SoftBank’s Masayoshi Son is the most powerful man in technology … with an obsession for AI, and 300 year plan for success
February 21, 2019
Masa Son, the founder of Japanese technology giant SoftBank, has become the most powerful person in Silicon Valley (and the richest man in Japan).
He hit the headlines recently with a series of global acquisitions including Cambridge chip designer ARM, virtual worlds startup Improbable and office space provider WeWork (which has now rebranded as the We company).
SoftBank 49% jump in profits is largely driven by a strong performance from SoftBank’s $100 billion Vision Fund, the largest tech fund in the world. It is based in London’s Mayfair, and backed by Saudi Arabia’s Sovereign Wealth Fund and companies like Apple.
Son’s strategy for the fund, which spans agriculture, transport, satellites, payments, computer chips, and ecommerce, is quite simple … AI.
He recently said that he is devoting “97% of my time and brain” to driving the future of AI.
The most powerful man in Silicon Valley
Welcome to Masa World … The Japanese billionaire bases himself just outside Palo Alto in a palatial estate just off the Sands Hill Road.
Startup founders fortunate enough to earn an audience with Son recall being led down a hallway lined with artwork to make the pitch of a lifetime. Some were ushered into a large conference room with an enormous table, spotless marble floors and ornate woodwork. Others found themselves in a small side room illuminated by chandeliers waiting for the meeting to begin. Eventually they met Son in an intimate sitting room where a two-seater couch faces a couple of chairs and a small coffee table.
Under Son’s guidance, the Japanese conglomerate, which he founded in 1981, has repeatedly shaken up entire industries with blockbuster acquisitions of companies like Sprint and prescient investments in startups like Alibaba.
Son capitalised on the rise of personal computing in the 1980s and bet so heavily on the dot-com boom of the 1990s that he is said to have at one point owned 25% of the Internet. He lost billions in the dot-com bust, but sinking $20 million into Alibaba in 2000 helped revive his fortune. Son is now worth about $15 billion — and, remarkably, maintains his tremendous appetite for risk and long-term thinking. At a time when most CEOs look no further ahead than the next quarter, Son forges ahead with a 300-year plan for his company.
At the heart of his plan lies the Vision Fund, a $93 billion pool of money that he intends to use to shape the future for centuries to come.
If that kind of timeline seems odd, well, Son is something of an eccentric. He often quotes Yoda, passionately prepares for the singularity, and has been known to make big bets on companies based upon what he once called his “sense of smell.” He plays an active role in SoftBank’s investment decisions, and Aron recalled being told that Son has “final say” on each Vision Fund deal.
Son has always had a penchant for making deals. As a student studying economics at UC-Berkeley forty years ago, he convinced Forrest Mozer, a professor who had invented a talking calculator for the blind, to join him in building a pocket translator.
“It surprised me,” Mozer told CNN recently. “Here’s this young, little kid coming into my office with a business plan that really made a lot of sense. I went home and told my wife that I just met this guy who is going to own Japan someday. It turned out I was more right than I thought.”
Son sold the device to Sharp in a deal he said netted him “close to $1 million” — an early win for the young entrepreneur. “It was clear if you spent an hour a day with him that his mind was all on business,” Mozer says.
Son returned to Japan after graduating from Berkeley in 1980 and founded SoftBank –the name is short for “bank of software”– in 1981. It focused on distributing software developed by other companies, before branching into computer trade shows and tech magazines. From the start, Son focused on “how he could help change society with technology,” said the longtime SoftBank employee.
By the mid-90s, it seemed clear that answering that question meant investing in online companies. In what could be seen as a precursor to its activities today, SoftBank pumped billions into hundreds of internet startups. Some, like Yahoo and Alibaba, paid off handsomely, helping overshadow losses from notable flops like Kozmo and Webvan. Son bet so heavily on online ventures that people took to calling him “Mr. Internet.”
Son’s net worth soared accordingly, only to collapse when the bubble burst. He is widely reported to have seen his paper wealth fall by $70 billion in 2000. “One year before that, my personal net worth was increasing $10 billion per week. For three days, I became richer than Bill Gates,” Son told Bloomberg TV last year. “Before I told anybody else, our stock started crashing… We almost went bankrupt. Somehow. I survived.”
Son started rebuilding immediately. “When something like that happens he doesn’t sit back and sulk and become inward looking,” the longtime SoftBank employee said. Son looked to new opportunities, including investing in broadband services in the early 2000s, acquiring Sprint for $20 billion in 2013 and buying multiple robotics companies in 2017 — among them Alphabet’s Boston Dynamics, which builds robots that run, jump and climb stairs. More than a decade after the Dot Com bubble burst, SoftBank reaped the financial rewards of the early Alibaba deal. When the Chinese e-commerce company went public in 2014, SoftBank’s $20 million investment was worth nearly $75 billion.
“He likes to joke he has had more failures than anyone else, but has learned from all of them,” says Chris Lane, an analyst with Bernstein who tracks SoftBank. “Most people still admire his track record, and the amazing success he has had despite these setbacks.”
