 I think Tech Talks. Tech is our middle name. As a matter of fact, it's our double middle name. Twice as nice. Steve Zercher. Yes. I'm from the Shidler College and from the American Chamber of Commerce in Japan. What a guy. Thank you for coming back. That multiple hats. It's great to have you here. Thank you so much. It's a pleasure to be with you, her J. I wanted to explore with you, you know, the relationship in terms of entrepreneurial things between Hawaii and Japan. Okay. Let's begin with Japan. What's your connection there? How long you've been there? What are you doing there? Okay. Well, I originally went to Japan as an exchange student at Kansai Gaide. That was in the late 70s. So that was my introduction to the country and I fell in love with it at that time. I went back to graduate from San Francisco State University in economics and then through some connections ended up working in the software world back in the mid-1980s. That was my introduction in the pack. And I always had a dream to be able to mix my love of Japan with my love of the software world after I discovered that. And lo and behold, after I got my MBA at Shidler, a friend of mine at Hewlett-Packard says we had the perfect job for you. It was a project manager job or tech search and retrieval. So, you know, pre-Google and I was able to get into Hewlett-Packard I didn't know there was a world pre-Google. It's hard to imagine, isn't it? It's like Stone Age pre-Google, right? I certainly understand that. I don't think I can get through the day without Google. But anyway, Hewlett-Packard hired me and I was able through another software group to get a job as a business development person in Japan. So, I represented Hewlett-Packard software industry, software business in Japan. I did that for about four or five years. It was very, very successful. Speak Japanese? I do. I'm not fluent, but that was helpful. Actually, most of my business dealings, I was dealing with most of the major OEMs like Itachi and Toshiba and the people who are horn facing or always English speakers. So, I used English. That was one of the few advantages that I had because I had many disadvantages trying to understand Japanese business culture. But I was able to land a deal with Itachi, which was the IBM of Japan. And after that, I did several OEM agreements. So, I built up this reserve of experience of working with Japanese OEMs, selling them Hewlett-Packard software. And that launched me into a regional development job, vice president of Asia for various other companies. I ended up leaving Hewlett-Packard about the Carly Fiorina time if that rings a bell with you. Some stories about her, maybe I shouldn't share that on the open internet here, but she was an interesting character. Special person. Yeah, she was a special person. And then... You were named for president. Yeah, she did. Yeah, she did. And then after that, I decided to go back to school. I got a PhD from Case Western Reserve University in management. And about eight years or so ago, I began teaching at the same university where I was an exchange student many, many years prior. So, I'm a professor of management at Kansai Gaida University, which is in Osaka, Japan. And one of the things I do is I teach entrepreneurship. So, I do that actually in Japan, mostly with foreign students and some Japanese students mixed in. And then here, this summer, I'm working at Schuyler and I teach entrepreneurship as well. So, I see entrepreneurship, at least within the classroom setting, in Japan. In the winter of Osaka in the summer? Well, full-time in Kansai Gaida is where my normal job is. And then I have a summer break, so I come to Hawaii and teach here. Cool. Sorry, that's such a long answer. But the other part of it is that... I teach in English. I teach in English, yeah. But I've also got involved in venture capital in Japan through various investment funds and also an angel investor in Japan and also the United States. My most recent investment in Japan is a brewery. Really? Yeah, a beer startup. Yeah, no, beer. So, it's craft brewery, craft beer, artesian beer. It's a small one in Lake Iwako, which is in Kyoto. That's my latest investment. I think Alan, who you met before, thinks I'm crazy to invest in that one. But it's a fun one. So, I have an experience of investing in Japanese companies. Not necessarily tech. Yeah, I go outside of tech. I mean, that's my forte, obviously, because of my business experience. But, you know, if I find a good team, if I find an interesting opportunity, I'm willing to invest in other opportunities in Japan and the United States as well. So, anyway, a long winter dance to serve for you there. I have this broad experience of direct business experience and then teaching about it and then more recently as an investor. So, I was asking you before the show, and I'm so interested in this. Yes. Is, you know, I wouldn't say that the American business culture invented entrepreneurship is because that's so everywhere in the world. It's a French word. So, they came up with the word. Yeah. But we certainly have refined it in recent years anyway, especially around tech, especially in California, you know, in sort of a partnership with New York. The two coasts get together and create this entrepreneurial environment and then it all goes to IPO. And after that, you know, it's history. But it's different in Japan, it's different. And I like you to help me understand the differences between, say, what goes on in Silicon Valley with