but there an audio CD goes for $30 and a DVD with 2 episodes of a TV series goes for $50. The high (and increasing) costs of car ownership have dried up demand--not only have sales slumped, the total number of vehicles on the road has also begun to decline. Cars are no longer the status symbol they used to be, and young people increasingly view car ownership as not worth the hassle. In America, we enjoy the best of both worlds. We lead the world in many sectors of the economy, and if we don't like the Cobalt or the Caliber, we can buy a Fit or a Prius cheaper than almost any other place in the world, weak dollar or no. When the Japanese system works, it benefits Toyota and Honda--and America. But not the Japanese so much.

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Droen11 on Jul 17, 2008

History tells the story. Any society, economy that becomes financial based and not manufator based fails and that is what has happened in the U.S. Financial based economies put the money in the hands of only a few people and it becomes about profit not growth.

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Areitu on Jul 17, 2008

IllinoisAutobahn: I think you've got one of the clearest explanations on why Toyota works well, while the rest of Japan seems to falter as an economy. Some of the points in your comment leads me to think they adopted a model of manufacturing that works extremely well, while the way Japanese businesses are interrelated, combined with a cultural aversion to "rocking the boat" means they never focused on much else. A note about car ownership in Japan, I always thought the intensive and expensive inspection/registration process was specifically designed to create a disincentive to hold onto older autmobiles and increase turnover, resulting in dirt-cheap used cars in Japan costing next to nothing--making them ripe for exporting, either whole or in pieces. davey49: Nokia is Suomistä ("From Finland," if I conjugated it right). In 2006, the company made more money than the state budget.

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