Building software in Japan, with Jim Weisser

I'm presently returning from vacation in Japan with my family. I recorded with Jim Weisser, CEO of Signtime while in Tokyo. This conversation will be annotated in the usual format later in the week.

Sponsor: BoxWorks 2025
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[Patrick notes: Complex Systems now produces occasional video episodes! You can access them directly on YouTube: www.youtube.com/@patio11podcast. My kids inform me that I’m supposed to tell you to like and subscribe. This episode with Jim is audio only.]

Timestamps

(00:00) Intro
(00:24) Exploring the Japanese software market
(01:25) Challenges in the Japanese startup ecosystem
(02:37) Jim Weisser's background and journey
(05:14) The evolution of Japan's economy and business practices
(10:15) Understanding Japan Inc. and its impact on software
(10:28) The role of systems integrators in Japan
(19:01) Sponsor: Box - Check out BoxWorks 2025
(20:29) Cultural differences in software development
(26:06) Digital transformation and efficiency in Japan
(32:44) Labor market dynamics and employment practices
(35:50) Startup ecosystem and equity culture in Japan
(42:53) Success stories and market potential in Japan
(43:42) Corporate relationships in Japanese companies
(44:10) Salesforce's success in Japan
(45:44) E-commerce boom in Japan
(46:33) Rakuten's evolution and strategy
(48:27) Amazon's journey in Japan
(49:13) Cloud services and security concerns
(51:18) Sansan: Business card management
(55:14) Venture capital landscape in Japan
(01:05:02) Personal reflections on living in Japan
(01:16:21) Wrap

Transcript

Patrick: Hideho everybody. My name is Patrick McKenzie, better known as patio11 on the internet, and I'm here with my good friend Jim Weisser in Tokyo.

Jim: Hi Patrick. Great to be here with you today.

Exploring the Japanese software market

Patrick: So we're going to talk a bit about the Japanese software market, which is near and dear to both of our hearts. I'll acknowledge the bit of awkwardness at the outset—if you can't guess from the name Jim Weisser, both Jim and I are white guys. But we've got about 45 years of combined experience in the Japan market and have learned a few things over the years, and also experienced some frustrations.

One of those frustrations is that the language wall has been getting less towering over the years, but it's still very high. Market knowledge from Japan doesn't hit the community of practice in the United States—like Silicon Valley investors or companies that are attempting to expand into Japan—that well. As a result, people have some misconceptions about how the market works here. There are many millions of dollars of wasted investment and many botched international expansions by startups as a result of this.

Challenges in the Japanese startup ecosystem

So we thought we would take the opportunity to let people know a few things. If they have the opportunity to visit Tokyo, they can visit you or get recommendations from Japanese people to talk to—although I will say it is a true fact that many people in the Japanese startup ecosystem in Tokyo do not have great English ability out of the box. That has made working here harder than it otherwise would be for many startups over the years. There's essentially two startup communities in Tokyo based on what one's working languages are.

Jim: I think there is some truth to that. What's great is there is a startup ecosystem now, where when I did my first startup in 2000, there was no way to reasonably say that. Things have definitely proceeded significantly in that direction. There is less thorough overlap, and there are a substantial number of Japanese-only interactions that, if you don't have some degree of language ability, most people would struggle with. It's not necessarily exclusionary—it's more a matter of comfort. At least that's how I find it. Once people discover that I speak Japanese, I felt a willingness to work together on a lot of different things. On the other hand, I preach thick skin, so people being rude to me—I may just not have noticed.

Jim Weisser's background and journey

Patrick: So can you give people a sense of your background? You've done a few startups at this point, right?

Jim: Yeah, I'm a serial entrepreneur. I've done five different companies. People are always wondering, okay, how did you end up in this situation you're in? So let me give a little summary introduction.

I grew up in Texas, so I understand how to not only speak Texan, but that the second person plural is correctly "y'all." I think that's an important piece of wisdom I hope people listening about the Japanese startup and venture community can appreciate.

More than that though, I studied chemical engineering with an environmental engineering specialization in college. I went to Rice in Houston and had the opportunity to work at a chemical plant while I was in school. I discovered that this wasn't my greatest passion or deepest interest in the world. So I thought, okay, why don't I just go to Japan, teach English for a year or two? I felt a high degree of confidence I could come back and work in industry.

What started out as a year—eighteen months, perhaps two years of English teaching—was starting to wind down when the internet started to happen here. So this is kind of '94, '95. I'd always, even as a kid, had bought my own phone line back when that was a thing and connected my computer to the internet with a 300-baud modem. I'm probably dating myself with that number.

But once I got here and once I started working for an internet provider here—I was in internet infrastructure, and that's when things were hard to do—I started out as an engineer. In the course of about four years, I had nine different business cards or nine different jobs. Now that doesn't mean those were all full-time jobs, but it was hypergrowth, and it was the first time I'd experienced it.

There were ten of us in an apartment in Tomigaya, which is near Shibuya in Japan, out of 600 around worldwide. We started in '96, and then in 2000 when I left, there were 10,000 of us around the world and 600 in Asia. So it was a very different kind of world of experience.

Patrick: Currently you're a SaaS founder of SignTime, which is e-signature for Japan, competing with both the international giants and also a few domestic startups or services from larger companies as well. Full disclosure: I'm an investor in SignTime.

But we want to give people maybe less of the scintillating subject matter expertise with regards to Japanese signatures—although I'm saying that only halfway tongue-in-cheek, they're actually quite fun here—and more of the broader picture of the Japanese software industry.

The evolution of Japan's economy and business practices

Before we dive into the software industry, software is always everywhere in service of business goals. Let's talk a bit about the Japanese economy more broadly.

Jim: That's always a good place to start. If we think about Japan Inc. as a whole—and people vary at what they mean by that. Historically it's either meant the very large Japanese companies or the globally competitive Japanese companies. For an extended period of time, there was a dual economy in operation in Japan. Even in large businesses, you would see very successful global players—the Sonys or the Panasonics are the ones that most easily come to mind, but in a number of other heavy industries, essentially anything that you could drop on your foot and it would hurt, Japan was very, very strong.

But what was not typically very strong was the service-related and financial sector type industries in Japan. And that also includes software. What you would see is someone like a large insurance company would have premiums that were materially higher than what you'd see in the US, even though it's a very heavily regulated market. The way things had developed through the eighties and nineties—and I'm not sure exactly when it started to change materially—but you would see that dichotomy going on.

I guess you can't talk about Japan Inc. without touching on the keiretsu structure. Companies were all affiliated and strung together by a bunch of networks, originally with a certain bank that was their representative or was responsible for the company doing well in some ways that are very foreign to America, or at least from my perspective.

Patrick: For people who haven't heard keiretsu before, just a bit of background knowledge. Imagine you have a large manufacturing company, like one whose end product is making cars. There's an entire supply chain to making cars. There's a factory for the cars and there are big machines that go in the cars. The first thing for doing vertical integration—obviously you want to be making the machines that you make your cars with, and it turns out that after you have those machines available for yourself, selling them to other people is a great idea as well. So maybe your automobile company owns the heavy industry company as well. The heavy industry company owns a bit of the automobile company, which is its largest client, but not its sole client.

