Joi Ito's Web

Joi Ito's conversation with the living web.

From my column in Japan Inc.:

- Appeared on Professor Mitsuru Iwamura's show on Asahi News Star.
- Was invited, along with several other entrepreneurs, by the minister of the US Embassy, Mr. Christopher J. La Fleur, to meet David R. Andrews, legal adviser to the US State Department.
- Met the famous Jack Wadsworth, chairman of Asia for Morgan Stanley.
- Had dinner with Jun Makihara of Goldman Sachs, Ernest Higa of Higa Industries, and Merle Okawara of JC Foods who is now president of eBay Japan.
- Participated as a board member of a study group meeting at the Economic Planning Agency on increasing intellectual property in Japan.
- Paid my taxes.
- Had dinner with several Liberal Democratic Party politicians and complained about the stupid laws designed to prevent companies from cheating, laws that assume we don't have any corporate governance, like real boards.
- Participated as a board member of the Science and Technology Agency's Information Technology Security Study Group.
- Was interviewed by an MPT study group setting up their new research institute and once again told them exactly what I told the EPA and the STA.
- Met with IBM's Net Gen team.
- Met with GE. GE, like IBM, is interested in meeting us half way.
- Had lunch with a team from Goldman Sachs.

From my column in Japan Inc.

Appeared on Professor Mitsuru Iwamura's show on Asahi News Star. Mr. Iwamura was the former head of research and policy at the Bank of Japan and he is currently teaching at Waseda University. Mr. Iwamura is famous for having started the digital money experiment at the Bank of Japan and for being an expert in cryptography, payment systems, statistical economics, and privacy. As always, the discussion with him was very interesting. We talked about the nature of money, especially in the context of the Net. Many people make the mistake of thinking that money actually has value. Actually, money does not have value in itself. The only reason one takes money in exchange for something is because one believes that someone is willing to exchange something of value for that money in the future. Money as it exists today is not redeemable for anything of value from the issuer. Historically, it was during the industrial revolution that almost everything became "for sale." Linux and other things now show us that maybe money can't buy everything and that forms of non-money exchange will become more and more important as the cost of collaboration and value exchange continues to be driven down by the Internet. One of the key areas of focus for policy makers and businesspeople should be in the gateway between the economy and the non-economy value creators.

Was invited, along with several other entrepreneurs, by the minister of the US Embassy, Mr. Christopher J. La Fleur, to meet David R. Andrews, legal adviser to the US State Department. We talked about the future of Japan and what the US can do to help Japan move forward. I think we all concurred that the US should urge Japan to deregulate and adopt best practices and investor protection to help foreign investors make investments in Japan. Corporate governance, or the lack thereof, is a critical issue for foreign investors and will hurt the growth of the capital markets in Japan. US pressure on this issue is essential to increase the speed of change.

Met the famous Jack Wadsworth, chairman of Asia for Morgan Stanley. Jack is famous for having done the Apple IPO, and someone who I am happy to have focusing on Asia right now. We discussed the risks in the Japanese markets and the job we have ahead of us in educating investors and analysts. I think Jack will be one of the people the Japanese government will look to for advice on how to help build real exchanges and open up the markets to real public investors.

Had dinner with Jun Makihara of Goldman Sachs, Ernest Higa of Higa Industries, and Merle Okawara of JC Foods who is now president of eBay Japan. I met Jun for the first time, and was very impressed by his mellow yet sharp personality. I guess it is these people who create the real blue chip image of Goldman Sachs. Jun's father is the chairman of Mitsubishi Corporation. He is bilingual, famous at Harvard for his comedies, and really the kind of balanced bicultural person that we need more of in order to take Japan into the new economy. Merle defines the bicultural woman entrepreneur, and her move to head eBay Japan was surprising but made a lot of sense. Ernest, among other things, owns Domino's Pizza in Japan, the primary provider of nutrition for the new economy. As the discussion shifted between English and Japanese, I realized that being bicultural in Japan was more important than ever before.

Participated as a board member of a study group meeting at the Economic Planning Agency on increasing intellectual property in Japan. Not really sure why the EPA is focusing on intellectual property, but I guess the more agencies who we can convince to focus on increasing intellectual property rather than just widget factories, the better. I talked about, as always, the importance of supporting the development of free software.

