More than half of companies that are 2 centuries old or above in the world are in Japan. There are around 40 Japanese companies that are 5 centuries old. The secret to longevity lies in its unique history, the business culture and the national culture of Japan.
Show host Kyota Ko explains the reasons behind the overwhelming sustainability of Japanese businesses in comparison with the traditional Japanese performance art Noh and ancient Egyptian dynasties.
Hello world, you are listening to the Metro-classic Japanese, bringing you a podcast today about what you can really gain from working with Japanese people. My name is Kyota Ko.
And today I’m going to talk about one very unique part about Japanese culture. It’s about its business culture. In the world we live in right now, there are over 5500 companies that have been in business for more than 2 centuries. And 56% of them, which is like 3100 of them, are Japanese companies. So more than half of the world’s oldest companies are in Japan.
And that’s not it. According to the most recent research on this topic which was conducted by Teikoku Data Bank in 2019, there are over 33000 Japanese companies that are over 100 years old, there are around 40 companies that are 500 years old, and the oldest company there is of the world is also in Japan, it’s a construction company that has been in business for over 1400 years. It’s a company that builds traditional Japanese architecture like Buddhist temples and Shinto shrines. The service they provide has and will probably always be in demand – there are temples and shrines needing regular maintainable everywhere in Japan; so they found a very nice durable niche more than a millennium ago, but still, keeping a company in one piece for over a 1000 years – there’s gotta be something they are doing really well.
So today I’d like to discuss the reasons there are so many businesses that survive for centuries in Japan.
But first and foremost, one of the biggest factors does not pertain to culture. Let’s be honest here. Japan has had a huge advantage over many other countries in keeping an environment where companies could sustain their businesses over a long period of time.
Japan was in peace for much of its history, meaning Japan had not been invaded or attacked by other countries for thousands of years. Of course there were a few ages of civil war when samurai lords were all fighting with each other, and Japan invaded neighboring countries in the mid 1900s leading up to the end of World War II, and this is of course not a part I’m proud of being half Japanese. You know that’s another thing war does. It creates reasons for your citizens and all their descendants to feel ashamed about representing their country.
But getting back on track, apart from being bombed in WWII, many cities of Japan never have had to go through mass destruction.
In the world ranking of countries with the longest-lasting companies, Germany comes second with over 800 companies that are over 200 years old, the Netherlands and France come next, both with around 200 companies that are over 200 years old.
So there are around 4700 more multi-century-old companies in Japan than in second place Germany, and many sources attribute this difference to the gap in each country’s degree of involvement in war throughout their history. And this logic applies for the Netherlands and France because all these countries have had lots of war – lots of long ones, for example the Thirty Years’ War between 1618 and 1648 which happened in Central Europe and wiped out a third of the population in Germany, of course there were two World Wars mainly fought in Europe, and many other bloody wars having to do with religious conflicts. Every time, a chunk of the population dies, and when a chunk of the population dies, it’s hard for businesses to keep going. Your employees get killed or they have to flee to another country as refugees!
Many Japanese companies were lucky that their environments were relatively stable for centuries. Japan had really no war for around 250 years between the years 1603 and 1868. Almost the whole world was fighting with each other during this time, but in Japan, nothing. So the extremely long-lasting public safety definitely is one of the biggest reasons many Japanese companies have survived for ages.
But then there are also cultural reasons that helped Japanese companies to stay in business. One big one is that many of these companies are family businesses. The Toyoda family would be the most globally famous example of a Japanese family business nowadays. But Akio Toyoda is only the grandson of the founder of Toyota Motors, by the way, So Toyota is quite a young company from the perspective we are discussing here today.
And Toyota is also an exception because most of the Japanese companies with 200+ years are small businesses. They are kept small with an average of 115 employees, according to a study by Bank of Korea. So Toyota with at least 37,000 employees, is a big exception.
The idea that a business should be tied with the founding family seems like old-school practice. And it literally is old-school, but it’s been proven to work in Japan. But What’s interesting is that it’s not necessarily the founder’s bloodline that has kept all these companies going for hundreds of years.
If a family business tries to keep going over so many generations, of course there will be times where there is no male offspring or no offspring at all because of reasons like infertility of the husband or wife, and also if we put together all the past surveys conducted to find out what proportion of a population is gay, somewhere between 1 to 20% of us are not straight. If we just take the average, it’s assumed that one out of 10 sons will not be straight.
So hoping for a healthy straight male offspring for every generation of successors of your business over a course of hundreds of years is just unrealistic. Expecting direct descendants to keep succeeding the business is in no way a wise corporate policy if we think about sustainability.
