#386 Akio Morita: Founder of Sony

24:11You're supposed to turn and like hide your and direct your gaze elsewhere. Again, something that Akio just would not do. But I think the advice that the emperor gives to the Japanese people after the war is actually really, I think it applies to any difficult challenge. So it says the emperor who up and now had never been spoke, had never spoken directly to his people, told us the immediate future would be grim. He said that we could pave the way for grand peace for all generations to come, but we had to do it by enduring the unendurable and suffering what is insufferable. He urged Japan to look ahead, unite your total strength to be devoted to the construction for the future.

24:46And he challenged the nation to keep pace with the progress of the world. So unite your total strength to be devoted to the construction of the future and keep pace with the progress of the world. That's exactly what Okio is going to do with Sony. That's really what jumped out to me. Now, one of my favorite quotes, I think Charlie Munger is the wisest person I've ever come across. One of my favorite things that he ever said was that you need to avoid intense ideology because it turns your brain to cabbage. It turns your brain to cabbage. And so Akio says that his family avoided this. They were surrounded by fanaticism and by people saying, we should go down to the last man.

25:22We'd rather extinguish the country of Japan than lose a war. So he says, our family had avoided the fanaticism that seemed to grip so much of Japan's youth in those days, the worship of the emperor and the idea of a glorious death. In Japan, we often talk of a psychological climate or atmosphere that sometimes occurs and which seems to sweep people up into like -minded activity as though everybody is breathing the same special kind of air. Now, he's saying that happens in Japan. We know that happens everywhere. You just have to be very careful. Avoid a tense ideology. It turns your brain into cabbage.

25:55Now, this is one of the most inspiring parts of the entire book. If you think about the conditions in Japan right before Akio found Sony, many cities looked as though there was nothing more to bomb. Flimsy houses, shops and factories made of wood and paper had burned like dry tinder under a shower of firebombs. In Tokyo, less than half of the pre -war population of 7 million people remained into the city. Only 10 % of the city's streetcars were running. there was 60 buses in running condition and just a handful of automobiles and trucks in the entire city. Hospitals were short of everything. Department store shelves were empty.

26:36And there's also almost no food. In fact, when they decide, Hey, we're going to start a new company. And his co -founder, Buka is the person that says start the company first. They're like, why are you Matt? Why are you trying to make electronics? You should try to make food because food was so scarce. It's so crazy. So Akio talks about his future co -founder. And this is something that you and I talk about over and over again. You must, you absolutely must find and work, find the best people you possibly can and work with them. And Akio realized like, oh, this is very similar to like Steve Jobs realizing Wozniak.

27:10He said something like Wozniak had like more talent than like 50. You could pay like 50 average engineers and Wozniak would outperform all of them. There's an element of that with Akio just thinks that his co -founder, you know, the most brilliant engineer alive. And he was already, Abuka was already running a company out in like the countryside. It was the Japan measuring instrument company. He's going to quit doing this and move to Tokyo to start what's eventually going to turn to Sony. But Akio tells great stories about Abuka and he just talks about this guy's mind is like unlike anybody else's.

27:42So he gives an example to us here. He's like, okay, well, they're, you know, he has like 1500 employees already. They're making these small mechanical elements that control the frequency of radar devices. These devices have to oscillate at exactly 1 ,000 cycles per second. And Abuka had the ingenious idea of hiring music students who had a fine sense of pitch to check the accuracy of the elements against a simple 1 ,000 cycle tuning fork. I mentioned this story as an example of the freshness and inventiveness of his mind, which so impressed me and made me want to work with this man. And so the prehistory of Sony is Abuka is going to make some very smart decisions.

28:20First, he's going to move to Tokyo. Second, he works on what interests him. And then third, the very first product, he finds a way to add features to a product that a lot of people already have. You know, one thing that is very obvious in the book is like when they're forced to design with constraints, they are forced on a company level, on an individual level, a company level, and a country level to be resourceful. And I think the idea of, let's say, hey, there's already a product that's out there. Can we add features to this? Kind of jumpstarts, you know, our distribution. And so it says, Abuka had a very intriguing idea.

28:49Since shortwave receivers, these are little radios that everybody had during the war because they would broadcast updates in the war. So one, it's just like, they're not expensive and they're essentially ubiquitous in Japan. Okay. Shortwave receivers were strictly prohibited during the war. A keen interest had developed in listening to shortwave broadcasts. Now that it was no longer illegal. Okay. So you had this like black market underground, everybody had them anyways, but now it's not illegal. So now we can actually start making products for this. So the install base is already there, right?

29:21Because the radio was very important for hearing air raid warnings and getting other information during the war, people had taken very good care of their radios, but they could only receive regular AM broadcasts. So Abuka designed a shortwave adapter, something that could be attached to any standard radio, very simply, and would convert the unit to a shortwave reception. The conditions in which he did this is incredible. There's almost no inventory anyway. So you have to script the employees that Abuka had at the time would literally have to buy, they'd have to go to the black market to buy the tubes that they need to make this adapter, the shortwave adapter.

