"For high-tech ventures, there are no footprints left by anyone else.You have to think and act as you think."

Japanese-StyleEntrepreneurship:An Interview with SOFTBANK'S CEO, Masayoshi Son

by Alan M. Webber

The world of lapanese business, according to conven-tional Western thinking, consists of huge manufacturingcorporations, tightly interwoven corporate families, andhordes of lifetime employees working as devoted compa-ny salaiymen. Today there is another world emerging-one of high-tech startups begun by young entrepreneurswho contribute their fresh global outlook and new gener-ational attitudes to the traditional world of Japanesebusiness, Masayoshi Son, 34, founder, president, andCEO of SOFTBANK Corporation of Tokyo exemplifiesthis new Japanese-style entrepreneurship.

Born in japan of Korean heritage. Son attended highschool in the United States-graduating in tv/o weeks-then graduated from the University of California, Berke-ley, where he started several businesses and, at the age of20, used his technological skills to invent and patent adevice he sold to Sharp Corporation for$l million. He re-turned to Japan in 1981 and a year and one-half later,started SOFTBANK. In addition to its operations inJapan. SOFTBANK today has affiliates in the UnitedStates and Korea.

This interview was conducted in Mr. Son's office atSOFTBANK in Tbkyo, Japan by HBR's editorial director,Alan M. Webber.

DRAWINGS BY ROBERT RISKO

HBR: Your company is now ten years old. What wasit like in the beginning?

Masayoshi Son: When I first started the company,I only had two part-time workers and a small office.I got two apple boxes, and I stood up on them in themoming as if I was giving a speech. In a loud voice, Isaid to my two workers, "You guys have to listen tome because I am the president of this company." Isaid, "In five years, I'm going to have $75 million insales. In five years, I will be supplying 1,000 dealeroutlets, and we'll be number one in PC software dis-tribution." And I said it very loudly.

Those two guys opened their mouths. They stoodup and opened wide tbeir eyes and mouths, and theythought, this guy must he crazy. And they both quit.

That was in 1981. About a year and a half later,we were supplying 200 dealer outlets. Now we sup-ply 15,000. In ten years, we've gone from two part-time employees doing software distribution andmaking about $ 12,000 to 570 employees doing soft-ware distribution, book and magazine publishing,

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MASAYOSHI SON

telephone least cost routing, system integration,network computing, and CAD-CAM and makingabout $350 million.

Do you have a way of thinking about your companythat ties all these different parts together?

People usually compare tbe computer to the headof the human being. I would say that hardware is thebone of the head, the skull. The semiconductor isthe brain within the head. The software is tbe wis-dom. And data is tbe knowledge.

If you look at these earefully, you don't think tbeskull has the most value. Tbe brain is more valuable

I "I want to be number onein supplying wisdonn ondknowledge ail over Japan."than the skull. But everybody bas a brain. Inside thebrain are wisdom and knowledge. Wisdom andknowledge are the most valuable things in tbe body.I want to be number one in the business of supply-ing wisdom and knowledge all over |apan. But theknowledge industry is too big, too wide. So we spe-cialize in the PC industry's knowledge.

We supply that wisdom and knowledge throughmagazines, software, telephone systems, systems in-tegration, all kinds of media. That's why we carry40,000 different pieees of software. That's 40,000different kinds of wisdom. If you look at Matsushitaor Toshiba or Sony, they're not one-product compa-nies. They sell products that range from refrigeratorsto televisions to semiconductors. That's wbat I'mdoing in information for PCs. We have a variety ofinformation produets, praetically every type imag-inable, except the PC itself.

How did you actually start your company?

I started SOFTBANK in 1981, a year and a halfafter I came back from the United States, after gradu-ating from Berkeley. I wanted to start my own com-pany when I came back to Japan. I thought of 40 dif-ferent businesses I could start. It was like thinking ofan invention. As a student, I had a hobby of invent-ing new ideas for products. For me, thinking of newbusinesses is like inventing new products.

For a year and a half, I did researeh and made busi-ness plans. While I prepared, I had no income. I spentmoney, I had a new haby. My wife was worried. Allmy friends, my father, my mother, everybody wasworried. They asked me, what are you going to do?

' You spent years studying in the United States, andnow you aren't doing anything. I spent all my timejust thinking and thinking, studying what to do. Iwent to the library and bookstores. I bought books,I read all kinds of materials to prepare for what Iwould do for the next 50 years.