So in case there was no hope for a successor of a family business from the business owner’s bloodline, he would adopt a talented young man into the family and make him his heir. So again, what’s interesting is that it’s the family name and the company that are tied and it’s not the bloodline. Japanese business families have been quite flexible in this point.
So once in a while, these family companies literally introduce new blood into the family business, and we could assume that this is how they have kept a good balance between legacy and innovation across generations.
Over in Egypt, a similar practice had helped Egyptian dynasties to keep their rule for a long time , but because they were focused so much on preserving the bloodline instead of the family name, most of them couldn’t last for multiple centuries.
The 10 ancient Egyptian dynasties that existed between 3100 BC and 2000 BC lasted an average of around 100 years each. Now what you’re going to hear is not a really plausible system seeing it from the value sets we have today, but basically these Egyptian royal families made their eldest son and a daughter marry each other. So brothers and sisters married each other. And they gave birth the next generation.
Kara Cooney is a professor of Egyptology at UCLA and according to her and many other egyptologists, the intent behind promoting incest was to keep the family’s savings in one place. If a pharaoh married a person from outside the royal family and she gave birth to the next king, the pharaoh’s family would have to accept the in-laws into their dynasty and split their wealth and political power with them.
So as super greedy as it sounds, royal families made their sons and daughters marry each other so that they didn’t have to lose any part of their treasury and control over the kingdom.
But as you may know, reproduction – making babies – through incest carries a great risk of giving birth to children with all sorts of physical and mental challenges.
And imagine making heirs from incest a couple or more generations in a row. Some generations of royal offspring would have serious, serious problems even in staying alive and it becomes harder and harder for the succeeding pharaoh to create offspring because of innate physical issues.
Another problem was that so many children died young in the world of ancient humanity, by ancient Egypt we mean 4000 to 5000 years ago. The average life expectancy was like 30. So hoping for a male child to survive until adulthood was not fail-proof at all. A lot of luck was involved.
So with these two risks combined, the result was that there were several dynasties that ended because they didn’t have an heir when the last pharaoh of the bloodline died. So from the perspective of sustainability, trying to keep the bloodline going forever is an unrealistic business model.
Let’s come back to discussing Japan. Traditional Japanese businesses never really grow exponentially. They grow incrementally because they set realistic, feasible goals. Japanese business executives tend to be realists, not idealists. So don’t expect tremendous ROI if you consider investing in stocks of traditional Japanese companies. But they are much less likely to go bankrupt than companies in many other parts of the world, because they tend to prioritize sustainable growth over immediate and exponential growth.
In fact, it is said that many Japanese mega family businesses like Mitsui, Mitsubishi and Sumitomo have family mottos that discourage investment in short term gains. So when the bubble economy burst in Japan in the 1990s, many Japanese companies went out of business or were financially challenged, but these mega family businesses were fine. They endured through those hard times because they hadn’t invested much on short-term business opportunities. They didn’t have too much to lose.
Now there seems to be another reason Japanese businesses last for so long. They have set up a system in which they would naturally increase the chances of survival through the tests of time. Basically, they make sure their employees would naturally keep developing themselves by giving them hardships deliberately.
But before we go into details about people development in traditional Japanese companies, let’s look at the world of Noh, which is a 600-year old performance art of Japan. It’s like a more serene Kabuki, if you want to know details on why it’s a must see, I have put together a dummy’s guide to Noh in my blog. If you read it once before you come to Japan, I’m sure you’ll be enticed to watch Noh at least once. Try Googling the word Metro-classic Japanese and you should be able to get to my blog.
And you can totally check a performance out at a Noh theater in major cities like Tokyo and Osaka.
Anyway, the reason I’m bringing Noh into this discussion is because it develops actors in a similar manner as Japanese companies do with their employees. Or I should say, Japanese companies develop their employees like Noh does with their actors.
So Noh actors get their starts by becoming an apprentice to an already-established Noh performer, They learn basic moves and try to refine each move and increase the level of concentration they can put into their dance and song. They learn classic songs and plays, they have their first entry-level performance on stage, they feel they’re improving steadily, practice is doable and fun, until one day, their Noh master tells them they’re going to star in a real gig of a Noh play that’s way beyond their competency.
It’s as if they had been performing in easy plays like Little Red Riding Hood and Peter Pan, but all of a sudden their teacher tells them that they’re going to perform Macbeth a few months later. So the novice Noh actors are devastated. They tell their masters they can’t imagine themselves doing it, but the master is all Nike and says “Just do it.”