29:58They start making them, the product immediately becomes very, very popular. So they're doing this in Tokyo. In an empty and bare old building set among the rubble and devastation, the burned out homes and shops of the once prosperous downtown area of Tokyo, Ibuka started the Tokyo Telecommunications Research Laboratories. This is the company that's going to turn into Sony. And Akio does not hide the fact that without Ibuka, there would be no Sony. so what Akio does that's really smart and I think in line with his personality and who he was as a person he senses an opportunity he does not wait he jumps on it immediately so he wrote to Ibuka he writes him a letter said I want to help him with his new business and would support him any way I could he wrote back immediately inviting me to come see him and a new company but he told me that things were pretty tight and then he was paying people out of his own pocket and he was looking for funding I need to back up and tell you one thing what Akio was doing at this time his old physics professor at university there was a drastic and dire need for physics instruction and so Akio his job right now why he figures out what to do is he's teaching physics at the university so he's like hey don't worry you have trouble meeting me meeting your payroll I can I'm going to work I'm going to teach during the day and work with you and then I can just live on my salary from my teaching job now what they go and do and this is very common like Japanese culture is they go, they have to ask his dad, Abuka and Akio go and talk to Akio's dad, right?

31:27Because Abuka, he realizes how valuable Akio is going to be for the company. They're going to want to be co -founders for this. They have to essentially get permission from his father. Abuka told my father about the new venture. Now, this is very fascinating. And this is, again, talks about, remember Akio mentioned earlier, I have great memories of my father. His father's long since passed away by the time he's writing this book. I have great memories of my father. He was a great father. His job seriously, he made our family wealthy again. And then when he wasn't working, he was spending time with us.

31:52And we just had great memories. And I think one of the most important things is his father knew his son. His father knew his son. And this will make sense in one second. Ibuka told my father about the new venture, what they hoped to accomplish. And then I was absolutely needed for the new business. And his father said, tells Ibuka, I expect him to succeed me as head of the family and take over the family business. Kio's sitting in on this meeting, okay? But if my son wants to do something else, he should do it. He looked at me and smiled. You're going to do what you like best. He knew his son.

32:27He knew his son. That's one of the best things that he could have ever done for a son. So this is the early, and he's going to do, they're going to wind up helping because they go to his dad, Akio's dad for loans. They wind up, he winds up loaning him money. They convert that money into, uh, into equity. And then his dad's going to make a lot of money on the Sony stock. This is very fascinating. The early days of Sony. No money, workspace, and an old bombed out building and a company of misfits. I don't know why this, like it brings like tears to my eyes. It's just funny. This section is going to be funny.

33:00So our new company was not sending any records for financial success in those days. Yeah, no shit. When some of my relatives came to see me, remember, I was from a rich family, okay? When some of my relatives come to see me, They were so shocked by the shabby conditions that they thought I had become an anarchist. They could not understand how if I was not a radical, I could choose to work in a place like that. I don't know why that makes me laugh. Now, this is what I mean about self -confidence. This is what I mean about I kind of knew who they were from a young age and what they wanted to do.

33:32And they knew from the beginning, we're going to build differentiated products. They wanted to be high quality innovators. really when you get to the section of the book, the personality type we're dealing with here. You think of Steve Jobs at Apple, think of Edwin Land at Polaroid. Edwin Land's personal motto, for God's sake, was don't do anything somebody else can do. I don't even know if they ever explicitly say this, but when you have somebody saying, hey, I'm going to do something completely differentiated, I'm going to do it better than anybody else in the world. There is an element of pride and self -respect and competitive drive to what they're saying that is implied in what they're saying.

34:04And even if they don't say, their actions express what's important to them. They want to do something truly unique. They want to do something truly special, which Sony may not be like that today, but undoubtedly for the first four decades, it was that. It was its leader. It was completely innovative. So it says, Abuka and I often spoke of the concept of our new company as an innovator, a clever company that would make new high technology products in ingenious ways. Merely building radios was not our idea of the way to fulfill these ideas. And so that's the important part. You might not be able to get there from the very beginning.

34:37So they're essentially building radios. They're adding, they have this little adapter that goes on to other things, an existing product. But you have to get started somehow. And I think that's really important. It's like, this is, we know where we're going, but we're going to do the best with the opportunities in front of us, is how I read this part of the book. Now, another thing, always do your best work, even in terrible working conditions. We talked about this over and over again. You and I talked about this over and over again. That opportunity handled well will unlock, leads to unexpected opportunities.

35:04so the americans they need they're putting out you know they're coming to japan they're essentially controlling everything for the time being they they're starting to put out all like requests for things that they need built and the occupation american forces uh had taken over the japanese broadcasting company and they need this new technical equipment they need mixing units and other studio and broadcasting equipment okay buka knows how to build all this he had previous experience with this so they submit a bid on a contract to do this for the americans so they're going to get a bid to build this mixing unit.

