John Ganz on the Era When America Was Consumed by Panic With Corporate Japan

These days, there's a non-stop drumbeat of concern that China and its dominant companies will eat America's economic lunch, so to speak. Of course, this isn't the first time in our history that there were worries about a rising Asian industrial power. In the 1980s and early 1990s, there was a lot of concern about the rise of corporate Japan. And that fear was seen all over movies and pop culture, from Die Hard to the Michael Crichton novel Rising Sun. This time there is one big difference: Chinese dominance doesn't permeate our pop culture in the same way. And furthermore, the US has long had military bases in Japan, so that dimension was quite different, too. To understand this period further, we talk to John Ganz, who writes the Unpopular Front newsletter, and is the author of the recent book, When the Clock Broke: Con Men, Conspiracists, and How America Cracked Up in the Early 1990s. We discuss how this fear came about and disappeared, but also how it still influences American politics to this day. Only Bloomberg.com subscribers can get the Odd Lots newsletter in their inbox — now delivered every weekday — plus unlimited access to the site and app. Subscribe at bloomberg.com/subscriptions/oddlotsSee omnystudio.com/listener for privacy information.

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• 0:00Tracy Alloway?

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• 3:07Joe Weisenthal?

  Hello and welcome to another episode of the Odd Lots Podcast. I'm Jill Weisenthal.

• 3:11Tracy Alloway?

  And I'm Tracy Alloway.

• 3:13Joe Weisenthal?

  Tracy, here's something I've been thinking about with respect to China and all of the tensions with China, which is that it feels very elite, as in people in DC talk about it. People in, obviously in finance and business, talk about it. It does not strike me that in the broad, and I could be wrong, my judgment could be off, but it does not strike me that in the broad public that there are a lot of people, that it's top of mind for a lot of the public.

• 3:42Tracy Alloway?

  Weirdly, I think it was probably more top of mind in the past.

• 3:46Joe Weisenthal?

  Yeah.

• 3:46Tracy Alloway?

  In the hollowing out of America's manufacturing sector. I mean, that argument is kind of what has given rise to a lot of the populist politics that we see nowadays, right?

• 3:55Joe Weisenthal?

  Yeah, that's true. Right. During the China shock.

• 3:58Tracy Alloway?

  Yeah.

• 3:59Joe Weisenthal?

  There were a lot of people aware that their factories or the towns that depended on these factories were getting hollowed out, et cetera. But, you know, there's so much China, China, China. It's not in the media, right? It's not like, or sorry, it's not in the movies. And I'm thinking of like Back to the Future 2, was it? Where the main character's dad lost his job and they had this scene when he was getting laid off by his Japanese boss, et cetera.

• 4:25Tracy Alloway?

  Oh, you know what? My favorite example of this is.

• 4:27Joe Weisenthal?

  Yeah.

• 4:28Tracy Alloway?

  Die Hard.

• 4:29Joe Weisenthal?

  Yeah, of course, yeah.

• 4:29Tracy Alloway?

  Best Christmas movie ever, but also the Nakatomi Corporation.

• 4:33Joe Weisenthal?

  Yeah, right. This was like a whole thing in pop culture. And it's just not at all. Maybe that has something to do with the fact that studios still wanna, do they still distribute? Are American movies still getting wide distribution? Like, for a while in China? Like, cause for a while this was like a big story. Oh, are they not gonna talk about certain things?

• 4:49Tracy Alloway?

  This is partially why we have a bunch of superhero movies, by the way.

• 4:52Joe Weisenthal?

  Cause they're just anodyne.

• 4:54Tracy Alloway?

  Cause they play in international markets.

• 4:55Joe Weisenthal?

  And they're not going to like offend anyone too much?

• 4:57Tracy Alloway?

  Probably.

• 4:58Joe Weisenthal?

  It just doesn't feel to me for that from like a pop culture standpoint, that the threats from China, whatever they are, are like getting that much play.

• 5:08Tracy Alloway?

  We need a good movie about China developing an AI chatbot that goes rogue and tries to take over the world. I think there was an AI plot in the last Mission Impossible or one of the recent ones. I haven't seen it. I don't know who developed the technology. Maybe it was China. Who knows?

• 5:22Joe Weisenthal?

  It could have been. But anyway, like you said with Die Hard and there were several others. I think Michael Crichton had a book that talked about it. And certainly when I was younger, when I was like 11 or 12 and first became aware of the existence of the world around me. You know, I remember I had a teacher who was like really scoldy about people who drove Japanese cars, for example, and she talked about how.

• 5:44Tracy Alloway?

  It's anti-American.

• 5:45Joe Weisenthal?

  Yeah, how awful it was that there were people coming into our high school parking lot or whatever that drove Japanese cars.

• 5:51Tracy Alloway?

  Destroying the fabric of America by purchasing a Toyota.

• 5:54Joe Weisenthal?

  Yeah, of course. Now, you know, by Toyotas are made in the US, etc. No one talks like that with respect to Japan. But it is interesting thinking about like similarities and differences between our relationship with China today and our relationship with Japan in the eighties, late eighties, etc., when it seemed like that was going to be the economy that really sort of hollowed out.

• 6:15Tracy Alloway?

  There's a clear parallel here. There are also some key differences. I'm sure we'll get into all of that.

• 6:20Joe Weisenthal?

  A land of contradiction. Similarities are turned out. Anyway, I'm very excited. We have a guest I've wanted to talk to for a long time. The perfect guest because he recently wrote about this. We're gonna be speaking with John Gans. He is an author and historian. He is publisher of the unpopular front Substack, which I am a paid subscriber to and a big fan. And he's also the author of the recent book, When the Clock Broke: Conmen, Conspirators, and How America Cracked Up in the Early 1990s. Talk a little history. So, John, thank you so much for coming on Outlaws.

• 6:50Speaker 06

  Thank you so much for having me. I'm a big fan. It's very exciting for me.

• 6:53Joe Weisenthal?

  Very nice of you to say. Does that seem right to you that like you probably you pay attention to pop culture that just today with the China anxiety, it feels like a DC kind of thing more than a general public thing?

• 7:05Speaker 06

  I think that's true. It does feel sort of a an elite project. There's a lot of interest, curiosity about what's going on in China and what they do well, both in DC among policymakers, and I think also obviously in Silicon Valley.

• 7:18Joe Weisenthal?

  Yeah.

