Recently in Reforming Japanese Democracy Category

Today, an associate professor at the most prestigious university in Japan, Tokyo University was arrested today for developing a tool that enables piracy. The program is a P2P system cally Winny. Previously two of the users had been arrested. I got a call from Asahi Shimbun (Japanese newspaper) today asking me for a comment for the morning news tomorrow. I hope the print it. I think it's an absolute disgrace to Japan. While the US is fighting in congress, Hollywood pushing to ban P2P and Boucher et al are fighting for DMCRA, Japanese police go and arrest someone developing P2P software with a VERY sketchy case. The thing is, it's quite likely he will be found guilty.

I once served as an expert witness on the FLMASK case. FLMASK was a program that could be used to allow password protected scrambling of areas of an image so that porn sites could post pictures that passed the Japanese censors, but allowed users to unscramble them. The police were so upset that they cracked down on the hardcore porn sites with the argument that even with FLMASK'ed "clean" images, they would be deemed hardcore. The problem was, this left the developer of FLMASK free from claims that his software enabled anything illegal. So they busted him for LINKING to these porn sites that got busted as users of his software. They deemed linking to a porn site as the same as actually running a porn site. I was the chairman of Infoseek Japan at the time so I obviously had a lot to say about that. The amazing thing is... after overwhelming evidence of the stupidity of the allegations, the guy was found guilty.

Anyway, Japan is yet again leading the world in stupid Internet policing.

more on slashdot

As a child I travelled a lot, but mostly between US and Japan. I dealt with a lot of bicultural issues, but the rest of the world seemed far away. In the 90's I started going to Europe and Asia more, but it was always to "civilized" places.

Several years ago, I became actively involved in trying to reform Japan and I was allowed to be quite vocal about this. Last year, I gave a rant at Davos about how broken Japanese democracy was. Afterwards, Ms. Ogata, the former UN High Commissioner for Refugees told me that I should stop ranting as a Japanese and think more about global democracy and global issues. These words stuck with me and last year I tried to think about blogs and emergent democracy outside of the Japanese context. With the US elections front and center, the obvious place to try to apply these thoughts was the US. Having spent a year or so thinking about US politics, I realize how important the US election is, but I'm drawn more and more to countries that need more help.

I think many of us avoid thinking about or worrying about the rest of the world. We hear people talking about poverty, but it sounds like something in some far away country on a National Geographic special. Most people just don't care. To be honest, I cared, but in retrospect, I didn't REALLY care. I guess better late than never. As I prepare for my trip to Africa with Ethan and try to figure out exactly how I can contribute and what I should be studying, I'm drawn back to organizations such as the UNHCR. On the flight back to Japan, I saw Beyond Borders, a movie about relief work and the UNHCR, starring Angelina Jolie. The movie captured some of the experiences of being an activist on a global level and I watched it thinking about what drove some people to such high levels of commitment. Googling around, I found Angelina Jolie's journal from her mission to Russia last year. (We need to get her a blog...) What is really striking to me and something that I'm trying understand is the process that people go through to reach a higher level of caring for human beings outside of their immediate circle. I think that this process holds the key for some of the important contributions that technologies can make.

Just got out of a meeting of the Association of Corporate Executives or the Keizaidoyukai where I am a secretariat member and was the youngest member when I joined. The Keizaidoyukai is one of the two most powerful economic associations in Japan. The other one is the Japan Business Federation or the Keidanren. The Keidanren is the federation of all of the big companies, the members representing their companies. The Keizaidoyukai represents individual corporate executives. The Keidanren is more powerful, but the Keizaidoyukai has played a very important role in the past in pushing for reform. The Keizaidoyukai was founded after the war by a group of visionary business leaders in their 30's to rebuild Japan. It has grown into a large organization with over a thousand members and an average age of 66 years old.

Tony Kobayashi, the chairman of Fuji-Xerox is the chairman, but his term will end next month and is most likely going to be succeeded by Kakutaro Kitashiro, the chairman of IBM Japan. I'm a big fan of Tony Kobayashi and Mr. Kitashiro is someone I greatly respect. I should be overjoyed that Mr. Kitashiro is taking over the Keizaidoyukai but today we had a meeting with him and I was quite negative. I felt a bit bad, but I told the group that I was considering resigning because I was frustrated with the lack of measurable results from our meetings and that I thought it was difficult to try to gain the support of younger members when most of the people in the association were basically retired and had a lot of time to talk and not act. We all talked about how we needed to reform the Keizaidoyukai if it was going to be an agent of change in Japan.

I walked away feeling like I should give Mr. Kitashiro a chance to change the Keizaidoyukai, but with a feeling that it would be difficult. I can barely stand the tedious task of trying to convince the senior Japanese business executives. I can't image the really young leaders wanting to spend their time in these meetings. It's really a pity considering the strong philosophical foundations upon which the association was founded, but as with anything, age and power bring a variety of issues and it is losing its edge…

PS I resigned from the New Business Conference per my promise that I made here.

Several of us have been talking about a revolution in Japan recently and I've been interviewing many people about their thoughts on the need, the possibility and the correct process.

I think it is clear that it will take something on a revolutionary scale to change the Japanese system enough to make it a functioning democracy. This revolution probably does not involve violence. This revolution will require the people to want change so much that they become actively involved in trying to cause change.

Most people still have jobs and are generally happy. Most people believe that they cannot cause change. And in fact, there is no easy mechanism for the people to cause change.

Several people have suggested that a revolution won't happen until we have a true economic meltdown -- maybe in a few years.

I had several people over to my house yesterday including people from the press, IT industry, financial industry and non-profits ranging from someone in their 20's to people in their 60's. It was my own little deliberative democracy representing a variety of views. Anyway, we talked a lot about revolution. The older participants remembered the student uprisings in the 60's and 70's in Japan and described how they started and were eventually stomped out by the riot police. I talked about how blogs could encourage activism and they described that the way the students got "activated" was similar. We decided that the environment which caused the student uprisings does not exist today and the establishment and its ability thwart such an attempt is much stronger.

So, we decided that we focus not on politics or revolution for the moment, but on "truth." We will focus on having meetings and creating tools to help people in pursuit of "the truth." We talked about many things that we thought people should know and analysis that should be conducted and the members from the media explained that more than any malicious intent, it was the lack of incentive and will for them to spend the energy to do this that kept these sort of things from being reported. Someone mentioned that "the truth" is subjective. Yes. It is. But I think it is much easier to argue for the necessity of knowing the truth than arguing for democracy (a concept that I am find is actually quite alien to many Japanese) or the overthrow of the establishment. I think that blogging, polling and other tools that help us find out what the people think and expose and analyze what those in power are doing will help people become aware and active. That's the first step. We decided to continue to have regular meetings to talk about how to collect facts and highlight important truths.

So I'm getting ready to sue the Japanese tax office because they forced me to pay more than what I think is my fair share of taxes on my stock options. It's a complicated issue. I've already paid, and I'm try to get them to pay me, not the other way around. Anyway, the point of the entry is not about my taxes. So, when you try to sue the tax office in Japan, what are you actually doing? Well, the judge, it turns out is probably going to be a tax office bureaucrat who is doing a short stint as a judge. The lower courts have judges most likely to be transfered back into the tax collecting group in the tax office.

Doesn't sound good for you if the guy who is supposed to be "fair" is someone who has spent, and will spend the rest of his/her life trying to collect taxes from you.

Then, I hear from my accountant that some of the tax agency guys are telling people who are filing claims against the tax office, "Why are you doing this? Don't you know you can never win against the government?" They all deny saying this later, but I heard this from a credible source. Well it is true. the government wins over 90% of the time. Statistically, this is true. But to have the gall to say that "you can't win." TOTALLY UNACCEPTABLE FOLKS!

I recently had a discussion about privacy with another bureaucrat. I said that I would not be nearly as concerned about privacy issues in Japan if the judiciary were more functional and I could go to them with my issues later instead of having to pound on the bureaucrats to try to design a "fail-safe" system. He told me that the judges he knows were incompetent and that the judiciary were not in a position to understand the issues.

Now, I won't say that this is true of everyone in the bureaucracy, but at least some of these guys really think that they're in charge and laugh at the judiciary and quietly think the politicians are fools. Totally scary.

An op-ed that I drafted with the help of everyone here and here (with a final re-draft by Pamela from WEF) just ran. They cut my "special thanks" section...

in SCMP
The Internet, and the "blogs" (Web log services) in particular, provide opportunities for the passive Japanese public to wake up before the catastrophe. The Internet is also a way to enable the youth of Japan, currently silenced by the older generation and destined to get stuck with supporting them, to speak up and organise themselves before it is too late. This is critical both for themselves and for Japan as a whole.

You need to register to read the article online... Thank for all of your help with this everyone!

Here is a draft of my opinion piece for Keizai Doyukai the Association of Corporate Executives. I wanted to focus on identifying the dysfunctional democracy as the core problem and to encourage public debate and a global dialog without fear of "revisionists" bashing Japan as a result.

Version 1.0 Feb. 10, 2002
A democracy built after a revolution will be required to save Japan

The root of Japan's economic and structural problems is the weakness of Japan democracy. In a democracy, there should be multiple points of authority, the ability to criticize power without fear of retribution, critical debate and a competition of ideas. This may well be inefficient when there is a consensus on the direction of the country, but democracy is essential when a nation needs to change. Post-war Japan consolidated power in the ruling party. People were educated to be obedient. Harmony was maintained by co-opting or disabling people or organizations that could threaten the system. Diversity in the media, a strong judiciary, diversity in education and political diversity were stifled for the purpose of maintaining harmony. This harmony and consensus oriented process that once protected the happiness of the citizens of Japan is now the primary barrier to change. The system is self-perpetuating and is extremely resistant to change. It hides behind the powerful and complex bureaucracy and the monolithic media that does not represent a diversity of opinions.

