Hasta La Gadget!

Nothing is sacred from the Sakamoto boom. When you want to promote your product or business in Japan this year all you needed to do, apparently, was turn to Ryoma Sakamoto and hey presto.

Even controversial “new religion” Happy Science (幸福の科学) is exploiting the helpless samurai. Outside their office in Yurakucho a statue of Sakamoto (with a face perhaps slightly touched up to resemble Happy Science founder Ryuho Okawa) in his trademark pose stands welcoming visitors — or perhaps he is guarding the doors to stop people going in!

Happy Science was founded in the Eighties and now has numerous elaborately designed temples around Japan. It preaches a message of, well, happiness, which might sound a bit insubstantial but in fact the founder now has political ambitions.

With the Yurakucho office as its headquarters, Happy Science’s Happiness Realization Party campaign vans are among the most vocal and visible, and their candidates have stood in dozens of elections since last year. (None have won so far.)

Just along from the Happy Science office are many of those prefectural goods shops, which tend to focus on famous local foods. The Kochi one also has a statue of Sakamoto but they can at least claim to be his home province. We could help notice he was got up in Christmas garb for the forthcoming festivities.

As a man who helped revolutionize Japan and its embracing of the west, we reckon he would have quite liked the Santa beard!

The ultimate sign of celebrity in 2010? When your Twitter mistake causes a minor pop cultural sensation. About halfway through the summer, three-quarters term Alaskan governor Sarah Palin made a linguistic mistake on the micro-blogging site–something politicians have been doing since well before Twitter became something more than a nonsense word itself.

In July, Palin tweeted the following,

Ground Zero Mosque supporters: doesn’t it stab you in the heart, as it does ours throughout the heartland? Peaceful Muslims, pls refudiate.

Critics quickly pounced on the made up word “refudiate,” which it seemed was something of an amalgamation of “refute” and “repudiate.” Palin pulled the word, replacing it with the former–which, honestly, didn’t make all that much sense in context either.

Supporters, on the other hand, embraced the made up word. Vindication, it seems, is theirs. The Oxford English Dictionary has deemed “refudiate” its “Word of the Year.” The Twitter-friendly word joined such terms as retweet, Webisode, crowdsourcing, gleek, and nom nom.

That’s what you get for misunderestimating the Shakespeare of our time.

Last year’s Word of the Year went to another tech-friendly term: unfriend.

To say that it’s a contentious political season is a bit of an understatement. As we inch closer to the midterms, tempers are running high, and the slightest thing can set a candidate off. Take last night’s Florida gubernatorial debate on CNN between Democrat Alex Sink and Republican Rick Scott.

During a commercial break Sink’s aide shows her something on a smartphone–a Motorola Droid. In the video, you can see Scott becoming visible upset at the sight, making some barely audible comments.

When the debate returns from commercial, CNN’s John King briefly goes over the rules for time and then throws Scott a question about the state’s 11 percent unemployment. Scott answers with the following,

First Alex, you say you always follow the rules,” he said. “The rule was no one was supposed to give us messages during the break, and your campaign did with an iPad or an iPod.

The fact that he got the device wrong should have no impact on your final vote. Right?

I’ve been fighting the urge to write a giant missive about the Japanese economy for a long time, but it’s finally come to a head. There are many reasons I don’t write pieces like this:

1) They take a long time, and I’m a busy guy running a company
2) I can’t bother responding to critics (see #1)
3) Internal CScout disagreements about economics
4) Bright and cheery is good for business!
5) I don’t want to have a heart attack

It’s been well-documented that the Old Grey Lady is…well…old, grey, and behind the times, and shows no sign of being willing to retire to the nursing home anytime soon. The NYT is constantly on the case, discovering things in Japan that everyone has known about for years: QR Codes, internet cafes, and even complete bullshit like Japanese people dressing like vending machines.

I’ve never met Martin Fackler (though I have had the pleasure of drunkenly arguing economics with NYT reporter (and LSE grad) Hiroko Tabuchi) and I’m sure he’s very intelligent and amiable. However, his latest piece on Japan entitled Japan Goes from Dynamic to Disheartened is a perfect representation of everything that’s wrong with reporting on Japan, economics, and general consumer trends all wrapped into one. More annoying is getting the story emailed to me by twenty different people just to show how fucked Japan is and, thus, how screwed I am.

It is undeniable that Japanese consumer culture has changed quite a bit since the good old days of bubble and boom, but I would argue that it’s a GOOD thing this is finally happening. Japan might just be on the way to the correction it’s needed for twenty years.