300 year “number one” strategy
Son laid out his investment plan during the shareholder meeting in June 2018. He called it his “cluster of number one strategy”, meaning investing in unicorns that are, or could be, “the number one players in the market.”
Near the top of that list is We, the 8 year old business that provides coworking spaces in 80 cities worldwide. SoftBank invested $4.4 billion in them in 2017, despite the fact the company wasn’t actively seeking funding.
“This company,” he told shareholders, “is ready to become next Alibaba.” explaining the deal which is arguably the signature achievement of his career. But Son’s future as an investor may depend on proving, as he once put it, that his success with Alibaba “was not just one lucky hit.”
It’s been barely a year since the Vision Fund officially launched, but, SoftBank has scored some modest wins with the Vision Fund. It invested $2.5 billion in Flipkart, India’s leading online retailer, in 2017. That investment yielded a 60% return when Walmart bought the company less than a year later in a deal that reportedly pegged SoftBank’s stake at $4 billion. And then there’s Uber, which SoftBank first invested in when the ride-hailing company was valued at $48 billion. Uber is believed to be pursuing a secondary stock sale at a $62 billion valuation — with plans to go public next year.
Son is laying the foundation for a company, and a personal legacy, that endures for centuries.
“In 300 years’ time, we would like to become that company that makes the most contribution to human evolution — the company that has greatest impact on humanity,” he said during a recent shareholder meeting.
To achieve that grandiose goal, Son continues pursuing bold, almost brash, deals designed to keep SoftBank at the center of any trend he believes will fundamentally shape world. In the past, that meant telecoms and internet firms. Today it means big data, biotechnology, robotics, agriculture, ride-hailing and autonomous vehicles. Son likes to say he is preparing for the day when “all sectors of society and industry will be redefined” by super-intelligent machines.
In a conversation with Eric Gundersen, CEO of mapping startup Mapbox, the entrepreneur marveled at how Son was able to discuss ideas that were “multi-decades out” before going back to “specific customers” and industry details in the present. “You can’t have a visionary strategy unless you know the details,” Gundersen said. And he has an idea what Son’s visionary strategy is. “You’re seeing him own the infrastructure for the future.”
Son’s Success Pyramid
Son says he developed his decision-making framework when he was 26 years old. And the 30 years of success is the proof of the validity of it. He continues to revise and improve on it.
His framework is based on Lanchester’s Law (which “specifies the casualties a shooting force will inflict over a period of time, relative to those inflicted by the opposing force”), Sun Tzu’s Art of War, and his own thinking
The framework has five pyramid levels, from top to bottom: Ideology, Vision, Strategy, Leader’s Competence, Tactics. Each level has then five attributes:
- Ideology: Road, Sky, Terrain, Leader, Systematisation
- Vision: Summit, Information, Strategy, Seven, Battle
- Strategy: One, Wave, Offensive, Defensive, Group
- Leader’s Competence: Knowledge, Trust, Benevolence, Courage, Strictness
- Tactics: Wind, Woods, Fire, Mountain, Sea
Son says all his decisions can be based on those 25 attributes. Let’s consider each of them:
Road: Use information revolution to make people happy
This is Softbank’s universal mission. Everyone in the company has heard of it and is familiar with it. It was mentioned several times also during the 30 years plan talk.
Sky: The information Revolution
The sky is for timing. There are unique things to be alive under this sky at this particular time. He gives few example of some of the unique things happening during this time:
- Information Big Bang
No matter how great of a person you are, if you were born during the wrong timing, your opportunities are limited. The present people are extremely lucky to be living at this time and there is an unique and huge opportunity. Son reminds of the previous revolutions:
- Agricultural Revolution
- Industrial Revolution
- Information Revolution
The Information revolution is likely to be by far the biggest one. They got so lucky to be here during this timing. The opportunity is here and it should be taken advantage of.
Terrain: Terrain advantage: the epicenter of the Internet is Asia.
- In the past, the United States had 50% of the world’s internet,
- In 2015, Asia will have 50% of world’s internet users.
In the past, you had to be in the US and had to speak English, simply because the users were there. All big internet companies have historically come out of the US.
But the times have changed, the internet is shifting to Asia. Softbank Group has already been making a presence in Asia for a decade, notably by making investments in China such as Alibaba, Renren, etc…
With both this godsend opportunity from the Sky(Timing), and Terrain advantage, there is now no reason why Softbank should not take full advantage of the opportunity.
Leader: In order to succeed, you need to gather great leaders.
Of course the CEO must be a great leader, but he/she must also have at least 10 leaders below him/her. Nothing can be done alone, Softbank needs to accumulate great leaders. Softbank, by looking and picking great ventures to invest in Asia, is also gathering another great leader to join the Softbank family.
*Son actually uses the word General, but I’m translating it as Leader.
Systematisation: Systematisation is needed for continuous innovation
With willpower or luck, you may be able to get one win. But you cannot expect that to continue forever.
In order to keep winning and keep generating innovation, you need to create a system where it will make it happen again and again. Some examples of the systems Softbank has already implemented include:
- Accounting is divided by departments
- Introduction of new business models
Without the systematisation, it will impossible to execute at a scale.