Because the system is not able to change itself, a revolution is required. Japan must build a modern democracy and empower the people to participate. Revolutions to install democracies do not occur through negotiation with bureaucrats or academic debate. Revolutions involve people becoming upset and forcing change. Revolutions in the 18th century involved bloody wars and uprisings. 21st century revolutions will involve a public uprising triggered by bypassing the forces which suppress information. The revolution will be a revolution in the ethics of the people. Japan has a constitution and almost all of the laws required to be a functioning democracy. What it lacks is the consolidated will of the people.

At one time Japan was viewed as a competitive threat to the United States. "Revisionists" in the United States tried to force policy changes in Japan. Many Japanese have very bad memories from this period. In addition, Japanese generally do not enjoy discussing domestic issues with the outside world, feeling that the issues are either too complicated for non-Japanese to understand or fearing external pressure on internal issues. Japan is no longer a competitive threat to the world. Japan's inability to recover from the economic crisis is a threat to the global economy. Japan would benefit greatly from exposing the domestic core problems to the Japanese public as well as the rest of the world.

The combination of increasing public debate on the Internet and a global dialog will help the Japanese people become aware of the domestic problems as well as the context and responsibility of Japan globally. A new sense of global responsibility to achieve a higher ethical standard will help the Japanese people create a modern democracy capable of solving the domestic problems and allowing Japan to participate in the global geo-political arena as a true global entity. The revolution in Japan will be an ethical revolution about people become aware that they are actually in charge.

Thanks to everyone for the feedback on my essay draft. I will try to break it up into the two specific essays for two very different targets. The first one is and op-ed for the South China Morning Post. (Not sure if it will be published yet.) I am going to try to focus on a brief history of the problems in Japan, the fact that the dysfunctional democracy is the root of the problem and some examples of how a revolution might happen. Again, comments would be greatly appreciated.

Japan Needs More Democracy

Does growth in sophisticated economies require democracy? Do advanced economies thrive with more democracy? This age-old debate is more relevant than ever today. Doubters should look to Japan for reams of evidence that growth, especially when economic change is necessary, comes easier with democracy.

Post-war Japan consolidated power in the ruling party. Perhaps this was efficient at the time, as there was consensus on the appropriate direction of the country, but it created a super-powerful bureaucracy lording over the country. People were educated to be obedient. Harmony was maintained by co-opting or disabling people or organizations that could threaten the system. Diversity in the media, a strong judiciary, diversity in education and political diversity were stifled for the purpose of maintaining harmony.

While Japan was growing, it could afford to fund the ever-growing political machine. It could also afford not to change. However, today, Japan faces huge challenges both externally and internally. Ageing Japan now faces a competitive Asian manufacturing sector and a shift in resource allocation in the economy, towards the service sector. However the domestic services sector is inefficient and unable to compete globally since it has grown up protected by the bureaucracy and thus never had to compete. The markets are dysfunctional and unable to reallocate resources.

This harmony and consensus-bound process that once protected the happiness of the citizens of Japan is now the primary barrier to change. The system is self-perpetuating and is extremely resistant to change. It hides behind the powerful and complex bureaucracy and the monolithic media that does not give voice to a diversity of opinions. In short, Japan is stuck with a system pointed in the wrong direction without the ability to change the direction. The political system is unable to lead the nation. The lack of real democracy is the source of these problems.

Japan has a constitution and almost all of the laws required being a functioning democracy. However years of growth under a sclerotic bureaucracy has created a situation in which Japan’s democracy is dysfunctional. In a democracy, there should be multiple points of authority, the ability to criticize power without fear of retribution, critical debate and a competition of ideas. Japan’s “market for ideas” is far from this. Japan must build a modern democracy and empower the people to participate. The situation is so bleak that some say we may need a revolution to get there. If it does happen, the revolution does not need to overthrow the government. What it must do is consolidated will of the people to force the power elite to allow the authority to be distributed and to allow democracy to function.

There are many signs of change in Japan which convince us that there is a silent majority pushing for a true democracy.

Governor Tanaka of Nagano, an independent promising to shut down public works and crack down on corruption, was voted into office by people who were upset by the corruption and were willing to suffer short term pain in order to fight the corruption. He was ousted by the prefectural council in the first no-confidence vote executed in the history of modern Japanese politics, which did not involve a crime or a scandal. He ran again and won a landslide victory. He is now in the process of cleaning up the politics of Nagano.

The people are voting for more and more anti-corruption independent governors across Japan.

When Minister for Economic and Fiscal Policy, Heizo Takenaka, presented his aggressive plan to restructure the non-performing loans problem in October last year, the mass media criticized him, the bureaucrats were not supportive and the ruling party actively tried to stop him. And yet a poll run by Monex on its website showed that 87% of the people supported Takenaka. The support of Takenaka by this silent majority went un-reported in the mass media. The collusion between the bureaucracy and the media has been built up over decades, but the time has come for this to end. Meanwhile, we should remember that it under-represents the views of a large silent majority.

In business, the traditional backbone (backroom?) of the bureaucracy, change is also afoot. Carlos Ghosn has been able to take Nissan, a failing Japanese company, and turn it around with 99% of the original Japanese staff. Ripplewood, a foreign fund, has been able to buy Shinsei Bank (formerly the Long Term Credit Bank of Japan), ailing Japanese bank and turn it around.
Many of the problems can be solved by execution driven by ignoring the complex network of personal indebtedness (including lifetime employment) and exercising an ethics of transparency. The exciting thing about Nissan and Shinsei bank is that the people working in these companies quickly embraced the new ethics and were able to use the foreign influence as a positive catalyst.

There are many isolated examples of average citizens pushing for change and embracing a new ethics of transparency and activism, but again, they are marginalized by the mass media. As more and more of these individuals begin to express their opinions and organize themselves on the
Internet, the number and size of these incidents should increase.

The Internet, and the “blogs” in particular, provides opportunities for the passive Japanese public to wake up before the catastrophe. The Internet also is a way to enable the youth of Japan, currently silenced by the older generation and destined to get stuck with supporting them in the future, to speak up and organize before it is too late. This is critical both for themselves and also for Japan as a whole.

It is frightening to know that the collapse of brand-name corporations and the failure of the government to engage the people have largely caused many of the youth of Japan to lose faith in the system. Many have merely dropped out, but there is an increasing number of young Japanese organizing themselves with the help of tools such as mobile phones and the Internet. For the first time since the student uprisings in the 60's and 70's, which made activism "unfashionable", the youths are becoming more active. This is crucial, because if they don’t they will be rebuilding Japan from the ashes of a total economic collapse several years from now.

Historically, a catastrophe or a shock of some sort has been necessary for Japan to change. A sensible plan for rebuilding Japan’s democracy would be a good start, though. The Blueprint for Japan, which has been put together by a group of elected officials, business people (including ourselves) and professors, identifies some key factors for a new system. These include:
• Empowering local governments in the prefectures, and fixing the weight of representation in voting;
• allowing more political appointees to participate in the bureaucracy
• breaking up the press clubs
• increasing the size and power of the judiciary
• supporting more direct democracy and educational reforms
• increasing diversity through more immigration

Of course, this is just a start and may not be without flaws. However, we also know that change has never happened without someone taking the first step. The people of the silent majority of Japan need to wake up and realize that change starts with themselves.

Special thanks to the World Economic Forum for organizing the Blueprint for Japan 2020 and for help in editing this article. Thanks also to the contributors of my weblog and the rest of the Japan Blueprint members whose opinions this op-ed is based.

I've been asked by a variety of publications to write about my thoughts about Japan. I would love comments of my first draft.

--
version 0.3
People call the last 10 years "Japan's lost decade." There is debate after debate about the cause of the Japanese economic downturn and what should be done about it. Nobuyuki Idei, Sony's Chairman, calls it Japan's middle age crisis. After the war, Japan was young and low-cost. Targets were set and everyone worked very hard to build Japan into the world's second largest economy. Now Japan is expensive and aging. It has to change from "young and single-minded" to "old and rational".

In post-war Japan the targets were clear. The ruling political party promised to double everyone's income. Japan could compete in manufacturing because of its able and low-cost labor force. As the large automobile and consumer electronics manufacturers competed globally and earned money for Japan through exports, the bureaucracy distributed the wealth evenly in Japan and protected the domestic industries from foreign as well as domestic competition. The central government's mission to double the income of all Japanese citizens meant that it was necessary to channel the funds from Tokyo to the rural districts of Japan. As the costs in Japan increased, these funds were used to subsidize agriculture as well as fund public works spending to feed the citizen for whom farming was no longer a viable option. This flow of funds created the basis for the current political structure where rural Japan relies on the central government for funds and has a much higher representation in the Diet due to the weighting of voting system.

While Japan was growing, it could afford to fund the ever-growing political machine. It could also afford not to change. Aging Japan is now faced with an increasingly competitive Asian manufacturing sector and a change in direction and a reallocation of resources focusing more on services is required. Japan is stuck with a system pointed in the wrong direction without the ability to change the direction. The domestic services sector is inefficient and unable to compete globally since it has been protected by the bureaucracy and has never had to compete with anyone. The markets are dysfunctional and unable to reallocate resources. The political system is unable to lead the nation.

Professor Lawrence Lessig points out that in a true democracy, there are multiple points of authority, the ability to criticize power without fear of retribution, critical debate and a competition of ideas. This is rather inefficient when there is a consensus on the direction of the country, but democracy is essential when a nation needs to change. Post-war Japan consolidated power in the ruling party. People were educated to be obedient. Harmony was maintained by co-opting or disabling people or organizations that could threaten the system. Diversity in the media, a strong judiciary, diversity in education and political diversity were stifled for the purpose of maintaining harmony. This harmony that once protected the happiness of the citizens of Japan is now the primary barrier to change.

