How Robotics and AI Will Shape the Economy of the Future

What roles do robotics and AI play in the economy of the future? We explore the digital transformation, work from home and more with Dorie Clark, WSJ Bestselling author of The Long Game, as she talks with Ulrike Schaede, professor of Japanese Business at UC San Diego.

DORIE CLARK: Hello everyone and welcome. I'm Dorie Clark, and I am here on behalf of Newsweek. We are doing a special feature during the month of February called Creating the Economy of the Future. This is a special program presented by the government of Japan. And today, we are here with Ulrike Schaede. She is a professor at the University of California, San Diego. And, we're going to be talking about the economy, about business and about reinventing the economy of Japan and what we can all learn from it. Ulrike, wonderful to have you here.

ULRIKE SCHAEDE: Well, thank you so much for having me. It's great to be here.

CLARK: Wonderful. And for all of you who are tuning in live, please feel free to type into the chatbox and let us know who you are, where you're dialing in from. And, throughout the course of the next 45 minutes that we're going to be spending together, we're glad to take your questions as well for Ulrike. And we can learn from her about all the things that we need to know about future economic trends and how we can get smarter in responding to them and apply them in our own businesses and in our own careers.

So Ulrike, the first question that I have for you, this is something that, you know, even for people who don't necessarily have a huge knowledge of Japanese business, one of the things that I think is most remarkable and interesting, certainly for Americans, because our country is not that old, is that for many Japanese businesses, there's a tradition of businesses that literally have been around for hundreds of years. Yeah, it's not uncommon to have a business that has been around 800 years, which sounds astounding.

Can you talk a little bit more about that phenomenon? Why is that a thing? How have they been able to keep that going? And what can we learn from that?

SCHAEDE: Well, that's a great question. And actually, people have done research on this to figure this out. First of all, as you just said, America is not that old. So we do have companies in this country that are 100 years old, like half of them, you know, or a third of the lifespan of the entire country. So we do have a little bit of that. But there's also a bigger reason, and that is that Japanese companies have traditionally been managed to live for over 100 or 1000 years. There is a deep appreciation of the idea that companies should not die. I mean, if you think about why humans, you know, have to pass, it's because our cell structure stops working, and we're not reproducing the, you know, the cells that we need. But, companies aren't like that, right? They're building blocks. And companies have assets that you can build and buy with money and replace. So there's actually fundamentally no reason why a company should ever go bankrupt if it is managed well and if it is managed for, you know, creating value and innovation for the long run. So then it becomes interesting, right?

So why is Japan doing this and America isn't? And the answer is that over the past 30 or 40 years, the United States has turned to the stock market. We have, now have, a lot of companies in this country that are managed towards quarterly earning reports. Their CEOs are incentivized, for better or for worse by the way, it's not that one system is better than the other, and so both have their advantages. But in the United States, CEOs are incentivized to make sure that the stock price is always on the up. And if it isn't, then all hell breaks loose. And it's all over the news. And the company didn't, you know, match its quarterly earnings forecasts and what's wrong? And by the way, also, U.S. CEOs are paid in stock options. So they're really interested in this high stock price.

In contrast, Japanese CEOs are not paid in stock options. And as you may know, Japan had its own sort of scandal and bubble economy in the late 80s and early 90s. And in the process, people learned that the stock price is not always the best indicator of the quality of companies. So there is much less of an embrace of this short term, you know, when you know sort of create immediate result thing and there's much more of a patience with Japanese companies that are saying, okay, we're going to invest in innovation. We're going to train our people. We're going to reinvest in the company. And then the stock market used to like that, and it's changing in Japan now. But it's nowhere close to the United States, where the average lifespan of a U.S. company, to be in lifespan in terms of being included in the S&P 500 used to be over 50 years and is now less than 10 years.

And so and in Japan, you're right. You look at the Nikkei 225 index, there are lots of companies that look on paper as if they were founded in 1946. That is just because after World War II, they had to re-register. But some of them are actually going back to, you know, the Meiji years or even longer, right into the, to the 17th century. So, it's a difference in philosophy of what businesses should do, who businesses are run for—their shareholders, stakeholders or employees? And, and a whole different way of doing business as a result of that.

CLARK: That's really fascinating. Thank you, Ulrike, we are here with Ulrike Schaede. She's a professor at the University of California, San Diego. If you want to learn more about her work, go thejapanologist.com. That is her website, and you can check out her research and her writing there.

