Annex 1: Idemitsu Sazo (1885–1981)

His life as the founder and president of Idemitsu Kosan

With 108. 6 billion capital and 4,310 billion net sales in 2011,1,2 Idemitsu is the second largest petroleum company in Japan after Nippon Sekiyu. ‘It is ranked as the 262nd largest company in the world by revenue in Fortune Global 500 2008. It is number 26 in petroleum refining.’3 Its main activities include:4

• Petroleum refining and manufacture and sale of oil products. • Manufacture and sale of petrochemical products. • Exploration, development and extraction of petroleum, coal, geothermal resources and other mineral resources and so on.

Idemitsu Sazo, its founder, was born in 1885 to a prosperous merchant family dealing in indigo in Fukuoka on Kyushu Island. Idemitsu was the third of eight siblings. Due to the invention of artificial dyestuff in Germany, the indigo business experienced a long and gradual decline. By the time Idemitsu grew to adulthood, the family was driven out of business (see Appendices 1, 2 and 3). On account of his weak eyesight Idemitsu had difficulties reading books and studying, but could pass academic entrance examinations, first of a commercial school and then of Kobe Commercial High School

IESE Business School’s case No SM-1609-E reproduced with permission.

221 222 Phronesis and Quiddity in Management

(present-day Kobe University), which is one of the two leading schools in business and commercial teaching in Japan.

Days at Kobe Commercial High School The school was, at the time, headed by Tetsuya Mizushima,5 who used to work for Yokohama Specie Bank (the current-day Bank of Tokyo Mitsubishi UFJ) and had seen, at the time of his secondment to New York, how important it was for Japan to become economically strong in order to face interference from European and American powers, such as the Triple Intervention.6 He devoted his life to the education at Kobe Commercial High School of future leaders in the economic sphere, and exerted a deep moral influence on Idemitsu. Another individual who influenced Idemitsu was Kanekichi Uchiike, a professor teaching a course on the role of merchants. Uchiike stressed the benefits that merchants would acquire as a link between the pro- ducers and consumers, as the economy grew, but denied that the reason of being for merchants was to obtain commissions by mere inter- mediation. Idemitsu nurtured this belief and conceived the idea of a large-area retailer, namely, a retailer which covered a wide area with many branches (daichiiki kourigyou). In 1907, during the summer holidays of the third and last year of his time at college, Idemitsu travelled to the Tohoku region and chanced to read in a local newspaper about the discovery of an oilfield in Yahase, Akita Prefecture, and, out of curiosity, decided to visit it. An engineer guided Idemitsu through the oilfield, and from him Idemitsu learnt that the petroleum that was extracted was used as kerosene for lamps; how- ever, due to the popularisation of the use of electricity the demand for petroleum was declining. The engineer also indicated that petroleum might, in future, be increasingly used again due to the rise in the popularity and use of automobiles. Idemitsu’s graduation dissertation addressed the issue of Chikuho coal mines on Kyushu Island and their future. In his dissertation he con- cluded that the coal mines would be exhausted in fifty-one years’ time and predicted that the petroleum would replace coal as the main source of energy (Hyakuta, 2012a: 180–181; Kimoto, 2013: 29–31).

Sakai Shokai In 1908 Idemitsu joined Sakai Shokai (Sakai Trading Company) in Kobe, believing that he had failed his entrance interview at Suzuki Shoten, then a major trading company. Sakai Shokai had only three people on its Idemitsu Sazo (1885–1981) 223 payroll. Even after he received the notification that he had been admit- ted to Suzuki Shoten,7 Idemitsu surprised his teachers and classmates by refusing to abandon Sakai to join Suzuki Shoten. For many it was an act difficult to understand, since it was unthinkable that a graduate of such an elite school as Kobe Commercial High School would opt for a small trading company dealing in wheat and machine oil (lubricant) as his employer. Towards the end of that year Idemitsu visited Jutaro Hida, a wealthy man who had sponsored Idemitsu’s studies by contracting him as a tutor for his son; he stressed that Idemitsu should not break his commitment to Sakai Shokai’s owner. At Sakai Shokai, Idemitsu was assigned the task of selling wheat; but he was more interested, though the company owner never consented, in dealing in machine oil or lubricant, since Idemitsu was convinced that the days of petroleum would come soon. One day, a manager from Sakai’s oil suppliers came for a courtesy visit, and Idemitsu learnt from him that the demand for petroleum had surpassed the demand for coal in the USA due to the increase of petrol-driven motors (especially those in automobiles) in that country; however, the manager was sceptical about the future of petroleum in Japan. In 1911, as Sakai being a representative of Nippon Flour Mills Com- pany, a flour producer, Idemitsu was despatched to Taiwan to explore the flour market. The market there had been dominated by Mitsui and Company, one of the largest trading companies in Japan. In fact, the noodle factories Idemitsu visited informed him that they were, in fact, Mitsui’s customers. The market was growing but it seemed difficult to penetrate. Idemitsu’s only chance of getting order was to offer a lower price. The freight had played a significant role in setting the price of the flour. Idemitsu observed that cargo vessels plying their trade between Taiwan and Kobe did not have sufficient cargo to fill their holds for their return voyage to Taiwan. Accordingly, Idemitsu visited shipping companies as soon as he landed in Taiwan and obtained competi- tive freight quotations which would enable his company to lower its flour price substantially. Ultimately, over one hundred new customers signed on with Nippon Flour Mills, to the detriment of Mitsui’s market share. Mitsui suspected some dirty play on Idemitsu’s part and protested, to which Idemitsu responded by stressing his conviction that his role as a merchant was to help consumers obtain goods at a lower price and, in turn, producers would also benefit due to the increase in demand. 224 Phronesis and Quiddity in Management

Idemitsu, by then appointed managing director, was earning three times the salary than when he had first joined Sakai Shoka. Nevertheless, upon returning to Japan and learning of the bankruptcy of his father’s business, he began to think about starting his own business.

Idemitsu Shokai: Inception When I was working (for Sakai Shokai) my family went bankrupt due to a bank guarantee signed in favour of a relative. I saw that my mother had opened a retail shoe shop and, on the spot, I decided to leave my job and to work for my family. This was the reason why I set up Idemitsu Shokai. To be dutiful to one’s parents and help one’s brothers and sisters are expected from the moral point of view from all and every Japanese. Although I was determined to start a business, I did not have money. I chanced to know a person named Jutaro Hida who hailed from Awaji Island. I was then twenty-five and Mr Hida thirty-four years old. Hida-san was from a landed family. In his daily life he lived a very modestly. Seeing that I was concerned about the plight of my family, and at the point of starting a business, he sold a summer- house in Kyoto, and from its proceeds he offered me six thousand yen, then a huge amount of money.8

...He told me: ‘I will “donate” this to you. You don’t have to return it. You don’t have to pay me any interest. I’m not interested in busi- nesses because I have never worked. You don’t have to send me progress reports of your business. The only condition I ask from you is to carry through and realise your business idea. In addition, be respectful to your parents and keep harmony among your brothers. The money is for you.’

This is the way moral virtue works in Japan. He added that I must not tell anybody about this. Unlike other people, he did not want people to know his good deed. I think this is the highest level of moral virtue called intoku, ‘hidden benefaction’ ... (Idemitsu Sazo, My Sixty Years (Vol. III), cited by Kimoto (2013: 34–35))

On 20 June 1911 (the 14th year of the Meiji era) Idemitsu Shokai was opened in Moji city on Kyushu Island by Idemitsu. His departure from Sakai Shokai occurred in a friendly atmosphere. Idemitsu learnt from Sakai Shokai’s owner that the top executive had to get up earlier, work harder and go to bed later than anybody else on his staff. It was an Idemitsu Sazo (1885–1981) 225 important lesson for him. A framed piece of calligraphy by Tetsuzo Mizushima, the principal of Kobe Commercial High School, was hung on an office wall: it proclaimed the motto, ‘being a samurai in spirit and a merchant in talent’, which would become Idemitsu’s lifelong motto. Moji city was chosen for multiple reasons: (1) it was far removed from Kobe; thus, his business would not interfere with Sakai Shokai’s; (2) the city was growing fast due to its proximity to the Chikuho coalfield and Kita Kyushu industry complex (with its integral steel mill), as well as to China; and (3) a manager of Nippon Sekiyu whom Idemitsu knew was seconded to Moji to head its branch office, a fact which might facilitate Idemitsu’s plan to enter the machine oil (lubricant) business. Nippon Sekiyu’s executive, however, expressed his scepticism about the machine oil business on the grounds that locomotion was increas- ingly driven by electric motors rather than by steam engines, which would mean that the demand for machine oil lubricants would dwindle. Idemitsu later recalled:

Upon opening my business ...I decided to follow Professor Uchiike’s teaching about ‘from producers to consumers’. Producers were emerg- ing everywhere and in every industry, while consumption was becoming diversified; thus the society was becoming more and more complicated, which by force would make indispensable institutions that might link both ends, namely, the producers and the consumers. I was convinced that these institutions would always be needed as long as the human society exists.

[However] everything went wrong. The diffusion of electric devices provoked the decrease in the consumption of machine oil. Dealing in machine oil, therefore, was difficult beyond the imagination of a youngster like me without much work experience. Many colleagues kindly advised me to close down my company ...

A senior colleague of mine encouraged me by pointing out that the success in the machine oil, if achieved, would foretell my success in other businesses and as such I should stick to it by way of touchstone of perseverance . ...(from ‘Together with you, my fellow workers in commemoration of the 2600th year after the accession of Emperor Jinmu’, cited by Kimoto (2013: 46–47))

I started (the oil business) without knowing that background. So I was worried. But I renewed my determination by telling myself ‘where is my belief and conviction if I don’t persevere in my first policy’. (Idemitsu, 1956: 65) 226 Phronesis and Quiddity in Management

Idemitsu and his assistant sought for business among mining compa- nies in the area of Chikuho coalfield without success. After a year of fruitless effort, Idemitsu decided to start visiting textile companies, and a company named Meiji Boseki in Tobata allowed Idemitsu to send them a lubricant sample for testing. Idemitsu, accustomed in his youth to help his father, an indigo dealer, mix different varieties of indigo to obtain the appropriate combination for specific customers, submitted samples of oils of different characteristics, in contrast to other lubricant suppliers, who used to deliver a standard quality oil. Unfortunately, the orders from Meiji Boseki and a small number of other customers were not sufficient to allow the company to thrive. At the end of the third year of Idemitsu Shokai’s operation, Idemitsu was desperate, as the money contributed by Hida was running out. Hida and his family had moved to Moji to be near Idemitsu and to watch how the business developed. In March 1914, Idemitsu visited Hida to consult him about the future of his company and explained to him the situation, expressing his regret that the business was not doing well, and his intention was to close Idemitsu Shokai. To his sur- prise, Hida asked Idemitsu how much more financing he needed and offered to help by selling his property in Kobe. Hida estimated its value at 7,000 yen and exhorted Idemitsu not to give up but to persevere in his endeavour for three, five or ten years more. If Idemitsu ultimately failed, consoled Hida, they would live by begging together. Back at his office, Idemitsu sought information that might guide him in a new business and read in a local newspaper about small fishing boats that were powered by kerosene. This was a revelation for Idemitsu, since he had thought that kerosene customers had been more than suffi- ciently supplied by the existing distributors of Nippon Sekiyu and there would be no way his company could compete with them; however, these boats might offer a new business opportunity. Instead of kerosene, Idemitsu could offer them the use of gas oil. In those days, unlike kerosene, gas oil was not subject to taxation. The cracking temperature was different between kerosene and gas oil, but their composition did not differ too greatly; therefore, Idemitsu guessed that gas oil would not cause any mechanical problems if used to drive engines. His potential customers would also be able to save money if they used gas oil instead of kerosene. Idemitsu bought a boat with a hot bulb engine to test the use of gas oil and discovered that, as for heat efficiency, gas oil was better than kerosene. Even though the ignition point was lower in the case of gas oil, it would not affect the normal operation of engines. Idemitsu Sazo (1885–1981) 227

Idemitsu approached a fishing company (which later would come to be known as Nihon Suisan) in Shimonoseki city, which lies across the channel separating Honshu and Kyushu Island. The company was con- vinced of the advantage of using gas oil by Idemitsu, but pointed out the difficulty Idemitsu might encounter due to the fact that Idemitsu Shokai was not permitted to develop sales activities in Shimonoseki due to a representation contract with Nippon Sekiyu. Undaunted, Idemitsu proposed to fill the customer’s boats with gas oil at sea. Despite the difficulty presented by the rapid current off the coasts of Shimonoseki and Moji, Idemitsu and his employees supplied gas oil to the boats by operating manually handled barges; ultimately, Idemitsu came to acquire a 70 per cent market share in shipping boats and freighters in the Moji and Shimonoseki areas. Nippon Sekiyu’s Moji branch manager appeared to be confident in Idemitsu’s future as a busi- nessman and did not intervene, despite protests from other distributors. The First World War was raging at the time. Idemitsu predicted a shortage of petroleum and recommended his customers to stock up on kerosene and gas oil. In 1914, Japan produced 471,436 kilolitres of petroleum from its own oilfields (50% of its domestic demand) but more production was impossible due to the difficulty of importing steel pipes necessary for oil exploration (Kimoto, 2013: 69); the import of petroleum from abroad was declining due to the war. There was no interruption of Idemitsu’s supply of gas oil to his cus- tomers, all of whom were grateful, since their competitors could not operate their fishing boats due to the oil shortage. The customers were also surprised to discover that the monthly invoices from Idemitsu showed no price increase, owing to his determination to follow Profes- sor Uchiike’s belief that merchants and commercial intermediaries must guarantee and secure a (reasonable) supply of goods to their customers (at a reasonable price).9

Education of his staff Idemitsu deemed the training provided to his employees essential:

Idemitsu Shokai wished to create a better atmosphere at its workplace than any other companies. We equipped each branch with a training camp and lodgings in order that our young apprentices not be influ- enced by habitual vices of society and also for them to socialise with each other ...I feel responsible for them and are in charge of their education on their parents’ behalf. (My Sixty Years (Vol. I), cited by Kimoto (2013: 105–106)) 228 Phronesis and Quiddity in Management

Idemitsu gave guidance to his staff and employees at the office and, in addition, held periodic meetings with them and spent time with them. Idemitsu set a great store on the independence and autonomy of his employees:

It’s not I alone who is independent in the work place. Each employee is also autonomous and independent in their post. In other words, they are responsible for their task and they should carry out their mission ...accordingly, other people are not allowed to interfere in others’ work. This is the meaning of independence and auton- omy ...Thus in their private and public life, they learn the spirit of independence and autonomy; and these staff work in unison in the direction set by the company and bring about the collective strength. That is how we are at Idemitsu. (A speech delivered in September 1940 on the occasion of ‘the 2600th Anniversary of the Jimmu Era’, cited by Kimoto. (2013: 114–115))

Manchuria As early as 1913, Idemitsu conducted a survey on Manchuria and decided to explore its market in the following year. This was done in reaction to the constraints he had always felt in the domestic market, due to his status as a lower-priority distributor of Nippon Sekiyu. For business development purposes, Idemitsu first visited the South Manchuria Railway Company (Mantetsu) and approached its procure- ment department to sell the machine oil or lubricant he had found accumulated in Nippon Sekiyu’s warehouses in Moji due to a lack of buyers. (The petroleum company’s manager doubted the feasibility of selling these products in Manchuria because the import duties were not levied, and therefore high-quality lubricant from the USA dominated the market there.) Idemitsu travelled to Fushun to talk to Mantetsu’s engineer in charge of rolling stock. Very few Japanese visited the city and he was a welcome visitor. The engineer promised to ask his headquarters to test Idemitsu’s sample lubricants. With the request coming from its engineer, Mantetsu could not but agree to conduct the test; the procurement department, however, pointed out that Idemitsu’s lubricants did not comply with Mantetsu’s standard because their specific gravity was too high (0.91 versus <0.9 required by Mantetsu) and the flashing point too low (160 degrees Fahrenheit versus >175 degrees Fahrenheit required by Mantetsu). Idemitsu Sazo (1885–1981) 229

Idemitsu argued that Mantetsu’s standard blindly followed the speci- fications suggested by US suppliers, and managed to convince Mantetsu to conduct an experiment on test wagons – a test which would turn out to be successful. The price quoted by Idemitsu for the lubricants caused a stir among Mantetsu’s staff: instead of the 36 per koku (180 litres) at which Stan- dard Oil was selling their product, Idemitsu only asked 18. For the procurement department this was not acceptable; it would reveal that they had been paying too much to Standard Oil. Some at Mantetsu praised Idemitsu as a conscientious merchant, while others doubted his competency because of this ‘lack of consideration’ towards Mantetsu’s procurement department. In May 1915, Mantetsu placed an order with Idemitsu Shokai for 3 million kokus (54,000 litres) of lubricant. Though it must have been only a very small percentage of Mantetsu’s lubricant consumption, it meant a big deal for Idemitsu. Between 1916 and 1917, the winter in Manchuria was extraordinar- ily severe. Idemitsu travelled to Manchuria and compiled a comparative study of his lubricants and those from US suppliers. He hypothesised that American lubricants were not fit for severe cold conditions. In addition he discovered that American products increased their viscos- ity when the temperature fell below minus 10 degrees, and they started to freeze when the temperature reached minus 20 degrees. In spite of Idemitsu’s warning to Mantetsu about the freezing of lubri- cant and the burning of engine shafts if they continued to depend on the US lubricants, Mantetsu did not take heed. However, the follow- ing winter was even more severe than the year before and, as a result, Mantetsu saw its 700 wagons experiencing burnt-out shafts, with dam- age being estimated at 4 million. What was worse, huge quantities of soy beans and grains had to be discarded because of the transport problems that arose due to these mechanical failures. As a consequence, Idemitsu was invited by Mantetsu to travel to Dalian with sample lubricants. On 7 February 1918, Mantetsu carried out an experiment on the freez- ing of lubricants in the courtyard of a hotel in Changchun, using the samples submitted by Idemitsu (Nippon Sekiyu), Standard Oil, Vacuum and Texas Oil. They were poured into cups and left on the patio for one hour. The outdoor temperature stood at minus 20 degrees. After 30 min- utes it was decided that this period would be long enough to observe the effect of temperature on the oil. The sample lubricants from Stan- dard Oil, Vacuum and Texas Oil were found to be frozen. Idemitsu’s 230 Phronesis and Quiddity in Management sample, however, was left unaffected and remained in a liquid state. A further test was conducted the following day with the wagons travers- ing about 120 kilometres from Changchun to Gongzhuling and back, and the result confirmed the first findings regarding the viscosity of Idemitsu’s samples in extremely cold temperatures. Mantetsu accordingly switched all the supply sources of lubricant from US companies to Idemitsu Shokai. It was later discovered that the lubricants from Standard Oil and Vacuum were made from crude oils rich in paraffin, which showed excellent characteristics for lubrication due to its wax content, but tended to freeze easily; Idemitsu’s lubricants, in contrast, were extracted from crude originating from the Michikawa oilfield in Akita, oil which was rich in naphthene and, owing to its lower wax content, less prone to freezing. Therefore, Idemitsu’s effort to develop lubricants that were not subject to freezing by combining different compositions was also aided by good luck.