At one time Japan was viewed as a competitive threat to the United States. "Revisionists" in the United States tried to force policy changes in Japan. Many Japanese have very bad memories from this period. In addition, Japanese generally do not enjoy discussing domestic issues with the outside world, feeling that the issues are either too complicated for non-Japanese to understand or fearing external pressure on internal issues. Japan is no longer a competitive threat to the world. Japan's inability to recover from the economic crisis is a threat to the global economy. Japan needs build a true democracy to execute the reallocation of resources required for a long-term recovery. Japan would benefit greatly from exposing the domestic core problems to the Japanese public as well as the rest of the world. Japan's core problems are its dysfunctional democracy and the lack of diversity. The system is self-perpetuating and is extremely resistant to change. It hides behind the powerful and complex bureaucracy and the monolithic media that does not represent a diversity of opinions.

Because the system is no longer able to change itself, a revolution is required. Japan must install a modern democracy and empower the people to participate. Revolutions to install democracies do not occur through negotiation with bureaucrats or academic debate. Revolutions involve people becoming upset and forcing change. Revolutions in the 18th century involved bloody wars and uprisings. 21st century revolutions will involve a public debate, which changes the ethics of the people. Japan has a constitution and almost all of the laws required to be a functioning democracy. What it lacks is the attention of the people and the ethics to execute on the rule of law.

The Japanese people are also beginning to show their unhappiness. Governor Tanaka of Nagano, an independent promising to shut down public works and crack down on corruption, was voted into office by people who were upset by the corruption and were willing to suffer short term pain in order to fight the corruption.

The combination of increasing public debate on the Internet and a global dialog will help the Japanese people become aware of the domestic problems as well as the context and responsibility of Japan globally. A new sense of global responsibility to achieve a higher ethical standard will help the Japanese people create a modern democracy capable of solving the domestic problems and allowing Japan to participate in the global geo-political arena as a true global entity. The revolution in Japan will be a ethical revolution about the people become aware that they are actually in charge.

I found an interview with Keiji Shima on Charles Whipple's page. (I found his page linked from his comment on my retribution item.) He is more relevant than ever. Keiji Shima who passed away several years ago was the chairman of NHK, Japan's national TV station and the largest broadcasting company in the world. He started his career there as a political journalist and eventually became chairman. My mother was hired by him to represent NHK in the US. I often worked for him as his assistant and translator. My personal opinion is that Shima-san was ousted from NHK when he tried to make it "independent" and free from LDP control. Some people say it was the CIA. (I think this is unlikely.)

I remember sitting in his office when he was chairman and watching the Diet session with him. He once picked up the phone and shouted at someone that he had told "so-and-so" not to say that in the Diet. My exposure to the tight relationship between the head of the biggest broadcast company and the politicians as well as the extremely brutal ousting of Shima-san by THEM was my first exposure to THE SYSTEM.

After Shima-san was ousted, I showed him the Internet. To be exact, I showed him Adam Curry's MTV.COM and downloaded and played one of the first video clips Adam had posted. At first he wanted to know who controlled it. He asked, "Does Murdock own it?" I said, "No... No one does." He then asked, "Can I own it?" ;-) He quickly figured it out though and paid us to set up a server for him so he could launch The Shima Media Network in 1994. It was the first paid web page that Eccosys built.

Very few people showed up at his funeral and even today I am sometimes "blocked" by people who know about my relationship with Shima-san and were enemies of his. Having said that, many people respect what he tried to do and believe that he was a visionary before his time.

Michael Porter was the moderator and I was the challenger for a 30 minute session with our Minister of Financial Services and Economy, Heizo Takenaka. I was allowed to ask one question to Takenaka-san. I told him about the conclusion of the two sessions from yesterday. The conclusion of the first session was that there was a basic lack of democracy and diversity causing many of the problems and creating a resistance to change. There was not multiple points of authority, only one. The LDP. There was an inability to criticize power without fear of retribution. Plans are easy, but execution is difficult. Execution is left to the bureaucracy which gets in the way and prevents execution. Media and the bureacracy were the problem according to the first session. The second session yesterday blamed the lack of political will. When Takenaka-san proposed a very aggressve plan to take care of non-performing loans last year, the press slammed him and mostly reported the position of the bank heads. The bureaucrats were not supportive and the LDP tried to crush it. The interesting thing was the a poll on the Monex site showed that 87% of individuals were supportive of Takenaka-san's plan but that was not reported by the press. (reported it on this blog) I asked Takenaka-san whether he thought it was an issue of political will or whether he felt that the bureaucracy, media and the LDP actively got in his way and whether this was a significant barrier to execution.

He said that Diet was in session and that this was a very sensitive time. He made a good point that the silent majority was supportive and that it was important to empower them. Having said that, he dodged my question, but the fact that he dodged the question was partially not to screw up the Diet process which is quite complicated and important. I think part of it was fear of retribution. I think his inability to respond was a response in itself.

Here are some notes...

Question: Japan lacks political will and requires BOJ and leadership
Answer: balance sheet problem requires balance sheet adjustment - NPL
We are in deflation - there are many reasons - demand shortage, demand supply gap is not that big - supply side problem may be big. China low wages... we can't stop that.
Deflation is fundamentally a monetary problem. Therefore monetary policy is important. Money supply is too low and we need to increase the money supply. We also have to pay special attention to nature of BOJ. BOJ is indepedent from the government so we are in discussion with them.

Question: BOJ would argue that the money supply need to get into the economy to do any good. Therefore the banking system needs to be fixed for that to happen. That's your job. What are you doing?
Answer: The amount of money being available by BOJ is growning, but the total money supply is low. The reason for the this difference is that the money intermediation process is broken in Japan. This is because of the NPL problem in banking sector. Now we have a very explicit plan to address the NPL. But, the total money supply is the responsibility of the BOJ.

Question: The government is in the position to influence the BOJ. Koizumi has the ability to choose the governor.
Answer: BOJ is independent from the government. The government and the BOJ should share common targets. Japan should be allowed to choose their own implementation tools. The BOJ established a new role three years ago and we are still in the process of developing the realtionship between the government and the BOJ.

Question: What inflation level target would be appropriate to deal with the deflationary problem.
Answer: The inflation target is not that important. The important point is to increase the money supply. BOJ may set a target. If the BOJ decides to increase money supply, then the target will be important.

Question: Yen is increasing when you are hoping that the exchange rate to stimulate the economy. Are you concerned.
Answer: I can't comment directly on the exchange rate. The rate should be set based on supply and demand. The impact of the exchange rate will be over 6 months later so I'm not worried about the short term impact.

Question: Is consumer demand a way to increase money supply.
Answer: Yes. BOJ can purchase assets and this will increase money supply. Banks say there is no need for lending. This is a good way for the BOJ to increase money supply.

The good thing about being a table host is that you can request certain guests to be assigned to your table. I requested that Bill Joy and Paul Saffo get assigned to my table so I would not be the only nerd at the table.
Every year, several associations in Japan host the "Japan Dinner" in Davos. Several years ago they changed the format from formal speeches, to a talk show sort of format where the extremely talented Professor Takeuchi would go around picking people out of the crowd to request comments. Since the format change, the dinner has become quite popular and this year there were over 200 people registered this year, the most ever.

I was chosen this year to be the moderator of the "talk show". I was VERY nervous. Takeuchi-san is by far the best at this sort of thing and I knew I would not be as good. Also, I don't know all of the people so it's hard for me to pick them out for questions. Anyway, I tried my best. I started out with a wrap up of the day's events and then went around and called an a variety of people to make comments. I asked Sadako Ogata, the former United Nations High Commissioner for Refugees, one of the most impressive people I know. She wrapped up with with a very strong comment about Japan's role in the world. I wish everyone in Japan could hear her speak. She allowed us to end on a tone that made me proud to be Japanese.

Overall, I think my speech was OK. I think my choice of speakers was weak. I didn't choose enough non-Japanese and I wasn't able to manage people who were talking too long. I don't know if they will ask me to do this again next year, but if they do, I'll make sure and study the attendee list and know the backgrounds of everyone in the room in advance.

This is the second panel on Japan. This panel represents more of the more established figures in Japan. The Challenger is Paul Krugman, the moderator is the Chairman of Fuji-Xerox Yotaro Kobayashi, Professor Takatoshi Ito, Masayuki Matsushita the Vice Chairman of Matsushita Electric Industrials, Junichi Ujie, President and CEO of Nomura Holdings Inc., and Malcolm Williamson, President and CEO of Visa International.

This panel is focused primarily focused on more pressing issues than our panel and is more economics oriented.

Here are some notes.

Professor Ito presented a variety of short term and mid-long term scenarios.

Williamson "You can defy gravity for awhile, but eventually you fall. The longer you defy gravity, the harder your fall. This is what is happening to the Japanese banking system... Good bank mergers can reduce costs where 1+1=1.5. In Japan, bank mergers end up with 1+1=2.5. Banking is the most important issue. I've never seen a country come out of a recession with a bankrupt banking sector, which what I think is what Japan has."

Mr. Matsushita is saying that industries that were protected now suffer from weak management, elevated cost structure and dependency on government grants and subsidies. The elevated cost structure reduces the global competitiveness of these industries. Japan needs to supliment it's dwindling work force with skilled foreign workers and students. Do not limit internationalization to a select sectors.

