Commentary / Japan

Eiichi Shibusawa was a man of his time and ours

by Ken Shibusawa

Contributing Writer

About a week after Reiwa was unveiled as the new imperial era’s name, I was surprised when the government also announced that bank notes will be redesigned — with the face of Eiichi Shibusawa printed on the new ¥10,000 bill. The news caught me by surprise because Shibusawa is my great-great-grandfather. But, of course, he is more well-known as “the father of Japanese capitalism.”

The ¥5,000 bill will feature Umeko Tsuda, a pioneer in higher education for women, and the ¥1,000 bill will feature Shibasaburo Kitasato, a pioneer of modern medicine in Japan. The three together appear to be conveying to us an important message for the new Reiwa Era. Life science, female empowerment and business will be important keys to unlock the gate to an era of sustainability for Japan. Finance Minister Taro Aso said the timing of the announcement was sheer coincidence. If that was truly the case, this would only indicate that there is some other greater force at work, delivering the message that Japan is indeed entering a new era.

Shibusawa (1840-1931) was an important figure in industry and commerce during the years when Japan was emerging from a feudal state to catch up with the advanced Western nations during the Second Industrial Revolution. That was when the nation was in the Meiji Era (1868-1912), and it was during this period, in 1873, that Shibusawa established the Dai-ichi Bank, Japan’s first bank (now part of the Mizuho Financial Group).

Back in those days, however, a bank was a startup venture business, and no one in Japan had seen one before. To explain the value of this new startup, Shibusawa said: “A bank is like a mighty river. If money does not gather at a bank, it is merely a puddle of water or a drop of dew. The potential to bring greater wealth to the nation and the people will be unrealized.”

I am sure that when the new bills start circulating in about five years, he will be raising his voice: “I don’t like the dark. Don’t leave me in drawers!” Of the approximately ¥980 trillion worth of cash and deposits held by households across the country today, it is estimated that over ¥40 trillion is physically stashed away in drawers and closets — and therefore not contributing to economic growth.

Shibusawa is also credited with being involved in the founding of almost 500 companies, including many that still exist today, such as Oji Paper, Toyobo, Tokio Fire and Marine Insurance, Tokyo Gas, Sapporo Brewery and the Imperial Hotel. He was also an enthusiastic proponent of a new form of transport — trains. Many of the railway companies that he helped to create later were merged and nationalized, which was privatized again in the late 1980s as the Japan Railways (JR) group of today.

He envisioned an estate-like residential neighborhood surrounded by greenery — Denenchofu in southern Tokyo. To connect this new residential area to the center of the capital, a private sector railway was built that became what is now the Tokyu group. He was also involved in the economic development of the less-developed areas of Tohoku and Hokkaido. He led the only private sector large-scale development initiative in Hokkaido’s Tokachi area.

Shibusawa was Japan’s first modern venture capitalist, financing and starting new businesses, and leaving them when he felt they could operate on their own. He was a serial entrepreneur, and by the sheer number of startups he was involved in, a parallel entrepreneur as well. He did not take control of the firms by sheer number of shares, because he felt that the more shareholders the better. His vision was to enrich the lives of the many rather than a select elite. He was a champion of the minority shareholder and corporate governance, something that is pertinent in today’s capital markets.

Although Shibusawa is often called the father of Japanese capitalism, he did not use the word “capitalism” (“shihon shugi“). Instead, he used the word “gappon shugi” — which can be translated as “stakeholder capitalism” now. Eiichi did not establish his companies just to maximize shareholder value. Instead, he felt corporate value, and hence the wealth and prominence of a nation, was created by the involvement of many stakeholders. Therefore, the fruits of the value creation should be used to maximize stakeholder value, including, of course, the shareholders.

Shibusawa was also Japan’s No. 1 social entrepreneur. He helped establish around 600 social organizations, including universities, hospitals, social welfare and international relations/relief organizations. He once said that “economy has no national borders.” However, politics do. And Shibusawa was keenly aware of the potential risks of misunderstanding among people of different nations. He dedicated a great deal of time during the last one-third of his 91-year life to private sector diplomacy.

The Second Industrial Revolution gave rise to new technological systems such as the telegraph and railroad networks, and the 20th century set the stage for a new emerging global power, the United States. To build better relationships with the Americans, he led four missions to the U.S. between 1902 and 1921. He met not only with business leaders and grassroots citizens, but also four incumbent U.S. presidents: Theodore Roosevelt, William Howard Taft, Woodrow Wilson and Warren G. Harding. When Shibusawa passed away in 1931, the U.S. press referred to him fondly as “Japan’s Old Man.”

He was a proponent of a Japan-China business alliance as well, leading a business mission to China in 1914. He recognized India as an important partner in the trade of cotton and textiles, establishing the Japan-India Association in 1903. Shibusawa led humanitarian relief aid in Japan for the Armenian Genocide in 1922.

Shibusawa’s mantra was “Rongo and Soroban” (Analects of Confucius and the Abacus), integrating moral conduct and business. In present-day language, I believe this can be interpreted to mean promoting economic return as well as social impact. His message from over 100 years ago, in today’s language, is sustainability — indeed, a very important message for the new Reiwa Era.

Ken Shibusawa is CEO of investment advisory firm Shibusawa & Co. and has co-founded Commons Asset Management. He is also a director of the Japan Association of Corporate Executives (Keizai Doyukai).

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