[IMPACT Interview] Heizo Takenaka (Part 1/3) Entrepreneurs – A driving force for social development

2016/06/28 | By IMPACT Japan

IMPACT Interview: Heizo Takenaka (Part 1/3)
Entrepreneurs – A driving force for social development

This project introduces entrepreneurs who are active across Japan and the world, and unveils the methods behind their successes. In this two-part series, I spoke this time to Heizo Takenaka, one of the leading Japanese entrepreneurs of our time, and who promoted political and economic structural reforms in a variety of ministerial positions, including Minister of State for Economic and Fiscal Policy, during former Prime Minister Koizumi’s term in office.

What is an entrepreneur? Why does Japan not produce entrepreneurs? I asked him for his views.

Heizo Takenaka
Born in 1951 in Wakayama Prefecture. Took up posts as a professor at Toyo University and emeritus professor at Keio University from April 2016. Held successive positions in the Koizumi administration over a period of 1,980 days, including serving as Minister of State for Economic and Fiscal Policy and Minister of State for Privatization of the Postal Services, thus recording the longest consecutive period of tenure of any state minister following World War II. Since announcing his retirement from politics, he has energetically engaged in government-related work, including serving as one of the expert members of both the Industrial Competitive Council and the National Strategic Special Zone Advisory Council, as well as holding positions in the private sector such as Chairman/Director of Pasona Group Inc., Director of Roppongi Academyhills, and Outside Director of Orix Corp., and he is working committedly to develop industry and train human resources.

William Hiroyuki Saito
A second-generation Japanese-American born in California in 1971. Special Advisor to the Cabinet Office for the Government of Japan. An entrepreneur himself, he sold one of his businesses to U.S. company Microsoft Corp. in his 20s. William is currently active in nurturing next-generation leaders, and serves as Chair of IMPACT Foundation Japan, an independent legal entity that he set up. IMPACT Japan Foundation plans and manages the INTILAQ Tohoku Innovation Center as a base for activities by the Qatar Friendship Fund.

Entrepreneurs are quite simply a driving force for advancing society

- William Hiroyuki Saito (below, William)
Mr. Takenaka, you yourself are an entrepreneur who was instrumental in reforming economic policy within the extremely large organization that is the government. For that very reason, I would very much like to ask what your definition of the term “entrepreneur” is.

- Heizo Takenaka (below, Takenaka)
I am just one academic, but I would say that a true entrepreneur is a person who instigates discontinuous changes in the world. I think of entrepreneurs quite simply as engines for advancing society.

Now that I am 65 years old myself, I realize that life truly is short. There are people my age who have already retired from work, and there are also some who have passed away. Within the long span of history the time that a single person spends alive does not amount to much, and that being the case it’s my hope that young people will grow more conscious of discontinuous changes.

- William
Well you’re still very young yourself, Mr. Takenaka – you’ll have to keep at it!

- Takenaka
I guess I’d better take care of myself so that I can live healthily for another 10 or 20 years! I hear Klaus Schwab (the founder of the World Economic Forum, who was born in 1938) has cut back on overseas business trips. I think the 10 or so years from your 40s, which is about your age now, is a really interesting time.

- William
The age we consider to be “young” will probably continue to go up in the future. I’d like to see those people who think of themselves as retired making much more of an effort at entrepreneurship.

Well, we have already digressed but if we could return to the main topic, what exactly do you mean by “discontinuous changes” as a definition of entrepreneurship?

A dream, courage, and some money –
that’s all anyone needs to achieve innovation

- Takenaka
The debate about what we need to do to make society better has been going on for quite some time and in many different fora. The importance of innovation was presented to the world by Joseph Schumpeter, one of the leading economists of the 20th Century. In his first book he did not use the word “innovation,” however. The term he used in its place was “new combinations.” Schumpeter argued that generating new combinations in society will lead to major transformations, and that that is the source of dynamism for driving the growth of capitalism.

- William
When we put emphasis on the word “entrepreneurship” I suspect there are probably quite a number of people who hesitate to act because they mistakenly assume it means that only someone special can achieve it. Maybe if we were to talk about it as “connections between people” it would help people think of it in terms of trying to bring about change, starting with something they are already familiar with.

- Takenaka
I am sure there are in fact some people who have an incredible spark of genius about them, but innovations that have actually brought significant changes to the world have in many instances been combinations of various people’s and companies’ ideas.

For example, James Watt’s steam engine, which was central to the industrial revolution, was created by combining the power of chemistry – the production of steam – with a cannon technology for confining the steam through pressure. Smartphones are also the result of joining together two different technologies – telecommunication technology and digital technology.
Nevertheless, no matter how many horse-drawn carriages are linked together, they do not make an automobile. Asking yourself whether things that play different roles can be combined – that is what produces discontinuous changes.

- William
However, in Japan we do not see an increase in examples of connecting and coordinating outside one’s own organization. I get the feeling people fear that if they stick out amid the homogeneity, they will immediately be hammered down.

- Takenaka
Yes, in Japan there is an atmosphere of being immediately ostracized if you do something different to everyone else. Considerable courage is needed to follow a different track to others. I think this is a good place to bring up an expression that former Prime Minister Koizumi used countless times in the Diet: namely, “a dream, courage, and some money.” This is from a Chaplin quote originally (“courage, imagination…and a little dough”). Have a dream. Then have the courage to take the first step. And you will need a little money as well. That is what this expression means. It is better to have lots of money, but it’s okay even if you do not necessarily have a lot. Having no money will not do, however.

When society has capitalists who can take on risks that young people can’t
and who make sound investments, entrepreneurs are born

- Takenaka
Schumpeter believed that financiers were important for bringing about innovation.

For example, two young people come up with a good idea in their garage, but they don’t have the money to put that idea into practice. Who will support them? That’s where financiers come into play. They form a vital piece in the process of realizing innovation.

- William
In America there are countless cases where angel investors have assisted ventures, but in Japan there are few groups and individuals that will take on that sort of risk. Lending the money should be synonymous with assuming the risk that a young person is unable to take, but for some reason lending money has a negative image.

- Takenaka
Society has to attach much, much more importance to the work of financiers. There is a prevailing view that what financiers do is outrageous – that all they do is lend out money and then snatch up a share of the profits that are many times the size of their initial investments – that they are making easy profits. We need to change that.

There is another well-known saying by Schumpeter in which he suggests that capitalism’s success will be the cause of its decline. Initially there is momentum and the successes accumulate. However, the larger organizations grow as a result of success, the more organizational inertia sets in, and then these organizations end up becoming groups that do not seek discontinuous changes. The fact is, this absolutely applies to Japan.

Otto von Bismarck, who was a central figure in the unification of Germany, said that a fool learns from experience and a wise man learns from history. Experiencing success that has occurred within narrow parameters and then attempting to recreate it subsequently will not always give rise to the same success. What is important is to take a more modest approach and continuously consider the evidence for why a previous case was successful.

(Continuation of the interview with Heizo Takenaka in Part 2 – coming soon)

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