Mr. Ujiie is saying that the Nikkei is hovering at the 8000 yen level, the level 20 years ago indicating the markets negative feeling about the probable scenaro. On the other hand, the policy makers seem to be following Ito-san's best case or base case scenarios. It is beomcing popular in academia and policy to talk about inflationary measures. Such initiatives must be accompanied by an increase in money supply. There must be regulatory reform along with monetary policy. For instance, tax reform.

Kobayashi-san is asking whether banks are taking actions in response to Takenaka's plan. Are the current signs of change in the banks a real sign that the Japanese economy is really moving towards reform, or are these changes real?

Professor Krugman says "no." Deflation is key. Deflation is not responding to conventional monetary policy and the analogy with the UK is not a very good one. They did not have a real deflationary problem. What kind of structural problems cause a deflationary tendency. Most problems cause inflation. The cause of a deflationary tendency. Non performing loans may not do much for the economy and it isn't clear that it isn't just a result of the deflation problem. People blame the banks for the fact that an increase in a monetary base does not result in increased output from banks. Well, if banks have increased money supply at 0 percent interest, there is a good reason just to keep in reserve. Regarding industry structural reform... "sometimes a kick in the rear helps gets us going, but sometimes it just hurts." It's unclear whether it will help the economy. He sees two upside and two downside scenarios. Upsides are new technology forms the basis for recovery or a radical expansionary policy. Down side is a full deflationary spiral or government defaut to which deflation plays a major role.

Kobayashi-san asks the panel for action ideas.

Ujiie agrees with Ghosn about execution being key. We have had a plan. Lets stop debating and implement.

Matsushita-san says that he doesn't think that structural reform will fix deflation, but that such reform will be necessary for companies to become competitive internationally which may indirectly help the economy, but that he is not a macro-economist. (Sounds like something I would say...)

Professor Ito thinks that the most important thing is the leadership of Prime Minister Koizumi who can coordinate all of the monetary policy.

Mr. Williamson agrees with Professor Ito and thinks that Professor Krugman sounds a bit defeatest. Leadership is very important. Korea and UK were both highly influenced by leadership in getting out of the crisis. It is a combination of factors, but the biggest thing is the change in psychology of the people who don't see the problem.

Question from the floor: Is there enough political will to give a leader the power to establish a political mandate which is necessary for political leadership.

Ujiie-san thinks that the people are prepared for the pain so the people have given the political mandate for structural reform. It is unclear exactly who takes the burden.

Krugman thinks that the structural may be exaggerating the pain that is required. It may not. Maybe it is just rolling printing presses is what is required, not blood and sweat. Maybe it's not leadership but just clear thinking that is required. Japan may stress the leadership and pain and make it much more complicated than you have to make it. Leaders will try, they will fail, there will be pain and we may just have another lost decade.

Question from the floor: Where did the "fire in the belly" go that used to be in Japan.

Professor Ito says that there is no sense of crisis on the streets.This isn't a generational change. It is the reflection of a more pessimistic view of the future. It's a reflection of macroeconomic pessimism and stagnation.

Question from floor to Professor Krugman: But the "new technology saves Japan" scenario. Will the banks fund it?

Professor Krugman says he thinks so. I commented that VC's in Japan are few and big companies are focused on developing very large business units that are core and innovation in the form of ventures is stifled. Ujiie-san mentioned that there are some attempts such as the angle tax law, but they are so poorly written that they don't work. Mr. Williamson thinks that it is an issue of a lack of VC's, not a banking problem.

Kobayashi-san is wrapping up by saying that the leadership of Koizumi is key in delivery of the package a reality. Commenting on our session... the system may seem broken now, but it used to work. The "iron triangle" is losing confidence and is maybe a source of political will to change. Maybe this enough to make the Prime Minister to listen to the micro side and maybe he can listen to Professor Ito and Krugman on them macro side.

Idei-san pondering the future of Japan...
We had a meeting of the members participating the World Economic Forum panel at Davos on the Blueprint for Japan 2020. It's such a huge issue... I showed everyone the picture that we drew (on my Mac... oops! ;-) ). Idei-san has been using the term "quantum leap" instead of "reform" and shared some of his views of Japan's problems with us. We still have some more homework to do before the panel, but I think we all agreed on the major points. I was appointed to be join Heizo Takenaka, the Minister for Economic and Fiscal Policy and for Financial Services on his panel which will follow our panel. There are three panels on Japan and I'm the messenger from our panel to his. I wonder who's on the other panel. Anyway, we're the first one so I think we can set the tone.


Had brunch with Yu Serizawa of the World Economic Forum and Oki Matsumoto of Monex and talked about the Blueprint for Japan 2020 and the panel in Davos. Oki drew a pretty interesting picture based on the discussions we've been having and I doodled it on my Mac. There are a lot of missing components, but the story goes like this.

We have efficiency problems because the markets that traditionally allocation resources efficiently are dysfunctional. One of the reasons that they are dysfunctional are because of the dysfunctional democracy which causes the inefficient insider circles which act in their self-interest without check. The dysfunctional democracy is driven by the lack of diversity. The public are educated to be risk adverse and obedient, the media are huge and controlled and speak with almost a single voice and the judiciary do not have an ethics of independence and are part of the "group". This cycle perpetuates the central harmony and concentration of power. Even if once piece of the cycle changes momentarily, the cycles co-opts or ejects diversity and everything continues along the same path. We need some sort of external influence which is more resistant to this cycle which can break the loop. Also, I think the idea is that things like "values" and "spirit" of the people are probably more important than specific rules and laws. It's probably a combination of social changes, pressure from the outside and some leaders (the governors?) that might be able to break this cycle and cause change and a more democratic ethic. One thing to focus on is that we have a legal (albeit not enforced) framework for a democracy and it's probably the ethics of each of the organs and individuals which makes it dysfunctional rather than the structure. Thus, it's probably a deeper issue...

I'm still working on my Blueprint for Japan 2020 for Davos and focusing on trying to figure out what we need to do to "fix" Japan. I'm digging around trying to define the problem.

The biggest problem is the recession, but it's just one piece. It's also a very visible piece. There are other less visible indicators such as the lack of entrepreneurs, high suicide rates, mental health problems, lack of political participating of the people, lack of diversity in politics, huge media companies with little diversity, 4% of the universities providing over 30% of the CEO's for public companies, the medical scandals, a judiciary that is unable to enforce the constitution, the difficulty in filing claims against the government and corruption at many levels.

Reading Hiroo Yamagata's interesting proposal (from 1998) to increase VAT to simulate inflation, based on Paul Krugman's proposal in Japan's Trip. He says:

Hiroo Yamagata
But wait! You've been reading the papers, and they say that structural reform and bank clean-ups are essential for Japan's recovery! What about those? Well, those are definitely good things and should be pursued in their own right. But neither have too much to do with the recession.

I think he has a point, but I think that's not a reason why we shouldn't continue to push structural reform. Although reforms don't have as much of a direct effect on the macro-economy as people say per Hiroo's argument, it's difficult to have a healthy economy without entrepreneurs, a healthy, open market, transparency and a democracy that people trust. I think that it is much easier to cause reform during a down market because people are willing to bite the bullet and change in order to survive, power-structures are more fragile and susceptible to change and people are in pain and possibly willing to become more politically active. Now there are a lot of "maybe's and might's" here but I think that when people are happy shopping and getting paid for doing almost nothing, it's pretty hard to stage a revolution. I guess one might argue that we don't need a revolution in Japan, but I think that without one, we won't be able to change into a truly functional democracy. Without a democracy, it is unlikely that Japan can be a global player in the 21st century. Again, a pretty bold claim... So now I think I've identified my homework.

Is there really a problem with Japan or are people just upset because of the recession?
IF there is a problem, how do you cause change? (You need power to change and you don't have real power in Japan unless you are on the inside and therefore unlikely to change.)
Will structural reforms, in the long run, help the economy?

I guess one of the short-term questions that I have to answer is whether we should talk about the economy and involve a bunch of economists in the debate or focus on democracy and deal with the law professors and politicians. ;-)

Today was the second meeting of the WEF Blueprint for Japan 2020. Oki and I reported on our presentation in Geneva.

Richard Koo, the chief economist of Nomura Research Institute talked about some of the macroeconomic issues regarding the Japanese economy which was really staggering to think about. 85% of the value of the land disappeared after the bubble. This is 3 years of GDP. That's huge when you consider that the great depression in the US was only 1 year of GDP drop in assets. The savings and loan problem in the US was only a 20% drop in the value of assets. The scale of the Japanese problem is gigantic and unprecedented. On the other hand, this could happen to any country such as Taiwan, Thailand, China or even the US. The huge drop in asset value is causing another very unique situation where 70%-80% of companies are paying down debt when interest rates are basically 0% because they are so highly leveraged against assets that have lost so much value. The fact that the economy is even functioning is amazing.

We talked a lot about the issues and how to communicate our point. We decided to focus on how diversity enables markets and democracy since this point of view is rather unique and core. We decided to start a blog about this project. ;-)

jidaikai_thumb.jpg
This is the "young" group of the Association of Corporate Executives which is probably the most prestigious association of CEO's in Japan.

We started out talking about the rights of women. One of the men said that all of the women he asked didn't want a career and that it was just a few professional women who were trying to push their agenda. I said that it was like the abducted Japanese in North Korea saying that they didn't want to go back to Japan. They either didn't know better or they didn't want to say... I remember when Shima-san, the former chairman of NHK was told that most people in the company didn't like him. He went around asking people if they liked him and everyone said, "yes". He told me, "so obviously the survey is wrong."

We're talking about the ageing population problem in Japan. Taxes in Japan for inheritence are very high and crush families. Someone mentioned that monogamy from the view of some women is a system that allows weak men to get their fair distribution of women and don't give women enough choice. The idea is that maybe women should be free to choose who they get their seed from and that society should support all children. Japan has one of the highest abortion rates in the world. If Japan culturally accepted divorce or single women and allowed them to have children and society helped support this, maybe the people would have more kids.