35:36Okay. Now there's something really funny that happens. The general has to go and actually tour your factory or your offices. And they're like, what the hell is going on here? And they tour it after they awarded them the bid. So it says, when the general saw our shop, he was taken aback by how primitive it was. He shook his head. We were this tiny unknown company working in very primitive conditions. He was concerned about our terrible building. He was so concerned about a terrible building that he recommended we keep buckets of sand and water around the place in case it caught fire. When the equipment was delivered, everyone marveled at its quality, especially the skeptical officer who was still puzzled by the fact that a new small company in a makeshift factory could produce such a high technology product.

36:15We were able to obtain further jobs because of the breakthrough and trust we made on that first job by demonstrating our quality. And even more important, when they deliver this mixing unit to the Americans, they spot a tape recorder for the very first time and they immediately realize it's obvious. It's like, wait, tape recorders are superior technology to a wire recorder. So they decide to build one. They decide to build a tape recorder. That in turn leads to another important insight that they're going to build their entire company around. So one of the things that Steve Jobs admired so much about Sony was their marketing, how impressive their marketing was.

36:50And that was a skill they had to learn because both Akia and Abuka are engineers. They're like, oh, we build a great product. Customers will come. And obviously that's not true. They build the best tape recorder, but the tape recorder flops. And so this is when they learn a very important lesson. You must know and then find your target customer. And Akio is going to become obsessed with marketing and advertising. So I had no experience in merchandising or salesmanship. It never occurred to Abuka or me that there was any need for this. Abuka believed strongly that all we had to do was make good products and orders would come.

37:17So did I. We both had a lesson to learn. We were engineers and we had big dreams of success. We thought in making a unique product, we would surely make a fortune. I then realized that having unique technology and being able to make unique products were not enough to keep a business going. You have to learn to sell the products. And to do that, you have to show the potential buyer the real value of what you're selling. I was struck with the realization that I was going to have to be the merchandiser of our small company. And so at the beginning, they try to sell the tape recorder just like normal people.

37:48Like they'll do demonstrations on the street and everything. And people are like, oh, that's kind of cool, but you know, it's kind of a toy and it's really expensive. Like, I'm not sure why I'd buy that. Definitely not going to spend that much money on it. And he realized like, oh, I need to find people that have a problem to solve. And then they'll understand the value immediately. He says, I knew that to sell our recorder, we'd have to identify the people and institutions that would be likely to recognize the value in our product. It wouldn't be a toy for them. It'd be a tool. There was an acute shortage of stenographers because so many people had been pushed out of school and into war work.

38:19Until that shortage could be corrected, the courts of Japan were trying to cope with a small overworked core of court stenographers. And so what they realized is the tape recorder would be very effective to record all of this instead of having somebody who needs to type it right away, right? We were able to demonstrate a machine for the Japanese Supreme Court and we sold 20 machines instantly. Those people had no difficulty realizing how they could put our device to practical use. They saw the value in the tape recorder immediately. And so one thing that was very consistent with Akio and Abuga was the fact that they were always on the lookout for developments of new technology made by other people and how they could take advantage of that.

38:57So they followed the work of Bell Labs, for example, very closely. And when the transistor was invented, they realized, oh, this is going to help us make a lot of these devices that already exist. And we can actually make them smaller. And they thought they had an advantage because miniaturization and compactness was something that was very important to Japanese culture. And so Akio is going to have this idea for what he calls a pocket radio. You can almost see this almost like a precursor to the Walkman and then in turn is the precursor to, you know, Steve Jobs and the iPod. The idea that you can have a thousand songs in your pocket is what obviously Steve said.

39:30In their case, it's like you have a radio that fits in your shirt pocket and you see this, you know, he's a very quick learner, this showmanship and marketing genius that Akio starts to develop. We could make a very small radio powered by batteries. miniaturization and compactness have always appealed to the Japanese. Our boxes have been made to nest. Our fans fold. Our art rolls into neat scrolls. We set as our goal a radio small enough to fit into a shirt pocket. Not just portable, I said, but pocketable. Now, we like the idea of a salesman being able to demonstrate how simple it would be to drop it into a shirt pocket.

40:06Problem is the product they make was slightly bigger than a standard men's shirt pocket. And that gave us a problem. So what do you do when your pocket size radio doesn't fit in a pocket? You make the pocket bigger, of course. We came up with a simple solution. We had some shirts made for our salesmen with slightly larger than normal pockets, just big enough to slip the radio into. Now, there's something in this also story that I think is really important for people to understand. Products don't compete, companies do. Products don't compete, companies do. So there's an American company called Regency that put out a pocket radio a few months before ours, but the company gave up without putting much effort into marketing it.

40:51So I can't understate or overstate rather how important advertising promotion and set and and educating the market is for these new products to Akio is, he will literally threaten to fire people if they don't listen to him, if they're not spending the budgets he wants to spend when he launches new products. And so this idea is like he has the kind of disdain for other companies that don't put much effort into marketing. And so this American company called Regency, okay, they had the radio, they had the market to themselves for a few months. The company gave up without putting much effort into marketing it.

41:23As the first in the field, they might've capitalized on their position and created a tremendous market for their product as we did, but they apparently judged mistakenly there was no future in the business and gave it up. So a few years into Sony, they're starting to get traction. They're developing the ability to not only create new products, but also market them. And Akio decides, hey, I'm going to go all over the world and I'm going to visit other companies and factories and I want to learn from them. And I want to pull out one thing that he found really, really inspiring, which is at the time, one of the most successful companies in the world was Philips.