Paid my taxes. Found out that I couldn't pay my taxes from Citibank because they are not a part of the Bank of Japan network. I wonder who to complain to about this. Generally pissed off about paying so much to the government, I went to be on a panel at a Minshuto symposium. On the panel with me were Susumu Fujita, president of Cyber Agent, Makoto Naruke, president of Microsoft Japan, Sachio Senmoto, founder of DDI and currently CEO of eAcccess, and Sakihito Ozawa of the Minshuto party. Fujita-san announced that he was going to be doing an IPO the next week and that he was going to publish on the day of his IPO a book called Japanese Dream. We all slammed the current froth and speculation in the market and talked about the importance of prudent investors and solid management.
The discussion turned to what we wanted from the government. I'm not sure if they picked tax day for this symposium on purpose, but it was fresh in my mind when I told the audience of journalists and politicians that the only reason I was paying taxes in Japan was because I liked the culture and the food. If it weren't for these I probably would have moved to the US a long time ago. In the information age, I told them, one can do business from anywhere. If they are going to keep getting paid taxes, I told them that they had to give us better service at a lower price and had to think of people and companies as customers. I also told them that they needed to become younger, study more, and be less arrogant. Senmoto-san wrapped up the panel by saying, if they didn't do that, it was "No way" for the Minshuto party. Yukio Hatoyama, the spokesperson for the Minshuto, was quite impressive on his wrapup and promised to be young, smart, and more service oriented. It will be interesting to see whether the Minshuto can really become the new economy party.


Had dinner with several Liberal Democratic Party politicians and complained about the stupid laws designed to prevent companies from cheating, laws that assume we don't have any corporate governance, like real boards. These laws are now making it extremely difficult for startups to move quickly. The politicians I spoke to promised to push to change these laws. It is clear that the LDP has all the power, but it probably has no real ability to change anything because of its size. On the other hand, the Minshuto party doesn't have enough power. I guess the only thing I can do is push everyone. I never thought I would have to get so involved in politics just to do business in Japan.

Participated as a board member of the Science and Technology Agency's Information Technology Security Study Group. They probably set this up because they got so much heat for being hacked. I think it is a good opportunity for them to help increase security awareness at universities since they will be merging with the Ministry of Education. Also, I think that the separation between technical and non-technical people is so huge in Japan that the policies are usually discussed in a technology-stupid environment. I urged the STA to force more technical people to learn law and economics and participate aggressively in policy discussions so we get smarter bills.

Was interviewed by an MPT study group setting up their new research institute and once again told them exactly what I told the EPA and the STA. I wish these ministries would talk to each other more instead of doing everything in parallel and competing for turf.

Met with IBM's Net Gen team. IBM has put together a team to work on targeting Internet startups for financing, partnership, sales, outsourcing, et cetera. Generally large corporations and startups have a very hard time making contact and maintaining relationships. I think this is IBM's attempt to meet us half way. I think the issue is going to be whether these "Net Gen teams" can filter the companies with potential from the walking business plans.

Met with GE. GE, like IBM, is interested in meeting us half way. Jack Welch has told all the GE business units to "webify," and it looks like GE will be looking in part to venture businesses to help them with this. I think this is a great opportunity for leveraging the assets that GE has built in Japan over the last 100 years.

Had lunch with a team from Goldman Sachs. It looks like they are pretty serious about the Japanese market. We all agreed that the current Mothers market is frothy and dangerous. I think all prudent capitalists want the market to slow down a bit and focus on fundamentals. Having said that, I am still very optimistic about the next three years or so.

From my column in Japan Inc.:

- Went to visit some business model patent experts.
- Had dinner with Kuroiwa-san [Yuji Kuroiwa, Japan's Ted Koppel] and his director from TV Man Union.
- Had dinner with Yu Takami and Kotaro Yamamoto.
- Met with Dan Fujii from Hambrecht & Quist. It looks like H&Q are being very aggressive in Asia and they may help raise the quality of VCs here.
- Met with Funabashi-san of Asahi Shimbun.
- Gave a short presentation at the Global Internet Project meeting.
- Had breakfast with John Patrick.
- Was selected to be on, and attended, the first advisory board meeting for MITI's preparation for the next round of WTO talks.

From my column in Japan Inc.

Went to visit some business model patent experts. It looks like the Japanese patent office is encouraging people to file business model patents. What an extremely stupid position. I can't see how business model patents help Internet businesses in any way. Internet ventures should be able to compete without having to resort to this sort of protection. I think business model patents are an attempt on the part of the US to leverage the advantage they have of being ahead of the rest of the world in the development of Internet businesses. How typical for Japan to copy the US without thinking about the chilling effect it will have on the market and the inherent stupidity in the concept. Who is going to invest in Internet startups if there is a risk that some behemoth US business might come in later with a portfolio of submarine patents and steamroll the thing. Arrgh.