And we'd love to hear who you are, please feel free to type into the chatbox. Let us know who you are, and where you're tuning in from, and any questions that you have for Ulrike, about the economy, about what's going on, about the future of Japanese business, and what we can all learn from it.

So, Ulrike, I want to dig down on something that you were alluding to earlier, which I think is interesting. So obviously, in the 1980s, the Japanese economy was incredibly high flying, and then the economy there for a pretty long time, I mean, actually, you know, multiple decades, entered a period of recession of, you know, very slow growth. And that's something that certainly is alarming to consider for people in the United States who are so used to the stock market ticking up and up and up and up. Which, you know, perhaps itself might be unsustainable.

What was it, exactly? You know, for those of us who, who, unlike you, you know, have not spent decades studying and becoming an expert in Japan, and Japanese economics? What exactly happened? What was it that caused this, this recession? Why was it so hard to shake? And what are the lessons that we can all learn from it today?

SCHAEDE: So there are a couple of reasons. And let me see what I can structure my answer to make this concise, because I could give a whole lecture on this, right?

So, Japan had a bubble economy between 1987 and roughly 1991, where stock prices went through the roof and real estate prices went through the roof. Think of that as Japan's equivalent to our global financial crisis of 2008. Okay, so this whole thing was a delirious—it was a lot of fun, you know—we were sprinkling gold on salad leaves and stuff. So it was, it was, it was a lot of fun. But it couldn't go on forever, because it was built on a house of cards. There were like, you know, false valuations on real estate that were then becoming the collateral of land, and then that was false. So eventually, this whole thing went up into hot air, and the stock market collapsed, and the banking system came under tremendous pressure. It's similar to our, as I said, our Lehman shock, as the Japanese call it 2008/2009.

The Japanese government at that point made a choice. And the choice was that they would not do radical surgery, but that they would band-aid this thing. That they would try—first of all, there was denials, so it wasn't really a choice—hey, let's, let's, let's, let's just wait a couple of years, and all of this will be cleaned up, because our banks are strong, and our companies are strong.

This just wait and let them quietly, you know, kind of, kind of refinance these loans that had gone bad. And so it was good, the economy will come back. And that didn't happen. And then came a realization that something fundamentally new had happened to the economy, namely, that it was embarking on a very different growth trajectory. That sort of the high growth era of the post-war years when Japan was selling consumer end products into global markets, especially the United States, was kind of over. Because at the same time, South Korea and Taiwan had figured out how to make consumer electronics and even cars so the Japanese economy became suddenly under a competitive shock. And then came this choice moment in the late 1990s when the Japanese government decided that they wouldn't do what the U.S. did with Lehman, but that they would rather phase out the banks and consolidate them and merge them and keep the savers' deposits safe. And so you could, you know, look back on that and say, well, that was clearly a policy mistake, they should have just, you know, clean this thing up already and move on with life.

But on the other hand, Japan went through this entire two decades of low growth, with almost comparatively, almost no increase in unemployment. And that's because there was a choice made that we will not let our largest companies go bankrupt. They will get these loans that came to be called zombie loans. So there's a lot of bank lending to companies that would otherwise, you know, have gone bust. And the whole purpose there was to maintain employment.

Now, some economists will tell you that it's a really inefficient way to sustain employment. But society at large, certainly benefited from that, like because people kept—not everybody, but a lot of people—kept their jobs that would otherwise have lost it. People kept a purpose in life, that to get up in the morning or to go to work. There's still the system of life and employment, which is now coming under pressure. But in any event, so there was again, this was a long-term thing—let's see whether if we play this out a little bit longer, some companies may survive. And so what you get as a result, though, is two decades of nothing. And I'm not sure if we could turn the time back, whether Japan would make the same choice, but they made that choice at the time. So that's there, that's the outcome. But by the way, it also worked to last decades, but maybe it's a different question.

CLARK: Huh? Yes, that's, that's so interesting. Ulrike. Thank you for shedding light on that.

We're here with Ulrike Schaede. She's a professor at the University of California, San Diego. Her website is the Japanologist and we're talking about the business reinvention of Japan and creating the economy of the future.

So, Ulrike, I'm excited to talk to you about the economy of the future. But before we do, I just temporarily wanted to enter a time machine and go back slightly to the period just before the sort of heating up the incredible heating up in the late 80s, of the Japanese economy.

