#102 Akio Morita (Sony)

What I learned from reading Made in Japan: Akio Morita and Sony by Akio Morita. --- [0:01] Forty years ago, a small group gathered in a burned-out department store building in war-devastated downtown Tokyo. Their purpose was to found a new company, their optimistic goal was to develop the technologies that would help rebuild Japan's economy. [5:00] I was born the first son and fifteenth-generation heir to one of Japan's finest and oldest sake-brewing families. The Morita family has been making sale for three hundred years. Unfortunately, the taste of a couple of generations of Morita family heads was so refined and their collecting skills so acute that the business suffered while they pursued their artistic interests, letting the business take care of itself, or, rather, putting it in other hands. They relied on hired managers to run the Morita company, but to these managers the business was no more than a livelihood, and if the business did not do well, that was to be regretted, but it was not crucial to their personal survival. In the end, all the managers stood to lose was a job. They did not carry the responsibility of the generations, of maintaining the continuity and prosperity of the enterprise and the financial well-being of the Morita family. [8:18] Tenacity, perseverance, and optimism are traits that have been handed down to me through the family genes. [9:25] I was taught that scolding subordinates and looking for people to blame for problems—seeking scapegoats—is useless. These concepts have stayed with me and helped me develop the philosophy of management that served me very well. [10:28] I had to teach myself because the subjects I was really interested in were not taught in my school in those days. [14:09] The emperor, who until now had never before spoken directly to his people, told us the immediate future would be grim. He said that we could “pave the way for a grand peace for all generations to come," but we had to do it "by enduring the unendurable and suffering what is insufferable." [23:58] When some of my relatives came to see me, they were so shocked by the shabby conditions that they thought I had become an anarchist. They could not understand how, if I was not a radical, I could choose to work in a place like that. [24:28] Ibuka and I had often spoken of the concept of our new company as an innovator, a clever company that would make new high technology products in ingenious ways. [29:36] We were engineers and we had a big dream of success. We thought that in making a unique product, we would surely make a fortune. I then realized that having unique technology and being able to make unique products are not enough to keep a business going. You have to sell the products, and to do that you have to show the potential buyer the real value of what you are selling. [32:20] There was an acute shortage of stenographers because so many people had been pushed out of school and into war work. Until that shortage could be corrected, the courts of Japan were trying to cope with a small, overworked corps of court stenographers. We were able to demonstrate our machine for the Japan Supreme Court, and we sold twenty machines almost instantly! Those people had no difficulty realizing how they could put our device to practical use; they saw the value in the tape recorder immediately. [38:03] Marketing is really a form of communication. We had to educate our customers to the uses of our products. [39:15] We would often have the market to ourselves for a year or more before the other companies would be convinced that the product would be a success. And we made a lot of money, having the market all to ourselves. [40:20] The public does not know what is possible, but we do. So instead of doing a lot of market research, we refine our thinking on a product and its use and try to create a market for it by educating and communicating with the public. [42:33] Everybody gave me a hard time. It seemed as though nobody liked the idea [the Walkman]. “It sounds like a good idea, but will people buy it if it doesn't have recording capability? I don't think so." I said, “Millions of people have bought car stereo without recording capability and I think millions will buy this machine.” [46:38] "We definitely want some of these. We will take one hundred thousand units." One hundred thousand units! I was stunned. It was an incredible order, worth several times the total capital of our company. When he told me that there was one condition: we would have to put the Bulova name on the radios. That stopped me. We wanted to make a name for our company on the strength of our own products. We would not produce radios under another name. When I would not budge, he got short with me. "Our company name is a famous brand name that has taken over fifty years to establish," he said. "Nobody has ever heard of your brand name. Why not take advantage of ours?" I understood what he was saying, but I had my own view. “Fifty years ago," I said, “your brand name must have been just as unknown as our name is today. I am here with a new product, and I am now taking the first step for the next fifty years of my company. Fifty years from now I promise you that our name will be just as famous as your company name is, today." [49:04] When I attended middle school, discipline was very strict, and this included our physical as well as our mental training. Our classrooms were very cold in winter; we didn't even have a heater; and we were not allowed to wear extra clothes. In the navy,I had hard training. In boot camp every morning we had to run a long way before breakfast. In those days I did not think of myself as a physically strong person, and yet under such strict training I found I was not so weak after all, and the knowledge of my own ability gave me confidence in myself that I did not have before. It is the same with mental discipline; unless you are forced to use your mind, you become mentally lazy and you will never fulfill your potential. [52:06] Norio Ohga, who had been a vocal arts student at the Tokyo University of Arts when he saw our first audio tape recorder back in 1950. He was a great champion of the tape recorder, but he was severe with us because he didn't think our early machine was good enough. He was right, of course; our first machine was rather primitive. We invited him to be a paid critic even while he was still in school. His ideas were very challenging. He said then, "A ballet dancer needs a mirror to perfect her style, her technique." [54:21] Nobody can live twice, and the next twenty or thirty years is the brightest period of your life. You only get it once. When you leave the company thirty years from now or when your life is finished, I do not want you to regret that you spent all those years here. That would be a tragedy. I cannot stress the point too much that this is your responsibility to yourself. So I say to you, the most important thing in the next few months is for you to decide whether you will be happy or unhappy here. [59:40] My argument again and again was that by saving money instead of investing it in the business you might gain profit on a short-term basis, but in actual fact, you would be cashing in the assets that had been built up in the past. [1:00:00] One must prepare the groundwork among the customers before you can expect success in the marketplace. It is a time-honored Japanese gardening technique to prepare a tree for transplanting by slowly and carefully binding the roots over a period of time, bit by bit, to prepare the tree for the shock of the change it is about to experience. This process, called Nemawashi, takes time and patience, but it rewards you, if it is done properly, with a healthy transplanted tree. Advertising and promotion for a brand-new, innovative product is just as important. [1:01:19] If Japanese clients come into the office of a new and struggling company and see plush carpet and private offices and too much comfort, they become suspicious that this company is not serious, that it is devoting too much thought and company resources to management's comfort, and perhaps not enough to the product or to potential customers. Too often I have found in dealing with foreign companies that such superfluous things as the physical structure and office decor take up a lot more time and attention and money than they are worth. ---- Founders Notes gives you the ability to tap into the collective knowledge of history's greatest entrepreneurs on demand. Use it to supplement the decisions you make in your work. Get access to Founders Notes here. ---- “I have listened to every episode released and look forward to every episode that comes out. The only criticism I would have is that after each podcast I usually want to buy the book because I am interested so my poor wallet suffers. ” — Gareth Be like Gareth. Buy a book: All the books featured on Founders Podcast

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:01David Senra?

  Forty years ago, a small group gathered in a burned-out department store building in the war-devastated downtown Tokyo. Their purpose was to found a new company, and their optimistic goal was to develop the technologies that would help rebuild Japan's economy. In this early gathering was a young engineer, Akio Morita, then just 25 years old. Today, that company is one of the most powerful and respected multinational corporations in the world, Sony, and Akio Morita is its outspoken chairman. The Sony story is one of consistently high-quality merchandise and phenomenally successful marketing strategies masterminded by Morita, who realized he would have to create the markets for Sony's unprecedented products.

• 0:45David Senra?

  Morita's striking departure from the traditional Japanese business practice of making decisions by committee led to the spectacular success of the Sony Walkman, which was his own idea. And perceiving that Sony's future would be intimately tied to that of the United States, Morita decided to found a US subsidiary, Sony America, and he took the highly unusual step of moving his entire family to New York during its establishment. From his global perspective and as a friend and admirer of the US, Morita candidly discusses the differences between Japanese and American management practices, the often stormy trade relations between Japan and the West, the real reasons behind the hollowing out of

• 1:28David Senra?

  American industry, and the role of technology in preserving the future of mankind. Alright, so that is an excerpt from the book that I read this week and the one I'm going to talk to you about today, which is "Made in Japan: Akio Morita and Sony." And it was written by Akio Morita and Edwin Reingold and Mitsuko Shimura.

• 1:51David Senra?

  Okay, so that excerpt I just read talks about the founding of the company comes right after World War II. Tokyo's been devastated by not only the atomic bombs dropped in Nagasaki and Hiroshima, but there was a ton of firebombing done all over Japan. And so I want to spend some time, I think that's one of the most remarkable elements to Akio and Sony's story. So I want to spend some time describing what that environment was like. Okay, so this is gonna be Akio as a young person dealing with the war. And he's in the Navy at the time. He says, "I was having lunch with my Navy colleagues when the incredible news of the atomic bombing of Hiroshima arrived. I understood what the bomb was and what it meant to Japan."

• 2:35David Senra?

  He says he had a better understanding than other people because he studied physics before the bombing. "I understood what the bomb was and what it meant to Japan and to me. The future had never been more uncertain. Japan had never lost a war, and only a young man could be optimistic. Yet I had confidence in myself and in my future even then. I was 24." Okay, so that's one of the first personality traits I want to bring to your attention. Akio was, he had the utmost confidence in himself even when at times he shouldn't have had. And a lot of people even called him cocky. You're gonna see a lot of parallels between Akio and Steve Jobs. Steve Jobs actually met Akio.