I came up with 40 new husiness ideas - everythingfrom creating software to setting up hospital ebains,since my wife's father is a doctor and has a hospital.Then I had ahout 25 success measures that I used todeeide which idea to pursue. One success measurewas that I should fall in love with a particular busi-ness for the next 50 years at least. Very often, peopleget excited for the first few years, and tben, after theysee the reality, they get tired of the business. I want-ed to choose one that I would feel more and more ex-cited about as the years passed.

Another faetor was that the husiness should beunique. That was very important to me. I didn't wantanyone else doing exactly the same thing. A thirdwas that within 10 years I wanted to be number onein that particular husiness, at least in Japan. And Iwanted to pick a business wbere the husiness cate-gory itself would be growing for the next 30 to 50years. I didn't want to choose a sinking ship.

I had all those measurements, about 25 in all, and40 new ideas. I took a big sheet of paper, and I drew amatrix and put down scores and comments for each.Then I picked the best one, wbicb turned out to bethe personal eomputer software business. That wasthe start of SOFTBANK. |You picked an industry that was about to take off.Did you become a successful entrepreneur simplyby picking the right industry?

If you go back to 1981, everything wasn't so obvi-ous. The PC was only a toy then. There was somehardware already made in Japan, but tbere was al-most no software. Nobody even knew what kind ofsoftware was available in all of Japan. It was my judg-ment that personal computers would be a very im-portant product for the entire society in 10 or 20years. And that PCs would only become more im-portant. But the PC industry was not establishedtben. The big, grown-up businesses did not knowabout the PC industry. They weren't even all that in-terested in it. Today in Japan, only 2 million PCs aresold each year, whieh is one-fourth the numher soldin the United States. A few years ago, it was onlyone-tenth.

And the PC industry has lots of different dimen-sions. I thougbt about making software myself andstarting a software business, like I had done while Iwas at Berkeley. But, I thought, if I make good soft-

94 HARVARD BUSINESS REVTEW [anuary-February 1992

The Business of SOFTBANKMasayoshi Son describes SOFTBANK'Scurrent businesses as follows:

"SOFTBANK has six divisions in different businesses, five whollyowned subsidiaries, and five joint ventures. We started in the software dis-tribution business. Today we distribute 50% of all the PC software sold inJapan. We supply software to 15,000 dealer outlets. We have 40,000 stock-keeping units, ranging from very eomplex, expensive network softwareto video games.

"We're also in the book and magazine husiness. We publish 11 maga-zines, all on the PC industry, and we will he adding 3 more in the next3 months. We distribute 1.5 million copies a month. There are 3 mil-lion PC users in Japan, so we reaeh 50% of the Japanese PC users eachmonth. As publisher, I decide which magazines to start, which to stop,and I create the hasie idea for each magazine. Eaeh one is different. Forexample, one covers how to choose PC products, another what tlie newsis in the PC industry, another what the key trends are for managers inthe industry.

"Our third business is the telephone data business, which today con-sists of a telephone least cost routing device that I invented. It's a smalldevice, about the size of two cigarette packs, that attaches to ordinarytelephones and automatically chooses the least cost route for long-distance calls from among the four different telephone companies. Wehave installed over 1.5 million of these units, and we get a royalty fromthe three new telephone common carriers.

"We're also in the computer networking husiness. We have 26% owner-ship of a joint venture called Novell Japan, Ltd. In the last 12 months,we've invested about $20 million in this husiness. There are about 200companies trained and supplied hy SOFTBANK that specialize in sellingcomputer networks to corporate customers. They are our authorizeddealers. We call them our Network Pro Shops, like golf pro shops. We traintheir engineers and their sales force and supply products to them.

"We also have SystemBank, a system integration husiness, a joint ven-ture with Perot Systems. 1 sold 35% of SystemBank to Ross Perot, whoalready has Perot Systems in the United States. SystemBank will do thesame kind of business in Japan that Perot Systems does in the UnitedStates-customization work for large corporations such as hanks, insur-ance companies, newspapers, manufacturing companies. We have allkinds of experience in the PC area, but we don't have any experience inmainframe and minicomputers. So to run SystemBank, I recmited thenumber two person from Unisys Japan and the numher one person incomputing from the Dai-ichi Kangyo Bank. Now, in our first year, we haveahout 100 engineers working for SystemBank.

"And we recently started another new division of SOFTBANK that's inthe CAD-CAM business. Intergraph is the largest CAD-oriented compa-ny in the United States, and we're now the master distributor of its prod-uct for PCs in |apan."

I looked around for some-one wbo was selling software,and I couldn't find anyone. So, Ithought, if no one is going to doit, I sbould do it. 1 made a list ofthe software producers and wentto see them to find out what kindof software was available. I foundHudson Software was makingsome computer games. Andthere was Personal Media andMilky Way. But it was mostlygames and hobbies. There wassome business software, but itwas very low quality at the time.

