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May 30, 2022·edited May 30, 2022Liked by Noah Smith

It really is astonishing that in spite of this corporate culture, Japan produces a ton of impressive technical innovations. Imagine if they could actually shake themselves loose from all the make-work... their per-capita GDP would probably leap up to parity with countries like Germany (which excels in a lot of the same areas).

One could hope that the COVID work-from-home experience might've shaken things up a bit in terms of the need to appear in the office all the time? But probably not. Even in the US, bad managers have already pushed toward forcing people back to appearing in person and looking busy. :-/

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May 30, 2022·edited May 30, 2022Liked by Noah Smith

Interesting post!

Season 4 of Aggretsuko dealt with these issues by having an outsider, Himuro, take over the company as CEO. He shakes things up, rewarding Haida for automating the accounting stuff, but also tries to make lots of layoffs* and pressures Haida into cooking the books to make the company's profits look good. Himuro is portrayed as ruthless and psychopathic - he admits to viewing workers as disposable - but also innovative and candid. By contrast, the original CEO and other managers think of the company as a "family" (which, ofc, belies the long hours and abuse that Retsuko and her coworkers have had to endure), so they're reluctant to make layoffs. I think the writers might have written Himuro this way because they're suspicious of changes to a more American-style, profit-driven corporate culture.

* As Himuro himself says, it is difficult to actually fire people in Japan, so he "fires" them by pressuring them to quit voluntarily.

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I am still left wondering with a big question.

Why haven't new companies formed that are able to shake up the market? I get that keeping old companies from failing is a problem in that regard in itself, but at the same time, in theory at least, someone could start a company with real productivity increases that would easily mop up competition (Rakuten seems like a good example of this). So quite simply, why hasn't that happened?

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> Over time, WFH will teach Japanese workers how to do stuff for themselves without constant meetings and without looking over each others’ shoulders.

I think this only addresses half of the problem.

Companies need to learn to measure output and effectiveness. Where we saw WFH fail globally were in places where management never had a clue of how to measure productivity. In the past, they just loved seeing people in the office all day being "busy" and equated that to productivity. Of course, that is universally the case in Japan.

You can't have Naoto-san submit an unusable piece of work, and then accept it because he "worked all night on it." You have to measure the output, not time spent, or worse, perceived time spent.

The individual employees can learn to manage their own time at home and accomplish tasks well, but none of that matters of the company itself doesn't have a way to measure output and effectiveness (and consequently reward it). If anything, I would argue that WFH will never succeed unless the other part is accomplished first.

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Really great article. Can confirm this is the current work style and is brutal on employees.

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May 30, 2022Liked by Noah Smith

Thank you for interesting and clear articles. Since you’re doing a Japan series, perhaps you can do an article on the Nissan/Ghosn story too, would be interesting.

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Two--make it three--points:

1. WFH is a great idea, but have you seen a Japanese house? The self-deprecating term was "rabbit hutch." A separate home office--which has a lot to do with productivity--is much easier in America.

2. Japanese manufacturing productivity is as good as Japanese office productivity is bad. Taylorism--the notion that a assembly-line worker is a kind of robot with nothing to contribute but their muscles--never took off in Japan.

3. I worked in a fancy job in an elite US government agency, and was seconded to something similar in Japan. (This was over 20 years ago, and the rest of this might suffer from geezer's fallacy.) I thought that the people were better than my US colleagues on average. But my God, the makework and wasted talent! The other interesting thing was the role of the HR office. In the US, it is mainly a compliance job. In Japan, HR pretty much controlled career progress for office workers. This partially immunized workers from toxic bosses. The one guy at my level I recognized as a star was duly promoted to the top of the organization, so maybe HR did know what was going on.

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This kind of work culture goes beyond corporate jobs too. Excessive hours in the office and rigid seniority seems to also apply in academia. It is something I have heard from quite a few junior researchers working in Japan over the years. It can even be the case in healthcare. I did a placement in a hospital lab in Japan some years ago. The professor in charge of the lab, who was known as a bit of a workaholic, would "leave" the lab at 6 or 7pm then go to the cafeteria and then come back in through the back door. This was to allow his subordinates to go home rather than have to wait till he really left the building.

Maybe also worth noting that the same things apply to many other country's work culture too, Japan is just more so.

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Thanks as always for the interesting work.

