SoftBank in a Hard World
Notes on "Gambling Man: The Secret Story of the World's Greatest Disruptor, Masayoshi Son," by Lionel Barber
There are many moments in Lionel Barber’s first-rate biography of SoftBank founder Masayoshi Son where one wants to say, I can’t help but like the guy. If one were to come up with a great adversary to the Gods of the Copybook Headings in the Kipling pantheon, it would be someone like Masa Son.
The thing the Japanese admire the American economy for is its dynamism. It’s common for Japanese companies to be structured in such a way that they provide lifelong employment, which has advantages. These days, the kind of stability that comes with that is something more Americans may admire themselves. But Masa Son is the exception, he is more American than the Americans.
Son is exceptional. The son of “the pachinko kingpin of Kyushu,” he’s a third-generation zainichi and, at several points anyway, undoubtedly the wealthiest. His own family is of fairly recent Korean extraction, but that part of Japan has had connections with Korea for hundreds of years, and it’s also near Japanese coal country, one of the places you could point to as being important to the industrial revolution in Japan.
Son is a man always between worlds; though he did face discrimination for his ethnic background in Japan, even at the early stages of his career he received support and advice from some of the more central institutions and players in the Japanese economy, including the founder of Uniqlo, and it’s hard to argue he didn’t eventually find the acceptance one gathers motivated him.
There are a lot of questions about SoftBank in general; it’s gone through many iterations, and many different sources of cash. Some of his deals have come under CFIUS scrutiny. After the early Alibaba investment, that company became the ballast of SoftBank, a huge and immensely valuable stake that kept it afloat even while laden with enormous amounts of debt. So it’s a Japanese company, but its most valuable asset, certainly before COVID, was Chinese. A lot of the lead investment people over the years have been Indian, and many had a past with Deutsche Bank, which is not exactly most savory banking institution. Son also backed Greensill in several ways that indicate a conflict of interest.
Barber is very fair to Masa Son, and the assessment he comes up with is mostly positive. But if we were to come up with a primarily negative assessment of SoftBank it would be that they’re oversized, which when combined with their spray-and-pray approach to investing, is not conducive to the careful development of economic relationships that are more necessary now, and will be more so in the coming years. The libertarian argument against cheap money has always been that it causes a misallocation of resources, and it would be hard to find a better example of that than SoftBank.
This may sound like an oddball comment, but there’s a way that SoftBank serves as a bit of a Japanese shit-test. The country has some of the best technologists and manufacturers in the world, but the investments they make in the U.S. tend to be fairly practical; whiskey, steel, cars, these sorts of things. One of Masa Son’s real coups going in the other direction was also unusual, bringing the iPhone to Japan, and cracking the very tightly contested consumer electronics market there for Steve Jobs. In the main, Japanese economic relationships with the West are developed in a slow and deliberate way, which is not how Son does it.
Barber’s biography is a fine-grained look at many of the deals for which Son is known, with new details about almost every one. It’s an extraordinary work of reportage, and an extraordinary look at the man, whom, Barber writes, is seen by the world’s most powerful people to have, “a seductive blend of humility and hubris, common sense and insane risk-taking, for whom national borders, technological frontiers, and ethical boundaries are there to be crossed.”
Masa Son is famous for investing in companies sight-unseen, with big bets that one sometimes strains to see a relationship to their actual value. There is a certain anxiousness to the way Son conducts business whose causes it would be inappropriate to speculate about. Maybe a decade ago it was common to refer to disruption or disruptors in a positive sense. It’s an interesting choice of noun for people who shepherd vast amounts of capital. Does it compare favorably to ‘visionary,’ another boosterish word sometimes applied to these people? And what might the differences be? Is a disruptor a visionary who failed to realize his vision?
Son is a visionary in the hallucinatory sense. He is a man always in search of something to revolutionize, which is dangerous in anything other than business and sometimes in that, too. His vision, such as it is, is often hard to pin down, and it is probably unworkable in a time in which globalization is in retreat. He is not a technologist, though he is interested in technology. His big early purchases in the U.S.—Ziff and Comdex, a technology trade publisher and a trade show—suggest he is more of a technology booster. One of his more boosterish bets was his enormous investment in WeWork, later in his career, which is really just a real estate company which the suckers among us were persuaded to see as a tech company, or something even more ambitious.
There are a few reasons why you might overpay for an asset, and Son does it all the time. It might be because you need it to execute some bigger strategy, or there might be some other underlying reason that has nothing to do with the asset itself at all, like a means to disguise a payout.
In the early stages Son really did make a number of inspired bets, and in his mid career a few very smart ones like ARM, the British chip designer, but in SoftBank’s later incarnations one suspects that his main motivation is simply to show the game isn’t over. The ideas he has come up with more recently are either bad or unrealistic. At one point his plan was to take five percent stakes in all the FAANG companies, to what end who can say, basically trying to transform one of the largest tech investors into something more institutional. And then there’s the Vision Funds, which are enormous and run mostly on Gulf State cash, but Son seems to be at a loss for where to actually put the money. Then in one of the final moments of the book, he’s going with the same strategy as the Silicon Valley guys, with capital-intensive AI development, a model the CCP just put a bullet in.
I think the verdict on Masa Son is that he’s a cautionary tale of a guy who wants to change the world in an egoistic way, though naturally always with the pretense he is making it a better place. Barber writes about how he never had a good feel for where politicians were at. That’s a skill that will be more important going forward, not less. He did really well in the consumer tech explosion over the last 30 years, and anticipated both where the market was going and had a good plan for how to take advantage of it, but there’s only so much efficiency a consumer actually needs. It seems to me that this whole thing is sort of coming to an end.