Given the state of the PC andsoftware industries at that time,how did you go about launchingyour company}

ware, who would sell it? Making software and sellingsoftware are entirely different businesses. Even if Imake good software, if there's no one to sell it, I'dhave to close tbe business.

HARVARD BUSINESS REVIEW January-February 1992

Wben SOFTBANK was onlytwo or three months old, I decid-ed that I needed to show the endusers and dealers what softwarewas available in Japan. There wasa consumer electronics show inTokyo, and I made a reservationfor the largest size booth, thesame size as Sony, Matsushita,and Toshiba. I purchased thespace, and I called all the soft-ware vendors I could find, maybejust a dozen at that time. I toldthem that I had bought the space,I was going to prepare the flyers, Iwas going to have decorations,displays, a model PC, and I wasgoing to pay for everything. I toldthem, you guys can be in mybooth for free. They all said,what? How can you do that? Whyare you doing that? How can youmake money doing that?

They had the software, hutthey didn't have the money toshow it to anyhody else. I had alittle money, but I didn't haveproducts to sell. And there were

^^_^^__^^^ so many PC dealers who hadhardware hut no software. So, I

thought, some matchmaking is needed. At the con-sumer electronics show, I had a booth the size of eightsmall booths. I had a huge sign that said, "Now therevolution has come for software distribution for

95

MASAYOSHI SON

SOFTBANK'S Ten Years of Growth15.000

Affiliated DealersSOFTBANK'S network ofdealers and distributionoutlets now numbersmore thon 15,000ocross Jopan.

14,000

12000^

4,300

StaffFrom 0 modest storl,SOFTBANK lios grown to

SalesSOFTBANK tios consis-tently expanded itsannuol sales volume.

(in millions ot dollarsall figures converii^!!at 130 yen to thedollar)

37 88 89 90 91 iiO 91

96 HARVARD RUSINESS REVIEW January Rhruary 1992

PCs." I had more people come to my booth than Sonydid. My booth was always packed, jammed with peo-ple. And they all said how good it was.

My plan was that a hunch of people would sign upto establish outlets and another bunch of peoplewould order software through SOFTBANK. In fact, Igot almost nothing. Nobody signed up for a dealer-ship. Zero. And I sold very few software products. Ac-tually, most of the software vendors who attendedthe booth would tell people, if you can't make upyour mind today, here's my card. You can call me di-rectly if you decide to buy my software. So I was cutout of the deal completely. I probably made backone-twentieth of the cost of the booth.

What happened after the show?

After that, many people were laughing at me.They said, that guy's really dumb. He's a nice guybut dumb. 1 said, OK, I'm dumb. But I'm going to keepat it, and someday, somebody will find out whatI can do and what real software distribution means.

Actually, one person did call me from Osaka a fewweeks after the show. He said, we're starting a big PCshop, and we need software. Please come and talk tome. I said, sorry but I'm too busy to make the tripright now. Actually, I wasn't busy. There were no cus-tomers. But 1 didn't have the money to go to Osaka,

He said, my company's name is Joshin Denki.Have you heard of us? I said, no. I didn't know thecompany. It turns out it's the third largest homeeleetronies dealer in Japan.

He said, please ask Sharp, ask Matsushita who weare. If you make up your mind to come to Osaka,we'd be happy to see you.

So I called up Sharp because of my previous rela-tionship with them when I was at Berkeley. They

"After the show, many peoplewere loughing at me. Theysaid, that guy's really dumb.He's a r~iice guy but dumb."

said, loshin Denki called you! You should go toOsaka right away!

That afternoon, the person from Joshin Denkicalled me again. He said, you were too busy to cometo Osaka. It's completely by chance but tomorrowour president is going to Tokyo. It's really by chancebecause he has some other business to do there.

The next day the president arrived. He told methat he had come all the way to Tokyo just to see me.The company had started a big computer shop two

HARVARD BUSINESS REVIEW lanuary-fcbruary 1992

weeks hefore, and it needed software. It already hadsome software and a direct channel with some ven-dors. But it wanted more.

I told him, if you have some business relationshipswith software vendors, that's fine. But if you want to

"I have very little money verylittle business experience.What I do have is the greatestenthusiasm, the greatestwillingness to suoceed."

do business with me, you'll have to discontinue allthe relationships you've already formed. That'sprobably against your business ethics, but if youwant to succeed with PCs in Japan, you should dobusiness my way.

He asked me many questions: How much capitaldo you have? How old are you? What kind of busi-ness experience do you have?