Crisis By 1923 Idemitsu Shokai had nearly fifty employees on its payroll. Its branch office network covered Hakata, Osaka, Iwami Ota, Seoul, Jintao and Vladivostok, with each of its branch managers given full power to make decisions. Despite the growth in size, Idemitsu Shokai suffered from a perpet- ual shortage of money. Its business model consisted of delivering goods and collecting payment two or three months after delivery. Compa- nies like Mantetsu, due to its complicated accounting system, even paid the amount due as late as six months after delivery. Thus, the more lubricants Idemitsu sold, the more constrained in finances it became. Though the firm’s profit and loss account was in the black, its bank debts snowballed. On 1 September 1923 at 11:58 a.m. Kanto (Tokyo and its environs) was devastated by what would become known as the Kanto Earthquake. Tokyo and Yokohama were razed to the ground; more than 170,000 houses were destroyed and over 380,000 burnt to the ground; the casu- alties and the missing exceeded 100,000 people. The economic damage was estimated at 5,500 million (which spelled a national disaster when compared with the government’s total budget of 1,400 million). As a result, financial industry almost came to a total halt, with half of all banks’ offices in Tokyo destroyed. In the spring of 1924, Idemitsu received notification from Dai-Ichi Bank’s Moji office to the effect that it would withdraw all the money loaned to Idemitsu Shokai six months after the notification. It signified a Idemitsu Sazo (1885–1981) 231 mortal blow to the company, since the running of its business depended on two banks; namely, the Dai-ichi Bank and the Nijusan Bank, each of which provided a 250,000 credit line. Business with the Dai-ichi Bank had begun in 1917 when Idemitsu met its branch manager, who liked his serious approach to finances. However, the manager left Moji three years later. The chemistry that existed between Idemitsu and this manager did not continue between Idemitsu and the bank manager’s successors. Idemitsu travelled to Manchuria and tried to negotiate with banks in Dalian. While they trusted Idemitsu Shokai’s reputation, 250,000 was too large an amount for these banks to grant, and nobody stepped for- ward to help Idemitsu. Only two months remained before the Dai-ichi credit was to expire. Idemitsu felt regret for having adhered to the idea of wide-area retail business, and he wondered if he should have lim- ited himself to the normal intermediating business between producers and retailers, proceeding in a fashion which lacked complexity and was unencumbered by personal philosophy. One night he was visited by two people, one of whom was a fellow oil distributor while the other a person who appeared to be connected with the underworld. The latter offered him financing of 250,000, but with interest ten times higher than that of a loan from a normal bank. Idemitsu rapidly calculated that the payment of the interest would devour his entire earnings, but thought that the financing would save his company and his employees’ livelihoods. Idemitsu was almost inclined to accept the offer but, before com- mitting himself, he visited and consulted Hida, who had always been against borrowing money from usurers. During his visit, Hida remained silent for some minutes and drew Idemitsu’s attention to the fact that all his properties had been given as a security for Idemitsu’s debts from banks, and that he did not have anything left for further loans; how- ever, Hida indicated, that, if both of them were to go bankrupt due to the closing of Idemitsu Shokai, he was still willing to beg for a living with Idemitsu. Idemitsu felt as if he had been struck by lightning and, relieved, lost his fear of going bankrupt. Back in his office, Idemitsu reviewed his company’s assets and debts, and found that, even after returning 250,000 to Dai-ichi Bank, repay- ing other bank loans and accounts payable, and collecting the pending accounts receivable, he would be left with a certain amount from which indemnity could be paid to his employees. Moreover, he was sure that his staff would be able to manage by themselves, thanks to the training and experience he had given them. 232 Phronesis and Quiddity in Management

With this information, Idemitsu went to see the branch manager of the Nijusan Bank (it was by far a smaller bank than Dai-ichi Bank) and explained to him that, owing to the withdrawal of financing by Dai-ichi Bank, Idemitsu Shokai would be forced to close; however, Idemitsu also guaranteed the manager that the borrowings from his bank would be paid back without fail. Idemitsu asked, in addition, to be given some time to collect pending receivables. The branch manager reviewed Idemitsu’s financial statements and was reassured that Idemitsu’s company was doing well; in addition, in spite of its large debts, it was growing rapidly. The manager decided to go to his headquarters in Oita and immediately took a train to this destination. The branch manager asked for an interview with the president of the Nijusan Bank and was shown to the latter’s office. The president, upon being requested for an increase in the lending to Idemitsu to replace that from the Dai-ichi Bank, asked why the manager considered the opera- tion to be necessary and whether he had any doubts about the future of the client company. The manager stressed that Idemitsu was a reliable man, an individual of virtue, and it was almost their moral obligation as bankers to extend a helping hand to him and his business. 500,000 was equivalent to 17 per cent of Moji branch’s deposits, but the president approved the increase in the credit line to Idemitsu Shokai. However, some directors of the bank expressed their concern with this decision and pressured the president to change his mind. One day, Idemitsu was invited by the bank president to visit him in his residence in Oita. Accompanied by the branch manager, Idemitsu met the bank president. Both men looked at each other without speaking a word. After a short while the president asked Idemitsu if everything would be OK (‘daijobu desuka?’) to which Idemitsu replied ‘daijobu desu’ (‘OK’). The president nodded assent; and both of them contem- plated in silence the Japanese garden facing the room. Idemitsu Shokai was then rescued from the brink of bankruptcy. Idemitsu reminisced years later about this scene as being very much like a dialogue between Zen monks (Hyakuta, 2012a: 288–293). In December 1927 the Nijusan Bank merged with the struggling Oita Bank to become Oita Godo Bank, and a new, 48-year-old president was appointed. The new management instructed the review of all loans. The audit department classified the loans to Idemitsu Shokai as bad debts on the ground that, despite the firm’s economic performance, the banks debts represented an extraordinary proportion in relation to its equity. The loans to Idemitsu by then amounted to 800,000. Idemitsu Sazo (1885–1981) 233

The Moji branch manager (who, too, was new) was reluctant to carry out the sudden withdrawal of the credit that had been extended to Idemitsu due to his fear of its collapse and the subsequent conversion of all the loans into non-performing debts. The branch manager frequently visited Idemitsu Shokai to check its financial statements and books; he increasingly became aware that Idemitsu was not a run-of-the-mill-type of businessman. Idemitsu’s insistence on the company’s priority to return a part of its profits to society and the consumers, and his credo that Idemitsu Shokai must not be a ‘slave to gold’ struck the manager as being the characteristics typical of a confidence man. Due to his suspicions he decided to observe the behaviour of Idemitsu and his staff more closely. After a while, the branch manager realised Idemitsu believed whole- heartedly in his credo.10 His staff, for whom no attendance book nor written manuals of operation existed, started their day earlier than any- body else and worked until very late at night. Idemitsu was always found working with them for long hours. After three months investigating Idemitsu Shokai, the bank manager decided to recommend that the bank headquarters not withdraw money from the company; he was adamant on that point. The branch manager was called to Oita for a meeting with the presi- dent of Oita Godo Bank. During the meeting, the manager emphasised the need to help a company like Idemitsu, in the belief that a banker’s mission was to help such enterprises to grow. The president asked him to arrange a private meeting with Idemitsu in three days’ time in a Japanese restaurant in Oita. On the day following the meeting, the president declared in an executive committee meeting that: (1) the decision to withdraw the loans from Idemitsu would be reversed, and (2) the credit line to the same would be increased (Hyakuta, 2012b: 308–312). Idemitsu always held a conviction that banks were willing to lend money if the customer’s business was healthy:

We at our company believe that the ideal thing is not to have any equity of one’s own; not to allow capitalists to exploit other people; and not to become the ‘slaves to gold’. Therefore, we run our business on the basis of borrowed money. People have a negative view of bank borrowing for the financing of business, but the fact of the matter is that many of them cannot bor- row, because their businesses are not in a good shape and banks do not want to deal with them. A company like Idemitsu must be able to 234 Phronesis and Quiddity in Management

operate with bank debts, as its economic health is fine. People should not blame banks for not lending them money if their businesses are not doing well. Even though we have undergone much strain and difficulty, we have so far managed to borrow necessary monies from banks. Many banks told me that they had been endeavouring to help Idemitsu to grow. (From ‘People’s World’ and ‘Things’ World’, dated August 1966, cited in Kimoto (2013: 121–122))

The Second Sino-Japanese War and the Second World War Two events had a great impact on Idemitsu’s subsequent course of action: The Second Sino-Japanese War (7 July 1937–2 September 1945) and the Second World War (1 September 1939–2 September 1945). In 1930 the number of the jobless in Japan rose to 3 million in the aftermath of the Wall Street Crash that plunged the world economy into what became known as the Great Depression. The petroleum market suffered from a glut which was worsened by the dumping practised by foreign petroleum companies that thus tried to seek a solution to the reduced demand. Nippon Sekiyu sought a way out by deciding to exploit the Korean and Taiwanese markets with its own direct distribution network; Idemitsu protested against this action, but to no avail; as a consequence, Idemitsu was forced to withdraw from these two markets. Manchuria accordingly became the centre of Idemitsu’s business activities in the light of growingly fierce competition in the Japanese market. In 1931, Mantetsu’s railway line was damaged by an explosion near Liutiaohu,11 an event which would be named ‘the Mukden Incident, also known as the Manchurian Incident, [a] was a staged event engi- neered by Japanese military personnel as a pretext for invading the northern part of China, known as Manchuria, in 1931’.12 In 1932, Japan’s prime minister, Tsuyoshi Inukai, was assassinated by a group of young Navy officers discontented with his government’s poli- cies (the 15 May Incident). It was a further push towards control of political power by the military. Prior to this, in March, Manchukuo, Japan’s puppet nation in present-day China, was established under the leadership of the Kanto Army stationed in Manchuria. The USA and the UK protested this act as an infringement of 1922’s Nine Power Treaty on the integrity of China’s territory. (The majority of the member countries of the League of Nations did not recognise Manchukuo as an independent country; as a consequence, Japan declared its break with the League in 1938.) Idemitsu Sazo (1885–1981) 235

In 1934, the Manchukuo government founded Manshu Sekiyu Kabushiki Kaisha with the participation of the Japanese government (1million), Mantetsu (2 million), Nippon Sekiyu and two other petroleum companies, and Mitsui and Company (each investing, 500,000). Its intention was to monopolise the sale of petroleum prod- ucts. The supply sources would be Manshu Sekiyu (50%) and Standard Oil, Texas Oil and Asia Oil (the Royal Dutch Shell) (50% distributed among them). Idemitsu travelled to Manchuria and tried to dissuade Manshu Sekiyu and the Manchukuo government by stressing the danger of confronting the interests of foreign majors (see Appendix 4). In 1935 the Manchukuo government inaugurated the monopolistic petroleum distribution by Manshu Sekiyu. The reaction from the USA and the UK did not take much time; they flatly refused to have dealings with Manshu Sekiyu, and the Californian crude exporters formed an alliance to prohibit the sale of crude oil to Manshu Sekiyu. The boycott by the majors took the shape of the dumping of gasoline at a level of half its price on the Manchurian market when Manshu Sekiyu’s refinery plant was commissioned a year later. Manshu Sekiyu was forced to reach an agreement with the majors by sharing the market (i.e., 22.5% for Manshu Sekiyu, 77.5% for the majors). In the meantime, Idemitsu Shokai deployed its sales-might by tak- ing advantage of its capillary distribution network in Manchuria. Its sales force sold Manshu Sekiyu’s products by carrying them in cans on handcarts, and by visiting customers door to door. In the same year (1935), Idemitsu despatched a manager and his assis- tant to Shanghai to enter its petroleum market.13 The two men managed to break into the closed circle of the petroleum industry in Shanghai and to contract the use of government-owned storage, to which six months later an oil tanker from Japan delivered 2,000 boxes (hako = 0.036 kilolitre) of kerosene. Prior to starting their operation, Idemitsu sent a letter to the USA and the UK petroleum companies explaining that Japan had to seek a market for its surplus kerosene production (estimated to be 36,000 kilolitres) and warning that any intent on their part to jeopardise their operation would provoke a reaction by Idemitsu to protect itself. The head of Stanvac (Standard-Vacuum Oil, a joint venture for Asia between Standard Oil of New Jersey and Standard Oil of New York) instructed his sales manager to crush Idemitsu Shokai. Oil majors tried to practise dumping in the areas where Idemitsu Shokai sold kerosene. Idemitsu’s staff (fifty people brought from Japan) employed guerrilla 236 Phronesis and Quiddity in Management warfare tactics; by the time the majors started to dump kerosene in an area, Idemitsu had moved to another location. The Japanese moved by small boats loaded with one ‘to’ cans (about 18 litres) up and down the channels in Shanghai. After six months, in view of mounting losses incurred because of their dumping practices, the majors decided not to continue to confront Idemitsu Shokai. On 26 February 1936, young Army officers broke into the official resi- dences of the prime minister and a number of other ministers and killed Makoto Saito, the Home Minister, and Korekiyo Takahashi, the Finance Minister. Infuriated, the Japanese Emperor ordered the suppression of the units that had revolted. However, in the wake of the incident, the intervention of the Army in Japanese politics began: reversing the tra- dition of appointing retired generals and admirals to the ministerial positions in charge of the Army and the Navy, those in active service were appointed in the following year. In April 1936 the government started to control petroleum distribu- tion in Japan by setting up Sekiyu Rengo (Sekiren – the Association of Petroleum) as a joint stock company with the participation of Nippon Sekiyu, Ogura, Mitsubishi and so on. Sekiyu Rengo controlled the gaso- line distribution as well as the price-setting, sales quotas and so on of petroleum and its products in general. Idemitsu Shokai was excluded from Sekiren. Sekiyu Rengo was also assigned the role of controlling and distributing petroleum in Manchuria, to the dismay of Idemitsu. His company had already established a network of its own not only in Manchuria but also in China as a whole. For the following ten years Idemitsu waged a war against the domination of Sekiyu Rengo. Idemitsu vented his anger against the incompetency of the bureau- cratic machine:

After the Sino-Japanese conflict started, power shifted into the hands of the bureaucracy. The conflict developed into the Greater East Asia War, which is the largest war we ever had ...and required all- out effort from everybody. With the pretext of a planned economy, extremely strict control was exerted. Public functionaries made a commendable effort day and night. Undeniable, however, is their lack of experience resulting in a weak power base. A lack of experience means no possibility to exercise one’s own sixth sense and to achieve a simplified future vision. They cannot discern and define objec- tives; nor can they know how to appropriately use their power. Their effort is wide of the mark and cannot lead anywhere. Their habit Idemitsu Sazo (1885–1981) 237

forces them to map out, first of all, steps and orients them towards the easiest way. They launch a huge number of laws and regula- tions as well as the creation of units, centres, institutions, etc. Thus, birth is given to control committees, associations, unions, commis- sions, state-owned companies, subsidiaries, giving the impression of completion. These measures may serve us in facing the current critical situation; but the other side of the coin is that responsibility shirking, division- ism, red tape, inefficiency were put in place. These would hamper and delay an all-out effort. The officials would set store by the interpreta- tion of phrases and clauses of hastily prepared regulations and laws; in the process they would lose sight of the real objective, be led astray, and would evade responsibility by submitting any decision to collec- tive meetings. These officials, in their ignorance and lack of practical wisdom, would set up an endless number of controlling organisations to the detriment of simplicity ...They are to rules and official bodies what slaves are to capital ... (‘The New Year’s Speech in the Third Year of the Holy War’, cited by Kimoto (2013: 130–131))

