I returned to Tokyo from Kansai late last week, burdened with about 20 liters of water. A friend is pregnant and it has become hard to buy water at local convenience stores and supermarkets in Tokyo (although another friend, who buys her water on-line, has had no supply disruptions).
While in Kansai, Japan’s second economic engine based around the city of Osaka, I found things operating pretty much as normal. I met up with some foreign friends from Tokyo whose firm (a European company) had relocated them; they have been moved back now. Certainly there is a lot of concern about the refugees in Tohoku, and there are a lot of people out raising money for the relief effort, but the streets are crowded and stores well stocked.
But across Japan, anger is growing at the government and TEPCO (Tokyo Electric Power). And anger, too, is growing at the western media for ignoring the plight of the people in Tohoku and at foreign companies for abandoning Japan (more on this below).
The situation at the Fukushima Dai-ichi nuclear power plant remains critical. The government finally intervened and provided TEPCO with more guidance and resources, but by the time it stepped in there was already serious damage to a containment vessel. Thus there is a high probability of long-term radiation leaks that will devastate the local Fukushima economy, which is dependent on agriculture (sales of spinach, broccoli, and other produce from a wide area are already banned) and fisheries (who knows what the long-term implications are here) and of course the destroyed plant.
The Tohoku earthquake has revealed critical weaknesses in how Japan has organized its economy — and they are weaknesses that one suspects are shared in many other nations. During the earthquake the cellphone network in Tokyo was knocked out. The regular telephone system continued to work (if you could find a pay phone) but the easiest way to contact people was over the Internet. Young people with smart phones used Skype to contact each other when they could not use the normal cell service. When the quake hit I was in Boston and was able to get through to people on Skype right away. There are probably lessons here on how to redesign the cell network using the distributed principles behind the Internet, but the contrast of distributed and hierarchical systems runs deeper.
Japan is famous for its lean production systems and efficient supply chains. But these have proven to be very brittle in the face of this disaster. Large companies such as Toyota and Sony were forced to halt production not because of damage to their own factories, which were quickly checked and ready to go back online, but because they were dependent on a small number of parts from suppliers in Tohoku. These disruptions extended beyond Japan as well, even to Apple and some medical devices makers.
Supply chain problems cascade down to the local level as well. In Tokyo there have been long lineups to buy gasoline, and the convenience stores that everyone relies on struggle to remain stocked. There are many pictures online of empty shelves and it is hard to buy water unless you have an infant and are carrying your Mother-Child Record Book (Boshi Techo, the official record that every pregnant mother in Japan receives). Ironically, the inefficient mom and pop shops did much better at keeping necessities in stock as there is more redundancy in their distribution systems.
The most serious failure, though, has been the management of TEPCO. The workers on the ground have performed heroically, but TEPCOs history of poor record keeping (some of the emergency equipment had not been properly tested for more than a decade, though it is not known if this contributed to the problems), cozy relationships with regulators, and general rigidity made a bad situation worse. These problems are not limited to TEPCO. They pretty much describe the education system (Japanese universities have fallen out of the world’s top ranks), the government ministries, the political parties, and much of the economy.
There is a lot of talk about how the Tohoku earthquake and tsunami will force Japan to transform its society and address its deep problems. One of the more moving appeals has been from actor Ken Watanabe and his Kizuna 311 website. Kizuna has been translated as solidarity, but another rendering could be the “deep connections between people.”
The Japanese, especially in the stricken northeast, have demonstrated the power of kizuna maintaining a functioning society in the face of catastrophe. Can this be translated to the post-disaster period? The answer depends on three critical uncertainties. How these play out will shape its future:
Inward Looking or Outward Looking. The Japanese have been moved by the global response and especially encouraged by the South Koreans and Chinese, countries that they have had fraught relations with for many decades. On the other hand, they have been offended by the decisions of many Western companies to pull people out of Tokyo. The departing managers are referred to as “Flyjin” (a play on the common word for foreigner “gaijin”) and their companies derided for their “cowardly betrayal” — and these impressions will be remembered. Japan has gone through many cycles of looking outward for ideas followed by long periods of inward focus in which these ideas are digested and transformed. Which cycle will emerge next?
Networked or Hierarchy. The current hierarchical model of management has cracked. Can the Japanese look to their own traditions to create a more open and networked style of organization?
Economic Transformation or Stagnation. The economic model that worked for a rapidly growing young population that could buy natural resources as needed on global markets and export its way to prosperity has failed in Japan. Japan is leading the world towards shrinking-population economics, to use the title of the excellent book on this topic by Akihiko Matsutani. If one believes that 7 billion people is beyond the earth’s long-term carrying capacity, then many countries will have to follow Japan down this path.
Over the last few days I have been able to meet with a number of young people in their mid to late 30s. These people have fathers who drove Japan’s economic growth, building the web of small and medium sized companies that employ the bulk of the (shrinking) workforce. They will be taking over these companies over the next decade, and the long-term outcome of Japan’s current crisis will depend on how they respond.
Steven Forth, CEO of LeveragePoint in Cambridge MA, has been engaged with Japan one way or another for most of his life. Follow him on Twitter @StevenForth.