Now, as you know, as we were emerging from post-World War II, Japan, of course, was building just huge capacity, and was becoming a kind of force to be reckoned with, in terms of business processes and business excellence. And one of the interesting things in the early part of the 1980s in the United States was just the incredible concern that was arising because Japanese manufacturing in particular was just so much better than American processes at the time. And so we have, we end up with American businesses really looking to Japanese peers, and Toyota, for instance, and the Toyota way, was something that a lot of people learned from, and, you know, for instance, "just in time" practices became looming very large in the American consciousness. I'd love to hear a little bit more about that.

What was that process like in terms of, you know, how Japan actually rebuilt and resculpted itself and achieved those, those levels of international excellence that we keep learning from what was the Toyota way and its ilk all about? And why did it have such an impact?

SCHAEDE: So three things happening there between the, I would say the 50s and the 80s. So after World War II, Japan's, you know, it was basically destroyed. And so there's a lot of scrambling for jockeying for position. So a lot of these small startup companies like Honda and Toyota and Sony started out, right. And then there were some pre-war companies that had a lot of technology. So sometimes people forget that before World War II, so the early part of the 20th century, Japan was already a large and functioning, you know, economy, with large companies. So, at the time, before the war, Japan was basically exporting, you know, textiles and mechanical toys and so forth.

So, your question really is what happened after the war that Japan could rev up so fast and become basically America's favorite supplier of consumer end products? And the answer is that there's a strength in Japan that that actually is shared in some ways by Germany, maybe in terms of engineering of and the meticulous execution of a production process, and attention to detail and thoroughness with which things are built and also maybe some ingenuity and how you build the entire manufacturing process. And by the way, this is true still today. And so if you look at, you know, if you look into the future later we'll talk about digital manufacturing. It's Germany and Japan that's kind of really positioning to lead in that.

So in the 60s and 70s, how Japan was still sort of developing and, you know, the first Datsuns that came to the United States where there were jokes. Well, I bought a Japanese car and rusted, well Datsun, right? So they were, they were learning and then came the OPEC Oil Cartel in the 70s. That basically undermined the US way of thinking about cars, these large, beautiful, you know, Cadillacs and Buicks, and so forth. They were fundamentally gas guzzlers. And here came these small little Japanese cars. They were fantastically engineered. They will never break down. And they got a gas mileage like nobody else. So Americans fell in love with those cars.

And then came Sony with its miniature radio, which was a similar thing, there was only a core competence and miniaturization. The technology was originally from the United States, but Sony took it back to Japan and made a radio that was, that we liked. And then came the electronics industry, right. So Sony and its Trinitron TV and the, you know, Panasonic, which developed the VHS, the videotape recorder was a Japanese invention. And they figured out how we could tape a football game of three hours and watch it later. So we just embraced all that and the camcorder, and so those were the good old days, right, and then that the fax machine, and cameras, so Americans really liked that a lot. And Japan got better and better and better at making it a very high level of quality, no variance, very reliable, nifty consumer end products.

And behind that is an education system that is very much about not making a mistake, not sticking out, not—you know, taking full responsibility for doing better. And, and in fact, a, you know, sort of, an excitement about doing something with perfection. And we see this, by the way, in Japanese art. And like the tea ceremony, where it's all about the ultimate expression is to do to perfection. And it was this thing about perfection, that really worked well in manufacturing and designing manufacturing processes, and that worked well to this day. And again, it's not as if this is all great, right? It also comes at a price.

So what these companies were not so great at for a while was actually how to do the sort of Silicon Valley break it, fix it, you know, cutting edge breakthrough innovation. That's just that's very, it's happening now, but it's a more difficult thing to do. So what served the Japanese, Japanese industry, really well in the 1960s and 1970s was this, this willingness of every worker to be super meticulous about quality control. And then learn how to build this quality control into the manufacturing process. So that it wasn't like some supervisor looking down and then blaming somebody for making a mistake. No, no, let's build this into the process of how we make things so that the at the end of the conveyor belt is the perfect camera or the perfect car or the perfect TV.

CLARK: Yeah, that's, that's really interesting. Thank you, Ulrike. We're here with Ulrike Schaede, she's an expert on Japan and its economy. Her website is thejapanologist.com. You can learn more and check out her work there.