• 3:17David Senra?

  At the very beginning, if you study the early days of Apple, Steve said that he wanted Apple to be the Sony of computers. And so that's one trait they share. And I'll talk a little bit more about what Steve Jobs said about Sony later on. All right, so back to the book. "I had seen the terrible results of conventional firebombing. I was in Tokyo when the incendiary bombs whipped up a firestorm that killed 100,000 people in just a few hours. Parts of all of Japan's major industrial cities were charred wastelands in 1945. Depressing heaps of blackened remains were the homes of millions of Japanese." And again, I think that's one of the most remarkable parts of this entire story is that

• 4:01David Senra?

  he's gonna start one of the greatest companies of all time out of this kind of environment. So he says, "When I first heard of the atomic attack on Hiroshima, it struck me that American industrial might was greater than we realized. It was simply overwhelming." I for one should have been prepared for it. In fact, as a boy in high school, I had seen a film of the construction of the Ford Motor Company's River Rouge complex in Dearborn, Michigan, and was thrilled by the concept of this gigantic project. Japan had no integrated manufacturing like that at the time.

• 4:37David Senra?

  So Japan's devastated. They just lost their first war in their entire history, and yet here we see the unwavering confidence of Akio. He says, "I don't mind saying that even then, as a young man, I felt that somehow I had a role to play in that future. I didn't know how big a role would turn out to be." So I want to tell you a little bit about his early family history, which is fascinating because he comes from a family that had a family business for going back 300 years. And so he learns a lot from this family business, but specifically what happens to a multi-generational family business when you lose focus on the business. So I want to talk about that a little bit here. So he was born the first son and 15th generation heir to one of Japan's finest and oldest

• 5:21David Senra?

  sake brewing families. The Morita family had been making sake for 300 years. That's bananas. So they had a really prosperous, they were one of the richest families in Japan at the time, yet the generations, the two generations, excuse me, the three generations that came above, before him, were, they essentially didn't focus on the business, they were extremely rich. So they spent their time like buying art and fine ceramics and all this other stuff that had nothing to do with the business. And so his dad, Akio's dad, is now going to have to run the business, and he's essentially running a turnaround project. Okay? He went from a once prosperous business to one that was almost out of business and was

• 6:04David Senra?

  actually restored back by his father. So he said, "Unfortunately, the taste of a couple of generations of Morita family heads was so refined and their collecting skills so acute that the business suffered while they pursued their artistic interests, letting the business take care of itself, or rather they put it in other people's hands." So what does that mean? He says, "They relied on hired managers to run the Morita company. But to these managers, the business was no more than a livelihood. And if the business did not do well, that was to be regretted, but it was not crucial to their own personal survival." So there's a misalignment of incentives here, vastly different from a multi-hundred-year family business, right?

• 6:47David Senra?

  So he says, "In the end, all the managers stood to lose was the job. They did not carry the responsibility of the generations of maintaining the continuity and the prosperity of the enterprise and the financial well-being of the Morita family. And so, that is why, when the business fell into my father's hands, as the first son of the family, he was faced with the immediate task of bringing the company back to profitability and restoring the Morita family fortunes. No outside manager could be counted on to do that for him." So one of the best things that ever happened to Akio is that he had a very understanding father. And his father, so the Japanese tradition, according to Akio, is the firstborn son has to take over the family business.

• 7:31David Senra?

  That was Akio's destiny before Sony. And so as such, his dad, from a very young age, took Akio to work with him. He'd sit in on meetings, even from the age of like 10, 12, 13. He'd be in all these meetings, they'd be reviewing numbers. And Akio would talk about, like, after the meetings were over and after he was essentially shadowing his dad, he'd have to think for a long time and try to interpret what the adults were talking about. And I think that is really important, that Akio later in his life says he's a big fan of the total immersion theory. And I think that has something to do with how his dad, his dad just kind of brought him in here, "You're not going to understand everything, but I'm going to constantly keep you at the very edge of your capabilities." It's a very uncomfortable place, but it's a place where probably all of our growth comes from. So I think it was very smart.

• 8:16David Senra?

  So I want to cover a couple of things that he learned from the family business, some traits that his family taught him, that he kept his whole life, tenacity, perseverance, and optimism. He says, "This ancestor of mine had the eagerness to try something new." So this is, they were in the Saki business, and there's ebbs and flows to any business, and so they realized they have to diversify. He says, "The ancestor of mine had the eagerness to try something new and the courage and strength not to give up if a single project failed." His predecessor as family head had started a beer business by hiring a Chinese brewery who had learned his trade in England. He also founded a baking company, which prospered. "Tenacity, perseverance, and optimism are traits that have been handed down to me through my family genes."

• 9:01David Senra?

  And he's gonna tell us some explicit business lessons that he learned from his father. He says, "I think it was very important that I was also cautioned time and time again as a young man." So now these are gonna be direct quotes from his father. "Don't think that because you are at the top, you can boss others around. Be very clear on what you have decided to do and what you ask others to do and take full responsibility for it." Now, back to Akio. He says, "I was taught that scolding subordinates and looking for people to blame for problems, seeking scapegoats, is useless. These concepts have stayed with me and helped me develop the philosophy of management that served me very well." So Jeff Bezos has this great quote where he says, "You don't find your passions, your passions find you." And I think that is actually completely true.

• 9:46David Senra?

  This example, Akio's another example of that. He finds his obsessions with electronics extremely early in life. So he says, at this point, he's a young boy. He says, "I began to buy books about electronics and I subscribe to magazines that contain all the latest information about sound reproduction and radio." These are, you know, industries that Sony's gonna build some pioneering products a few decades later. He says, "Soon I was spending so much time on electronics that it was hurting my schoolwork. I was devoting nearly all of my after-school hours to my new hobby." This reminded me of when I did the podcast on the Microsoft co-founder Paul Allen, him and Bill Gates. You could change some of the words in that sentence I just wrote to you and it would still hold true for those two as well. So, "I devoted nearly all my after-school hours to my new hobby.

• 10:30David Senra?

  I had to teach myself because the subjects I was really interested in were not taught in my school in those days. In fact, I became so engrossed in my electronic tinkering that I almost flunked out of school." And I think it's really hard to tell what you're meant to do in life. There's so many options, like you have, especially when you're younger and you don't know much about the world. Like there's all these possibilities are limitless and you have this like this paradox of choice, you know, how do you pick one thing out of millions of different options or opportunities? And I think one easy way to figure out how you want like to get an enjoyable life is like just listen to your passions, like what do you do for fun? I always talk about that my love of that word autotelic. It describes an activity that you're doing just for the sake of itself.

• 11:14David Senra?

  Is there a way, is there an activity that you do in your life that's like that? And if so, is there a way to make money and build a career around it? So one theme that that appears over and over in the book and it also, I also mentioned it in the the opening excerpt of this podcast was the role of technology in preserving the future of mankind. He has an entire chapter, it's only like eight chapters in this book, they're all giant. And one of them is called technology as a survival exercise. It's like a weird way to think about technology, right? And I think it's an accurate way to think about it, but I think the reason he was able to think like that is because of these experiences that he had very early that, you know, most people on the planet will never, in almost not only people alive today, but in human

• 11:58David Senra?

  history, never had, right? And so let me read a paragraph so I can add some context to what I'm, the point I'm trying to make to you. He says, "I had built a time clock which was attached to my radio and was set to wake me up at six o'clock every morning. I remember very clearly the morning of December 8, 1941. It was still December 7 in the United States when my timer turned on my radio and I heard the announcement that Japanese forces had attacked Pearl Harbor." Now, okay, everybody knows that happened, right? His response was fascinating to me. Listen to what he says. "I was shocked. I remember thinking that this was a dangerous thing. I had grown up believing the West was somewhat superior in technology.

• 12:40David Senra?

  Knowing about America's technology, I was concerned that a mistake had been made."

• 12:47David Senra?

  So Akio is saying there is like the technologically superior country. Like these, in matters of life and death, you don't want to be fighting a war against another country that's technologically superior, right? So my brain immediately went, it's like, well, the same applies on a much smaller scale to companies. Like if you're competing with companies that have tech, that are more technology superior, like you're gonna lose. And this is not a new idea. This week, if you, if you happen to use Twitter, if you want to follow Founders Podcasts on Twitter, I, every so often, I just tweet out like old ideas from books I've covered in the past. And this week, I tweeted one out from Andrew Carnegie, because he talks about like, he would invest heavily in the latest technology of his day when he's building the factories, right? For steel production. And a lot of the old timers in the business were like, you're wasting money, this is foolish.

• 13:32David Senra?