41:55It was my first visit to Phillips that gave me a new insight. It was a surprise to me to find the great Phillips of my imagination situated in a small town in a small corner of a small agricultural country. I was taken with the thought that a man born, that's Dr. Phillips, I was taken with the thought that a man born in such a small out of the way place could build such a huge, highly technical company with a fine worldwide reputation. Maybe I thought we could do the same in Japan. So this is, now he starts understanding the why behind sony okay we're going to change the image of japanese products as at the time they were thought of poor quality exactly what jeff bezell said earlier they were copycats of low quality in fact the one of the astonishing things in the early days of sony the reputation of poor quality for japanese products was so well known that in the early days sony would print made in japan as small as possible on its products so sometimes it was so small you couldn't even read what it was.

42:53And so another thing that Akio realizes that's really smart is if I want to make products known for quality, I need to target an affluent audience that can actually afford to pay for quality. And so he says the Japanese company must export goods in order to survive. It became obvious to me that if we did not set our sights on marketing abroad, we would not grow to be the kind of company that Buk and I had envisioned. We wanted to change the image of Japanese goods as poor in quality. And if you're going to sell high quality, expensive product, you need an affluent market. And that means a rich, sophisticated country.

43:28And I'm going to get to this in a little bit, but Akio takes a very drastic measure when he realizes, oh, America is so important to the future of our company that I'm going to move at the drop of a dime, my entire family there. I have to, to be able to sell to Americans, I have to understand them. So therefore I have to live like an American. This guy is incredible. I'll get there in a minute. I want to go back to this because he talks about something over and over again. Marketing is just communication. So you have to be able to communicate directly. He does not like intermediaries. He doesn't want anybody in between him and his end customer.

43:57He talks about why this is so important. He talks about the importance of laying the groundwork of very slowly educating the market before you release the product. There's a lot of great ideas in here that I think are timeless. Marketing is really just a form of communication. In the traditional Japanese system for distributing consumer products, The manufacturers are kept at arm's length from the consumer. Direct communication with the consumer is all but impossible. That is not good enough for Akio. We realized from the beginning that it would not serve the needs of our company and its new advanced technology products.

44:25So they want to set up their own stores. They're going to go direct to the consumer. If we're separated by a third or a fourth party, they simply would not have the same interest in our enthusiasm for our products and our ideas that we had. It's going to sound exactly like the reason, if you think about the rationale that Akio is demonstrating, we're probably in the late 1950s, early 1960s. It sounds exactly, if you go back and read Steve Jobs thinking when he wanted to do the Apple stores. Exactly, it's the same kind of thinking. They arrive at the same exact conclusion. It's like, wait a minute, so other people are going to sell the products?

44:57We give our heart, our soul, our blood, our sweat, our tears, all of our life energy and our time to developing products. I'm going to hand them off to people that don't give a shit? No, not good enough. Not going to happen. We had to educate our customers to the uses of our products. To do so, we had to set up our own outlets and establish our own ways of getting goods into the market. And he's got some great ideas about that, which we'll get to in a minute. Now, one thing that's really, really important, again, it's going to sound a lot like Steve Jobs, going to sound a lot like Edwin Land. It's going to sound a lot like James Dyson.

45:24No market research. The public does not know what is possible. We do. I mean, think about the Walkman. That market was just sitting there. Somebody could have grabbed it. And everybody's saying it was a shitty idea to begin with. and he's gonna sell 400 million units. It's incredible. So the reason that's also beneficial that you don't have to wait on the market research, what if the market doesn't exist? What is there to research? He trusts in his own judgment, his taste and the skillset that he has. And what would happen is none of his competitors, they were like kind of copycats and follow -ons.

45:53So he winds up creating the market and then having the market to himself for a very long time. Our competitors would take a very cautious wait and see attitude while we market and develop a new product. In the early days, we would often have that market to ourselves for a year or more before other companies would be convinced that the product would be a success. And we made a lot of money having the market all to ourselves. We have to keep a premium on innovation. This is something that him and Abuka talked about from day one. Our plan is to lead the public with new products rather than ask them what kind of products they want.

46:24The public does not know what is possible, but we do. So instead of doing market research, We refine our thinking on a product and its use and try to create a market for it by educating and communicating with the public. Do you see how everything he says is interacted? We're going to aim straight for the top. We're going to innovate. We're going to have high prices. We're going to have big margins. We're going to be the best marketers. We're going to educate the customer. We're going to go direct. Everything works together. As an example, I cite a product surely everyone knows of, the Walkman.

46:53This idea took shape when a buka came to my office one day with one of our portable stereotype recorders. Okay? So he's carrying around this like heavy thing, which sounds funny now. Remember people who would put like boom boxes on their shoulders and stuff? You'd see movies like in New York City, you know, back in the 80s. I bring that up because it was obvious, like what is that person doing? That person is carrying something. It's like 15 pounds. He's carrying it around with him because he wants his music to travel with him. Everybody was listening to music at their homes, in their bedrooms.