all these entrepreneurial experiences and venture capital experiences and what goes on in Japan. Yeah, that's something, obviously, I thought about a great deal through the various stages of my career when I was representing Hewlett-Packard selling software to Japan. I would ask myself, why am I doing this? Why don't they have their own software industry? Why aren't they coming up with products that are equal or maybe even superior to ours? So, to think about Silicon Valley, I'm from actually San Francisco originally, so I'm a San Francisco product. I think part of the culture there was an openness and a willingness to embrace new things. You know, you think about the hippies, the 60s and the gay community that grew in San Francisco. There's so, San Francisco for whatever reason, its cultural roots had a openness to new things and technology kind of fit right into that starting in the 1970s and 1980s. Of course, having Berkeley and Stanford and other fine universities in that area contributed a flow of really smart computer science graduates, you know, Hewlett-Packard, many of them rolled out of there. And then Venture Capital kind of started there, although it was rooted also in the East Coast. I remember the days when the East Coast was actually dominant over the West Coast. Inventure Capital. Inventure Capital and then the name computer companies is like digital, for example. So they were actually preeminent, but then eventually, California, Silicon Valley, in particular, eclipsed them, probably maybe into the 1980s or so. So that's the infrastructure, I think, that helped grow the entrepreneurial culture in Silicon Valley, and that's kind of the model now. That's pervasive throughout the United States and throughout the world. And when you take that, though, and you apply it to Japan, you run into these cultural impediments. So Japan, even though you can think of many marquee companies, like you were saying, Sony, when we were off air before, Honda or others, it started in the pre-World War II period. When the economy began to grow and the society solidified, they were no longer kind of starving. It was kind of a desperate time after World War II in Japan. Once that they established their economy and began to grow quickly, like in 1968, they became the number two economy in the world. And I think the previous cultural preferences began to set in, more of a conservative nature began to set in, government involvements and a bank involvement in venture capital or startups just didn't make sense within that cultural context. It's interesting, you know, the vital period, you know, the logarithmic growth period where you don't necessarily see it, but you know it's happening. Yeah. There's a book written by Simon Winchester, who was a writer and academician with the East West Center called Pacific. And one of the early chapters, each chapter is about an iconic story defining the Pacific region. One of the iconic stories he wrote up was the story of Sony. We're talking about this with Alan Miner last week. Yeah. And it's very interesting. So Sony was involved in the war. They were making primitive electronic equipment for the war. Uh-huh. Okay, and there were two partners and one of them I guess was Marita, the guy who was famous for so many years. Yes, right. And they realized that they were behind the curve and they had to get global. And they had heard that somewhere in Canada, I want to say Winnipeg, which is really nowhere compared to Japan and somewhere in the cold of Winnipeg, there were some people working on something called the transistor. So they sent two young fellows out, across the world, go to Winnipeg and find out everything they could find out and maybe if possible get a license on this technology. And they did. They got a license and they brought it back to Japan for the transistor. Yeah, they brought it back to Japan or the Sony company, I think it was called something different then. Yeah, a different name, that's right. And Presto, we have the Sony radio, which was the beginning of Sony's success. And look what it is now at a tight, I'm not sure if that was hide anymore, but. So that's very unusual because I worked for a number of years at Hewlett Packard and they prided themselves on their engineering. And part of the reason why HP was not able to innovate when software became more dominant is that there was a sense that our engineers are the smartest ones in the world. We're the only ones who can come up with great products. And I think Japanese established blue chip companies also believe that as well. So for Sony to go out and source alternative technology and bring it in, that is very, very different from the common model for Japanese business development. Yeah. It had a big effect. So you're saying though that after a while that kind of cutting edge mentality is now into the classical conservative approach. Yeah, so my favorite story to illustrate that is that DNA, which is a mobile gaming company, it's very well established. They own a baseball team, right? So whenever a company owns a baseball team, you know they've made it, right? So Namasan, who's the founder of that company, she was talking at a lecture that I went to about some of the challenges and she said, one of the big things is to be able to hire talented engineers out of the better schools. She told a story that I think it was a Waseda graduate. I was thinking about joining her company and her mother, I'm sorry, his mother came and pounded on the door