The CEO of software maker Ashisuto tells the Japanese to stop imitating Westeners.
More Japanese than the Japanese
By Alex Stewart
DR. BILL TOTTEN MUST rank as one of Japan's biggest paradoxes. He is the founder of Ashisuto, a large software business with over 700 employees and sales in 2001 of JPY16.6 billion, but he prefers the Japanese classics and tennis to building a business empire. He is possibly the only Westerner around espousing the benefits of lifetime employment, and he'd rather wear a kimono to work than a business suit. He calls himself a Japanese nationalist and even raises the Japanese flag outside his home in Kyoto on public holidays.
Totten's company celebrated its 30th birthday this year, which is already an achievement for a foreigner in Japan. Yet, what interests the 62-year-old Bill Totten is his management philosophy, which is at complete odds with the prevailing model of shareholder capitalism.
J@pan Inc readers enjoy the creative friction that occurs when East rubs up with West. In the case of Totten it produces someone more Japanese than the Japanese.
Japanese readers may know Totten-sensei from some of the dozen books he has written in Japanese on topics concerning the state of Japan's economy and cultural values. His forthright views, despite their strident criticisms, endear him to many voters fed up with the status quo. For foreign readers his views shed light on the idealized mind of the Japanese samurai businessman, which still prevailed when he came to Japan over 30 years ago. His views on life-time employment, treating customers as family, and his low regard for making money from money -- "money which breeds money is immoral" -- all belong to the same cast of mind.
Despite describing himself as an "extreme right wing communist," his company is not a totalitarian camp, or a pseudo-religious organization, like some companies in which charismatic founders impose their will. To his employees he is simply, "Bill-san." They are required to read, and if need be argue with him, over his Philosophy and Beliefs company manual. Failure to agree leads to dismissal, but not before a fair hearing, and one can hardly imagine it has ever happened. Despite his impressive height (195cm) and fierce views, he seems too kindly to terrorize staff to bend to his will.
From the Ashisuto company manual Philosophy and Beliefs:
"I hereby promise each and every member of Ashisuto all reasonable assistance in understanding this paper, every reasonable opportunity to have his questions about this paper answered, every reasonable opportunity to express and discuss his disagreements with this paper, and every reasonable opportunity to convince me to change this paper. And, I promise to change this paper in whatever way any Ashisuto member can convince me to change it."
Reasons for coming to Japan
I joined a company in the computer industry which wanted someone to go to Japan to survey the computer market. They sent me over here in August of 1969. That was just after the US government had created the US package software market by forcing IBM to charge separately for hardware and software. They didn't have any good software packages; we didn't know the Japanese language, Japanese society, or the market, and since Japanese wages were low and our wages were high -- the dollar was worth JPY360 -- we weren't going to get much business trying to figure out what kind of information systems people wanted and trying to build it for them.
As I went around people started asking me about packages. There were some other companies around which had good ones, so I tried to get the company to license other people's software packages and sell them here. I couldn't convince them to do that and about a year and a half into the assignment I went back to the office and said, "Look, if you're not going to support me, I'm going to quit and do it myself." My boss said, "Bill, it's a free world. There's the door. All you have to do is walk through it." It was just a bluff, but I had too much pride to go back, so I walked through the door.
I didn't know anything about starting a business, even in the United States, much less here, so I talked to a Japanese friend, Nagatsuma-san, and he hired me into his company to start the business. We looked at two products, chose one and introduced the other to one of his friends. He felt we'd led the other software company along, and if we couldn't take it we should introduce it to somebody else. I wanted to kill the product so we didn't have any competition, but that was not the Japanese idea of fair play, so we did it the fair way.
I started the business in his company in February of 1971. We used up a lot of the money, so his partners wanted to get rid of the business. Rather than stopping it, he and I volunteered to get our friends to put up some money and start it as a separate company. We started the new company on March 22, 1972. For the first several years Nagatsuma spent more time here than in his own company. He gave us four of his employees -- they were technical employees -- plus one secretary, which they hired for the project, so he's kind of the mother of the company.
We got to know each other because our company in the US was called SDC and his company in shorthand was called SDC, and our lawyers, unbeknownst to me, went after him to change his name, which he did, to SDI.
On private versus public company ownership
I own about 30 percent of the stock. An adviser to the company owns 12 percent, and right now the company owns the rest. My plan has always been when I leave the company to turn my stock over to the employees or the senior employees. I'd like to give it away, but you can't because the tax agency requires you to sell it at what the tax agency decides is the value. I've never had to answer to stockholders. I've always run the company for the customers and employees. That's the way it should be done. I don't believe in unearned income. The Bible, Aristotle, Plato, Confucius -- they all say that it is bad to breed money from money. It ruins society if you breed money from money. You should get money from contributing something concrete to society. I don't believe in contributing to somebody's unearned income.