  And so what he realized, this is the lesson that Andrew Carnegie came away with, which I think Akio understood in matters of life and death, and then later in matters of commercial interest in his, in business Sony. But essentially, Andrew Carnegie would tell us in this one excerpt, that you need to invest in technology, the savings compound, it gives you an advantage over slower moving competitors, and can be the difference between profit and loss, in Andrew's case, and in the Japanese-American war, in between life and death. Okay, so now Akio is gonna tell us a little bit about what was like right before, right after the war ended and right before Sony was founded. So, the Emperor of Japan, he, actually, this is the first time the Japanese people have ever heard his voice, which, which blew my mind.

• 14:14David Senra?

  But he's gonna give advice, the Emperor of Japan comes on the radio and gives advice to the Japanese people. Now, the advice that he's talking about, I feel applies to any difficult challenge. Could also apply to building a company, right? So he says, "The Emperor, who until now had never spoken directly to his people, told us the immediate future would be grim. He said that we could pave the way for grand peace for all generations to come, but we had to do it by enduring the unendurable and suffering what was insufferable. He urged Japan to look ahead. Unite your total strength to be devoted to the construction for the future," he said. And he challenged the nation to keep pace with the progress of the world."

• 14:57David Senra?

  Akio never says it, but Akio took these words to heart, apparently, he took these words to heart, because... Akio was very like mission driven, right? He really felt like not only do you want to build the best products at the time, Japanese product, he said products made in Japan had the reputation for being like crappy, poorly made. And so he's like, I want to build a company that proves that Japan can build the best products in the world. And he felt that if he was successful doing so, he'd be able to restore the industry that was destroyed. So it's like, not only is he trying to build a company, or first of all, build a great product, and then second, build a great company, but he's trying to like, like put the troubles of his entire nation on his back. He's a very, very intense person, as you could imagine. He's got some advice for us. This section I'm going to read to you right now, it reminds me of this Charlie Munger

• 15:42David Senra?

  quote, which says, "Avoid intense ideology, it turns your brain to cabbage." If you want to learn more about like the Japanese ethos at this time, I'm in the middle, Dan Carlin of Hardcore History, my favorite podcast that's ever existed, he's in this middle of this multi-part series on the war between Japan and China at the time, or I guess other countries in Asia as well. And he says something in that podcast where he's like, "The Japanese were like everybody else, just more so. They were extreme people, fanatics." So he says, "We had managed to do our duty and had come home without physical scars." He's talking about him and his brothers all served in the war. "We had also avoided the fanaticism that seemed to grip so much of Japan's youth in those days.

• 16:24David Senra?

  The worship of the emperor and the idea of glorious death. In Japan, we often talk of a psychological climate or atmosphere that sometimes occurs and which seems to sweep people up into like-minded activity, as though everybody is breathing the same special kind of air." So you want to avoid that. There's nothing wrong if you come to your own conclusions like that. Like you might be extremely passionate about, you know, your family or the work you're doing, whatever the case is, but you don't want to just be downloading ideology from other humans and then have this like mass psychosis that occurs constantly through human history. So this is the conditions in Japan right before Akio found Sony. And he says, "Many cities looked as though they were nothing more, there was nothing more to bomb.

• 17:08David Senra?

  Flimsy houses, shops, and factories made of wood and paper had burned like dry tinder under a shower of incendiary bombs. In Tokyo, less than half of the pre-war population of 7 million remained in the city." That is mind blowing. Only 10% of the city's streetcars were running. There were only 60 buses in running condition and just a handful of automobiles and trucks. Hospitals were short of everything. Department store shelves were empty.

• 17:42David Senra?

  So, I want to interrupt here, because there's a, there's a actual story that's told in Walter Isaacson's book on Steve Jobs, about the meeting that took place between Steve Jobs and Akio Morita. So, I want to read the excerpt real quick. So, he says, "On a trip to Japan in the," because it's relating to the conditions in post-war Japan. "On a trip to Japan in the early 1980s, Jobs asked Sony chairman Akio Morita, 'Why everyone in this company factories were wearing uniforms?'" And this is a quote from Jobs. He says, "He looked very ashamed and told me after the war, no one had any clothes, and companies like Sony had to give their workers something to wear each day. Over the years, the uniforms developed their own signature style, especially at companies such as Sony, and it became a way of bonding workers at the company."

• 18:26David Senra?

  Another quote from Jobs. "I decided that I wanted that type of bonding at Apple. Sony, with its appreciation for style, had gotten the famous designer Izzy Miyaki to create its uniforms." So, Jobs had the idea. He tried to implement that at Apple. No one at Apple wanted to wear the uniforms. So, Jobs actually hired Izzy Miyaki. He's the one that, you know, everybody's, Steve Jobs is infamous for wearing like the same thing every day. It's like that black, long-sleeved shirt he would wear, that he had like hundreds in his closet. Those came from Izzy Miyaki. He knew, he was introduced to Izzy Miyaki by Akio Morita. Okay, so back to the book. This is where Akio meets his future co-founder. His name is Musuro Ibuka. I'm probably, just, I mean, you know, I can barely pronounce words in English.

• 19:11David Senra?

  So, there's no way I'm pronouncing any of these words correctly, but, you know, just bear with me. So, Ibuka is a genius, and he's also 13 years older than, than, than Akio. So, I think, Akio definitely benefited from...

• 19:27David Senra?

  Meeting him. And Akio had already, or excuse me, not Akio. Masuro, Masuro had already founded his own company. And so let me tell you a little bit about this. The company that Ibuka ran was called Japan. The translation is Japan Measuring Instrument Company. It employed 1,500 people making small mechanical elements that controlled the frequency of radar devices. These devices had to oscillate at exactly 1,000 cycles per second. And Ibuka had the ingenious idea of hiring music students who had a fine sense of pitch to check the accuracy of the elements. So what he's making. I mention this as an example of the freshness and inventiveness of his mind, which so much impressed me and made me want to work with this man.

• 20:12David Senra?

  Ibuka didn't feel professionally satisfied out there in the countryside merely producing components in large quantities. So he wants, he's, he's working on something he's not passionate about. He wants to try to, he wants to develop electronics. And so that's where they're going to wind up teaming up. And so it says, "In this empty and bare old building set among the rubble and devastation, the burned out homes and shops of the once prosperous downtown area of Tokyo, Ibuka started the Tokyo Telecommunications Research Laboratories." This is what, that's the original name of Sony right there. Okay. So Ibuka is going to make some smart decisions here that I think lessons for all of us. One, he first, he starts working on what interests him. And two, at the very beginning, you know, they don't have a lot of money.

• 20:56David Senra?

  He finds a way to add features to a product that a lot of people already have instead of trying to invent something new. Okay. Ibuka's resources were all in his own pocket and in his own head. And he had an intriguing idea. Since, since short wave receivers were strictly prohibited during the war, a keen interest had developed in listening to short wave broadcasts. That's how they communicated messages to the Japanese population during war. Now that it was no longer illegal, perhaps the demand could be met. Because the radio was very important for hearing air raid warnings and getting other information during the war, people had taken very good care of their radios. So they had this piece of equipment. A lot of people in Japan had it and they were, they were functioning correctly. But they could only receive medium wave band,

• 21:40David Senra?

  which is regular AM broadcasts. So Ibuka designed a short wave adapter. This could be attached to any standard radio very simply and would convert the unit to short wave reception. The employees had to scrounge through the black market to get the, to get the, the, the equipment they needed. And the, uh, but, but once it was finished, the product became very popular. So Ibuka is doing all of this before, before he, he's gonna start, uh, like being partners with Akio. So Akio sees this, all this is happening, he senses an opportunity and he jumps on it, which is another good idea by him. So he says, "I wrote to him immediately and said I would like to, to visit him in Tokyo. I said I wanted to help him in this new business and would support him in any way I could.

• 22:25David Senra?

  He wrote back immediately inviting me to come see him and the new company. But he told me that things were pretty tight and that he was, and that he was paying his people out of his own pocket and he was looking for funding." Because I knew Ibuka, they had met previously when, uh, when, when Akio was studying physics. "Because I knew Ibuka was having trouble meeting his payroll, I got the idea that I could work with this new company part-time and teach part-time." So at a time Akio, uh, before he found Sony, he's teaching physics at the university. And, um, what happens is the government decides, "Hey, any, any teachers that had, that served in the military in the war," which, um, since Akio was in the Navy, that, that accounts for him, they, they called it like purging them.

• 23:08David Senra?

  Um, and so they fired all of them because they didn't want them, like the people that fetishized war to teach the new generation. They just went through like a devastate, the most devastating time in Japanese history. So they didn't want any kind of repeats of that. Now Akio gets a lucky break because he doesn't have to teach anymore, but he's still on the government payroll by mistake. Um, so he says, "Months went by without any notice that I had been officially purged from my university job. And every month the school would call me, uh, to tell me to, or would call to tell me to come and pick up my pay because for some reason I remained on the payroll." So he's able to, to get money from the government of Japan, his normal paycheck, but work at Sony full-time. This went on until October of 1946, when the Ministry of Education finally got around to issuing my personal purge notice.

• 23:51David Senra?