Then there are other things that go into a car, like a motor, and you will have a supplier ecosystem around you. Most of the supplier ecosystem is not companies you own directly, although the keiretsu says that reality says a different thing in that they might have a factory in Gifu Prefecture—where I lived—where de facto 80% of the orders for the last 40 years have come from your company. There's not formally the ownership relationship there, but for certain strategic inputs you own the company and then the company owns a bit of you. You wrap up this sort of corporate shell game a little bit and then have a central organizing bank.

Where is the bank? Are you the bank? Is that a materially different question for keiretsu? Just note that when you join a Japanese company and are strongly suggested what bank you should get your paycheck in, almost all good salarymen take the advice of the HR department on what bank to use.

Jim: That's one thing that's evolved a bit though in the last ten or fifteen years—I need to put a specific date on it. But the depth of those connections has dropped. I think from about ten years ago, and especially five, you've seen the TSE—the Tokyo Stock Exchange—encourage companies to not have so much in the way of cross-shareholdings.

Now, without getting too far ahead of ourselves, relationships in Japan are material in sales. Even if you're not cross-shareholding each other or holding each other's shares, if you have a preexisting relationship, that gives you a head-and-shoulders advantage over anyone else who might be trying to compete with you in that business.

Patrick: There's also—and we'll be getting a bit into the weeds as we discuss this in full detail—but within a keiretsu, there's a flow of people between companies in a way that there's far less flow of people generally in the Japanese economy. The labor market in places like the United States has high liquidity. If you are at Facebook, it's highly probable that you have spent time at Google before, or you will spend time at Google in the future.

That is becoming more of a thing in Japan, but historically it's not been a large thing. What was a very large thing is that if you are at a keiretsu's organizing bank, you'll spend a few years in the heavy industry, perhaps a few years in the automobile arm, and then rotate back to the bank as you are promoted through the ranks. That's both a source of relationships and advantage within the companies. It also gives you a view of the local conditions that your customer is in, etc., which is historically quite prized in Japanese management circles.

Jim: Right. That's a good point. The term "being seconded to a subsidiary" is something I've only ever heard in the context of a Japanese corporate relationship.

Understanding Japan Inc. and its impact on software

Patrick: So we have Japan Inc.—well, Japan Inc. is not coextensive with the Japanese economy, but it calls a lot of the shots. One thing that is interesting to know about Japan Inc. is that, with very rare exceptions, Japan Inc. doesn't do software directly. Why is that?

Jim: Oh geez. Well, I would say that there are a few parts to it. I think the first part is if you look at the historical development of the systems, you see that systems integrators are very, very dominant here as they were in the US in the seventies. Now it's got 60-plus percent—actually, 60-plus percent of the entire IT spend or technology spend. In the US it might be 25 or 30% now.

Patrick: Just defining this for the benefit of a foreign audience: A systems integrator is a large consultancy which handles all sorts of IT issues on behalf of a company. Those are the disparate systems that they're integrating. They will write code, they will procure licenses to your databases, they will run your servers for you. They will often have operational employees that work for you to operate those systems in sort of a business process outsourcing context.

In the United States, you could think of an Accenture or a company like that. The large ones in Japan are household names like Fujitsu, NEC. The one I previously worked for, which will go unnamed in proper Japanese salaryman fashion—it's on my LinkedIn, but you never talk about it when you talk about it.

When you think of software that is developed in Japan—with the notable exceptions of embedded software and video games—most of that is written within a systems integrator. As you just mentioned, 60% of all IT spend. So everything from the server racks through Microsoft Office licenses goes through SIs. Indeed it was the case that when I worked in a Japanese company to get a Microsoft Office license, I had to take my friendly sales guy out to a dinner to get a plus-one license allocated to our company. But that thankfully has changed a little bit over the years.

Jim: I think that's actually a good illustration of an observation I've had over time, and that is in any organization or any company, you have a continuum ranging from "is technology a cost to be controlled or a resource to be exploited?" In Japan, particularly given the fact that the economy had been down for, say, 30 years—give or take, from 1989 to 2019—it was always cost to be controlled. There's no natural uplift in the market. Because of that, you were just trying to reduce cost, reduce cost, reduce cost the whole way through.

Patrick: Can I give some examples of pathological things that I've seen on this? While I was at the company that will remain nameless, there were a few of us engineers doing Java coding, and we were working on desktops that only had 512 megabytes of RAM by default. This is in the mid-2000s. So that's barely enough to successfully boot a Java virtual machine.

Why did it require approval from management to go up to one gigabyte of RAM when every gamer had that? Well, partly it was because engineers are cheap and the company is sort of priced into paying for their time regardless of whether the JRE boots up in one minute or ten minutes. Partly it was out of a control-the-cost culture.

Now, buying a bunch of cheap Dells with 512 megabytes of RAM would've been one way to save money. But then you're buying computers for engineers, and that sounds all sorts of icky. Instead, you should lease the computer for $20 a month. Now, if you want to upgrade a leased computer from 512 megabytes to a gigabyte, that incurs a frictional cost that is higher than if an engineer were just installing a stick of RAM for themselves. It will take the engineer out of the engineering rotation for a number of weeks until that order goes through the pipeline, etc.

That was just a thing that we put up with as engineers back in the day.

Jim: Yeah, I think it's worth mentioning that in that particular case, there were specific tax advantages to leasing over buying. When computers were expensive, you had to depreciate them. So again, tax policy, amazingly enough, can affect engineering efficiency.

Coming back around though a bit—you asked why Japan Inc. doesn't do software—I think another reason is that within Japan, there's historically been very little specialization. People have been interchangeable parts in manufacturing, and while you might be sent off to a subsidiary to learn more about a specific part of the business, the number of people who were devs who were something else in the previous two years is a non-trivial number. You would never see that in any US environment that I'm aware of.

Patrick: One of my two closest colleagues when I was a developer at the systems integrator was a library sciences major who was still working her way through HTML while I was doing Java backend and frontend development. We were paid the same amount because we were the same seniority in the company. That is how it works. There's a lot of things that you can say about that system.

I will say for the very talented engineers, there's an individual at that company that I would stake against anybody in the Googleplex, and another two or three that would be principal engineers at any company in the world. Then there were identified people who they tracked into engineering where they were incapable of doing engineering work.

I remember the first time I noticed this because it's not like anyone comes up to you and says, "By the way, Patrick, there are some people who are incapable of programming, but we still pay their salary."

I was debugging something with another engineer, and I told him over email that there was a problem in a particular function. He said he wasn't able to find the problem. After a few frustrating emails, I thought I'll just walk over to his desk—it'll be easier in person. Maybe there's a language barrier getting in the way here.

I said, "You know, the bug is in the assignment in the middle of this function."

He said, "I can't find the function."

The function was on the screen. It was in the middle of the screen. I pointed at the function on the screen.

"Where's the assignment in this function?"

That function was three lines long: def function, however you do that in Java—it's been a while—blah equals blah, blah, blah, and return.