So Ulrike, one of the challenges that's facing pretty much every developed economy these days, but perhaps especially true in Japan, is the aging of the population. And this is something that has caused a lot of consternation among projections, you know, how are we going to be paying for health care? How are we going to be paying for benefits?

What what is the latest on that situation as it affects the Japanese economy? And how can every advanced society be thinking about these questions, since it is a topic of demographic concern just about everywhere?

SCHAEDE: So yeah, it's interesting that, you know, it used to be that Japan was like 20 years behind, you know, and in the 20th century, but since the public economy, what we're learning is that Japan is actually 20 years ahead. So the bubble economy, the recession and, you know, dealing with this long financial recession, and at the turn of the century is what the U.S. had embarked on, you know, in the 2010s. And maybe we're still kind of dealing with that a little bit. And, so it is with aging.

So the no country is aging faster than Japan. By 2030, the Japanese workforce will shrink by about 20 percent. And by 50, by 2050, it'll be, you know, down 30 percent. This is something we can project well because we know, we can forecast with quite some accuracy, how old people will be in 20 years from now, and what the population will look like. So Japan is 20 years ahead of other places that are facing this, like China and Korea and Germany and France and also, you know, some other places in Asia. And so what Japan is doing with this aging thing is going to be an example for a lot of other places.

But I also think that Japan is actually quite fortunate. And because for Japan, this, this aging, and this, this, this labor shortage, this looming labor shortage is happening at the exact same time as the digital transformation is going to hit us. And so that takes away a lot of the fears of replacement.

So if you think about it, why are we worried about robots? Why are we worried about the digital transformation? For a number of things. We don't want to be run by machines. We don't want to, you know, we would like to have recourse if somebody makes a decision. We don't want some AI or machine learning, saying, you know, determine whether we have access to credit or not. But we are also worried that the robot will arrive and take away jobs, and the self-driving car will take away the driver and that sort of thing.

And, and in Japan, that fear is really not that pronounced. It's more like, when will we finally have machines that can make cars without people because we don't have people. And so the labor shortage that's hitting Japan is hitting Japan, just at a time when the labor force is shrinking and that changes the perception of what we can do with this digital transformation. And how we can maybe employ the digital transformation as a solution to a lot of the problems that demographic change is bringing. And so, Japan is making—is going to make—but there's no choice, they have to make some choices, that that we can then study later.

America, of course, has a lot of immigration. So we could say, well, why wouldn't Japan just choose a lot of immigrants, young immigrants? And wouldn't that be a choice and, and it is, but Japan is making a choice not to do that. Whether there is now a huge increase in immigration—so this is one of the choices. So we can learn from Japan, how to you know how to do that and think about immigration in a different way.

But it's also that Japan is saying, well, we can just automate some of these, these processes, then, and then we can address the labor shortage in a different way.

CLARK: It's it's such an interesting point, that in many ways, Japan is the laboratory of the future, because its trends are ahead of many other cultures, which will have to face them, in relatively short order.

So we have a comment coming in from Diane. Diane says, "I think Ulrike makes an interesting point that it all starts with education, the respect for teachers, and the crimes, like littering are so different than in the United States."

And I think, you know, Diana is touching on on something quite interesting. Ulrike, perhaps you can expand a little bit more about the Japanese education system, you know, whether it's the kind of K to 12 or the university education, what is the current thinking? And, you know, have things been re-evaluated in recent years or not, with regard to the pipeline into jobs and careers and how the Japanese educational system is changing or should change in order to better prepare people for the jobs of the future?

SCHAEDE: Well, that's a terrific question. So the education system itself is a reflection of something even deeper that's underlying this, and that's the social contract of what's important for our country. Right? And there's some really interesting new research that gives us some tools to analyze this. And in particular, I'm using in my work now, what's called tight-loose theory, tight-loose. And then this is a research by Michele Gelfand at Stanford, who has done a lot of global work on different country cultures. And there's a lot of cultural stuff going on, of course, but this particular framework looks at culture, a set of norms of behavior and measures, to what extent people in a certain country or setting agree that certain behavioral prescriptions are important. And to what extent are they willing to punish deviance? Right? And so she, she then defines us is a tight or loose.

So let me give you an example. So California, where I, you know, it's a very loose place. I mean, if I were to color my hair green tomorrow, and when I go to go to school, students would say, well, that's cute, right? If a Japanese professor went to university with green hair, they would they would you know, that people would be worried, you know, she okay, you know, what's, what's wrong with her. And so there are certain things that just just not done, and people in Japan can be pretty clear about that. Right?

