Japan's Startup Ecosystem Cannot Stop Its Talent From Leaving
Let me pick out the parts from an email to a friend that seem worth sharing.
I should say upfront that I’m just an engineer, not a politician or policy wonk, not a VC, not even a startup founder. (Yet. Ha.) But as a small-time member of this crowd — Silicon Valley — I do have opinions about this.
On the Outflow of Talent
First, let me explain the “outflow of talent” that came up in the discussion with this friend.
Look at Japan’s current situation, and the ecosystem supporting startups there is extremely weak.
An ecosystem, concretely, comes down to whether the following are in place:
- entrepreneurs
- investors
- talent (staff)
- customers
Entrepreneurs and investors go without saying, but staff and customers turn out to be surprisingly troublesome. Do talented people in Japan choose to work at startups? Do Japanese customers favor buying the products and services startups make? Those are the two questions. This is a mood, a tendency, formed by the Japanese population as a whole, so it’s not something a small number of people can easily change. But the customer problem can probably be sidestepped by expanding services globally.
So the most serious issue is talent.
To cut to the conclusion: the flow of Japanese talent overseas cannot be stopped.
There are various reasons, and various people say various things.
In Japan, say you’re “working at an early-stage startup,” and people still look at you funny. Some might even say you’re throwing your life away. Not so in America, especially in Silicon Valley. Working at a startup is itself a form of career advancement, and many young people probably think it even adds prestige. America has plenty of vibrant startups, and most of them aren’t gambling on “will we collapse tomorrow!” Join one, and it often turns out to have a surprisingly ordinary salaryman vibe.
Safe. Comfortable.
Compare that to how many Japanese people work, and it’s crazy. You can’t take time off easily, you do unpaid overtime, and you get called in on days off. At night you drink with clients, and on weekends you’re exhausted at home. There’s no room to negotiate salary, and if you casually quit, finding reemployment is difficult. It’s basically hell on earth.
This is my own opinion with a bit of exaggeration mixed in,
but it’s roughly what people say.
With that kind of future visible, what will young, talented people do? Isn’t it natural to think, “if only there were a chance…”?
So what should Japan do?
That was the starting line for this piece.
Where do you compete? When do you compete?
“How much are you investing in your own future?”
That’s a startling question, isn’t it? What do you think?
I believe visible stability is nothing but an illusion. The world is fluid, and even when it looks like nothing is changing, that’s just because the speed is slow. Eventually, the time that must come will come — that’s how I see it.
In other words, if there’s something you want to achieve or something you want to protect, you must not neglect polishing yourself.
Somewhere — I think it was something written by the author of Dragon Zakura — it said, “From your 30s onward, you live off the interest of the savings you built up in your 20s.” That’s wrong. You’re not depositing it in a bank, so no one’s going to pay you interest. That thinking belongs to the old, nostalgic world of stable, secure lifetime employment. Grab a certain position while young, and after that, as long as you don’t screw up, you get promoted automatically; become an executive, and you don’t need to understand world trends or the latest technology — just nag your subordinates appropriately and make them work hard. Way too stupid.
You have to keep building, always, and enjoy doing it. Without that, leading a happy life strikes me as extremely difficult.
A happy life isn’t just about economics. An old guy who’s high-status and well-paid but actually left out of the loop isn’t happy, is he?
So it’s better to always be competing, always investing in yourself.
Since I’m using the word “investing,” you have to invest something, and the most desirable thing to invest is your environment. Spending money is certainly one option, but in many cases that ends up being one-off. Taking risks and placing yourself in a demanding environment is actually the biggest investment you can make in yourself.
I wrote at length about the importance of environment in a previous post, so please refer to that.
Maldini’s Words and Sequoia Capital
“Maldini’s Words and Sequoia Capital” — ClayTech
Competing, and Coming Home
This overlaps with the link above, but I still like soccer analogies, so let me think about it this way.
Japan’s J.League can’t honestly be called world-class, so in recent years it’s become standard for many talented players to transfer overseas. To raise their own level, they put themselves in a higher-level league.
And most players eventually return to their home country’s league near the end of their careers. Not out of some noble mindset of “time to contribute to my home country” — they come back simply because they stop getting good offers overseas. (They’ll say all kinds of things publicly, but that’s essentially what it is.)
They’re just a small handful at the very top of Japan’s several-million-strong soccer population, but I think the basic mindset of such people is: no matter how unsightly it gets, keep clinging to the top level and keep pushing. Contributing to their home league is certainly somewhere in the back of their minds, but it’s more like “I’ll do that when the time comes. Until then, I’ll go as far as I can.”
Depending on how you look at it, you could call that egoistic and selfish.