• 7:18Speaker 06

  A lot of think tanks are studying China, thinking about China. A lot of business people are very interested in China. But yeah, I don't know. It's strange because you would think in a in an age that, you know, has a lot of, one might argue, paranoid thinking going on, it doesn't factor that much into a lot of pop culture. I think the movies thing might be a part of that. That wasn't the case.

• 7:41Joe Weisenthal?

  Just the sheer box office exposure.

• 7:42Speaker 06

  The box office exposure, but I think in the 80s and 90s, there was definitely more cultural product, which I'm sure we'll discuss, more cultural products that brought this kind of fear, curiosity, interest, paranoia to the surface.

• 7:56Tracy Alloway?

  All right. Well, why don't we get into the Japan panic of the 1980s and where it actually started. And by the way, I was reading the Substack that you wrote on this particular topic, and I fell into a giant rabbit hole reading the emerging Japanese superstate.

• 8:12Joe Weisenthal?

  Oh.

• 8:13Tracy Alloway?

  And coverage of it. So I didn't know the author of one of the first provocative Japan is going to take over the world type books was a guy called Herman Kahn, I think. And he is the inspiration for Stanley Kubrick's Doctor Strangelove.

• 8:27Joe Weisenthal?

  I didn't know that.

• 8:28Speaker 06

  Yeah.

• 8:29Tracy Alloway?

  And if you read some of the coverage of his book that came out in the 1970s, it's really funny because it's just stuff that you would never get away with writing today. The New York Times, New York Times review actually starts out by saying, ebullient Herman Kahn, who boasts that under all these 300 pounds of friendly fat, there lies a lean and sinewy intellect. I don't think I don't think you could start a book review by saying the author is fat.

• 8:56Joe Weisenthal?

  Talking about the author's weight.

• 8:57Tracy Alloway?

  Yeah.

• 8:57Speaker 06

  Yeah. No, that's true. Yeah, Herman Kahn is a really strange and interesting character. He is, he is one of the models for Doctor Strangelove. He wrote a book called On Thermonuclear War, which is probably one of the strangest books you'll ever read, and it's extremely cheerful book about thermonuclear war, basically kind of saying it wouldn't be that bad, and saying that, you know, yeah, and I think this is where the term, he may have originated the term mega deaths, and saying, you know, yeah, we'll get a little messed up, but actually, there's so many people in this country who are so productive, how bad would it really be?

• 9:30Tracy Alloway?

  We'll have some mega deaths, don't worry about it.

• 9:32Speaker 06

  We'll have a few mega deaths, but I don't think, and he thought that the United States shouldn't be so fearful about it. But there's another weird interpretation of the book that this was kind of like some signaling strategy that the United States, because in the book, he said, you can't show that you're afraid to actually pull the trigger, because then the other side will push you around. So in a way, the book was some kind of signaling strategy in his game theory mind to be like, hey, man, we're not worried. We're writing books that say thermonuclear war is not that big of a deal. Very, very bizarre figure, and I think some people consider him very sinister, obviously, but a real eccentric.

• 10:07Tracy Alloway?

  But he was actually worried about Japan.

• 10:08Speaker 06

  Yeah, I think he was worried about Japan, and he was a little ahead of the curve, actually, because he wrote his book in the, I think it was in the late 1960s, and it came out in the 19, early 1970s. And he was describing Japan and its institutions, and predicted that by the year 2000, that Japan would be the first economy in the world and overtake the United States. This was a little bit before, now, the later books make a little more sense. This is really before you start to see the economic problems of the United States that would make this kind of interest, and also before the trade deficit with the United States had really exploded. So he was a kind of visionary, not in that he got it

• 10:50Speaker 06

  right, but he kind of prefigured a genre of books that would only really hit about a decade or so later.

• 10:58Tracy Alloway?

  Yeah, Joe, I clipped this, but reading some of the book now, it's kind of quaint, but he says, his best estimate is his medium scenario, and the medium scenario

• 11:09Tracy Alloway?

  Is that Japan probably passes the US in per capita income around 1990.

• 11:14Joe Weisenthal?

  Huh, okay.

• 11:15Tracy Alloway?

  And probably equals the US in gross national product by about the year 2000. That's the media.

• 11:21Joe Weisenthal?

  The media, so it could have been a.

• 11:22Tracy Alloway?

  He's being conservative.

• 11:23Joe Weisenthal?

  But it sounds interesting because it's very easy to say, oh, this is going to be a big problem. Once the trade deficit is gigantic, right? It's like, oh, we're really dependent, we're, you know, up a creek, et cetera. But he seemed to have some intuition that there was something there in Japan. And that was like, okay, there's something going to be some great out competing in terms of just based on their productivity.

• 11:44Speaker 06

  Yeah, I think that he observed correctly that Japan had made a miraculous comeback after the war. They had transformed themselves from being totally destroyed in the world. And to be from being kind of a producer of goods that were considered kind of cheap, just in the way we used to think made in China or made in Taiwan. Weren't necessarily signs of quality. And then Japan becomes, you know, a place where it manufactures items that are still not terribly expensive, but are known for engineering feats and are quite good. And he also gets into some things we might today call orientalist or essentializing. But he had these, what he thought were sociological insights about the solidity of Japanese society, of their education system, of the relationships between

• 12:26Speaker 06

  the state and businesses and other writers kind of develop these themes in different directions.

• 12:31Joe Weisenthal?

  Maybe we'll get into this. Peter Navarro's book Death by China came out in 2011. He was pretty ahead of the curve in terms of, you know, in 2011, certainly not as much as people are talking about today.

• 12:42Speaker 06

  But in a way, wasn't the real China shock in the aughts?

• 12:47Joe Weisenthal?

  Definitely, yeah, yeah.

• 12:48Tracy Alloway?

  That was like the whole WTO thing. I feel like that was really when it kind of peaked. You mentioned the cultural aspects of this and it is funny reading again, some of the coverage where everyone's like, I read the Chrysanthemum and the Sword, or I read Mishima. And now I've cracked the code of Japanese economic success. But so much of the panic was actually trying to figure out how Japan had done this.

• 13:12Speaker 06

  Right.

• 13:13Tracy Alloway?

  Before we get into all those different interpretations, what's your story of the Japanese economic miracle? In the nineteen eighties.