So Diane talks about, you know, learning, the Tokyo's largest metropolitan area in the world, it's one of the cleanest and safest. How do you get that done? Well, you have some sort of agreement, that there are certain norms of behavior like littering, it's just not okay, if you don't do it. And foreigners who come so this is not innate, or this is not something that people learn even at school necessarily, because foreigners who live in Tokyo for a while, stop littering, they stop being noisy, and they stop doing that they adjust, right? And that's, we do that because we want to fit it.

Okay, so now you get the social proofing going on, we behave in a certain way, because we want to be part of this community, and then gets into the education system, you know, clean up, don't do this, don't do that behave like this. What you get is, you get a very clean, safe society that actually has a lot of, you know, and that has a lot of benefits for like, things like the Toyota Production System, and being very thorough, and how you in particulars and how you execute then implement quality control at the shop floor and so forth.

So, so tight-loose is not about one is better than the other, they're better for different things, right? So depends very good and societal cohesion, and no crime and no littering and making, you know, great things at a high level of quality. It's not so great, as I said earlier, breakthrough innovation, you know, that sort of thing. But the thing is for Japan right now, this is the reinvention, the reinvention that's happening in Japan right now is the recognition that in order to compete at the technology frontier, of the digital transformation, Japanese companies have to be, get better at breakthrough innovation. There, it has to be a mindset change. We need to be good at AI. We need to be good at these, you know, current technologies. We need to be more experimental, and in our setup of R&D and innovation, and we need more startups, and we need more of that.

So as you just said, Dorie, that's exactly right. The universities are changing their curricula. And it's going with it slowly. Everything in Japan is happening slowly, but slowly, but certainly, there are changes in curricula at the high school level. And there are more, you know, more playtime at the kindergarten, more of this experimental thinking at the University of Tokyo and other universities in Japan have top-notch curricula when it comes to AI and cybersecurity and that sort of thing. So things are changing.

And Diane is right that the old education system was feeding into this "monozukuri," the art of making things and the change the reinvention of the economy is also now being slowly but certainly reflected in a reinvention of the education system. And also, how young people think about their careers and their employment, and what they want to accomplish in their work lives and work-life balance. So this is a very interesting change process going on. And observers differ whether Japan is too slow and when it's slow, too slow, or whether Japan is missing out on a lot of opportunities. But if you change the lens a little bit and try to see what is actually changing, you will see that there's a lot of quiet, steady change going on in Japan.

CLARK: Yeah, thank you so much. We're here with Ulrike Schaede professor at the University of California, San Diego. This is our Newsweek special feature on creating the economy of the future. And if you want to learn more about Ulrike and her work, just go to our website, it's the japanologists.com.

So Ulrike, you were mentioning a moment ago, the changes that are on the horizon. And the question actually came in from one of our live stream viewers who's tuning in. From Nalin, who wants to know, Japanese, the Japanese Prime Minister has recently called for a new form of capitalism that will include investments in green tech, digitization and human capital. What do you think the motivation behind the initiatives is? What impact will it have? And should other countries be doing the same thing? What what do we need to know about this new initiative and in some of the future implications?

SCHAEDE: So it's a brand new initiative. It was announced three weeks ago. So we scholars were trying to figure out the answers to those excellent questions... Okay, so what is this?

Fundamentally, I think, what, what's going on there is this notion that, if we do it, right, capitalism can be good for all, it can be good for all. It doesn't have to be dog eat dog, it doesn't have to be rich and poor. It doesn't have to lead to polarization. If we do it, right. So then the question is, okay, so what does doing right, mean? Right?

And that's where, again, we're going to look at Japan, I think. So the Prime Minister put together has put together a, a, a council, a deliberation council to figure out the answers, the composition of this council is very interesting. It has a number of startup people, it has reformers so that people are a little bit more concerned about, you know, not throwing the baby out with the bathwater. So let's, let's keep what works in the Japanese economy.

So, I think at the end of the day, what we'll learn is what they're trying to address is how can we do both? Be a society that values stability, long-term corporate growth, long-term value creation, and equality, and societal cohesion? How can we marry all of that with an economy that can be you know, the be a leader in breakthrough innovation? And, you know, and, and a vibrant sort of high metabolism economy. And the prime minister himself said that this is going to be very difficult, but if somebody can do it, maybe it's us. Right?