Another engineer realized I had this conversation with him and came up to me afterwards and said—I'll make up a name—"Patrick, you have to understand that Tanaka is a very valued engineer here, and he is very valuable for writing documentation. The coding may be a little, not so much. So when you have a coding issue, you just deal with that for him to protect his time for doing the real craft of engineering, which is requirements analysis and producing the Excel files that code monkeys like you will turn into code."

Jim: Yeah. I would add one small thing on that. I think that generally the specifications are over-specified. There's a history of that where you go back to how NTT was set up as a public company working with six big Japanese producers of electronics and so forth. It was the buyer that drove that rather than the people who'd theoretically be competing for the business saying, "Hey, we got this new feature," and they'd be like, "We want it in blue in this corner on this side."

Patrick: Yeah. There were, to the best of my recollection, three Excel files created in triplicate for every database access object which matched to a SQL query. You would have one row in the Excel file for each field in the database that you were touching, and then an explanation of every constraint that was on that field and what the field meant in the Excel file to pass to the engineer who was going to write the SQL query for you.

Then when you did display of the same information—it's no longer in the database, it's in a Java object now—so you have an Excel file listing out all the attributes of your Java object, which are most of the time just echoing the database because this was not exactly rocket surgery.

Anytime we were doing work that would be five minutes work in Rails, it was about four to six hours of Excel architecture work prior to being allowed to write any code. In part that was due to this being an iterated thing where you would not show code work in progress to the client, because who did that back in the day—we were all waterfall all the way. But you would swap Excel files with them to make sure, okay, is the design of the system matching your expectations?

Very occasionally we would have a mockup also created in Excel because Excel is the system that runs Japan in so many ways.

Cultural differences in software development

Jim: You mentioned waterfall there for a moment. Just a small anecdote: for us at SignTime, we do agile development, and for us that means a push every two weeks or so. When I have explained to potential customers that over the course of four or four-and-a-half years, we have 550 versions or pushes, this is a number that is at least a factor of ten, maybe more, past their expectation.

I think part of that ties into one of the challenges of the Japanese software market and clients. In the US there's a willingness to eat a little bit of pain on the first day of a new software deployment. You know, okay, we know it'll be a little bumpy at the beginning, but we'll hash through it and we'll have actual data from the people working on it about, "Oh, you thought it would work this way and it didn't, so we'll fix it quickly."

Patrick: That becomes institutionalized into things like Patch Tuesday for the broadest deployed systems in the world, prior to the constantly online, constantly patched online systems. But there exists a set of practices in US capitalism that tolerate software changing under you. You're about to tell us what the parallel set of practices is in Japan.

Jim: Well, what I was going to say: in Japan, typically there's much less tolerance for mistakes. Software is treated in the same way you would treat a physical piece of hardware. If you have a strong warranty or if you're building a good product, it doesn't break for years and years and years. If you push something that's broken, even if you fix it quickly, that might be okay once—you can kind of get a, "Oh yeah, we understand it was a little bumpy once"—but much more than that, and you will become known as being unstable.

If you're unstable, you will not have client adoption at the end-user level, the gemba level. That's literally factory floor, but you can use it in a white-collar context as well. When you don't have that, you may have sold however many seats or licenses or whatever, but you want to have a successful client.

I think that's one of the things that we see a lot of bumps with. In fact, what we started at SignTime, we were approaching it more on a Silicon Valley approach where it's like, "Okay, we'll fix it fast." What we realized really quickly was we could do overseas dev for some large chunk of it, but we needed to have Japanese do QA because Japan is great at QA/QC. In some ways, not to toot my own horn, but I do feel like that's a fairly good matching of strengths.

Patrick: I will say again, we did our test management in Excel because what other software exists for test management? But the senior engineers at the company I worked at—when you ask them to QC something, they would make video game testers experience envy with the degree of thoroughness that they would test. Even like, okay, there's an input field—fifteen characters pasted into the input field, go—as one of the several hundred things to try on all of the input fields.

You can anticipate some things about how this made development cycles longer than they would've otherwise been. But I do think the quality muscle memory and the search for quality was helpful for me in my post-Japan career as well.

Jim: Well, generally, at least when it comes to software, Japanese clients do not suffer from the tyranny of low expectations. That can be very positive. But if you start out with a "move fast and break things" type culture, then that's very hard for your clients to adapt to. There are ups and downs to both of it.

I think when people are doing software design or software implementation design and so forth, the Japanese expectation will be different than the typical Western expectation. It's not just language. I think in part because of kanji, people are willing to have a high degree of arbitrariness that wouldn't show up as much in the US. The willingness to read manuals in Japan is incomparable to the US market.

Patrick: I think one of the things that startups often find when they have their first Japanese users is there are blog posts written for them—99 steps or detailed posts where someone will essentially produce professional-grade output of like screen-grabbing the entire click-by-click flow of doing something, regardless of whether it's in English or if you've localized into Japanese. But if you want to create a new calendar appointment, there is someone who has written a blog post in Japanese about click-by-click making a calendar appointment for your software.

There are many users who will feel that if your documentation doesn't describe something in that level of detail—if you're expecting people to just intuit it based on the UI—that your software is broken and clearly not ready for production use here.

Jim: It's funny you say that. One of our clients once said, "Hey, I don't need a manual to use you guys. This is great." We do have a manual, at least for the API—we have that in Japanese and English. We just have the API calls and people develop against it. It's an interesting gap.

Digital transformation and efficiency in Japan

I mentioned the gemba earlier and success or not with it. I think one of the things—one of the challenges that people run into—is that when you look at digital transformation as a whole (that's a buzzword in Japan for the last ten-ish years), when you look at that, one of the challenges from the experiences we've had at least is that very few Japanese companies want to flip an entire process at once. They're very worried about exception handling. Also, well, we've got this many people working on it now, why don't we move 10% first?

The problem that shows up though is that you're doubling the work of that worker or those series of workers by having multiple processes, and you haven't solved the problem set in its entirety. You've just said, "Okay, now you have two ways to do things."

I think that's been one of the challenges here. Another that I've had a friend propose to me recently that I'm not as sure about is that Japan at the end of 1989, 1990, whenever you want to say the growth or the bubble ended, was hyper-optimized for that era of technology. So moving things via batch, via mainframe and COBOL—COBOL exports, you do that at night, it comes across, you use faxes in ways that are probably well past what anyone in the US does or has. That level of efficiency was very, very high. So the incremental efficiency from doing that via software was comparatively low versus other countries.

Patrick: We could have an entire discussion about how Japan enthusiastically embraced operations research after the war and pushed it in ways that took the US and other countries decades to catch up, despite it having been largely invented in those other countries. But Japanese infrastructure is extremely functional.

Things that sound just impossible, even in a scoping meeting in places like the US, are just routinely ground out every year in Japan based on standard operating procedure. I'll drop a link in the show notes for how many billions of paper cards get delivered over a three-day period during the New Year's holiday every year. It's just like the post office has a manual for this, and they burst up to 10x the typical number of seasonal employees and then deliver all the cards and then spin down and just get ready to do it again next year.