So metaphorically, what happens is they’d been working on becoming a good Little Red Riding Hood, and they can nail the line “Grandma, why is your mouth so big?” A 6 year old could do that. And then now they have to play Macbeth and say something like “Come, you spirits that tend on mortal thoughts, unsex me here.” Now they have to talk to spirits and still sound believable.
So what they are ordered to do is to go through the process of starting as a novice again and acquire a new skill set. And the master doesn’t give specific instructions on how to dance and sing. A Noh performer called Noboru Yasuda wrote in his book that apprentices are just told that what they’re doing is not good or not good enough, and they need to figure out for themselves what is being required from their performance.
So they keep practicing under a lot of pressure because the gig is not gonna put itself off. Many of them get on stage on the dreaded day of the performance all nervous, and they may or may not do well.
But it’s through this being given a seemingly almost-impossible challenge that Noh actors develop themselves. It’s like they work so hard on developing one skill, but every now and then let go of almost everything they learned and go back to becoming a learner by taking on a completely new challenge. This cycle continues right up until death. There are Noh actors as old as 90 years old who still perform on stage. And they keep redefining themselves. Right up till their death.
Something very similar happens in the Japanese corporate world. Something called job rotation. Now job rotation per se is not a uniquely Japanese culture. There are many companies around the world that allow employees to transfer to other departments or offices in different cities or countries if they wish to. But traditionally, Japanese companies have not given permission to transfer. They’ve given orders to transfer.
So in large traditional Japanese companies, around every two or three years, employees would be told something like “You’re going to move to Sales starting next month.” Or “You’re going to move to the CSR department from April.” They get transferred to a department they are totally inexperienced in.
And they’re given a very short notice, as short as 2 to 4 weeks. And there’s really no refusing these directives. Most Japanes employees just suck it up and do it. They have a farewell party to say bye to their colleagues and in the next month they say hi to their new colleagues in their next workplace.
Why, why in the world would a company want to give up the experience an employee accumulated in one department and put him or her into a completely new field? It’s of course because there’s more to gain than lose. By rotating jobs and building experience from scratch again, employees wouldn’t get bored in their jobs, they wouldn’t burn out in their jobs, and they would be able to grow their network within the company and of course learn the ins and outs of business so that later on in their careers, they would have first-hand knowledge of many parts of the business. So they are less likely to make unwise decisions, and because their employees wouldn’t get bored or burned out in their jobs, they get to keep experienced employees for decades.
Now Japanese companies do this and their employees accept transfers without complaining and this system works only in Japan because in this country, people generally tend to stay in one company for a very long time. Until a few decades ago, you would be considered weird if you ever changed jobs. If you joined one company, you were kinda expected to stay there until retirement. Even now, while people in America change jobs for an average of 12 times in their lifetime, Japanese people change jobs 2.08 times. 2 times.
So it’s really rare that an employee would quit a company in just a few years. Most of them would stay there to fulfill their career, so job rotation makes sense. Or maybe it’s the other way around. The reason Japanese people don’t change jobs many times is because they are provided new challenges every few years by their companies.
I often have a chance to work with people in Japan Railways which is the biggest railway company in Japan. If you come to Japan, you cannot travel without getting on a JR train. Whenever I work with them, I always feel that job rotation is not just a custom for Japanese companies. It’s an effective ecosystem that allows employees to challenge themselves over and over.
Every JR employee I have met, well not just JR people. Almost every employee representing a traditional Japanese company I’ve met has a very humble personality and they are super pleasant to work with. They are always on their feet to learn. No matter how high up their position in the company is, humility is a common trait in many of them.
One year a person may be operating trains, in another year he may be overseeing HR. In another year he may be overseas running a global project. The variety of experience these people gain is just tremendous.
Of course if you’re an engineer in a manufacturer or you have some other very technical profession, it’s less likely that you will be assigned to a totally different role, but generalists hop around roles a lot within the company. So most employees in these kinds of companies are constantly learning something new. Right up until retirement, just like the Noh actors.
One last point here is that the work at Japanese companies are streamlined to an extent where anyone can learn and do a good job. This is also why job rotation is even possible in Japanese companies. Everyone’s experience at the job gets written down in a manual, so that the next person to fill the position can learn, and do a good job. I feel this concept of continuity in the minds of businesspeople and organizations is the key to sustaining companies for centuries.
So what I wanted to talk to you about today was that by working with Japanese people, you’ll expose yourself to these values, and there are pros and cons to them, but you can absorb just the good parts and find a way to apply them in your life. You know, it’s like adding another useful perspective to your world view.
So I hope you enjoyed this episode. それでは、またお会いしましょう。