47:22You're taking these giant 15 or 20 pound stairs around with you. What does that tell you? There's clearly a demand here. Just no one has done it yet. That seems kind of odd, right? So he's got his own co -founder, one of the genius engineers, the person that invents the products. And this guy has like some, you know, half -baked solution to this problem. I got this big ass tape recorder. I can record things. I can play things. And then we have these big ass headphones. and you know if I were that this is the way I take away I take around my music on its face that makes no sense clearly like there's a demand here right and so it says he looked unhappy and complained about the weight of the system I asked him what was on his mind he explained I like to listen to music but I don't want to disturb others and then I can't sit there by my stereo all day right because it's not portable so this is my solution I take the music with me but it's too heavy a book has complaints set me into motion I ordered our engineers to take one of our reliable small cassette tape recorders and strip.

48:21This is the important part where people thought no one would want it. Strip out the recording circuit. I'm not recording anything. We're not going to record anything on it because the recording circuit makes it bigger. I needed to make it smaller. This is just very logical, clear thinking. And then take out the speaker because you're going to do this with headphones. So now I just took out the recording unit and took out the speaker. What happened? I just made it miniaturized, which means you could carry it. Replace them, the recording circuit and the speaker with very lightweight headphones, which they also had to invent.

48:51Okay. Now here's the crazy thing. Everybody gave me a hard time. It seemed as though nobody liked the idea. Will people buy it if it doesn't have recording capability? I don't think so. That's the, that's the pushback that he's getting. Of course they are. They're already, they're already finding these half -baked solutions to the problem where they just want to take their music with them. This is really, really smart on what he did here. He goes, this is his response. Millions of people have bought car stereos and they don't have recording capabilities. I already told you. They're not recording anything in the car.

49:23Millions of people bought this. Isn't that a little weird? So you tell me they would only do this if they're in the car? No, of course not. They would take it with them. And I think millions will buy this machine. Now he gets the prototype back. I thought we had produced a terrific item and I was full of enthusiasm for it. But our marketing people were unenthusiastic. Think about how many people are just telling them over and over again, this is not going to sell. But I was so confident. This is why I kept mentioning his self -confidence and the fact that he called himself cocky. These are his words, not mine.

49:51This is why it's so important. It jumped out at you over and over again if you read this book. And it's why I kept bringing it up to you. What did Nolan Bushnell, who mentored Steve Jobs, who helped shape Steve Jobs' thinking, you know, he hires Steve Jobs when he's 19. What did he say? He says that only the arrogant are self -confident enough to push their ideas onto other people. What did Edwin Land say? that when you create a new product, people think, oh, I got to push it through staunch opposition. He's like, no, it's going to be staunch indifference. No one's going to give a shit. You have to push.

50:23You have to be the one pushing through your new product, your new invention, do indifference. You have to make people care about them. Every single step of the way, from his engineers to his marketing people to asking people around him, like this stupid, no one's going to buy it. This is why it's so important. He says so, but I was so confident that the product was viable, that I said I would take personal responsibility for the project. He used his unusual levels of self -confidence to push past all the naysayers in his own company. I never had a reason to regret it. The idea took hold, and from the very beginning, the Walkman was a runaway success.

50:58My point in telling the story is simple. I do not believe that any amount of market research could have told us that the Sony Walkman would be successful. Another lesson from McKeown is autobiography is that if you know why you are doing what you're doing, hard decisions become a lot easier. So he says, I turned out a chance to make big profits. The buyers thought I was crazy, but even though our company was young and I was inexperienced, time has shown that I made the right decision. So he's going and he's demoing this product. This is one of these radios at the early days of Sony that they're making.

51:29And it's this giant company called Belova. It says, the people at Belova like the radio so much that their purchasing officer said, we definitely want these. We'll take 100 ,000 units. 100 ,000 units, I was stunned. It was an incredible order, worth several times the total capital of our company. He told me there's one condition. We have to put the Belova name on the radios. So yank off your Sony name. You're going to manufacture and make it, but you're gonna put it on our, we're gonna put our name on the product. That stopped me. I had vowed that we would not be an original equipment maker for other companies.

52:05We wanted to make a name for our company on the strength of our own products. We would not produce radios under another brand name. When I would not budge, he got short with me. Our company name is a famous brand name and it's taken over 50 years to establish. No one has ever even heard of your company. Why not take advantage of ours? I understood what he was saying, but I had my own view. I said, 50 years ago, your brand name was just as unknown as our name is today. I am here with a new product and I am now taking the first step for the next 50 years of my company. 50 years from now, I promise you that our name will be just as famous as your company name is today.

52:46He never even considered it. One of my favorite episodes I've ever done, I found this like really old biography of Ralph Lauren. And one thing that's that I think the reason I wanted to read about Ralph, because I watched a documentary from one time. And same thing. He had no money. He's like living in this like studio apartment with the train running over him. They just have a mattress on the floor. It's him and his wife, who he's still married to to this day. He starts out making ties. That's the very beginning of the Ralph Lauren empire. And he goes and meets, I think Bloomingdale's if I remember correctly.

