Japan's Startup Ecosystem Cannot Survive Without Stopping Its Brain Drain
Let me pull out the parts of an email to a friend that seem worth sharing.
Let me be clear up front: I’m just an engineer, not a politician or a policy proposer, not a VC, not even a startup founder. (Not yet. Ha.) But as one small piece of the population here in Silicon Valley, I have plenty of feelings about all this.
On the brain drain
First, let me explain the “brain drain” that came up in this discussion with my friend.
Look at Japan’s current situation and you’ll see that the ecosystem supporting startups there is extremely weak.
You can define “ecosystem” concretely by whether these are all in place:
- entrepreneurs
- investors
- talent (staff)
- customers
Entrepreneurs and investors go without saying, but staff and customers are surprisingly the tricky part. Do talented people in Japan choose to work at startups? Do Japanese customers happily buy the products and services startups make? Those are the two points. This is a “mood and tendency” formed by the Japanese population as a whole, so it’s not something a small effort can easily change. But the “customer” problem can be avoided 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 about it.
In Japan, if you say “I work at an early-stage startup,” people still look at you strangely. Some might even say, “You’re throwing your life away doing that.” That’s not the case in America, especially in Silicon Valley. Working at a startup is itself a form of career advancement, and many young people think it burnishes their résumé. America has plenty of energetic startups, and most of them aren’t gambling on “will we collapse tomorrow?!” Once you actually join one, it often turns out to be surprisingly ordinary office-worker life.
Safe and comfortable.
Compared to American companies, the way many Japanese people work is crazy. You can’t take time off easily, you do unpaid overtime, and you get called in to work even on days off. At night you drink with clients for business entertainment, and on weekends you collapse at home exhausted. There’s no room to negotiate salary, and if you quit rashly, finding a new job is hard. It’s basically hell on earth.
Well, this is my own opinion with my own exaggeration mixed in,
but generally this is roughly what people say.
Now, with that kind of future visible, what do 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 point this time.
Where do you compete? When do you compete?
“How much are you investing in your own future?”
That’s kind of a jarring question, but how about it?
I think visible stability is nothing but an illusion. The world is fluid, and even when it looks unchanging, that’s just because the speed is slow. Eventually, “the time that must come, comes.” That’s how I see it.
In other words, if there’s something you want to achieve or something you want to protect, you can’t neglect polishing yourself.
Somewhere — I believe it was something written by the author of Dragon Zakura — it said, “From your 30s on, 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 nobody’s giving you interest. That way of thinking belongs to the old, nostalgic world of “stable, secure lifetime employment.” Grab a certain position while you’re young and, as long as you don’t screw up, you automatically get promoted, and once you’re senior enough you don’t need to understand the latest trends or technology. You can just nag your subordinates and have them work themselves ragged. Way too dumb.
You always have to keep building, and enjoy doing it. If you can’t do that, I think having a happy life is very, very difficult.
A happy life isn’t just about money. Some middle-aged guy with a senior title and a good salary but actually left out in the cold isn’t happy, right?
So the ideal state is to always be competing, always investing in yourself.
Now, if we’re using the word “investment,” we’re investing something, and what’s most desirable to invest is your environment. Spending money is one option, of course, but in many cases that ends up being temporary. Taking a risk and putting yourself in a harsh environment is actually the biggest self-investment there is.
I wrote at length about the importance of environment in a separate post before, so please refer to that.
Maldini’s Words and Sequoia Capital
“Maldini’s Words and Sequoia Capital” — Clay Tech
Competing, then coming home
This overlaps with the link above, but I still like football analogies, so let me think about it this way.
Japan’s J.League honestly can’t be called world-class, so in recent years the standard has been for many talented players to transfer abroad. They place themselves in a higher-level league to raise their own level.
Most players end up returning to their home league at the end of their careers. But they’re not returning with some lofty mindset of “time to contribute to my home country now.” They simply stop getting good offers abroad and come back. (Well, they’ll say various things publicly, but that’s essentially what it is.)
They’re just a tiny handful at the top of Japan’s several-million-strong football population, and I think the basic mindset of people like that is “keep clinging to the top level and keep fighting no matter how unsightly it looks.” Contributing to their home league is of course 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 how you look at it, you could call that egotistical and selfish.