• 13:20Speaker 06

  You know, I think that you have, it's, there's obviously the actual economic facts and the relationship the United States with Japan. And then there is the discourse about it. I think what happened is you had a situation where you had the beginnings of deindustrialization in the United States. You had a very strong dollar. You had a lot of products that are coming in that were extremely high quality and attractive to American consumers. You also had some policies that are very strange. Caterpillar was a big competitor with Komatsu. They went to the Reagan administration. They brought this economic study to the Reagan administration and they said, well,

• 14:01Speaker 06

  we want to open up Japan's financial markets because the, the difference in our currencies is causing this problem. Now, this doesn't even make sense in economic theory. What, what, what actually happened is Japan is the country with excess savings. So Japanese investments began to flow into the United States. Caterpillar suddenly finds Komatsu with a plant next door to it. So this little scheme to undermine its competitors through, through currency wizardry didn't work. The Reagan administration was open to it because they were into free trade stuff. So it didn't really break with their ideology, but it was a strange

• 14:39Speaker 06

  move that backfired. And then also Japanese investors were used to very meager returns. And the United States had very attractive investments going on at that time, like treasuries, because of the Volcker policies, had very high returns. So Japanese savers were very interested in them. And Japanese investors also started to look at real assets, like they started to look at real estate. And the returns on those things were so fantastic compared to the way things were in Japan.

• 15:11Tracy Alloway?

  Oh yeah. Mitsubishi bought the Rockefeller Center, right?

• 15:13Speaker 06

  They bought the Rockefeller Center. There was talk of Nintendo buying the Seattle Mariners. There was, there was a lot of purchasing, a lot of downtown LA. You mentioned the Nakatomi Tower, like there was all this idea of Japan investing in American real estate and buying quintessentially American Properties and this was kind of upsetting to people. So the trade deficit was obviously upsetting people who actually had a skin in the game of the industries, workers, the businesses, Lee Iacocca was not very happy about it. He wrote about it and complained about it on TV. But the actual purchasing of American, like these kind of symbols of Americana, made people kind of get more tense about this nationalistic fervor.

• 15:56Speaker 06

  So yeah, the money was just flowing in and at that time with the United States had a lot of deficit spending. And we were pumping out ships and military equipment. And the interest in Japanese savers and American treasuries just came along at the right time. Paul Songas, who was, I don't know how many of your listeners are going to remember him.

• 16:17Joe Weisenthal?

  I do.

• 16:18Speaker 06

  Okay. So he was kind of a I don't. centrist, business friendly, democratic politician who was a candidate for president. Not someone you would expect to kind of like demagogue on populist terms, but he said in a speech, the UAW, the Cold War is over and Japan won. This is obviously a huge exaggeration, but it was more like the Cold War ended and Japan kind of paid for it. So I can understand from the perspective of Japan, when they're seeing these things bumble up and anger bubble up in America, they're like, we thought we were competitors a little bit, but Right, but, but not this much. Yeah, yeah, yeah. Mostly friendly. Mostly friendly, yeah.

• 16:58Joe Weisenthal?

  What was Trump doing this time? Did he have, where was Trump in all this?

• 17:02Speaker 06

  He was extremely upset about both the trade deficits with Japan and the investment in Japanese

• 17:07Joe Weisenthal?

  He's been very consistent.

• 17:08Speaker 06

  He's been extremely consistent. He published ads in the newspaper. He went on TV and complained about it. He said Japanese, Japan was ripping us off. And Japan was buying all these wonderful American things that should belong to us. So that economic nationalism goes way back when. And there might be an argument that his protectious instincts were really shaped by that encounter with Japan as a potential rival. So I think that, you know, the Japan panic and Trump kind of being of another age in a certain way. Although again, some of these Things apply well to

• 17:41Joe Weisenthal?

  But it's like left its fingerprints on American society, hasn't it?

• 17:44Speaker 06

  Absolutely, absolutely. So I think that weirdly those unconscious impressions or institutional knowledge or just hangups that stick with individuals.

• 17:53Joe Weisenthal?

  Yeah.

• 17:53Speaker 06

  Definitely. And, you know, he may just still be thinking of Japan, Japan, Japan.

• 18:14Joe Weisenthal?

  There are some market stories where you want every detail. Tracy and I have made quite a few podcasts on that basis. But sometimes you've only got 10 minutes and need to know what's moving markets and why. That's the Barclays Brief Podcast. Every week, experts from Barclays Markets and research get you up to speed on what matters and what to watch next. About the time it takes to grab a coffee. So search Barclays Brief wherever you get your podcasts.

• 18:40Speaker 01

  This is the Bloomberg Tech Minute brought to you by ChatGPT. I'm Carol Muster. Getting hired at SpaceX requires exceptional ability and may include having Elon Musk review a candidate's resume. So writes Bloomberg Business Week's Lauren Grush. She reports that the company culture is defined by Musk and job candidates must understand that a commitment to SpaceX means adhering to this culture and exhibiting loyalty to Elon Musk. To get hired, candidates must demonstrate their achievements from past jobs. And hands-on experience matters more to recruiters than advanced degrees. With the company looking for people with raw innate intelligence. A spokesperson for SpaceX didn't respond to a request for comment on its recruiting and hiring practices.

• 19:23Speaker 01

  But according to recruiters, advisors, and those who've interviewed for jobs there, it's the space exploration dream that draws people to the company. And Musk invokes that dream regularly to remind workers why they're there. Prospective hires are told that the job will require stamina, including in job ads that candidates, quote, "must be willing to work extended hours and weekends as needed." One major perk for all that hard work? Employees' access to equity, either the right to buy shares or payment in the form of restricted stock units that vest over time. That's the Bloomberg Tech Minute brought to you by ChatGPT. Get started at ChatGPT.com.

• 20:03Joe Weisenthal?

  It's interesting because with the China anxiety these days, like the fear is right, some breakthrough is going to happen with semiconductors or something in China and the American companies would just sort of go out of business, et cetera. But in the anxiety with Japan was like, your boss is going to be Japanese or the name of the office building that you go to will be renamed Japanese, et cetera. That's very different because people don't really talk about that we're all going to be working for Chinese international corporations in the future.

