Livedoor Case Is a Pivotal One for Japan Inc.: William Pesek
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Livedoor Case Is a Pivotal One for Japan Inc.: William Pesek
Jan. 20 (Bloomberg) -- ``Geezers who live in the past aren't able to seize business opportunities.''
Takafumi Horie, the 33-year-old president of Tokyo-based Internet company Livedoor Co., made few friends in corporate Japan with that line in his 2004 book ``The One Who Makes Money Wins.'' The Web technology upstart may have even fewer now that he's the subject of an investigation that helped trigger a sell- off in Japanese stocks and shut down trading in Tokyo.
The allegations against Horie seem thin. Allegedly, affiliate Livedoor Marketing Co. presented false information during a takeover it made in 2004 and overstated earnings.
Horie's woes wouldn't be so newsworthy in this post-Enron Corp. world if the university dropout didn't personify Japan's New Economy. Depending on your bias, Horie is either a business guru or a crass showman. Thus, allegations this week that Livedoor broke securities laws and misled shareholders are either dismal news for Japan's outlook or a non-event.
The latter camp has a point. Livedoor, after all, is just one company and its troubles come amid the healthiest recovery Japan has seen in 15 years. And the stock market has calmed down. Initially, the Livedoor news triggered the Nikkei 225 Stock Average's biggest plunge since the Sept. 11 terrorist attacks. By yesterday, the Nikkei was climbing again.
The downside risks still shouldn't be ignored. This story goes far beyond Horie; it's really about where Japan's economy may be in 10 years.
Bigger Than Horie
For Japan Inc., which long seethed at Horie's unconventional and cheeky ways, a sense of revenge is in the air. Rather than delighting in Horie's woes, the establishment should appreciate what he's done for an economy struggling to find new sources of growth amid China's rise.
Last year, the scrappy entrepreneur shook things up by waging a hostile takeover battle with Fuji Television Network Inc., the nation's largest broadcaster. Such a move was almost unheard of in Japan. His unsuccessful campaigns to buy a baseball team and enter parliament also challenged Japan's stuffy ways.
If only Japan had 100 such entrepreneurs defying the status quo, taking risks, testing financial market rules, questioning shareholder-unfriendly practices and urging executives to change with the times, its economy might be far more dynamic.
Slow to Change
Those who dismiss Horie as a get-rich-quick self promoter ignore how much excitement he's stirred up. There's little doubt scores of Horie wannabes are perched before laptops with visions of creating their own Internet success stories and taking on Japan Inc. That drive is badly needed in a nation in which individual initiative remains all too rare.
While Japan's economy is indeed recovering, it's still more about job protection than creation, more about supporting corporate behemoths than ground-up entrepreneurship.
That Japan has been slow to change was on display on Jan. 18 when the Tokyo Stock Exchange halted trading for the second time in its 56-year history as orders overloaded computer systems. It was a major embarrassment for Asia's No. 1 economy and showed that Horie has a point about Japan's slowness to embrace new technologies.
Horie isn't always a loveable character. His casual attire of T-shirts rather than dark suits and ties, and his informal speaking style of shunning honorific language normally used to show respect to older executives, raised eyebrows and made headlines.
Old Versus New
One wonders if Japan Inc. has just issued an ultimatum: Do as we say, or else. By raiding Horie's Tokyo home and office, the establishment seemed to send that message. Now that he's been warned, Japan Inc., which Horie once branded a ``club of old men,'' is closing ranks to discredit his accomplishments.
Rarely has there been a more graphic example of New Japan -- entrepreneurial, globally minded, out to make money -- clashing with Old Japan, which favors harmony over shareholder value and abhors outsiders or surprises. Public sentiment often takes on a generational quality. Many older Japanese loathe Horie's cocky demeanor; younger people welcome his efforts to rock the boat.
More than entrepreneurship is at stake here. Livedoor's stumble also raises questions about the outlook for mergers and acquisitions.
An important ingredient in Japan's recovery is corporate consolidation. Government regulations that favor giant, established companies with bloated workforces over newer ones virtually eliminate competitive pressures. The risk is that Livedoor's woes will slow Japan's much-needed M&A boom.
Another question worth asking is whether prosecutors are aiming lower just to get a conviction. It's quite possible they have more on Horie and this is an excuse to find the evidence they seek.
Either way, the outcome of Horie's run-in with the law may show how far Japan Inc. has come -- or hasn't. Let's hope this isn't an excuse for entrepreneurial New Japan to be flattened by the Old Japan steamroller.
To contact the writer of this column:
William Pesek Jr. in Tokyo at wpesek@bloomberg.netLast Updated: January 19, 2006 17:32 EST