This year, Daisuke Matsui, who was also active on the Japan national team, transferred to Júbilo Iwata. At his peak he played in France, then moved around Russia, Bulgaria, and Poland, and at the last club he was with, he was reportedly expected to play a role not just as a player but as staff, supporting the manager. He probably thought, “well, I guess this is close to my limit.”
In Matsui’s case, the results are yet to come so we don’t know how it’ll turn out, but in Shunsuke Nakamura’s case, the feedback is clear. His return to Japan is connected to Yokohama F. Marinos regaining strength (finishing 2nd last year), and it seems to be having an economic effect too. (Apparently the $142 Nakamura No. 10 jersey sold 2,000 units in a single day at launch.) As money comes 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 isn’t something others can measure, but he was at Espanyol without results, thinking “maybe it’s about time,” and Marinos providing him a good landing spot strikes me as a genuinely beautiful case. Incidentally, at Celtic, where Shunsuke Nakamura played in his prime, he performed well enough to be counted among the club’s legends, and club executives are eager for him to have his retirement match there.
Someone who succeeded abroad taking one more shot back home. It’s a truly beautiful story. Honestly, I find it inspiring.
When people bring this up, the counterexample that always comes up is Hidetoshi Nakata. He played abroad and retired there, straight away. He was 29, quite young for a footballer to retire. He thought in his own way about how to contribute to the football world, and put that into action — he leads a charity team called Take Action FC — so it’s not really anyone else’s place to comment on that.
Once you’re past 30 yourself, you really understand: playing football itself gets tough, honestly. It really is a hard sport.
But purely as a matter of preference, I feel more “well done” about Shunsuke Nakamura.
Notice, though, there’s a condition for drawing this kind of “beautiful story.”
Fundamentally,
“only those who took the challenge are given that right” —
a harsh fact.
The All-Japan Homecoming Plan
As I’ve already said, when you think about startups, Japan honestly can’t claim to be world-class in terms of its ecosystem and competitiveness. 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 time.
For example, in J.League terms, pouring huge sums from sponsors into grabbing up-and-coming players one after another, running flashy promotions: that’s not simple to begin with, and whether it ultimately produces sustained growth is a big question mark.
So what’s needed right now, I think, isn’t
“a system that stops people from leaving”
but
“a system that brings them back.”
Facing honestly the stage Japan is at and drawing the right growth curve from there, I think, is the first necessary step.
For example, a few people I’ve met over here are “startup junkies” (lol), but there’s no environment in Japan today that satisfies their entrepreneurial urges.
There’s an interesting trend, though.
They start out in software services and end up wanting to do hardware.
Many people will call this just a general trend in the world: lower prototyping costs from 3D printers, IT solutions becoming saturated, the age of MAKERS arriving, people starting to get tired of the internet.
I want to propose a hypothesis that this urge isn’t really about any of that, but about a phase in an entrepreneur’s career.
Elon Musk, after PayPal, went and built Tesla and rockets. Amazon’s Bezos can’t hide his passion for hardware these days either. Jack Dorsey too, in the making of Square, seems to carry various “manufacturing stories” in the background.
Even for Silicon Valley, the situation for hardware startups isn’t exactly good. VC investment amounts are clearly getting smaller and more fragmented, and hardware, which eats up upfront investment, has a hard time getting funded. So an accessible system specialized for hardware startups would be far more realistic and effective than spouting nonsense like “shifting Japan into a software-services-based nation.”
Founders 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’ll naturally leave the concrete measures (taxes? subsidies? special zones?) to the experts. That’s not an area an amateur should stick his nose into.
And this direction is also correct when you consider the surplus talent Japan will end up carrying in the future.
If you don’t know what this is pointing at, nothing I say will make sense, so I won’t explain
Almost 10 years ago now, when I heard Mr. Kumamoto of amadana (Real Fleet) speak, I recall him saying, “back in my Toshiba days, there were engineers with amazing skills making incredibly boring things, and I thought something had to be done about that.” Japan surely has more than enough hardware engineers with amazing skill.
You can’t expect the crazy, gambling-style explosive growth of “hundreds of times bigger in 2, 3 years!” Hardware business was never that kind of thing to begin with. Technology and experience built up steadily ferment over years, and then astonish the world. To keep Japan alive, and to leave “Nippon” behind for the future, I think this is the reasonable solution, indeed the only one.
That’s all: just the ramblings of a curious engineer living in Silicon Valley, a would-be founder in waiting.
Originally published in Japanese at https://clazytech.com/2014/03/85/. Translated with LLM assistance and reviewed before publication.