And so we are going to watch this for, you know, going forward, because I think yet again, this is something where we might be able to learn something from Japan. I think, what's driving it is that, you know, Japan used to look at America and say, well, we want to be like America. We want to have a Silicon Valley. You know, we want to have a Wall Street, we want to have, you know, we want to have this and the other thing. And right now, frankly, America isn't looking so great.

I mean, Wall Street is great, stock price. Crazy. But it's a little bit crazy, right? And so there are lots of people in Japan to say, Well, we had this craziness, we have that in the 80s. Not sure we like that craziness, is there a different way of doing this, that still would lead us better off and have us growing? That is not so polarizing, and that doesn't lead to income inequalities in the same way?

I mean, if you compare income inequality in Japan and the United States, it's very different. It's edging up in Japan, which gives a lot of people concern, but it's nowhere near the levels of the United States. And so, so think that this new capitalism program is a little bit of a expresses a concern that if we become too much like the United States, will, we'll end up with more income inequality and that's just not something that Japanese society will, will accept. And in fact, you asked me earlier, why did it take two decades for Japan to get over its bubble? And part of the reason was that Japan needed to get over its bubble without creating a lot of income inequality. And, and so there are lots of stoppers in place already.

So I think this new capitalism will be an attempt to set up an economy that that that is good for not just one part, not just the smartest or not just the best educated but that that creates a system where everybody has a role to play and everybody can find a spot and that and good place in a safe place in that economic activity.

CLARK: That's a really interesting observation, Ulrike. Thank you. We've been talking about creating the economy of the future. We're here with Ulrike Schaede check out our website at thejapanologist.com.

Ulrike, one of the places where the recent experience of the United States and Japan has differed has been, of course, the past couple of years with the pandemic. Immediately coming out of the pandemic, the United States has been experiencing the great resignation, with many people leaving their jobs. My understanding is that there's been much less of that in Japan. The United States and Japan reacted pretty differently from public health and shutdown perspectives with regard to the pandemic itself.

Can you talk a little bit about the differences in the response and how things are looking in Japan now, as we, you know, fingers crossed, hopefully, emerge into a kind of post-pandemic or quasi post-pandemic? What's, what's the view of things as a result of the craziness of the past two years?

SCHAEDE: Yeah, that's a longer topic, right? By the way, as we speak, even California is coming out of this, this latest Omicron wave, but Japan is in it. So we don't actually know. But and hopefully that, you know, friends in Japan will do will do fine. Japan has not been hit as hard by this. I mean, if you ask people in Japan, they say we were just we were hit just as hard. But if you look at things like death per 100,000, or even cases per 100,000, Japan's immediate hit in terms of the health the nation, has not been as bad as the United States, which maybe it's not saying much because the United States has been hit so hard. That's a that's a different story. Right.

Japan has done in terms of health of the population, the pandemic has given, you know, shown us again, that yes, you can have an aging society, and not have a high death rate like that. But at the at the business level, of course, a lot has changed a lot because Japan used to be Japanese business used to be predicated on people working long hours in the office. It was you show up in the morning, or you go home late at night, and, and the pandemic has questioned whether that's really necessary. And so, you know, after decades of long commutes, and people kind of slipping in the morning and was large places like Tokyo and Osaka and having one-hour commutes, and the train and so forth. Suddenly, Japan had to switch to working from home.

This brought its own new challenges, right? Because one is that Japanese homes are small. And a lot of people like, actually, this is true in many countries, right? People had to work from their bedrooms, but but some Japanese apartments don't have bedrooms, right? So it's the yes this was hard for everybody. It caused a whole new challenge for Japan. Also, because Japanese businesses were not made for working from home and they didn't have enough VPN accounts. And they didn't have you know, an IT system set up and they had this whole you know, fax mentality, still paper mentality, you know, sometimes joke because in Japan, the word for paper is "kami" and the word for Gods is also "kami." And in Shinto there are lots of Gods, right? Anime spirit and so forth. And so I sometimes joke that Japan is a country of kami and kami, you know, gods and papers. And so Japan to do, very... basically go cold turkey, on this paper culture. And that has created a whole new outlook among young Japanese have what they want in their lives. Do they really want to go to work in the morning and come back home late at night and, and a lot of younger workers, older workers don't have the liberty of saying I want to change because there's actually really no liquid job market for a large portion of Japan's workforce.