of Namasan and was crying and pleading with her, please. I sent my son through Waseda. Do not hire him at your no-name company that I have no idea if it's gonna be successful. I want him to work for the government or I want him to work for Hitachi or Sony. So she said that is what she faced and that was a successful company. That just shows oftentimes the students themselves, the engineers, do not see themselves in an entrepreneurial setting because it's just too risky and if you fail in Japan, there's consequences. All in Japan will be a shame. Yeah, there's a shame issue. In Silicon Valley, when you fail, people go, oh, you'll be better because you'll learn from that but that kind of accepting attitude doesn't really exist in Japan, yeah. And also, yeah, the government up until recently has really not been supportive of entrepreneurial development. Now, I have to say that things are changing in Japan. So people have to. It will change while you've been there, no? Yeah, they have and when it comes to entrepreneurship, so there have been a few success stories in the last few years that have maybe helped to change the perception about startup companies and the value that they can bring and also from an investment perspective, the return on investment. So venture capital, although it is nothing compared to the United States or China, for that matter. China's gone from zero to equal levels, if not more than the United States in the last 10 years or so. But Japan's numbers are going up and there does seem to be greater opportunity and maybe a little bit more flexibility, but it's still 10 to 15% of what the U.S. Startup environments like. What that tells me, and it's not necessarily a happy thought, what that tells me is they're gonna look to the U.S. as the primary entrepreneurial community in the world. And they're gonna take their signals from the U.S. and they're gonna be slightly conservative because they see themselves as behind the U.S. in terms of reactivity. Yeah. I think in many aspects of Japanese business culture and certainly political culture, Japan looks to America. Yeah, I don't know, maybe they, maybe Jay, you're right. I don't know if that's the right solution, though. The criticism is beginning to mount. The number of AI professionals, the AI graduates in Japan is relatively small compared to the rest of the world. And artificial intelligence right now is where a lot of venture capital is going to. Gotta get on the boat, yeah. Yeah, exactly, so the founder of SoftBank was criticizing Japan recently and saying Japan's like a third world country because they're so far behind in artificial intelligence. And then his latest vision fund is focused on artificial intelligence. And you can't find Japanese engineers to hire for companies that he'd like to start in Japan. Why? They're not studying it? This, my own opinion, is that there's probably interest. This is a little bit harsh, maybe, but I've been in Japanese education now for a number of years. I think the university systems are failing the young people and failing industry, that they're not teaching students proper skills to be successful in the IT world that we're living in now, the software world. It's a global IT world. Yeah, another story I can tell, this one engineer, the founder of a company, he went to KO, their computer science department. He graduated and he realized they didn't teach me how to program. He graduated after four years at KO, which is one of the best private schools in Japan. And he looked at that and said, these professors are teaching abstract theory having to do with computer IT related matters. They're not teaching me how to program and how to actually become successful as a business man. So he was saying, and I agree actually based on my observations, not necessarily in IT, but just in general, it's the education system that's still preparing students for the 1970s and 90s. So that's a problem. My name, I went to a lunch a few years ago with the vice mayor of Beijing, the vice mayor. Okay. And I said to him, I said, good for you, good for Beijing, good for China, because 29% of all of your college graduates are engineers. And he said, yes, well, thank you, but it's not 29%, it's 59%. Wow. So I mean, that's the world to come. That's what any country needs to have to compete globally. Yeah, Jay, I would say that's the world of today. So I've been reading through my IT sources that the innovation, especially in the AI area, in China equals or maybe even surpasses what's going on in the US. I just saw actually this morning a graph through a new source that I get. It was showing the percentage of AI engineers. It used to be pretty much dominated by the United States, like 60%, but it showed a graph over the last few years. The US is trending down to 40% overall. This is worldwide and the rest of the world is going up and a big part of that is China. So they get software. Whereas we were talking earlier, Japan is still struggling to wrap their minds around the development of software, the value of software. Maybe for these cultural reasons, I can't really say, because I didn't live in China and haven't studied this too deeply, but it seems like the Chinese business culture and the education system and maybe the government leadership is allowing China to rapidly go up the curve. And maybe, although most Americans don't want to hear this, even surpass the United States when it comes to innovation development, especially in the AI area. And that's what I'm