I told him, I have very little money, very little busi-ness experience, I have no product, nothing. What Ido have is the greatest enthusiasm, the greatest de-sire to succeed. 1 said, you have already been pur-chasing some PC software. Today you probably havemore knowledge and more experience at this than Ido. You are older than I am and more talented. But inaddition to purchasing PC software and hardware,you are also going to purchase home electronicsproducts, refrigerators, televisions, VCRs. 1 will dedi-cate all my time and effort, all my energy, my entirespirit to PC software only. Several months from now,who do you think will be more knowledgeable, moreof a specialist in this business? If you want to be thenumher one PC dealer in Japan, you have to find thenumber one guy in software distribution. That's me.I have no evidence, but I strongly believe in myself.

He said, wow, you're an interesting guy! And hegave me exclusive purchasing rights for all the PCsoftware for Joshin Denki. Joshin Denki had thebiggest store specializing in PCs in Japan.

What was your next move?

After I got Joshin Denki, I went to many other de-partment stores and electronic shops. Have you seenJoshin Denki- They're the largest PC dealer in Japannow. And do you know why they're so successful?Because they have the software! And I have the ex-clusive on that software. So if you want to succeed,please talk to me. And they all opened accountswith me very quickly. In one month, I got most ofthe biggest dealers in Japan as my customers.

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MASAYOSHI SON

A Brief Autobiography of a Japanese Entrepreneur"I was born on August 11, 1957 in Saga prefecture on

Kyushu Island, the most southern of the four main is-lands of lapan. The town was called Tosu, a very smalltown. And the house I was born in was on land ownedhy Japan National Railways. It was land where Koreanslived for free, in houses they had built there illegally.The railroad wanted them to leave, but they had builttheir houses and didn't want to move. They had no

place else to go. Once there waseven a fire in the Korean houses,and the railroad officials finallythought that the people wouldhave to leave. But by the nextmorning, after the fire, the smallgroup of Koreans had already re-built their houses.

"My grandfather and grand-mother came from Korea. My fa-

ther and mother were hoth horn in Japan, in the past inJapan, most Korean people were discriminated againstvery hadly. For example, there arc prohably 600,000 Ko-reans living in Japan. And some 99% of them are stillusing Japanese names, not their real Korean names, be-cause the Japanese government required them to useJapanese last names. As long as they use Japanesenames, most Japanese people don't know that they'reKorean. But unee it's found out, then they face all kindsof discrimination. I myself had prohlems fitting in. Iwas trying to hide the fact that I wa.s a Korean. I evenused a Japanese last name: Yasumoto. Today all of myfamily, all of my relatives, still use Yasumoto as theirlast name-except me.

"When I was growing up, my family was very poor.My father raised pigs and chickens and made sake,which was also illegal. But my father worked hard, eventhough we were poor. He worked so hard that he wasable to get a car, the first in the town.

"When I was 13, my family moved to the higgest cityun Kyushu Island, a town called Hakata. My relativeswere all against us moving, but my father wanted me togo to a hetter school. That was the only reason he decid-ed to tnove. 1 was a good student, but in those days I hada darkness in my mind all the time. It was because ofmy nationality. When I was with friends, I was veryhappy. When 1 came hack hume alone, 1 had the feelingthat I was hiding something from my friends. I thinkmost Koreans who live in Japan have the same feeling.They use their Japanese last names, and it's like they'rehiding something.

"I went to the United States to go to high schoolwhen 1 was 16, That's when I started using the nameSon. I always used the name Son in the United States.On my passport my name was Son, but with myJapanese name, Yasumoto, in parentheses, I even metmy wife in the United States, in the English languageschool that we both attended. She is also from Kyushu,She went with me to Holy Names College and to Hcrke-Icy, Now we have two daughters, nine and ten years old.

"I lived in the United States for six-and-one-halfyears. My way of thinking about life, ahout people,about business, everythmg was affected hy my experi-ences in the United States. Before I went to the States, Ihad the feeling of hiding something. After living there,1 felt that there really shouldn't be any discriminationagainst people just because of where they were bom. Igot much more freedom in my thinking from my expe-riences in the United States.

"When 1 moved back to Japan, I first went back toKyushu for a year and a half to research what to do forthe rest ot my life. Then when I decided to start SOFT-BANK, 1 moved to Tokyo.

"Last year, in Novcmher, 1 got my Japanese citizen-ship. It took me several years because at first the govern-ment said that I could not use my name Son if I be-came a Japanese citizen. They said that in the Japanese-dictionary there's no last name Son. They said that if 1wanted to get Japanese citizenship, I must change myname to a Japanese name. But I said, no way, I'm notgoing to change my name.