In July 1937, a confrontation (the Marco Polo Bridge Incident14) between the Republic of China’s National Revolutionary Army and the Imperial Japanese Army took place, marking the start of the Second Sino-Japanese War (1937–1945). In April 1938 the General National Mobilisation Law was approved in order to equip the government with the power to mobilise all the necessary resources to pursue war with China. In the same year, Austria was annexed by Germany (the Anschluss). In July, Japan decided not to participate in the Olympic Games scheduled for 1940. Idemitsu was horrified at the ignorance about the importance of petroleum among the military and even businessmen in the petroleum industry. For him, a country like Japan without petroleum resources must keep good relations with the USA. In line with this idea, Idemitsu made up his mind to construct a large-scale oil deposit complex (100,000 tons) in Shanghai; his staff, however, voiced a concern in the light of the rumour that the Imperial Japanese Army might with- draw from central China, a move which would leave the deposits unprotected. Sekiren management devised a plot to snatch the deposit complexes, when built, out of Idemitsu’s hands (Hyakuta, 2012a: 336–337). Their 238 Phronesis and Quiddity in Management plot consisted of: (1) having these deposits requisitioned by the Army, (2) importing crude from abroad, (3) depositing it in a ‘bonded’ area in Japan (which would grant Sekiren the exemption of import duties, if the refined products were exported in less than one year) and (4) send- ing the product to Shanghai, depositing it in Idemitsu’s deposit complex and then selling it in China. As the yen–dollar exchange rate in Japan was $23 per 100, the sales collected in dollars in Shanghai and converted in yen at $11 per 100 would contribute huge profits to Sekiren. A confrontation with Russia (known as the Battles of Khalkhin Gol15) and the USA’s denunciation of its trade treaty with Japan in 1939 brought about a petroleum rationing system in Japan. It meant that the only way for Idemitsu Shokai to survive was to shift its centre of operation to the Chinese market. Idemitsu had learnt by then of Sekiren’s plan to steal his deposit complex thanks to his intelligence gathering network. He visited the Ministry of Trade and Industry to denounce Sekiren’s plan on the grounds that the company was trying to make money at the cost of the national interest by speculating on the difference in exchange rates. As a result, he succeeded in pre-empting his adversary’s planned moves. In March 1940, the first phase of the petroleum deposit complex, which comprised of nine tanks, was inaugurated, with a deposit of 30,000 kilolitres in total. Kerosene and gasoline imported from smaller US oil companies were stored in these tanks. However, soon afterwards, Idemitsu received a request from the General Staff of the Imperial Japanese Navy Air Service (kaigun koku honbu) in Tokyo to the effect that it wanted to make use of the Shanghai petroleum deposits. Despite the outcry of disgust among his staff regarding this request, Idemitsu opted to accept it for the sake of national interest (Hyakuta, 2012b: 344). The rental fees (3,000 per month) paid by the Navy were not sufficient to pay even the interest on the debt contracted to finance the construction of the deposits. Nonetheless, Idemitsu went forward with the construction of the second phase. In mid-1940, rice began being rationed in Japan. In Europe, the German Army occupied France and conquered the majority of Western Europe. German air raids on the UK started. In September, the Tripar- tite Pact was signed among Germany, Italy and Japan. This act meant that Japan irremediably turned against the USA and the UK. When Idemitsu heard of the pact he at once concluded that petroleum would become a lethal weapon, and Japan’s survival as a nation would be in peril (Hyakuta, 2012a: 346). The USA immediately declared an economic Idemitsu Sazo (1885–1981) 239 sanction against Japan and banned exports of scrap iron, steel and high- octane gasoline for airplanes to Japan. Idemitsu suspected that total prohibition of the export of petroleum would subsequently occur. The Japanese government set up Sekiyu Kyohan Kabushiki Kaisha (Kyohan) to exert more control on the distribution of petroleum. (Kyohan was the continuation of Sekiren and would later become Sekito.) This meant that petroleum companies might not be able to buy petroleum except through Kyohan. Idemitsu was forced to resize its business in Japan and to move its centre of operation to Manchuria and China. Accordingly, Idemitsu, though he had until then been reluctant, founded joint-stock compa- nies in Manchuria and China. Mantetsu and the Imperial Japanese Army had been already pressing Idemitsu to do so. Idemitsu at that time had over fifty branches abroad with six hundred employees (Hyakuta, 2012a: 346–347). Idemitsu never liked the idea of incorporating his business as a joint-stock company, convinced that Idemitsu must be his and his employees’, and not subject to control by shareholders. However, the domestic operation came under the control of a newly incorporated joint-stock company. The three companies in Manchuria, China and Japan were put under the management of Idemitsu Kosan, a private company; and the head office was moved from Moji to Tokyo. War against the USA, the UK and the Netherlands was declared on 8 December 1941. That year, Japan produced 308,000 kilolitres of crude oil, seven hundred times less than that of the USA’s 220 million; Japan could only satisfy 12 per cent of its oil demand through domestic pro- duction, the balance during peacetime being met by the import from the US (4/5) and Dutch Indonesia (1/5) (Cohen (1973), cited by Kimoto (2013: 134)). Japan’s need of petroleum amounted to 5,560,00 kilolitres, which included non-military and military consumption; when the war started, Japan had a stockpile of 6,787,000 kilolitres (Kimoto, 2013: 134–135). Therefore, the securing of the oil supply from Indonesia (which was producing 10 million kilolitres) was essential for Japan. As early as June 1941, Japan stopped exploring new domestic oilfields, and the drilling equipment and other machinery were put into storage in preparation for ‘operation oil fields occupation’ in South-East Asia (Kimoto, 2013: 134–135). In July 1941, Japan invaded Indochina, a move which was consid- ered by the USA as preparation for war with them. Accordingly, the USA 240 Phronesis and Quiddity in Management declared the freeze of Japanese assets located in the USA. The UK and the Netherlands followed suit. In August the USA declared a total ban on the export of petroleum to Japan. Idemitsu estimated that 80 per cent of Japan’s petroleum need was supplied by the USA, and conjec- tured that Japan’s oil reserves would run out in six months to one year’s time (Hyakuta, 2012a: 354). On 1 September, two months after war was declared, specialists in oil exploration were conscripted and despatched to Saigon by 5 November. A number of them were sent to northern Borneo on 13 December, where they found the existing oilfield and refinery had been destroyed. How- ever, by mid-March of the following year, both were reconstructed and the first cargo of 6,000 kilolitres of oil was shipped to Japan. Another group of oil specialists was transported to Sumatra on 11 February 1942, and the Palembang refinery was occupied by forty parachutists on 24 February. The Palembang oilfield, the largest in South-East Asia, could produce more than Japan’s yearly domestic consumption. Idemitsu was relieved (Hyakuta, 2012a: 357). For the administration of petroleum, Japan’s Southern Expeditionary Army Group (NA) planned to set up a government-led company (kokusaku kaisha) with the participation of petroleum companies and trading houses. The number of employees was going to be as high as 2,500. The Ministry of War (rikugunsho) in Tokyo thought the number too excessive and suspected devious planning on the part of the par- ticipating companies, who may have wanted to monopolise petroleum interests after the war (Hyakuta, 2012a: 358–359). Idemitsu was approached by a colonel in the ministry, who asked his opinion on how to design and implement the management of petroleum policy in occupied South-East Asia. Idemitsu estimated two hundred people would be sufficient and promised to send his staff in a week’s time;16 he also commented that he was willing to sacri- fice his company if it was to help the country (Hyakuta, 2012a: 362). Accordingly, the colonel thought it natural that people incapable of understanding Idemitsu considered him crazy (Hyakuta, 2012a: 363). To the dismay of the NA, the Ministry of War finally appointed Idemitsu Shokai to be in charge of petroleum policy management and asked Idemitsu to send a survey mission in July 1942. The atmosphere in Tokyo was exuberant; however, one month earlier Japan had lost four aircraft carriers in the Battle of Midway, a fact which the Navy had hidden from the public. What was worse, Japan was to lose a consid- erable number of its airplanes in the Battle of Guadalcanal that would be fought in August 1942. Idemitsu was in total ignorance of the real situation (Hyakuta, 2012a: 364). Idemitsu Sazo (1885–1981) 241

The survey mission, upon arriving in Singapore, found that there was strong resistance, among some of the military members, to working with Idemitsu Kosan. However, the Idemitsu mission pushed ahead and asked their Japan headquarters to send ninety-six employees: sixteen seconded in seven posts in the Philippines, nine in two posts in Burma, twenty-five in eleven posts in Malaysia, ten in three posts in Sumatra, thirty-one in twenty-one posts in Java and eight in sixteen posts in Borneo (Hyakuta, 2012a: 367–368). Local people were also hired. Thus, in less than two months the petroleum supply network had been put in place. By 1943 the Japanese economy showed signs of stalling. Many fac- tories wound down and shop shelves were emptying. Idemitsu Kosan in Japan could only sell goods that were not under state control and had to resize many of its branch offices; nevertheless, in Manchuria and China it sold petroleum and was prospering (Hyakuta, 2012a: 370). It also had 140 and 166 employees seconded to the Army and Navy in South-East Asia. In May, the airplane on which Isoroku Yamamoto, the commander- in-chief of the Combined Fleet, was travelling, was shot down by a US aircraft. Idemitsu found that there was a large discrepancy between the petroleum production in South-East Asia and the amount actually imported, and determined that many vessels sank during their voyage to Japan (Hyakuta, 2012a: 372). The Combined Fleet did not protect cargo vessels, which were easy targets for US submarines. An association for marines killed on active service estimated that 3,575 merchant vessels, 2,070 motorboats and 1,595 fishing boats (a total of 7,240 ships) were sunk during the war, a figure that represents the death of 60,000 sailors and fishermen; the casualty ratio was 43 per cent, higher than that of Army soldiers (20%) and Navy seamen (16%) (Hyakuta, 2012a: 373). On 9 March 1945 Tokyo was bombarded by 325 B29 bombers: 100,000 inhabitants were killed, the injured numbered 50,000, 260,000 houses were burnt down and the number of air raid victims exceeded 1 million people. Idemitsu sent his wife and his daughters away from Tokyo, but kept his eldest son with him in the belief that a Japanese man should not retreat before the enemy (Hyakuta, 2012a: 379–380). In May, Germany surrendered unconditionally, and Japan was left alone to keep fighting. In August, atomic bombs were dropped on Hiroshima and Nagasaki, and on 15 August Japan accepted the Potsdam Declaration and surrendered. The petroleum reserve in Japan was almost zero and there was no possibility of the country continuing to wage war. 242 Phronesis and Quiddity in Management

After the war In the final year of the war Idemitsu turned sixty, an age at which many people retire. Idemitsu Kosan then had sixty-two branches outside Japan, whereas in Japan it had only eight. The majority of its staff was working in countries such as Korea, Manchuria, China, the Philippines, Vietnam and Indonesia. All these overseas branches would be lost; how- ever, Idemitsu was more concerned about the safe return of his staff from abroad than the collapse of these branches (Hyakuta, 2012a: 14). On 17 August Idemitsu called all his employees to a meeting on the second floor of their Tokyo headquarters, to which the company had moved from Moji in 1940. Out of 1,000 employees, 700 were seconded abroad and 200 conscripted to the Army. A total of 149 employees were in Japan and there were only sixty in Tokyo. Some managers expected Idemitsu would declare the closure of the company, since the defeat of Japan spelled the loss of the company’s assets outside Japan. Idemitsu slowly but firmly told his staff not to be querulous or grum- ble about their fate; instead, they should face up to their situation. He then emphasised the fact that Japan boasted a 3,000-year history and its people should not lose their pride as a great nation as it was a cer- tainty that, as long as the Japanese people existed, the country would pick itself up. He expressed his conviction that Japan would re-emerge and surprise the world (Hyakuta, 2012a: 16). On 30 August General MacArthur flew in to Japan at Atsugi airbase, and on 2 September the Japanese government signed what became known as the ‘Japanese Instrument of Surrender’ and both the Army and the Navy were dissolved. On 8 September United Nations forces set up General Headquarters (GHQ) in the Dai-ichi Seimei Building in Hibiya, Tokyo. Idemitsu Shokai remained open, but, without access to oil supply, could not conduct any business. In a board meeting a number of direc- tors suggested that the company should dismiss its employees. Idemitsu resolutely opposed this and stressed that they would not rescind any employee’s contract. Since its inception in 1911, Idemitsu Shokai had never fired anybody; ‘no dismissal’ was regarded to be an unwritten rule within the company (Hyakuta, 2012a: 21). Idemitsu argued as follows:

Regarding Idemitsu, a small portion of its business in Japan remained because of the control over it during war-time. Business in Taiwan, Korea, Manchuria, China, and other areas in South Asia disappeared Idemitsu Sazo (1885–1981) 243

with the atomic bombs. Idemitsu invested the resources it had gained in Japan in overseas markets, and from such investments it obtained considerable proceeds, but neither the principal nor profits could be repatriated. Accordingly, Idemitsu was only left with its debts. Though our business disappeared and only debts remained, Idemitsu still has 800 capable staff abroad. They are our only capital, and they would create our future businesses. Idemitsu, respectful of human beings, must not dismiss any of its staff. (A speech on the occasion of the reading of an Imperial Rescript recorded in My Sixty Years, cited by Kimoto (2013: 145))

Radio days In November 1945, an ex-colonel named Kosuke Nagai paid a visit to Idemitsu and proposed to switch to a radio repair business, stating that GHQ had decided to increase the coverage of radio for a better dissem- ination of its occupation policy and the new business could provide necessary materials to repair six hundred radios believed to be out of order (Kimoto, 2013: 156). Idemitsu thought the proposal was in line with his idea of large-area retail business and offered Nagai employment at Idemitsu, asking him how much money he would need to start up the repair business. Nagai said 5 million would suffice and was instructed by Idemitsu to visit the Bank of Tokyo and Mitsui Bank to borrow the sum. On 4 January 1946, Nagai finally managed to obtain the necessary financing to the amount of 10 million, although he needed only half the amount. Upon being granted this sum, Nagai asked Idemitsu what he should do with the remaining monies. Instead of insisting Nagai to leave it with the head- quarters, Idemitsu encouraged him to keep it for the future expansion of his department (Kimoto, 2013: 161). Idemitsu recounted in his memoir as follows:

Of course I don’t doubt that the repair and distribution of radio sets per se is an important national initiative, but, based on my belief, I absolutely wish that through ‘the radio repair business, it not being our ultimate target, we can benefit our nation country by show- ing through this plan the true meaning of hard and sincere work’. Without such a belief, the radio repair department lacks meaning for Idemitsu. Only by realising the spirit of the respect of man, and earnest and sincere work through the endeavour of the radio depart- ment can Idemitsu fulfil its reason for being and would not betray 244 Phronesis and Quiddity in Management

the expectations cherished by our repatriating staff and our new recruits ... (‘The Speech dated February 1st, 1946’, cited by Kimoto (2013: 159))

The radio repair department set to establishing a network of repair shops. Amongst the selection criteria for the locations of a shop was: (1) that it be convertible in future into a petrol station, (2) that there- fore it be in a main town and near the coast, (3) that it preferably be a detached house. To start with, fifty locations were rented to lodge former Navy engineers and Idemitsu employees. The new hires counted nearly one hundred despite the post-war economic depression. Typically, the repair shop had an opening of 1.8 metres, was staffed by four employees, and sold radio valves and light bulbs. Even medicines were on display, a practice conducted so that the payroll could be met. The necessary materials for radio repair were procured from the Occupa- tion Army and electric appliance manufacturers. The latter source often failed in their supply and the staff had to go to bazaars to obtain supplies they needed (e.g., Okachimachi in Tokyo) (Kimoto, 2013: 163).

Repatriation of the staff from abroad On 12 February 1946 the first group of seventeen repatriated employ- ees arrived from Malaysia. Among this group was Masami Ishida, who would, years later, become Idemitsu’s president. Ishida pleased Idemitsu by his report that, though the war was lost, Idemitsu’s staff complied with the mission entrusted to them by Idemitsu (Kimoto, 2013: 163).17

Doing whatever business one can In order to maintain employment and feed its employees Idemitsu did anything it could lay its hands on: vinegar and soy sauce production and sales in Ibaraki Prefecture, a fishery in Mie Prefecture, agriculture at the foot of Mt Daisen in the San’in region, a printing business in Tokyo. Some branches even dealt in black-market goods in order to keep Idemitsu’s word to rehire anybody coming back from abroad (Kimoto, 2013: 172). On many occasions the profitability of these businesses was called into question. For example, in a poultry firm at the foot of Mt Daisen, eggs sold well, but later they discovered that the pricing was faulty: they had not taken into consideration the cost of feeding the poultry. In another business, the person in charge did not know that overheads Idemitsu Sazo (1885–1981) 245 must be included in the pricing, and was happy with a loss-making transaction until his mistake was pointed out.