I told everyone that someone who was visiting from the US asked me if Mizuka and I were planning to have kids. When I said, "not yet," she said to Mizuka, "you know you can have kids without his approval. I have some left in my freezer if you want any."

Interesting thoughts, but probably not something the elders of the Association of Corporate Executives would understand.

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Oki Matsumoto and I, with the help of Ichikawa-san of Keio University prepared a bunch of slides about what was wrong with Japan. Since I was bouncing around Europe having fun, I made Oki bring the printed slides to Geneva. Thanks Oki! We stuck the slides up on panels to make a booth for the Expo Bazaar during the GLT summit. We made 5-10 minute presentations to GLT's as the passed through the both and got feedback from them. I will post the presentation slides later, but the jist of our presentation was...

Japan was in trouble and needed reform, but because of the cost to the global economy of executing these reforms, it was very difficult. Also, the problems in Japan are rather well hidden and complex we tried to explain these issues. We focused on three points. Democracy, Diversity and Markets. Japan does not have any of these working well.

Diversity was necessary for markets and democracy and diversity included changing the educational system to allow a variety of respectable career paths including risk taking paths. The media needed to be more open and free to allow diversity of opinion.

Democracy required a more fair election system. It required a judiciary to help check the legislature.

Markets were important to reallocate resources. We needed a strong organization like the SEC to enforce rules in the markets. We needed corporate governance to create financial transparency.

We needed a lot of things. Yu Serizawa took notes of the session and I typed them up in random order. We will organized these notes and output them more formally after discussion with the rest of the Blueprint for Japan 2020 team in Tokyo, but for your reference, I will post the notes here as is.

Here is the powerpoint presentation of the slides for our booth.

Do we use the word revolution?

Minimize the risk of the revolution by having a blueprint

Democracy, Diversity and Market Driven

Q - Expectation for changes were high when Koizumi was elected, but did cause reform?

A - He set the mood and the atmosphere but he did not implement is not here to cause revolution.

Q - Is it going to take another 15 years?

A - Act now for the future.

A - Tipping point. It doesn't look like it's changing, but maybe we are closing on the tipping. What are the points of the disequilibrium that is pushing us to the tipping point?

Once we empower people, we may be surprised by the support from the public.

Q - How do we engage the young people who are in the end the stakeholders of the future? They will be the people leading and paying for the pension. Are they aware of the potential problems we are creating for them?

A - Media reform and education

A - Empowering

Q - Are the Japanese happy? We are rich and we work hard, but are we happy?

A - Our major problem is elders is they say, "you are demanding too much. Look at how far we have come since 1945." We would like to compare ourselves to the rest of the world, not our past.

A - We think we are rich, but we aren't. We are funding the $8t balance sheet debt.

Government is borrowing money from younger generation. They are insolvent.

Maybe get TV or newspaper to do poll of people about issues

Cause enforcement through SEC and Judiciary

Q - What happened 10 years ago?

A - Plaza Accord was US policy to force Japan to switch gears from high intensity growth and cause the bubble and the collapse (We've been driving on first gear for too long and Americans decided to wake us up in brutal way) Inability of commercial bankers and the process of using land as primary asset for loans and very little direct investment.

A - Around '85 shifting from land to building value. (For instance earthquake proof buildings)

Q - Can the global economy afford our reform?

2 Tier Society and lack of respect for entrepreneurs and risk adverse environment

All or nothing "shoganai" approach - introducing values that more commonly accepted

Q - Is the Japanese B/S really worse than the US?

In the end the government tapping on the private savings is a voluntary taxation and common in other countries

Q - Do Japanese really care about democracy?

Japan is an obedient society and system build to be controlled first by the Emperor and then the occupation so now no one is driving?

Too much democracy makes low GDP - See Latin America - maybe it worked until the global forces were open to Japan

Government served a purpose at the beginning but system failed to reinvest ourselves in the '70's

We should have known? Maybe US should have done something better than the Plaza According?

Q - What is your top priority? Is it fixing the capital markets? Is it increasing the inflow of capital? You can't change everything, but changing the capital markets is feasible, but so start there.

Comment from us - Japan isn't hooked in with the out side world.

The Japanese are not integrating with the external world from the perspective of free trade and media. Maybe Japanese language foreign media. Try to increase the engagement of Japan.

Fundamental problem that the structure does not allow change. Can we bypass by empowering individuals? (See Nagano-ken) Use ID to do polls?

Japan is a fake democracy with socialist culture. A true democracy would allow diversity of opinions, not the collusion between government and media. Government is not making policy but just allocating resources.

Yu - Collusion between all sort of other groups.

Q - What if there are no longer any resources to be allocated? What does the government do then?

Making a new post-industrial Japan. We need to dump manufacturing and shift to services, IT and Bio. How do we fix low productivity sectors?

Education needs to change to help allocation human resources to post-industrial Japan.

We need the "foam" like the backward high jump. What enables this change?

Q - Japanese recognize entrepreneurship in foreigners…

A - Japanese are partial to foreigners and keep the engagement partial

Need to open up to the world

Q - Need to be more confident in the world

A - How do you produce more confident people

A - Need to shift away from brand name and cause self-esteem - education and societal values - tend to rely on big names instead of something new - exclusive and not inclusive society

Wake up on reality of immigration - need to wake an integrate them

Are we happy or are we unhappy - figures and reports. 50% of people are unhappy with their jobs. Why can't we express the unhappiness

Double income had to be applied to agriculture so we allow subsidies which are anomalies. Japanese story is all about anomalies.

Can the world afford real change in Japan.

It is so complicated and so intricate. Where is the tipping point?

Japan Inc. doesn't work except for industries that aren't regulated.

Some things are changing. More entrepreneurs…

It's not true that people are not interested in Japan. For instance, pop culture…

No longer an economic argument

Stunned by the ignorance by outsiders on Japan

System locked into equilibrium. Can't get out of it... Diversity is push it.

Pressure points, where?

Is it a leadership issue?

Can we make the pain of not-changing bigger than the pain of change?

What are the gains of changing, not-changing. Acknowledgement of the present problems. Reckoning.

The Japan Times Online
Japanese workers least loyal to firms, survey discovers

LONDON (Kyodo) Japanese corporate workers harbor the lowest level of loyalty toward their employers among the world's 10 major economies, according to a British survey released Tuesday.

Only 50 percent of Japanese respondents to the survey, which features the views of 362,950 employees, said they would wish to stay with their current firm or would recommend it as a good place to work.

Researchers attributed the findings to a "Westernization" of Japanese attitudes toward the workplace and the nation's stagnant economy.

Japan's figures rated poorly when compared with the results from Brazil (79 percent), Spain (76 percent), Germany (74 percent), Canada (73 percent), Italy (70 percent), the United States (67 percent), France (67 percent), Britain (59 percent) and China (57 percent).

I heard this sort of thing from Hirata who read it in a report from Mexico. I think it is true. It is counter-intuitive, but I think it really shows that the social fabric of Japan has broken down and that much of what we believe about Japan is wrong.

I think that if we can take this shift and convert it to the "wind of change" that Jane referred to, we might be able to change Japan more easily that most people think...


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Yet another breakfast about how to save Japan... This one is co-sponsored by The National Institute for Research Advancement (NIRA) and the Association of Corporate Executives (Keizai Doyukai). The title of this project is called "The Action Plan for Reviving the Japanese Economy." The chair is Kanemaru-san, the CEO of Future System Consulting.

This is the second breakfast. I presented my standard presentation at the last breakfast talking about the lack of a functioning market/risk-return model.

Oe-san of Plantec is presenting today. He is talking about liquid space and communities. He is also talking about how speed is power... I wonder where he is going with this...

Now he's talking about music and raves in Israel...

This final point is to shift the "solid Japan" to a "liquid Japan"...

I just pointed out the risk of fluctuation amplification that comes risk speed and the necessity of diversity to dampen this and the fact that at some point speed is out of control and does not lead to straight forward "power" for the state.

Oe-san is talking about bottom up control rather than top-down control...

Jinno-sensei, Professor of Economics from Tokyo University agrees with me I think and is talking about getting "sea sick" from the speed and "slow down and calm down" for the economy...

Now we're talking about information and journalism and I got a chance to talk about blogs... I told everyone I was blogging them right now. ;-) (shocked faces)

We are now all agreeing that we have to destroy/purge a lot of the older structures, but now Inukai-san is asking, HOW do we destroy old structures...

bp2020_thumb.jpgFrom 4:30pm at Hotel Okura was the press conference for the "Blueprint for Japan 2020" initiated by the World Economic Forum. The agenda fits well with what I am trying to do in "activating" the young leaders in Japan, but on the other hand, it sounds like a lot of work. I'm hoping that it will overlap with what we are doing at Keizaidoyukai. Klaus Schwab is good at getting press so maybe this initiative will provide some exposure of the core issues as well as get some support from outside of Japan to force change in Japan.

Following are some quotes from the press release.

World Economic Forum
YOUNG JAPANESE LEADERS JOIN THE WORLD ECONOMIC FORUM TO LAUNCH "BLUEPRINT FOR JAPAN 2020"

"29 August 2002, Tokyo, Japan - The World Economic Forum announces today the launch of its Blueprint for Japan 2020 project created by Professor Klaus Schwab, President of the World Economic Forum, within the framwork of the Young Asian Leaders Initiative. The objectives of the project are to identify and strategize on how Japan should approach its ten most significant challenges in building a revitalized Japan by 2020."