"Instead, my wife, who is a Japanese citizen, went toJapanese court to change her name to Son, She had beenusing her maiden name as her official Japanese namehut using Son on a daily basis. She went to court tochange her official Japanese name to Son. They askedher why she wanted to change her name and she said,because that's my hushand's name. They said, are youreally sure you want to change your name to a Koreanname- She said, yes. She was the first person who wasa Japanese citizen who had ever changed her name toa Korean name. But the Japanese court accepted it.

"Then I went hack to the government and said that Iwanted to become a Japanese citizen and keep myname. I told them there must be a perstm who's aJapanese citizen with the name Son. They checked andfound one person-my wife. So I tuld them they shouldaccept my application to hcctmic a Japanese citizen andallow me to keep my last name. They finally said OK.That's the government."

98 HARVARD BUSINESS REVIEW January-February 1992

I also went to see the president and vice presidentof Hudson Software. They were the biggest softwarevendor at that time, although they only had 10 or 12employees. 1 told them the same story I told the pres-ident of Joshin Dcnki: that I would dedicate mywhole life and effort to selling software and that they

I "In one year, nny monthlyrevenues went tronn$ia000to$2.3nnillion."should give me an exclusive. They already had busi-ness relationships with many dealers by themselves,but they cut all those off and sold through me exclu-sively, hi just a couple of months, I doubled, thentripled their sales. They became very happy!

Before I got Joshin Denki, I had almost no sales.Then right after 1 got Joshin Denki, I got about$ 150,000 in sales to them. The next month, I startedto do business with many other stores and thatamount douhled. The next month, a 50% increase.And the next month. In one year, my monthlyrevenues went from about Sl0,000 to $2.3 million.

How did you make sales grow that quickly}One of the first things 1 did was to expand the

choice of software that Joshin Denki had. I toldthem, I'm going to get all the PC software that'savailable in Japan. Everything. 1 said, you shouldn'tdecide which software you're going to buy for yourstore. I'm going to decide everything.

The president of )oshin Denki said, all right, but ifthe products don't sell, we should be able to returnthem to you.

I told him, no. I said, in your other stores you haveneon signs, you have showcases. Those are expen-sive. But in a PC shop, a neon sign doesn't do anygood. What matters is software. Software is part ofthe decoration. Even if it doesn't sell, if you haveevery software package that's available in Japan, thatsends an important message to the end users. It tellsthem this is the biggest software lineup in Japan.

So I told him, I'm going to get you every softwareproduct. But I have no money. So if you want me todo that, you are the one who must pay. And, ofcourse, some of the software will be a total loss. Buthaving all the software products will give you a real-ly good business. The loss will be made up by thesoftware creating your store's unique attraction anddecoration. Actually, the idea really worked. Manypeople came to the store just because they heard thatevery software product was available there.

HARVARD BUSINESS REVIEW Jaiiuary-fcbruaiy 1992

Raising money is always a challenge to an en-trepreneur. How did you finance your company^

When I started the company, I used straight bankloans. And that was really difficult. I went to theDai-ichi Kangyo Bank when the company was onlythree or four months old. At the time, I had revenuesof about $10,000 and I asked for a loan of $750,000.1told them, I have no collateral, I have no business ex-perience, and I am not going to ask my family or myfriends to cosign my loan. I will sign myself, and I'lltake all the responsibility. But unless you give methe prime rate, I'm not going to take a loan from you.

The people at the Dai-ichi Kangyo Bank said, areyou crazy? What arc you talking about? What areyou doing here?

I said, I came to get a loan, of course.The people at the Dai-ichi Kangyo Bank just start-

ed laughing. We can't give you a loan, they said. Doyou have anything that can convince us?

I said, no, I don't have anything. But if you reallythink about business in the future, what we're doingmight interest you.

Then they asked me, is there anyone you can useas a reference?

I told them to talk with Dr. Sasaki at Sharp be-cause he was the person I had business experiencewith from selling Sharp my invention at Berkeley-my pocket language translator.

The bank branch manager was a really good guy.He didn't want to give up on me just because Icouldn't give good reasons why his headquartersshould give me a $750,000 loan. So he called Dr.Sasaki. Dr. Sasaki said, Mr. Son has good businesspotential, so please give him this loan. The branchmanager also asked Joshin Denki, and they recom-mended me for the loan too.

Then it was up to the hranch manager to fill in theformal scorecard of the bank using his judgmentwhether or not to make the lt)an. When he used theordinary scoring, the total was -15 against mak-ing the loan. But the last column was "potentialgrowth." He gave us 15 points for potential growth.So the total came out zero. He sent the scorecard toheadquarters and they said, since the total is zero,you make the judgment. The branch manager said,I'm going to give him the loan.