Where even the Navy feared to tread During the months after the war ended, law after law regarding petroleum was scrapped without any new regulations taking their place. Immediately after the war the oil reserve in Japan was estimated at 450,000 kilolitres, only 7 per cent of what Japan had at the beginning of the war (6,787,000 kilolitres) (Kimoto, 2013: 175). The government, led by Prince Higashi-kuninomiya, asked permission from GHQ to import petroleum, but the request was refused. On 13 October 1945, GHQ issued a memorandum that exhorted the use of stocked waste oil and other petroleum products and encouraged the distribution of these items through legitimate channels; a portion of kerosene for GHQ (that had been destined to GHQ by the government) was released to the public market in December. An official at GHQ suggested that the waste oil stored at the bottom of the Japanese Navy’s oil deposits should be used. In response, Japan’s Ministry of Commerce and Industry invited tenders to extract the waste oil; however, nobody submitted a bid. Even towards the end of the war, the Navy, with all the problems of the shortage of oil, did not dare to touch it: they were afraid of the existence of toxic or explosive gases. In March 1946, an official from the Ministry of Commerce and Indus- try visited Idemitsu and asked for his help. Idemitsu’s guess was that GHQ would not allow Japan to start importing oil unless the waste oil issue was sorted out. A former Naval officer working in the radio repair department informed Idemitsu management that the waste oil at the bottom of the tank had been mixed with rainwater and mud; as a result, while the oil content would not be great, oil might be obtained from the mud. The major difficulty was the need to extract the mud from the tank bottom by hand; pumps would be impossible to use as they would easily be choked by the mud. Idemitsu asked his staff’s opinion; many of them were against the idea. However, Idemitsu decided to accept the request: (1) because Idemitsu Shokai’s motto was not to be a ‘slave to gold’,18 and thus whether the operation was profitable or not should not affect its deci- sion to accept the challenge; (2) because, though it had been repairing radio sets and conducting several other businesses, Idemitsu’s principal business was related to petroleum; (3) because this might be the first step towards a renewed petroleum business; and (4) because, if successful, Japan would restart the import of petroleum (Hyakuta, 2012a: 74–79). 246 Phronesis and Quiddity in Management

Immediately, Idemitsu closed some of Idemistu’s unprofitable busi- nesses and assigned the staff from them to the oil dredging project. Two hundred employees were sent to the eight former Navy oil deposits in Hokkaido, Ominato, Yokohama, Yokkaichi, Maizuru, Kure, Tokuyama and Sasebo. The operation began in April 1947. In Tokuyama, for example, the tank was 88 metres in diameter and 10 metres deep, and was buried underground. One of the staff volunteered to go down by ladder to the bottom with a lifeline tied to his body. He was instructed to pull the lifeline as soon as he experienced breathing difficulties. Stripped naked, he dredged the mud for eighteen minutes, but feeling dizzy, he was pulled out of the tank and then fainted. It was therefore decided that the employee working in the tank would be changed every ten minutes. The work continued in all eight locations. In winter the operators suffered from chilblains and severe chapping of the skin. Despite the physical strains experienced by the staff of Idemitsu, the dredging work turned to be less profitable than expected due to the rise of inflation that started in the summer of 1946. The contract with the Ministry of Commerce and Industry entitled Idemitsu to get 259 for each litre of waste oil, and the initial estimate promised a return of more than 5 million to Idemitsu; however, inflation increased the cost of such expenses as freight, warehouse rental and personnel, and ended up erod- ing the profit. Idemitsu’s management reckoned that the break-even point would be surpassed by the end of 1947. Idemitsu felt sorry for his employees, who were doing their utmost to help the company, and he prohibited anyone from telling the operators who were dredging the tanks about the economic losses which the company might incur. Some of the directors recommended the cancellation of the contract as there would be no penalty for doing so. Idemitsu, however, stuck to the ini- tial intention of carrying the project through on the grounds that the work was not only for Idemitsu’s benefit; the future of Japan’s petroleum industry depended on its success. He was convinced that the suspen- sion of the project would result in GHQ having a negative impression of the Japanese people, and Idemitsu staff would become a laughing stock (Hyakuta, 2012a: 109–111). The dredging work lasted one year and four months, between April 1946 and July 1947. Idemitsu collected 20,000 kilolitres of oil, for each litre it was paid the above-mentioned 259, totalling 5 million in revenue; however, in the process it lost 5.7 million (Kimoto, 2013: 179). Idemitsu Sazo (1885–1981) 247

Purge from public posts In June 1947, GHQ made public its memorandum on the purge from public posts of those who corresponded to one of the seven categories: (1) war criminals, (2) Army and Navy officers, (3) principal members of ultra-rightest parties, (4) members of the Taisei Yokusankai,19 (5) directors of overseas financial institutions and development organisa- tions, (6) official administrators of locations occupied by Japan such as Manchuria, Taiwan and Korea and (7) other militarists and ultranation- alists. Based on GHQ’s memorandum, in the following month the Japanese government promulgated the decree on the purge from public posts and set up committees to identify people to be purged. Ultimately, a total of 206,000 people were ousted from public posts, including business- men such as Konosuke Matsushita on the charge of having constructed wooden aircraft on the order of the Army (Hyakuta, 2012a: 87–88). Many directors of Sekito were purged; however, Idemitsu considered himself free from any suspicion as he had not been a member of the organisation. The reality was that, at the beginning of June he was informed about his inclusion in the list of those to be purged and that he would no longer be a member of the House of Peers (of which he had been a member since 1937). Idemitsu did not care about losing his posi- tion in the House of Peers, but became angry because he was considered to be a confirmed militarist (he was not required to leave the presidency of Idemitsu Kosan, however) (Hyakuta, 2012a: 88). Idemitsu appealed to the relevant committee (koshoku shikaku sogan shinsakai) and asked for a review of the decision but received an answer stressing the impossibility of repeal. Idemitsu sent a protest to GHQ, too, but the answer to his protest noted his wartime collaborationist past. Idemitsu pulled all the strings within his reach to investigate the real reason of his purge. He discovered that the requisition of Texas Oil Company’s oil tanks in Shanghai during the war had been attributed to Idemitsu and was given as the reason. In reality, the requisition was made by the Army, and the management of the tanks was assigned to another company. His staff suggested that Idemitsu should contact the government and explain this fact. Idemitsu thought better of it and decided to go to GHQ personally. He was received by two officers at GHQ’s G2 to whom Idemitsu explained the situation through the translation of one of his younger staff members. Obviously, the Americans were not impressed and greeted his explanation with jeers. Idemitsu barked at them and asked them if they were not ashamed of discriminating against an 248 Phronesis and Quiddity in Management innocent man. The two Americans’ superior, who was in the room, approached Idemitsu and told him that he would look into the mat- ter. Idemitsu told his staff not to use the word ‘please’, because he was not presenting a petition, but instead was demanding justice and was speaking not only for himself, but for Idemitsu Kosan’s entire personnel (Hyakuta, 2012a: 91–92). The US superior was Major John Fujio Aiso, a third-generation Japanese born in the USA in 1909, and a lawyer trained at Harvard Law School (who was to be appointed a judge in California in later years). Major Aiso instructed his staff to review Idemitsu’s case and investi- gate Idemitsu’s activities during the war. Based on the report from his staff, Aiso recommended to his department that they remove Idemitsu’s name from the list. However, another unit (GS) opposed this recom- mendation, so Aiso visited GS and demanded to know the reason for their decision to keep Idemitsu’s name on the purge list. A few days afterwards, Idemitsu received notification that the charge against him had been dropped. His staff was jubilant, but Idemitsu did not show any emotion. Idemitsu reproached them and told them that the charge had been groundless and there was no reason to rejoice; rather, in its lieu, they should be angry with GHQ’s arbitrariness. He emphasised that they were not slaves to GHQ. His staff realised that they had been acting as if GHQ were their king, and that the only person equal in spirit to the Occupation Army was Idemitsu (Hyakuta, 2012a: 87–94, 126–128).

Struggle with Sekito At the beginning September 1946, Idemitsu submitted a proposal titled ‘On Japan’s petroleum policy’ to the Minister of Commerce and Indus- try, which was designed to protect Japan’s petroleum market from monopolisation and exploitation by foreign petroleum companies, to reopen the refineries on the coast of the Pacific Ocean, and to help Japanese petroleum companies to build large-scale refineries in the Kanto (Tokyo) and Kansai (Osaka) areas (Hyakuta, 2012a: 100). No reaction was elicited from the ministry, so Idemitsu personally vis- ited their offices and spoke with the chief of petroleum section. Idemitsu sensed in this discussion that the government’s intention was to set in place some organisation to control the industry instead of giving it back its freedom. Returning to his office, Idemitsu drafted another proposal titled ‘An opinion about the petroleum distribution structure’, pointing out the inconvenient wartime practices committed by Sekito, and sent it to the government, petroleum companies and GHQ. Idemitsu Sazo (1885–1981) 249

In mid-September, about one week after Idemitsu’s document had been distributed, GHQ demanded the reorganisation of the petroleum distribution structure. Idemitsu’s staff were pleased, but he cautioned them, noting that Japan had to be careful about the intent of any American petroleum companies’ attempts at controlling the Japanese market (Hyakuta, 2012a: 106–107). At the end of September Sekito changed its name from Petroleum Dis- tribution Control Company (Sekiyu Haikyu Tosei Kaisha) to Petroleum Distribution Company, dropping the word ‘control’. Idemitsu doubted whether GHQ would be fooled by such a cheap trick. In fact, GHQ’s reaction came quickly. It ordered the closure of all the refineries on the Pacific coast by 30 November. In December it further ordered the dissolution of Sekito and demanded a proposal to set up a new state-participated organisation for petroleum distribution. Idemitsu was suspicious of the reasons behind the senior American officers’ order to close all the refineries. As a matter of fact, GHQ had advisors (PAG – Petroleum Advisory Group) from Stanvac, Rising Sun (Shell), Caltex, Tidewater and, later on, Union (Hyakuta, 2012a: 107). Going against Idemitsu’s suggestion to create a totally new organisa- tion, the ministry sent a new plan for Petroleum Public Company to GHQ in November. The company was, in fact, the same organisation as Sekito as regards to its structure and management. In January 1947, GHQ approached a former Japanese Army intel- ligence officer named Takechi and asked him to introduce GHQ to someone not only knowledgeable about the petroleum industry in Japan with a balanced view of it. Takechi consulted his former bosses and colleagues and identified Idemitsu as the most appropriate person. Takechi met Idemitsu and was impressed. To Takechi, Idemitsu looked like a valiant general; in Takechi’s eyes, Idemitsu possessed the dignity which only a real soldier could possess (Hyakuta, 2012a: 115). GHQ’s officers did not want their identities to be revealed to Idemitsu, nor did they require Idemitsu’s be disclosed to them. However, Idemitsu thought that he would immediately be recognised if he were to visit GHQ himself. Therefore, he sent one of his trusted assistants (who would later on become Idemitsu’s third president) for discussions with GHQ. Through his assistant, Idemitsu explained that: (1) the current petroleum distribution organisation had too many person- nel, (2) its excessive size was the product of an excessive number of dependent units and organisations outside Sekito, (3) its exces- sive size and organisation led to more intermediaries’ commissions and, as a consequence, higher consumer prices, (4) its large size also 250 Phronesis and Quiddity in Management led to the loss of flexibility and (5) therefore, the key point was to determine first of all the minimum necessary number of staff and thus keep the size of overheads as low as possible (Hyakuta, 2012a: 118–119). In March, Idemitsu was interviewed by a colonel in charge of petroleum at GHQ. The interview lasted three hours instead of the origi- nally planned one hour. Idemitsu stressed that Japan had lost everything because of the war, but from now it would conduct a war in the eco- nomic field instead of the military one, a battle for which petroleum was indispensable, and which required that petroleum be handled in a liberalised system. He also pointed out that though America had abun- dant petroleum, sooner than later it would have an excessive supply and would have to export it, and Japan would be a very valuable market (Hyakuta, 2012a: 129). Such interviews were held on several occasions. The colonel was always delighted to talk with Idemitsu, a man who put his patriotism before the interests of Idemitsu Shokai. One day the colonel introduced to him a member of PAG who was the top executive at Stanvac, a petroleum distribution company, a joint venture of Standard Oil of New Jersey and Standard Oil of New York. The executive turned out to have been in charge of the Shanghai oper- ations at the time when Idemitsu entered the Shanghai market and he knew of the excellence of the Idemitsu staff. The man praised the spirit of Idemitsu and admired Idemitsu’s decision not to dismiss anybody despite the company’s plight. He proposed to Idemitsu a contract for the distribution of his company’s products. Idemitsu was moved, but, though he was painfully aware of the chance the proposal signified for Idemitsu, he refrained from accepting it. He took this action due to his fear that, in agreeing to such a contract, he would be ‘stealing a march on others’. This, he worried, would make others seek egoistic deals with American petroleum majors. Given that, at the time, no clear petroleum policy had been struck by GHQ nor had any distribution system been put in place, the end result may have been the dominance of Japan’s market by foreign oil companies, a situation Idemitsu clearly did not wish to occur (Hyakuta, 2012a: 134–135). The Japanese government’s plan of a public corporation for the distri- bution of petroleum was required by GHQ to be modified. At the end of March, the government decided to set up, with an initial 30 mil- lion capital, a not-for-profit organisation for petroleum distribution; in April the cabinet appointed a committee headed by Minister Ishii for the creation of the organisation. It so happened that Ishii had studied at Idemitsu Sazo (1885–1981) 251

Kobe Higher Commercial School three years after Idemitsu and they had known each other since their student days. Ishii, a journalist by train- ing, was offered the appointment as the new organisation’s head by the former president of Sekito, but refused. On 1 June 1947, Sekiyu Haikyu Kodan was created. Everyone knew that Kodan would not last more than one year, but wanted to be appointed by it as its sales agents ahead of the liberalisation of petroleum. If not appointed, they would be for ever excluded from the competition (Hyakuta, 2012a: 140). Both the petroleum department at the ministry and Kodan’s manage- ment connived to eliminate Idemitsu Kosan from the list of appointed sales agents and devised a clause in the application conditions:

It was stipulated that as a requisite condition to be appointed as sales agent, the applicant should be current petroleum distributors, resellers, or repatriated distributors that used to operate abroad. In a note it was mentioned that even an expatriate applicant which did not have a sales experience in Japan would be qualified to apply, as long as it had sales experience records abroad. However, it was further mentioned in the note that from these repatriated dis- tributors, those that used to have head offices in Japan would be excluded ...Idemitsu was the only company that corresponded to this exclusionary condition. (Hyakuta, 2012a: 142)

On 13 June, after his day’s work, one of Idemitsu’s staff working at the dredging site in Tokuyama happened to learn about the exclusion condition from a local waste oil dealer and immediately jumped on a train to Tokyo to inform Idemitsu of the news (telephone communi- cations were in a dire state and could not be relied on). The following morning he arrived at Tokyo headquarters and disclosed the news to the top management. Idemitsu instructed Takechi (who had joined the company some time ago, in the full knowledge that its financial states were miserable) to verify the information. Upon its verification Idemitsu lodged a protest with the ministry but was not successful. The ministry’s proposal was submitted to GHQ on 18 June. Idemitsu had a press meeting four days afterwards and appealed to the public, but to no avail. Takechi went to see GHQ’s G4 section’s Andre Chang, the person who was the originator of the plan to dredge the oil tanks for waste oil and who come to admire the spirit and courage of Idemitsu’s employees. At the end 252 Phronesis and Quiddity in Management of June the head of the ministry’s petroleum section was called to GHQ and was severely reprimanded and warned against any attempt to fool GHQ. The exclusion note was dropped (Hyakuta, 2012a: 150–152). Idemitsu applied for permission for the distribution of petrol in sixty- five locations; the number of applications exceeded 4,000, and the maximum number of distribution points was only 1,500. Shortly after Idemitsu’s application was filed, Kodan communicated to the company that Idemitsu might be in conflict with the antitrust law (a law that had been enforced to avoid the emergence of cartels and trusts in the wake of the dissolution of zaibatsus). Idemitsu laughed at this accusation and did not take any action. However, libellous articles and attempts to black- mail Idemitsu abounded; and such articles and letters were sent to the Ministry of Commerce and Industry and GHQ. Andre Chang one day showed a collection of letters denigrating Idemitsu and asked Idemitsu why he was so hated. Idemitsu attributed this to the fame his employ- ees had for being hard-working and leaving no opportunities for their competitors after they had entered a location. Idemitsu also attributed the venom against him to the opposition to any kind of state control he had voiced before the war. On the following day, the head of the petrol department at the ministry was called to GHQ and shown the collection of letters and documents that were directed against Idemitsu. Chang told the head that they had checked the situation and found the accusa- tions groundless, and that if libellous documents continued to flow in, GHQ would investigate those behind them and take pertinent actions. After that day these documents and letters ceased to appear (Hyakuta, 2012a: 156–157). At the beginning of October, Kodan published a list of appointed dis- tributors. Idemitsu was awarded twenty-nine places: Moji, Wakamatsu, Fukuoka, Karita, Karatsu, Sasebo, Makurazaki, Aburatsu, Oita and Beppu in Kyushu; Shimonoseki, Tokuyama, Hagi, Hiroshima and Matsue in the Chugoku region; Osaka, Kobe, Maizuru and Kyoto in the Kinki region; Marugame, Matsuyama and Hayatahama in Shikoku; Nagoya, Yokkaichi, Shimizu and Kanazawa in the Tokai and Hokuriku regions; Tokyo and Yokohama in the Kanto region; and Sunagawa in Hokkaido. That day Idemitsu called his staff to the conference hall in the com- pany’s headquarters and reported to them that, through being granted a small number of branches, Idemitsu could now restart its petrol business thanks to everybody’s effort. It was two years since the war had ended and Idemitsu had pledged not to dismiss anybody (Hyakuta, 2012a: 158). Idemitsu Sazo (1885–1981) 253

