Unflat Japan: Living in the Shadow of the Dragon

There are many things that a trip to your old stomping ground can do to you. Some people lose themselves in remiscences, others realize why they left in the first place, and others just give up and acknowledge that nothing is going to change much no matter how much they hope they will. I belong to the latter group, with a little dash of the second. Over the Japanese Obon holiday I got the chance to return to the Beijing after nearly a year hiatus.

With my ex-girlfriend badgering me on MSN to check her university paper, and adverts for the 2008 Olympics playing constantly on the subway lines, I could’ve been forgiven for thinking that the plane had inadvertently shot itself through a worm hole over the South China Sea. Given that the plane appeared to be piloted by a drunken eight-year-old, the worm hole and the ground were probably the only two things that we did manage to avoid on the Air China flight.

Due, in part, to the fact that I’m close to finishing Thomas Freidman’s excellent The World is Flat, and mostly due to the astonishing sense of complacent insulation that a lot of Japanese people seem to be hardwired with, it seems clear that something bad is going to happen to Japan and it’s people sometime soon. The problem is, as Friedman would put it, Japan is not flat.

Flattening of the world, for the uninitiated, comes about when technology enables people to communicate and do business with other people in other countries. When call centre jobs are outsourced to India, there is flatness – cheap fiber optic cabling allows someone to be routed from their home in New York to a call centre halfway across the world in Bangalore. Software engineers in China are writing applications for Dell, IBM and Google – three programmers in China can be paid twice the national average wage and still be three times cheaper than. Flattening, and therefore increased globalization (and thus increased interaction and competition with a global ecosystem) comes about through one thing: cheap tech. In Japan, there’s no such thing as cheap tech.

Yes, Japan has one of the world’s highest penetrations of broadband internet in the world. Yes, Japan’s Internet access is both cheaper and faster than anywhere else in the world, and yes, I know that Japan is one of the first countries to completely move to a 3G mobile phone network. I know these things, but, the problem comes about when you realize that innovation in Japan is not encouraged from the bottom up. In Japan, gadgets, gizmos and toys are doled out by closed companies that only conform to their own, closed, proprietary network or format. A Docomo phone works on the Docomo 3G networks with which you can only access the Docomo website, i-mode. To get onto the Docomo network, you can’t just use your cheap Softbank phone, you have to go out and get a Docomo phone with a new Docomo SIM card. Everything is branded, stamped, sealed and walled up.

You might think that this is all well and good, that this is nothing new, and why should Docomo allow free roaming Internet access on its mobile phones, anyway? No one else does. The problem isn’t the mobile phones or the business model, it’s the Japanese population, which is shrinking, and it’s shrinking fast. The over 65’s now account for nearly 45% of the entire populous, and if there’s one thing that over-65’s do not do, it’s play around on i-mode hoping trying to get a dancing panda dance in time with the music. The people who spend the most money on mobile phones are the teenagers, the ones who desperately need a mobile phone to stay in touch with the people they see every day, and have a large disposable income. This pool of rich kids is rapidly diminishing, and so are the profits of Japanese fun-providers everywhere.

There are two important factors that will contribute to Japan’s economic downfall. The first is that the Confucianist culture that promotes the second: top-down innovation. This essentially means that instead of people going out and grabbing tools – be they lathes, scythes or laptops – the companies and government tell people what they can use and then make available a series of models to choose from. Giving people the widest possible choice of how to do their business – or bottom-up innovation – is what has driven economies since the first industrial revolution. When I went to buy a mobile phone, I was told that there were only 4 models that were available with my pre-pay SIM deal. Two of the models were out of stock and the two remaining choices were a black Samsung and a white Samsung.

Compare this with an American going to Starbucks, where the customer is able to create his or her own coffee, mixing and matching from various items on the menu – regular milk or soy milk, low fat or high fat milk, sugar or sugar free, caffeinated or decaffeinated. You can argue that a mobile phone is not a cup of coffee, but the principle of giving choice to the customers is exactly the same. In China, mobile phones are cups of coffee: you can go to a China Mobile showroom and buy the handset of your choosing, then go to the shop on the corner and buy a SIM card (all Chinese phones are unlocked by default) for the network of your choosing. There’s a wealth of choice and payment plans. In Japan, people tell you “these are what we’ve got” and you have to make do with that.