  I welcomed the subsidy while it lasted, because our new company was not setting any records for financial success in those days. Yeah, that's an understatement. So during the early days of Sony, they had no money. Their workspace was in an old bombed-out building, and the only employees was like a gang of misfits. And so here's an example of that. It says, "When some of my relatives came to see me, they were so shocked by the shabby conditions that they thought I had become an anarchist. They could not understand how, if I was not a radical, I could choose to work in a place like that." So at this point, Ibuka and Akio are partners now, and there's a really smart move. They knew from the very beginning that they eventually had to build a differentiated product. They just had to get there in steps, right? Because they didn't have a lot of money.

• 24:34David Senra?

  So it said, "Ibuka and I had often spoken of the concept of our new company as an innovator, a clever company that could make new, high-technology products in ingenious ways. Merely building radios was not our idea of the way to fulfill these ideals." Okay, so they think they found the differentiated product that they want to make, right? So they want to make a wire recorder. We don't even know what that was. But the parts makers wouldn't sell to them. So there's a bunch of lessons in here. One, this was a blessing in disguise, a reminder that big things start small, and that you should always do your best work, even if you're working in terrible conditions. All right, so I'm going to go right into the story.

• 25:15David Senra?

  It says, "But as it sometimes happens, the refusal turned out to be a blessing in disguise. We weren't able to make a wire recorder, which was a disappointment, but the bright side was, there was a recorder in our future, a much better product, the tape recorder, although we didn't know it at the time." Okay, so it says, "The occupation forces," that's essentially US Army forces, "had taken over the Japan Broadcasting Company." That's kind of like Japan's equivalent of like the BBC. "And they needed a new technical, they needed new technical equipment such as mixing units and other studio and broadcasting equipment." Okay, so they put this call up, saying, "Hey, we need, can anybody make this for us?"

• 25:54David Senra?

  So Ibuka was familiar with like mixing units and the technical equipment they needed, so he submits a bid. So then an army general... Comes to the early Sony, again, it's the same company, but it's not called Sony at this time. So he comes to the office to discuss the bid with them, and this is hilarious. He says, "When the general saw our shop, he was taken aback by how primitive it was, and he shook his head. He was so concerned," now, this is the general, "he was so concerned about our terrible building that he recommended we keep buckets of sand and water around the place in case of fire." Now, think about that. Sony is this gigantic company today, one of the most successful companies of all time.

• 26:38David Senra?

  And it started out in a bombed-out building that an American general's like, "Listen, this thing is gonna either collapse or catch fire. You need to put sand and water around the place." So they get the job. He says, "When the equipment was delivered, everyone marveled at its quality." So that's another lesson. Like, you can do great work, you don't need all the things you think you need. Think, like, they're able to build quality equipment in even such terrible conditions. "Everyone marveled at its quality, especially the skeptical officer, who was still puzzled by the fact that a small, new company in a makeshift factory could produce such a high technology product. Because the quality was so high, we were able to obtain further jobs."

• 27:19David Senra?

  There would be no Sony today if they didn't do the absolute best job they could, the absolute best work they could on a tiny job. So one thing led to another, then they just keep, they just, the entire story of Sony, like most companies, like, you start small, okay, and then take another step, take another step, and then, you know, over forty, thirty, thirty or forty, fifty years, whatever it is, like, you, you, the results that you can get, and what you can accomplish in one lifetime, is unpredictable, unfathomable to us. So it says, "We were able to obtain further jobs. Because of the breakthrough in trust we made on that first job by demonstrating our quality." So not only did they get the new job, but now, Ibuka has to constantly go back and forth from the early Sony factory, if you wanna call it, to where the, like, the headquarters,

• 28:02David Senra?

  where the American operation, where the American occupation, rather, not operation, occupation forces are, okay? And that's extremely important, too, because that's what's gonna lead them to producing their first differentiated product. So it says, "While Ibuka was delivering the mixing unit, he spotted an American-made tape recorder, the first tape recorder he ever laid eyes on." So they make a tape recorder, I'm gonna fast forward, because the tape recorder flops. And they're gonna all, remember that quote from Warren Buffett where he talks about like every time like there's a like a bubble pops, investors learn very old lessons, like lessons that you should have known because if you'd studied history, you see that happens over and over again.

• 28:44David Senra?

  This, what's happening, this is what, the 19, late 1940s, maybe early 1950s. What they're about to learn now, companies today are learning. And companies in the future will learn, how many people build a product? And then just expect people to just knock down their door? And sales to just come out of nowhere, and that never happens, alright? So same thing happens here. And they're gonna learn a lot, they learn an important lesson. That you must know and then find your target customer. And so they, they launch a product that has no market. They have to go out and create their market, and they do it very intelligently. Says, "Neither Ibuka nor I had any real training in the consumer end of things, or any real experience in making consumer products or selling them. I had never made anything for sale to anyone. I had no experience in merchandising or salesmanship.

• 29:29David Senra?

  It never occurred to Ibuka or me that there was any need for this." It's a hell of a statement, right? "Ibuka believed strongly that all we needed to do was make good products and the orders would come. So did I. We both had a lesson to learn. We were engineers, and we had a big dream of success. We thought that in making a unique product, we would surely make a fortune. I then realized that having unique technology and being able to make unique products are not enough to keep a business going. You have to sell the products. And to do that, you have to show the potential buyer the real value of what you're selling. I was struck with the realization that I was going to have to be the merchandiser of our small, small company."

• 30:14David Senra?

  Because even though they're both engineers, Ibuka was like the more, he was better at it, he's more qualified. And so this is the role Akio adopts like his whole life. So in that sense, you could think of the very early days of Apple. Ibuka is kinda like Wozniak and Akio is like Jobs in that sense. It's not a perfect analogy, but it's, it's close enough. So he says, "So at this point, I should give you some background, they launched it. No one's buying it, it's really expensive, it's, it's big. And so he's like, what the hell, what are we doing? So he says, "A fortunate chance incident helped me see the light. I was still trying to figure out what we were doing wrong in trying but failing to sell our tape recorders. When I happened to stroll by an antique shop..." I noticed a customer buying an old vase.

• 30:56David Senra?

  Without hesitation, he took out his wallet and handed over a large number of bills to the antiques dealer. The price was higher than we were asking for our tape recorder. Why, I wondered, would someone pay so much money for an old object that had no practical value, while a new and important device such as our tape recorder could attract no customers? To me, there was no contest. The tape recorder was the better bargain. But I realized that the vase had perceived value to that collector of antiques, and he had his own valid reasons for investing that much money in such an object. At that moment, I knew that I had to sell our recorder. I knew that to sell our recorder, we would have to identify the people that would like

• 31:41David Senra?

  that would be likely to recognize the value in our product. So before this, they're just trying to sell the tape recorder to like the general consumers. Not and in hindsight, you can see where their mistake was. They they they priced the tape recorder. It was I forgot the exact conversion, but let's say it's like multiple months worth of what the average worker's salary was. Right? So very like it's just no one's gonna spend, let's say it takes half a year of your of your of your employment or your your work to buy a tape recorder. That's absurd. So they do something really smart here, and they realized where like they go to businesses or specifically, actually, it's the government. So it says, "There was an acute shortage of stenographers because so many people so

• 32:24David Senra?

  many people had been pushed out of school and into war work. Until that shortage could be corrected, the courts of Japan were trying to cope with a small, overworked corps of court stenographers." So they're like, "Okay, well, instead of you just typing out, why don't you just tape everything?" And so he says, "We were able to demonstrate our machine for the Japan Supreme Court, and we sold 20 machines almost instantly." The value of the product they're making is like solving a very real problem they had. And so, of course, they're gonna buy right away. "Those people had no difficulty realizing how they could put our device to practical use. They saw the value in the tape recorder immediately, and to them, it was no toy."

• 33:08David Senra?

  So they used the profits from the tape recorder to branch out into other different product ideas. And so one idea they had was, they had an idea for what they call a pocket radio. Okay, and it says, "We could make a very small radio powered by batteries. Miniaturization and compactness have always appealed to the Japanese. Our boxes have been made to nest. Our fans fold. Our art rolls into neat scrolls. And so we set our goal of a radio small enough to fit into a shirt pocket. Not just portable, I said, but pocketable." So think about how crazy this is. Fifty years later, Jobs is gonna, Steve Jobs is gonna introduce the iPod and he's gonna say it's 10,000 songs that fit in your pocket.

• 33:51David Senra?

  We see the, the early predecessor to the iPod coming from, from Akio and Sony. So now they do something really smart too. And you could also see like people like Jobs or Musk doing something like this. So what do you do when your pocket-sized radio doesn't fit into a pocket? Akio's idea, you make the pocket bigger. So he says, "It was a bit bigger than a standard's men's shirt pocket, and that gave us a problem. We liked the idea of, of a salesman being able to demonstrate how simple it would be to drop it into a shirt pocket. So we came up with a simple solution. We had some shirts made for our salesmen with a slightly larger than normal pockets, just big enough to slip the radio into." Now, they're not the only ones that came up with this idea.