I think your friend's thesis here is that perhaps the calcification set in—perhaps Japan had a high starting point in, say, 1990 and got even better at cost control and optimizing against that high starting point of competence in a way that adopting software would've required localized degradation in performance that wasn't viewed as—it's a new cost and it's localized degradation in performance, and therefore the pathological version of second-system syndrome: don't spin up the new thing. It's all downside for us. Just keep doing it the way that works.

Jim: Well, not only that, there was no benefit to improved employee efficiency in a lifetime employment situation with more people than jobs.

Patrick: If I can give an anonymized anecdote about that: there's a particular financial institution in Japan that has a floor of people doing the work of a cron job. A talented engineer was once offered a site visit and visited the floor and said, "This is an interesting way to go about doing things. We would probably do this with a cron job."

He explained that to the manager of the site, and the manager of the site listened appreciatively and said, "That's a very interesting way of doing things. We wouldn't have thought of doing it that way given that we have this floor of people that handles this thing."

Then the engineer made a bit of a faux pas and suggested, "Well, you know, it's not even a hard cron job. I mean, we could help you bang that out."

He's like, "Yeah, no, we're not gonna do that."

When asked why, the manager politely explained: "This floor of people exists at this company whether their work stream exists or not. They've been doing this operational work consistently every day for—in the majority of cases—20 years of tenure. They have a right to be employed at this company tomorrow, regardless of whether their work is required or not. There's no other job that we have that we can conveniently retrain them on. So we're gonna keep doing it the way that works for us. You can keep your cron job."

That sounds like almost a too-good-to-be-true anecdote, and I've seen it multiple times over the years.

Jim: We once didn't get a sale because we have a deep integration with some CRM systems where it's easy to send a quote, and the question was, "Well, what about a hanko?" Yeah, that's a Japanese chop, a Japanese seal. We said, "Yeah, we do that electronically, not a problem."

The response was, "Oh, well we have a sales admin who does this, so what would she do?"

It was a much smaller scale than the floor of people doing the cron job, but that approach certainly still exists in a number of places.

Patrick: Yeah. To be clear, the expectation for lifetime employment is a bit on the outs in Japan. Like many things, there is a huge amount of variance between cohorts. If you were hired in 1990 into lifetime employment—and lifetime employment was only ever a thing for about 30% or so of the Japanese labor force, give or take how you count. People who worked for most positions in the government, most white-collar positions in the government, and then the salarymen who were doing largely white-collar work for larger companies, although factory workers also had lifetime employment for a while, at least at the large name firms.

But if you were hired into that system in 1990, it is difficult to renegotiate the social contract with you. It is not as difficult to renegotiate the social contract with contract workers who are hired in 2000 into the same firm, maybe doing a similar thing. This also leads to some of the organizational dynamics which are challenging within Japanese companies because authority derives largely from status, and the status of a real employee of the company and the status of contract worker are very, very different statuses.

If the new kids with the ideas are all contract workers, because that is what the company's doing as a labor force management strategy, then it will be a very, very long time indeed until their ideas actually break through to changing the way the company does operations.

Labor market dynamics and employment practices

Jim: I think one thing that's interesting related to that, and one thing that's completely changed since I've been here, is that something like 30% of Japanese new grads now leave their employer within three years. Okay, what world are we living in? Part of it is that they've seen an erosion of the social contract. I think part of it is also that they've seen the outcome from lifetime employment, and finally the opportunity to move and do things now is very different than it was maybe ten years ago. You started seeing, in the middle of the career, job change advertisements.

But when I look at the hiring market across the startups that I've done: in 2006, there were very, very few people at all who you could consider. The ones that you could find were not typically people who would be hired by large, high-performing organizations.

Patrick: Yep. When I wrote about doing business in Japan in 2014, I mentioned that because of low labor market liquidity and the consensus picks in Japanese society being scooped up very early by large Japanese employers, as a startup, you were almost necessarily looking at the socioeconomic margins for people to hire. That was the only people that were available to you, also the only people who would say yes to your offer. I think both of those have changed a little bit in the intervening decade or so.

Jim: I would say this has changed radically in the intervening decade. Ten years ago—I guess that's when you wrote that, plus or minus—it had started to change, but very slowly. The startups, particularly brand-name ones, were doing better. There were a series of Japanese SaaS companies that were mainly taking packaged software and moving it online that were well-known or popular or however you want to describe it. So they had a good brand name, a good brand approach, and that was starting to percolate.

But now I talk to people at large three-letter companies, and I had a fairly senior person come up to me. I introduced myself: "Hi, I'm Jim Weisser. I'm at SignTime startup, blah, blah, blah."

This person said, "Oh, I hate you guys."

I'm like, "Oh my gosh, this really big important three-letter company is not happy with us. Did we screw something up somewhere?"

"Yeah, we can't hire anyone because of companies like yours."

This is maybe two years ago, so post-COVID basically. This was one of these mind-blowing experiences that, okay, we're considered now to be competing for not only new grads, but even the young talent. Part of that too is startups pay better than big companies, which is also just a completely weird dichotomy.

Startup ecosystem and equity culture in Japan

Patrick: Yeah, I think there are multiple funded startup ecosystems in Tokyo. There are some which are—I want to use the word exploitative, and I feel some level of resistance to using that word. But engineers and other professional workers at Japanese companies are typically paid very low relative to norms in, say, the United States. Some of the differential is the lower perceived risk. Some of the differential is being paid in established ways.

To use an excellent quote by an essay that I will drop a link to in the show notes: something is just an ingrained culture of worker abuse, bluntly. The older people at the company who are writing the salary schedule didn't need more than ramen and water a few years ago in their twenties, and so you won't have it either. Then you will gradually age into earning a more reasonable salary, which is tied very heavily—including in explicit ways—to major life milestones. For example, your salary at many Japanese companies will automatically increase if you get married or if you have a child in a way that would be straight-up illegal in the United States.

But where was I going with that? Oh, yeah. So there are some very well-funded Japanese startups which pay even less than traditionally managed Japanese companies do. Then there are others which perceive themselves to be in competition with the Googles of the world and pay salaries which are designed to not get left on the table by a Google engineer.

Google in Tokyo is also in competition with the Google of the world at the mothership. They have interesting internal policies on whether they will pay you Tokyo wages or San Francisco wages based on their perception of whether you are internationally mobile or not. Which is a useful thing to know if you ever are interviewing for those companies and wonder, "Hey, is this a misprint? Ten million Japanese yen for an engineer seems a bit low." If you're capable of saying that sentence in idiomatic English, you can get that salary offer doubled almost immediately.

Jim: This goes back to $65,000 for a good software engineer seems a bit low, right? But to your point on that, not just the big 5, 6, 7, however many you want to draw the line around, but because equity tends to be undervalued in Japan, most Japanese do not look for asymmetric rewards. For most Americans who want to work at a startup, that's part of the drive. It's not just the small team and the culture and so forth and the opportunity to build something—it's, "Hey, you know, there is a chance."

Patrick: And not merely chance, there's a reality that there are some people in the community that you look up to who made their bones at a particular generational defining company. You've met them. It's not a mirage. There is some chance that the next thing will have that outcome for you. Then you meet people at meetups who say, "Yeah, I was in four startups that didn't really amount to much of anything, earned a standard salary. And then I was at one that did very well. And now here's my next thing."