I've always had the freedom to run the company my way, or my board and myself have, because we own the stock. What our advisers are saying is, if we don't pay dividends, which we don't, and there's no chance of selling the stock, then there's no advantage to the employees of owning the stock. But there is an advantage I tell them: You are keeping other people from owning it. They say, well, maybe the employees don't want it. So, I've decided, okay that's fair, if the employees don't want it, I'll sell it to the highest bidder. That bidder will demand dividends and they'll have to cut down bonuses to employees to pay those dividends. If they are that stupid, then I'll sell it, but I don't think, when it gets to crunch time, they'll be that stupid.
Softbank, and a lot of the public companies that have grown faster than us in the last 10 years, have grown faster because they've been able to use money as a tool. Our only tool really is our people, our reputation. When you open up the newspaper, you see two page advertisements -- one page costs up to JPY33 million. They are able to do stuff like that because they are public.
If we had outside capital we could buy products. I don't like the idea of developing software because it's so creative you don't know who's going to be able to come up with the best software. You know the nice thing about the book publishing business is book publishers don't pay people to write books, they pay people to read manuscripts and then they pay for the ones that they think are good. In this kind of business we can solicit software and pay for it and not have to pay royalties and so increase our margin. We can advertise more, promote more.
On being an employee
I think the company should be kept as an institution where people out of college come in and work for their lifetime, and as long as they are providing good services to our customers, then our customers will keep dealing with them. My generation is the first generation. The younger people are the next generation. [We're] just passing through. I've never taken a penny out of the company, except salary and bonus. I'm on the same scale as 700 employees. We're not communists. I earn more than most of the other employees. The other employees' income is based on what we consider their worth to the company. It's a scale system. Everyone's paid on fixed salaries plus bonuses that depend on how well we perform.
On the evils of stock options
I think using stock options is a scam because it gives incentives to just a few people at the top of the company. The bonus system gives an incentive to every employee. When you look at it, year in and year out, the people who do most of the work are the average employee. We have to sell our product. We have to support our customers. It's not the top executives who are doing that. It's 700 employees.
I think the important thing, though, is running the company for the customers and for the employees -- where the employees are not busting their asses to make money for the stockholders or Bill Totten, but having a good working environment for themselves. [The only way to do this] is for them to continue satisfying the customers. The relationship among the employees is family-like and the relationship between the employees and customers is family-like. I think of it like working in a small village. You have to work together to protect yourself from the hurricane. We're just a small community of ourselves and our customers.
On the problems of the lifetime employment system
Industries come and go. The steel industry rose very quickly and then kind of stagnated. If you are going to have lifetime employment, you have to educate your people so that when steel dies, and you have to go into plastics, or when automobiles die, and you have to go into rail cars, people can adapt too. One of the big problems at Japanese companies that are trying to get rid of people is that they really didn't train people to do anything except what was the hot business at that time. Now that business has changed, they need fewer people with the old talent, and they haven't educated people to be flexible, so that they can learn new things. They have to pay for labor they can't use.
That's one of the big headaches we have. We realize that the software packages business isn't going to last forever, and we have to educate our people so that they can move into something else. Finally I think we have a good plan for that. We're moving into a much less profitable business selling services related to our products. If you just sell the product, there is a better margin, but selling the services -- the lower margin business -- guys in their 50s, 60s or 70s can become really expert in computer information systems. If they develop professional talents, they can work until they die if they want to. The way to build that talent is to go out and build information systems for people, to build databases for people, so we're moving in that direction. Not to make a lot of money, but to improve the career paths of our employees.
On being different
I'm not a joiner...I don't belong to any political party. I don't belong to any club, except my tennis club. I started wearing Japanese clothes instead of suits for business but everyone at the company started complaining about it, so I quit. The Japanese have only been taught to believe in what everyone else is doing, so there was big resistance when I switched from long neckties to bow ties. They were up in arms. They said, you can't do that because no one else is doing that.
If I knew how to set up a religion I would, as a tax break. I own my own property in Kyoto (a large traditional residence next to the Kamogawa river). If I converted that into a shrine I wouldn't have to pay property tax. However, it's not easy to do.
On overproduction and automation
If you take the GDP figures and divide them by the population, the output per citizen, taking 10 year averages, was 16 in the 1990s, eight in the 80s, four in the 70s, and it was one in the 60s. So Japanese are producing 16 times what they were 30 years ago. They've got to consume 99 percent of that [Totten argues that exports minus imports equals 1 percent of Japan's GDP]. That's why we've got deflation.
People don't work here any more, because there's no jobs for them. You don't need secretaries because you've got personal computers; you've got robots in the factory; banks have become vending machines; the ticket seller at the station is a vending machine; the ticket taker at the gate is a vending machine. If you don't have the right ticket when you get off, you go to a vending machine...mother machines are building the machines. They've automated so much that there's no work left, so people are trying to restructure.