Had dinner with Kuroiwa-san [Yuji Kuroiwa, Japan's Ted Koppel; see www.kuroiwa.com] and his director from TV Man Union. Kuroiwa-san is a very well-known announcer on Fuji-TV news. He joined TV to try to make a difference in society. He spearheaded the Japanese effort to create paramedics in Japan. Until Kuroiwa-san focused on this issue, Japanese ambulances did not carry doctors. We talked about the role of mass media and the fact that, although it can have great impact, there are many things that it cannot accomplish. Mass media created "the public." The Internet is going to redefine media. I think all socially conscious people are waiting for the Internet to penetrate into everyone's lives and for the birth of a new media that is not controlled by advertisers and "the establishment." I asked Kuroiwa-san to quit Fuji and focus his attention on the Internet once we clear the 50 percent penetration mark. ;-)

Had dinner with Yu Takami and Kotaro Yamamoto. I met Yu-san many years ago when he started the Salary Man's party. He also started a foundation to focus on recycling. As an environmentalist he had been very active, and his leadership and organizational ability put him close to the top in this area. According to Yamamoto-san he came up with the idea for Takami-san to network all of the organic vegetable farmers and sell direct to people who wanted organic vegetables. This network quickly became one of the largest in Japan, and recently Takami-san sold the business to the makers of Aojiru [a veggie drink famous for being disgusting but good for you. Slogan: "Ahhh, disgusting!"].

Takami-san is one of the most "un-capitalist" people I know, and now he is sitting on a fortune looking for some place to spend it. I think this may really be an excellent thing for Japanese politics and society waiting to happen. It is really great seeing people who get rewarded for focusing on "the right thing."

Met with Dan Fujii from Hambrecht & Quist. It looks like H&Q are being very aggressive in Asia and they may help raise the quality of VCs here. Dan Fujii is the brother of a sempai of mine from ASIJ (the American School in Japan). The ASIJ alum are really out in force these days. I remember that after graduating, many of the ASIJ team went off to foreign financial institutions, probably because they could leverage their bilingual ability and because the pay was good. Now, the great convergence of geeks and money is happening in Japan and it is creating a ASIJ reunion.

Met with Funabashi-san of Asahi Shimbun. He is spearheading the movement to make English a second language in Japan and is an advisor to prime minister Obuchi. Since my Japanese language ability sucks, I am obviously in favor of this, but aside from my personal interests, I think that it is a very good idea to increase the level of English literacy in Japan. I remember when I was interpreting for the former chairman of NHK, chairman Shima, he asked me to tell Jack Valenti (chairman of the Motion Picture Association of America) that the less English a Japanese person spoke, the more likely it was that that person had power. I think the belief that all power in Japan resides in non-English-speaking power brokers in Tokyo has really held back the globalization of Japan. I think it is time that we blow away this silly inferiority complex/superiority-complex bullshit and get on with it. Obviously, the non-English literate majority in Japanese politics are going to try to block this initiative.

Gave a short presentation at the Global Internet Project meeting. The GIP is chaired by John Patrick, the VP of Internet Technology for IBM and an advisory board member of Neoteny. The GIP works on Internet policy issues at a global scale to help make Internet available everywhere. One issue that I brought up after Elliot's (head of EC stuff at US Department of Commerce) talk was that I thought security and privacy policy should not only include legal and operational commitments on the part of operators, but should also require technical disclosures and third party audits of technology to make sure that all technical attempts to make things secure and private were in place and properly written. I believe that consumers and shareholders should force companies to be audited technically for security and privacy negligence. Anyway, I think everyone agreed that this was an important topic, but that there were just too few technically competent people making noise on policy boards. I think it was Vint Cerf who said that probably consumers should lead this push and not policy makers. I think he may be right.

Had breakfast with John Patrick. We talked about the future of Neoteny. We agreed that in the future, people would wake up and realize that many big companies and entrepreneurs did not have the ethics to take care of our privacy, return wealth to the community, and other things that you would expect good people to do. John had written a paper on e-philanthropy (http://www.adtech.internet.ibm.com/patrick/pages /e-philanthropy.html) that I found very interesting. I believe that having the highest level of ethics, contributing to the community and not giving in to the win-lose sort of competitive element is essential for building trust and value that lasts. You can't buy trust later, no matter how much money you have. (Even if you are Bill Gates.) John and I agreed that building trust from the beginning was essential. Also, I believe in this "land grab" era of Internet growth, we have the unique opportunity to be both extremely successful and generous, and generally win-win all around. We should take advantage of this unique period in history where I believe that good guys really can win!

Was selected to be on, and attended, the first advisory board meeting for MITI's preparation for the next round of WTO talks. The talks will focus on deregulation of all levels of e-commerce on a global scale. I think that deregulation is generally a good idea, but business model patents and the US copyright on killer content may give them the opportunity to create lots of global monopolies which we should all watch out for. It was a very strange feeling sitting with the people who generally throw up the barriers that I'm always trying to tear down.