In Japan both there is less of a script of that—there's fewer examples around you of people who are sort of free-floating in the ecosystem, both because of lower labor market liquidity but also because, among other things, Japanese companies don't award much equity to people outside of senior management. When they exit, they tend to exit earlier in their life cycles than American companies. You can IPO on a valuation of tens of millions of dollars in Japan.

So if you have been awarded, say, a basis point of a company and the company exits at $40 million, well you can do the math—that is a nice bonus, but isn't going to change the rest of your career trajectory in the way that being at Google at IPO definitely changed the rest of your career trajectory. There are however many unicorns—10-plus companies a year these days that have that sort of outsized outcome for people. The number of Japanese unicorns—there've been a few at this point. DeNA—I never know how to pronounce their name in English.

Jim: I say D-N-A, DeNA.

Patrick: Yep. I'm struggling to think of a second one. Oh—

Jim: Preferred AI.

Patrick: Preferred AI. I didn't realize they were a unicorn already.

Jim: Yeah, I think 2.0 unicorns. Part of it is the venture ecosystem as a whole. Part of it's where do you become successful or not? Part of it as well is that even for the senior management, sometimes the equity vesting and so forth is very procedural, but it takes a long period of time for it to vest through.

If you look at that tens of millions of dollars—let's just say you IPO at 40 million bucks—the likelihood that you go from a first-day pop and then a substantial down, you're down half after that, is non-trivial. At least historically. I haven't looked as much recently. I did have some friends of mine who had started a company that went public in Osaka, and at the point they went into a sale to private equity, they had never recovered their first-day price four or five years later. That unfortunately was not uncommon with the small-cap stocks.

Now, the other thing about the early listing is that unfortunately, a number of founders view listing as the end. I mean, that's good, but you know, I've had some success, sold a company. But to me, it would be hard for me to say, "I've listed the company, now I'm worth whatever, 10 million bucks, okay, I'm done." I can have my lifestyle taken care of.

To their credit now, the Tokyo Stock Exchange is pushing people where they're not saying "You can't list under a hundred million yen, or a hundred million dollars"—whatever it's 65 million US dollars, 70 million at the current exchange rates. But they're basically saying, "You could use the new target where you have to get over that within a couple of years, or they'll consider delisting you for being too small."

That's actually doing something we haven't seen here before, which is encouraging M&A for relatively strategic reasons. I mean, it has existed, but when I was selling my company in 2015, we talked to two Japanese companies and a dozen foreign. The Japanese companies were all like, "Well, your EBITDA is this, so we'll give you six times EBITDA."

I'm looking at like, "Well, I get multiples of sales from people who are trying to enter the market. I don't think your EBITDA multiple's gonna work out that well."

Success stories and market potential in Japan

Yeah. So hey, one thing we haven't talked much about—because we talked a lot about some of the differences, and it's been fairly anecdotal—it's probably worth talking about some of the things that have worked out well for foreign companies here, and then maybe one or two companies that are a little bit different flavors or spins or whatever here versus what people might expect.

Patrick: Yep. So Japan is a gigantic market still—third largest economy in the world most years. It is often the second largest economy for a variety of software companies at various stages of the lifecycle. That is a thing that you will hear both economically and in terms of usage with regard to many of the AI tools out there. It's also something that you can find in the annual reports of Google, Microsoft, etc.—pick the names. Many of the big names run their Japanese offices. There are thoroughly Japanese companies that have a corporate relationship with the mothership. Some are more hybridized or have more of a cosmopolitan feel to their offices. Sometimes it depends on whether it is just doing market entry in Japan versus actually doing product development, although that isn't a hard and fast rule.

Salesforce's success in Japan

There have been a number of startups that have just done very well here. So Salesforce is one example. You mentioned that you have a thesis on why Salesforce did well in Japan in particular. Do you want to share that with people?

Jim: Yeah, sure. I mean, Salesforce in Japan, at least at the point I was doing market entry—part of it was they had a good partner coming in. They were working with some investors that had worked at Oracle Japan, and so were familiar with the market and they had built a deep partner ecosystem.

My understanding—and it's been a while, this is like 2006, 2008, somewhere in there—Salesforce had their CRM platform and they might've started their core platform. There was a Japanese privatization going on at the time of the post office. So the systems integrators at that point couldn't provide anything within the timeline required because the servers by themselves, with the software, the servers by themselves would take longer than the time of privatization to arrive in Japan.

So Salesforce worked with, I believe it was within the Hitachi group of companies, and they built out the platform as a service, so Hitachi group companies could do their development work on top of the Salesforce-based platform. Well, I don't know what the numbers are today. If you would consider Salesforce the sales cloud, the support cloud, and the platform, Japan is overweight the platform versus every other market. The CRM is still used—it's the most popular here, probably, or perhaps number two behind Oracle. But the support less so. But the platform people love because it fits with the SI model.

E-commerce boom in Japan

Speaking of startups that have done well, e-commerce has taken Japan by storm over the last couple of years. Well, it has been up and to the right for almost as long as I've been here—20 years now, although I'm in the US now. There was a step-function increase during COVID, and there was for the longest time, and continuing, a very successful Japanese company by the name of Rakuten which kind of invented the e-commerce category here and has been in brutal warfare with Amazon for the last couple years. And then against those who have more platform plays such as the Shopifys of the world and also some Japanese companies which have business models similar to Shopify in the course of the last couple of years. Do you want to talk a little bit about what you've seen in that sphere?

Rakuten's evolution and strategy

Jim: Sure. Let me try and define some of the different pieces of each of those, at least the way I think about them. So Rakuten in Japan actually started out as an internet shopping mall, which all of us knew in the late nineties that that's a failed business model. It wouldn't work. Well, it turns out that Mikitani Hiroshi, who started it, understood the market better than we did, and he brought more small businesses online in Japan than anyone else.

So Rakuten wasn't the first-person seller. Rakuten was kind of the proxy storefront, and amazingly it worked. Rakuten since then has expanded to where Rakuten also has a bank and a cell phone company.

Patrick: You're not a real Japanese company until you own a bank or an insurer. There may be an insurer in there. I'm not sure that there is. I'm a policyholder of Rakuten insurance.

Jim: Well, the thing is, I don't want to detour too far down this rabbit hole, but once you have a very substantial customer base in Japan, it becomes, "What else can you sell?" Now, that's true anywhere, but especially in Japan where financial service products are very lucrative.

So that's Rakuten in a nutshell. Started out as an internet shopping mall—it is now that too, but has a wide portfolio of things.

Patrick: They have a Rakuten point system, which point systems are all the rage in Japan. Again, 30 years of stagnation—if cost cutting is the only thing that you can do to impact the family finances, then you cost cut with a vengeance. So, the notion of like, "You get 1% of your spend back in terms of points"—so you can use those points as one point equals one yen, but only within our ecosystem of companies. And by the way, if you get our credit card, we'll give you an extra 1% of spend, and then you can get points for your credit card spend outside of our ecosystem, which draws you back into our ecosystem, etc.