53:15And they're like, we love these ties. These are incredible. I've never seen any designs like this. We'll have this big giant order. You know, this guy has no money at times. So it's like literally life -saving amount of money. And then they're like, great. Love to do this. Oh, by the way, Ralph Lauren, like take, take that off and put on, you know, our house brand. and Ralph says no, even when he had no money. And he's like, I'm not being an original equipment maker for other companies. Like, I'm here to take the steps to build a lasting and enduring brand. And it takes a lot of courage to do that.

53:45In this case, Akio just turned down an order for 100 ,000 units, which was worth several times the total capital of his company. But again, if you know the why, your why, it just makes the why behind what you're doing, just makes all these decisions easier to make. They're difficult at the time, but understanding it's like, hey, this is where we're going and we're not going to deviate from that. Another thing that's from the very beginning, we're going to be the best. We're going to aim straight for the top. This is something they talk about over and over again. We were not interested in producing low quality goods just to make money.

54:17What I had in mind was class and high quality. Later on, he talks about, we wanted to be Sony. We viewed Sony as a pioneer. Sony is a pioneer. It never intends to follow others. The company will always be a seeker of the unknown. That is a great line. The company will always be a seeker of the unknown. The road of a pioneer is full of difficulties. Next thing he does, I already mentioned this earlier, America is very important to our company. So I'm going to move there. I needed to know more about how Americans lived and how they thought. I realized that my future would depend on the United States.

54:50I would move my family to the United States and experience the life of an American. Now, Sony winds up being the first Japanese company to sell their stock in the United States. So he says, I realized what a disruption this move would be for my family, but I'm a believer in the total immersion theory. So his kids are young at the time. His wife was a massive supporter of him. So they literally come over and I think he's the only one that speaks any English. His kids have to learn English. They're going to a school where they're the only Japanese people there. His wife, you know, has to build a social circle where she doesn't even speak the language.

55:30He's not exaggerating. He says, I'm a big believer in total immersion theory. He then takes an idea that worked in Tokyo and he's going to import it into New York. Well, the way I would describe this is David Ogilvie has this great line where he says only first class business and that in a first class way. I think Akio would agree with that. So he had opened a showroom in the Ginza district in Tokyo. Remember he was talking about earlier it's like i don't want people you know we put blood sweat and tears into making these products i don't want people in in between us and our customer i'm just not interested in that so he opens a showroom in the ginza district in tokyo where potential customers could try out the products with no salesman around and it winds up becoming like a massively popular place for people like to gather and to hang out he talks about like the advertising value of that show that showroom was enormous and he's like okay if i want to do the same thing in in New York, where I go.

56:23He's like, well, if I want to reach the people who had the money to afford to buy our high price products, then Fifth Avenue is obviously the place to find them. So he takes the idea from the Ginza district and he does it on Fifth Avenue. Now, something that this is important because something that he repeats about the book, it is our policy to charge a premium for our products. We at Sony have always been fanatics about quality. So he talks about quality and high prices over and over again. Abuka and I knew we were after quality above every single thing. And he knows to be the very best to go after the highest quality.

56:57You have to be an extreme person with unreasonable, what many people would deem unreasonable expectations. And he applies it to himself, his kids, applies it to his business, applies it to maintaining physical and mental discipline. This was very interesting. So he says, when I attended school, discipline was very strict. and this included our physical as well as our mental training. Our classrooms were very cold in the winter. We didn't even have a heater and we were not allowed to wear extra clothes. In the Navy, I was indoctrinated into hard training. In bootcamp every morning, we had to run long distances before we could get our breakfast.

57:30In those days, I did not think of myself as a physically strong person. Yet under such strict training, I found I was not so weak after all. And the knowledge of my own ability gave me confidence in myself that I did not have before. It is the same with mental discipline. Unless you are forced to use your mind, you become mentally lazy and you will never fulfill your potential. And so he's talking about the schooling that he had, the fact that other institutions and people held him to a high standard. He wound up matching that standard that gave him, in turn, gave him confidence. And so he's looking around, he's like, well, Japanese schools have gotten soft.

58:05I'm in America. He says most American schools are way too permissive. So he winds up sending his son to a very strict boarding school. So he lives like his own philosophy. He thought it was beneficial for his own life. And then he passes on, obviously, to people inside Sony, but also to his family. Now, I did come across one of these. This is the single best idea, not single, the most memorable idea that I've never forgotten. You know, when I read this book for the first time five years ago, that I think can be applicable to anybody else. And that is hire a paid critic. So he finds this guy named Nariya Oga, who is a vocal arts student at Tokyo University.

58:45And he was testing and a fan of the early Sony products back in 1950. So he would test their very first audio tape recorder. And Akio says, I had my eye on Nourio for a bunch of years because of his bold criticism of our first machine. He was a great champion of the tape recorder, but he was severe with us because he didn't think our early machine was good enough. He was right, of course. Our first machine was rather primitive. We invited him to be a paid critic. even when he was still in school. His ideas were very challenging. This is what Nerea said that he was trying to do at Sony. He says, A ballet dancer needs a mirror to perfect her style, her technique.