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!

From my column in Japan Inc.:

- Had lunch with Yasuhide Uno of Osaka Yusen. His father wired up much of Japan with a cable music service, without MPT approval.
- Had dinner with Ryu Murakami, the Akutagawa Award-winning writer of Coin Locker Babies fame who is now writing an email magazine on finance.
- Professor Iwamura is one of the smartest people I know; he studies extensively on his own and has become one of Japan's leading experts in a myriad of fields, including macroeconomics, cryptography, risk, venture business, and policy.
lso, several Japanese government agencies had their websites whacked -- which doesn't surprise me a bit.
- In the early 90s, the US also went chasing after the digital graffiti kids who kept slapping them in the face, but all they ended up doing was creating a rift between the hacker community and law enforcement.
- I was on a panel at a Solomon Smith Barney conference on Internet valuations for fund managers. Nobuo Matsuki of Schroder Ventures, an analyst from Solomon Smith Barney, and Taizo Son from Indigo were on the panel.
- Ex-chairman Takeo Shiina of IBM Japan has set up a project to educate politicians and bureaucrats on the new economy.

From my column in Japan Inc.

Had another double breakfast at the Hotel Okura the second week in January. The first was with a possible incubatee and the second was with the president of a Japanese branch of a US investment bank. The hotel's Orchid Room is starting to buzz like it did back in the bubble days; lots of money people with big smiles shaking hands vigorously. Generally a bad sign. ;-)

January 14
Had lunch with Yasuhide Uno of Osaka Yusen. His father wired up much of Japan with a cable music service, without MPT approval. The network is now a huge asset and Osaka Yusen is fighting with the MPT to get the bureaucracy's approval, which would legitimize the network and allow Osaka Yusen to really move into the digital age. Meanwhile, his son has launched a bunch of Internet ventures and has become quite a successful entrepreneur. Uno-san is a soft-spoken and very intellectual guy and I think that with the power of the Osaka Yusen sales force and network infrastructure -- combined with Uno-san's venture spirit -- they will be quite a force.

Had dinner with Ryu Murakami, the Akutagawa Award-winning writer of Coin Locker Babies fame who is now writing an email magazine on finance. Professor Iwamura from Waseda, whom I met when he was still head of research for the Bank of Japan, and several other friends of Murakami-san joined us as well. We spent the evening discussing the future of the economy, the definition of "value" in the context of culture, and free software.

Professor Iwamura is one of the smartest people I know; he studies extensively on his own and has become one of Japan's leading experts in a myriad of fields, including macroeconomics, cryptography, risk, venture business, and policy. He always manages to poke holes in many of my theories and I feel like I'm sparring with an academic Kung Fu master.

Also, several Japanese government agencies had their websites whacked -- which doesn't surprise me a bit. I've already told various ministries that security was very bad on some of these sites, but there is nothing like a real slap in the face to wake people up. Now everyone in the government is scrambling to tighten up security and catch the hackers. What they don't realize is that the real threat comes from the very serious professional criminals who don't hack Web pages -- they work with organized crime to use computers for fraud and extortion.

In the early 90s, the US also went chasing after the digital graffiti kids who kept slapping them in the face, but all they ended up doing was creating a rift between the hacker community and law enforcement. I hope this time the Japanese government won't make the same mistake.

January 28
I was on a panel at a Solomon Smith Barney conference on Internet valuations for fund managers. Nobuo Matsuki of Schroder Ventures, an analyst from Solomon Smith Barney, and Taizo Son from Indigo were on the panel. I expressed my concern that revenue from group companies and synergies should not be discounted in valuing companies since they should be looked at as independent companies by investors if they are being judged on their true value. Afterwards, Son-san told me that one of his primary concerns right now was to try to build relationships with non-Softbank companies in order to build independence (he's the younger brother of Softbank's Masayoshi Son). I thought that this was quite a good attitude.

February 8
Ex-chairman Takeo Shiina of IBM Japan has set up a project to educate politicians and bureaucrats on the new economy. I somehow ended up getting enlisted to make a presentation and do several demonstrations. Some of the politicians showed a bit of interest, but I was -- once again -- stunned by the lack of experience Japanese politicians have in using the Internet or computers. Also, it added a bit of support to my recent theory that maybe we shouldn't try to educate the politicians -- who might get involved without having adequate knowledge and screw things up instead of helping. Maybe it is better to keep quiet and move forward without them and let them catch up later -- if at all.

