60 Business The EconomistNovember 7th 2020
I
n the 1990 s, when a youthful Son Masayoshi, a Japanese entre-
preneur, was pursuing acquisitions in his home country, he
sought advice from a banker eight years his junior called Mikitani
Hiroshi. They shared a lot in common: both had studied in Ameri-
ca (Mr Son at the University of California, Berkeley, Mr Mikitani at
Harvard Business School); they had a common interest in the in-
ternet; and they were both baseball mad.
In the decades since, both men have blazed past a stifling cor-
porate hierarchy to become two of Japan’s leading tech billion-
aires. Mr Mikitani, who says in an interview that he did not even
know the word “entrepreneur” when he enrolled at Harvard, pio-
neered e-commerce in Japan via Rakuten, which is now a sprawl-
ing tech conglomerate worth $14bn. Mr Son’s SoftBank, after spec-
tacular investments in early internet stocks, muscled into Japan’s
telecoms industry. They have both invested heavily in Silicon Val-
ley. They also each own baseball teams named after birds of prey;
the SoftBank Hawks and the Rakuten Golden Eagles.
Now it is rivalry, not a shared past, that better defines their rela-
tionship. In Japan SoftBank and Rakuten are elbowing their way
onto each other’s turf. Their respective investments overseas in
Uber and Lyft, two ride-hailing firms, put them at odds. Even the
Hawks and the Eagles are bitter enemies. Until recently Masa, as
Mr Son is known, appeared to have the advantage. He has bigger
money bags than Mr Mikitani, and a higher profile thanks to the
audacity of his $100bn Vision Fund, which backed blitzscaling
tech startups globally. Yet Mickey, as Mr Mikitani is known, has
made a quieter bet on mobile communications that is almost as
bold—though in a different way. If it pays off, it could start a revo-
lution not just in Japan, but across the world, too.
Discussing it by Zoom from his home in Tokyo, a hoodie-wear-
ing Mr Mikitani is keen to emphasise both the audacity of the bet
and the difficulty of bringing it to fruition. Since 2018 he has com-
mitted $8bn to build a fourth- and fifth-generation (5g) mobile
network from scratch in Japan, a country where a triumvirate of in-
dustry heavyweights, including SoftBank, dominate. Instead of
replicating the huge investments they have made in hardware, he
used low-cost base stations, cloud-based architecture and soft-
ware to create what Rakuten calls the world’s first fully commer-cial virtualised network, adaptable for a new modular technology
called Openran. In essence, what Mr Mikitani has sought to show
is that an internet firm like his, with a geeky software-engineering
culture, can provide a high-quality, low-cost alternative to the
hardware-obsessed telecoms giants, using Openranat the core of
its 5garchitecture. It’s a work in progress but it has been blessed
with geopolitical tailwinds. Concerns about the influence of the
Chinese government over Huawei, the world’s biggest 5gequip-
ment supplier, have caused telephone companies, as well as gov-
ernments, to embark on a frantic hunt for alternatives. Openranis
attracting a lot of attention. All eyes are on Rakuten to see whether
its network functions.
Mr Mikitani and his lieutenants are upbeat. Though he has
faced naysayers all the way—“Good luck, Mickey, you’re going to
fail,” he says his ceo friends all told him—the company has
brought forward to 2021 the year when it expects to have coverage
over almost all of Japan. It had been 2026. Low costs have lured
more than 1m customers, even though coverage remains patchy.
Globally, Tareq Amin, Rakuten’s mobile-technology guru, has be-
come one of the most prominent Openranevangelists. In Septem-
ber he struck a deal with Madrid-based Telefónica, a big telecoms
group, to develop the technology further. Mr Mikitani says one of
the blessings of the Openranmodel is that, rather than replacing
antiquated kit with each new generation of mobile technology, it
can be updated with software. He likens it to Tesla’s ability to use
software to upgrade its electric cars.
For all that, Mr Son is hovering menacingly in the background.
Well before Mr Mikitani started to encroach on his telecoms terri-
tory, he used SoftBank’s big stake in Yahoo Japan to challenge Ra-
kuten in e-commerce. Last year SoftBank upped the stakes by or-
chestrating a merger between Yahoo Japan (now known as z
Holdings) and Line, a messaging app, to create Japan’s largest on-
line services company. Kirk Boodry of Redex Research, an Asian
equity-research firm, says Rakuten’s e-commerce operating mar-
gins have fallen by half recently as it spends money to defend itself
against both Yahoo and Amazon in e-commerce. That may eventu-
ally constrain Rakuten’s telecoms ambitions. As he puts it: “They
don’t have enough money to be as disruptive as they’d like to be.”
Mr Mikitani is gracious about his former client. He credits Mr
Son with having a great eye for investments and tactfully does not
mention the Vision Fund’s debacle with WeWork, an office-rental
firm that faced near-collapse last year. He insists SoftBank and Ya-
hoo “are my rivals, not my enemies”. He goes on to express the iro-
ny that whereas once he was Mr Son’s investment banker, now, of
the two, he is more of the operator.Home RAN?
That raises the question of both men’s legacy. Mr Son may have
broken the mould for investing in snazzy startups in a way that put
him on the cover of global magazines (including this one). Al-
though he has a strong claim to be one of Japan’s great entrepre-
neurs he has never pioneered a new technology. Mr Mikitani has
never achieved such global stature. He is arguably more famous
outside Japan for making English the lingua francain his company
than for Rakuten itself. Yet if his 5gdreams come true, Mr Mikitani
will have helped engineer a solution not only to a global techno-
logical problem but a pressing geopolitical one, too. As far as the
tech world is concerned, that would be a more far-reaching
achievement. And if Masa resents that, he can always get his talons
out on the baseball field. 7Schumpeter Mickey v Masa
Which Japanese tech mogul will ultimately be the heavier hitter?