59:29A singer needs the same. His criticism and taste was so valuable that at the time the book was published, Nereo, who starts out as a paid critic, is now the president of Sony. Another thing Akio preaches is he spent a lot of time with the, especially as he gets older, with the youngest Sony employees. He would have dinner with them every night. He'd surround himself with them. They're obviously the ones that lead him to the latest technology, so he gets older. But he also genuinely cared for their well -being and didn't want them to stay at a company where they didn't believe in the mission or they weren't happy.

1:00:01And I think this is advice that he would give to younger people, and I think it's just excellent. If you're going to work in a job that you hate, you're going to wind up getting to the end of your life and hating your life. Let's say you only work eight hours a day, like a normal schedule. that's still half of the time that you're awake. If you sleep for eight hours, you work for eight hours, you get eight out of the time. Like 50 % of the time you're awake, you hate what you're doing. How's it possible you're gonna get 10 in your life? Like, oh, I had a great life. It's just impossible. Nobody can live twice in the next 20 or 30 years to the brightest period of your life.

1:00:29You only get it once. When you leave the company 30 years from now and when your life is finished, I do not want you to regret that you spent all those years here. That would be a tragedy. I cannot stress this point too much that it is your responsibility to yourself. the most important thing in the next few months is for you to decide whether you will be happy or unhappy here he learns a few things through spending time with all these young people in the company and he actually found a unique way to at this point sony's a massive company you know tens of thousands of employees it's just impossible for him to know everybody like he did in the early days and so he found a unique way to identify bad managers so he said i used to have dinner with many young lower management employees almost every night and we would talk until late and so he's him in on the fact that he has a blind spot that he needs to fix.

1:01:14Before I joined this company, I thought it was fantastic. It's the only place I wanted to work, but I work for this section chief and he represents the company, but he is stupid. And everything I do or suggest has to go to this guy. I'm very disappointed that this stupid section chief is Sony as far as my career is concerned. This was a sobering thought for me. I realized there might be many employees in our company with problems like this, and we should be aware of their dilemmas. I started a weekly company newspaper where we would advertise job openings in other parts of the company. This and then we made it possible for employees to apply to those other jobs confidentially.

1:01:50Why is that so smart? We've had many cases when we discovered a manager was inadequate because so many people working under him asked to be transferred. We learn a lot by listening to our employees. Wisdom is not the exclusive possession of management. and then he talks more and more about his management philosophy. He talks about the difference where most of his competitors, he thought he had an advantage because they essentially manage for like next quarter and he was fine making investments that'll pay off five, 10 years in the future, especially around marketing and advertising and the launching of a new product.

1:02:25Like if he does a great job and invest a lot of money into educating the customers about the product, making more people aware of the product's existence, it may look like he's spending a lot of money now, but if you can turn these people into fans and customers of your company 5, 10, for 5, 10, 15 years, think about not only how much money they'll buy in other products for a company, but how many other people they tell about the company, which very, it seems like that should be obvious. But if you actually look at, and he talks about this a lot, if you actually look at the behavior of people, like they're so short, it's just so natural for them to err on the short term.

1:02:56So he says the world of business has some peculiarities. The remarkable thing about management is that a manager can go on for years making mistakes that nobody's aware of. This is because management is an elusive thing. It cannot be judged by next quarter's bottom line. Managers can look good on the bottom line, but at the same time, they could be destroying the company by failing to invest in the future. A Sony president was reluctant to spend the money on promoting a new product. He said, if we spent a lot and it didn't bring in enough sales, we would lose money. I told him over and over again, you must consider the return that comes in five or 10 years, not just the immediate return.

1:03:30They wind up, this goes on for a while in the book, and they keep fighting. The Sony president and Akio keeps fighting about the advertising and marketing plan for this new product. So they went fighting about this for quite a while and then Akio can't sleep one day and just calls him in the middle of the night. And he goes, I finally said, if you're not gonna spend a million or $2 million in this campaign in the next two months, I'm going to fire you. My argument again and again was that by saving money instead of investing it in the business, you might gain a profit on a short -term basis. But in actual fact, you are cashing in on assets that have been built up in the past.

1:04:04And so that is why they're constantly, you know, if they just said, oh, we're interested to make the Sony Walkman and maybe the Walkman's successful for 10 years, 15 years. Eventually they know they're in a technology business. The technology, they can't stop it. He talks about over and over again. He would teach his manager. He's like, listen, we need to harness technology. You can't fight against it. It's a phenomenon that we have to utilize. There's nothing we can do. Once new technology is developed, we can't just dig our head in the sand, like pit our head in the sand. We have to learn the new technology and then we have to use it to invent new products.

1:04:34So he talks about over and over again. And so the way that a Kiyo would educate customers about a new product was actually inspired by a very old Japanese tradition. I'm gonna attempt to pronounce this. You know how it goes with this, with me in pronunciation, nimawashi, okay? The thing that educating customers and nimawashi both have in common is time. One must prepare the groundwork among the customers before you can expect success in the marketplace. It is a time -honored Japanese gardening technique to prepare a tree for transplanting by slowly and carefully binding the roots over a period of time, bit by bit, to prepare the tree for the shock of the change it is about to experience.