"The Young Japanese Leaders who are launching the Blueprint for Japan 2020 include: Business leaders: Joichi Ito, President, Neoteny; Oki Matsumoto, President, Monex; Hiroshi Mikitani, President, Rakuten. Politicians: Keiichiro Asao, Democratic Party; Motohisa Furukawa, Democratic Party; Yoshimasa Hayashi, LDP; Taro Kono, LDP; and Yasuhisa Shiozaki, LDP. Academics: Motoshige Ito, University of Tokyo; and Jiro Tamura, Keio University."

"The Blueprint for Japan 2020 will be presented to the 1,000 corporate members of the World Economic Forum at its Annual Meeting 2003 in Davos where young leaders will take into consideration comments from the international political and business communities and further develop the Blueprint."

I wrote a paper to present at Ars Electronica this year September 7-12 in Linz, Austria. The title of this year's festival is Unplugged - Art as the Scene of Global Conflict. I had a deadline for the book so I tried my best to put my thoughts together, but I feel like my paper is still a bit disorganized and unfinished. I'd like to edit it before I present it in September so your feedback would be greatly appreciated.

Identity and Privacy in a Globalized Community

By Joichi Ito

June 17, 2002

Version 1.0

From atoms to bits

In his Wired Magazine column of January 1, 1995 "Bits and Atoms" Nicholas Negroponte' describes the shift in focus from atoms to bits.[1] The shift from atoms to bits is still one of the most significant shifts impacting society today. As with most technical trends, people have over-anticipated the short term impact (the dot-com bubble) but have severely under-estimated the long term impact.

The impact of digital communication networks and globalization on identities and nations

The industrial revolution triggered a cultural shift causing nations to become powerful entities in a globalized geo-political world. The world began to focus on the products of mass production and the world began to focus mostly on the "atoms". Individuals became able to travel easily and individuals began to be identified and tracked as physical units and physical borders rigorously managed. Digital communication technology and cyberspace has increased greatly the power and value of the non-physical world and is affecting the nature of national borders and identity. Here I would like to explore some of the changes facing an era of digital transnational communications, focusing on value shifting to cyberspace and its impact on identity, authentication and privacy.

Scalability of communications as profound as mass production

Although cyberspace and bits are rather new, non-physical space is an old idea.  A major step toward large-scale shared virtual communities and the scalability of communications was the creation of the printing press and the public. The invention of the printing press created another huge virtual world, the world of literature and public opinion. Before the printing press, there was no public. The next and much more significant step was the invention of electronic communications. Electronic communications such as the telephone changed speed and in turn the nature of markets, warfare and politics. The more scalable digital communications and the Internet have allowed the public to wake up from its semi-conscious state to an actively aware state where the public can now think for itself and communicate.[2]

The technology of the mass production of physical things allowed a new level of scalability and division of labor to form. During the industrial revolution, markets were suddenly flooded with entities rich from the benefits of the ability to mass produce and money became a much more central component of our reality and perception of reality. As Marshall McLuhan points out, the metaphors and language we use molds very much what we can imagine or do.[3] The abstract management of resources was possible in the modern world of mass production. Yet, money generally represented atoms, most companies in the 1920's being valued primarily on value of their physical assets.

As information technology has made communication and the transportation and the management of bits scalable and low cost, more and more of our wealth represents information -- information about atoms and information about information. Companies are now generally valued at premium on the value their physical assets. This "Intellectual Capital[4]" is the value of the information and other intangible assets held by the company. More and more of our value, identity and time exists in the digital world.

John Perry Barlow once described cyberspace as "where your money is."[5] Cyberspace is not just the Internet, but everything digital. The balance of your bank account is just some entry in some computer. This value is information about information about some value somewhere, but much of it is self-referential and mostly very contextual.

Entities beyond physical

There are many instances where entities exist primarily in the digital world.

MUD's

MUD's are multi-user role playing games where players invest thousands of hours developing characters which own assets, have attributes and relationships with other players. The time and the knowledge of the players is invested in the game and the game becomes a rich highly contextual entity in the digital world which one could argue has substantial control over its representatives in the physical world.[6]

VISA

VISA for many years was just a contract between its members who wished to perform transactions electronically. The members created the rules and the system was completely distributed and each member was responsible for its own risk. VISA was able to be a brand recognized entity when necessary, but could disappear from regulators because it was not a legal entity and did not have a physical location.[7]

Multi-national corporations

Multi-national corporations or "legal persons" often have the benefit of existing in a limited liability state of global distribution, but often also suffer from the paralysis of being exposed to multiple jurisdictions because of the necessity to interact to a great extent with the real world.

Identity

Most people believe that identity is simply one's name, age, sex and address. In fact, we all have multiple identities that are aspects of the entity which is unique human being flesh and blood that we are. Actually, companies, government agencies and political bodies are also entities. Identities can be roles such as shareholder, officer, rape victim or spouse. Identities are identified by identifiers. Some identifiers require the authentication of the entity whereas some identities can be authenticated by uniforms, passwords, secret hand-shakes or other identifiers which do not expose the entity behind the identity.

It is essential to consider the issue of identity independently from the issue of authentication of the entity. When one is engaging in a transaction with some identity, one is concerned with the risks and attributes of the identity with respect to the transaction. When one is trying to sell diamonds, one is concerned with the authentication of the other identity's financial attributes. If one is trying to receive donated blood, one is concerned, not with who it came from, but the type and whether it is safe. If one is selling liquor, one is concerned with the age of the purchaser, not the address.

It is true that for many transactions, it is necessary to authenticate the entity, but often knowing the name, age, sex and address of the entity one is interacting with gives us no value. For police dealing with entities within their jurisdiction, the authentication of the identity gives them to ability to throw the entity in jail, but for most of us, the reputation of the entity, cash on hand, validity of the third party insurer or some other attribute is probably more important. With the global Internet, the ability to punish an entity beyond the borders of our community do not generally exist. For this reason, authentication of the entity is much less important than the authentications of identities and the attributes of these identities.

In fact, in many cases, it is essential that the entities are not identified and are able to remain anonymous. When one asks questions at a public help desk, or consults someone about sexual abuse inside of an organization or tries to reveal information about war crimes in inside of a country ruled by an oppressive government it is essential that one is able to remain anonymous.

Although pure anonymity is often very important, pseudonymity, the ability for one not to link identities with each other or with the entity, but for the identity to be authenticated, is important For the sexually abused student who is consulting the counselor, both parties need to know that it is the same identity that they have been corresponding with, but neither need to know the actual name and address of the other. In fact, many common law countries allow people to legally use nick names or pseudonyms. Such pseudonyms are common on the Internet and very useful. The tendency for us to try to force entity authentication on all pseudonyms is a very simplistic and policeman like view of identity. Pseudonyms are like roles and by limiting their use to transactions or participation in communities where reputation or other form of collateral like attribute can be secured; they can be a very important and functional tool.[8]

Privacy

Definition

Roger Clarke defines privacy as "Right to privacy is the freedom from unreasonable constraints on the construction of one's own identity" and calls this digital identity a Digital Persona.[9]

As law enforcement, national security interests, political interests and commercial interests continue to collect more and more information about us and trade and analyze this information a great web of databases of digital identities are created linking physical entities to a massive dynamic body of information which represents our digital personas, their attributes and the relationships between these personas. We currently have very little control over how these personas are formed and managed and often we do not even know they exist.

The future of privacy, as Roger Clarke describes, lies in our ability to manage the construction of one's identity. In order to do this, one must understand the current state of privacy, the threats to privacy and technologies and methods that can better protect our privacy.

The EU Directive on Data Protection[10]and most of the world's privacy policies are based on the OECD's 8[11] guidelines about privacy that deal more with data protection than data format and architectures. These guidelines were written over 20 years ago when we were dealing with large mainframe computers, centralized databases and very little trans-border dataflow. Today, we are dealing with a distributed network, much more computing power and much more invasive data collection. The EU Directives talk about destroying information when it is no longer needed. In today's world, it is impossible to destroy information once it is created. It lives on in traces on hard disks, backup tapes, log files, surveillance databases. Once information has been created, it is important to assume that it will one day become public. Therefore, what is essential today is to manage the creation of information about ourselves. The best policy is to create information only when necessary and disclose only the information necessary for the particular transaction. It is essential to keep identification information to a minimum and to keep identifiers as separate as possible in order to make it difficult for hopefully impossible for the information about a particular transaction to be used in ways unknown or unintended by us.

Law enforcement and national security concerns are pushing money laundering laws to make our financial privacy illegal. They are trying to implement a myriad of biometric database to link information about our identities to our physical entities to be able to profile and model individuals. All of this information greatly enhances their ability to find and capture criminals, terrorists and other people who are not friendly to their concerns. Much of what these agencies do is essential for order in the world, but most criminals intentionally avoid identification and regularly thwart efforts by authorities to track them through such methods. In the mean-time, great databases of the profiles and relationships of regular citizens end up being compiled and these databases can and will be abused by governments, politicians, organized crime and eventually terrorists. The greatest threat to the freedom of individuals in our great new globalized information economy is the "ends justify the means" sort of thinking prevalent in counter-terrorist and law enforcement agencies without thorough consideration of the risk that such massive surveillance has on the freedom of normal individuals.

In fact, law enforcement and spies have more technology than ever before. They can read license plates from spy satellites, recognize voices on telephone lines with computers, plant microscopic tracking devices and genetically identify strands of hair. Our fears are increased by fraud by trusted executives, terrorist attacks, computer viruses and a variety of new threats. We need to be aware that throwing away our privacy and giving unlimited access to government agencies will not solve these problems.

Privacy enhancement technologies and architecture

In the past, being a privacy advocate meant that one was anti-information technology. Most information technologies in the past calculated things such as the efficiency of factory workers or sorted people to send them to concentration camps. Today there are many technologies that protect or enhance privacy.