• 20:30Speaker 06

  Right. And if you look at the image of dystopia in the eighties, like in cyberpunk literature or in Blade Runner, it's a lot of Japanese company signage in a city of mixed ethnic makeup that looks very chaotic. It looks a lot like cities in Japan. So yeah, I think people were really thought, and I think it was just kind of common sense. If you got into a, if you took an airplane ride and you got into a conversation with businessman next to you, a guy who owned a small business, he had read in magazines, newspapers, books, everyone kind of like the mid, I'm sorry to use this meme, the mid-wid take at the time was sort of like Japan is going to take over the United States. Yeah.

• 21:12Tracy Alloway?

  Okay. So clearly that did not happen.

• 21:14Speaker 06

  No.

• 21:15Tracy Alloway?

  And the per capita income of Japan is still a lot lower than the US. Walk us through like, I guess, the bursting of the bubble and what exactly like, why this vision of Japan as a superstate or whatever did not come to pass?

• 21:30Speaker 06

  You know what's really interesting is that the, that the panic coincided not with the peak of Japanese power, but with about the asset bubble bursting.

• 21:40Tracy Alloway?

  Mm hmm.

• 21:41Speaker 06

  So you see in 1992, Rising Sun, the Michael Crichton book come out and then, and that also.

• 21:49Joe Weisenthal?

  He top ticked it, huh?

• 21:50Speaker 06

  Yeah. And.

• 21:51Tracy Alloway?

  Has anyone read it?

• 21:53Speaker 06

  I have seen the movie. I have read the book partially when I was doing research for the book, for my book. And at the end of the book, he include, in case no one got the very subtle message of the book, he included a bibliography of books he had written, he had read about Japan that that detailed the the threat. The book is not subtle. A group of Japanese businessmen are involved in the murder of a very beautiful blonde woman. Uh, and the detective is tasked to find this out and he has a meeting with the senator and the senator, they talk about maybe the possibility of dropping another bomb on Japan. That's another thing to remember is that Japan, United States and Japan in living memory had fought a war.

• 22:35Speaker 06

  And there was Pearl Harbor, which Americans felt very sensitive about. So what happened was there was a credit fueled bubble in Japan and it burst and it was followed by a banking crisis, deflation. And then all of a sudden, everything that everyone believed was so wonderful about Japanese capitalism. So in in nineteen eighty-two, Charles Johnson wrote a book called Midi and the Japanese Miracle. And this said, okay, well, the reason why they did it is because they had this wonderful industrial policy, which coordinated investment, protected industries, guided firms. And it was kind of a mixture of state intervention and private capitalism.

• 23:20Speaker 06

  That was one theory. That was a little different from the theories that said, oh, the Japanese have some special cultural Confucianism or whatever, Shinto Buddhism that was making them do this. And everyone said, oh, well, Japanese firms are insulated from financial markets, right? Because they have this close relationship with banks. They don't have to, they don't have to raise funds on capital markets. They have these longstanding relationships so they can do these great long-term development projects, research and development projects. They're not exposed to the quarterly pressures of American companies, so on and so forth. Then after the bubble crashes, everyone looks at all this stuff.

• 23:57Tracy Alloway?

  It's like, oh, wait.

• 23:58Speaker 06

  They say, oh, this was a horrible system of crony capitalism. Where the government was protecting people and there were bad loans on the books. And if there had been functioning markets and a lot of these things wouldn't happen. So suddenly, all of the things that appeared, most of the things, not all of them. But many of the things that appeared really impressive about Japanese capitalism. All of a sudden, people discovered what the downsides were. But this didn't set in in the United States. Japan was, there was an outflow, there was a sudden huge outflow of Japanese funds. They had invested, yeah, I mean, between 1988 to the end of 1990. Japanese investors invested about $52 billion in the United States from, you know.

• 24:43Speaker 06

  That includes everything from buying companies to real estate to new factories. And then in the first few months of 1992, that figure had dropped to 2.3 billion. And they made a net investment of 30, almost $31 billion in securities. And by 1992, they were net sellers of government securities. They took some real baths, like this financier Minuroi Sutani. He, and this was one of these things that upset Americans. He bought Pebble Beach, he sold it for a loss of about $350 million. Yeah, so by the early 1990s, the tide was kind of going out, but the upset wasn't.

• 25:23Speaker 06

  And part of why this happened was the United States still had a close economic relationship. But there was a election going on and a Japanese, election in the United States. And a Japanese politician made a very intemperate remark about the appearance and abilities of American workers. He said that they were not able to read in many cases, that they were overweight. And this caused a massive rage in the United States. And a lot of politicians going into the election year, obviously gin this up.

• 25:57Joe Weisenthal?

  We talk about 92 here?

• 25:58Speaker 06

  This is, this is in 1992.

• 26:00Tracy Alloway?

  Oh, is this the whole Atari Democrat thing?

• 26:02Speaker 06

  The Atari Democrats are a little different. They wanted, they were among the people who were really curious about, I think, state industrial policy in Japan.

• 26:12Tracy Alloway?

  I miss this whole era of American history, by the way. Firstly, because I was like eight years old, but secondly, because I was in Japan.

• 26:19Speaker 06

  Right.

• 26:19Tracy Alloway?

  We didn't hear a lot about it.

• 26:21Speaker 06

  Well, you were there as it as the bubble popped.

• 26:24Tracy Alloway?

  Yeah, so I never, I have no memories of experiencing this feeling of Japanese supremacy. I have a lot of memories of feeling like the economy was very downbeat.

• 26:35Speaker 06

  Oh, wow.

• 26:35Tracy Alloway?

  In the sort of early 2000s when I came back and when I was actually a teenager and sort of aware of my surroundings.

• 26:42Speaker 06

  Yeah. Did you ever get the sense that they felt like it was a missed, it was a lost golden era or missed opportunity?

• 26:48Tracy Alloway?

  I mean, I think there was a little bit of nostalgia, certainly in the finance community. You know, people could remember what the deal making days were actually like. But beyond that, I'm not entirely sure.

• 27:00Speaker 06

  Got you.

• 27:01Joe Weisenthal?

  This summer, all the bros read Ezra Vogel's Daniel Chauvin biography. But he also wrote, and I think you talk about it, he wrote a Japan book in 1979. Japan is number one less than for America, which I think you.

• 27:14Speaker 06

  Yeah.

• 27:14Joe Weisenthal?

  Talk about is that, does that book hold up? Was it good?

• 27:16Speaker 06

  I think that that book is one of the, one of the more serious books. I mean, you know.

• 27:20Joe Weisenthal?

  Yeah.

• 27:21Speaker 06

  He's a real scholar.