It is a beautiful flywheel, which for a variety of reasons US startups don't generally have nearly that level of investment into financial services.

Jim: Well, now let's talk about Amazon's card.

Patrick: Yeah, true.

Amazon's journey in Japan

Jim: Amazon, I think, was much more similar to its US start here. They were the largest online store or bookstore, CDs, whatever they started with. Amazon has generally followed markets by GDP, so Japan was an early market for them. They've done very well.

One of the challenges they ran into—we were talking about the Japanese systems working well before—was the default logistics offer in Japan was time-of-day delivery down to about a two-hour window, which Amazon traditionally had charged for in other markets. So it was one of these, "Okay, how do we make this a charged thing?" And it went back and forth on their Prime offer. It was complicated here, though. Also, of course, they have third-party sellers as well now, and AWS is very big here.

Cloud services and security concerns

I don't have specific data on AWS in Japan. I do know that speaking with Japanese organizations, there is still a substantial fear—a security fear—of going to the cloud. So I believe AWS is doing very well here because if you want to do something in the cloud, it's AWS, Google Cloud, or Microsoft Cloud. But how much uptake there's been, I don't know.

Patrick: I think it's been pretty high, although I'll look for public numbers to substantiate in the show notes. Anecdotally speaking, when I was leaving the company in 2010, there was an ongoing debate among engineers on whether we would successfully transition—again, we were an SI, we built systems for traditionally managed Japanese companies and universities and other organizations. There was an open question on whether we could ever get the clients over the security worry and get them onto the cloud.

That was like an open question in America for like five years of AWS, and then it got decisively settled by the various advantages. I think reality will win out and it largely did.

Jim: I think you're right on that. And there is also a very substantial—a much more substantial IaaS or infrastructure-as-a-service market done by those same SIs. In the US we went through our virtual server phase and our VMware-based server phase for a while. That is still substantial in Japan.

Patrick: Yeah. And managed services as well, which seems like there are ebbs and flows in the infrastructure market. For a while, everyone wants to do things on bare metal, and then no, you want to have someone do things to the bare metal on your behalf and pay them money. Then we invent a new set of bare metal primitives and serverless—so five years ago you should be running serverless, and now no wait, why would you run serverless when you can have someone manage your serverless for you? And I guess the next phase is probably like managed serverless or something.

Jim: Show me an AI-managed server to replace your managed serverless or some such, because that will be the new hot thing.

Sansan: Business card management

Patrick: So another interesting Japanese company that most listeners of this podcast probably won't be familiar with is Sansan. Can you give people a little explanation of what they do?

Jim: Sure. Sansan started out as a company predominantly focused on business card capture. Historically in Japanese sales—where relationship is the most important thing, it matters in all sales, but really it matters a lot here—when your salesperson left, so did his or her business cards, to the extent that many employment agreements would stipulate who gets to keep the business cards at the end of an employment relationship.

So Sansan created a business where they would consolidate all the business cards for the salespeople and company. So if you met the president of a famous Japanese car company and one of your colleagues is actually pitching something else to the same company, they could actually pull you in and use that experience for you. In many ways it was a "make sure the knowledge doesn't disappear as each person leaves the company," tied with "how do we leverage the internal pieces that we have."

Now since then, they've also added a cloud invoice management system that's pretty substantial. And they have a few other pieces as well. But that's kind of where they are. It is a company that's hard for me to imagine someone in the US doing because people would say, "Wait, when was this company started? Why didn't they just use LinkedIn?"

Patrick: The job to be done here is very similar to LinkedIn. Business cards themselves are part of a ritual. If you take a meeting with someone, you will get a business card from every person in that meeting by default. One of the core jobs of sales in an enterprise context everywhere is to map out the power structure and control within your target, find internal champions and find who can actually make a decision to buy the thing, and then successfully influence them to get that accomplished.

Essentially, we have this distributed graph of how power and control is exercised within the Japanese economy. There are windows into that graph, and those windows are kept in a distributed fashion in binders of business cards by various sales guys who have gone out to the companies and figured out literally what humans will be invited into the meeting when we have a discussion about cloud monitoring software, for example.

It is very difficult from outside of a Japanese organization to collect that list. You can't simply go to LinkedIn and say, "Okay, who's on the cloud monitoring team at my target company?" Very many Japanese professionals will not have a LinkedIn profile, or their LinkedIn profile will not usefully explain what they actually do for a living.

Jim: Actually a side note on that: I know some Japanese professionals who only get a LinkedIn when they're looking for jobs. That's their "I'm looking for another job" signal as their approach to LinkedIn.

Patrick: Yeah. And there's also a fun cultural side note that you should expect to have an active Facebook profile if you're doing business in the Japanese market, because very many people will do business over Facebook Messenger. To the extent where there were any number of highly effective account executives and other sales folks that I worked with who would register "first name and then last name is the name of your company" as a Facebook account so that they would have a professional presence on Facebook which was disconnected from their personal presence on Facebook.

Jim: I had not heard of this. I find it tremendously amusing. I would agree with you even more to the extent that I had been off Facebook for a number of years due to some complicated issues about 3, 4, 5 years ago. Since we're fundraising, I got back on Facebook so I could effectively communicate with VCs here.

Also, I believe you mentioned you were gonna have another guest, James Riney, who's a venture capitalist here, in the not-too-distant future. He wrote an article that went viral on why Japanese don't use LinkedIn in 2012, 2015, or 2017. It's an interesting discussion point for you to have with him as well, perhaps.

Patrick: Yeah. I'll drop a link to that in the show notes.

Venture capital landscape in Japan

Since we touched on venture—I think that it's probably worth spending a couple of minutes on just how much things have changed. Too often when I talk to people about what's different, I feel like we're just doing a "this is how things work, this is how they used to work" discussion. It may be relevant and still practicable, but doing the forward look and looking at how things have changed recently, I think also has some value.

I was just at a big conference in Kyoto last week. There were 12 to 14,000 people there, hundreds, perhaps even thousands of VCs. I think they said 4,000 startups, 300 or 400 VC companies. Had that been done 10 years ago—maybe it was done 10 years ago, I'd never heard of it until fairly recently—the size and scale of the ecosystem, the fact that there are a bunch of people that are actually all meeting in one area, astounded me.

When I was first working in the internet, there was typically like one, two VCs. JAFCO was one. There were a couple of other, probably very small ones. But JAFCO came out of, I believe, Nomura—it was one of the banks, essentially. You found that all of the folks there approached this as they would a public company. At that point you could only get debt, or sorry, you could get investment, but personal guarantee was required to receive it. So if you're a startup that went bust, you're still on the hook for a million dollars or however much you got.

Jim: On this—people who have been heavily influenced by Silicon Valley culture do not understand the degree to which Silicon Valley culture had founder-friendly terms as like a core element of why it worked at all, and how those founder-friendly terms are not abundant in nature. That's one of the things that distinguishes the ecosystem from other ecosystems.

Patrick: True. Even if you look at the history of funding in the US—like the guy who did DEC Computer, the amount he gave away 10 or 20 years before Silicon Valley really got going—it is materially different than anyone doing these kind of things now. But you can also see where everyone looks at Silicon Valley for what is venture capital. That is the only model people seriously look at.