Being more interested in the philosophies underpinning political and economic thought (rather than “politics” and “economics”), my most difficult goal is in defining terms. After all, without defining our terms it’s useless to even begin such discussions without them devolving into nonsensical Ham Sandwich Fallacy (of four terms) squabbles:

Major premise: Nothing is better than eternal happiness.
Minor premise: A ham sandwich is better than nothing.
Conclusion: A ham sandwich is better than eternal happiness.

This may be a simplified example, but without defining the meaning of “nothing”, we can argue all day using the same vocabulary, but never truly understanding one another.

In the case of discussing Japan’s economic situation, we first need to define the meanings of “inflation” and “deflation”. Contrary to what you may have heard, neither term means rising or falling prices, but rather an expansion or contraction of the monetary supply which may or may not lead to price fluctuations. After all, computers and mobile phones have continually gotten cheaper over the last decade, but one would hardly attribute that to deflation. Lower prices, such as those Japan is experiencing, can be a consequence of deflation, but not always!

Back in the days when people carried gold coins for money, inflation was achieved through literal debasement of the currency. People would shake the coins in a bag, or shave off bits and pieces around the edges, in order to get tiny pieces of gold to turn into new coins. Thus, the ridged edges of coins were created to combat this (these days it’s just ornamental). This meant that the value of each coin became less, and prices would go up as a result. These days, in the same manner, central banks around the world create new money, but instead of shaving the coins they just add a couple of decimal points to a spreadsheet somewhere.

With all of the complaining about deflation and prices that are “too low”, I have to wonder, “Who are they too low for?”. God forbid that the rest of us living with budgets and expenses get to spend a little less on our beef bowls.

Yes, Japanese consumers are saving more, but they’ve always been good savers. In fact, it’s a testament to the will of the Japanese people that they still save at all since they haven’t earned anything in interest for years! Rather than bemoaning the newfound frugality of Japanese youth, we should be celebrating it. Savings are a GOOD thing, just as having a currency that’s worth something is ultimately beneficial to an economy. An economy, I might add, that has to import nearly 50% of its food. Why on earth would we want a devalued yen? Sure, Sony can sell more televisions and cars to Americans who can’t afford them anyway, but the rest of us have to eat. Falling prices allow for falling wages as well, thus keeping companies profitable and the rest of the economy employed.

This new young generation of Japanese savers isn’t hoarding their money for the fun of it. They are scared for the future, and rightfully so. The Japanese economy has quickly shifted from an all-out consumer society where people would pay anything for any kind of crap, to a more sophisticated society of consumers who are careful with their money. The time preferences of Japanese consumers has become longer, but that doesn’t mean that they won’t be ultimately spending it. Savings are nothing but delayed consumption, and right now we’re in a rebuilding phase. The more the government tries to debase the yen the more we need to save to protect ourselves.

I’m just going to pull out some excerpts from Fackler’s piece that really caught my eye. It’s full of gems!

“Japan used to be so flashy and upbeat, but now everyone must live in a dark and subdued way,” said Masato, 49, who asked that his full name not be used because he still cannot repay the $110,000 that he owes on the mortgage.

I was thinking the same thing last weekend. Friday night I was having so much fun! Lots of drinking, partying, and craziness, but on Saturday I could barely move. Life is unfair!

Perhaps I’m missing something, but this passage from Fackler’s piece about “microhouses” makes no sense to me at all:

The downsizing of Japan’s ambitions can be seen on the streets of Tokyo, where concrete “microhouses” have become popular among younger Japanese who cannot afford even the famously cramped housing of their parents, or lack the job security to take out a traditional multidecade loan.

These matchbox-size homes stand on plots of land barely large enough to park a sport utility vehicle, yet have three stories of closet-size bedrooms, suitcase-size closets and a tiny kitchen that properly belongs on a submarine.

“This is how to own a house even when you are uneasy about the future,” said Kimiyo Kondo, general manager at Zaus, a Tokyo-based company that builds microhouses.

Is this opposed to the sprawling mansions that Japanese people used to build in Tokyo? Hell, Fackler doesn’t even say which part of “Tokyo” he’s referring to.

But, wait…what happened to deflation? Aren’t housing prices going down as well?

Anyone who has ever looked at real estate in Japan knows that it’s already a luxury to own land in Tokyo to begin with, let alone build a house on it, and the land itself is worth many times more than the structure. Besides, people worried about the future typically prefer to rent.

