Back to school, 2024 edition

Plus, a visit to Awaji Island; and, a 10-year anniversary

Friends - belatedly, a warm welcome to 2024! In time-honored fashion, I commemorated New Year’s Day with a hike.

In the (expanded) Bay Area, CES and Health Care Week (centered around the JPMorgan Healthcare Conference, complete with Berkeley Bio delegation; h/t Darren Cooke) have come and gone. I enjoyed the Circuit podcast (with

Digits to Dollars

and Ben Bajarin) readout of what CES meant - and maybe didn’t mean - for semis.

At Berkeley, a new spring term have begun. 2024 marks my tenth (!) year since coming back to Haas to teach. What started as a complementary exploration, done while managing a consulting practice, has become my primary occupation. What has not changed - the surge of excitement on the first day of class! Thursday afternoon, before Class 1 of Strategy for the Networked Economy (S4NE), v10 (an evening class), I was ready to jump out of my shoes.

For the first time, S4NE is offered through the Flex, live online cohort of the EWMBA program at Haas. Haas launched this in fall 2021, as we came out of the pandemic, in a great example of a concept we talk about in S4NE - antifragility!

Readers may recognize the term - antifragile is a neologism coined by the statistician/author Nassim Nicholas Taleb (perhaps most famous for The Black Swan) and one I pair with discussion on cyber readiness in S4NE. Whereas being resilient implies weathering a stressor (or, in the networking sense, traffic finding a new path), and being robust implies some level of resistance to interferors, antifragility connotes using the stressor to become stronger. Startup failure lessons, if captured, are a great example of this, and Taleb himself uses serial entrepreneurs as an example. At the industry level, black box recorders on airplanes are another. I am glad Haas is embracing the opportunities that digital delivery presents.

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A warm welcome to new readers. By way of introduction, in this newsletter I generally cover themes related to my instruction:

• Strategy for the Networked Economy

• Clusters: Locations, Ecosystems and Opportunity

• Business in Japan

• Competitive Strategy

With the occasional foray off-topic thrown in. Thanks for being here! Special thanks to

The Chip Letter

for the recommendation.

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While many were at CES ooh’ing and ah’ing over the latest in consumer technology (and catching the crud, by the sounds of it), I went to Japan over the second week of January. (While there, and therefore closer in time zone, it was great to connect with

Jon Y

, who has some fascinating content in the Asianometry pipeline.)

For the first time since 2016, I visited Osaka. A familiar face greeted me on the Haruka train in from Kansai Airport.

It was great to catch up with my former Japan Society board colleague Norio Nakazawa, former head of JETRO San Francisco. Thanks to Norio for braving a cold night on a holiday in Japan.

Osaka was prelude to a long-awaited visit to Awaji Island, connected by highway to Kobe on the main island of Honshu. Awaji Island has about 120,000 people and is something of a gateway between Honshu and the island of Shikoku. It is also the new home to Pasona (TSE:2168), a staff placement and training firm. In September 2020, during the thick of the pandemic, Pasona announced it would move 1200 people, roughly equivalent to 1% of the island’s population, to the island, including both executive and back office functions.

In Clusters class we talk about seed companies (e.g. Fairchild, Linkabit) and anchor companies (e.g. Intel, Qualcomm) - here was a potential anchor company that by dint of its business (staffing and training) could help create new seeds, moving part of its staff out of the super-city (Tokyo) to an island! Suffice it to say, I had wanted to visit for a while.

As a company, the bulk of Pasona’s business is in its staffing business, which contributes over 80% of revenue. Revenue by segment is shown below.

Intuitively then, Pasona would likely want to be near its customers, whether in Tokyo or in Osaka or elsewhere. My gracious host, Shou Fukuda, had clearly fielded this question before, and noted the company maintains significant staff and physical presence in Tokyo and elsewhere. (And indeed, one of our meetings was held in central Osaka, when I was fresh off the plane.)