Today at SOFTBANK, we have a special day wherewe honor the few individuals who made contribu-tions to help start SOFTBANK. One of the people wehonor is that bank branch manager.

After you had gotten the software distribution busi-ness going, how long did you wait to begin yourother divisions^

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MASAYOSHI SON

I started the publishing division six months after Istarted the company. My employees said, our presi-dent has gone crazy. Out of his mind. We're alreadyso busy with the software distribution business. Wedon't have that much profit yet, and now he's start-ing another business totally different from whatwe've heen doing. A magazine business. And he hasno experience in publishing. And he's starting twomagazines simultaneously.

My first magazines were OhlPC and Oh.'MZ. Ev-erybody said to stop, but I did it anyway. And, ofcourse, when I started those magazines, the out-come was terrible. I printed 50,000 copies, and 85%were returned. They didn't sell. And there were veryfew advertisements. Every month, the two maga-zines lost a couple of hundred thousand dollars.They ate up all the profits from the software distri-bution business. So my people said to me, we toldyou not to do it.

But we couldn't stop now because if we stoppedthe magazines, everyone would say that SOFTBANKwas in trouble. That SOFTBANK was going to die.So we couldn't stop. But every month we were losingso much money. So what could we do?

One day I decided that I would do everything pos-sible to make OhlPC successful in the next month,and if I couldn't succeed then, I would quit with thatissue. Quit immediately, rather than waiting severalmonths, accumulating losses. I spent all the rest of

I"My ennployees said,our president has gone orazyOut ot his nnind."the money I had on TV advertisements, nationwide.I made the magazine twice as thick, I kept the pricethe same, I changed the entire layout, and I printed100,000 copies, twice as many. The new, larger maga-zine sold out in three days. Ail 100,000 copies weresold out. After that, the magazine just took off.Today circulation of the semimonthly OhlPC isroughly 140,000 per issue.

What kind of entrepreneurial experiences preparedyou to start SOFTBANKI

When I was a student at Berkeley, I started my firstbusiness and even hired some of the professors tohelp me. Actually, while I was at Berkeley, I had 250inventions that I wrote down in my "Invention IdeaNotes." Then I picked one to develop a prototype andapply for a patent. I made close to $1 million by sell-ing the patent to Sharp.

I came up with the idea in 1977 or 1978.1 was 19years old and took some semesters off to work on myinventions. I looked through the faculty directory,and I called a number of faculty members. I wantedto know who was the best professor in tbe micro-computer field. I'd ask one person and I'd be referredto somebody else and then to somebody else until Ifinally found a couple of good people. I went to seethem and said, I have some ideas. This is my sketchof my new invention. Will you help me? At first,they said no, hut finally I found a few who wereinterested. I formed a project team with these pro-fessors. I told them, I don't have any money now, butI will pay you, so please keep track of how manyhours you work on this project. After I got the moneyfrom Sharp for the patent, I paid them all.

Right now the product is called the Sharp Wizard,but the idea, the prototype, was mine. It's like a cal-culator, but it's actually a computer. It can do trans-lations in eight languages, like a dictionary, andthere now exist all kinds of applications stored onintegrated-circuit card software that can plug into it.It has telephone directories, calculations of scien-tific programs, business applications.

I also had computer game projects when I was atBerkeley. I remodeled the software on game ma-chines that I had brought from Japan and installedthem in restaurants, cocktail lounges, dormitories,and cafeterias. I made another $1 million from that.

I also made game software while I was a student.My company was called Unison World. When 1 cameback to Japan, I sold it to my associate in that ven-ture for close to $2 million. Later the name waschanged to Kyocera Unison, and now I think it'scalled Kyocera Electronics.

Of course, I didn't get the money from those busi-nesses all at one time. Some of what I got supportedme when I first returned to Japan.

When did you go to the United States, and whatwas your experience there}

T went to the United States to study when I was 16years old. 1 told my family I wanted to go, and every-one started crying, especially my mother. How comeyou're leaving our family and going all the way to theUnited States? She said, it's a buneh of barbarianswho live in that country. My mother was really sad,but my father had no comment for a couple of weeksbecause he knows me. He realized that nobodycould stop me, that if he tried I would just run awayfrom the family and go anyway. He decided thatrather than making me run away from the familyand Japan without any money, he should send me tothe States with some money and with support.

100 HARVARD BUSINESS REVIEW January-February 1992

Masayoshi Son's New Common Carrier Box"To understand my invention and our telepht)nc data

business-called the DATANET Division-first youhave to understand sornething about the telephone sys-tem in Japan.