Pauley report In December 1945, a mission headed by Edwin Pauley visited Japan and prepared a report on the reparations to be collected from Japan. Its recommendation included such harsh ideas as not to allow the living standard of the country to go beyond that of the level of other Asian countries; to keep steel production capacity at its 1930 level; and perhaps to suppress Japan’s industrial might and convert it into an agri- cultural nation (Hyakuta, 2012b: 14–15). The report’s harshness was alleviated by another report issued by another mission in 1948; however, the new report recommended the import of petroleum products from Indonesia and the scrapping of Japan’s refineries (Hyakuta, 2012b: 13). The change in the tone was attributed to the shift in the USA’s policy during the Cold War, which argued in favour of transforming Japan into a bulwark against communism. Such a transformation would require the strengthening of Japan’s industrial might. In this context Idemitsu could not understand why GHQ stuck to the destruction of Japan’s petroleum industry. Takechi revealed to Idemitsu information he had gathered which pointed to the US oil majors’ intention to dominate Japan’s petroleum market, information which also brought to light the discordant opinion within GHQ that favoured a better treatment of Japan’s petrol industry.20 In fact, in May 1948 a third mission, headed by P. H. Johnston, issued another report that made a 180-degree volte-face regarding the refiner- ies. Takechi interpreted this shift in the US attitude as wholly due to the tension in Germany and in the Korean Peninsula between the USSR and Western countries (Hyakuta, 2012b: 16–17). In June the USSR blockaded Western Berlin. In August the Republic of Korea (South Korea) was born, followed by the birth of the People’s Democratic Republic of Korea (North Korea) a month later. In August, Caltex Japan’s director paid a visit to Idemitsu and pro- posed they form an alliance; the director expressed Caltex’s appreciation of the Japanese company’s sales potential in spite of its small size. He further revealed that the import restriction on petroleum would be lifted and Kodan would be dissolved before long. The proposal looked very enticing, but Idemitsu froze when the American referred to their equity participation in Idemitsu. The acceptance would spell the end of Idemitsu’s independence as a national company. The American hinted at the alternative of allying themselves with Nippon Sekiyu if Idemitsu did not agree to the proposal. Nevertheless, Idemitsu insisted that it would be impossible to let Americans intervene in Idemitsu’s management (Hyakuta, 2012b: 19–20). 254 Phronesis and Quiddity in Management

Primary distributorship: Bid for tanks In September, GHQ sent a memorandum to the Japanese government indicating the privatisation of petroleum import bases and the early dis- solution of Kodan. It stated that by the end of March in the following year Kodan must be dissolved; the primary distributor of petroleum would then directly be able to import and sell petroleum products. Idemitsu’s heart leapt with anticipation. His dream, cherished from his youth, to import petroleum from abroad and sell it in Japan would come true. However, for that to occur, Idemitsu must be appointed the primary distributor (motouri kaisha). Through Takechi Idemitsu got hold of information about the requirements for primary distributors. The first requirement was the possession of import premises, which Idemitsu assumed were oil tanks. If the dissolution of Kodan was March 1949, nine months remained for Idemitsu to be in possession of oil tanks by the end of the year. Idemitsu groaned, and for the first time he looked dejected. His staff began to travel Japan from north to south in search of oil tanks for sale. In October, one of his staff chanced to read a small article in a newspa- per about the protest against the sale of oil tanks formerly owned by the Mitsui Group. The protest was lodged by a trading company against the closed-door sale of the oil deposits formerly owned by Mitsui and Com- pany to Mitsui Group’s General Bussan. The trading company proposed that the sale should, instead, be made in a public auction. Idemitsu took immediate action by expressing his protest to the com- mittee in charge of the dissolution of the former zaibatsus. Idemitsu’s protest was espoused by newspapers and public opinion turned in favour of Idemitsu, which in turn forced the committee to suspend the closed-door deal. Idemitsu was determined to obtain the fifty-seven oil tanks located in fourteen different locations throughout Japan. He was surprised upon reading the auction advertisement because it indicated that the ten- ders be submitted to Mitsui and Company. It was obvious that, despite the failure in the brazen closed-door deal, an attempt was being made to award the tanks to General Bussan. Idemitsu leaked his finding to a journalist who reported in his newspaper on the twisting of public rules in favour of certain private interests. This strategy worked and the submission of tenders was addressed by the committee. Idemitsu had, nevertheless, yet to procure the necessary financing for the auction. The oil tanks were evaluated at 28 million and for the tender bid the submission of a bank guarantee was required. The pay- ment ought to be made immediately after the adjudication. Idemitsu Idemitsu Sazo (1885–1981) 255 estimated Idemitsu would need at least 30 million, if not 40 mil- lion to be on the safe side. This was a steep amount. After the war, Idemitsu had accumulated 20 million worth of debts on account of unprofitable operations. The Ministry of Finance was in the middle of enforcing a belt-tightening monetary policy; no bank would be willing to lend money to Idemitsu. Idemitsu’s heart sank. After three years of struggling the situation seemed to have caught up with him. All of a sudden an idea came to mind: he might as well visit the Bank of Tokyo in the faint hope of suc- cess. Years afterwards Idemitsu referred to this concept as being possibly some kind of divine indication or inspiration (Hyakuta, 2012b: 25). Idemitsu walked to the head office of the Bank of Tokyo in Nihonbashi, Tokyo, and asked for the manager in charge of Idemitsu. Idemitsu explained Idemitsu’s plan to participate in the auction and stated that they were in need of 28 million. The manager frowned and expressed his regret for not being able to meet Idemitsu’s request on account of the amount being too large to lend given the gov- ernment’s current tight money policy. However, when Idemitsu was heading for the door, the manager suggested that there would be no harm if Idemitsu made the same request to the managing director, the manager’s boss. Although he was aware that repeating the same explanation to the MD might be futile, Idemitsu approached him and again explained Idemitsu’s auction project. The MD asked how much Idemitsu needed. The 40 million figure was Idemitsu’s response, which was accepted, to Idemitsu’s surprise, without the ‘batting of the eyelid’ by the MD. When Idemitsu had left the bank, the MD called the manager and recounted to him what he had witnessed two years before. The MD had to travel to Moji and heard from the Moji branch manager about the dredging operation being carried out by Idemitsu’s staff. His curiosity piqued, the MD then visited the Navy’s oil tanks in Sasebo. Stripped to loincloths, members of Idemitsu’s staff were struggling with the muddy waste oil. Obviously they were undernourished, but they did not seem dejected or pathetic. The MD was convinced that Japan would recover if it could count on young people like them, and he approved the Moji branch’s decision to deal with Idemitsu (Hyakuta, 2012b: 28–29). To make sure that no underhand actions were taken, Idemitsu visited GHQ and asked for an interview with a lieutenant at GS (responsible for civil policy) and, though he never met him before, confided his fear that the auction might not be fairly conducted. The lieutenant had heard about Idemitsu and was friendly to him. He telephoned the committee 256 Phronesis and Quiddity in Management on the spot and expressed GHQ’s interest that the auction be conducted with due justice. The auction turned out to be a total success for Idemitsu. To his sur- prise, all the tanks were awarded to Idemitsu. The Petroleum Advisory Group (PAG) pressured GHQ that some tanks be ceded to other bidders, a fact which Idemitsu accepted; in the end he took charge of only four- teen tanks in Moji, Nagasaki and Ube, with 38,000 tons capacity. This happened near the end of 1948 (Hyakuta, 2012b: 30–31). Idemitsu was now ready to apply for the appointment as primary distributor.

Primary distributorship: Seven sisters In 1949, the committee for the dissolution of Kodan accepted the par- ticipation of Stanvac, Caltex and Shell in its meetings.21 In the February meeting these three oil companies proposed five conditions for pri- mary distributors: (1) the possession of import bases (deposit tanks); (2) the capability to sell; (3) infrastructure for import management; (4) a secondary distributor network; and (5) an alliance with a foreign oil company for future oil imports. The fifth condition was obviously a result of the oil majors’ intent to exclude Idemitsu, since Nippon Sekiyu had already surrendered to Caltex and let it join the company as a major shareholder. Other main players, for example, Toa Nenryo with Stanvac, and Mitsubishi Sekiyu in negotiation with Tidewater for an alliance, had met the condition.22 Idemitsu recalled that Japan entered the war for petroleum and lost it due to a lack of petroleum. Now Japan was going to be dominated through the control of petroleum. The fourth condition posed another problem to Idemitsu. As it directly sold petroleum products to consumers it did not need secondary distributors. It was beyond doubt that the fourth and fifth conditions targeted Idemitsu for its exclusion. At the beginning of March, the committee held another meeting. It was conjectured that the three foreign oil companies represented PAG, and behind PAG GHQ directed the operation, and therefore the commit- tee would end up accepting all five conditions. When the chairman was about to take a vote on the issue, a young manager who served as the head of petroleum department at the Ministry of Commerce and Indus- try asked permission to talk. Upon being allowed to speak he expressed his opinion that the first and the second conditions were sufficient and others were counter to the principle of equality of opportunity to everybody that should exist in a free economy. Idemitsu Sazo (1885–1981) 257

The manager had discerned the intention of the petroleum majors to dominate the Japanese market and thought he had to prevent this from occurring. Once the market was controlled by foreigners, the reconstruc- tion of the Japanese economy would be jeopardised. The committee members finally had to submit for fear that the discussion be leaked to the media and public opinion turn against the committee (Hyakuta, 2012b: 34–36). In April the committee published the list of primary distributors: Stanvac, Shell, Caltex, Nippon Sekiyu, Mitsubishi Sekiyu, General Bussan, Nihon Gyomo Sengu, Idemitsu, Showa Sekiyu and Nihon Kogyo, of which Nippon Sekiyu and Caltex were considered to be the same unit. Kodan was dissolved on 31 March 1949, which marked the end of state control of sales of petroleum in Japan. The percentage of imported oil quota was: Caltex/Nippon Sekiyu, 25 per cent; Stanvac, 24 per cent; Shell, 24 per cent; Showa Sekiyu, 5.48 per cent; Idemitsu, 5.46 per cent; General Bussan, 5.21 per cent; Mitsubishi Sekiyu, 5.21 per cent; Nihon Gyomo, 2.37 per cent; Nihon Kogyo, 2.25 per cent (Hyakuta, 2012b: 39–40). In August 1949, GHQ disclosed to the primary distributors that the ‘joint use system’ would be abolished by the end of the year. The sys- tem allowed the joint use of refineries and oil tanks among primary distributors. Its abolishment would mean that it would be impossible for Idemitsu to distribute petroleum in eastern Japan since the company had the majority of its installations in western Japan. In September there was a confrontation in a meeting between the government and the pri- mary distributors about the date of the abolishment of the joint use system. The primary distributors favoured the immediate scrapping of the system, while Idemitsu insisted on a period of preparation before its dissolution. Finally it was decided that at the end of November the joint use of oil tanks would be abolished but that of refineries would continue until sometime in the near future. Another form of pressure exerted by the oil majors took the shape of the increase in the import quota of crude oil and the reduction in the import of oil products. GHQ, lobbied by PAG, thus shifted its policy to the refining of crude in the consumption market. This shift was negative for Idemitsu as it did not have its own refineries. The encirclement of Idemitsu by the oil majors began to place strains on its situation. Its 9.8 per cent market share in January 1950 went down to 7 per cent. The Japanese economy found itself immersed in a deflationary state, and the recession was gradually making itself felt. 258 Phronesis and Quiddity in Management

In July 1951, the Tokyo Stock Market index (the current-day Nikkei index) recorded its lowest level in history, standing at 85.25; many small and medium enterprises were driven to bankruptcy (Hyakuta, 2012b: 54). On 25 June, at 38 degrees north latitude, a military confrontation between North and South Korean armies took place. North Korea crossed the 38 degree line, beginning the Korean War, and eventually cornered the South Korean Army in Pusan. The result of this act was that the UN Army (mainly made up of the US Army) participated in the war and pushed back the North Koreans. The war on the Korean Peninsula changed the economic situation in Japan. The textile and metallurgical industries benefited from it, followed by cement, fertilisers and pulp industries. Idemitsu was res- cued: the reconstruction of Japan’s industrial might, thanks to the war, helped it to increase its sales. However, the domestic market suf- fered from a shortage of fuel oil. GHQ released 45,000 kilolitres of fuel oil and 10,000 kilolitres of gas oil from its reserves, but this amount did not suffice, which forced GHQ to give permission to primary distributors to import fuel oil and to assign the necessary for- eign currency to them to enable this. In July, Idemitsu was assigned $US 1 million and $US 228,000 for the import of fuel oil and gas oil, respectively. The allocation of hard currency, however, turned out to be a snare in disguise since the condition accompanying the provision of monies stip- ulated that the currency had to be used by mid-September. Less than two months were left. Idemitsu had not been in touch with the oil market outside Japan (1951) and would have difficulties in carrying out trans- actions over $1 million in so short a period of time. Idemitsu decided to push forward the import transaction in the spirit of ‘nothing ventured, nothing gained’ (koketsu ni irazunba koji wo ezu23). A manager who was sent to the USA discovered that the price of fuel oil had skyrocketed because of the Korean War, something which con- trasted with the low price at which fuel oil was being sold in Japan. If Idemitsu imported fuel oil to Japan, the company would hardly make any profit; rather, it might even lose money. Idemitsu staff realised that PAG had been keeping fuel oil under control and selling it at a lower price so that Japanese primary distributors be dissuaded to import oil stocks. The majors made up for the loss by selling fuel oil at high prices, as well as gasoline and lubricants, which the Japanese were not allowed to import (Hyakuta, 2012b: 65–66). Idemitsu Sazo (1885–1981) 259

Idemitsu looked for a tanker for the importation of the fuel oil and gas oil it had procured, but no shipping company wanted to under- take such an import. Idemitsu and his staff suspected PAG’s hand was behind this reluctance. His directors recommended Idemitsu to con- cede attempting to import oil at this time; however, Idemitsu reminded his staff that Idemitsu had earlier dredged the bottom of oil tanks and chalked up a huge loss, but its action persuaded GHQ to supply the Japanese government with petroleum. As a result, GHQ had concluded that Idemitsu’s action benefited Japan, so his staff should remember the spirit that moved the company then – he ordered them to go ahead with the import transaction. He added that Japan was in dire need of fuel oil and Idemitsu could help – whether the company made money or not would not be material (Hyakuta, 2012b: 67).

Nisshomaru and the import of petroleum Idemitsu thought it was time Idemitsu had a petroleum tanker of its own; however, other directors voiced their objection because there was insufficient money for such a purchase, but if there were, the construc- tion of oil tanks ought to be prioritised. Additionally, no other primary distributors had such tankers. Idemitsu conceded that the tanker might not be of urgent need. However, he stressed that the time would come when they need would need a tanker, and, in the belief that merchants should act in light of situations five or ten years ahead, decided to go ahead with the project. In March 1950, the Ministry of Transport made a public tender for the permission (within the context of the government’s sixth new ship- building plan) to which Idemitsu applied for the construction of a large-size tanker. For the construction of large vessels, the ministry’s approval was indispensable, and, with it, a low-interest loan was made available from the Development Bank of Japan. In the sixth plan, the ministry originally did not include the construction of tankers. The Eco- nomic Stabilisation Agency (Keizai Antei Honbu), in charge of the actual plan, cited the excessive tonnage of oil tankers as the reason for the exclusion of tanks. However, Idemitsu lobbied for the inclusion of tankers and managed to get two included in the plan. In mid-December, one of the two tankers was awarded to Iino Kaiun, a shipping company. To get the remaining tanker awarded to Idemitsu, Idemitsu and Masaaki, his youngest brother and the future second president of 260 Phronesis and Quiddity in Management

Idemitsu, visited the Agency on 26 December 1950 to explain to its directors the necessity of a petroleum company having tankers. They had to wait two hours for a five-minute meeting with the Direc- tor General of Finances. In that time, Idemitsu drove home the point that Idemitsu had been maintaining an uphill fight against the majors instead of allying itself with one of them in order for Japan to keep its own national oil company, but it needed a trump card to survive: a tanker could be such a card. On 29 January, a public hearing was held on the sixth plan; Masaaki and Idemitsu’s assistant appealed on the grounds of protecting Japan from the international petroleum cartel. On the following day, a meet- ing chaired by the Minister of Transport was attended by experts. Opinions were divided in favour of Kyoei Tanker and Idemitsu. The meeting lasted hours and ended in the evening. The Transport Minis- ter kept quiet, but when the meeting reached a deadlock, he was asked his opinion. His verdict was in favour of Idemitsu. The construction of the tanker started in March 1951 at Harima Shipyard in Aioi City. The tanker’s size was to be 18,774 tons, one of the largest vessels in the world. Its construction was completed on 22 December 1951 and it was christened ‘Nisshomaru’. The vessel travelled to San Francisco immediately. Idemitsu wished to buy gasoline, but GHQ’s permission could not be obtained. Once again, Idemitsu felt the invisible hand of the oil majors was exerting control. At the end of February 1952, the Japanese government decided to grant a $450,000 April–September foreign currency quota to Idemitsu for the purchase of 15,000 kilolitres of gasoline (despite the objections from GHQ) thanks to the entry in vigour of San Francisco Peace Treaty on 28 April. Nisshomaru was despatched to Los Angeles. Even though it was still en route, Idemitsu managed to sign a financial contract with the Bank of America (BoA) for the amount of $US 4 million (Idemitsu’s capital was only 200 million, which, at the exchange rate of $US 1 = 360, was only $US 500,000). The BoA argued that Idemitsu’s capital was too small for the credit, but agreed that its management was excellent and this merited it to be treated as a creditworthy client. Nisshomaru imported high octane gasoline from the USA, which caused a lowering of the price of the rest of gasoline in Japan, something which made it difficult for the oil majors to enjoy the excessive profits as they had received previously. Their reprisals came during Nisshomaru’s fifth voyage to the USA. A few days before her arrival, Sun Oil, the seller, suddenly cancelled their contract. Idemitsu assumed that the majors Idemitsu Sazo (1885–1981) 261 had exerted pressure on Sun Oil. Idemitsu instructed his staff to search for a supplier on the coast of the Gulf of Mexico. A small, Houston- based oil company accepted the deal. Nisshomaru hastily cleaned the benzoyl and creosote that the ship carried for export to the USA from its oil tank as soon as she reached San Francisco, and then headed for the Gulf of Mexico, passing through the Panama Canal. The cleaning of benzoyl and creosote demanded severe physical exertions from the crew. Nisshomaru loaded its tanks with 21,000 kilolitres of gasoline and 2,500 kilolitres of lubricant, and won the upper hand over the majors. However, Idemitsu sensed the majors were going to keep challenging Idemitsu’s every move (Hyakuta, 2012b: 80–82).

