The End of the Software Startup Gatekeepers

This is our 200th episode, so I wanted to do something special. Everyone loves to complain about the poor quality of Japanese software, but today I’m going to explain exactly what went wrong.  You'll get the whole story, and I'll also pinpoint the specific moment Japan lost its way. By the end, I think you'll have a new perspective on Japanese software and understand why everything might be about to change. You see, the story of Japanese software is not really the story of software. It's the story of Japanese innovation itself.   The Elephant in the Room Japanese software has problems.  By international standards, it’s just embarrassingly bad. We all know this, but what’s interesting is that there are perfectly rational, if somewhat frustrating, reasons that things turned out this way. Today I’m going to lay it all that out for you in a way that will help you understand how we got here, and show you why I am optimistic about the future. You see, the story of Japanese software, is not really about software. It's the story of Japanese innovation itself. The ongoing struggle between disruption and control. It’s a story that involves, war, secret cartels, scrappy rebels, betrayal, rebirth, and perhaps redemption.   How This Mess Started So let’s start at the beginning. The beginning is further back than you might expect. To really understand how we got here, we need to go back, not just to the end of WWII, but to the years after the Meiji restoration, the late 1800s, back when the Japanese economy was dominated by the zaibatsu. Now, “zaibatsu” is usually translated as “large corporate group” or “family controlled corporate group.” While that is accurate, it grossly understates the massive economic and political power these groups wielded around the turn of the 20th century.    Japan’s zaibatsu were not corporate conglomerates as we think of them today. You see, although the Meiji government adopted a market-based economy and implemented a lot of capitalist reforms, it was the zaibatsu, with the full support of the government, that kept the economy running. And the zaibatsu system was almost feudal in nature. The national government could, and did, pass legislation regarding contract law, labor reforms, and property rights, but in practice these were more like suggestions. In reality, as long as the zaibatsu kept the factories running, the rail lines expanding, and the shipyards operating at capacity, the men in Tokyo didn’t trouble themselves too much with the details. In practice, the zaibatsu families had almost complete dominion over the resources, land, and people under their control. They were the law. At the turn of the pervious century, there were four major zaibatsu (Sumitomo, Mitsui, Mitsubishi, and Yasuda). And each zaibatsu had its own bank, its own mining and chemical companies, its own heavy manufacturing company, etc. But it wasn’t just industry, each of these zaibatsu  groups had strong political and military alignments. For example, Mitsui had strong influence over the army, while Mitsubishi had a great deal of sway over the imperial navy. At the start of WWII, the four zaibatsu families controlled over 50% of Japan’s economy. This fact, when combined with their political influence, quite understandably, made Japan’s military government very uncomfortable, and during the war, the military wrested away a bit of the zaibatsu’s power and nationalized some of their assets. After Japan’s defeat, the American occupation forces considered the zaibatsu a serious economic and political risk to Japan becoming a liberal, democratic fully developed nation. They targeted 16 firms for complete dissolution and another 24 for major reorganizations.   Rising from Ashes Now, that was supposed to be the end of the zaibatsu. I say “supposed to” because those of you who know Japanese history understand that it never really happened. Of course, many things changed.