"In the past, there was only one telephone company,NTT-it was a monopoly. About five years ago, threenew companies, new common carriers, started service.One is called DDl, formed by Kyocera. The second isTeleway Japan, which Toyota started. The third is JapanTelecom, which belongs to Japan Railways Group.

"Now, let's say you want to call from Tokyo to Osaka,whieh actually does carry the greatest percentage oflong-distance calls in Japan. If you want to call usingNTT today, you only have to dial eight digits. If you callusing any ot the other three companies, you have to addfour more digits as the prefix. And with the other threecompanies, you have to know each company's differentprefix. For example, for DDI, the prefix is 0077. ForTeleway Japan, it's 0070. R)r Japan Telecom, it's 0088.

"For a user, it's cumbersome to dial four digits. Busi-ness employees are usually in a hurry to make theircalls. They dt)n't know the different four digit prefixes.And they don't know how much each phone call costsor which carrier might he less expensive. So they justdial the original number from NTT hecause that'swhat they've gotten used to. Even after the three newcompanies started, most husinesses were still ignoringthem, still using NTT.

"What I designed is a least-cost routing device. It's asmall device, just the size of two cigarette packs. Thereare no buttons. You just attach it to an ordinary tele-phone, and it will automatically choose the least-cost

route among the four different telephone companies.The user just dials the ordinary eight-digit numher, thesame as with NTT. Then the computer huilt into thehox commands it to choose the common canier thatwill provide the greatest savings for that telephone call,depending on the day of the week, the time of day, andthe destination of the call.

"At most companies, the employees don't even no-tice when the hoxes have heen installed or that they'reheing used. But the accounting managers know he-eause we're saving them close to 25% of their phonehilts. But the user doesn't pay for the box. And the usergets to keep all of their savings. The way we makemoney is from the new common carriers. They pay us aroyalty on their telephone hillings. It has heen verygood for them too. Their original plans were to breakeven in the fifth year of service. Because of my hox, theyall made a profit in their first year.

"I invented this hox four years ago and applied for 13patents in Japan and the United States. We install thebox for free, usually in husinesses. We've already in-stalled over 1,5 million of them. In fact, I have a partner,Mr. Ohkuho, who is also a young Japanese entrepre-neur. We own 3% of his company, Shin-Nihon Kohan,which does the installation. And now I've designeda custom VLSI chip that is integrated into the ordinarytelephone and the facsimile machine. My chip is al-ready built into some of the newer telephone sets andfax machines. Another important feature of my inven-tion is that whenever the rate data change, a host com-puter calls up the hox and downloads the new data toupdate it automatically."

I flew to Oakland to study as part of a foreign stu-dent program. There was a college in Oakland calledHoly Names College tbat bad a special program forforeign students to learn English. So for my first sev-eral months there, I took English lessons becauseJ bad to wait until September for a high scbool toaccept me.

Then in September, I went to school at Serra-monte High School. I had spent three months inJapan as a freshman in high school, so I enteredSerramonte High School as a sophomore. After oneweek, I was promoted to a junior. After three orfour days as a junior, I was promoted to a senior.I was a senior for another three or four days, then Itook an exam and graduated. The result was thatI finished high school in the United States in twoweeks. Then I went to Holy Names College for myfreshman and sophomore years before transferringto Berkeley.

HARVARD BUSINESS REVIEW January-February 1992

After you graduated from Berkeley, did you con-sider pursuing your entrepreneurial career in theUnited Statesf

I thought about it. In fact, a number of things ar-gued in favor of staying in the United States. Many ofmy friends said I would be crazy to leave because Iwould have to start my business all over again inJapan. I already had a company established, and itwould be much easier to keep doing that. And, ofcourse, the entrepreneurial climate in the UnitedStates is much more responsive to someone who'strying to start a business. There's more capital. Inthe United States, there's not the negative percep-tion of the entrepreneur that there is in Japan. Ingeneral, it's harder to be an entrepreneur in Japanthan in the United States. Japanese banks will notloan money to you because they are more conserva-tive. And because of the culture, it's harder to attract

101

MASAYOSHI SON

My Mends said I would be crazy to leave because I would have to startall over again in Japan.

the best employees. They like to work for the bigcompanies or for the government because Japan isa lifetime employment country. All these thingsargued in favor of staying in the United States.

So why did you decide to go back to Japan?