Summit: The scenery you see when you have climbed to the top of the mountain
This is vision. The leader must be able to vision that scenery at the top of the mountain. He must be able to choose which mountain to climb. By choosing the correct mountain, you have already won 50% of life’s battle. You must have a great convinction that the mountain is correct be able to have a good idea of what the scenery on the top of that mountain looks like before you climb it. The leaders without a vision are the worst ones of all.
The vision does not come out in a day or two, you must think about it everyday. The vision for his 30 year plan took a whole 1 year of intensive thinking, and input from many many people.
“He did research on 40 businesses, and in the end, the pile of papers he had accumulated were 1 meter in hight”
When son graduated from university and came back to Japan, he wanted to start an enterprise. But it took him 1.5 years before he did it. During this period, he was researching and accumulating information. He had came up with 40 businesses. He would create a very thoughtful plan for one business, create the business plan, financials, competitor’s analysis, plan for 10 years, expected revenue etc. And he would think that his was the best business in the world. 2-3 weeks later, he would come up with another business, a business better than the one before. He would then redo the research and create the new plan. He repeated this 40 times, each time with a business better than the one before. And the last one of his business plans turned out into Softbank. He emphasizes the importance of information accumulations (research).
Strategy: Strategy is basically the implementation for the vision.
After the reasearch you may have 40 choices, strategy is when you decide to go with one of them and never look back. Strategy takes a vision into reality.
Seven: The on who fights a battle with 50% winning chance is a fool. The one who fights a battle with 90% winning chance has made his move too late.
The best generals only fight battles they know they are going to win. Son is regarded as an agressive risk-taker but in reality he is very careful. He never risks more than 30% of the business. Even if the business is to fail, he can close it down and the core business can still go on. You must be sure that your math is right.
The leader must close down, make a retreat when that must be done. It is one of the hardest things to do. This is even harder for the next generation of leadership because they will be critisized to be not as good as the previous generation. Needs extreme courage to close a business down, you’ll be criticised by all points of view. When a general has lost 30% of his troops, he should immedialy call for retreat, any other decision is foolish. Not understanding this concept will bring Softbank into ruins.
Fight: The are things that can be seen during the fight
Words are cheap. Execution is hard. There are always competitors. Things change during the fight. No matter how good is the vision, strategy or research, it is all useless if you don’t come down and do the actual execution. He mentions that all companies fought their way into their current position: Toyota, Honda, Ford, Rockefeller, Billl Gates, Steve Jobs. Vision = Execution. Execution = Vision. Why one must fight? In order to make the vision come true.
One: Must be by far the number one
Must own the specific market. You only make long-term profits if own the market and are far ahead of number two. If you are ahead by only a littile, it will probably me only a matter of time before you lose all profits. This is even more true in the technology space. Only if you are number one, you will be able to build a platform and define the de facto standard. Examples of platform that he mentions are: Microsoft’s Windows, Intel’s CPU, Google, Amazon, Yahoo.
The company must have a #1 culture. You must always strive to become number one. A culture that starts to become comfortable of not being number one is a very negative culture, it’s very bad. Son says he has always been number one since elementary school. He just can’t sleep if he is not number one.
Wave: Do not go against wave
Don’t go agains the wave. Get the direction right. Which OS should you choose? Of course the one who will become most used. Do not choose a niche.
An enterpreneurs who succeeds in a niche is not a successful entrepreneur. The successful entrepreneur succeeds in the mainstream market, that might as well be an othodox way. Softbank does not invest on niche markets, it invests on markets that will become big in the future. There is no meaning in winning a small market. If you choose to pursue a niche market because you are afraid to fight in the main market, then you are a loser.
- Development of new businesses
- etc. etc.
Must be good in multiple skills.
- Cash Flow
- Cost reductions
- Investment Relations
- Close down a business
- Media Reputation
- etc. etc.
Many ventures today die because of financing. Softbank has a commitment to become zero debt financing in 4 years.
Group: Synergy 5000 companies.
Softbank Group will be compromised of 5000 companies. It will be a multi-brand, multi-business model. This may not be necessary if you want to survive for the next 30 years, but it is must have to survive for the next 300 years. Companies like Microsoft and Intel are struggling today as they have only a single brand.
- Critical Thinking
- Global negotation
- Presentation skills
- Analytical Skills
- etc etc.
The leader must posses multiple skills, and have a good banance of skills. Must be very proficient in one skill so that he can make most out of the specialistz. The leader does not rely on specilists, he/she makes best use of them.
Trust: Mutual voluntary cooperation
Trust and be trusted. Partnerships. If you lose trust, others will not work with you.
Benevolence: For the happiness of people
Recall the vision. For the happiness of people.
Courage to fight against a big opponent. Courage to shut down a business.
Strict with self. Strict with others when necessary. If you truly believe in the vision and the good for everyone, you must become a demon at certain times.
Son skips the following are they are already well covered in Sun’s Art of War and other literature. however Sea is a original from Son.
The fight has ended only when everything has been engulfed and remains only complete silence and peace. As the sea.