• 34:35David Senra?

  And this, this next paragraph is a reminder that products don't compete. Companies do. So it says, "An American company called Regency put out a pocket-sized radio a few months before ours. But the company gave up without putting much effort into marketing it. As the first in the field, they might have capitalized on their position and created a tremendous market for their product, as we did. But they apparently judged mistakenly that there was no future in this business and gave it up." So you could also say Sony, what's Sony's most famous product? The Sony Walkman. They sold hundreds of, hundreds of millions. And if you're too young and if you're listening to this, uh, it was essentially like you had a cassette player.

• 35:18David Senra?

  I don't even know if you know what that is, or later it's called a disman, a CD player. It was like, um, a non-digital iPod. Think about it like that. And they sold 400 million units. It was one of the most successful consumer products of all time, and it happened before the iPod. The genius in what Steve Jobs did was make it fully integrated. In fact, um, he was inspired by Sony at the beginning of his career, but then he learned from mistakes of Sony in the, in the nineties. Uh, there's tons of examples of that in like, uh, I'd read Steve Jobs, the book by Walter Isaacson, where it goes into great detail, uh, about this time where like, uh, how Jobs was able, because Sony was competing with Apple at the time to be, to be, this is pre iTunes. Um, and you know, Sony had all the advantages.

• 36:00David Senra?

  If you would have been asked to guess who would be the first person to, first company to release like a, you know, digital Walkman with a way to buy songs and everything else, you would have thought Sony. Um, and it was actually, Apple was, uh, the one that was obviously succeeding that. And you see that, you know, this plays out over and over again, uh, in the case in what we're referencing in the book. It's like, okay, well, you know, we weren't the first to the market. You had all this other company that's, that could have had a pocket radio, and yet they made the mistake. So again, that's just an, uh, that's gonna happen. It happened 50 years ago. It happened 20 years ago. It's gonna happen 200 years ago because the nature of, of humans and the nature of companies just doesn't change. And so that's why it's so valuable to study the principles in, in the history of entrepreneurship. We're getting to the why, which I think is extremely important.

• 36:45David Senra?

  Like you have to know why you're doing what you're doing. And so this is Akio and Sony's why. They want to change the image of Japanese products as poor quality. And so he says like, and give you an idea about this, like in the early days, this reputation was so well-known that Sony printed made in Japan as small as possible. And in some cases, they had to re, uh, they had to reprint or I don't know what the, the proper term is though. They made it so small that you couldn't read it, so customs wouldn't accept it. That's how embarrassed they were. Like, that's how bad Japanese products were known at this time. And now it's weird because, you know, in large part of Sony and other people, like, they're known to make high-quality products, so he's successful. So he says, "A Japanese company must export goods in order to survive.

• 37:28David Senra?

  With no natural resources except our people's energy, Japan had no alternative. As business prospered, it became obvious to me that if we did not set our sights on marketing abroad, we would not grow to be the kind of company of Buca and I envisioned. We wanted to change the image of Japanese goods as poor in quality. And we reasoned, if you're gonna sell high-quality, expensive product, you need an affluent market. And that means a rich, sophisticated country."

• 38:00David Senra?

  Alright, so now we get some ideas about how to run business from him. He says, he talks about marketing. You should think about marketing as just as communicating. So he says, "Marketing is really a form of communication. In the traditional Japanese system for distributing consumer products, the manufacturers are kept at an arm's length from the consumer. Communication is all but impossible." So, that's a big problem for a company that's creating, they're creating companies or products that have no precedent. So he needs to communicate directly to them. This is also Jobsian. He says, "We realized that from the beginning, that it could not, that it could not serve the needs of our company and its new advanced technology products." The traditional way of doing things to Japan, so they have to come up with their own way, right? "Third or fourth parties simply could not have the same interest in our enthusiasm for our products and our ideas that we had.

• 38:45David Senra?

  We had to educate our customers to the uses of our products. To do so, we had to set up our own outlets and establish our own way of getting goods into the markets." And we're gonna also see his other ideas. He didn't believe, he didn't believe in market research. He didn't think the public, he believed the public doesn't actually know what is possible, and that we do, meaning Sony. Then he talks about the idea of the Walkman. And I just referenced that they sold over 400 million units sold. Let me, and then another note I left myself, it says, "This was very much like Steve Jobs. "In the beginning, when our track record for success was not established, our competitors would take a very cautious wait-and-see attitude while we marketed and developed a new product." In the early days, we would often have the market to ourselves for a year or more

• 39:30David Senra?

  before other companies would be convinced that the product could be a success. So if you're able to arrive and use your own reasoning and trust your own judgment, like you're gonna have a huge advantage over people are just gonna wait and copy what other companies do, right? And we made a lot of money having the market to ourselves. This gave them a huge advantage at the very beginning of the company. They're just making more profits and then they can reinvest those profits to make more products and you have this wonderful virtuous cycle. We have to keep a premium on innovation. For many years now, we have put well over 6% of sales into R&D, and some years as much as 10%. Our plan is to lead the public with new products rather than ask them what kind of products they want. That type of thinking is found all throughout history.

• 40:15David Senra?

  That's Akio saying it. You could easily say Henry Ford would say the same sentence, Steve Jobs would say the same sentence. The public does not know what is possible, but we do. So instead of doing a lot of market research, we refine our thinking on a product and its use and try to create a market for it by educating and communicating with the public. So that's like just a basic business principle that worked in his days and will work today and will work in the future. As an example, I can cite The Walkman. The idea took shape when Abuka came into my office one day with one of our portable stereo tape recorders and a pair of our headphones. He looked unhappy and complained about the weight of the system.

• 40:57David Senra?

  I asked him what was on his mind and he explained, "I like to listen to music, but I don't want to disturb others." So you need a private way to do that, right? "I can't sit next to my stereo all day." So now you need it to be private, but you need it to be portable. "This is my solution. I take the music with me, but it's too heavy."

• 41:17David Senra?

  So he said, "Ibuka's complaint set me into motion. I ordered our engineers to take one of our reliable small cassette tape recorders, strip out the recording circuit in the speaker, and replace them with a stereo amplifier. I outlined with other detail, the other details I wanted, which included very lightweight headphones." Now, so he's got an idea from a product. Sees the, firstly sees the problem. Hey, I'm sure Ibuka's not the only person that feels that way, right? Humans, all humans, almost every human loves to listen to music. And he's like, "But we, it's too big. Can we make it smaller?" So he says, "Everyone gave me a hard time. It seemed as though nobody liked the idea. It sounds like a good idea, but will people buy it if it doesn't have any recording capability?"

• 42:00David Senra?

  So he's talking about the pushback he's getting from internally from the company. "I don't think so. People are saying, hey, they're not, it's a good idea, but since you can't record on it, no one's gonna buy it." And then Akio just uses his own basic judgment. He said, this is what he says to, back to his employees. He goes, "Millions of people have bought car stereos without recording capability, and I think millions will buy this machine." And this is one of the best sentences in the book. "The accountants protested, but I persisted." So let me read the back cover, because he talks about the Walkman since it's so important, and this is his quote on it. He says, "Nobody openly laughed at me, but everybody gave me a hard time. It seemed as though nobody liked the idea. I do not believe that any amount of market research

• 42:42David Senra?

  could have told us that the Sony Walkman would be successful." And again, 400 million units moved. That's amazing. So the Walkman comes out, and he says, "I thought we had produced a terrific item, and I was full of enthusiasm for it. But our marketing people were unenthusiastic." So he still has to fight this battle at the engineering level, now at the marketing and sales level, and at the accounting level. "They said it wouldn't sell, and it embarrassed, and it embarrassed me to be so excited about a product most others thought would be a dud." But this is where I always talk about like, I think we have a deficit. Like, most people say, "Oh, be humble, like, don't, you know..." You know, you want to err on the side of humbleness over like arrogance or maybe self-confidence.

• 43:22David Senra?

  I say it's the other, like we have a, we're sitting at a 40-year low for, for new business creation in the United States. That is a massive, massive problem for our society if that continues. And we have a generation of smart kids that for some reason don't believe in their ability to start a company. And I think one way to fix that is like, first you see, you study stories like this where you see, you know, people with no education, no resources, doesn't matter, they build companies, you know, over and over again. I think that this podcast demonstrates that over and over and over again. And yet, so what I would say is like, no, we need to teach them be confident. You can do whatever you want to do. Err on the side of confidence and cockiness, because at least even if you fail, at least you tried. That's better than having, being full of self-doubt and sitting on your ass and doing nothing. Like what, what is that going to solve? That's ridiculous.

• 44:05David Senra?

