Avoiding the Gaijin Syndrome Steven Schlossstein Editor's Introduction: Starting with this issue, reprints of Steven Schlossstein will periodically appear. These are contributed textfiles to the Japan forum on Compuserve where Mr. Schlossstein is one of the more notable contributors. His reprints enhance the Asian coverage that appears periodically throughout ShareDebate International. Besides his nonfiction, he also does fiction--I thoroughly enjoyed his novel, Kensei. See his biography for more background. Author's Biography Steven Schlossstein is an international strategy consultant and acclaimed author, with extensive experience in capital markets and investment banking, investment advisory services, market penetration studies, trend analysis in domestic U.S. and East Asian markets, and strategic planning. Since 1982, as founder and President of SBS Associates, Inc., he has designed, negotiated, and implemented numerous transactions for U.S. corporate institutions, including various strategic consulting studies. He has particular expertise in the rapidly expanding East Asian markets, from Japan and Korea in northeast Asia to Thailand and Indonesia in the southeast. Major projects have included the acquisition of a Tokyo company by a U.K. high-technology firm seeking a market-entry strategy in Japan; the development of a trust banking strategy in Tokyo for a major New York money-center bank; strategic market studies in Korea and Taiwan; identification of manufacturing strategies in Indonesia; and the execution of a strategy for a global investment management firm seeking to expand its client base in Asia. He has served on several panels for the Office of Technology Assessment in Washington. Mr. Schlossstein is the author of the highly acclaimed The End of the American Century (1989) and Trade War (Greed, Power, and Industrial Policy on Opposite Sides of the Pacific, an American Library Association Best Business Book of 1984). In addition, he has written two novels dealing with the business environment and social change in Japan: Kensei (The Sword Master, 1983) and Yakuza (The Japanese Godfather, 1990). His fifth book, Asia's New Little Dragons (The Dynamic Emergence of Indonesia, Thailand, and Malaysia) was published in spring 1991. He is currently at work on a new non-fiction book titled The Smart Box: How America's New Software Revolution is Transforming Television. His columns and articles have appeared inter alia in The Los Angeles Times, The Dallas Morning News, The Trenton Times, Business Tokyo, and International Economy. Mr. Schlossstein was born in 1941, and received a B.A. in history and philosophy from Austin College in 1963. He did graduate work at the East-West Center, University of Hawaii, 1964-66, including a year of study at Tokyo University, and received his M.A. in Japanese history. In 1984, he completed the Advanced Management Program at the Columbia Business School. He reads and speaks fluent Japanese and German. He resides in Princeton, N. J., with his wife and their two adopted Korean children. Avoiding the Gaijin Syndrome Steven Schlossstein February 5, 1992 Copyright 1992, Steven Schlossstein All Rights Reserved Reprinted via permission of the author Ask any foreigner who has spent considerable time in Japan for the one word that best describes that country, and odds are the person will choose the term "gaijin." Literally, it means "outside person," and life there is one constant reminder that you are an outsider. But "gaijin" carries a more derogatory connotation than most Americans associate with the word "foreigner" -- more akin to the expression "townie" used by college students to describe a member of the local community. Not an ugly or bitter word, by any means, but one that suggests you and I are different, and you are inferior. We have seen numerous examples of Japan's "gaijin syndrome" in the few weeks since President Bush's notorious trip to Tokyo --enough insults and arrogance to make Americans boil with anger. And that is just what many Americans are doing. But America's own "gaijin syndrome" reached an absurd level last month when numerous parties objected to Nintendo's plans to purchase the Seattle Mariners. By not letting the Japanese play our game, we are in effect choosing to play theirs. This is wrong. It is the gaijin syndrome that will be the undoing of the Japanese economy in the long run, and could be the undoing of ours, if we let it happen. Let me explain why. Take the baseball analogy one step further. The Japanese allow only two foreigners on each of their teams, yet they want tobuy into our national pasttime. Think about the results of this policy: Japanese baseball second-rate, while America's, with brilliant black and Latino players, is world-class. Now that same cultural philosophy exhibited by Japanese baseball also exists in the business world. And what do we find? That the Japanese have similarly restrictive attitudes toward women in the workforce. That Japanese firms have a miserable record in promoting foreign executives into top management ranks. That in a period of increasing decentralization, Japanese overseas managers still have to seek approval from central headquarters in Tokyo for even the smallest issues. As the Japanese grow increasingly smug about their economic success and what they think are "brilliant" management practices, the rest of the world will be moving on. How long, for example, will Japanese workers be content to demonstrate unthinking loyalty? A young woman who serves tea at a Japanese conglomerate may decide she can get more from life by marketing Apple Computers. Soon the Japanese may wake up and find more Tokyo University graduates at Goldman Sachs than at Nomura Securities. When we finally decide what to do about the trade problem, should we follow the lead of the charter members of America's "gaijin syndrome" movement? The leading culprits are in Detroit, of course, the very source of two-thirds of our merchandise trade deficit with Japan and an industry whose incessant refrain has been "the problem is with Japan, not with us." Or should we follow the lead of those American corporations that have been competing quietly -- and successfully -- in the global marketplace? These firms are rarely hyped in TV commercials or featured on trash journalism's talk shows, but collectively do more than $100 billion worth of business with Japan every year. The popular media also fails to report that most of America's global success stories in recent history are mainly high-tech companies. In the 1980s, where were the Japanese equivalents of fast-growing firms like Apple, Compaq, Microsoft, Novell, Intel, Cypress, Lotus, Borland, AST Research, Micron Technologies, Applied Materials, Sun Microsystems, Bell Computers, Boeing, Genentech, Cytogen, and Amgen? Take a look at the stock price performances of the large Japanese electronic producers like Hitachi and Fujitsu over the last five years. They have barely moved. Then take a look at the performances of the American firms just mentioned. There is no comparison. Further, these American success stories demonstrate none of the characteristics of the "gaijin syndrome." They employ a very high percentage of foreign engineers. Five of them in fact are even run by foreigners (Apple and Compaq by Germans, AST by an Indian, Borland by a Frenchman, Intel by a Hungarian). These firms have highly flexible work rules and compensation structures. And they are also the most highly decentralized. Most important, they are comfortable in the global marketplace. They built their successes from the start with exports (or foreign investment) in mind. They do not shy away from joint ventures or strategic alliances. And finally, their most frequent refrain is this: protectionism stinks, and industrial policy stinks even worse. So the lesson is simple. The answer to our problem with Japan does not lie in emulating practices appropriate to a narrow, insular culture. Protectionism, provincialism, and stagnant business principles are the recipe for ruin in global markets, for Japan as well as for us. The future belongs to those firms -- regardless of nationality -- that play the global business game well on every level. Japan has its share of such companies -- Sony and Honda, to name just two. Germany does, and so does America, in spades. Understanding this principle will not necessarily help us sell more Chevrolets in Japan in the short run, but it may help us develop better public policies and business strategies to remain economic winners in the long run. ###