• 27:22Joe Weisenthal?

  Yeah.

• 27:22Speaker 06

  And it was more a real analysis of institutions. It doesn't get into the kind of, there may be a little armchair sociology in there about Japanese cultural mores, but there's definitely much more hard analysis of the relationship between government and business in Japan.

• 27:38Joe Weisenthal?

  Let's talk a little bit more about actually 1992 and the politics of that time. You mentioned Paul Tsongas.

• 27:43Speaker 06

  Yeah.

• 27:44Joe Weisenthal?

  He did win a primary somewhere, didn't he? Win New Hampshire or something? Anyway, but more importantly, that was also the year that Ross Perot ran as an independent. And then he dropped out and then he got back in the race and he had a pretty good showing. He may have tipped the election to Clinton. I think there's some debate about that. I know his main focus was NAFTA. But was this, was the, was there a Japan element to his populism?

• 28:07Speaker 06

  There was no one in, in, in politics at that time who was worried about the future of American economy, industry. Even our political supremacy in the world that was not fixated or focused or had a comment to say about Japan. And Ross Perot was not an exception. He was both a protectionist. So he thought that the United States' trade policies were giving us, were leaving us in a bad place with regards to not only Japan, but also at that time, West Germany, German unification had just happened and South Korea. But he also. Was very curious about the way he believed, he wasn't really much, he was a big capitalist,

• 28:48Speaker 06

  not much of a free trader. So he was really attracted to the close relationship between business and government in Japan. And he also was very proud of the close knit nature of his companies. A delegation of Japanese businessmen, I think from Toyota, came to visit Electronic Data Systems, his firm. And they praised him and they said, of all the companies in the United States, you're the most Japanese.

• 29:13Joe Weisenthal?

  I bet they said that to everyone.

• 29:14Speaker 06

  Maybe, probably. But he was extremely proud of it. He was like, he said, every worker is a brother. That's my, that's the way Japanese companies run, and that's the way I run. So he thought we needed to adopt policies more like Japan between cooperation of business and government.

• 29:31Tracy Alloway?

  This is something I find so interesting because in the Japan panic at that time, like, one of the thoughts was, well, Japan is very bureaucratic, but in a good way. It's very like consensus driven. And we have big groups of people who get together and make a decision that's good for everyone. And then when you fast forward to today, and all the angst about China, it's very much like, well, China has an authoritarian system of government, and China can decide by a single person what it's going to do. It's going to build like a huge, high speed rail, and that's not consensus driven. It's funny how it kind of flipped.

• 30:07Speaker 06

  Yeah, that is interesting. There wasn't the sense that there was direction or command, and there was like a really strong political system behind all this. It was a series of, you know, on the smarter end, really good institutions and great education, on the more pulpy, poppy end of cultural essential features that made them extremely good at this. The way that they presented Japan was like, there's no center of power. This is an interlocking, Borg-like corporations and businesses are all cooperating in different ways. It wasn't like, oh, there's an authoritarian state with a leader. This leaderless authoritarianism, and there was some kind of fears that were reminiscent, maybe. You got to also remember that the Cold War is winding up. The Soviet Union is no longer the primary opponent or

• 30:52Speaker 06

  United States. So the collectivism of Japan becomes the thing that's set against American free enterprise and rugged individualism. Some people view that in a it's a it's an interesting mix of admiration and envy and also kind of fear and saying, oh, we're not like that as Americans. So it's a little bit different. I mean, it's also different because the United States and Japan were ostensibly military allies.

• 31:20Joe Weisenthal?

  Yeah.

• 31:20Speaker 06

  They were in the same kind of block in the Cold War. They were arguably part of our empire, kind of under our protection. The discourse was that the that Japan was sneakily kind of getting out from under American hegemony to set up their own. And that doesn't make a whole lot of sense in historical retrospect, or even was a possibility. No. China was obviously never had that kind of relationship with the United States. They were always, I mean, they were, we organized a rapprochement with them, but they were never an ally or even one might say, I don't, I think vassal state is putting it far too strongly, but but a part of the Western block.

• 32:00Joe Weisenthal?

  This is, I want, this is exactly where I wanted to go do, because one obvious difference besides the pop culture and everything else with US China is that today in 2025, there are people who are very worried about war with China.

• 32:13Speaker 06

  Yeah.

• 32:13Joe Weisenthal?

  If China were to forcibly were to blockade Taiwan, would DC feel impelled to enter a war? Is the Chinese industrial might going to sort of hollow out our capacity to even like build weapons at some point because we don't have any efficient factories in the United States? I mean, that is a very, that's very different, right?

• 32:35Speaker 06

  There is.

• 32:35Joe Weisenthal?

  Were there shades of that?

• 32:36Speaker 06

  There were some very small shades of it. The more hysterical books imagined a shooting war between the United States and Japan, a Japanese total reindustrialization that included remilitarization. This doesn't make a lot of sense because Japan is very insistent on his pacifism. I mean, that might be changing now. But this, that fear was really not one of the more realistic ones projections. So there was. Was a little bit of worry about that. I think people were fantasizing and imagining Japan as a rival to the United States that would eventually be a military rival, could be a military rival. But no, so far as I know, there was one book, The Coming War with Japan. Most of the others viewed it as a economic war and a cultural war.

• 33:21Speaker 06

  But the fantasy of, like, they were gonna do, Pat Buchanan had an essay in a book about trade policy where he talked about, they've decided after losing World War II, they're gonna take the economic road to build their empire. So it was more like using war as a metaphor, but there was, I think, fewer worries about the actual military might, which makes sense.

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• 36:23Tracy Alloway?

  Can I push back on one thing, which is the premise of this entire conversation?

• 36:28Speaker 06

  Please.

• 36:29Tracy Alloway?

  No, but the way we started out, we were talking about like the Japan panic really resonated with America. And I guess my question is like, yes, there were books. Yes, there were some characters in movies and things like that. But did it actually resonate in the political or social sense? Because, you know, I'm looking at a headline right now from 1992, and it says, "Harsh Views on Japan May Help Fuel Perot Campaign." Well, Perot ran unsuccessfully for president, so I would argue they did not, in fact, help him.

• 37:00Speaker 06

  Well, I would say that he had the most successful third-party candidate.

• 37:07Tracy Alloway?

  Yeah, okay, that is true.

