The Power to Compete | Hiroshi Mikitani

Summary of: The Power to Compete: An Economist and an Entrepreneur on Revitalizing Japan in the Global Economy
By: Hiroshi Mikitani

Introduction

Embark on a journey through Japan’s economic and political landscape in ‘The Power to Compete: An Economist and an Entrepreneur on Revitalizing Japan in the Global Economy’ by Hiroshi Mikitani. Discover how the once-dominant nation struggles to maintain its prowess due to factors like market protectionism, stifling bureaucracy, and lack of innovation. Find out about proposals for reform that could reignite Japan’s economic growth, including restructuring employment systems, embracing innovation, and fostering an environment that values people over tradition. This summary highlights key issues hindering Japan’s progress and provides a wealth of examples on the importance of learning from global engagement and embracing change.

Japan’s Economy in Shambles

Japan’s economy is facing a crisis due to its protective trade practices, hampering its innovation. Sclerotic bureaucracy and increased public debt have led to a lack of eagerness to embrace change by its leaders. Although the Shinzō Abe administration tried to reform the economy, it still suffers from state capitalism. Despite being technologically advanced, the lack of visionary leaders limits Japan’s growth. The country needs to address its lifetime employment policies, inflexible labor markets, and working-hour limitations to attract foreign workers and encourage female employment.

Japan’s Innovation Crisis

Japan’s over-reliance on invention and lack of innovation have hindered its economic growth. Economist Joseph Schumpeter emphasized that innovation drives economic expansion and prosperity. Japan’s funding system for start-ups is one pitfall as banks tend to be risk-averse, unlike venture capitalists in the US. To overcome this, Japan needs to encourage a culture of risk-taking, promote collaboration between industry and academia, and invest in research and development. Without innovation, Japan’s economic future remains uncertain.

Innovating for a Global Market

Japan faces challenges in meeting international standards due to their technology not fitting the global norms. South Korea’s Samsung dominates the global TV market by engaging with the world and sending employees abroad to study new markets. Rakuten, a technology corporation, grew by hiring engineers from abroad, a strategy uncommon in Japan’s insular society. Author Hiroshi Mikitani highlights the importance of embracing a global mindset to compete in innovation.

Japan’s Brand Decline

Japan’s iconic brands are losing their once-distinctive reputation, resulting in a decline in brand cachet and innovation. Sony’s downturn, once equivalent to Apple’s, had Akio Morita’s death as a contributing factor, and Toyota’s reputation has also waned. Japan’s firms need to re-establish brand resilience to regain their position as a purveyor of cool products. However, some Japanese companies such as Rakuten made Sony’s electronic payment service profitable. Japan can regain its revered status by embracing new disruptive technologies and giving more autonomy to the younger generation of Engineers, who will create value for the company.

The Pros and Cons of Abenomics

Abe’s Abenomics policy is aimed at revitalizing Japan’s economy. The policies are based on the Keynesian theory of fiscal stimulus, which suggests that government spending creates income for workers and investors, leading to a multiplier effect. The Japanese power structure does not support dissenting views about Abenomics. However, critics believe that the government bureaucracy stifles competitiveness in the private sector. Fiscal leakages and the tendency to save rather than spend in difficult times render fiscal stimulus ineffective. Experts suggest that investing in infrastructure in heavily congested areas could be more economically useful.

Japan’s Soft Infrastructure

Japan can benefit from soft infrastructure such as an IT autobahn and improved education. Instead of focusing solely on physical infrastructure, Japan must realize the importance of investing in communication networks and improving its school system. An IT autobahn could create a national framework of free, open communication networks, leading to a more robust multiplier effect. Education spending, focusing on people rather than construction, must be prioritized. Japan needs to make its school system more like its Western competitors, with smaller class sizes and less emphasis on rote memorization.

The Importance of English in Global Business

Many countries view English as critical to economic development, with some, like Turkey, investing billions in teaching it to their citizens. South Korea and Sweden have embraced English instruction, but Japan lags behind, despite their students spending a significant amount of time studying it. The problem lies in Japan’s focus on memorization and lack of interactive learning opportunities. To address this issue, Japan needs to increase its education spending to provide more personalized instruction, as demonstrated by successful “cram school” tutors. While talented foreigners cannot work in Japan without speaking Japanese, this requirement may hinder their ability to compete globally. Furthermore, the intertwined relationship between Japanese industry and government creates a dynamic that favors the powerful and wealthy, perpetuating the need for English instruction to be viewed as a critical tool for upward mobility.

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