The rest of the piece is a tale of woe: Young Japanese who find it “foolish” to borrow and spend (umm…they’re right?), and the obligatory mention of suicide. Even this one I don’t get:

There are vending machines that sell canned drinks for 10 yen, or 12 cents; restaurants with 50-yen beer; apartments with the first month’s rent of just 100 yen, about $1.22. Even marriage ceremonies are on sale, with discount wedding halls offering weddings for $600 — less than a tenth of what ceremonies typically cost here just a decade ago.

Fackler goes on with his hard-hitting examples of Japanese retail down in the dumps:

On Senbayashi, an Osaka shopping street, merchants recently held a 100-yen day, offering much of their merchandise for that price. Even then, they said, the results were disappointing.

“It’s like Japanese have even lost the desire to look good,” said Akiko Oka, 63, who works part time in a small apparel shop, a job she has held since her own clothing store went bankrupt in 2002.

So says the 63-year-old woman working in a clothing shop in a neighborhood full of shops for old people. I’m pretty sure it’s a universal truth that older people don’t buy a whole lot of new clothes. Instead of Senbayashi, try hitting up some young shop girls in Shinsaibashi and then we can talk. I’m not saying retail isn’t tough right now, but that’s a pretty bad example.

However, for many Japanese, it may be too late. Japan has already created an entire generation of young people who say they have given up on believing that they can ever enjoy the job stability or rising living standards that were once considered a birthright here.

Good! For fuck’s sake, who could possibly think that guaranteed lifetime employment makes any sense??

Deflation has also affected businesspeople by forcing them to invent new ways to survive in an economy where prices and profits only go down, not up.

It’s sloppy thinking to correlate falling prices with falling profits, and vice versa. I’m not saying that Japanese companies aren’t making less profits, but I’m also not going to jump ahead and blame it on the Phantom of Deflation. Profits, simply put, are the difference between the costs of production and the ultimate selling price of a good or service. In a deflationary environment where prices are dropping everywhere, it’s perfectly normal for companies to continue being profitable. In fact, it happens every day all around the world! If it’s really deflation, prices are dropping EVERYWHERE in the economy, including prices of labor and materials.

Yoshinori Kaiami was a real estate agent in Osaka, where, like the rest of Japan, land prices have been falling for most of the past 19 years. Mr. Kaiami said business was tough. There were few buyers in a market that was virtually guaranteed to produce losses, and few sellers, because most homeowners were saddled with loans that were worth more than their homes.
…
“If we only had inflation again, this sort of business would not be necessary,” said Mr. Kaiami, referring to the rising prices that are the opposite of deflation. “I feel like I’ve been waiting for 20 years for inflation to come back.”

If anyone loves inflation, it’s people in real estate. Once nominal prices and wages go rocketing up (but not REAL prices or wages), consumers are temporarily tricked into thinking they’re richer than they are. Remember that bubble back in the 80’s? That was a BAD thing.

Then, the scary, deflationary finale:

“Deflation destroys the risk-taking that capitalist economies need in order to grow,” said Shumpei Takemori, an economist at Keio University in Tokyo. “Creative destruction is replaced with what is just destructive destruction.”

No, no, and NO. Again, we need to define our terms. Is Takemori referring to “lower prices” when he uses the word deflation? Economies are perfectly capable of growth in an atmosphere of lower prices. It’s up to the entrepreneur to anticipate these changes and adjust accordingly. Miscalculations in deflation are far less harmful than miscalculations in an inflationary environment. In the case of the latter, money is misallocated and simply wasted.

Japan definitely has a lot of problems, but “deflation” sure isn’t one of them. Now, if you’ll excuse me, I’m going to go dress as a 10-yen vending machine and lay low with my Japanese bretheren ’til this recession blows over.

Still trying to get up to speed on the whole net neutrality situation? Check out the intro above for a recap of the basics — it ran during the last Engadget Show as part of our interview with Columbia law professor and noted net neutrality advocate Tim Wu. Then, head after the break for both cuts of the interview — the edited piece that aired with the show and the uncut half-hour version. If you’ve got the time we highly recommend the full-flavor edition — it’s seriously interesting stuff, and Tim’s not afraid to speak his mind on one of the most important tech issues of our time.

Update: And here’s a downloadable copy, for those who were asking.

Continue reading Engadget explains net neutrality — and our full interview with Professor Tim Wu!

Engadget explains net neutrality — and our full interview with Professor Tim Wu! originally appeared on Engadget on Fri, 24 Sep 2010 18:25:00 EDT. Please see our terms for use of feeds.

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