The more I thought about it, the more reasons Ifound for starting my company in Japan. I had a verylong-term vision. I didn't have any evidence, but Ibelieved in myself. I believed that someday I wouldhave a very big company, a global business, and avery successful company. If I were able to do that,my headquarters should be in Japan. It's more diffi-cult to start a business in Japan, but once I started it,once I had the company, it would be easier to keepthe loyalty of the employees if the headquarterswere in Japan. Japanese workers work harder, theyhave a stronger loyalty to the company, and theytend to stay in the company for a very long time.They don't often have bright creativity, but theywork very hard to make continuous improvements.In America, the workers arc more likely either toleave the company after awhile or not to care aboutthe company very much.

It sounds as if the quality of the employees playedan important role in shaping your thinking. But you

also said that the best employeesin Japan like to work for big com-panies or the government. Whatwas your experience in attract-ing employees}

In the beginning, it was veryhard for us to get the best employ-ees. We had to advertise in thenewspapers and magazines, and itwas still very difficult. We had tohire ex-truck drivers and all kindsof people for jobs they had neverdone before. They might havebeen truck drivers, and now theywould be selling products or tak-ing orders.

But these employees were verydevoted to the company. Theysaid, I was driving a truck untillast month. Now I can work in ahigh-tech company. My family isvery happy. I don't want to losemy job. So 1 will do my best. 1 hademployees who worked so hard,they stayed overnight, sleeping onthe floor of the office for three

months at a time. They would go back home for onlythree or four days in three months. Thuy worked likehell. That actually added to the spirit of the company.

Now that SOFTBANK is established, what is yourexperience in attracting top-notch people}

Look at our board of directors. We have a personwho used to be second in command at Sharp. He wasthe head of all engineering at Sharp and a representa-tive director there. We have the man who was secondin command at Unisys Japan; he's now running Sys-temBank. We have the man who used to be a directorof the Tokyo Stock Exchange. He was in charge ofmaking the rules that control how companies go pub-lic and deciding which companies could go public.

The way I attract these men to SOFTBANK is toexplain what my dream is. It's not money becausethey actually come to work and we never talk aboutpayment. They come to work, then a week passes, orlonger, then we finally get around to talking aboutmoney. I'll ask them, by the way, how much do youwant? And they say, whatever you want to give me.Then I ask them, how much were you making lastyear? Then I give them the same amount.

So they don't come to SOFTBANK for the money.It's for the dream that everyone has together. Thedream of making the company successful.

102 HARVARD BUSINESS REVIEW January-February 1992

Now that you've been running SOFTBANK for tenyears, what is your assessment of the future of thePC and PC software}

The PC and PC software have gone through threestages of growth. The first stage was a game softwarebusiness. PCs were used mostly for games and for

"I'm putting all my effortsand making all my investmentsin computer networking.That's an area that's goingto grow like hell."

hobbies. The second growth stage was business ap-plications like word processing and spreadsheets.The third growth stage is here now-the networkedcompany.

I've been putting all my efforts and making all myinvestments in computer networking. I want to benumber one in computer networking because that'san area that's going to grow like hell. Our joint ven-ture with Novell is the key for that. We started thecompany in April 1990 and began shipping productsin July 1991. We have a very strong group of ownersin the company. Novell owns 54%, NEC, Toshiba,Fujitsu, Canon, and Sony each own 4%, and we own26%. We not only sell the network operating sys-tems but also network-related products such asperipherals, cables, transceivers, boards, and more.We already have 1,500 network-related products.

One common criticism of Japanese business is thatit lacks creativity and innovation. How importantis innovation to SOFTBANK'S operation}

The kind of business we're in requires us to comeup with innovations. We have to be innovative bothin our products and in how we do business. For exam-ple, our telephone data business is a completely newconcept, a new product, a new style of business. Incomputer networking, I came up with the complete-ly new concept of forming this kind of joint venture.It's the first time in the industry that five competinghardware vendors have joined in one company-NEC, Toshiba, Fujitsu, Canon, and Sony all invested.They worked together under the same roof, and theyreleased the networking software product on exactlythe same day. Since those companies control 80% ofthe PC market, when we released the product, weestablished the de facto standard. We dominated themarket from the first day. hi the magazine business,we were the first to bundle PC application demon-stration diskettes in our magazines. All of thesewere my original ideas, my innovations.

Why do you think you became an entrepreneurrather than joining a successful Japanese corporation}

I think I became an entrepreneur because I havemy way of doing business. Especially for high-techventures, there are no footprints left by anyone else.You have to think and act as you think. To do that,you have to have your own company. But if you haveyour own company, you're an outsider in the Japa-nese business world. It's difficult. But that's life. ^Reprint 92109

HARVARD BUSINESS REVIEW January-February 1992 103

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