Thomas Hoover - The samurai strategy

"You mean that business with the sword?"

"Nah, what in hell do I know about swords? That's your toy box. I'm talking about the real world, friend. Turns out Matsuo Noda was the prime mover in one of the biggest takeover plays of the century."

"What takeover? They don't screw around with corporate takeovers in Japan."

"They don't take each other over. They take other businesses over. Washington may think that war back in the forties is over, but somebody neglected to pass the word to MITI. Seems they've got the idea it was just the opening skirmish-the only folks who surrendered were the army and navy." Henderson grew ominously serious for a change. "Question is, where's this thing headed? Is the idea of turning our industrial base into a packaging operation for imports some kind of conspiracy, or is it just nature takin' its course?"

Conspiracy? That wasn't a word Henderson threw around lightly. In fact, he tended to scoff at conspiracy theories, claiming they were a substitute for hardheaded analysis. I agreed. So what was he driving at? I pressed him.

He paused to light a cigarette. "I bring up this unsavory possibility because I'm beginning to detect a little operation code-named 'eat an industry.'"

"Henderson, that's my game. I pitch in to help the little fish fend off the big ones."

"No offense, friend, but you probably couldn't even get into the ball park where Noda and his boys are playing. We're talking the very big leagues here."

"Now hold on a second. Noda's not interested in companies. He's just shooting a little craps. From what I've seen so far, the guy seems to be completely on the up-and-up. In fact, looked at from the long view, you might even say he's putting money into this country, never mind it's just the Wall Street casino."

"Sure he is. It's like he first kicks the shit out of you, then hands you a Coke so's you'll feel refreshed."

"What in hell are you talking about?"

"Well, let's back up a notch. Since I don't want to bad-mouth your new client, why don't you let me give you what I'll call a purely hypothetical case." He sipped at his Scotch. "Let's suppose you were a Japanese guy, like Matsuo Noda for instance, and you wanted to take over some strategic American industry and ship it to Japan. How'd you go about it?"

"Well…"

"Have a drink, counselor." He plunged forward. "And let me tell you a little fairy tale. About how Matsuo Noda ate the American semiconductor industry."

"Noda?"

"It was MITI actually. But Noda was running the Ministry when they did it, and he was the guy who set up the play."

"Noda ran MITI?" This was news to me.

"Yep. Vice minister. Then he went on to greener pastures, being the Japan Development Bank, and left the details to another MITI honcho by the name of Kenji Asano. According to my sources, though, it was Noda who handled the tricky part, the money, after he went over to the bank. Got it together, laundered it, and dispensed it."

"Laundered it?"

"Can't think of a better word. MITI carefully made sure the kickoff funding from the Japan Development Bank got passed through a shell organization called the Japan Electronic Computer Company, hoping nobody would trace it back to the government."

"I think you're starting to see things, but I'd like to hear this little fantasy."

"Okay, off we go to the land of make-believe. Once upon a time not too long ago and not too far away, a few guys at Intel or Bell Labs or some damn place got the mind-boggling idea you could shrink down a computer's memory and put it onto a little sliver of silicon no bigger'n a horsefly's ass. Various outfits tinkered around with the concept and eventually it got commercialized. Lo and behold, Silicon Valley was born, where they start turning 'em out by the bucketful. By '78 we're talking a five-billion-dollar industry. Kids barely old enough to drink legal got so rich they just gave up counting the money."

"The American dream, Herr Doktor."

"That it was. Now, they were making a memory chip called a 16K RAM, that's sixteen thousand bits of Random Access Memory storage. Orders are pouring in, and they can't buy the BMW's fast enough out in Silicon Valley."

"I know all about that."

"Well, there's more. Seems Noda and Asano and their honchos at MITI had been watching this and thinking over the situation. They decided, probably rightly, that whoever's got the inside track on these computer chips has the future by the balls. Twenty years from now there's nothing gonna be made, except maybe wheelbarrows, that don't use these gadgets. So round about '75 they concluded they ought to be the ones in the driver's seat. MITI 'targeted' integrated circuits."

"Well, why not? We're the ones told them they were supposed to be capitalists."

"In truth. But just like in fairyland, our princess had a problem. See, these chips weren't as simple to copy as an internal combustion engine, or even a transistor. They're a heck of a lot more complicated. And to make things worse, back when America was inventin' these silicon marvels, nobody in Japan would've known one if it'd bit him on the butt. So it's a tall order." He crumpled an empty cigarette pack and reached in his coat for another. "Now, imagine you're these guys in MITI. You want to take over an industry you don't know the first thing about. How're you gonna start?"

"I'd probably begin by licensing the patents."

"Nice try, but you don't want this job to be too straightforward. Then everybody'll suspect what's happening, and besides, it wouldn't be as much fun. So if you're this guy Noda, you decide to set up a sort of Manhattan Project, like America had to make the first A-bomb. You go over to see Nippon Telephone and Telegraph, their AT amp;T, and you say, 'Boys, we just decided you're gonna pitch in with all you got. After that, you commandeer some labs at Toshiba and NEC. Then you get yourself a batch of these little American gizmos and start trying to figure out how the hell they work."

Henderson poured himself another drink, then turned back. "Now, since you need to catch up fast, you do a little 'reverse engineering,' which means you steal the other guy's R amp;D. You take a bunch apart and decide you'll go with the 16K RAM chip made by Mostek-a big outfit here that's since gone belly up, by the way, thanks to our friends at MITI. And by 1978 you've made yourself a Mostek clone. Bingo, you've got the technology."

"I think I'm beginning to get the drift."

"Whoa, buddy. You're just starting to get rolling." He forged on. "By this time everybody's wanting these chips, so all of a sudden Silicon Valley can't keep up. Now you and your boys at MITI are ready to move. You've got the know-how, so all you need to do is start turning them out by the truckload. Of course that takes millions and millions in plant investment, so you do what Asano did, bring your old pal Noda back into the picture. Since he's now running the Japan Development Bank, he obligingly lines up a whole shit-load of cheap money for these outfits gearing up to chop America's nuts off. All in all, he gets together what amounts to a subsidy of low interest bucks to the tune of about two billion dollars. All carefully laundered. Ready, set, go.

"Silicon Valley glances up from countin' its receipts and all of a sudden, from out of nowhere, here come your Japanese chips. Reeeal cheap, since you've got all these cheapo 'loans' to capitalize your plants. Inside a year you've got nearly half the market.

"Now, you figure somebody's surely going to blow the whistle, so you can't believe your luck when Silicon Valley thinks you're some kind of joke. Come on in, they say, and sell as many of those crappy 16K models you can, since we've got ourselves a hot 64K version cooking, and that's where we're gonna make our real killing. When you hear this, you do a quick retool. And while the Valley is seeing how sexy and expensive a design they can come up with, your thrifty gang back home just sticks together a bigger version of that 16K chip you stole from Mostek in the first place-and you're out front with a 64K. Now it's time for hardball, so you flood America with these things. You drop the price of your 64K RAM chips from thirty dollars down to half a buck when they still cost over a dollar to make. Before you know it, you've got seventy percent of the American market."