This year, Daisuke Matsui, who was also active with the Japan national team, transferred to Jubilo Iwata. At his peak he played in France, then moved around Russia, Bulgaria, and Poland, and at his last club he was reportedly expected to play a role not just as a player but also as staff, a position supporting the manager. He probably thought, “I’m about at my limit.”
We don’t yet know how Matsui’s case will turn out, since the results are still to come, but the feedback from Shunsuke Nakamura’s case is clear. His return to Japan is connected to Yokohama F. Marinos’s revival (they finished 2nd last year), and it seems to have had an economic effect too. (Apparently 2,000 units of Shunsuke’s #10 jersey, priced at $142, sold on the very first day of release.) As money flows into Marinos that way, it will eventually support the club’s growth into a team that can compete globally, and by extension contribute to the development of the J.League. Whether he himself is happy is not something others can measure, but at the time, when he was at Espanyol and not producing results, thinking “maybe it’s about time…”, Marinos providing him a good landing spot strikes me as a truly beautiful example. At Celtic, the club where he played at his peak, Shunsuke Nakamura performed well enough to be counted among the club legends, and club executives are said to have earnestly hoped he would have his retirement match with them.
Someone who succeeded abroad raising one more flag back home. It’s a really beautiful story. Honestly, I find it admirable.
When this kind of story comes up, the counterexample people often cite is Hidetoshi Nakata, who played overseas and retired there as is. He did so at 29, quite young for a soccer player. He thought in his own way about how to contribute to the soccer world, and he’s put that into action — he leads a charity team called Take Action FC — so that’s not something for other people to comment on this or that about.
Once you pass 30 yourself, you understand well that playing soccer itself honestly becomes tough. It really is a demanding sport after all.
But speaking purely from personal preference, I think Shunsuke Nakamura really did well.
There’s a condition, though, for drawing this kind of beautiful story.
Fundamentally, only those who took the challenge are given that right. That’s the harsh reality.
The All-Japan Homecoming Plan
As already mentioned, when you think about startups, Japan’s ecosystem and competitiveness can’t honestly be called world top-class. So it’s only natural that people suited to startups leave Japan, and I think it’s unreasonable to expect that to change dramatically in a short period.
In J.League terms, it’s not simply a matter of sponsors pouring in massive funds, snapping up players who are hot right now one after another, and running flashy promotions — and even if you did that, whether it would result in sustained growth is a huge question mark.
So what’s needed right now, I think, isn’t
“a system that prevents people from leaving,”
but
“a system that brings them back.”
Honestly grasping the stage Japan is at and drawing an appropriate growth curve from there — isn’t this the first necessary step?
A few people I got to know here are “startup junkies” (lol), but there’s no environment in today’s Japan that satisfies their urge to start companies.
There’s an interesting tendency, though.
They start from software services and end up wanting to do hardware.
Many people would call this just a general trend in the world — citing things like 3D printers lowering prototyping costs, IT solutions becoming saturated, the era of MAKERS arriving, or people starting to get tired of the internet.
I’d like to propose a hypothesis that this impulse isn’t about any of that, but rather a phase in an entrepreneur’s career.
Elon Musk also built Tesla and rockets after PayPal. Amazon’s Bezos too can’t hide his recent passion for hardware. Jack Dorsey also seems to carry various “making things” backstories behind Square’s design.
Regarding hardware startups, the situation in Silicon Valley isn’t great either. VC investment amounts are clearly becoming smaller and more fragmented, making it hard for hardware, which eats up upfront investment, to get funded. So an easily accessible framework specialized for hardware startups seems far more realistic and effective than spouting nonsense like “shift Japan into a software-services-based nation.”
Executives and engineers who left Japan and succeeded overseas would think, “if I’m going to do a hardware startup, Japan is the place after all,” and come back.
Isn’t that an exciting story?
I naturally want to leave the concrete measures — taxes? subsidies? special zones? — to the experts. That’s not an area where an amateur should be putting in his two cents.
This direction is correct too, given the surplus talent Japan will face in the future.
If you don’t know what this is pointing to, there’s no point explaining further, so I won’t
Nearly 10 years ago now, I heard Mr. Kumamoto of Amadana (Real Fleet) speak, and I recall him saying: during his Toshiba days, there were engineers with incredible skill making incredibly boring things, and he thought something had to be done about that. Japan surely has more than enough hardware engineers with amazing skill.
You can’t expect crazy, gambling-level explosive growth like “hundreds of times in 2-3 years.” Hardware businesses simply aren’t like that to begin with. Technology and experience built up steadily ferment over several years, and then astonish the world. To keep Japan from dying, and to leave “Nippon” for the future — isn’t this an extremely reasonable, indeed the only, solution?
That’s all — just the ramblings of a curious engineer and would-be entrepreneur living in Silicon Valley.
Originally published in Japanese at https://clazytech.com/2014/03/85/. Translated with LLM assistance and reviewed before publication.