Daily Speculations The Web Site of Victor Niederhoffer & Laurel Kenner Dedicated to the scientific method, free markets, deflating ballyhoo, creating value, and laughter;  a forum for us to use our meager abilities to make the world of specinvestments a better place.

Home

Write to us at: (address is not clickable)

Francis Y. Sogi

0/06/04 "Kona Wind": Excerpts from the coming autobiography of Francis Y. Sogi

YKK and the Cycle of Goodness

It is fascinating that a simple, everyday device like a zipper helped me hone my expertise in dealing with Japanese business clients during this early period in my legal career. It was in 1958, through the introduction of T. Shinohara on the West Coast, that I was asked to meet with Tadao Yoshida, the founder of Yoshida Kogyo KK (YKK) of Kurobe, Japan. Kurobe is on the island of Honshu, facing the Japan Sea.

Mr. Yoshida arrived in New York with Harry Isaka, an assistant who served as his interpreter. I met them at the Statler Hotel in midtown Manhattan prior to escorting them to dinner in a nearby restaurant. After introducing ourselves and chatting for a while, we started to leave the room and head out when Tadao Yoshida said, Excuse me, the lights are on and I should turn them off. We should not be wasteful of valuable electricity. That experience remains with me nearly half a century later. I was most impressed with a man who was mindful of waste even in a hotel where the room charges included all utilities. <> This man will succeed, I said to myself.

During the course of our dinner, Mr. Yoshida talked about his philosophy of life and business. He said that he was convinced he could succeed if he had a location, a piece of machinery, and a roof over it. His mechanical skills and creativity were beyond limits and he was way ahead of his time. His philosophy, the Cycle of Goodness /(Zen No Jyunkan), /was based on principles advocated by Andrew Carnegie of U.S. Steel, whom he admired. According to this philosophy, by serving the people and society, an enterprise will prosper as it will cycle back returns to the entrepreneur, similar to a Mobius strip. The Cycle of Goodness works generally in this manner: YKK must produce quality products at a reasonable cost. For example, a piece of product that costs 100 yen to produce initially will be produced for 50 yen, resulting in a profit of 50 yen. This profit is divided among the ultimate customer, the dealer, and YKK. With this profit, YKK could invest in research, development, purchase materials in large quantities, thus lowering the cost, pay dividends, and increase the wages and salaries of its employees.

Based on this philosophy, TadaoYoshida led YKK to become one of the largest privately owned companies in the world. It now operates in 66 countries with 132 companies in its group. YKK is reputed to be the Fastener King of the world and its market share is the largest in the world. I was privileged to have been part of this expansion over the years. YKK started as a manufacturer of metal zippers and later developed slide fasteners out of other material never imagined possible by old-time zipper makers. Through its founder's forward-looking creativity and charisma the company grew and there is every indication that its scope of operation and expansion will continue.

When Mr. Yoshida started in the business, he said his goal was to produce enough fasteners to reach the moon, but he has in reality gone to the moon and back many times over. When he started using aluminum in YKK s fasteners, he mentioned to me the possibility that his firm could manufacture automobiles or refrigerators, but he saw a greater potential in the building materials field. YKK has since developed its own unique designs for building homes and office buildings. In expanding its operations worldwide, YKK also acquired smaller specialty-products companies in the fashion industry and related fields and expanded its operations worldwide. In addition, YKK produces its own machinery and tools.

Tadao Yoshida s management style was to train his employees in such a way that everyone would become an entrepreneur like him. The reason he came to New York in 1958 was to seek a solution to a problem with a $300,000 shipment of aluminum zippers that customers complained were defective. After agreeing that the zippers were indeed not operating properly, he summarily decided to return the total price he had received and recalled the entire shipment to Japan. Since that time, I have never heard of the company experiencing any endemic defects in its products again.

Why Japanese Business Will Succeed in Iraq

In the early 1950s, as George Yamaoka and I were the only lawyers able to speak both English and Japanese and were the only ones who were qualified to practice in both jurisdictions, we attracted a lot of business from American companies eager to do business in Japan. We represented some of the leading firms in Japan, some from pre-war days, with a client list that included Mitsubishi International, C. Itoh & Company, Marubeni-Iida, Nissho-Iwai, Toyoda Tsusho and Toyota Motors, Kawasaki Heavy Industries, Kawasaki Steel, Kawasaki Shipping Company and many others. We also represented some of the major city banks such as Bank of Tokyo, Mitsubishi Bank, Mitsui Bank, Tokai Bank, Daiwa Bank, Fuji Bank, and others. We also represented a number of U.S. companies who were investing in Japan such as Ford Motor Company, American Cyanamid, Lederle Laboratories, Chase Manhattan Bank, IBM, Readers Digest, Union Carbide, Lockheed Aircraft, AIU, and many other Fortune 500 companies.

Doing business in Japan during this time was far more serious and difficult, however. It was not uncommon for Americans and Japanese to misinterpret cultural signals and expressions. We were representing Lockheed Aircraft whose T-94 Trainers were being used by the U.S. Air Force in Japan for training purposes and the craft required periodic overhaul. As the major industrial companies started to prepare their bids, the Air Force permitted them to visit its Tachikawa Air Force Base for further discussions. At one of these meetings, the Japanese agents were complimented for their approach to the overhaul project and were told to sharpen their pencils. Elated, they rushed home to their home office to inform senior management that they had been told to sign a contract. The Americans, on the other hand, had merely meant that they should fine-tune their proposals and reduce the cost.

International geopolitics also contributed to Japan's success during this period. The Korean War broke out in 1950, just two years before the signing of the final peace treaty with Japan. The outbreak of hostilities on the Korean peninsula prompted General MacArthur to strongly recommend the formation of a police force in Japan, now called the Self-Defense Force. Though it was short, the Korean conflict benefited the Japanese economy to some extent. In the 1960s, the Vietnam War definitely benefited Japan without straining any of its resources. As a result of all of these conflicts, it was clear that the United States definitely needed to have Japan on its side because of its sometimes paranoid fear of Communism, something that was not a factor in Great Britain, Canada, or Japan itself. All three of these countries did business with and carried on trade with the Communist countries, while the United States did not.

Now that Gulf War II is over, Japan will again be one of the beneficiaries in the reconstruction of Afghanistan and Iraq since it has been one of the staunchest supporters of the United States, right or wrong, and seldom, if ever, criticizes the United States openly. With heavy reliance on imported oil from the Middle East, Japan must work together with others in assuring themselves of the supply of oil. Also, Japan has advanced technology and equipment that can be useful to the reconstruction of Iraq. It is said that in Gulf War I (Desert Storm), Japan contributed much technology that helped the United States greatly. If the work in Iraq is based on an international open bid system, Japan will be an important player because of its efficiency and ability to perform the work effectively at a relatively low cost. Finally, Japan s experience after World War II can be a valuable resource to the United States in the rebuilding of Iraq although the human problems are poles apart between the Japanese and Iraqis.

© 2004 (all rights reserved)

Francis Y. Sogi is the father of Daily Speculations contributor James Sogi. Publication of his autobiography, "Kona Wind," is expected in December. "He has more experience there than anyone in the US and his opinion is worth listening to," says James Sogi.