• 37:08Speaker 06

  About 20% of the vote, which is significant. I think about 2/3 of Americans by 1989 believed, I mean, there's reason for this because the Soviet Union looked like it was on its last legs, but believed that Japan was a bigger threat than the Soviet Union. And a lot of politicians went on the stump. Songas tried to Japan bash, as they called it. Pat Buchanan went Japan bashing. Clinton, less so. But I would say there was a side of Clinton's campaign and a side of his eventual Staffing of his of his administration that was definitely a lot closer in thinking to the people who are worried both worried about and and admiring of Japan. They went in with the intention of being really hard nosed about certain trade negotiations.

• 37:52Speaker 06

  And they also, and this is not, we talk a lot about industrial policy. There was discussion of industrial policy back then. There was a side of the Clinton administration that looked at Japan Japanese industrial policy and protectionism and said, this looks very interesting. We may be living in a very different world if the bubble doesn't pop in Japan and those policies start to make more sense. So the side of the Clinton administration, I mean, that that is both interested and wants to take a tougher line in Japan, it kind of becomes a moot point as Japanese economy kind of collapses and fades away. So it was a really pivotal moment. And yeah, I think that it's such a strange thing that it was, everybody was fixated on it with such common sense.

• 38:36Speaker 06

  Politicians ran on it, arguably demagogued on it. And then it's kind of a historical curiosity.

• 38:42Tracy Alloway?

  Can I ask one more question?

• 38:45Speaker 06

  Of course.

• 38:46Tracy Alloway?

  Which I don't know if you'll have the answer to this, but I've always wondered about it. Why was there not as much hand wringing over Korea, say? Because on the face of it, this is a country that also very rapidly developed economically, also had similar relationships with the US, US military presence and some US investment and things like that. But it all seemed to be directed at Japan rather than Korea.

• 39:13Speaker 06

  I think that that is because of the United States' history with Japan and the war, which had it in our imagination. I think also Japan at that time was a kind of cultural hegemon in East Asia in the way that maybe South Korea is now in terms of their exports of pop culture and video games and art and music and so on and so forth. I think that's a big part of it. I think also there's a great book by an author, Drew McKibben, called Consuming Japan. I think Japan in a way was a lot of Americans for, and he argues that Japan away was a lot of Americans for. First contact with globalization. And it was both very interesting, but also a little scary and alien.

• 39:55Speaker 06

  And I think perhaps China, the rise of China, the rise of South Korea, it doesn't look so weird anymore because we went through the experience of Japan. And also because the experience of Japan kind of turned into a nothing. So perhaps some of the cultural memory of that, or the familiarity we have with other cultures from Japan, I don't think we, we Americans are so used to, are more cosmopolitan than, I would say that we are at the beginning of the eighties. Yeah.

• 40:22Joe Weisenthal?

  Japan throughout all of this, I mean, it was cool, right? Like Sony Walkman were always cool in the United States. People look at this, the Chinese EVs and they're very impressive.

• 40:32Speaker 06

  Right.

• 40:33Joe Weisenthal?

  I don't know if any of them are like cool. Like we don't really have Chinese branded other than Labubus, actually.

• 40:38Speaker 06

  Yeah.

• 40:39Joe Weisenthal?

  Which I think is like the first time there was a specific.

• 40:41Tracy Alloway?

  Yeah.

• 40:41Joe Weisenthal?

  Chinese made capital B brand that sort of.

• 40:45Tracy Alloway?

  I was gonna say, like, we joked about doing a Labubu episode before, but like, I think we actually should because this is probably China's like biggest cultural export ever.

• 40:55Joe Weisenthal?

  Thing, but like.

• 40:56Speaker 06

  Yeah.

• 40:56Joe Weisenthal?

  Japan is just so cool.

• 40:58Speaker 06

  They created a lot of really inexpensive, but extremely interesting and fun devices. I mean, and.

• 41:05Tracy Alloway?

  I miss my Game Boy, I gotta say.

• 41:07Speaker 06

  I miss my Mini Display and it wasn't even that useful. It was just really, it was just really neat. Yeah.

• 41:12Joe Weisenthal?

  Nintendo, right.

• 41:13Speaker 06

  Nintendo, Sega, the design was terrific. I think one thing that Japan, and this was also American businesses were really curious about how Japan did. And they think, oh, they have all these wonderful craft traditions. And all these wonderful craft traditions are not left behind. They're incorporated into industrial production.

• 41:30Tracy Alloway?

  Detail oriented.

• 41:31Speaker 06

  Detail oriented engineering, a lot of paid attention to design and aesthetics. So that I think was a big reason why a lot of those products were really nicely designed. I think it's a sad thing in a way. I think there's a little bit of, of China, of people think, starting to think Chinese cars are cool.

• 41:48Joe Weisenthal?

  Yeah.

• 41:48Speaker 06

  Japanese cars were always like, that's reliable and well-built. But they weren't like, they were kind of like, it's a little boring.

• 41:57Joe Weisenthal?

  Okay.

• 41:58Speaker 06

  And to own a Japanese car. Japanese electronics, I think, were always like, this is really neat. I think it was not necessarily, maybe Lexus was the exception, right?

• 42:05Joe Weisenthal?

  Hmm.

• 42:06Speaker 06

  But Toyota, Honda, I think these were, oh, it's very practical, practical choice. I think there's a little bit of Chi- of Chinese car culture starting. That's like, oh yeah, they're really making some cool looking stuff over there now. And also there is a beginning, you know, you see lots of TikToks and reels and so on and so forth of Japanese, of, of, I'm sorry, Chinese cities. So I think there's a beginning of, I don't know what to call it, China chic, but definitely like, wow, the amazing things are happening in China. So I think there's a little bit of that. I'm not a young person anymore, so I'm not, and I, I think there's also just like.

• 42:42Speaker 06

  You know, Apple is so dominant in, in consumer electronics and you don't need that many devices anymore.

• 42:49Joe Weisenthal?

  Right.

• 42:49Speaker 06

  So the fact is, we don't need CD players, we don't need Walkman, we don't need Mini Discs, we don't need all these different things. So there, there was this kind of wonderful market that had all these different interesting gadgets in it. And I think that that fascinated people. And your phone or your computer does all of that now. I find that to be, I mean, this is just a factor totally of aging and nostalgia. But as we were just saying, I find that to be a little sad and I thought those devices were actually better in certain ways, yeah.