It strikes me that any effort to reform Japanese corporate culture needs to start with the social model that current corporate culture is based on. My understanding is that there's a very strong shared understanding that once a worker is hired, the company owes that worker a livelihood for their entire career. This means that Japanese workers have a lot more personal financial stability than American workers, and also means that companies have an incentive to invest in worker's skills that's much stronger than the incentives facing American companies.

If workers weren't expected to stay with their companies, it would be hard to maintain this social contract. In that case, you'd have the best, most talented workers leave for greener pastures unless they get raises commensurate with their skills. If you don't underpay the most productive workers you can't afford to overpay the least productive workers, so companies would have to cut pay or fire low productivity workers. At that point, for better or for worse you have the American labor market.

I wonder if the right approach would be to in some sense formalize the lifelong implicit contract between workers and firms (or at least, make a formalized version of this an option) in a similar way to athletes' contracts. If this was more formalized, you could imagine companies explicitly trading employees: If Toshiba wants to hire a manager from Sony who they think could improve productivity, they would pay Sony compensation as well as paying the worker. That would compensate Sony for training and development and maintain corporate loyalty. And if Sony had a worker whose skills were not useful at Sony but who could be useful at Toshiba, they could pay Toshiba to take that worker off of their hands.

Likewise, when a company is going bankrupt, the government could offer bounties to companies that hire their workers, rather than bailing out the company itself.

Of course, the downside of this could be that limiting worker mobility even more than the current system could mean that firms capture a larger share of match surplus, but I'm not sure if Japanese firms actually do have more bargaining power and capture more match surplus than American firms. And the current system has such limited mobility that it might not be a huge de facto change.

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I love the Japan articles. I am not sure if my observations are still accurate, but they appeared to be when I was there, and they may affect productivity. I lived in Tokyo from 91 to 96.

1. The Corporations provided a lifetime work commitment—no need to worry about losing your job.

2. The boss was in the same room as the workers. Appearances of work mattered more than anything else.

3. "The nail that sticks out is hammered down." It was a common saying.

4. Fired (let go) employees would not tell their families. Many would get on the morning train and roam the city parks till late and then go home. They were keeping the appearance of working.

5. Each quarter, everyone received a bonus, not based on anything they did; it was just a bonus.

6. I used to have a book about a Japanese management experiment. I picked it up at a photoshoot for my daughter. She was a child model in Japan, and we would travel frequently. I have lost the book in my travels. I think the book was published by the American Management Association and based in the 60s. The manager changed the company by providing the employees with a better cafeteria, better work conditions, etc... It was primarily industrial positions, and the results were good. It measured productivity some, but mostly employee satisfaction. It was interesting how the ideas of the book did not catch on.

I liked my time in Japan, but there was always an underlying amount of stress to conform. As an American, I could sidestep some of it, but I would occasionally hear an older person grumble and mumble about something I did.

The years I was there were also the time before the stock market crashed there. The American Cowboys, investors that shorted the market arrived.

Enough. It was fun to be in a different culture. Remember, Franz Boaz, stated something like cultures are not meant to be compared, only understood. (I paraphrase)

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"But basing promotions and pay entirely on seniority ossifies organizations utterly, because it means the same old guys are always in charge. And it also prevents ideas, technologies, and best practices from flowing between companies, because employees who switch employers are a very important vector for the spread of ideas."

Unfortunately, this could describe the American Democratic party as well.

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"Thus, Japan’s government should turn these bailout funds into resolution funds. After acquisition, the companies should either be quickly dissolved or sold off to private equity firms. This can generally be done within a single year."

Why bother acquiring them at all then? Seems like this would just be a bailout for the owners of those companies without the bailout for their employees. If the company isn't going to be kept around might as well just let it fail and not waste government money covering the resulting losses to the owners.

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That was more interesting to me than I was expecting. Are you taking requests? I’d love to read your take on Canada’s mediocre productivity.

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I would say that the article shows a lack of depth of understanding.

For example, the very first point about productivity. This productivity measure is NOT about the work output but revenue generation.

Can you please share your insight why this is low in Japan?

Well, I can.

But I am sure that my comment may not get approved.

In that case, I would love to have this article for a debate on our platform.

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I had just read an abstract saying that four-day workweeks are associated with lower productivity. Of course, that's in an American context where a lot of the people with such jobs are cops.

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Very interesting. I read your post with the story of Toyota in the back of my mind, which is SUCH an interesting example of a high performing corporate culture, albeit one built on long-tenured, stable employment. I've reached zero conclusions, but am buried in food for thought.

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