1:05:19This process called nimawashi takes time and patience, but it rewards you if it is done properly with a healthy transplanted tree. advertising and promotion for a brand new innovative product is just as important. Another line from the book that can serve as a maxim, you need to air condition your factories before your offices. If Japanese clients come into an office of a new company and see plush carpet and private offices in too much comfort, they become suspicious that this company is not serious, that it is devoting too much thought and company resources to management's comfort and perhaps not enough to the product or potential customers.

1:05:56This is going to sound exactly what Steve Jobs said when he came back to Apple, by the way. Akio says, that is exactly my sentiments. The investment should go into those things that relate directly to the product. Too often I found in dealing with foreign companies that such superfluous things as the physical structure and office decor take up a lot more time and attention and money that they are worth. In fact, there's a great line from one of Steve Jobs biographies right before comes back to Apple, this guy named Gil Amelio is the CEO of Apple. And so it says, Steve Jobs believed that Amelio had maneuvered himself into the gig by positioning himself as a turnaround expert.

1:06:33And then this line from Steve just makes me laugh. But how can he be a turnaround expert when he eats his lunch alone in his office with food served to him on China that looks like it came from Versailles? This also speaks to, again, the directness, the clarity of thought, and the self -confidence that Akio had. Once Sony's really successful, all these countries asked them to come and visit and help them. You built one of the most successful manufacturing and technology companies in the war -torn ashes in Japan. We may be poorer countries. There's China in the 1970s, Soviet Union in the 1970s.

1:07:10Can you help us do it? And his whole point is he knows if people are serious about the work that they're doing because if you actually care about the product that you're making and the company that you're building, then you stay in the details and it's obvious when you don't stay in details so he takes this tour in 1974 to the soviet union and because they're like we want to work with sony can maybe you move some of your manufacturing here and he looks at the places this is just not going to happen in japan this is what he told him in japan we use our top talent and our best brains and spent years seeking ways to increase increase the efficiency and productivity of even such a simple thing as a screwdriver we have racked our brains and made detailed studies and experiments to decide just what is the exact and precise temperature for soldering iron in each particular application.

1:07:53You do not make any such effort here. There appears to be no need to do it because no one seems to care. And so he gives them really good advice. And it's exactly what Edmund Land from Polaroid built his career off of. And what Steve Jobs learned from Edmund Land, it's the combination of art and technology of liberal of liberal arts technology, the building of that intersection. and he's like russia has this all this like history of great art if you have art and you have technology why do you not combine them to come up with some wonderful things he's essentially describing what they did at sony and one thing that one of the things that he repeats over and over again that he think gave them a great advantage you know he's not positioning the book as like look we had to deal with all this crap we had to build sony and you know burned out department store, he actually thought that designing constraints and being forced to be resourceful on an individual company and country level was a huge advantage because most of his competitors are so wasteful.

1:08:49So you can think about what he's about to say here is like being wasteful is the opposite of resourcefulness. One of the most significant value concepts that we have cherished from ancient times is this term pronounced mot -tai -ni. It is a key concept, one that may help explain a great deal about Japan, the Japanese people, and our industry. It is an expression that suggests that everything in the world is a gift from the creator and that we should be grateful for it and never waste anything. We Japanese feel that all things are provided as a sacred trust and are actually only loaned to us to make the best use of.

1:09:23To waste something is considered a sin. We have developed this concept that goes beyond mere frugality or conservation. It is a religious concept. concept. The wasting of anything was considered shameful and virtually a crime. We have always had to practice conservation for survival. We have learned how to be efficient. We looked at all of our factory operations and our products and made design changes where we could save even small amounts of energy. We have also restudied all forms of power consumption at Sony, in our factories and in our offices and in our products. When you were told from childhood that the metal object that you hold in your hands comes from an iron ore mined in countries far away, which is transported to Japan at great expense and is produced in furnaces that use gas and coal from other faraway places, such objects seem very valuable.

1:10:21I am reminded of the American expression. There's plenty more where that came from. We have no such expression. We must all learn how to be more skillful. We must learn new technologies to survive. We must always create more opportunities. And he does a great job of showing that we can identify and create opportunities just with the right perspective in our mind. It's exactly how he started Sony. If you think about where we started the podcast at. I am reminded of the story of the two shoe salesmen who visited an underdeveloped country. One cabled his office. No prospects of sales because nobody wears shoes here.

1:10:59The other salesman cabled, send stock immediately. Inhabitants barefooted and desperately need shoes. And that is where I'll leave it for the full story. Highly recommend reading the book. If you buy the book using the link that's in the show notes on your podcast player, you'll be supporting the podcast at the same time. I'll also leave a link down below. Make sure you're on my personal email list. I email the top 10 highlights for every single book. I read. That's available at davidcenter .com, and you'll find it down below. That is 386 books down, 1 ,000 to go, and I'll talk to you again soon.