• 43:19Tracy Alloway?

  Joe, I just remembered the car my mom had in Tokyo in the early 1990s.

• 43:24Joe Weisenthal?

  What was it?

• 43:24Tracy Alloway?

  It was called My Fair Lady.

• 43:26Joe Weisenthal?

  Wait, what?

• 43:27Tracy Alloway?

  It was manufactured by Nissan and it was actually a really cool looking car, but it had a terrible name. So I don't know if, if it would be considered cool or not nowadays.

• 43:37Speaker 06

  They often switch names, I think, when they came to the United States, they would have consultants tell them that branding would sound strange in America.

• 43:42Joe Weisenthal?

  Wait, was it this car, the Nissan Fair Lady Z?

• 43:45Tracy Alloway?

  I think so.

• 43:46Joe Weisenthal?

  This is so sick. It's a really nice looking car.

• 43:50Tracy Alloway?

  It was some sort of sports car.

• 43:51Speaker 06

  It's very cool. It's like a Citroen almost.

• 43:53Joe Weisenthal?

  Yeah, that looks cooler than I would associate with a typical.

• 43:56Speaker 06

  Yeah, I thought it was going to be some kind of like minivan, suburban.

• 44:00Tracy Alloway?

  Right.

• 44:00Joe Weisenthal?

  Yeah, wow.

• 44:01Speaker 06

  Yeah, it's very cool.

• 44:02Joe Weisenthal?

  That's extremely cool like a car.

• 44:03Speaker 06

  Yeah.

• 44:04Tracy Alloway?

  Yeah, it was. It just had a very strange name. I always remember that. I remember like staring at the steering wheel because I think it was like printed on it. Anyway, back to the topic at hand. So there are clearly parallels between the Japan panic and a lot of the fear around China at the moment. On the other hand, there do seem to be a lot of big differences. Number one, China is not a tiny island with a lack of natural resources and farmable land and things like that. It has a much bigger population. Walk us through where you see the biggest areas, I guess, of similarity and difference.

• 44:41Speaker 06

  I mean, exports were a big part of the growth of both. There's obviously a strong state in both. In one case, it's more of this vaunted Japanese bureaucracy, which then turned out not to be so great. On the other side, it's the Communist Party and state banks. Big trade surplus is a big part of it. But there are big differences. I mean, China's a lot bigger, has a way bigger population. I think its political system, as you were saying, it can kind of make things happen and prevent things from happening, make really radical intrusions in the financial system. It doesn't have infinite power in that regard. I think I've heard you guys discuss that on. But I think they have definitely a little more political, economic firepower than Japan has.

• 45:23Speaker 06

  And I think part of that is, you know, the strength of the Communist Party's an institution and the size of the population.

• 45:29Joe Weisenthal?

  It is interesting to think, like, here in 2025, we could have a conversation and be like, you know what? China's really successful because it coordinates its banks with its manufacturers. They have this very intense ideological grooming, such that executives are major. They believe in the Chinese Communist National Project.

• 45:50Speaker 06

  Right.

• 45:51Tracy Alloway?

  Or willing to sacrifice returns for the country.

• 45:53Joe Weisenthal?

  Sacrifice returns and all these things. And in theory, and I don't know what's going to happen, but in theory, in two years. We could go back and say, oh, they had all these corrupt relationships between the companies and the banks.

• 46:04Speaker 06

  Yeah.

• 46:05Joe Weisenthal?

  Crony capitalism. It was all this crony capitalism, etc. It is hard to know in real time what factors are real in success because I do find when I read stories about the degree to which the CEO of Huawei like deeply believes in the CCP and the sort of nationalist agenda, like, yeah, wow, that's very compelling. I could see how there's this alignment. But then, you know, something could happen a few years later. You're like, oh, that was really silly how they like, right? It's hard to know in real time, isn't it?

• 46:34Speaker 06

  Yeah, I think that's absolutely true. I don't think, you know, we should be complacent or but but I think it's an interesting lesson of the history here is just things can go from being commonsensical, the biggest threat. Everybody knows that they're gonna they're gonna win. Everybody knows that they have a better system. And then a few years later, everyone is like, what were we thinking? Why did we think that? And we could they had so many internal problems that were just of this. And that's kind of the same way with financial bubbles bursting. I guess you could talk about these as also as like political bubbles is that everyone's like, oh, wow, look at this big combine, this big system that's kind of humming along. And then things are going on behind the behind the scenes that are like, oh, there's an intrinsic flaw that's making its way to the surface and then it kind of manifests itself.

• 47:19Speaker 06

  So.

• 47:20Joe Weisenthal?

  George Soros gave a great speech one time making this exact point that there is a similarity between what you he would call financial bubbles and like political bubbles where you believe in a system. Right. And then something emerges that sort of irrevocably shakes your confidence in this system. So I think I find that analogy very compelling.

• 47:39Speaker 06

  Yeah, but Japan didn't cease to exist.

• 47:42Joe Weisenthal?

  Yeah, I remember that. It's still one of the richest, thriving, peaceful, prosperous countries in the world.

• 47:46Speaker 06

  It's not a terrible place to live.

• 47:47Joe Weisenthal?

  No.

• 47:47Speaker 06

  Yeah, it's not like it went back to the Stone Age. So I think that that's also just very growth mindset, but it's still, I think, has extremely low rate of unemployment, healthy, relatively healthy population, good education, not a terrible place to live.

• 48:00Tracy Alloway?

  Just on this point, though, why didn't Japan get into the sort of software side of technology as much as it did on the sort of hardware side in the 80s and 90s?

• 48:09Speaker 06

  You know, I think that that is a question I don't exactly know the answer for, but that's often given as the big mistake that they made, right? So Japanese companies made an investment decision at just the wrong time that that hardware, and I think it was partially because they were always just really good at developing hardware, and they had developed a lot of institutional knowledge about making devices and improving devices, improving hardware, and they were like, look, this is what we're good at. I also think that there is a certain, not to get into too many cultural explanation, but there is a certain conservatism in Japan about tools, about about devices, and things that are seen to work aren't quickly gotten rid of.

• 48:54Speaker 06

  The Japanese government just had to kind of wage an internal jihad to get people, to get its own bureaucracy to stop using floppy disks. Japanese companies still often use fax machines.

• 49:05Tracy Alloway?

  Yes.

• 49:06Joe Weisenthal?

