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Divide and Prosper: An Asian Model for Successful Business Growth

I recently read Divide and Prosper, by Kuniyasu Sakai and Hiroshi Sekiyama, and posted a review in Goodreads.  My full review is linked here.

The book is, ostensibly, a business book.  It is written as an inspirational management guide.  As such, Divide and Prosper is extremely useful, providing a wealth of practical information for a successful business manager.  But this is only one tiny fraction of the book’s value.  The greatest merits of the book come from its attempt to inspire and motivate younger people to aspire to more than is offered by the status quo.

In my review, I wrote about the author’s detailed description of the subcontractor system in Japan in the section, “Big Business, Small Companies.” In this section, Sakai and Sekiyama describe carefully how the major corporations enslave the majority of the nation’s companies and people.

To Sakai and Sekiyama, the status quo does not provide redeeming lives to the majority of people.  This goes against the conventional “wisdom,” which says that Japan has achieved a higher standard of living than most of the nations of the world.  While it may have severe limitations in space and cost of living, the standard of wealth, safety, and convenience make Japan a mark of success, not failure.  But rather than spreading wealth thinly and evenly across the majority of the nation – as is the “common knowledge” explanation goes – the subcontracting system enslaves the majority of people. The big companies are not much more that a system of installing a small cadre of mediocre administrators to threaten, cajole, and pacify the masses, while pooling the wealth into the hands of a few wealthy and powerful elites, who hide anonymously behind the veils of their organizations.

First, the authors describe how the system is integral to the Japanese economy as a whole.  “The shitauke system is in one sense the very foundation of our modern business and industrial structure, the base upon which our giant commercial structure has been built.”  They continue to say that,”large corporations in a wide variety of fields act merely as “trading companies,” farming out jobs to their affiliates at cut-rate prices while charging their clients for the prestige of dealing with a top-notch Japanese firm.”

This structure is possible because the major, publicly traded, international corporations only comprise a small minority of the Japanese economy.  Sakai and Sekiyama write that, “90% of Japanese economy is minor industry.  Relatively few companies have more than three hundred employees, and more than three-quarters of all Japanese companies are very small, employing only a handful of people.  The real backbone of the Japanese industry is not the Toyotas and Nissans, the Matsushitas and Sonys, the Fujitsus and NECs, but rather, the thousands upon thousands of small firms that allow these behemoths to exist in the first place.”  Here, we start to see that the heart of their story is not just a positive guide to successful business, but a scathing war cry, aiming to defeat the massive corporate giants that cripple Japan and, ultimately, our world.

“In Japan, most small firms (and nearly all small manufacturing firms) exist in the shadow of a few dozen giant corporations which completely control their destinies. The master firm completely controls both its subcontractors’ production levels and unit costs, and this is the reason the giant industrial combines so jealously guard this system.”  Of course.  If a big company can control the production level and unit costs, it can offload most of its risks and take most of the returns from manufacturing.  It automatically inflates the big companies at the expense of the smaller subcontractors.

“What many people, even here in Japan, would find surprising is the astounding quantity of goods the firm purchases rather than manufactures.”  Again, this should not come as a surprise.  Manufacturing themselves would create a large number of “risks”, namely the human resources, facilities, and capital necessary to produce products.  Instead, the big corporations merely farm out the production, waiting “to put its name on the outer case and send the products through its international marketing and distribution system.”

This structure, Sakai and Sekiyama say, is an “industrial shock absorber.”  “The advantages of this system for the parent firm are just as obvious as the disadvantages for the smaller firms.  If the giant corporation falls on hard times, it will take a very long time (as we saw in the 90s) before it needs to lay off employees or radically alter any part of its own corporate structure.  It battens down the hatches and rides out the storm, keeping its own inconvenience to a minimum.”

“Having served as one of these “slave” companies for many years, I believe very strongly that a situation in which one must produce at another’s beck and call is ultimately destructive. ”

Men are not lemmings.  Of course, the “mass suicide” popular story about lemmings is a misconception, but the metaphor that we frequently behave unquestioningly as popular opinion dictates, with potentially fatal or dangerous consequences is, I think, quite valid.  Our fetish with big things – especially BIG business, BIG companies, and BIG data – may, in fact doom us.  I hope not.

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