Petroleum from Iran A famous incident that gained popularity for the company was the import of Iranian crude oil:

In 1953, Idemitsu sent its large tanker Nisshomaru to Iran to pur- chase oil. Iranian prime minister Mohammad Mosaddeq has recently nationalized the oil fields and was under British-led embargo (Abadan Crisis). Idemitsu managed to buy the oil at 30 percent below market price, but displeased the British. This was popular with the Japanese public, but got Idemitsu in conflict with the Japanese government and MITI. Later the same year was the 1953 Iranian coup d’état. In the 1960s, Idemitsu imported crude oil from Russia. Again it got a good price at 40 percent below market value, but angered the United States who decided to boycott Idemitsu when buying fuel for its military jets in Japan. Idemitsu called the boycott ‘an odd Christmas gift’, but ‘utterly negligible’. In 1978 it broke off contracts with the Soviet Union. (http://en.wikipedia.org/wiki/Idemitsu _Kosan accessed on 22 April 2013)

Struggle with PAJ In 1965 the Seamen’s Union went on strike, provoking petroleum short- ages. Idemitsu ignored the quotas imposed by the Petroleum Association of Japan (PAJ), from which Idemitsu previously had withdrawn its mem- bership, and produced oil at full speed. The following year price control and production quotas were removed and Idemitsu rejoined PAJ, but Idemitsu had to give way to his younger brother as Idemitsu’s president to please the Ministry of International Trade and Industry (MITI), the controlling body. 262 Phronesis and Quiddity in Management

The 50th anniversary In November 1961 Idemitsu Kosan celebrated its 50th anniversary in its newly built head office in Marunouchi, Tokyo. Idemitsu’s speech recounted the history of the company and summarised it as fifty years of respect for human life and dignity, avoiding temptations and compromises, which must be carried on by a younger generation. Dur- ing the reception good news did not stop pouring in: the operation to claim land at Anegasaki beach in Chiba for the construction of the largest refinery plant in Asia began; the governmental authorisa- tion for the construction of the petrochemical complex in Tokuyama was granted; and the financing for the construction of a 130,000 ton supertanker was approved by the foreign currency committee. Idemitsu recalled the past fifty years as a period full of sufferings and revealed that he had often a thought that the only way to alleviate his problems was through his death. His staff was surprised at these words because Idemitsu never had revealed his inner sufferings to them (Hyakuta, 2012b: 291–293). A few days afterwards, the news that Hida was gravely ill reached Idemitsu, and he visited him at his Jiyugaoka house. There they rem- inisced together and Idemitsu asked why Hida had given him 6,000. Hida told him that he had never considered Idemitsu to be a merchant, he saw him as Idemitsu was a blacksmith and wanted to observe how Idemitsu would make hoes and ploughs, and found him to be the best at that (Hyakuta, 2012b: 294–295). Hida passed away the following year.

Idemitsu’s last years In 1966, Idemitsu appointed his youngest brother Masaaki as his suc- cessor as president of Idemitsu. In 1968 Takechi retired as a senior managing director and left the company. On 6 October 1973 the fourth Middle East War broke out. Ten days afterwards the six member countries of the OPEC (Organization of Petroleum Exporting Countries) raised the price of petroleum from $US 3.01 per barrel to $US 5.12, a 70 per cent increase and the OAPEC (Organization of Arab Petroleum Exporting Countries), prohibited the export of petroleum to the USA and European countries because of their support for Israel. Japan had maintained a neutral stance in the con- flict and escaped the petroleum embargo. However, upon OPEC raising the price from $US 5.12 to $US 11.65, the Japanese economy was dealt a brutal blow. The price of everything manufactured using petroleum skyrocketed. Idemitsu Sazo (1885–1981) 263

Idemitsu, nonetheless, expressed his optimism in an interview:

If you don’t have gasoline, you can walk. You have feet. If you cannot heat your stove because you don’t have kerosene, you may put on a coat. We used to work with our coat on in the years that followed the end of the war. We suffered from severe hardships then. We may have, in coming years, high inflation. But the economy moves on a cyclical base of a few years, and so we will have a boom someday. This time the fluctuation was a bit exaggerated. But compare this with the war-time situation: it’s nothing. The most important thing is that we don’t lose our pride and self-reliance as Japanese; if we don’t lose these characteristics, there is nothing to be afraid of. (Hyakuta, 2012b: 348)

On 6 March 1981 Idemitsu felt acute pain in the stomach and was hospitalised. He was diagnosed with ileus, intestinal obstruction caus- ing colic, vomiting and constipation. An immediate operation was needed but his advanced age made this inadvisable. The doctor admin- istered treatment to alleviate pain. Idemitsu seemed to have stabilised the following day, but a few hours later the doctor was called to find Idemitsu beyond the reach medical assistance. On 7 March at 11:25 a.m., the 95-year-old Idemitsu quietly passed away (Hyakuta, 2012b: 361–362).

Et maintenant In 1998, Moody’s downgraded Idemitsu’s rating to B2, that is, to ‘highly speculative’ perhaps on account of its high debt–equity ratio (near 20), and near 2 trillion interest-bearing debts. Another problem bedev- illing Idemitsu was the lack of an institutionalised corporate governance mechanism (the top executive was the only person who had access to the critical information from Idemitsu’s two mutually independent divisions (Idemitsu Kosan – petroleum, and Idemitsu Sekiyu Kagaku – petrochemistry), giving rise to unnecessary investments known as the Heisei era’s superfluous investments) (Shimamoto, n.d.: 30–32). Shosuke, Idemitsu’s son and Idemitsu’s fifth president was reluctant to float Idemitsu’s shares on the stock market because of his father’s credo (respect for human beings, Idemitsu as a big family, independence, freedom from ‘slavery to gold’, direct connection between the producers and the consumers) (Shimamoto, n.d.: 9). In 1999, Idemitsu launched a plan called the Idemitsu Survival (IS) Plan to clear debts by pursuing drastic cost reductions: scrapping 264 Phronesis and Quiddity in Management unnecessary installations and equipment, selling idle or inefficiently used assets and divesting non-core businesses. In compliance with Idemitsu’s credo, layoffs and dismissals would be avoided by cutting the employees’ salary by 10 per cent for three years (Shimamoto, n.d.: 35). Shosuke was persuaded by his directors of the need to list its shares on the stock market on the ground that Idemitsu had to strengthen its financial structure; otherwise, if it went bankrupt, they would have disobeyed the founder’s wishes. In 2001, 37.8 billion-worth of preferential shares was subscribed to by five banks, and 80 per cent of the employees were given the right to the company’s shares through the association of employees (Shimamoto, n.d.: 39–40). The attendant reformation was carried out with Idemitsu’s listing on the stock market, the introduction of attendance books and the pay- ment of overtime; however, on the other hand, Idemitsu continued with the tradition of no dismissal and no labour unions (Shimamoto, n.d.: 41). By 2005, the interesting-bearing debts were reduced to below 1 trillion and the debt–equity ratio went down to 2 (Shimamoto, n.d.: 43).

Appendix 1: Idemitsu Sazo’s management thinking

Idemitsu always stressed that commercial dealings were like playing hardball:

I never cease to point out to my staff this: comparing their work and mine, there is an abysmal difference; my young staff’s work is, so to speak, like conducting kendo practice using bamboo sticks; no matter how hard they are hit, they only get a lump on their head. My branch managers’ may be likened to the practice with wooden sticks; they may bleed if hit by them, but will never lose their life.

As to my case, I have to say it is like fighting with drawn swords. If I fail, I will lose my life, and my company will go bankrupt. It means that there lies a surmountable wall separating such people as branch managers and general managers and me (who have to fight always with a real sword). This wall exists and will continue to exist. Only I know how hard it is to be faced with this challenge ... (from ‘People’s World’ and ‘Things’ World’ dated August 1966, cited in Kimoto (2013: 81)) Idemitsu Sazo (1885–1981) 265

Idemitsu published his autobiography (Idemitsu, 1956) in the news- paper Nihon Keizai Shimbun; it provides us with direct insight into his management thinking. Several issues stand out in the autobiography: (1) think by oneself; (2) luck; (3) belief and the sense of mission; and (4) behavioural principles.

Think by and for oneself Idemitsu stresses the importance he has always attached to think- ing matters out himself using his own criteria instead of depending on knowledge gained from lectures (Idemitsu, 1956: 57). Due to his insomnia and neurosis, ever since his childhood, Idemitsu could never concentrate on what he read, which made it necessary for him to think through matters himself. These neural troubles also led Idemitsu to struggle to overcome them by dint of self-control.

Luck Idemitsu firmly believes in his good luck (Idemitsu, 1956: 59–60). Despite devastations brought about by the Second World War, his company did not suffer destruction by fire or casualties. Idemitsu’s head- quarters was spared from destruction despite the bombings. During the war, bombs were dropped from airplanes in Shanghai and hit oil tanks in the company’s premises. Luckily, Idemitsu’s tanks filled with oil were saved. Idemitsu attributes such good luck to the protection by his guardian god, revered at Munakata Shrine near his birthplace. In his youth Idemitsu knew a neighbour who offered one day to give him a money gift (to the sum of 8,000), which the neighbour would raise from the sale of his summer house in Kyoto. No repayment was expected; no interest was to be charged; the only condition was to use it to run his own business, and never work for other people. The luck was twofold: the gift-giver did not have any obligation to give anything; and the gift came in the wake of the bankruptcy of Idemitsu’s father’s business.

Belief system and the sense of mission/principles of behaviour Idemitsu’s dilemma was the win–lose relations he felt existed between the buyers and sellers: if the former gained, the latter lost (Idemitsu, 1956: 66). He saw a way out of this dilemma during the Second World War. Idemitsu conjectured that the war in Europe would lead to oil shortages and contacted his clients to offer to secure their oil sup- ply, which prevented their activities from being interrupted. When the 266 Phronesis and Quiddity in Management war was over, these clients pledged, in their gratitude, their loyalty to Idemitsu. Thus, it dawned on Idemitsu that his mission as a commercial intermediary would consist of informing and advising consumers and producers of the oil demand and supply, acts which would justify the surplus the intermediary would get. This idea about his mission actually came earlier. One of his professors at Kobe Commercial High School pointed him in the same direction. As a consequence, Idemitsu reached the conclusion that the benefit he and his company could contribute both to consumers and producers would be the saving of distribution costs by efficiently linking both ends of distribution channel. Idemitsu’s work ethic was strengthened by his sense of social mission, which was predicated in the belief that whatever business you are in, the base of everything is being human. Thus, the trust relationships with his employees overrode the obtain- ing of profit, as illustrated by the fact that Idemitsu did not dismiss its nearly 1,000 employees who came back from China, Korea, Manchuria and Taiwan after the Second World War. This was in spite of the deple- tion of the company’s financial resources on account of the destruction of its overseas investments and the huge debt it had accumulated. Idemitsu’s employees were assigned to any contracts the company could find, such as the repair of electric appliances and cleaning of the Navy’s oil tanks. That profit-maximisation is not Idemitsu’s main purpose is expressed as follows: ‘my company’s management is not predicated on the pursuit of profit but that of business’ (Idemitsu, 1956: 59–60). Idemitsu Sazo emphasises the importance of serving his clients by providing goods and services (i.e., the pursuit of business).

No compromise Idemitsu’s past is a history of ‘turning enemies into your allies’.

Predicated on the conviction that no compromise must be made. Concerning our principles, we have never compromised them, and because of this many people have become our enemies. Therefore, we should not stop short of only making them understand our stand- ing; nay, we have to convert them into our allies by dealing with them with passionate sincerity; namely, by laying out our stance forthrightly, which by force ought to convince them. (‘My Sixty Years’ (Vol. I), cited by Kimoto (2013: 72)) Idemitsu Sazo (1885–1981) 267

Appendix 2: Chronology of Idemitsu

World History Year Idemitsu History

1911 Idemitsu Shokai founded in Moji Outbreak of First World War 1914 Sales channel opened up overseas (former Manchuria) Great Kanto Earthquake 1923 Outbreak of Second World War 1939 1940 Idemitsu Kosan Co., Ltd. incorporated Outbreak of Pacific War 1941 War ends with acceptance of Potsdam 1945 Overseas branches closed, Declaration repatriation begins GHQ establishes Petroleum Advisory Group (dissolved 1951) Postwar Recovery: Beginning 1945 GHQ prohibits operation of Pacific 1946 coast oil refineries Oil Distribution Public Corporation 1947 Idemitsu returns to the oil established business as 29 of its outlets across Japan are named retailers for the Oil Distribution Public Corporation Primary oil distributor system 1949 Idemitsu named a primary oil established with 10 companies distributor named as suppliers Gasoline tax implemented GHQ permits resumption of operation of Pacific coast oil refineries Outbreak of Korean War 1950 Iran nationalizes oil industry 1951 Nissho Maru (second generation) commissioned San Francisco Peace Treaty signed “Return to the principle of Customers First” issued 1952 Import of high-octane gasoline from the United States for sale under the Apollo Gasoline brand begin Japanese government encourages 1953 Oil imported from Iran (Nissho shift of heating energy source from Maru Incident) coal to petroleum Iran Consortium established 1954 Petroleum Association of Japan 1955 New York office opened established Egypt closes Suez Canal (to reopen 1956 April 1957) 268 Phronesis and Quiddity in Management

(Continued)

World History Year Idemitsu History

Age of mammoth tankers begins Gas 1957 Tokuyama Refinery completed, oil delivery tax implemented Idemitsu enters the oil refining business Arabian Oil Co., Ltd. established 1958 Back to top Rapid Economic Growth: Beginning 1959 Japan’s first petrochemical complex 1959 First import of crude oil from opens in Yokkaichi Soviet Union Organization of Petroleum Exporting 1960 Countries (OPEC) formed 1961 Apollo Service Co., Ltd. established Petroleum Industry Law enacted, 1962 Munakata Kaiun Co., Ltd. production restrictions through established administrative guidance begin Idemitsu Tanker Co., Ltd. Liberalization of crude-oil imports a established Standard prices of petroleum Nissho Maru (third generation), products announced (discontinued world’s first ultra-large February 1966) 140,000-ton supertanker, commissioned 1963 Chiba Refinery completed Idemitsu withdraws from the Petroleum Association of Japan (later to rejoin in October 1966) Tokyo Olympics held 1964 Idemitsu Petrochemical Co., Ltd. established, Tokuyama Plant completed Kyodo Oil (now Japan Energy) established Restrictions on oil production 1966 Central Training Center opens abolished Idemitsu Museum of Arts opens Idemitsu Maru, the world’s first 200,000-ton class oil tanker (210,000 tons), commissioned Pollution Countermeasures Basic Law 1967 World’s first heavy oil promulgated direct-desulfurization equipment completed at the Chiba Refinery Air Pollution Prevention Law 1968 Lubricants Research Laboratory promulgated opens Back to top Petroleum-Industry Turbulence: Beginning 1970 Idemitsu Sazo (1885–1981) 269

Lead-pollution issues arise 1970 Lubricants refining equipment completed at Chiba Refinery Central Research Laboratories open Hyogo Refinery completed Tehran Agreement concluded 1971 IAC established U.S. announces measures to defend Idemitsu Japan Sea Oil the dollar Development Co., Ltd. established (renamed Idemitsu Oil Development Co., Ltd. in 1976) Geneva Agreement concluded 1972 Diplomatic relations normalized between Japan and People’s Republic of China Riyadh Agreement concluded Outbreak of Fourth Middle East War First import of crude oil from (Yom Kippur War) China First oil crisis (Daqing) Second petroleum law enacted, 1973 Middle East Office established emergency declared in Beirut Tehran Office reopened Hokkaido Refinery completed Japan Fair Trade Commission 1974 Kuwait Office established levels accusations at Petroleum Association of Japan and primary oil distributors Prices of petroleum products increased under administrative guidance Conference of oil-consuming countries held Unleaded gasoline introduced 1975 Unleaded Red Appolo Gasoline introduced Idemitsu Petrochemical Co., Ltd. Chiba Plant completed Aichi Refinery completed, Abu Dhabi Office (now Middle East Office) established Petroleum Reserve Law enacted 1976 Production begins at Agaoki Oil and Gas Field, Japan’s first undersea oil field Gasoline Retail Business Law enacted 1977 IIA established, Singapore Office opened (closed December 1980) Political instability in Iran 1979 Second oil crisis Iranian revolution 270 Phronesis and Quiddity in Management