From my column in Japan Inc.:

- By the time you read this, the news will be on the street that US VC J.H. Whitney (an investor in J@pan Inc.'s parent company, LINC Media) and PSINet have invested $20 million in Neoteny, my incubator.
- I attended one of the regular meetings at Koso Nippon, for the first time as a speaker.
- At the beginning of the year, I was on a show with my favorite announcer, Yuji Kuroiwa, and Kenichi Takemura, Kiichi Miyazawa (Japan's minister of finance and ex-prime minister), Jiro Koku-ryo (KBS), Yotaro Kobayashi (chairman of Fuji Xerox), and Rakutan Ichiba's Hiroshi Mikitani.

From my column in Japan Inc.

By the time you read this, the news will be on the street that US VC J.H. Whitney (an investor in J@pan Inc.'s parent company, LINC Media) and PSINet have invested $20 million in Neoteny, my incubator. The transaction was led by Tokyo's J.H. Whitney duo and was the most professional and honest deal of this size that I have seen here; we closed in one month. Makes me think twice about telling VC jokes now.

The news will include details on who's joining the Neoteny board, including Bill Schrader, the CEO and founder of PSINet, and Whitney's Paul Slawson. We've also brought together what we think is quite an interesting advisory board, selecting people who are clearly visionaries. The advisors will also be available to the companies in incubation, and consist of Jun Murai (Wide), Jiro Kokuryo (KBS), Mitsuru Iwamura (formerly Bank of Japan, currently at Waseda University), Pierre Omidyar (chairman and founder of eBay), Mitsuhiro Takemura (Tokyo University), Michael Backes (Timeline Computer Entertainment), John Vasconcellos (California State senator), Derrick DeKerkhove (McLuhan program director), Ryuichi Sakamoto (musician), Kotaro Yamamoto (Hakuo University ecologist), John Perry Barlow (lyricist for the Grateful Dead), John Patrick (VP of Internet technology at IBM), Jane Metcalf (co-founder of Wired), John Gage (Sun Microsystems), John Brockman (Brockman Inc. and the Edge Foundation), and Ryu Murakami (author).

I have been griping about not having a good location or good office space. We have decided to move to the Plaza Mikado Building in Akasaka (red hill), where PSINet used to be. Neoteny and some of the Neoteny network of companies will be joining us. I wonder what the press will say now. "Neoteny moves from Bit Valley to Red Hill" perhaps? I wonder if Red Hill will become the Sand Hill of Bit Valley?

We're kicking off several new companies that have been simmering in Neoteny's incubator: Car Generation, a driving school site; Waag Techno-logies, a mobile product selection and community site; and Linuxprobe.org, a Linux testing and information site. We have a bunch of other deals in the pipeline. I met Yasuyuki Kido of Neonagy for the first time. Neonagy is a solutions company focusing on Linux - a very cool company that I hope will work closely with us, despite the possible confusion in our names.

I attended one of the regular meetings at Koso Nippon, for the first time as a speaker. Koso Nippon is an NPO run by Hideki Kato, formerly of the Ministry of Finance. The organization researches and distributes information aimed at building a better Japan. This month's meeting was organized by Seigo Matsuoka's Editorial Engineering Laborato-ries team, which just finished their new online community project, ISIS. A pretty illustrious list of speakers attended, each of whom spoke for a few minutes. I got sandwiched between Hiroshi Suzuki, who recently moved from MITI to Keio University, and Eisuke Sakakibara (dubbed Mr. Yen in the press). We talked, as usual, about Internet communities, trust, value, and the economy. I never thought I'd be on stage chatting with Sakakibara about the economy.

At the beginning of the year, I was on a show with my favorite announcer, Yuji Kuroiwa, and Kenichi Takemura, Kiichi Miyazawa (Japan's minister of finance and ex-prime minister), Jiro Koku-ryo (KBS), Yotaro Kobayashi (chairman of Fuji Xerox), and Rakutan Ichiba's Hiroshi Mikitani. The show ended up being kind of short and shallow, but we had a very interesting discussion in the waiting room afterwards. I was really impressed by Yotaro Kobayashi, who has read Francis Fuku-yama's book on trust, Kevin Kelly's book, New Rules for the New Economy, and Toshio Yamagishi's work - also on trust - all material which I think is highly relevant to a wired economy. The talk ended up, as usual, in a discussion about trust, communities, and the definition of "value." Later, Jiro and I decided that we really needed to work on the definition of value in this new economy - a rather mighty undertaking, since I think everyone has been avoiding going there for too long and the definition is getting rather old.

It was a bit disappointing, though, to hear that Finance Minister Miyazawa doesn't use the Internet yet.