

Japan: To Fix Your Economy, Honor Your Failed Entrepreneurs - hackerbob
http://techcrunch.com/2010/10/17/japan-to-fix-your-economy-honor-your-failed-entrepreneurs/

======
wheels
I'm suspect of his statements about Japan, which I don't know much about,
given his statements on Germany, which I do, and are complete bollocks.

Germany, like most rich countries, has various incorporation forms, some which
limit liability and some which do not. The GmbH and AG (translated literally
"company with limited liability" and "stock company") are the standard startup
vehicles. Recently there was also a new simpler form created, the UG
("founders' company"), which is also limited liability and doesn't require the
initial stock value to any particular amount, unlike the GmbH (€25k+) and AG
(€50k+).

Furthermore, Germany is _very_ much a country of entrepreneurs. 66% of Germans
are employed at a company that has fewer than 250 employees [1]. Germany _does
not_ have nearly as much of the shoot-for-the-moon entrepreneurship that the
US is famous for, but to claim that founding companies is an oddity is nowhere
close to being factually correct.

In contrast, in the US, half of Americans work for companies of under _500_
people [2].

[1]
[http://de.wikipedia.org/wiki/Kleine_und_mittlere_Unternehmen...](http://de.wikipedia.org/wiki/Kleine_und_mittlere_Unternehmen#Deutschland)

[2]
[http://www.ilr.cornell.edu/international/news/upload/BERLIN%...](http://www.ilr.cornell.edu/international/news/upload/BERLIN%20SME%20report.pdf)

~~~
jessriedel
OK, but the distribution of company sizes is a only a good metric if you take
a dictionary definition of "entrepreneurship". Yes, you can call a country
which has a bunch of old-fashioned mom-and-pop book stores "entrepreneurial"
in the sense that the risk/reward of the businesses are concentrated (high
variance) because they are individually owned. But that's not the disruptive,
innovative entrepreneurship that interests HNers. I think there's a broad
range of HN-style entrepreneurship that shouldn't be characterized as shoot-
for-the-moon but would not at all be measured by distribution of company size.

~~~
stretchwithme
yeah, its disruption that creates wealth, not doing things the way they've
always been done. Its not the scale of an enterprise or even growth in the
number of employees.

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d2viant
Japan has a lot of smart businessmen, but their problem is actually that the
government has supported their businesses too much. Japan is in a horrible
economic situation precisely because they've honored failed entrepreneurs (or
at least their ventures) too much. They've honored them by preventing them
from failing completely when they should have -- they've backed them with
state funds and as a result have created zombie entities that have contributed
to the prolonged deflationary cycle that Japanese citizens continue to
experience.

It's a fine idea to honor peoples' attempts at entrepreneurship, but by
propping up failed ventures instead of making room for new innovators sends
the wrong message to their economy and is causing untold number of problems.

~~~
jessriedel
The article is about honoring failed entrepreneurs in the sense of valuing
people who start companies and fail (by correctly realizing that the success
of a start-up is almost completely uncorrelated with the technical skill of
it's employees and only weakly correlated with their future start-up success
rate). It doesn't have anything to do with government subsidies.

~~~
chipsy
Subsidies are highly relevant to startups.

When companies break up, the employees, assets, and consumers are freed to be
used again. If that doesn't happen, the company's operations continue to serve
the existing demand and tie up resources, but there are no productivity gains,
or possibly even diminishing ones. A zombie company is a company that should
be destroyed by disruptive innovators.