For instance, David Chaum's blind signature technology allows users to authenticate the fact that a piece of digital cash is authentic, but allows the users to remain anonymous. This allows us to create the digital equivalent to real cash. This could create problems for agencies trying to clamp down on money laundering, but it could also help protect the privacy of activists in a totalitarian regime.

Huge databases of fingerprints or other biometric information can be very invasive and potentially dangerous, but companies such as Mytec Technologies[12] of Toronto are working with technologies which allow the biometric information to be stored on the user's card, rather than in the database. The organization uses cryptographic technology to authenticate the validity of the information in the card and provides access with a card and biometric combination, but does not retain an image of the fingerprint, retina or face that might be used to provide access.

Zero Knowledge Systems[13] provides a suite of products that help users manage their identities, the cookies they receive, the privacy policies of the sites that they visit and a variety of other things that are usually not visible or selectable to the user.

Eric Hughes once talked about the "open book protocol" which describes an encrypted accounting system that allowed people to audit a group of linked accounts while retaining the privacy of the individual entries.

Pharmanet in British Columbia, Canada, through the insistence of Mr. Flaherty, the Privacy Commissioner, allows patients to assign a password to prescription records.

I have proposed an idea as a replacement for profiling, database marketing and recommendation engines. If one were able to store on some small device or IC card, a local profile of one's shopping habits and one's computer or phone had a recommendation engine built in, shops and online merchants could provide us with the profile of the products and we could recommend things to ourselves. This would allow much higher privacy than the current system which profiles user on the merchant's servers. My method is also superior because one's profile could help recommend products even on a first visit to a site. The difficulty would be in standardizing the product profiling codes.

The Internet itself has become a method for activists to organize and disseminate information. A new breed of privacy activist exists who uses technology and tries to come up with technical methods for protecting privacy and most importantly tries to influence the architecture of computer and network systems.

Lawrence Lessig - Code

Lawrence Lessig in his book Code[14], describes how computer code are like laws and the architecture of databases and networks like politics. It is this war over architecture which occupies the battles of the digital privacy activists. New data formats will make it easier and easier to merge databases and link isolated transactions for bits of information about individuals. It is cryptography that will create the boundaries and limit the use of information.

Cryptography provides us with the tools to communicate securely with authenticated peers. Cryptography allows us the flexibility to create a variety of architectures. Authentication systems range from centrally controlled to completely distributed systems. Identification systems range from totally anonymous to pseudonymous to identification of entities. Cryptography gives us the ability to make technically possible, what we want possible and make technically impossible, that which we decide should be impossible. Creative use of cryptography allows us to trust who we would like to trust and be seen and communicate with only those we wish to communicate with and keep separate and unique. Each community and the group of identities in that community can have its own rules and architecture with the proper cryptographic technologies supporting it.

According to Philip Agre, Privacy is no longer a simple discussion of "the simple tradeoff between privacy and functionality" but a "more complex tradeoff among potentially numerous combinations of architectures and policy choices."[15]

Online communities[16] and reputation capital

Online communities such as mailing lists, conferencing systems, online games, online auctions sites, networks of BLOG's and the Linux community represent communities that have many of the same attributes as nations.

There are many fundamental differences, but one of the biggest differences is that because of the lack of physical access and usually the lack of the ability to access directly the entities behind the identities, these communities have to govern themselves without the ability to punish the entities behind the identities physically, such as throwing someone in jail.

The two most important items that a community has to manage its participants is the securing of reputation which can take the form of personalities developed through interaction, attribute points in games, reputation points on eBay or ability to influence and participate in development in the Linux community. It is this reputation and the ability to take away access to the identity tied to the reputation which helps enforce the rules and behavior within the community. 

In fact, this is not just an online phenomenon. Organizations such at the WTO use membership and trade sanction rather than physical attacks as its primary method of enforcing its rules. These are processes that are in place with any community, but the online versions are unique in the ability to attach these processes to online personas as opposed to identities tied to physical bodies.

In this way, communities that provide value to its members can govern themselves and manage accountability without access to the physical entities and provides us with a model for pseudonymous networks.

Culture, communities and the sovereignty of nations

As the events of the last year have shown us, it is very difficult for many communities to occupy the same space. Each community has its own culture and rules and each makes sense in its own context[17]. Before, all we needed was the ability to physically isolate the incompatible communities and create a sense of identity within these borders, and sovereign nations and physical borders helped to do this. Now with globalized media, economy and the Internet, people occupying the same space can have access to multiple cultural contexts.

We have spent the last 20 years trying to get everyone connected together into the "Global Village". The problem with the global village is that it is impossible to create a "Global Culture". The solution is to increase tolerance for different cultures, but also to allow different cultures to co-exist by creating distinct boundaries between communities, each with its own rules and culture. It is diversity that makes gene pools, politics and the Internet robust.

Each community will be able to interact with other communities based on bilateral or global rules. Each community will be able to enforce its rules through its ability to sever ties with communities or individual identities.

Human beings will continue to be physically exposed to the rules of the nation where they live, but digital personas will be able to freely associate with and join communities globally and will be governed in each community based on the rules of those communities.

Governments currently try very hard to extend their jurisdiction beyond their physical borders such as the French concern over Nazi paraphernalia on Yahoo or the American "War on Terrorism." Most nations try to tax income and track assets of their citizens beyond their boundaries. Eric Hughes once said, "You can't tax what you can't point a gun at." The difficulty that these nations face is that unlike the days when our assets were physical, there is really very little to prevent digital assets from moving freely and the cost and difficulty of enforcement becomes extreme.

Global companies will choose tax havens to set up their funds, countries with loose labor laws for their factories and countries with good food to host their board meetings. Nations should view themselves more as service businesses land lords, their taxes being the price and their rules, infrastructure and culture being the services they provide. Physical nations that provide physical services can and will charge for these services in the form of tax or service fees. The easiest way for such a tax to be levied is where the money enters the physical world, such as in the form of consumption tax. Other service providers to provide non-physical services, such as online security, transactions, underwriting and data protection can charge for their services in the form of transaction fees or service fees. There will be additional layers of services where the physical nation-states and commercial entities meet and overlap. Yet, these borders are already quite blurred. Some people in the UN are calling for the more active use of mercenaries to fight their wars and many agencies of governments in countries such as Singapore are very hard to distinguish from commercial entities. In the future nations will mostly likely be more concerned about trying to be popular and maximizing the value created by their tax income rather than trying to forcefully beat their own culture into the hearts and minds of the global community.

Conclusion

In the new world of colliding cultures, a blurring of physical and virtual identities and a dissolving of the sovereignty of nations, governance and order becomes the crucial issue. One thing that the Internet has taught us is that very difficult problems can be solved by unbundling the pieces and creating protocols for each of the layers or objects to interact and work together. The Internet has also taught us that no one has to be "in charge". (When people try, they fail. See ICANN.) The key to success in governing the communities of the future will be a combination of global rules and practices for trade and interaction and technical architecture that allows communities to be independent and separate from each other. Conduct in the physical world will be governed by physical nations and physical policemen while conduct in the virtual world will be governed by the rules and methods of each of the virtual communities. Protocols will have to be created and enforced by both virtual and physical communities where the bits change to atoms and vice versa. It is this protocol that will be the core issue and topic of debate between computer scientists, lawyers, politicians and citizens for the years to come and the answer will be as much technical as it is legal.



[1] Negroponte, Nicholas. Bits and Atoms. <http://web.media.mit.edu/~nicholas/Wired/WIRED3-01.html> (June 4, 2002). Wired Magazine. January 1, 1995.

[2] See de Kerckhove, Derrick.Connected Intelligence. Somerville. 1997.

[3] McLuhan, Marshall. The Gutenberg Galaxy. London: Routledge & Kegan Paul. 1962.

[4] Edvinsson, Leif and Malone, Michael. Intellectual Capital. HarperBusiness. 1997.

[5] It is not clear when John Perry Barlow started saying that cyberspace was "where your money is," but many people quote him. Barlow, John Perry. Barlow Home(Stead)Page <http://www.eff.org/~barlow/barlow.html> (June 4, 2002).

[6] Mizuko Ito describes people who play MUD's and the level of reality that these identities assume. See Ito, Mizuko. "Cybernetic Fantasies: Extensions of Selfhood in a Multi-User Dungeon." Paper presented at the 1994 meetings of the American Anthropological Association, Atlanta <http://www.itofisher.com/PEOPLE/mito/Ito.AAA94.pdf> (June 9, 2002)

[7] Dee Hock is the founder of VISA and describes his VISA and the distributed nature of the organization his book. See Hock, Dee. Birth of the Chaordic Age. <http://www.chaordic.org/> (June 4, 2002). San Francisco: Berret-Koehler Publishers Inc. 1999

[8] Roger Clarke describes clearly the various types of identities and the difference between entities and identities. See Clarke, Roger. "Authentication: A Sufficiently Rich Model to Enable e-Business." <http://www.anu.edu.au/people/Roger.Clarke/EC/AuthModel.html> (June 9, 2002)

[9] Roger Clarke coins the phrase "Digital Persona" and ties it to a discussion of privacy. See Clarke, Roger. "The Digital Persona and its Application to Data Surveillance." <http://www.anu.edu.au/people/Roger.Clarke/DV/DigPersona.html> (June 2, 2002)

[10] "The European Directive on Data Protection" <http://www.privacy.org/pi/intl_orgs/ec/eudp.html> (June 9, 2002)

[11] Guidelines on the Protection of Privacy and Transborder Flows of Personal Data <http://www1.oecd.org/dsti/sti/it/secur/prod/PRIV-EN.HTM> (June 9, 2002)

[12] <http://www.mytec.com/> (June 16, 2002)

[14] Lessig, Lawrence. Code and Other Laws of Cyberspace. Basic Books, 1999.