reading now, not necessarily in general news, but through the tech news. Before he retired, Bill Gates and one of his buddies from Microsoft took a trip around the country to every college campus they could manage, trying to encourage people to study computer science. And the reality was that not enough people were studying computer science. The reality was Microsoft and a lot of these tech companies in the US, well, they're global now, were getting their engineers from overseas. Oh, yeah. We had a show here on ThinkTech a few years ago where there was a team of engineers from Microsoft visiting Hawaii and we got them all on the show was really something. Oh, cool. They were all from somewhere else. They were all born somewhere else. Yeah. And so the US is, clearly the US is falling behind, especially in the advanced computer science. Yeah, I mean, there are examples of great success like Stanford, their AI system, where their AI department is rated number one in the world and their graduates are getting multiple hundreds of thousands of dollars when they graduate, so that's not enough. You know, that's maybe what, I don't know, 30 or 40 or 50 engineers that are graduating. That doesn't meet the demand. Your point about the foreigners' usage within IT companies, Rakuten, have you heard of Rakuten? They're like e-commerce, they're the number one e-commerce company in Japan, somewhat similar to Amazon, but a different business model. They were very famous a few years ago. They decided to flip their internal language from Japanese to English. They made huge news. So all Japanese employees within Rakuten, in Japan, were supposed to speak in English. Mikitani is the founder of Rakuten. He decided, I want to be a global company, we need to do this. One of the reasons he did that, 80% of his engineers were foreigners. 80. And by flipping to English, it was foreigners, so they were IT graduates from all over the world that he was recruiting. And if he had English as a standard language, that was one of the stumbling blocks. So he could tell them, no, English is the official language within Rakuten, you can work. So it's 80%. So they're struggling. One of the business ideas that I have is, boot camps have taken off in America as to maybe come up with boot camps to bypass the Japanese education system and try and prepare high school graduates to become developers. In France, they've done that in the United States. One of the many ideas in the back of my mind to start a business. So what are you even teaching? I teach entrepreneurship and marketing. Those two classes, I taught. And that grows all kinds of entrepreneurship. Well, yeah, I focus on what it is to become an entrepreneur. And within the class setting, which is artificial reality, as much as I can within the class setting to share what I've gone through in the various startups that I've been a part of and what it's like to develop your own business with the initial idea, to write a business plan to make presentations, to try and get funding. So next week, you're at Shidler, Peter Rowan. I know you know Peter. And some others will be judges for my students who will be presenting their own internally developed business plan. And they'll be rating them number one, number two, and number three. What you teach there, which each year is pretty cool. Oh, exactly the same thing. Yeah, I do exactly the same course. That's really cool. Yeah, yeah. So how do you compare the students between Japan and Shidler? Oh, while you're putting me on the spot, Jay. Be diplomatic. Some of the students here, I think have what it takes. You know, I can read it, because I've been in business so long, you can do a read on people. I think have the capability to be successful entrepreneurs. One thing that I find is that they often don't think beyond Hawaii. You know, and they should because this is such a small part of the overall world economy. So that's often a challenge. So I think there's a number of students have gone through that class that I think could become capable entrepreneurs. Now my class at Kansai Guide, 80% of those students are from all over the world. So I French and Swedes and everybody, these students, because of the success of Shark Tank, they all want to be entrepreneurs. So the motivation is extremely high. So I would say maybe the percentage is a little bit higher with those students eventually becoming, at least potentially becoming successful as well. Some of them want to set up business in Japan. One of the interesting things is that because the Japanese entrepreneurial community is so small and the cultural forces there are kind of aggressive, not aggressively, but preventing entrepreneurship from really flowering, foreigners have this great opportunity to come in and kind of build the void that exists in terms of entrepreneurship. So I know several people through the American Chamber of Commerce that have started their own business and have done extremely well. People from the U.S. From the U.S. primarily. Yeah, one sold his business for 300, he sold half of his business to entity Docomo for $350 million. And this was a, not online, but TV-based marketing program like Home Shopping. So that didn't exist in Japan when Harry came up with this idea. It's arbitrage, idea arbitrage. But the thing is, everyone told him no Japanese people are going to buy things off the TV. They have to go into the store and see it. That was the prevailing kind of myth about consumer behavior. And he said, oh, we'll