(Continued)

World History Year Idemitsu History

Back to top Deregulation: Beginning 1980 Outbreak of Iran-Iraq War 1980 Canada Office established (ceasefire agreed August 1988) 1983 Idemitsu unleaded Gold Apollo gasoline introduced Idemitsu Engineering Co., Ltd. established 1984 Japan’s first heavy gas oil hydrogenated cracking unit completed at Hokkaido Refinery The Provisional Measures Law on 1986 Idemitsu Credit Co., Ltd. the Importation of Specific established Kinds of Petroleum Refined Alkylation unit completed Products (Specific Petroleum at Aichi Refinery, Idemitsu Law) enacted New Gold Apollo Gasoline Cosmo Oil established introduced Petroleum industry deregulation 1987 IIE established action program begins Japan’s first heavy oil fluid catalytic cracking unit completed at Aichi Refinery Idemitsu 100 Gasoline introduced Gasoline production quotas (PQ) 1989 Idemitsu Nagahori Building, system abolished the first high-rise building built atop a service station, completed Consumption tax enacted Method of deciding on petroleum-product prices on a monthly basis begins U.S.-Soviet Malta Summit held, Idemitsu Oil Gas Co., Ltd. marking end of Cold War established Back to top Intense Competition: Beginning 1990 Service-station construction 1990 Idemitsu Music Award regulations eased established Iraq invades Kuwait Service stations opened in Portugal (1991–1999) Outbreak of Persian Gulf War 1991 Service stations opened in Puerto Rico (1992–2001) Guidance on crude-oil processing Beijing Office, Muscat discontinued Office established Idemitsu Sazo (1885–1981) 271

Earth Summit held 1992 Lubricants production plant completed in the U.S. Production begins at the Snorre Field in the Norwegian North Sea Nikko Kyodo Co., Ltd. (now Japan 1993 Idemitsu Zearth and Super Energy) established Zearth introduced Treaty on European Union (Treaty 1994 Dhahran Office established of Maastricht) takes effect North American Free Trade Production begins at Agreement (NAFTA) takes effect Ensham Coal Mine in Australia Heavy oil cracking unit completed at Hokkaido Refinery Great Hanshin Earthquake 1995 Japan’s first double-hull VLCC, Super Zearth, built Product Liability (PL) Law enacted Specific Petroleum Law abolished, 1996 Petroleum products shift to a new pricing structure Petroleum-Related Adjustments Zearth earns Eco Mark Act enacted product certification Petroleum Association of Japan Idemitsu Oita Geothermal collects signatures on an Co., Ltd. begins supply of increase in consumption tax steam All Idemitsu refineries and plants earn ISO 9001 and ISO 9002 certification Apollo-branded service station opens in Dalian, China Systemic changes made toward 1997 Idemitsu begins bulk supply liberalization of exports of of liquefied petroleum (LP) petroleum products gas Kyoto Conference on Climate Change held Self-service service stations 1998 All Idemitsu refineries and legalized in Japan plants earn ISO 14001 certification International industry New Business Development reorganization advances as Office established Exxon and Mobil agree to a merger Tokyo Commodity Exchange begins trading in gasoline and kerosene futures Nisseki Mitsubishi (now Nippon Oil) established 272 Phronesis and Quiddity in Management

(Continued)

World History Year Idemitsu History

Back to top Demand/Supply Structural Changes: Beginning 2000- TonenGeneral Sekiyu 2000 Preferred shares issued in established capital increase to 38.8 billion yen Successful commercialization of CVT traction oil 2001 Head office earns ISO 14001 certification Idemitsu Gas and Life Co., Ltd. established Petroleum Industry Law 2002 Electronic Materials Office abolished established Energy Solution Business Office established U.S. and British forces begin 2003 Hyogo Refinery closed attack on Iraq Amendments to the Act on the Hokkaido Refinery crude-oil Quality Control of Gasoline and naphtha tanks and Other Fuels permit damaged by fire resulting content of alcohol and other from earthquake off the additivesingasolineatupto coast of Tokachi 3% for ethanol and up to 1.3% for other oxygenated compounds Idemitsu Credit and Credit Saison merge through comprehensive partnership (ownership: 50%) Businesses of Munakata Kaiun and Asahi Tanker merged Okinawa Sekiyu Seisei Co., Ltd. closed Act on the Japan Oil, Gas and 2004 Mitsui Chemicals, Inc. and Metals National Corporation, Idemitsu Petrochemical Independent Administrative announce merger of Agency enacted polyolefin businesses System instituted of labeling Idemitsu Kosan Co., Ltd. total prices including merges with Idemitsu consumption tax Petrochemical Co., Ltd. Idemitsu Sazo (1885–1981) 273

Islamic extremists attack U.S. oil companies in Al Khobar, Saudi Arabia Authority in Iraq transferred from Coalition Provisional Authority to provisional Iraq government Kyoto Protocol takes effect 2005 Idemitsu Aviation Co., Ltd. established Hurricane Katrina strikes *Prime Polymer Co., Ltd. established London bombings Capital increase through third-party allocation of shares and paid-in retirement of preferred shares implemented Bali bombings Livedoor scandal 2006 Businesses of Idemitsu Gas and Life Co., Ltd. and Mitsubishi Liquified Gas Co. merged Nippon Oil and Japan Energy Idemitsu Unitech Co., Ltd. form partnership in absorbs Idemitsu Plastics development, refining, logistics Co., Ltd. and other operations Stock listed on First Section of the Tokyo Stock Exchange Pension-related issues arise 2007 Food mislabeling scandals Crude-oil prices rise 2008 Idemitsu Kosan President Akihiko Tembo named President of the Petroleum Association of Japan Financial instability arises in Fuel-oil pricing method response to subprime-loan issues changed (to market-linked pricing) New strain of influenza spreads 2009 Okinawa Idemitsu Co., Ltd. worldwide established Democratic Party of Japan Akihiko Tembo named victorious in 45th elections to Chairman, Kazuhisa House of Representatives and Nakano named President forms new government Massive earthquakes occur in Haiti 2010 Chiba Chemicals (magnitude 7) and Chile Manufacturing LLP (magnitude 8.8) established to achieve joint Accident results in oil leak in Gulf operation of ethylene of Mexico complex

Source: http://www.idemitsu.com/company/history/index.html accessed on 27 July 2013. 274 ∗ of US dollars Thousands Millions of yen 150.0 150.0 150.0 200.0 200.0 2.43 FY 2007 FY 2008 FY 2009 FY 2010 FY 2011 FY 2011 dollars) Net salesOperating incomeNet incomeNet cash provided by operatingNet activities cash provided by investingNet activities cash provided by financingCapital activities expenditureDepreciation and amortization 59,934 (78,448)Total assets 235,340Total 8,953 equity (86,136)Interest-bearing debt (62,846) (139,223) 60,929Net 55,891 income per share (in (74,848)Net ¥3,864,263 yen assets and per 86,995 dollars) 77,041 share (inCash ¥3,790,489 yen dividends 102,411 23,681 and per dollars) share (in ¥3,112,305 yen (59,092) and 159,723 4,637 ¥3,659,301 81,717 81,460 120.98 44,462 12,732 12,404.45 ¥4,310,348 (718,973) 1,943,345 $52,443,714 11,079.25 82,797 3,323 96,927 128,771 (79,462) 83.11 11,741.64 858,314 146,201 2,420,057 138,078 79,197 (966,813) 12,864.75 5,977 149.48 928,867 527,689 2,289,809 14,668.18 1,679,987 55,867 61,062 1,517.45 2,476,142 60,663 960,496 467,190 2,517,849 1,609.83 64,244 178.47 986,144 497,286 742,944 64,376 2,682,139 540,880 32,633,399 919,806 781,662 19.58 783,265 11,191,238 614,513 7,476,737 Appendix 3: Idemitsu Kosan’s financial figures in 2012 Financial Highlights Idemitsu Kosan Co., Ltd. andFiscal Consolidated years Subsidiaries ended March 31 For the year At year-end Per share data 275 9.6 – 1.3 – 11.7 – 21.9 – 9.3 1.6 12.3 20.4 3.0 1.3 1.8 19.0 6.9 0.7 1.4 19.3 4.3 0.9 1.5 20.5 7,503 7,826 8,330 8,201 8,243 – 40,000 40,000 40,000 40,000 40,000 – interest-bearing debt). + (%) ∗∗ U.S.$1, the approximate rate of exchange prevailing on 31 March 2012. This translation should not be construed as a = /(total equity ∗∗∗ Operating income = shares) Operating income used to calculate ROIC includes equity in earnings/losses of affiliated companies and dividend income. Return on equity (ROE) (%) Return on invested capital (ROIC) Shareholders’ equity ratio (%) Net debt/equity ratio (times) Number of shares issued (thousands of Number of employees (people) ROIC Solely for the convenience of the reader, the consolidated financial statements as of and for the year ended 31 March 2012 have been translated into Ratios ∗ ∗∗ ∗∗∗ United States dollars at ¥82.19 representation that all the amounts shown could be converted into U.S. dollars. Other data 276 Phronesis and Quiddity in Management

Appendix 4: The current-day world petroleum industry

The petroleum industry includes the global processes of exploration, extraction, refining, transporting (often by oil tankers and pipelines), and marketing petroleum products. The largest volume products of the industry are fuel oil and gasoline (petrol). Petroleum (oil) is also the raw material for many chemical products, including pharma- ceuticals, solvents, fertilizers, pesticides, and plastics. The industry is usually divided into three major components: upstream, midstream and downstream. Midstream operations are usually included in the downstream category ...

...Oil accounts for a large percentage of the world’s energy consump- tion, ranging from as low of 32 percent for Europe and Asia, up to a high of 53 percent for the Middle East. Other geographic regions’ consumption patterns are as follows: South and Central America (44 percent), Africa (41 percent), and North America (40 percent). The world consumes 30 billion barrels (4.8 km3) of oil per year, with developed nations being the largest consumers. The United States consumed 25 percent of the oil pro- duced in 2007. The production, distribution, refining, and retailing of petroleum taken as a whole represents the world’s largest industry in terms of dollar value ...

Oil companies used to be classified by sales as ‘supermajors’ (BP, Chevron, ExxonMobil, Conoco Phillips, Shell, ENI and Total S.A.), ‘majors’, and ‘independents’ or ‘jobbers’. In recent years, however, National Oil Companies (NOC, as opposed to IOC, International Oil Companies) have come to control the rights over the largest oil reserves;

Table A1.1 Top ten largest world oil companies by reserves and production

Rank Company Worldwide Worldwide Total Reserves Company Output (∗) (Reserves) Liquids Natural in Oil (Produc- (Millions Reserves Gas Equivalent tion) bbl/day) (109 bbl) Reserves Barrels (109 (1012 ft3) bbl)

1Saudi 260 254 303 Saudi 12.5 Aramco Aramco 2 NIOC 138 948 300 NIOC 6.4 3 Qatar 15 905 170 ExxonMobil 5.3 Petroleum 4 INOC 116 120 134 PetroChina 4.4 5 PDVSA 99 171 129 BP 4.1 Idemitsu Sazo (1885–1981) 277

6 ADNOC 92 199 126 Royal 3.9 Dutch Shell 7 Pemex 102 56 111 Pemex 3.6 8 NNPC 36 184 68 Chevron 3.5 9 NOC 41 50 50 Kuwait 3.2 Petroleum Corpora- tion 10 Sonatrach 12 159 39 ADNOC 2.9

(∗): Total energy output, including natural gas (converted to bbl of oil) for companies pro- ducing both. Source: https://en.wikipedia.org/wiki/Petroleum_industry accessed on 29 July 2013. by this measure the top ten companies all are NOC. The following table shows the ten largest national oil companies ranked by reserves and by production.

References

Cohen, J. B. (1973). Japan’s Economy in War and Reconstruction. Minneapolis, MN: University of Minnesota Press. Hyakuta, N. (2012a). A Man They Called a Pirate I (Kaizoku to yobareta otoko – gekan) (Vol. II). Tokyo: Kodansha. Hyakuta, N. (2012b). A Man They Called a Pirate II (Kaizoku to yobareta otoko – Jokan) (Vol. I). Tokyo: Kodansha. Idemitsu, S. (1956). My CV (watashi no rirekisho) Watashi no Rirekisho (Vol. 2, pp. 55–76). Tokyo: Nihon Keizai Shimbun. Kimoto, S. (2013). Sayings of Idemitsu Sazo: A Businessman with Gentlemanly Spirit Combined with Business Acumen (Idemitsu Sazo goroku: shikon shosai no keieisha). Tokyo: PHP Bunko. Shimamoto, M. (n.d.). The Self-Renewal of Idemitsu Kosan (1): The Road to Its IPO (Idemitsu Kosan no jiko kakushin (1): jojo eno michinori) http://www.hit -u.ac.jp/kenkyu/file/gcoe/shimamoto110307_02.pdf accessed on 27 July 2013. Annex 2: Kazuo Inamori

‘Kazuo Inamori (born on January 30th, 1932) is a Japanese phi- lanthropist, entrepreneur, and the founder of Kyocera Corporation and KDDI Corporation. He is the chairman of Japan Airlines.’1 (See Appendix 1 and Appendix 3.) We will describe below, first, Inamori’s experience as the founder of Kyocera and KDDI and, second, his management philosophy2,3.

Management history and organisational system

Founder of Kyocera Inamori graduated from Kagoshima University’s Engineering Faculty and joined a firm named Shofu Kogyo in 1955. Founded in 1917,4 it was a well-known company in the field of high-pressure insulators. Inamori was assigned to R+D for the development of new ceramics, which were special ceramics produced using materials artificially compounded rather than natural materials such as clay. Shofu Kogyo had been in the red for some years and remained afloat as a company due to the aid of financial institutions. The payment of salaries to the staff was irregular. Many colleagues of Inamori’s left the company after a short while. Inamori himself applied to Japan’s Defence Agency and was accepted, but due to the objection expressed by his elder brother Inamori rejected the offer and decided to continue with Shofu Kogyo. Faced with the fact that there was no escaping from his situation, Inamori decided to make an all-out effort in his assignment within the R+D unit. At the beginning of 1956, Inamori and his team suc- ceeded in developing forsterite to manufacture U-shaped Kelcimas (high-frequency insulator components for TV picture tubes). Until then, the only company capable of producing these items had been Philips.

278 Kazuo Inamori 279

Thanks to the growing TV set market, U-shaped Kelcimas were in high demand. Inamori was put in charge of mass-producing them and invented the electric tunnel kiln used in sintering.5 The Special Ceramic Section, which spun off from the R+D unit, was the only profitable section at Shofu. When new recruits for the section became necessary, Inamori did not wish to accept personnel from other sections who had been made redundant; he believed their morale would be low. Instead, he contracted new employees from the Employment Office, judging them on the basis of the positiveness of their personalities.

Despite these successes at Shofu, after a strong difference of opinion with his superior, he [Inamori] decided to leave the company. Learn- ing this, several of his co-workers joined him. In 1959, together with seven other colleagues, Inamori established Kyoto Ceramics, which later became known as Kyocera.6 (Chemical Heritage Foundation, 2010)

In founding a company, Inamori had to look for financial support. One of the seven people who had left with him, Masaji Aoyama, intro- duced him to two of his classmates at Kyoto University, Ichie Nishieda and Tamotsu Majikawa, who also decided to invest in Kyocera. Both of them worked for Miyaki Electric (and they even persuaded Mr Otoya Miyaki, the president of their company, to take a stake in the new firm).7 Despite the fact that Inamori had neither experience in nor knowl- edge about management, the investors decided to trust in him because, in Nishieda’s words, Inamori looked promising and seemed to have his own philosophy of life.8 Inamori was allowed to be a shareholder due to his practical contribution, namely, the rendering of his services as an engineer. Likewise, Nishieda saw to it that the new company was established independently of Miyaki Electric, and made sure that Mr Miyaki was aware of the fact there was a high risk of his money not being recouped. Thus, Kyocera started its life with 3 million yen in capital and 10 million yen borrowed from the Kyoto Bank. The company recruited twenty junior high-school graduates, who, immediately after joining Kyocera, complained that they had been deceived since they believed Miyaki Electric (in whose premises their interviews had been conducted) was actually Kyoto Ceramics, a much smaller company. For Inamori this was one of the first problems: how 280 Phronesis and Quiddity in Management to keep his staff happy and get the best of them in order for Kyocera to survive. Inamori also realised in 1960 (Kyocera’s second year of operation) that the most important thing for a company was to establish a partner- ship with its employees based on mutual understanding. This realisation came after the firm recruited ten high-school graduates who, after one year of joining, filed a demand that they be guaranteed future increases in their salary and a bonus payment. They stressed that they would leave the company unless their demand was accepted. Inamori himself did not feel secure about Kyocera’s future at all; so, to agree to their demand required lying to them. After two days spent dis- cussing with the employees their wishes, Inamori asked them to believe in him, stating that his only wish was to turn the company into a work- place where they would be happy to work, and that he did not hold any egoistic desire to take undue advantage of the firm.