The people who own the machines get all the revenue, and everybody else will be poor and can't consume. If you can't consume then you can't sell what you're making. We have to pay people a wage not to work. If you're Japanese you get JPY3 million a year, whether you work or not. If you don't want to work you can take care of your grandmother, take care of your children, play tennis, write novels or draw beautiful pictures. But basically we are going to tax the people who are producing enough to pay everyone a minimum wage. For those people who want more than the minimum wage there are enough jobs around. If you don't do this, then the economy will not recover.
Basically the idea today is that if you don't work, you don't have wages; if you don't have wages you don't consume. This [way of thinking] is only 200 years old and now we've outgrown it. If you go back to Athens, there was no technology and no economic writing of any significance. There was beautiful sculpture, great poetry, legal thinking, education, but nobody had any economic concept because 20 percent of the people were citizens and 80 percent were slaves. The slaves did all the work, so telling the slaves what to do was all the economic thinking you needed. We've reached the point where we can use machines as our slaves, but people are slow-witted and it will probably take 50 to 100 years to bring our social rules up to date..
People aren't looking at the data. The aging slope is very slight compared to the productivity slope. The people who are helping society most are the older people who are the ones the government thinks are hurting it most. They are willing to consume and not demanding to work, which is what we want. We want consumers.
On being a right-wing communist
I describe myself as an extreme right-wing communist.
The Japanese for person is ningen, which means people together. Their concept of person is a social person, not an individual person. The idea of business or economics is cooperation. Cooperation has the same root as the word for communist. I say I'm a communist with a small 'c.' I have good relationships with the Communist party and left wingers, but I also have good relationships with the right wingers. There are certain things that I'm very right wing on. For example, I'm a nationalist. I think the Japanese are throwing away their national identity, trying to kiss the American ass too much, rather than being themselves. In my neighborhood I'm the only one on national holidays who puts out the flag. On Article 9 I think they should change the Constitution. I want them to keep the part which says that they will not use violence for international disputes, but that's no reason to deprive them of an army, navy, or air force, because within their territorial waters, they need a military to protect themselves, at least until we get a true world government.
I think the right wingers in this country do more to protect the nation than anybody else. They do more to protect the citizens than anybody else, and the people in the middle are really sponging off society.
What you need in Japan are more citizens to care about what is going on. Basically so few people are aware of what's going on, so few people care, that it probably doesn't matter who's in the prime minister's job, he's not going to get much done.
I would be very much against Tokyo governor Shintaro Ishihara (as prime minister) because I like him personally, and he'd wreck his health on a bad job. He'll have more fun doing another term as governor of Tokyo. There are so many dishonest people in the government and so many just working for themselves. Koizumi is a good example. He spends all his time working on his own popularity, and the people who are opposing him are mostly working for their popularity and their seats. There are very few people in government and politics who are sincerely trying to do something for the country. Some of those (who are) tend to be extreme right-wingers and some of them extreme left-wingers.
On the lack of Japanese cultural awareness
The people who have been in power have been trying to ruin the country for 150 years. They have been saying let's get out of Asia and become a Western society. They threw away Japanese clothes, they threw away Japanese teaching, basically everything, and all they do is kiss the white Caucasian ass. McArthur came in after the war and totally wiped out the teaching of Buddhism, Shintoism, Confucianism and the teaching of the Japanese classics. It was about the beginning of the Heisei period that the post-1945 generation came into power. They don't know anything about Japan. They have the same racial features as Japanese. Inside they don't know anything about Japan -- the culture, the values, anything, so you've got a bunch of hollowed-out Japanese. It's a product of the 'out-of-Asia-into-Europe' movement [which took place] right after Perry [Commander Perry whose arrival off Japan precipitated the opening up of Japan in the 19th century] came here. Now they express it in the color of their hair. You know, you've got dyed blonde Japanese.
On Japan's key values
The three Japanese values I like most are, first Confucianism. Confucius was a teacher of rulers. The basic thing he says is, "Why are you a ruler? Because you happen to be lucky." So have a little humility. Use the power for everybody. Don't use it selfishly. That's the kind of leader we need today. Not people who use their high government office, their high business office, for their own selfish interests, but people who use it as a trust for the good of everybody. Buddhism teaches basically to reduce your lust, to not want so much. The difference between the religions which came out of the Middle East -- Christianity, Judaism, Islam -- and Taoism or Shintoism is that they all say God made this world for man -- it's a present for man, and so man should take care of it, but also he is free to do whatever he wants with it. But Tao and Shinto say man is a part of the world, and you have to adjust your living to the world. With all the environmental problems we have these days that kind of teaching is more needed.
This story first appeared in J@pan Inc magazine (www.japaninc.com).