Three Longs & Three Shorts

Why so many of the world’s oldest companies are in Japan

Given that we like investing in outstanding franchises which produce stellar free cashflows for decades on end, we are particularly interested in understanding why Japan – more than any other country – houses some of the oldest companies in the world. As per this article from the BBC, “The country has 33,000 businesses at least a century old…. Back in 2008, a Bank of Korea report found that of 5,586 companies older than 200 years in 41 countries, 56% of them were in Japan. In 2019, there were over 33,000 businesses in Japan over a century old, according to research firm Teikoku Data Bank. The oldest hotel in the world has been open since 705 in Yamanashi and confectioner Ichimonjiya Wasuke has been selling sweet treats in Kyoto since 1000. Osaka-based construction giant Takenaka was founded in 1610, while even some global Japanese brands like Suntory and Nintendo have unexpectedly long histories stretching back to the 1800s.”
So why does Japan have the uncanny ability to produce companies which last centuries? “Yoshinori Hara, dean and professor at Kyoto University’s Graduate School of Management, says these long-standing entities, at least 100 years old, are known as ‘shinise’ – literally meaning ‘old shop’.
Hara, who worked in Silicon Valley for a decade, says that Japanese companies’ emphasis on sustainability, rather than quick maximisation of profit, is a major reason why so many of the nation’s businesses have such staying power. “In Japan, it’s more: how can we move [the company] on to our descendants, our children, our grandchildren?” he explains.”
Japan’s isolation from the rest of the world has also helped its companies stay insulated from the shifting sands of global commerce: “…Innan Sasaki, an assistant professor at the University of Warwick’s business school who’s written about Japanese company longevity, says there are other reasons more specific to Japan.
“More generally, we could say that it is because of the general long-term orientation: the culture of respecting tradition and ancestors, combined with the fact that it has been an island country with relatively limited interaction with other countries,” she says, pointing to people’s desire to make the most of what they have for as long as possible by preserving local companies in the community.”
In fact, in order to sustain family owned companies, the owners of these firms have been willing to do some extraordinary things: “Several companies have even benefited from the widely-accepted Japanese practice of adopting adult male workers into the family bloodline to ensure an unbroken succession for the business, something even huge firms like Suzuki Motor and Panasonic have done.”
Astonishingly, one example of a family owned company which has been going since 1889 is Nintendo: “…most people don’t know that the company predates its massive global commercial success. Despite being thought of as a tech company, Nintendo was founded back in 1889, as a maker of playing cards for the Japanese game hanafuda. First imported by the Portuguese in the 16th Century, the game involves collecting cards with various flowers printed on them, each worth different points.
Kyoto University’s Hara says Nintendo is a great example of a company sticking to what he calls a “core competency”. That’s the basic concept behind what a company makes or does, which helps the company survive – even as the technology or world around it changes. In Nintendo’s case, it’s “how to create fun”, Hara says.”
The flipside of the Japanese love of longevity is its indifferent attitude to start-ups: ““To be in the start-up scene in terms of social acceptance has been challenging, since the ‘start-up’ world is not as acknowledged as ‘shinise’ companies. I’ve had hard times explaining and sharing with my parents or friends what I do and where I work,” says Mari Matsuzaki, 27. She works at Queue, a Tokyo-based education technology start-up, and used to run the Tokyo version of Slush, the international start-up not-for-profit aimed at students.
“Out of my graduating class, I am probably the only one who decided to enter a start-up,” she says. “While in other countries, founders are praised for transforming their failures into valued experiences, in Japan, the dominant mindset towards risk and failure is a battle many entrepreneurs have to overcome.””