Pasona’s Awaji activities are under Regional Revitalization Solutions (地方創生). The Regional Revitalization segment is still in an investment phase. At present, this business mainly comprises activities designed to bring people to the island, such as those shown below. This capture is from Pasona’s most recent quarterly earnings.

Here, Shou presents on three forms of advantage in moving HQ functions to Awaji:

• 天の利：I’ll translate this as “natural advantage”, as in the blessings of nature.

• 地の利：translates to “regional advantage”, in the Saxenian sense. Here, Pasona calls out 4 regional airports and proximity to the Osaka, Kobe, and Shikoku markets.

• 時の利：timing advantage: here, Pasona cites the upcoming Expo 2025 in Osaka and “IR”, short for integrated resorts, which refers to the planned casino development in Osaka Bay on Yumeshima. MGM Grand received the first concession, and in September 2023 closed a JV with Orix.

I could see the generalized argument for being “long” Kansai (Osaka / Kobe / Kyoto area), in that a lot of infrastructure investment is going into the area, and that investment will both need and facilitate commercial uses post-Expo. These are general area-wide arguments, and address both the Geographic Location and Infrastructure and Complementary Industries components of our usual Clustering framework. While Pasona has moved to an island, it’s an island close to a hub airport and major metropolitan areas. Some staff do choose to commute from the “mainland”, i.e,. Kobe.

It was noteworthy that Pasona has invested in its own staff experience, both in terms of housing, and in the form of a school for children of staff making the move from Tokyo. This seems essential to recruit and keep working parents used to having a variety of options to choose from.

In sectors such as semiconductors, the ratio of direct to indirect employment impact is generally well established. Intel employs 20,000 in the state of Oregon, and indirectly impacts another 100,000 per its own estimates. Thus, if it employs 3000 in Columbus, Ohio, it should ultimately indirectly employ another 15,000 or so. What is the multiplier impact for a staffing firm on its local community?

Another comparable that came to mind post-visit, is that of Disney developing Anaheim, and later its holdings in Orlando. In Strategy class, I pair the Disney: The Entertainment King case, about Disney under Michael Eisner, with Competing on Resources by Collis and Montgomery. That case describes Disney’s transition from being a theme park company that occasionally made movies, to the multi-touchpoint entertainment giant it is today, by augmenting its resources both organically (training, investing in new skills e.g. animation) and inorganically (e.g. acquiring ABC/Cap Cities).

I am hopeful that by fall 2024 - i.e., in time for Clusters class — MIT AgeLab’s upcoming book on Longevity Hubs (full title: Longevity Hubs of Innovation: How Regions Are Racing To Make Living Longer, Better) with my chapter on Longevity Hubs in Japan will be out! Awaji is  featured in the Japan chapter, along with Okinawa, Karuizawa, and Kamakura.

Stephen Johnston

and I discussed that upcoming book here.

Big thanks to Kenji Furushiro at Pasona North America for helping make the visit to Awaji happen, and for the Pasona team for their hospitality.

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Reads and listens:

• The Chip Letter
  has been on fire this month! All posts have been strong. I particularly enjoyed this on the history of the microcontroller.

  Tiny Computers from Texas

• WSJ Future of Everything….on hearing aids: The WSJ Future of Everything does a good job getting excited about innovation…without being too breathless or seeming like they work in marketing. It’s a fine line. This November installment - yep, I’m catching up - on advances in hearing aids resonated. 17 years into our “black slab economy” (i.e., smartphones), the theme of disaggregating UI has been on my mind. Bluetooth earbuds have educated people that wearing #eartech is, well, socially ok - and that opens a lot of doors for applications beyond wireless headsets. It was particularly intriguing to hear about beamforming earbuds, which implies product complex enough to have multiple mics and be able to steer parabolas in a desired direction….which just sounds really cool.

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It’s still raining in NorCal, so I’ll close with some more rainy day jazz, with a bit of a Gen X twist - Brad Mehldau, playing a solo performance of his version of the Beatles’ Blackbird.

Onward and upward!

Jon