  So here's, and again, Akio was cocky. People, that's what people said, he was too confident, too cocky. Well, this is an example where that belief, that, that, that profound belief in himself led to overcome all the objections into one of the greatest consumer products ever created. He needed that, that was a tool. They said it wouldn't sell and it embarrassed me to be so excited about a product that most others thought would be dud. But I was so confident that the product was viable, that I said it would take personal responsibility for the project. Check this out. I never had reason to regret it. The idea took hold and from the very beginning, the Walkman was a runaway success. So I'm pretty sure he said, I don't know why I didn't include that in my notes, but I'm pretty sure he said

• 44:49David Senra?

  that if the Walkman failed, he would resign from Sony. So now, like, everybody's telling him, no, this is a bad idea, this is a bad idea, this is a bad idea. You know, his natural inclination is to be overconfident, right? And that he said, I will risk my career. I will resign. That's the, like, that's what I would see. And I'm not saying like we, everybody has to build a company that says a Sony, but we do need, we can't have new business creation at a 40-year low. That is a huge problem. We've got to do anything in our power to, to, to, to explain to new generations, like the, the, we need new small businesses. We do. That's who employs most of the people in this country. It's, it's really important. And I think like, for one reason, I talked to a lot of people and a lot of people that think they, they want to start companies. It's like, I don't think I can do it.

• 45:34David Senra?

  And I don't know, like, the solution to that problem. Like, how do you convince somebody to have faith in themselves? I don't know the answer. Other than being exposed to examples of people that did not have all the benefits in life and still were able to overcome that and actually build a company and do what they wanted in life. Okay, so Sony walked into success. I'm gonna skip over that because another thing happens to him. And again, this is a... There's two things I took away from this part, what's about to happen. First, if you know why you're doing what... If you actually know why you're doing what you're doing, then a lot of the hard decisions that you're inevitably going to have to make become a lot easier, right? And so this is gonna be an example of that. And two, this is another example of Akio's huge belief and confidence in his judgment.

• 46:17David Senra?

  So he says, "I turned down what looked like a chance to make big profits. The buyers thought I was crazy, but even though our company was young and I was inexperienced, time had shown that I made the right decision." So what does that mean? He meets with this company I've never even heard of, it's called Bulova. So they liked the radios that Sony's making, but they want him to private-label them. And so he's like, "This is ridiculous." So he says, "They liked the radio very much, and their purchasing officer said very casually, 'We'll take 100,000 units.'" "100,000 units!" exclamation point. "I was stunned. It was an incredible order, worth several times the total capital of our company. He told me that there was one condition. We would have to put the Bulova name on their radios. That stopped me.

• 46:59David Senra?

  I had vowed that we would not be an original equipment maker for other companies. We wanted to make a name for our company on the strength of our own products. We would not produce radios under another name. When I would not budge, he got short with me." And so this is... This guy's being, you know, kinda like a jerk to him. He says, "Our company name is a famous brand name that has taken over 50 years to establish," he said. "Nobody has ever even heard of your brand name. Why not take advantage of ours?" Now, this is Akio. "50 years ago, I said, 'Your brand name must have been just as unknown as our name is today. I am here with a new product, and I'm now taking the first step for the next 50 years of my company.

• 47:43David Senra?

  50 years from now, I promise you that our name will be just as famous as your company name is today." Okay, so I'm gonna fast forward in the book. He's got a bunch of other just explicit ideas that he feels is beneficial to building, to work and to life. He's living in New York City. He founded the Sony American subsidiary. Now he's gotta go back to Japan because his dad dies. And it's his responsibility to put like the family's affairs in order. And so at this time, he's reflecting on the end of life and then about what can he learn from his ancestors? And then what can he teach the lessons to his kids? So, one thing he wants to teach his lessons to his kids is that they want to maintain physical and mental discipline. Akio is an extreme person.

• 48:28David Senra?

  He's a misfit. He's an obsessive. He talks about how, he talks a lot about the difference between Japanese culture and American culture. And he's like, he says the American culture is like, the main ideal is like a life of leisure. Like, he's like, you go to America and you see like advertisements for, to take like trips to exotic lands and just sit on your button beach and do nothing. And he's like, that's not, there's no Japanese equivalent of that. Like, we find honor in work, in work. And so you're gonna see a lot of like his extremeness in some of the advice that he has for his kids and other people. So he says, "The death in the family makes you examine your life and the future of the family. Where my children were concerned, I felt very strongly that the new post-war education system in Japan lacked discipline.

• 49:09David Senra?

  PTA groups had watered down the quality of education and study for examinations was nothing but rote application. When I attended middle school, discipline was very strict, and this included our physical as well as a mental training. Our classrooms were very cold in winter. We didn't have a heater, and we were not allowed to wear extra clothes. In the Navy, I had hard training in boot camp, but every morning we had to run a long way before breakfast. In those days, I did not think of myself as a physically strong person, and yet, under such strict training, I found I was not so weak after all." So essentially, he's just learning about the adaptability of human beings, right? "And the knowledge of my own ability gave me confidence in myself that I did not have before." It is the same with mental discipline.

• 49:53David Senra?

  Unless you are forced to use your mind, you become mentally lazy and you will never fulfill your potential. And I feel this is happening a lot. I think the advent of social media, obviously, is a problem with that. There's way less people listening to educational podcasts, audiobooks, reading books. We're scrolling through feeds, reading a bunch of essentially junk food for the mind. And I think what Akio is saying there is like, you need, just like you get up every morning, hopefully, and work out and discipline your body, like, what are you doing for your mental discipline? They're related. You have to do both, is what Akio is telling us. It's like, sharpen your mind. Don't just, just like you wouldn't sit at home all day and eat junk food. The good thing about that, I like the feedback loop for physical, right?

• 50:35David Senra?

  Where I feel it's not as apparent in mental discipline. So like, if you sat at home, you didn't exercise, you didn't take care of yourself, you ate a bunch of crap, you lived a sedentary lifestyle, you didn't push yourself, essentially you embraced comfort, you would see it. Because your body is like a physical manifestation of your will, right? At least, that's what I believe. But there's no mental equivalent. You know what the mental equivalent is? When you go to dinner, you're interacting with somebody that doesn't read, doesn't learn, basically, you got out of college or high school and just stopped learning, and you realize, oh, this is a boring person. This is a person that has nothing going on. They just, they nibble on mental junk food all day. And I love Josh Wolf's, he's an investor at Lux Capital, he learned this from somebody else, I can't remember who he credits, but he has this three-word aphorism that I think about all the time.

• 51:19David Senra?

  And it's dual, has a dual meaning. Avoid boring people. Now, the first meaning is, you avoid people that bore the hell out of you, for good reason. Because your time is here, is limited, and there's a lot to learn and to experience. But the other meaning is maybe more important. That you should be doing the work and collecting the information and being an interested person, so you avoid boring other people, too. I think what Akio is saying there is 100% correct. You need both physical and mental discipline. And you want to avoid areas, like what he's saying, Japanese school system got extremely weak. And so he sends his kids, like, I think he sends one to Switzerland to a boarding school, one to boarding school in London, they go to schools in New York City. He's not just telling you this, he's acting on it, too. He's got another unique idea, moving on.

• 52:04David Senra?

  This is something I've never even heard of before. Hire a paid critic. This is genius, man. So he says, "Noria Olga, who had been a vocal arts student at the Tokyo University of Arts when he first started our first audio tape recorder back in 1950." Okay? So he says, "I had had my eyes on him for all those years because of his bold criticism of our first machine. He was a great champion of the tape recorder, but he was severe with us because he didn't think our early machines were good enough." Now, I'm gonna finish this paragraph, but I'm gonna get to the punchline now because I think it'll help you understand. This paid critic he hires eventually becomes the president of Sony. Alright, so he was severe with us

• 52:49David Senra?

  because he didn't think our early machine was good enough. So he's got somebody else, he's got an external person holding himself to even higher level of quality than he did. So he says, "It had too much wow and flutter," he said. "He was right, of course. Our first machine was rather primitive. We invited him to be a paid critic, even when he was still in school. His ideas were very challenging. He said then, 'A ballet dancer needs a mirror to perfect her style, her technique. A singer needs the same, an aural... I don't know how to pronounce the word, A-U-R-A-L, mirror.' Olga is now the president of Sony." Okay, so now we're gonna see some more glimpses into his own personal philosophy. He talks a lot about the benefits of spending time with young people,

• 53:33David Senra?

  the benefits of vigorous exercise, and the benefits of maintaining self-confidence. So he says, "I like to play sports with young people because I get ideas from them and they give me a fresh slant on almost everything. I think it is good for my spirit, too, to be with young people who are enthusiastic. Since I've been playing tennis, I notice my reflexes are improving and this pleases me because when you start to age, the reflexes and reactions tend to slow down. I noticed when I began to ski that my balance wasn't too good, but it has improved also. Every executive should be aware of the need for this kind of vigorous exercise, not only for the heart, but also for the mind and the sense of confidence it gives you. It is important to maintain confidence in yourself."

• 54:15David Senra?

  Here's some example of advice that Akio gives to young people. Essentially, the main point is, don't work in a job that you hate, you're gonna regret it. He says, "Nobody can live twice. And the next 20 or 30 years is the brightest period of your life. You only get it once. When you leave the company 30 years from now, or when your life is finished, I do not want you to regret that you spent all those years here. That would be a tragedy. I cannot stress the point too much, that this is your responsibility to yourself. So I say to you, the most important thing in the next few months is for you to decide whether you will be happy or unhappy here." He comes up with a unique way to identify bad managers. I like this too.