Because of that, many of the more founder-friendly things—whether it's a SAFE-style agreement, the YC-type thing, or whether it's the ability to get an investment just for normal preferred shares without having to potentially go bankrupt personally to avoid paying back the debt—it's very good.

Jim: I would say like in any ecosystem, this one's very young. Because it's young, you see an abundance of people in seed and pre-seed. There are a few who are like, "We're pre-A," and the numbers in a Japanese context are different than a US one, but within a Japanese environment, we're pre-A. Then you see a fewer number of mezzanine-type folks who are like, "Well, you can list at $40 million valuation. So I'll come in while you're on track and hitting your sales targets and just get a quick flip, essentially."

I think there are very few VCs run by founders here. It's one of the things that we're starting to see a few changes, but we could use a hundred more—however many we need more—that are, "Okay, I've been through this." The ability to talk to a founder as a founder or former founder has a lot of value.

Patrick: I don't know to what degree it's changed, but my impression was that a large percentage of Japanese VC investment is done by corporate VCs which are investing for essentially corporate priority reasons. Partly as a talent management strategy and partly as—we have the internal genius who can't get the thing done for whatever political reason, we're going to spin them out with the company's money. They're going to build an organization to build the product. They will sell that to us because they thoroughly understand our needs. We will buy the product from the company we've invested in and then come to the conclusion three years after this that this is a bit inefficient. So we will purchase the company with our M&A team that we spun out of ourselves.

It sounds like a joke, but that was the routine practice of Japanese corporate VCs. To the extent that if you couldn't be slotted into that bucket, the corporate VCs wanted a bit less of your time. Are there more freestanding VCs these days?

Jim: Oh yeah, substantially more. And also I see a bit of a difference in the corporate VCs now than versus 10 years ago maybe. When I was looking at either selling or taking more money for PBXL—and that's the one I sold in '15—we talked with, I knew a guy who was a director at a listed Japanese company and I said, "Hey, you had mentioned you had a VC arm, can I come talk to you?"

He said, "Jim, we closed it up."

I'm like, "Oh, really? Why did you do that?"

He said, "Well, we did 66 investments."

"Okay, how'd that go?"

"Our return was zero."

I was like, "Okay."

He's like, "No, let me be clear. Not a 0% return. A 0% return of capital."

"Oof. Oh, okay."

"Yeah, yeah. I don't want that bad luck anywhere near me."

That's 10 or 15 years ago, and there are many more standalone VCs. It tends to be a relatively high-prestige occupation. Now that the whole innovation ecosystem gets a lot more buzz than it did, and people are joining it at the prestige level, I see many more people as standalone VCs. They typically—well, I'm a founder, so of course I'm gonna be biased this way—but they typically are overly financialized. I think that's where the operator experience or the founder experience being missing is an issue.

Patrick: I think another thing we've been seeing is more flow of both talent and money across the Pacific in both directions, although this has been a thing for as long as I've been here—20 years now—we've seen a bit of it, but expect to see much more over the course of the next couple of years. Tracking on that projection over 20 years—if I had described the current level of cross-border investment and flow of people to myself 20 years ago, that would've been a failure case, candidly. But at the same time, it's much more than in December, but—

Jim: Yeah. I think what many of the foreign VCs or the overseas VCs struggle with is the amount of capital they have to deploy versus the reasonable opportunities to deploy. There's a mismatch. Almost everyone I've talked to has experienced that because—what's an arbitrary number that's not a large number for a US VC? $3 million. Something like that. A $3 million capital deployment here does exist, but it's relatively infrequent. It's getting more frequent, but people want to raise hundreds of thousands of dollars.

Patrick: And there've been some great writeups on the internet over the years, so I will link to them rather than doing the full explanation verbally. But because VC funds are essentially rate-limited by the number of board seats they can take on seriously, and elsewhere as the size of the fund tends to mechanically create a lower bound on the check size that you can write effectively. If the lower bound on your check size for a burgeoning asset class in the United States is higher than the market capitalization of most companies at that stage in Japan, then that market will simply fail to clear for structural reasons.

Jim: Right. I think that's a fairly decent summary across the highlights and to some degree the lowlights. But I don't know, I've been very bullish on Japan for the past few years. The reforms—between people changing jobs and the governmental reforms that have happened for listed companies and just the comparative ease of doing stuff generally—there's so much more opportunity than there was.

Now, how much of that is immediately realizable to a 25-year-old who flies over from an arbitrary location in the US—call it San Francisco? It's a very different world. Doing business here is hard, in a lot of ways.

Patrick: And I will say, some reasons for optimism. We mentioned that the language barrier is real, but it's getting less forbiddingly high with each passing year. When I meet people who are 20 years younger than me who have shockingly good bilingual skills—better than I had after 10 years of living in Japan, or the same bilingualism but coming from a Japanese background—I ask them, "What was the magic pedagogy? Was there an app?" etc. And in most cases, the answer I hear is just YouTube. They consumed 10 times more of the language than anyone thinks is reasonable in the course of a United States university degree in it. And you too can have flawless Japanese for ordering a haircut the day you get off the airplane.

Jim: Just be careful not to watch too many of the gangster films. That might not do you well in business.

Patrick: One of my classmates from way back in the day was almost thrown out of the Japanese program because he liked anime a little bit too much. "That is communicative, but that is not contextually appropriate," was said in increasing tones three times before the ultimatum was delivered.

Personal reflections on living in Japan

Jim: I mean, you know, we've talked a lot about changes. We've gone much longer than whatever our plan was. But one of the things I'd like to ask you is—you came here 20-something years ago, fresh out of school. I think everyone's heard that story, but there are a series of personal and professional trade-offs that go with that. I think through some of these same things, but I'd be interested to hear your perspective on decisions that you've made. Not the somewhat immature "Oh, I would definitely not do that" or "I would," because I don't think those are useful questions to the person that you are. But the aspects of yourself—the facets, maybe—that got more polished or less polished because of Japan, or because of you being in Japan.

Patrick: Yeah. There's huge amounts of path dependence in this too. For example, I'm currently living in Chicago, but largely for family reasons. Many people who are making decisions about where to spend their career will not have exactly my family or exactly my family reasons.

Japanese society has been changing over the course of 20 years. One thing that is still true is that the integration of people who are not 100% Japanese into Japanese society is a little complicated. Your children as well have a similar social situation. We get to pick being the weirdos in most of the rooms that we're in. But our kids didn't get a vote in the matter of who their parents were or where they were born.

As I was hearing in the media, witnessing in the lives of my friends and then witnessing in the lives of my children, people of mixed parentage having a rough go of things—particularly during their schooling experience in Japan—I thought, "Well, I really want to give my kids a few years in the United States." There are many issues with the US, but one interesting thing is that after you step off an airplane and go 10 feet, people will just assume you're an American for the rest of your life. That is in many ways a positive norm.

I wanted to give my kids a few years of living in a country where they are considered first-class citizens and then they can pick which basket of goods they want as they get into college or the workforce. Who knows—they're eight to 10 years from college at this point. Japanese society may change quite a bit over the course of the next 8 to 10 years. But they'll still have options. They'll have some worthwhile experience of living in both countries.