try it and see. Huge success. It's a global world. Yeah. So what about that, though? The students in Japan. Yes. They can do entrepreneurial things in Japan. They're probably better, I shouldn't say better, because it could be that people from outside a given country could better understand the market of that country somehow. Sometimes, yeah, you have that perspective. But are they also doing entrepreneurial things outside of Japan? Coming from Japan, to the US, to Hawaii, for example, to start a business here. Yeah, that's, there's a little bit of brain drain that's going on in Japan. So if a company gets started and begins to gain traction, especially if they have a global focus to start with, rather than just focusing on the Japanese economy alone, sometimes even the investors will say, you need to go to Silicon Valley to be successful at the global level, Japan, not supportive, you need to go. So there are Japanese entrepreneurs that are in various parts of the United States that maybe have gone on their own because they figured their chances are better, becoming successful in the US and then maybe coming back to Japan later. That's a common model, success in the US or abroad, and then go back to Japan. Or sometimes the investors are saying, we want you to achieve ramp up in terms of revenue much quicker and we think you can do that better if you go to the United States. Now, do they come to Hawaii? Not that I'm aware of. So I would love to give you a better answer, Jay, on that one, but there may be some that I'm not aware of. Always looking for opportunities, you know? Yeah. And you flip it around now and say, well, suppose I'm at childless school. Yes. I'm studying in your course and I get excited about entrepreneurship. How can I express my entrepreneurial initiative vis-a-vis Japan? Should I go to Japan first? Should I start my business here and then go to Japan? Talking before about how the Japanese might start a business elsewhere and then come back, I'm always thinking that if you want to go global, you have to start local, somewhere. Yes. And then, if you're good, then you should go global because any really successful business now is global. Right. Yes, I agree. I think generally that's how things are done. You start in the market that you know best and the one that you're from. And then if you experience some level of success, you implementally grow. I mean, the companies I work for in the mainland, they would be successful in the US domestic market and then they would go international, which meant Canada or Mexico. You know, that's the first step, right? And then if they're successful there, then they go to Europe, maybe England or Germany as a traditional landing spot. And then Asia would be the one after that. So that was kind of a stair step process. When I talk to my students, I say the same thing that you just said, that when you think about starting a business, especially when it's internet related and you have access to the global market through the technology, that you should think globally to begin with. And there are some companies that are doing like Groupon that they haven't been ultimately successful, but when they started. What did they do? Groupon was, it's a company that allows you to get discounts. Oh, discounts, yeah, yeah. Yeah, restaurants. So they had kind of a glory period, maybe five or six years ago. And their business plan strategy to begin with was instantaneously global coverage. They set up operations in 30 different countries all over the world from the beginning. That was the approach that that founder took, which was a very smart approach. So yeah, my students that are in my class right now, I've already told them, think beyond Hawaii, if you want to actually genuinely become an entrepreneur, come up with something that would make sense, maybe back to the mainland or to the Japanese. I know because I live in Japan, how popular Hawaii is, food, the culture. Japanese people just love this state. I've had so many friends that have come here, Japanese friends, and they go for the first time and they fall in love with it. They want to come back again and again and again. So Hawaii has tremendous mind share within Japanese consumers. I don't know what the numbers are, but it's millions of Japanese that have come to Hawaii. So that provides, I think, a market opportunity for people here who can figure out some way to be successful locally and then also tap into the Japanese people who have a positive perception. Isn't that true? Yeah. It's all about understanding what the market wants. Yes. You've got to be able to do that these days. Yeah, the strategy now, what investors look for is product market. You've got to come up with something that has a demonstrated market and the people who are in that market are willing to spend money by. So that's really the crucial determinant of success. Oh, I mean, we're always interested, I'm always interested in trying to develop a tech industry or at least an entrepreneurial industry here. Yeah. And I wonder if you could comment on what the, you know, you said that in Japan, there were impediments, classical cultural impediments that you had to get by. Right. And we probably still had a, you know, a dampening effect. What about Hawaii? Hawaii is largely a Japanese culture. It doesn't have the same impediments. So are we as free and creative and innovative and aggressive and ambitious as, for example, Silicon Valley, or do we have impediments too? Yes. Yeah, since