• 55:00David Senra?

  So he's talking to some young people working at Sony. He says, "And this is what a young person tells him, "Before I joined the company, I thought this was a fantastic company. It is the only place I wanted to work. But I work for this section chief, Mr. so-and-so, and in my lowly capacity, I work for this man, not for Sony. And everything I do or suggest must go through this guy. I am very disappointed that this stupid section chief is Sony as far as my career is concerned." Now, we go to what Akio is learning from this conversation. "This was a sobering thought for me. I realized there might be many employees in our company with problems like this. So I started a weekly company newspaper, where we could advertise job openings. This made it possible for employees to try for other jobs confidentially.

• 55:45David Senra?

  We have had cases where we discovered a manager was inadequate because so many people working under him asked to be transferred. We learn a lot by listening to our employees. Wisdom is not the exclusive possession of management." So, this is another advice that he asks for us. "Don't sacrifice the benefits of individuality for the sake of consensus. When most Japanese companies talk about cooperation or consensus, it usually means the elimination of individuality. Many Japanese companies like to use the word cooperation and consensus because they dislike individualistic employees. I say that a manager who talks too much about cooperation is one who is saying he doesn't

• 56:26David Senra?

  have the ability to utilize excellent individuals and their ideas, and put their ideas in harmony. If my company is successful, it is largely because our managers do have this ability."

• 56:40David Senra?

  So this is more on his management philosophy. I do not like to have my managers think they are a special breed of people elected by God to lead stupid people to do miraculous things. The world of business has some peculiarities. The remarkable thing about management is that a manager can go on for years making a mistake that nobody is aware of, which means that management can be kind of a con job. That is because management, despite the work of Harvard Business School and others, and the increasing numbers of holders of advanced degrees in business administration, is an elusive thing that cannot always be judged by next quarter's bottom line. Managers can look good on the bottom line, but at the same time may be destroying the company by failing to invest in the future.

• 57:23David Senra?

  So this is one of his main criticisms about the difference between Japanese management and American management. His American management does not invest enough in the long term, de-optimized for short-term profits. So this is an example of what he's talking about here, that you can actually be achieving good short-term goals at the same time destroying the long-term value of the company. He says, "It does not start at the bottom line of the balance sheet, which can be black one day and red the next, no matter what you do. I told my managers recently, what you are showing to your employees is not that you are an artist who performs by himself on the high wire, but you're showing them how you are attempting to attract a large number of people to follow you willingly and with the enthusiasm to contribute to the success of the company.

• 58:05David Senra?

  If you can do that, the bottom line will take care of itself." And so we're going to see this actually play out. This is a story about the difference in Japanese and American management, and this has to do with Sony America. He says, "My Sony American president was reluctant to spend the money." So they're launching a new product, and very much like Steve Jobs, Akio was huge about product launches. He wanted to educate, he wanted to make sure there was investment, that people knew, like it was an event, right? And he wants to do it at the very beginning, so it pops. So he says, "My Sony American president was reluctant to spend the money. He said if we spent a lot on this promotion, and if he could not bring in enough sales, we would lose money. I told him over and over again, you must also consider the return that comes in five or 10 years, not just the immediate return."

• 58:51David Senra?

  So he says, "That night, I went to bed troubled. I couldn't sleep, tossing and turning, until I could stand it no more. In the middle of the night, I grabbed the phone and called Harvey." That's his manager, the president or manager. "He was in a meeting in New York. I got him out and yelled at him. If you're not going to spend a million or $2 million..." Oh, this is a Betamax campaign. "If you're not going to spend $1 million or $2 million on the Betamax campaign in the next two months, I will fire you." I had never said anything like that. And he had never heard me sounding like that. It made an impression, and I felt better. He spent the money, but I discovered later what they actually did. What they actually did was to shift the money from one part of the business so our total advertising expenditure remained the same. So he didn't actually do what he wanted to do.

• 59:36David Senra?

  "The trouble with American management was that profit was the main goal." So now Akio's going to lay out explicitly how he looks at this stuff. He says, "My argument again and again was that by saving money instead of investing it in the business, you might gain profit on a short-term basis, but in actual fact, you'd be cashing in the assets that had been built up in the past." So I like this idea. The way Akio would educate customers about a new product, it was actually inspired by this Japanese tradition of namawashi. So let me read this part to you. "One must prepare the groundwork among the customers before you can expect success in the marketplace. It is a time-honored Japanese gardening technique to prepare a tree for transplanting

• 1:00:18David Senra?

  by slowly and carefully binding the roots over a period of time, bit by bit, to prepare the tree for the shock of the changes it's about to experience. This process takes time and patience, but it rewards you." If it is done properly with a healthy transplant... If it is done properly... Excuse me. It rewards you if it is done properly with a healthy, transplanted tree. Advertising and promotion for a brand-new, innovative product is just as important." And the one thing that both these approaches to, not only moving trees and gardening... But to preparing customers for new products, the one thing they both have in common is that it takes time. And that was something Akio talked about over and over again. Optimize

• 1:01:02David Senra?

  for the long term. Great things are going to take a long time. You just, you can't, you know, this is what Warren Buffett was telling us. You can't make, what was it? You can't make a baby in one month by getting nine women pregnant. He's like, some things just take time. More difference between, what he considers difference between US and Japanese. His US partner comes over and looks at Sony's offices at the time, and he was just shocked. It was like very basic. They had everything they needed, but it wasn't like ostentatious or anything like that. So it says, this is the Japanese talking to the US. "If Japanese clients come into the office of a new and struggling company and see plush carpet and private offices and too much comfort, they become suspicious that this company is not serious, that it is devoting too much thought and company resources to management's comfort

• 1:01:46David Senra?

  and perhaps not enough to the product or the potential customers." So there's an example of this when I talked about, on the Ford and Ferrari series I was doing. When you look at the difference between like the early days of Ford when Henry Ford was in charge compared to when his grandson Henry Ford the second, Henry Ford the second would eat in a private dining room with white glove staff. They'd like serve them hamburgers as if it was like their own like high-end restaurant. And I think there's a, there's, it's almost like a canary in the coal mine. It's like when you see companies do this and never, and what happened to Ford after? Had a huge, like the Japanese and other like constraints in the market, like they gutted the American, like look at Detroit today

• 1:02:27David Senra?

  as compared in like the 1960s, 1970s. And I think when you see the, like what, what the company spends money on, it's, it's like actions express your priority. And so when you're, when you have, you know, white glove staff and a private dining room and all this other BS, this luxury, is that making, how does that benefit the customer? Is that making your product better? It's not. Why are you investing in such stupid things like this? What are you doing? Put that money into the product, put that money into the customer. But that's, you can't do both things at once. As soon as you start diverting resources away from what's best for the customer and what's better for management, those customers are gonna go elsewhere. Because another missionary, another misfit, another obsessive person is gonna do a better job

• 1:03:10David Senra?

  because you're not focused. I think this is exactly right. This is what Akio says about that. Exactly my sentiments. We want everybody to have the best facilities in which to work, but we do not believe in posh and impressive private offices. Generally, in the Japanese industry, the investment goes into those things that relate directly to the product. This is not rocket science. But there's something about human nature that we seek, like comfort is a false god. Like, we should not just be like trying to make our lives more comfortable. If we make, you never adapt and progress and learn in comfort. You just don't. And so I think like fetishizing that. And every time I see a super nice company offices, I'm like, oh, okay. Well, this, this business isn't gonna last that long.

• 1:03:56David Senra?

  It says, "Too often I have found in dealing with foreign companies that such superfluous things as the physical structure and office decor take up a lot more time and attention and money than they are worth." Again, this is not, I mean, he's telling us, you know, he's experiencing this half of a century ago, or whatever, maybe quarter of a century ago at this time where we're in the book. Warren Buffett just said the same thing. He's like, listen, we spend less than 1% of our operating profit on the headquarters, corporate headquarters. We see some companies that spend in excess. We, we look at the books, we analyze their numbers, and they're spending in excess 10%. 10% of the company's assets on headquarters. And he's like, me and Charlie, me and Charlie Munger have studied this. There's, and what we found is there's no correlation between

• 1:04:36David Senra?

  the percent of money you spend on your company on operations, like on headquarters and everything, to performance. That's a hell of an indictment. Meaning they're spending money for no increase in, in, in performance. And what happens when you, when a company or a person is not resourceful? Eventually, those resources are going to move to other people that are resourceful. Okay, so where we are in the story, Akio is visiting, he's invited to the USSR. And they're getting, they, they wanna work together. And so this part was fascinating because this is what Akio told the government in the USSR when it, when they wanted to work with Sony. And the punchline is, if you care about the product you're making, study the details. So he says, "The Soviets were eight to 10 years behind Japan and the West in their consumer electronic technology."