Speaking of things that have changed, past tense, but that are not widely known as having changed maybe outside of this community of practice—there is this leftover meme that Japan is an extremely xenophobic nation with a xenophobic immigration policy. That has not survived contact with reality over the course of the last 20 years. Certainly I think discourses about xenophobia are long and difficult ones, but with regards to the blunt reality of like the number of immigrants in Japan—that number is extremely up and to the right. I will drop a link to the graph, but it's physically perceptible in walking around Tokyo how many immigrants and tourists there are these days.

Jim: Well, yeah, I think that's a very accurate thing. To your point, xenophobia is always a tricky term. I've been in cities in the US where there's been xenophobia toward me, and I wasn't born in this city, however.

When I think about it, I remember when the government announced that they were gonna double or triple or have 10 million or 20 million Japanese tourists by 2020 or some number that was absolutely crazy and stupid or ridiculous. Well, guess what? Japan did it. If I remember correctly, we're on track to something like 55 million this year, 60—some number that is astounding, literally inconceivable to the me of 2003 or 2005 or whenever that was announced.

Anytime you have tourists being a large portion of the interaction with the foreign crowd, there's a certain level of discomfort that shows up because if you don't live there, you don't act like you live there. You don't act like an owner. So there's definitely some of that.

I do think though, to your point on kids and experiences, you're right that we particularly get to opt out of things. We get the—and people talk about the gaijin pass or something like that, where you pretend not to know. And you also, because you're different, probably have much better access to random CEOs than you would in the US. I mean, maybe you're special, you're patio11 on the internet. But certainly for me, that was something that became very clear when I was talking to some of my sales hires over time. It's like, "Yes, Jim, you can get a meeting, you're right."

I was like, "Yeah, but I'm just me."

He's like, "Yes, you are. But there are 10,000 people whose category I fit into. There might be a few hundred or maybe a thousand whose category you do." So you're more likely to get better access that way. What you do with it is certainly up to you and how much initiative you have.

Patrick: I will note that despite having an outsized online presence, a huge portion of my face-to-face meetings with captains of industry, let's say, have happened in Tokyo rather than Silicon Valley. Because there are many people in the software community who have a great difficulty turning off 100%, even when they're on vacation. Tokyo is very high on the vacation list. So they get to Tokyo and they just won't let themselves not do anything for two weeks. They're like, "Okay, what meeting should I get with software people in Tokyo?"

Problem: I don't speak a word of Japanese. Then the list of people you can possibly go out to dinner with is very short if those are your constraints. So I get some really nice meetings where if I was in Silicon Valley, I would not be on the list of like the top five people this person could spend time with on a Thursday, but might be in the context of limited options in Tokyo.

So, an interesting advantage of being a fish out of water, as it were.

Jim: Right, right. Well, just being one of the fish that are even more out of water that can visit.

Patrick: Sounds reasonable.

Jim: So I guess, you know, you talked about your kids and the facet of you that was polished or not, or what shines more brightly than it might otherwise have. Do you have any piece of you that might fit that category?

Patrick: It is difficult for me to disaggregate how much of my twenties was the same thing everyone goes through in their twenties about finding themselves in the world and getting better at being an adult and developing relationships, and how much was uniquely caused by me experiencing that in Japan.

I have any number of social challenges, let's say. As part of learning to produce the Japanese language, you have to get good at reading social situations. Not something I was very good at the day I graduated university, or that I had spent a lot of time on getting better at. Being able to participate in interaction and be extremely attuned to it as an observer—because you need to be, to correctly produce the language and understand what is the subtext of this conversation, understand what are the lines of hierarchy within this in-group that we're talking to right now, etc.—is a lens on the world that I didn't really have available to myself in growing up, or maybe had it to a grossly deficient degree.

Which I feel I have much more as a result of having spent many of my formative years here. It's one reason that my work often tends to talk a bit about like the ethnography of companies and the softer side of what are typically harder-side topics.

Jim: Right.

Patrick: Plus, as people who read Bits about Money know, I have a great love for bureaucracy in the sense that only someone who's experienced as much of it as me can have—the sort of double-edged appreciation where on the one hand, I hate this, but on the other hand, I really love this.

Jim: So actually the way I think about it is you have trained yourself in mental aikido or jujitsu when it comes to Patrick-the-salaryman interactions. At least as you present it, I have never been as successful emotionally at saying, "Haha, I'm going to do this. I'm going to do this in a way that is correct and proper and not at all annoying."

That doesn't mean you don't feel frustration. But the way you express it is the kind of person I aspire to be, but very, very rarely ever manage to be in those "I'm fucked up with red tape" kind of situations. I don't know, perhaps that's one of the facets that really came out—Patrick the Salaryman was in there, and part of that's reading the air or kuuki wo yomu. But just as we've been talking, maybe that's another one.

I know for me, certainly my tolerance of that has gotten better. But at the risk of using a Dungeons & Dragons analogy, I view it more like a mix of my constitution plus magic resistance to bureaucracy have gotten better, enabling me to continue to function.

Patrick: Yeah. There are fascinating institutions. You mentioned that foreigners are sometimes given a bit of a pass for Japanese social norms and also sometimes given a pass around bureaucracies, although not always in a direction that is helpful.

There is an occasional institution within Japanese companies of having a designated foreigner for those times where the company wants to play the foreigner card, but you need a foreigner to play the foreigner card. "And so Bob, you're up."

That was wild for me when I encountered it for the first time. There was a particular counterparty. The relationship with the counterparty was strong. It needed to continue being strong. The counterparty was underperforming terribly. We had a meeting and my boss told me, "The counterparty is underperforming terribly. We all know this." And everyone else said, "Yeah, yeah, shucks, nothing to be done about it."

The boss said, "Which is why Patrick is going to scream at them later today."

I'm like, "No, I am not. I am not a screaming person in the best of times." I was hyper-attuned while I was a salaryman to never being the ugly American, both for personal reasons and also like I don't want to poison the well for every American after me.

My boss said, "No, I'm ordering you to do this."

I said, "Boss, they're going to be quite annoyed if I yell at them."

They're like, "Yeah, but they're gonna be annoyed at you and not us. Then we will explain that you're just the American who doesn't get things. But they'll do the thing that you yell at them to do because you're yelling at them about it. Then we'll smooth things out with them later at the bar over drinks. And then everybody wins."

I'm like, "I don't know that I necessarily win here, boss, given that I'm the one doing the uncomfortable thing."

But you know, it was taking one for the team, protecting the wa by breaking it over one person. This is a thing in Japan to protect the social harmony.

Jim: Yes.

Patrick: But taking one for the team. Anyhow. So, Jim, it was great to have the opportunity to chat with you today. Where can people find you on the internet?

Jim: Well, our company SignTime is at www.signtime.com. And then I'm on LinkedIn and Facebook and Twitter. And if you're a Japanese VC, please feel free to DM me on Facebook.

Patrick: All right. I will drop links to those in the show notes. Thanks very much. And for the rest of you, thanks for listening and see you next week on Complex Systems.

Jim: Thanks.