BUSINESSWEEK ONLINE : MARCH 6, 2000 ISSUE
INTERNATIONAL -- ASIAN COVER STORY "On the Internet, Size Doesn't Matter" Softbank CEO Masayoshi Son talks about the role of Info Age-style zaibatsu No one has done more than Softbank founder and CEO Masayoshi Son to open Japan up to the potential of the Internet. And no one is better poised to profit once the Net economy takes off globally. Son invested early in promising U.S. Internet companies, such as Yahoo!, E*Trade, and E-Loan, and is now using them as vehicles to expand into Europe, Asia, and soon, South America. In a recent interview with Business Week Tokyo Correspondent Irene M. Kunii, he spoke about his plans to build the Internet Age equivalent of the zaibatsu, the mega-conglomerates that helped modernize Japan at the turn of the century. Here are edited excerpts: Q: You founded Softbank [in 1982] as a software distributor, and then moved into PC magazine publishing. In the last few years, you've invested in Internet startups. What kind of company are you creating? A: Today, Softbank is a global Internet strategic group with a portfolio of 300 Internet holdings. We invest, but we're not like most investment companies that just buy and sell. We're not interested in accumulating small stakes in the range of 3%, 5%, or 10%. When we invest, we purchase 30% or more in order to strategically incubate or support a company. Then we take it global. In Japan, we own 50% to 60% of a local venture, as is the case with Yahoo Japan and E*Trade Japan. We provide incubation functions and act as a business partner to set up local operations. So Softbank is a strategic holding company, and this function will be further enhanced. Q: How big is your group? A: Softbank aims to become a group of 780 companies 5 years from now. Right now, it consists of 300 companies, up from 120 a year ago. I'm certain that we'll achieve our target of 780 within 5 years, and probably even exceed it. Q: So you are intent on building an Internet zaibatsu, or a Net-batsu? A: Today, the term zaibatsu carries negative connotations, but that's because of the bad reputation these corporate groups developed after the war, when General Douglas MacArthur ran Japan [during the U.S. occupation]. He was determined to destroy the zaibatsu and thus depicted them as big and bad. However, when they first emerged around the time of the Meiji Restoration, they were strategic holding groups consisting of banks, shipping companies, insurance firms, and others. They made a great contribution to the industrial development of Japan. Now that Japan is changing from an industrial to an information society, the new zaibatsu will transform Japan from an industrial to an information society. Looking at the history, zaibatsu began as venture businesses and then grew into strategic holding groups. At a time when Japan was being transformed into an industrial society, these companies all shared certain necessary characteristics, such as the ability to make plant investments, access to capital and technology, and knowledge of English and finance. They were able to incubate new companies, thus building up their own efficient groups. It's the same way with the Internet today. Those who have an understanding of information technology, Internet technology, and business knowhow such as recruiting, marketing, and distribution, are at an advantage. Those who possess this knowledge are able to incubate companies rapidly. You have to be brave and ready to take on a challenge. The more knowledge you have, the better positioned you'll be. That's the difference between an e-company and a traditional company. Q: Who will help build the New Japan? A: Hikari is one amazing company, and there are many promising ones emerging in Tokyo's Bit Valley. I went to one of their sessions for the first time, and was surprised to see so many energetic young people. Then there are the large, traditional companies like Sony, Fujitsu, Toshiba, and others that are making efforts to transform themselves. You can see that something is happening here, and it's a good thing. Q: Do the established companies, like Sony, NEC, and Fujitsu, have a chance of succeeding in the Internet economy? A: I think they do. But young companies will grow at the speed of lightning, so in that respect, the playing field will be level. Just because a company is big doesn't mean it's strong. Until recently, big meant strong, but on the Internet size doesn't matter. I believe the age of ventures is beginning, and it should be a most interesting time. Q: Is this the dawn of the Internet Age in Japan? A: Yes, I think so. At Softbank, it started four years ago. But this year, we'll see the Internet begin to spread and then explode in Japan. We also expect the mobile Internet to become a big network, so we'll invest accordingly. Q: Will Japan be able to contribute to the global Net economy? A: I was pessimistic about Japan up until the first part of last year. Then, from mid-1998, I grew increasingly optimistic when I observed the energy level of young Japanese. Now, I believe we'll see the spread of Japan's own Net culture and the emergence of many young people doing IPOs. With their money and momentum, they in turn will be able to make big investments and hire talented people. Q: How long will this window of opportunity for new entrepreneurs last? A: The best chance is now. There will be great opportunities for those emerging this year, as well as over the next two or three years. Q: What is your strategy for Asia? A: I plan to invest in 100 companies in Asia within the next three years, and a minimum of 150 in five years. That's because there are so many promising companies popping up, one after the other. South Korea is already Asia's second-largest Net market after Japan. Yahoo Korea, for example, has more traffic than Yahoo Germany or Yahoo U.K. Online trading already accounts for 60% of individual investments. China's Net population may still be small, but in five years I expect it to reach 300 million, compared to 200 million in the U.S. and 80 million in Japan. China, too, promises great opportunities, so I plan to invest aggressively. _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ BACK TO TOP					RELATED ITEMS Japan's Net Builders (int'l edition) ASIA COVER IMAGE: Japan's Net Builders TABLE: Japan's Busy Net Builders...And Two New Net ``Incubators'' ONLINE ORIGINAL: "The Revolution Is Starting" ONLINE ORIGINAL: "On the Internet, Size Doesn't Matter" INTERACT E-Mail to Business Week Online

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