A hypothesis I had on why some countries have more conglomerates than US is that access to capital and funds are much harder in those countries in comparison to US. When access to capital is comparatively more limited, more innovations falls to the party that has comparatively easier access to capital (conglomerates) and therefore reinforcing their position as conglomerate.

The core of the article is buried 60% down:

> you have a firm that has lots of lifetime employees who can’t be fired, and whose skills are tailored to what your firm needs rather than to a particular occupational category transferable to any employer

> the system only makes sense if the company is also insulated from outside pressure

> the J-firm [Japan-style company], run by its employees and largely indifferent to the interests of shareholders, exists simply to continue existing

> And that basic impulse toward survival is why Japanese companies are so insistent on diversification. If you’ve made a commitment to keep people employed for life, then you need to create jobs for them if their current jobs stop making sense

> If you’re not very worried about profitability, and have lots of well-trained generalist employees, then it makes perfect sense to reinvest your company’s earnings by expanding into new industries

It’s always fascinating to see how Westerners idealize Japan on platforms like HN. It makes me wonder(i'm korean): how would a Westerner react if they saw me romanticizing the Mondragon cooperatives in Spain? They’d probably find it strange and out of touch with reality.

This essay on Japan's corporate diversification and physical tacit knowledge is an interesting read. However, as an East Asian, my assessment is that this system is heavily driven by Japan's unique, subtle classism. It's a highly collectivist society with strict age-based milestones and immense pressure to secure traditional employment. In Japan, your corporate affiliation often dictates your social standing.

The author paints the lack of shareholder pressure as the secret behind their successful diversification. While true for a few, the flip side is that it created a massive 'zombie company' problem—a heavily discussed issue in Korea and Japan that the West seems largely blind to.

Also, the idea of a 'horizontal culture' in Japan is a myth, especially in software. Even a glance at the Japanese web(5ch, onJ etc...) reveals a deeply entrenched vertical hierarchy. In my experience working with Japanese developers, their reliance on the legacy Waterfall model and an exhausting chain of approvals and reporting was far from horizontal. (Though I admit my sample size is small, it heavily contradicts the Western narrative).

I agree that this rigid system fosters the tacit knowledge needed for hardware and materials. Still, it proves that we all tend to project our fantasies onto cultures we don't fully understand. The divergence in perspectives on HN never fails to amuse me.

> the J-firm, run by its employees and largely indifferent to the interests of shareholders, exists simply to continue existing

I don't know if all companies should be run like Japanese companies, but there's something very heartwarming about this. Some companies exist for the purpose of employment, and that's okay. In fact it's admirable and makes me want to cheer.

I'm not sure I'd say a company that makes ceramic toilets also making a tool for memory chips... which is also ceramic is really 'different things'. They're clearly a ceramic company. Different tolerances, but similar expertise.

Now the paper company got into the hotel business seems a far better example. No idea how that happens.

> American firms, for example, tend to prioritize focus above all else: it would be bizarre for an American paper mill to also operate a concert hall and an airport catering business

I don't think Kimberly-Clark ever opetated a concert hall, but they did run an airline (Midwest Express) and K-C Aviation was an airplane servicing firm.

It's not that American companies don't operate in diverse businesses. Maybe they're less likely to, but it happens when the need arises... if there's no reasonable supplier for an important input, then you start one, or you ask an existing supplier if they can start a new line of business that's somewhat related.

The headline example is that Toto, known as a maker of ceramic toliets, is making a lot of money making specialty ceramics used in semiconductor manufacturing. Which yeah, ceramic manufacturer makes ceramics.

The US business market does like to spin-off divisions when they are successful and can be independent.

They’re an absolute disaster but I do love that the companies are actually investing in expanding into new things. Shareholders don’t want that, they want cold hard cash. Hence all the buybacks and PE firms destroying companies.

The one key thing that is completely incorrect is there is no horizontal hierarchy. Everyone has a boss, a boss that you must not suggest is wrong. I'm very fond of visiting Japan but having worked there, found it impossibly challenging to get anything done. When things work well it is great and the focused culture produces some great things, but when it fails it leads to catastrophe as no one is able to voice early in the process. Issues are only discovered once they are serious.

My experience in American organizations is that products and services need to not just make money, but make a lot of money. There is zero appetite for things that make a little bit of money relative to the cash cows of the company. You could say this is in part focus, but it is also based on internal accounting. Small product lines are saddled with total company overhead costs even if they do not apply to said product or service. Not good or bad, but it can lead to strange situations where you have a successful product that everyone complains doesn’t make any money.