This is the situation in recorded music right now. The major labels have
consistently succeeded in winning strong copyright protection, so instead of
collapsing, they are now seeing their position eroded by the innovators at a
very, very slow rate; if it were not for the government's protection enabling
the "copyright mafia" scenario, this situation wouldn't have happened and we
would not have an unending trainwreck of music startups that try to reinvent
the distribution process, but end up getting destroyed with fees or legal
battles. The situation is so bad that it hinders even the companies that try
to eschew all major label music(e.g. Jamendo), because the existing trade
groups get in the way of non-traditional licensing schemes.

~~~
jessriedel
I wasn't making a claim about subsidies. I was just saying I don't think your
comment was relevant to the article because of a misunderstanding about the
article's use of the word "honor".

------
patio11
_There is also no shortage of experienced engineering talent._

Yes, but no. Japan has many, many, many talented engineers. Comparatively few
of them work in web applications. Of those, most work on corporate IT apps
serving the needs of Japan's multi-nationals.

To the extent that there is a coherent body of practice involved in the
design, creation, operation, and evolution ofmodern web applications outside
of the enterprise, that body is largely understudied here. Everything from
modern web frameworks to metrics to split testing to making stuff pretty (many
Japanese sites are stuck in early 2000 web design, partially a function of
supporting obsolete mobile clients and partially of underuse of modern
technologies) is underdone here.

My views are partially colored due to living in Japan's answer to Kansas. It
may be better in the trendy Tokyo startup scene.

~~~
aaronbrethorst
That's rather ironic considering that the creator of Ruby is Japanese. I mean,
sure, Merb was created by EY people; Sinatra was created by a bunch of folks
working for Heroku; and Rails was spearheaded by a legendarily foul-mouthed
Dane, but none of those "trendy" web frameworks would've been possible without
Yukihiro Matsumoto.

~~~
jcromartie
And so again, we have really sharp engineers producing great work, but it's
just not "sexy" enough for web 2.0 startups on its own.

------
harisenbon
I feel that this fear of failure is one of many issues with the lack of
Entrepreneurs in Japan, but cannot by a long-shot be called the sole reason.
And that is not to say that Entrepreneurs are non-existent in Japan, or even
as rare as the article states.

I also see a lot of Entrepreneurs making it big in Japan (I live near a tech
incubator that is now 30%(?) iphone application companies, and the companies
there are doing very well. The largest web-design company in my tri-prefecture
area was started by an Entrepreneur.

In addition, I think of companies like Gree, Mobage (which just got purchased
by Yahoo) and other startups who are making it big right now.

Another thing to consider is the size of the market. The Japanese market is a
fraction of the English-speaking market, so even if a start-up does hit it
big, they are pulling from a smaller pool of possible income. This might be
another reason (no big dividends) why the Japanese are less reluctant to
become an Entrepreneur rather than work at a company and have (fairly) stable
job security.

>>So if the business fails, they lose their house; their savings; practically
everything they have. What’s worse: the Japanese and German entrepreneurs may
also face criminal penalties and go to jail.

I'm curious about this. Someone I know was an entrepreneur who recently went
under. He's now happily working on his next project, and has no criminal
penalties, and other than losing the building and land for the offices he had
built, suffered no life-altering penalties.

At the risk of sounding Wikipedian: [citation needed]

~~~
friendstock
[http://www.gamasutra.com/view/news/30195/Yahoo_and_DeNA_Debu...](http://www.gamasutra.com/view/news/30195/Yahoo_and_DeNA_Debuting_Yahoo_Mobage_Japanese_Social_Game_Site.php)

It's a joint project between DeNA and Yahoo, not an acquisition of DeNA's
Mobage by Yahoo.

------
Swoopey
This has been a hot topic recently here in Japan. Very happy to see more
attention being paid to the entrepreneurial environment in Japan.

However, it's important to point out that the web/high-tech entrepreneurial
industry is still fairly young and seems to be in its infancy compared to
areas referenced in another comment regarding government subsidies and
whatnot.

For the past four years, I worked as a head-hunter recruiting Japanese talent
for companies in the web space. I've met and spoken with over 3,000 industry
professionals ranging from company owners, entrepreneurs, engineers and
designers. Here's what I've learned:

1\. Those most considered risk-takers, confident and willing to forgo the
security and stability for more entrepreneur-driven opportunities are normally
educated outside of Japan, or have spent a significant amount of time outside
of Japan.