• 1:05:22David Senra?

  And so he takes a tour of the factory and they want to work together. And they're asking like what he thinks. And you know, this is, he's got a sharp tongue. He says, "In Japan, we used our top talent and our best brains and spent years seeking ways to increase the efficiency and the productivity of even such a simple thing as a screwdriver. We have racked our brains and made detailed studies and experiments to decide just what is the exact and precise temperature for a soldering iron in each particular application. You do not make any such effort here. There appears to be no need to do it because nobody seems to care." So needless to say, Sony and the USSR did not work together. Okay, I love this part.

• 1:06:07David Senra?

  So this, now we're in the chapter I told you about earlier, where he thinks about technology as a survival exercise. That's a very unique like way of thinking I don't think I've come across. And I think it's practically correct though. But this is going to be a longer part where I'm going to read to you. And essentially, the main idea here is being wasteful is the opposite of resourcefulness. And I always think like the best description of like what traits you need for entrepreneurship comes from Paul Graham. If you think about all the people that have studied entrepreneurship, very few probably have studied as much or to the degree that Paul Graham has, right? Meaning like multiple companies, not just your own. And that's his, that's his line, like, you know, the trait that he sees that successful

• 1:06:48David Senra?

  entrepreneurs must have is, and I say successful people in general, in all kinds of domains, is that they're relentlessly resourceful. And Akio obviously was, like you don't start Sony in a firebombed building without being resourceful, right? And so he talks a lot about this, like he, he has a lot of criticisms for the West. Actually, you know what, let me, before I read the section two, let me just tell you because I took some other notes that are in the book. So this is what, these are just some of the notes I took where he just keeps rattling off what he feels. Like, I like what he did, because Japan, like, at the beginning, he's like, he studied American industry to such a degree that eventually he knew it so well that he took what he thought were good ideas and then challenged the bad ones. And I think that's exactly, like, this

• 1:07:32David Senra?

  is what I want to do on the podcast. Like, I don't want to just idolize these people and just accept what they're saying without my own independent thought on it. And there's going to be areas where I disagree, or areas where I think I can improve on, and that's the whole thing. Like, you take all this collection of ideas, and you combine it together and imbibe it with your own personality, and then you have something unique, right? And I love how Akio did this, because he has huge respect for US industry. But he also is like, "You guys are making a lot of mistakes," here in his opinion. And, you know, there's no right, one right way, which is beautiful. So he says, "Japan creates more engineers and less lawyers." This is comparing and contrasting Japan and America. "Japan is more cooperative of government. They don't see them, they see them as allies, not adversaries. In Japan, the founder and CEO must resign if their shame brought to the company, and this is

• 1:08:15David Senra?

  not, this is much less important in Japan, or less worrisome, because the management of a company is more collective. So one person can leave, it's not the end. Japan optimizes for long-term investment over short-term profits. Japan is less hierarchical." He gives an example of this. "We air-condition our factories before our offices. America does the reverse." Most importantly, the most important thing for Japan, for a Japanese company, is continued employment and improvement of workers. America, it's the profit of shareholders. Japan believes any type of work is honorable. They won't look down on specific jobs. He says Americans are like, they turn their nose up. And they think like, you know, they

• 1:08:56David Senra?

  think all work, Japanese believes work is honorable in itself. He says Americans believe some type of work is honorable. And he says there's no mandatory retirement age, companies for, it's common for people in Japan to work into their 70s and 80s. Alright, so now let me go back to what he feels is like more of a Japanese tendency, which obviously, you know, other people and other cultures also have this, these traits, but he feels it's more common in Japan and less common in America at this time. Alright, so this is one of the most significant value concepts that we have cherished from ancient times. It's this concept called Jeez, Montanai. There's no way that's correct. So let me just describe what it is.

• 1:09:40David Senra?

  It is a key concept, one that may help explain a great deal about Japan, the Japanese people, and our industry. It is an expression that suggests that everything in the world is a gift from the Creator, and that we should be grateful for it and never waste anything. All things are provided as a sacred trust and actually are only loaned to us to make the very best use of. To waste something is considered a kind of sin. We have developed this concept that goes beyond mere frugality or conservation. The wasting of anything was considered shameful, virtually a crime. We have always had to practice conservation for survival. So now he's going to give you some background into why they've optimized so much for this one trait.

• 1:10:24David Senra?

  We learned once again the meaning of Montanai when the oil crisis came. But we also learned how to apply the principles that underline the expression, and today, with a much expanded economy, we use less crude oil, coal, and natural gas than we did in 1973 because we have learned how to be efficient. So he's saying this has been in our culture for a while. We had to do it because Japan lacks a lot of natural resources. We rely on outside countries to produce it for that. And so in times of struggle, we get really good and really efficient. And then when we don't have times of struggle, we still maintain that advantage, right? So that's the basic idea. We looked at all of our factory op-- and then this is him applying it to his company. "We looked at all of our factory operations and at our products and made design changes where we could save even small amounts of energy.

• 1:11:08David Senra?

  We also re-studied all forms of power consumption at Sony, in our factories and offices as well as in our products. In 1973, every maker of home appliances went to work to cut power consumption. And in fact, they competed with each other to see who could produce products using the least power. Low power consumption then became a major selling point and a new point of competition." I was disappointed to see how little was done in redesign of products in other countries like the US that had their own oil. In the US and Britain, such a crisis did not have the heavy impact on every single citizen that it did in Japan. So he continues, "When you were told from childhood, uh, when you were told from childhood

• 1:11:53David Senra?

  on that the metal object you hold in your hand comes from iron ore mined in countries far away, which is transported to Japan at great expense and is produced in furnaces that use gas and coal from other faraway places, such objects become very valuable." "Our general philosophy throughout industry in Japan is that everybody is an inspector and that the goods being made must be made correctly at every single stage of the operation. This is natural to us." I am reminded of the American expression, "There's plenty more where that came from." We have no such expression. He's got more advice that he mentions a number of times, extremely important to him.

• 1:12:35David Senra?

  He says, "My point is that it is unwise merely to do something different and then rest on your laurels. You have to do something to make a business out of a, to make a business out of new development, and that requires you keep updating the product and staying ahead of the markets. What you learn in school only becomes useful when you add something to it that is yours and you do it yourself." And then he's got more advice, he says again, "Never stop being resourceful." "Some people have said that the post-industrial society is here and some predict that we cannot expect technological innovation anymore." Isn't it funny? He's writing these words in 1986. This book was, or 1985. The book was published in 1986.

• 1:13:17David Senra?

  And the reason I think it's funny, because they say, people say the exact same thing today. "Oh, that's it, we're done." "Some people have said that this is the post-industrial society is here and some predict that we cannot expect technological innovation anymore and that we will have to live smaller lives with less satisfaction and luxury. I don't believe it. My prediction is that we can endure our lives with less energy, less of the old materials, fewer resources, more recycling, and have more of the essentials for a happy and productive life than ever." Step by step, year by year, we must all learn how to be more skillful and efficient in using our resources economically. I love, love, love that idea. And finally, um, we're getting, this is the last thing I want to talk to you about and

• 1:14:01David Senra?

  towards the very end of the book. The note I left myself as Akio is full of self-confidence and belief in himself, you should be too. I'm gonna, before I read his words, which I love, it like brought a smile to my face when I saw it, it's like, it's just another reminder that there is no like school of entrepreneurship, there's no, there's nobody that can stop you from making a product that makes other people's lives better, there's no school you have to go through, it's, it's open to everybody. And the reason I bring that up is because at one time it was closed to the Japanese. And just like what they did on a culture and country level where they learned from other people, they eventually like, learn the game and then realize, hey, we're just as good as it, at it as you are.

• 1:14:44David Senra?

  And you're gonna see his attitude here, you know, it's kinda cocky what he's about to say. But I feel like on a personal level, it's the same for all of us. The stories that we see over and over again is, you know, there's no, there's no license, there's no qualifications, no degree you need before you do this. And it is truly available to, to anybody that has an idea that makes somebody else's life better. So we're gonna see this on a, on a country level here. Americans and Europeans seem to think that their idea of how the world trading and monetary systems work and should continue to work should be universal, especially in the business world. And that since they believe, and since, and that since they believe they invented the game, the rules should never be amended.

• 1:15:26David Senra?

  Moreover, some American and European businessmen still look at the Japanese as newcomers, as novices who should still be paying tuition to the school. What they don't want to face is that, the fact that we are not only in the same school, but we've joined the faculty.

• 1:15:46David Senra?

  So I will leave the story there. If you want the full story, I recommend reading the book. It's fantastic. I really like the idea that this book is what 30 something years old and still has knowledge that is that is very valuable today. So if you want to leave, if you want to read the book and support the podcast at the same time, use the links that are in the show notes to buy the book. That helps out the podcast. You can either find those links in the show notes on your podcast player, or you can go to founderspodcast.com. Thank you very much. I will talk to you next week and I'll be back with another biography of an entrepreneur.