But the younger folks are saying, well, wait a minute, what do I want to do in life, so it's not a great resignation so much as a great opportunity to rethink what it means to be a successful Japanese business person. And this has opened up I think, and in some ways, a new sort of way of looking at what does it mean to be a successful person, and a happy person, and a happy family person? And it has opened up new opportunities for women, and for and also for companies to rethink what it means to create work-life balance for its employees. This is something that actually the leading Japanese companies are embracing.

So this, let's, let's reframe this as an opportunity, not a resignation, an opportunity. Let's set up new work processes, let's change the office design. This is something that happened prior to the pandemic. But this free address office that sometimes is attributed to WeWork in California, the free flow of you know, you go and you find a place in this beautifully styled office. A large Japanese companies in Tokyo and Osaka and Fukuoka and so forth, had already started that, let's make the office beautiful, let's make the office atmosphere different. Let's pull people out of this rut of being this office worker in this tiny little, you know, desk that is overflowing with paper and you know, sort of, you know, hot and sticky and narrow and open things up and let people focus more not on process, but on outcomes. And all of this is happening right now. It's a very exciting moment for Japanese business.

CLARK: It is this is a very exciting inflection point. We are beginning to come to the end of our conversation just a few more minutes here. But we have been here on behalf of Newsweek as part of our special series in the month of February on creating the economy of the future. It is a special series presented by the government of Japan. And we've been talking today to Professor Ulrike Schaede. You can visit her website at the japanologist.com and learn more about her work. And if you want to make sure you never miss one of our weekly series, go to DorieClark.com/LinkedIn, you can follow me there.

Ulrike, last question that I have you were talking about how this is, in many ways a kind of, you know, a special inflection point where the future of Japanese business is being reconsidered? What is success look like? Where are we aiming? I know that for many Americans, the Japanese companies that people are most familiar with are the large international conglomerates that we were talking about earlier—the Toyotas, the Sonys—I'd love to hear your thoughts about the current state of small business and entrepreneurship in Japan. What is what does that look like? What are the trends and what is happening in terms of new business development that we can be looking toward?

SCHAEDE: So as a great question. So first, the former conglomerates are changing rapidly, right? And, so some people may think that Japan is gone, because, you know, we don't see it anymore. It used to be that you walk into somebody's living room, and there's a Sony TV, and you know, and then the Panasonic and Fuji—and that's no longer there. It's now Samsung, or LG, or you know, some other brand like that. But don't be fooled by this. Because one thing that we need to appreciate, I think, if we want to understand the world economy, is that Japan is still the third-largest economy in the world. And the reason is that Japanese companies are making the very important inputs that go into these consumer end products. So Japanese companies are anchoring many of the supply chains, in electronics and cars and so forth. And this more sort of upstream role has also opened up opportunities for new business creation in Japan. And again, everything in Japan is always slow. You know, the whole innovation and startup scene started in around 2003 and 2004, full speed when the government allowed what's called the "one yen company." So it removed basically legal capital requirements. So now you can open a company in Japan with paid-in capital of one yen, which is one penny. So yes, it's easy to start a company in Japan.

Then there are all kinds of societal constraints on that, that, you know, the status of working for a startup company wasn't particularly high, was seen as a failure. You must have failed getting a job in a large company. That's why you're working at small one. But lately, there have been a number of programs and also a recognition that one of the biggest player in any innovation ecosystem is the large companies that need to buy product from small companies. And this is something that has happened over the last five years. And there's an increasing recognition that large companies need to engage in the ecosystem with small companies and appreciate what the small companies can bring to the table and buy their product buy their technologies buy their ideas, merge, acquire them merge with them. And this is something that I would recommend that we look out for. Because as that heats up, the entire Japanese innovation startup innovation ecosystem will, will grow rapidly. And I think we're at the cusp of that happening. And it will be another growth engine, insofar as that happens will be a big growth engine for the Japanese economy going forward.

CLARK: That is fantastic. Thank you so much for your insights today. We've been here on behalf of Newsweek and our special monthly series in the month of February Creating the Economy of the Future. We are here at 12:30 Eastern, 9:30 Pacific every Wednesday this month, talking about the economy of the future and what we all can learn so that we can prepare.

Ulrike Schaede, professor at the University of California, San Diego, thank you so much for joining us.

SCHAEDE: Thank you so much for having me. It was a great fun. Thank you.

CLARK: Thank you all and see you next week.