2\. Start-ups created in Japan, in the web space or high-tech space are
considered too risky. Even foreign companies that have been successful in
other markets have a stigma attached to them and are not considered as
attractive options.

In my experience, most Japanese like to see either a track record of success
in Japan as well as a partnership with or backing from a major Japanese
company in order for the start-up stigma to be removed.

3\. Tokyo is beginning to have a great start-up and entrepreneur community in
the high-tech space however, there is a language barrier that, in my opinion
contributes to the slow growth of the community. For example, there was
recently a conference title New Context Conference 2010, in which several
companies from a new YC Clone seed accelerator (Open NetworkLab) were able to
demo their start-ups. A part of the program is that companies receive
mentoring from international and Japanese investors, founders and the like to
help improve their start-ups. Watching the presentations, it's clear that the
Japanese start-up founders for the most part were struggling most with
presentation skills.

My point is, when your language ability is limited and you can only access
resources in Japanese, it's tough to really push and challenge yourself,
especially when a lot of the most exciting things happening in this space are
in English. It's unfortunate, but Japanese is not the language of business
outside of Japan.

4\. Have you tried starting a company here? With the long set-up time at least
1 month, expensive office space, taxes, banking fees, not to mention the
difficulty in closing a company down-- they don't make it easy to take a risk.

5\. If you're a former founder of a failed start-up here, unless you have a
great network it's highly likely that the only companies that will find your
failed start-up experience highly attractive are foreign owned. Most domestic
companies would be too blinded by your failure and/or the fact the founder is
used to being independent and most senior in their company, and may not be
able to adjust to a team environment again.

I could go on, but overall there's a lot that contributes to the current state
of Japan's lagging entrepreneur state.

------
jakarta
I always thought that if corporate raiders were allowed to descend upon Japan,
the companies could be kicked into action.

There just seems to be a lot of bloat, not only from conglomerates with tons
of subsidiaries but also from their ballooning cash hordes and debt free
balance sheets. It makes the corporate loan demand very very low in Japan
which creates issues for their banks when it comes to acquiring good borrowers
for loan income.

We had this happen in the 70s when raiders went after old school economy
companies (think Asher Edelman). They really helped weed out the inefficient
enterprises.

------
ojbyrne
The article laments the lack of innovation, then introduces a groupon clone as
an exemplar of how things should be. <eyeroll/>

~~~
harisenbon
I also wish that when they do these "The problem with Japan" articles, that
they actually interview someone Japanese.

While I'm sure that Jeff Char is an amazing man, and has done great things for
tech incubation in Japan -- I would like to know what problems the _Japanese_
feel they have with Entrepreneurship.

~~~
JoachimSchipper
I agree that speaking with some "locals" is useful, but don't entirely
discount foreigners who have lived there for a while - they tend to see the
quirks more clearly.

------
theprodigy
I would somewhat agree. In Asian culture losing face is probably the biggest
social fear there is. Americans for the most part don't have this fear.
Americans love the comeback story, the rags to riches, etc. We also have
government incentives in place that encourage you to keep trying even if you
failed.

~~~
cdavid
There are more significant issues than just losing face. Being at the head of
a company is a huge responsibility because you have to deal with your
employees welfare. Now, it may sound like anywhere else, but Japanese society
takes responsibility very seriously. It goes both ways, but it means that the
whole idea of having a small company for a couple of months and scrapping it
if it does not work is not really doable if you need other people to work with
you. You will look like a joke.

Also, being fired is still a significant stigma in Japan. Not just socially
(which matters a lot), but also practically because most jobs openings in
Japan happen twice a year, and because most big companies hate people who have
"hole" in their career, even if that's only a few months.

------
jbm
On the other hand, the Japanese fear is an opportunity for foreigners with
more mercenary spirit.

The lack of biz contacts are daunting but if Softbank can make it with a
Korean president, there is nothing stopping us. (or at least that's how I
justify trying things here)

------
stretchwithme
If green Japanese entrepreneurs believe that you shouldn't take a risk with
someone who's failed and thus can't learn from them and are more likely to
fail themselves, isn't that their own fault?

Regardless of this, Japan's economy will begin to recover when the government
stops interfering with interest rates.

If the market set rates, marginal businesses would fail, making room for new
companies.

And savers would have more incentive to save, making more capital available
for businesses that stand a better chance of generating returns that justify
the higher rates.

More viable business mean more capital returned to investors and more capital
for investment.

These low rates are really a subsidy for mediocre investments. And we all pay
for this subsidy through inflation and dumb idea bubbles.

------
known
True scientists celebrate failures.