I'm from the Bay Area, but I spent a great deal of time here in Hawaii, there's a gap. And maybe it is because of the Asian influence to some sort. I mean, maybe parents of kids that are going to schools here in Hawaii or maybe on the mainland, they want them to take more stable positions. I often talk to my Japanese students in my classes, what do you want to do when you graduate? I want to work for the government. I want to work in a bank. And then alternatively, I'll find students that I know have the spark, especially women. I find them and I tell them, you know, I think you can become an entrepreneur. And they look at me and it's like I'm saying, flap your wings and fly to the moon. They're all, you know, equally impossible. So maybe that's a part of it here in Hawaii. I know the government here has been investing for decades. I think I told you, Jay, when I graduated from UH from the MBA school, I applied to the Minoa Innovation Center. So that was back in 91. So I know it goes back to then. I didn't get the job. I ended up going into... Cheer up, the center is out of business anyway. Yeah, so I know the government sees the value of this and they're investing in it, but it just doesn't seem to have caught yet. So like we were talking about before, we need to have a clear winner that people can look at, these parents can look at and go, oh, I get it. That company has really taken off and I can see my son or daughter working for that company. Until we have that in Hawaii, it's a tough sell. Well, last question before we run out of time, is I wanted you to talk to the people in Hawaii, talk to their students in Hawaii, talk to the kids of all ages in Hawaii and tell them why it's important to have an entrepreneurial mindset for the future of our state, our people, and how you do that. Well, I think I'd answer that at two levels. For half of my career, I worked for big companies and half of my career, I worked for startups. And I have to say that the most enjoyable times was working for starters. It's hectic, it's chaotic, but you get a sense of accomplishment if you actually drive things forward. So if you think about getting greater joy and maybe greater feedback, positive feedback, I think entrepreneurship, even though it's risky and challenging, there's a greater sense of return. I'm talking beyond financial. Psychic. Just in terms of making a difference in the world, having a positive impact on the world. You know, I did great things when I was working for Hewlett-Packard and I loved Hewlett-Packard, but I was one of 60,000, right? If you do the same thing for a small company or your own company, and you realize it's because of my work that this company's been successful, that's a great, great job. So you think of what Steve Jobs did for the world. He was not motivated by the finances. He said that over and over again. He was motivated by making the world a better place. So that's one aspect. So just personal satisfaction. I think it's greater with smaller businesses based on my experience. The second thing is, if you really want to help Hawaii, this is the way to do it. Hawaii needs to diversify off of military and tourism, right? It needs a new economic base. So if you really love this state and you want to make a difference, that's how you're going to do it. So just kind of a personal satisfaction and then an investment in the community. So I would say those two things would be what I would give in terms of advice for people that are here to think about this. And what's the first step? Take my class. Or there's other competent professors at Shaila that teach entrepreneurship. That's always a good start. Intern with smaller companies, if you can find startups. Usually startups are looking for interns because they're kind of desperate for people. So get your feet wet a little bit on an internship basis. And then figure out is this the right thing for you or not? So I highly support internships. I encourage that of all my students to get involved. And then even as a student, my wife when she was an MBA student at Berkeley, that's how she met Alan actually, she started a business while she was a student. Zuckerberg did that, right? So if you really are excited and enthusiastic about it, you don't have to wait until you graduate. You can begin to experiment on maybe a low level to come up with a business idea, come up with a product that maybe you can sell to your friends and do it. Just go through the run through and gain that kind of first step experience. And then maybe that'll allow you to be confident enough to do it on a more official basis. Yeah, nothing like being creative keeps you alive. Oh yeah, absolutely. That's another thing too, Jay. For smaller businesses, creativity is a much bigger element. Sometimes bigger companies, creativity gets kind of crushed a little bit. I always had to fight my way around that. I was able to do it, but even HP in its glory days, it really didn't encourage creativity. The guy who founded the printer business, he had to move out of headquarters because there's no way you could have done it. He went to Boise, Idaho, where there was nobody, so he escaped from the crushing forces of the headquarters. Well, thank you, Steve Zarka. Yes, it was my pleasure. Entrepreneur and teacher of entrepreneurism and venture capitalist and a teacher in Shiloh College. Thank you so much. It may interest you to know that Think Tech is a startup. Very good. Congratulations on your success. Thank you very much.