Joi's Diary

Back to Contents of Issue: September 2000

The markets are stupid. The current Internet valuations have very little to do with the actual value of the companies.

by Joichi Ito

Joichi Ito is the founder and CEO of Neoteny (, an IT investment and operating company. He has created numerous Internet companies, including PSINet Japan, Digital Garage, and Infoseek Japan. In 2000, he was ranked among the "50 Stars of Asia" by Business Week and commemorated by the MPT for supporting the advancement of IT.

HAD DINNER WITH YUKIHIRO KAYAMA, the CEO of EC One. Mr. Kayama is a unique guy with a deep understanding of technology. EC One is one of the premiere producers of Enterprise Java Beans. (No, not coffee beans.) While at Mitsubishi Corporation, Mr. Kayama launched various projects that have been turning into huge gains for Mitsubishi. He recently retired to start EC One, which has also become a very successful venture. I think he is one of the few senior technology-focused people who is very successful and has multiple, multimillion-dollar home runs under his belt. I look forward to working on something with him soon.

· Went to see the new Lawson team. There were Mitsubishi people everywhere. Mitsubishi recently made a major investment in Lawson and has sent in an army of people to help Lawson dot-comify. I am very interested in seeing how the corporate cultures of Lawson and Mitsubishi merge and what kind of culture comes out of it.
I still think that the dot-com stuff should be asset-carve-outs into new ventures rather than joint ventures of big companies. In any case, I wish the Lawson team well and hope they can keep the good stuff and move ahead quickly.

· Was invited to US Ambassador Tom Foley's residence to meet a group of people from Washington State visiting on a trade mission. I hadn't been there since Haru Reischauer's memorial services, so it was impressive as usual. It was a huge group of many of the usual cast of characters and I wasn't sure what I was doing there. I said hi to Kay Nishi, who I hadn't seen for quite a while. Tom Foley was surrounded by a mob of people, so I decided to leave without talking to anyone else.

· Saw Shoichiro Irimajiri, the CEO of Sega who recently stepped down from his post as president. I can't disclose what we talked about, but it was enjoyable as always. Mr. Irimajiri is a junior high school classmate of my father's and I had heard about him many times. Mr. Irimajiri is someone I truly respect. He spent 20 years at Honda as an engineer and a manager and was able to move to the game industry and produce amazing results. His character, understanding of engineering issues, and ability to manage are the kinds of attributes that any Internet company should be looking for. One thing Mr. Irimajiri said that stuck with me was that although people say one loses the ability to design engines as one ages, the last engine he built was his best one. He said that it was because he just listened to his customers and designed it as they wanted. I recently read the Cluetrain Manifesto, which states that the markets are now conversations and the market will tell you what it needs. From Mr. Irimajiri's story, this is nothing new.

· Oki Matsumoto of Monex called me up the other day and said that the Bit Valley folks wanted to have a small seminar to talk seriously about the issues facing entrepreneurs today. He promised me that it wouldn't be the Big Bubble Bit Valley situation. Anyway, although it wasn't bubble, it was big. I think there were over a thousand people at the event, held at Aoyama Gakuin. The session started with an address from Taichi Sakaiya, director general of the Economic Planning Agency. He talked about the shift from the mass production economy to the economy of information. It was very cogent, but it sounded like he had given this address many times. He ended by giving a plug about the Internet Exposition that is being organized out of the prime minister's office, ending the speech on a much less lofty tone than it started. My presentation was followed by Oki Matsumoto's. I set myself up for a major disagreement by saying that I thought money in itself had no value, but that it was just a tool used for distributing resources and creating value. I also said that the markets were stupid and that the current Internet valuations had very little to do with the actual value of the companies. I said that everyone needed to learn how to manage and use money, but that the best companies were going to be built by people who focus on creating companies with real value. Oki disagreed with me in several areas. You can listen to our speeches and discussion at maria/japancom.html. The panel discussion was moderated by the writer Yasuo Tanaka.

· Now that Infoseek Japan is a subsidiary of Disney, we have access to some of the perks of being a Disney company. We invited all of our partners to a dinner at Club 33, the secret restaurant inside of Disneyland where you can see the electric parade and the fireworks while feasting on good food and wine in a fancy restaurant. We all got books of Club 33 matches with our names embossed on them, but they spelled my name wrong.

· Had breakfast with Leonard Liu. Leonard was an ex-IBM exec who became famous as the CEO who took Acer International and made it a global company. Later he was the turnaround CEO for companies such as Cadence and Walker Interactive. He is now the chairman of ASE, a large semiconductor company. When I was co-CEO of Digital Garage, Leonard invested in the company. He sat down one afternoon and looked through our numbers. He was able to tell me which groups needed restructuring and what critical decision I needed to make by when. Everything he said turned out to be correct. He is one of the greatest CEOs I know and one of my mentors. I asked him to join the advisory board of Neoteny and help us with our China strategy.

· Spent some time with Teruyoshi Katsurada, the former EVP of Dentsu [the biggest ad agency in Japan], who is now heading the association of advertising agencies thinking about the future of the Internet. Although you might expect a retired Dentsu guy to be old fashioned, on the contrary, he has a very good understanding of the basic nature of media and the future. In our discussion, he said that he thought it was time that "time" was given back to the user, since it was taken away from them by broadcast media. He felt that with the users back in power, it was necessary for ad agencies to look at a completely new model for advertising and that it was possible it would be a very different business model for them once they lose control of users' time.

· Met the founder of Wit Capital, Andrew D. Klein. He is well known for having founded the microbrewery Spring Street Brewing Company, which he took public using the first Web-based trading system that he developed. Andrew is famous for always dressing casually, and I was not disappointed. They have an operation in Japan. I look forward to them forging ahead and pushing the envelope as they have done in the United States.

· Was commended by the Ministry of Posts and Telecom for my years of service to develop new policies and for supporting the proliferation of Internet businesses. I wonder what that means? I did ask them whether accepting this award meant that I couldn't say bad things about NTT or the MPT. They assured me that was not the case and said there were "no strings attached." So I decided to accept it. The whole affair was rather nationalistic and interesting. There was a Japanese flag next to a flag with a big red postal mark. There was a bonsai on stage, where myself and several other people in other categories received awards, kind of like a high school graduation.

· Had dinner with the CEO of Yahoo Japan, Masahiro Inoue, and Michio Iwaki of Shiseido, who is the chair of the Web committee of the Advertisers Association. I had to apologize for the silly Infoseek Japan ads that make fun of Yahoo. I'm probably going to have to apologize again, since we're going to keep doing them.

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