~~~
anamax
> True scientists celebrate failures.

No.

Scientists try to produce knowledge. Scientists don't "celebrate" failing to
produce knowledge.

Note that producing knowledge is not the same as producing other goods or
services that may be related to said knowledge.

For example, learning why something that "should work" doesn't is a knowledge
success. However, it's a failure to do whatever "should work" is supposed to
do.

By the same token, just doing something that should work is a knowledge
failure even as it's a success at doing whatever "should work" is supposed to
do.

~~~
known
"I have not failed. I've just found 10,000 ways that won't work." --Edison

------
jdietrich
Given the parlous state of more liberal economies, perhaps the Japanese and
the Germans have a point.

~~~
DrJokepu
This is nonsense. According to the World Bank at <http://data.worldbank.org>,
the total cumulative GDP growth of Japan between 1991 and 2009 was 18.15%
while it was 59.47% for the United States. Even though measuring economic
development with GDP growth has its problems, the difference is so enormous
that it cannot be denied that the US economy did a lot better, even with all
the recent developments.

~~~
Retric
Those numbers are somewhat arbitrary move it back 6 years and Japan grew
faster from 1985 to now. The real story is Japan's growth from 1960 - 1995 was
ridiculous. To the point where it's still grown more from 1960 to now than the
US did. They had a significant collapse in 1995 which they are still
recovering from.

~~~
DrJokepu
Germany had no collapse in the nineties (although it had to deal with the
reunification), still the same number for Germany is 29%, still very far from
the US.

The same numbers for the 1984-2009 period are: Japan 61.7%, Germany 59.7%,
United States 108.8%. A very large difference.

~~~
Retric
We are not looking at the same numbers (Not inflation adjusted but relative
growth should work out).

[http://www.google.com/publicdata?ds=wb-
wdi&met=ny_gdp_mk...](http://www.google.com/publicdata?ds=wb-
wdi&met=ny_gdp_mktp_cd&idim=country:USA&dl=en&hl=en&q=gdp+usa#met=ny_gdp_mktp_cd&idim=country:USA:JPN)

    
    
      JP 1.347T (1985) > 4.991T (2008)  = 3.7x
      USA 4.188T (1985) > 14.591T (2008) = 3.48x

~~~
cdavid
I think you could prove almost anything depending on the time period you take.
Basically, since 1995, Japanese gdp has been very slow growing. In 2009, the
GDP has decreased of 5 %, which is far worse than any other rich country of a
significant size AFAIK in the last few years.

[http://www.google.com/publicdata?ds=wb-
wdi&met=ny_gdp_mk...](http://www.google.com/publicdata?ds=wb-
wdi&met=ny_gdp_mktp_kd_zg&idim=country:JPN&dl=en&hl=en&q=japanese+gdp+growth#met=ny_gdp_mktp_kd_zg&idim=country:JPN:FRA:USA:DEU)
(beware that 2009 is missing, I guess the definite numbers may not be there
yet).

I think it is fair to say that Japanese economy is in a really bad shape,
although the explanation is not as simplistic as the one given by techrunch,
obviously. Paul Krugman has a few papers on this which are well know, although
maybe not up to date anymore (<http://web.mit.edu/krugman/www/japtrap.html>).

------
adelevie
I'm eagerly awaiting Patrick McKenzie to chime in...