The best example, however, of a flat world (or an unflat Japan) is the actual booking of the flight (for an expat) in Japan to…well, anywhere else in the world but Japan. A local travel agent, No. 1 Travel, takes out adverts in the local press almost every week (every day in the daily English language newspapers). Obviously, they plaster their lowest theoretical ticket prices all over the adverts, and usually the actual price you pay can be double or triple that. The main problem with this particular travel agent was that they add a 5000 Yen fuel surcharge to all their tickets. Thus, a ticket that costs 74,000 Yen can end up costing nearly 80,000 Yen.

So, over Obon, I wanted to fly out to Beijing on the 9th and return on the 16th of August. I was duly informed that because of the busy holiday period, there were no inbound Japanese flights available on the 16th August, and that a ticket on a two and a half hour flight would cost somewhere in the region of 85,000 Yen. I wasn’t particularly happy with this, and spend about an hour scouring the local expat web forums for any website that might be able to give me a cheaper deal. I came across the ANA website, and found that not only were there flights to and from Beijing on the dates that I wanted; there was also no fuel surcharge. In addition, I was able to pay for the ticket at my local convenience store using the same technology that allows me to top up my pre-pay phone credit.

That’s flatness – someone somewhere was offering a cheaper deal that I had to use my laptop to get. Not only did I give my hard earned to the flatter operating business, I took my hard earned away from another, unflat business. If everyone did what I did, sooner or later, the unflat business will be in trouble. And that’s just what’s happening in Japan everyday – unflat, traditionally run companies are being run out of town by flatter companies that are doing Japanese work, but might not be actually located on Japanese soil. If you don’t believe me, take a trip to Dalian and see how many Japanese businesses are outsourcing to Chinese workers.

All this boils down to one simple point: The Japanese economy is in trouble and is going to continue to be in trouble because the tools that people need to compete in a global economy are held in an iron grip by companies that are failing because they won’t give the people the tools they need to compete in a global economy. There are people hungrier than they are who are studying ten times as hard in an effort to race them to the top. In China, there’s evidence that this is happening already, with Japanese companies outsourcing huge tracts of business to Dalian – so much so that the local universities are offering degree courses in Japanese. Of course, the Chinese people in Dalian are also learning English faster and to a higher degree of competence than their Japanese counterparts, so now there’s a labor pool in Dalian of Chinese skilled workers, who speak Chinese, Japanese and English.

These students came from families who worked on farms 60 years ago, and today, they’re leaving behind their contemporaries in developed countries at light speed.

Like many English teachers who work in Japan, I’ve come to both hate the Japanese school system and pity the student drones that it produces. Typically, the average Japanese child goes through about 10 years of English study. This is half the number of years that I studied Spanish at high school, and I could probably get by in Spain on that, some 15 years later. After ten years of English study, Japanese people still have problems asking the time in English (for the record, I can ask the time in Spanish, Japanese, Chinese and English). This lack of decent, effective second langauge education is disempowering every child in every developed country, but not all have a country like China on it's doorstep. The demand for international English speakers wasn't created by native English speakers, it was created by domestic and international economic forces - those who spoke English suddenly found themselves in the international market, able to make pots of money, and others wanted to do the same. For the vast majority of Japanese, they've been tragically let down by the Japanese education system when it comes to learning English. An Asian school and university system that produces adults who have to think about starting to study English when they're 22 years old when their counterparts have been studying since they were 12 years old is a school and university system that is falling way short of what is needed in the 21st century.

As the undisputed leader of the great tigers of the Asian economy, Japan is probably in the most dangerous, not the most comfortable, position because China is starting to catch them up, and they’re three times hungrier and three times more likely to study harder in order to become Japan. Pretty soon, products that have "Made in China" stamped on them will be designed in China too. As Thomas Friedman points out several times in his book, developing countries are not racing developed countries to the bottom, they’re competing on the most level playing field that’s ever been available to race us all to the top. Whether you're untouchable in terms of a skillset when the time comes, is up to you.