  As Tracy knows.

• 49:06Tracy Alloway?

  I know. I used to, part of my job used to be monitoring a fax machine for press releases, and most of them that came in were from Japan. And this was like the mid 2000s.

• 49:17Speaker 06

  Yeah, and I think that there's that that sense that some things, some ways of doing things, some processes, some technologies are good, and there's not any real reason to replace them. And obviously, like, when productivity is your number one goal, that's not necessarily, again, it may make us in some way, I find it very charming. And I find it also, one theory I've read is that the reason why unemployment is very low is because somebody has to be there to get those faxes, and they're not that, Japanese companies are not that keen to adopt software that might replace a worker. So there's a certain kind of pro-social attitude in not in not doing these upgrades.

• 50:01Speaker 06

  But yeah, the the transition to the software.

• 50:05Speaker 06

  The age was one of those places where Japan is thought to have made a wrong turn.

• 50:10Joe Weisenthal?

  Yeah, New Jersey, they still don't let you pump your own gas, right? We have our own cultural, own cultural dimension.

• 50:17Tracy Alloway?

  New Jersey famously socially oriented.

• 50:19Joe Weisenthal?

  That's right. John Gans, author of The Unpopular Front, Substack and the recent book, When the Clock Broke. Thank you so much for coming on Outlaws. I'm thrilled that we made this happen.

• 50:28Speaker 06

  Yeah, thank you so much.

• 50:42Joe Weisenthal?

  Tracy, that was a lot of fun. I do think that Japanese stuff seemed really cool back then.

• 50:47Tracy Alloway?

  Yeah.

• 50:47Joe Weisenthal?

  In a way, again, and maybe we should talk more soon about the rise of China, the brand, and whether there's, whether it will break through.

• 50:55Tracy Alloway?

  Labubus.

• 50:55Joe Weisenthal?

  Yeah.

• 50:56Tracy Alloway?

  Let's just do the Labubu episode.

• 50:57Joe Weisenthal?

  We'll do it.

• 50:58Tracy Alloway?

  Just give in. It's inevitable.

• 51:00Joe Weisenthal?

  Someone told me that if you go to the, um, the running shoe subreddit, there's a lot more mentions of, there's, I think there's, Anta is like the Nike of Japan. That you see more mentions of them on like, I tried to build a scraper of brand mentions over time. I couldn't get it done on Reddit. So I do think we should talk about that. But you know, that was, that's a whole aspect of Walkman, Nintendo, those were cool brands the whole time.

• 51:24Tracy Alloway?

  You know what's interesting about Nike and China?

• 51:28Joe Weisenthal?

  Yeah.

• 51:28Tracy Alloway?

  Is that there was a big pushback domestically against Nike products because of rising nationalism.

• 51:35Joe Weisenthal?

  Yeah.

• 51:36Tracy Alloway?

  In China and the idea that maybe Nike had made some missteps that like offended policymakers or people there.

• 51:43Joe Weisenthal?

  But no, overall, like having this conversation from 2025, given what we know about Japan today, the whole thing seems like, wow, that's, you know, it seems very surreal.

• 51:54Tracy Alloway?

  It seems very quaint.

• 51:54Joe Weisenthal?

  It feels very quaint.

• 51:56Tracy Alloway?

  Like this idea that we were really worried that a relatively small island was going to take over the world.

• 52:00Joe Weisenthal?

  That we were military, that we had a base on, right?

• 52:03Tracy Alloway?

  More than one base, just to be clear.

• 52:05Joe Weisenthal?

  Multiple bases on that we were as military related, that there was that much anxiety. It's sort of interesting chapter in our history.

• 52:14Tracy Alloway?

  I do think. It's also interesting, again, to think about like how much a lot of the strengths and weaknesses have flipped in perception. The idea that bureaucracy and consensus decision making was once seen as this competitive advantage. And now it's totally the opposite.

• 52:30Joe Weisenthal?

  I mean, in every context, right? You say, oh, one of the great things about the US. We have all these great checks and balances, et cetera. And then suddenly we like can't build anything or get any laws passed. Well, one of the big problems with the US is there are so many veto points and you can't get anything done. It's just whatever the mood is at the time, the same set of conditions will either be get the blame or the credit.

• 52:51Tracy Alloway?

  It's just a giant pendulum swinging back and forth, markets and politics.

• 52:55Joe Weisenthal?

  That's right.

• 52:55Tracy Alloway?

  All right. Shall we leave it there?

• 52:56Joe Weisenthal?

  Let's leave it there.

• 52:57Tracy Alloway?

  This has been another episode of the Odd Lots Podcast. I'm Tracy Alloway. You can follow me at Tracy Alloway.

• 53:03Joe Weisenthal?

  And I'm Joe Weisenthal. You can follow me at the Stalwart. Follow John Gans. He's at Lionel underscore trolling. Follow our producers, Carmen Rodriguez at Carmen Armin, Dashal Bennett at Dashbot, and Kale Brooks at Kale Brooks. For more Odd Lots content, go to Bloomberg.com/oddlots, where the daily newsletter and all of our episodes. And you can chat about all of these topics 24/7 in our Discord, discord.gg/oddlots.

• 53:27Tracy Alloway?

  And if you enjoy Odd Lots, if you like it when we talk about parallels between Japan and China, then please leave us a positive review on your favorite podcast platform. And remember, if you are a Bloomberg subscriber, you can listen to all of our episodes absolutely ad free. All you need to do is find the Bloomberg channel on Apple Podcasts and follow the instructions there. Thanks for listening.

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• 55:26Speaker 06

  The world of business is constantly evolving and Comcast business keeps you totally in step with secure AI-backed networking in more than 100 countries. They're powering over 90% of the Fortune 500 and millions of small businesses. That's a lot of muscle. And behind it all, thousands of experts answering your call at 2 a.m. like it's 2 p.m. One partner powering how business gets done for companies around the globe. When you add it all up, no one does business like Comcast business. For big business, AI opened up a world of promise, but that world of promise turned into a world of pain. Costs spiraling, data trapped, security and governance risks multiplying, and ROI out of reach. That's why enterprises turn to Boomi

• 56:10Speaker 06

  to connect data, apps and AI, helping them operate securely, efficiently and at scale. Boomi turns a world of AI pain into a world of AI gain. As Boomi says, "We got you." Head to boomi.com. That's B-O-O-M-I dot com.