[15] p. 5., Agre , Philip E. and Rotenberg, Marc. Technology and Privacy: The New Landscape. The MIT Press. 1997.

[16] One of the first books about online communities. Rheingold, Howard. The Virtual Community: Homesteading on the Electronic Frontier. <http://www.well.com/user/hlr/vcbook/> (June 9, 2002) USA: HarperPerennial. 1993.

[17] For a discussion on how difficult it is for different cultures to co-exist and the impact that culture has on the basic nature of a community, nation or civilization see Hall, Edward, T. Beyond Culture. Garden City, N.Y.: Anchor Press. 1976.

I was invited by Yotaro Kobayashi, the chairman of Fuji-Xerox and the Keizaidoyukai to give a speech at the Trilateral Commission about reform in Japan. I didn't know what the Trilateral Commission was when Kobayashi-san called me. A quick google pulled up a lot of rumors about it being a secret society to control the world.

The Trilateral FAQ says:

Is the Trilateral Commission secret?

A. Not at all. Right from the beginning, the Commission痴 membership list and informational materials on its aims and activities have been available to all free of charge. Each of the Commission痴 task force reports is publicly available, as is the publication providing extensive coverage of each annual plenary meeting. Information on the Commission痴 funding and major contributors is also available. The agenda and a list of participants for each plenary meeting are regularly distributed. Press conferences are held during the meetings, and draft task force reports are customarily made available to the press. Only the discussions at the meetings are kept 登ff-the-record,・to encourage frankness and maximize the learning process for members.

The conference was a lot of fun and a great chance to get feedback from some influential people about my thoughts as well as hear frank comments from them about their own thoughts. We had to cross a anti-war picket line in front of the State Department on the way to dinner, but other than that there were no problems.

Following is the text of the speech I gave. The speech was later picked up by the Asian Wall Street Journal. Thanks to David Farber for distributing the speech for feedback on his mailing list before I gave it and thanks to all of the people who helped me edit it.

Japan Reform and Recovery
Panel Comment by Joichi Ito
April 7, 2002
Trilateral Commission Annual Meeting
Washington D.C.

Acknowledgements

On the bus on the way to dinner last night, I overheard someone say, "The panel tomorrow on reform and recovery in Japan should be a short one. Maybe I'll have time for a nap." Well, I don't know about the recovery side, but reform is certainly moving forward. The fact that you have a 35 year old college drop-out entrepreneur instead of a 70 year old banker telling you that Japan is OK is evidence of that.

I would like to briefly describe what I think is going to happen to Japan, where we are now in that process, and what do we do afterwards. I would like to qualify my remarks by saying that I am not an economist or a historian, but I will make up for in honesty what I lack in knowledge and experience.

I believe that the primary problems facing Japan today are a dysfunctional or absent free market, an aging population and an impaired national balance sheet due to excessive and persistent bad debts. I believe the bad debt issue is being thoroughly discussed and considering the fact that it is probably about 1/12th of the financial savings of Japan, I believe the solution is a procedural one. The intense sense of urgency necessary to move reform ahead quickly as it has moved in countries such as Korea is hindered by the cushion of high savings.

I believe Japan has the resilience to rebound from a hard landing if we do it before the aging of Japan makes it impossible. I believe that Japanese entrepreneurialism after WWII shows that, given the opportunity, Japanese can be entrepreneurial, focused and efficient.

One of the biggest differences between the current crisis and the post-war period is that in 1950 there were 12.2 working-aged Japanese for every retirement-aged Japanese (although many were still engaged in primary industries such as farming). In 1995 there were 4.8 and according to the 1998 UN population projection based on a no-immigration policy, Japan will have 2.2 working aged Japanese per retirement aged Japanese in 2025 and 1.7 in 2050. It will be very difficult to revive a country when over a third of the population is retired.

The problem that needs to be solved for Japan to have a true productivity and growth revival is that of building new businesses that it can be competitive globally considering the recent changes in the global markets. Japan can no longer be competitive in manufacturing long-term considering the emergence of China and other competitors in Asia. Although Japan is still weak in these areas, a shift towards IT, bio-tech and service businesses is the only alternative. For this reallocation of human and financial resources to occur, a major change is required in Japan. Japan has historically been prone to reforms based on central planning rather than allowing free market forces to develop new industries. A market-oriented shift is the most efficient and appropriate. It is important to realize that in Japan, industries that have developed without government interference have been the most successful. The automobile and consumer electronics industries have been quite successful, but the sector of the economy that has been the most tightly controlled, the financial industry, has failed.

Many people blame the illiquidity of the equity markets on the ignorance of the Japanese people or the tax structure causing Japanese to keep their assets primarily in savings rather than in equity. In fact, the figures are even worse for new businesses, studies showing that only 1% of the population invests in start-ups. I believe that the Japanese people are in fact quite intelligent, the figures reflecting a very well founded belief that the markets are rigged against them.

The Japanese stock market has been a rigged market geared towards large institutions and "insiders", cross shareholdings making it even more opaque. Fund returns (ROI) are terrible and companies difficult to understand due to inadequate financial disclosures.

This has caused foreign investors to be wary of Japan, foreign investment per capita in Japan being $97 in 1999 compared to $1034 in the US, $199 in Korea and $1793 in Singapore. Notwithstanding, it is interesting to note that foreign investment in the Japanese stock market exceeds investments by Japanese individuals, clear evidence of distrust.

Japan has developed an educational system that filters an elite group of obedient and intelligent people to populate the government agencies and the large companies who are consequently awarded with a career of low risk and high return. The not-so elite end up in small business or even worse, new businesses, forced to take the high risks for lower return. This has caused a society where it is socially disrespected to be an entrepreneur. The total entrepreneurial activity in Japan is less than 2% of the population according to Global Entrepreneurship Monitor, whereas the in the US it is around 13%.

The "elite" in Japan who have been mandated with guiding Japan's resource allocation and direction maintain their power through a tight network of relationships and social contracts. These contracts fueled much of the productivity early on, but now hinder greatly Japan's ability to change. The collusion between bureaucracy, politics and business which was hailed as Japanese great strength is now its enemy.

Most employees in Nissan knew what it would take to turn Nissan around, but top management was unable to execute these changes because of the social contracts in place. The current CEO, Carlos Ghosn, although he is a great leader, made his biggest contribution by defaulting on social contracts

These networks of relationships cause business in Japan to be more about relationships and less about running efficient companies in productive markets. A reset of this power structure will create a risk/return model which is the core of a healthy market and new business growth. It will allow young people like me to take risks and create new businesses instead of spending our lives trying to climb the ladders of power inside of large Japanese companies.

I am not a nihilist, but I am comfortable with a certain level of anarchy, and I believe that this is necessary to create the true bottom of the market which will be the platform of rebuilding Japan. A soft landing with a false bottom will not root out the entrenched corruption and will not set in motion a true open and free market. Japan missed the opportunity to create such a market after the war because the American military government, in order to fight communism, allowed the old Japanese power structure to remain in pace. The current crisis may be a very important next step in a restructuring process that started with the Meiji restoration.

I want Prime Minister Koizumi to destroy the system. Many people of my generation call him "Koizumi the Destroyer". "Scrap and build" has become a popular phrase in Japan, but I believe that when we use that phrase most Japanese tend to focus on the build side and not enough on the scrap side. I would like to make no escape routes and suggest that we not talk about building until we finish scrapping. Many of my elders call me irresponsible to talk about scrapping without a plan in place, but I have yet to see a plan that has worked out the way economists have predicted, for that matter, any other planners have predicted. I believe that unleashing the entrepreneurial spirit in Japan on to a free and open market has a much better chance of success than some methodical plan created by economists and bureaucrats based on today's assumptions.

The key is to do it quickly. I do believe that things are moving in the right direction. Although Prime Minister Koizumi's popularity is waning, he has made it possible and popular to talk about destroying the system and has made it possible for people like me to say things like this at places like this today. The financial crisis is imminent, the political system is destabilized and there is a consumer confidence crisis.

Because of the rigidities built into the system, necessary change will force many large companies to collapse and the basic fabric of Japanese trust will be damaged causing a continuing increase in the crime, unemployment and the suicide rate short term. (Suicide in Japan is 30,000 per year vs. traffic accidents which kill only 10,000 per year.) I believe that an increased role of women, immigration, a proper representative political system with an elected prime minister, financial literacy and self-esteem will be essential elements of rebuilding Japan into a globally integrated and productive country. Although many Japanese are trying to back-pedal on the commitment to implementing global best practices since Enron, I think that foreign investors such as Ripplewood and foreign CEO's such as Carlos Ghosn will help Japanese understand that companies can be competitive without being trapped within the fabric of traditional Japanese relationships. I believe that Japanese business has some great unique traits such as the hard working stick-to-it attitude of Japanese workers and the ideological flexibility that allows quick changes when necessary, but I believe these Japanese features will be of most value to Japanese business once we prove that we can manage a free and open market with global best practices.

trilatfloor2.jpg
This is a picture from my seat on the floor at the Trilateral Commission conference during a break. Interesting that I was seated next to Tim Collins... ;-)

trilatbath2.jpg
Here is a picture of my bathtub at the hotel. Pretty bourgois, huh? ;-)

I gave a talk at the Hotel Okura Executive Luncheon Meeting about Japan New Economy.

It was printed in the Nikkei Weekly and here is the pdf file. The editor, Andrew Nichols, did a great job editing a rather rambling talk. Thanks!

An article about Japan with an extensive interview. Nice article. Called me "Japan's digital Renaissance man" which has been used since in other articles. Thanks Time!

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