Awakening to the need for management mission This incident opened Inamori’s eyes to the meaning of managing a company. Until that point, he had centred his attention on developing groundbreaking technology as Kyocera’s main purpose, and was con- vinced that hard work would overcome any obstacle. It dawned on him that, even if he, as manager, did not know what would happen tomorrow, he had the obligation to take care of his employees. (See Appendix 2.) He thus learnt that being a manager meant doing one’s best to max- imise the happiness of the employees and, because of that, he and his company needed to clearly define their mission. Inamori therefore focused on the pursuit of the employees’ happiness both in material and immaterial aspects, added to which was a contribution to the progress of man and society. Inamori firmly believed that the growth of Kyocera was not so much due to its technology as its partnership with its employees.

Securing orders from US companies Inamori secured for Kyocera a contract from Matsushita Electronics Industries (now Panasonic), which called for Kyoto Ceramics to man- ufacture U-shaped Kelcimas ...However, worried that his company was too dependent on Matsushita, Inamori sought orders from estab- lished Japanese manufacturers. Unfortunately, at that time his efforts did not meet with success, largely due to the Keiretsu (company affiliation) business network system. This led him to seek oppor- tunities in the open markets of the United States. His first U.S. customer was Fairchild Semiconductor, which placed order for silicon Kazuo Inamori 281

transistor headers. IBM placed large-volume orders for ceramic sub- strates. Inamori continued to develop and refine Cerdip packages and multilayer packages for the U.S. market. (Chemical Heritage Foundation, 2010: 15)

The penetration of Kyocera into the US market opened the doors for Japanese customers, who then recognised the excellence of Kyocera’s products due to their sales to US companies. Negotiations with US customers confirmed Inamori’s belief that, if an offer based on a good and principled sense was made, his US customers would not find it difficult to reach a quick agreement.

Listing on the stock market In 1971 Kyocera was listed on Osaka Stock Market’s 2nd Division; it had been growing at the rate of 50 per cent every year in terms of revenue and 40 per cent in terms of current profit. Many security firms had advised Inamori to carry out the stock-market listing. They recommended Inamori to adopt one of three approaches for an IPO (initial public offering): (1) to sell the shares owned by the shareholders; (2) to issue new shares; or (3) to combine (1) and (2). Inamori opted for (2) in the belief that, apart from his personal interest, he ought to represent the company’s interest. Kyocera’s shares were traded at 590 yen on the first day, higher than the 400 yen initially offered. Orders for about 800,000 shares were placed.

Price-setting Inamori argued in favour of determining the price of goods produced in consideration of possible sales quantity; namely, the price at which, multiplied by the quantity, it reaches maximum value. The material, personnel costs, overheads, and other expenses and costs must not be the determinant factors. The product cost ought to be set at a minimum but at the same time the product cost should be able to cover the total costs.

Setting a right price is very important ...if it is too high you can- not sell; but if it is too low, then you cannot gain profit. The ideal price is the maximum price that is within the permissible level for customers ...once it is set, you cannot increase it. If it is wrong, you cannot make money however hard you try. Therefore, price-setting must be done by the top management. ‘The price determination is the management’s responsibility.’ (Inamori, 2011: 62–63) 282 Phronesis and Quiddity in Management

Amoeba management and hourly profit system

In order to avoid organisational waste and loss of efficiency, Inamori decided to divide his company into smaller cells. Thus, ‘amoeba man- agement’ was invented. The name was adopted to reflect the flexible nature each unit had to possess within a changing environment; the unit should be amorphous and self-nurturing, as an amoeba. The objectives of this decision were threefold:9 (1) to establish a market-oriented divisional accounting system, (2) to foster person- nel with a sense of management and (3) to realise the concept of ‘management by all’. Transactions are conducted among amoeba units as if each one of them were independent SMEs (small and medium-sized enterprises). SME owners have to strive to make money out of unprofitable prod- ucts and services to survive; the amoeba units invigorated the Kyocera organisation thanks to this SME spirit. Management became the sum of the efforts made by everybody. Amoeba units can be created according to product categories or, when a product is produced on a large scale, according to each production process.10 Inamori (2012: 92–95) emphasises that, for amoeba management to be operational, there must be a philosophy behind it, such as Kyocera’s, which proclaims ‘the simultaneous pursuit of happiness in physical and psychological aspects of the employees, and the progress of mankind and society’ – this is to the exclusion of the managing personnel’s indi- vidual benefit. It also requires mutual trust among employees, without which amoeba units would degenerate into vehicles that would create unnecessary competitiveness among themselves. Amoeba units are not remunerated by bonus payment or prizes. Out- standing performance is only compensated via a public announcement of their accomplishments. The greatest motivation that can be derived from high performance lies in the praise and admiration of fellow workers. Amoeba units are free to determine their own budget, manage- ment plan, performance control, procurement of materials, personnel management; nevertheless, their superiors’ approval for each of these decisions must be sought. Amoeba unit leaders are thus trained in management practice on a daily basis. Amoeba units are evaluated on the basis of value added per hour; this is the revenue minus all the expenses and cost, divided by the total monthly number of working hours. It is expressed in terms of ‘per hour’ Kazuo Inamori 283 profit and loss account.11 No units with high hourly value added are entitled to economic remuneration. Kyocera’s website notes that:

In addition to Kyocera and KDDI, more than 300 outside compa- nies have adopted the Amoeba Management System on the advice of a consulting subsidiary of Kyocera. As a result, they dramatically improved business performance. I have no doubt that if top manage- ment, with a correct understanding of Amoeba Management, takes the lead and practices it in earnest, an enterprise can substantially enhance its structure. (http://global.kyocera.com/inamori/management/amoeba/index .html accessed on 14 May 2013)

Accounting system Inamori’s management style is supported by a solid accounting system.

I developed seven basic principles that are necessary for implement- ing this management accounting method and have been applying them in management ever since they were created.

1. Principle of Cash-Basis Management Cash-Basis Management describes a management style based on ‘sub- stance’, which focuses on the flow of cash. In other words, my first principle of accounting is that we should strive to manage business according for a cash basis.

2. Principle of One-to-One Correspondence

One-to-One Correspondence needs to be followed strictly, not just as an accounting discipline, but also as a way to regulate enterprises and the people who work within them. Through its application, we can achieve ‘transparent management’ that is free from any unfairness, either internal or external. 3. Principle of Muscular Management

A corporation must continuously develop itself. If we were to com- pare a corporation to a human body, our company would strive to maintain a lean and athletic body with excellent blood circulation throughout. In other words, managers should aim to create a lean and muscular company. 284 Phronesis and Quiddity in Management

4. Principle of Perfectionism

‘Perfectionism’ refers to the basic posture of management that aims at perfection in every detail of our business, without any ambiguity or compromise whatsoever.

5. Principle of Double-Check ‘Double-Check’ means a mechanism that sustains the soundness of personnel and organizations beyond accounting functions, and reaches across many aspects of a business.

6. Principle of Profitability Improvement A corporation must see improved profitability as its most impor- tant mission. To improve profitability, it is not only important to increase sales, but also to simultaneously raise the added value of the company’s products and services. To raise the added value, we must create products and services that have higher market value and which use fewer resources. Improving profitability is the prerequisite that enables us to raise employees’ standards of living and contribute to the advancement of society through corporate activity 7. Principle of Transparent Management

Since I founded Kyocera, the strong bonds formed between human minds have always been the basis for my business; in other words, I have managed the company based on mutual trust with [my] employees. It was necessary for a small company like Kyocera to have a strong bond between management and employees in order for it to survive in a highly competitive world. I realized then the importance of openly disclosing the true condition of our company to employ- ees in order to build strong trust between us. Such was the thinking that led me to build our style of transparent management, sharing the company’s true financial condition with all employees. (From the publication, Kazuo Inamori’s Pragmatic Studies: Management and Accounting, cited in http://global.kyocera .com/inamori/management/accounting.html accessed on 14 May 2013)

Inamori (2011: 78–79) asserts that the knowledge of accounting can- not be dispensed with by businessmen. His rules of thumb are as follows:

the revenue minus the direct costs and sales and administration expenses is operational profit; from among the direct costs the Kazuo Inamori 285

indicator that allows to test the health of capital investments is the depreciation cost; this ought to be traced according to its relations to the revenues broken down by different business divisions ...If the growth in depreciation is larger than revenue growth, you may judge that you have spent too much on the capital investment. ...as to the extraordinary or non-operational profit and loss, the indi- cator for the measurement of capital expenditure’s health is ...[the capability to] defray interests. Accordingly, you ought to trace [the said indicator] by each division, and if its growth is higher than the growth in revenue, which means a drop in the profit, a financial source to return loans, you have contracted too much debt and ought to reduce the capital investment.

The operational profit is the revenue minus direct costs and indi- rect costs; the current profit is the difference between the operational profit and non-operational expenses. Healthy management can only be established if borrowings can be repaid from depreciation plus the net profit after tax.

When you buy a plot of land, only the cash flow must be watched to meet the repayment of borrowings, since we don’t have depreciation ...The machinery and equipment as well as factory buildings are a different story because of the need to assess their depreciation and to bear the interest burden of the loans ...

Inamori (2011: 84–85) is cautious about the increase in fixed cost, a matter on which an accounting manager at Kyocera reminisces:

The president [Inamori] explained to us the risk implied in the fixed cost and always cautioned us against increasing in it. Accordingly, he was very cagey about the investment in fixed assets leading to the increase in the fixed cost and tended not to approve too easily investment proposals made to him. Nevertheless, if he was convinced of their need he was quick in taking action. Likewise, he was careful about the increase in the number of personnel as it might harbinger a fixed cost increase.

Turning Mita round In 1998 Kyocera was asked by Mita, a middle-sized OA (Office Automa- tion) equipment manufacturer, to save it from bankruptcy. The com- pany had 40 billion yen-worth of liabilities in excess of its net worth. Kyocera decided to amortise them in ten years. The fact is, however, 286 Phronesis and Quiddity in Management

Mita Industrial (currently Kyocera Document Solutions) under Kyocera’s management managed to repay the liabilities by the end of March 2002, six years shorter than previously estimated.

Foundation of DDI, a telephone operator Inamori always felt the need to have competitive communication costs. In 1984, when the government decided to privatise the telecommuni- cations industry and to allow private enterprises to join the market, he expected the lowering of long-distance telephone tariffs by means of the entry of various competitors in the telecom industry, which actually did not eventuate. For Kyocera to go alone and to challenge NTT, a mammoth telecom company, was too risky; but Inamori asked himself time and again over six months if Kyocera’s entry into the fray would help the people and the country. He eventually reached the conclusion that taking action was in the benefit of society and that the initiative would not serve any selfish purpose. When DDI, Kyocera’s project, was launched on 1 June 1984, Inamori learnt that it would face competition from two more competitors. The market analysts were of the opinion that DDI was at a disadvantage; Kyocera had neither previous experience in telecommunications nor any telecommunication-related technology. What was worse, DDI did not have access to the existing railway lines and express ways that would have allowed it to lay cables alongside them to establish a communications network. In a word, DDI had to do everything from scratch. DDI’s shareholders included, in addition to Kyocera, corporations such as Mitsubishi Corporation, Sony and Secom. Inamori is not in any doubt about his belief that DDI succeeded thanks to ‘the untainted sincerity with which his staff took up this busi- ness’ (Inamori, 2012: 144–145). From the time DDI was founded, he appealed to his staff and employees for the need to offer inexpensive long-distance call charges. This was done in order to serve the public, and was a once-in-a-lifetime opportunity to do business for the good of the people. ‘As a consequence, all the staff at DDI came to share the pure desire to render a useful service to the people, a fact which drove them to work with all their heart, mind, and strength to achieve success ...’, ‘seeing them devote themselves with such zeal, DDI’s agents and shops supported them’, ‘thus, like-minded people gathered together around DDI, leading the business to success’ (Inamori, 2012: 145–146). Kazuo Inamori 287

Upon entering the mobile phone business, DDI faced a competing application from another start-up operator for the telecommunications licence, despite the fact that the government restricted the grant of licences to only one company (apart from NTT) for each region. Inamori personally made the decision to give the Tokyo Metropolitan area and Nagoya region to his competitor while keeping the rest for his company. The rest of the management of Kyocera, however, was not happy at all. Aware of the difficulty caused by such a concession, DDI staff realised that they would have to deploy more energy than their competitors. DDI divided the Japanese territory into eight regions (excluding Tokyo Metropolitan area and Nagoya and its environs), setting up mobile phone companies in each of them. All of them achieved success from the start. At the end of 1990, the number of subscribers exceeded 177,000, reached 286,000 in 1991 and, by 1993, grew to 471,000. These figures surpassed those of IDO, NTT’s competitor in charge of the Tokyo Metropolitan area and Nagoya region. The mobile phone operator later became ‘au’, which continues to compete successfully against NTT DoCoMo. On 1 October 2000, DDI merged with other operators to give birth to KDDI. The decision to merge was made in view of the strengthen- ing of the NTT group, something which was contrary to the expectation that after NTT group was split, there would be more competition in the market. However, in July 1999, NTT, though split up into several units, became a holding company controlling east Japan, west Japan and the long-distance division. At the same time it incorporated NTT DoCoMo as a part of the group, along with the inclusion of an international com- munications division. This meant the emergence of a giant in the field, which would thwart the healthy growth of the telecommunications industry in Japan. Inamori approached Toyota’s chairman Seki Okuda and president, Fujio Cho, as Toyota was the main shareholder of IDO, and KDD’s chair- man Taizo Nakamura and president Tadashi Nishimoto, proposing to ‘shed small differences in favour of forging large harmony’ and suggest- ing that all of them should drop individual interests in the cause of the people’s benefit. (See Appendix 3.) Inamori was aware that if the merger was to be made on an equal footing among DDI and KDD and IDO, it would not work because of a lack of a company leading the merger; he insisted to his part- ners that his proposal was not based on the idea that his company get the lion’s share of the market, but was to be done in the interest of society. 288 Phronesis and Quiddity in Management

Turnaround of Japan Airlines (JAL) In February 2010 Inamori assumed the position of the chairman of Japan Airlines (JAL) at the request of Japanese government, who wished him to rescue the ailing carrier. Many were against him taking up the position because of his age and his lack of experience in the airline busi- ness. This was in spite of his achievement as a businessman who had created two successful companies with a combined turnover in excess of 5 billion yen. Inamori put forth three reasons in justification of his involvement in the rescue of JAL:

1. The influence on the Japanese economy: JAL’s disappearance would exert a grave negative impact on Japan’s economy, but if it were saved it would signal a message that even a company like JAL could be rescued. 2. The securing of the employment at JAL: although some employees would have to be shed, it was important that the rest be kept. 3. The responsibility towards the users: with JAL’s bankruptcy and its disappearance, Japan would only have one carrier left, which might result in the worsening of service and an increase in the price of airfares.

Indo (2013: 40–49) maintains that there were six accepted ideas at JAL before its failure: (1) JAL, as the national flag carrier, would never go bust, leading to the belief that the company would be saved by some- body even if its economic performance were miserable; (2) the parts for aircraft maintenance must be brand new, leading to the lack of appro- priate cost-result consideration; (3) the costs need not be taken into account, leading to its bloated assets (1,750 billion) and annual oper- ating expenses, including interest payments (2,000 billion) along with 50,000 staff, when JAL’s annual revenue did not amount more than to 2,000 billion; (4) the operating divisions and departments felt that the annual business plans did not belong to them and, accordingly, they were not responsible for them because they were prepared by the cor- porate centre’s management planning department; (5) other divisions and departments were perceived as being separate companies, leading to the compartmentalisation of the six divisions, including transport, maintenance, cabins, airports, business development and management planning; (6) the compliance to company manuals was more impor- tant than customer service, leading to inflexibility when situations unforeseen in a manual arose. Kazuo Inamori 289

Inamori introduced for the JAL management two management tools he had always used; namely, his management philosophy and the amoeba organisation. When he arrived at JAL he registered his surprise in response to his request to JAL’s executives about their management data: no clear answer could come immediately. Even if data came, they were a few months out of date and only showed the overall picture without any detailed, micro data. No clear identification of profit responsibility could be obtained. The disjointedness was extreme between the head office and lower management, the line and the staff organisations, executives and the rest of the employees, and JAL and its subsidiaries. Inamori even sus- pected that the top executives were more interested in dodging their responsibility than doing any positive work for the company. Inamori started his overhaul of JAL by enhancing the awareness among the management of the fact that JAL was in bankruptcy. Despite its bankruptcy, due to JAL’s uninterrupted operation, its management did not seem to realise that the company was in a dire state. He stressed the need to recognise the reality of bankruptcy and to identify its causes. Inamori personally wrote to JAL’s executives to the same effect. In June 2010 Inamori called together some fifty top executives and, during that month, personally provided them with leadership training with an emphasis on the way leadership thinks and acts. The con- crete message he tried to promote was ‘the maximisation of sales and the minimisation of costs’; the importance of cultivating one’s person- ality to gain respect from their subordinates; and the sharpening of one’s determination to achieve objectives even in the face of adverse work environment change. The training programme for these executives was followed by programmes for lower management, reaching 3,000 managers in total. As a follow-up to the training programme, Inamori instructed that monthly meetings be held from July onwards, and, over the course of these three-day sessions, economic performance be reported and anal- ysed with the assistance of a hundred leaders from each division. Each profit and loss account item would be discussed by comparing the bud- get and the real results; the discrepancy must be explained and, when needed, Inamori himself would personally give instructions. Inamori maintained that the revenue in air transport business was derived from the transport of passengers and cargo with activities to support it; that it was necessary that profit results be analysed by each flight and the support units be aware of their contribution to the overall 290 Phronesis and Quiddity in Management profit. In order to achieve this, Kyocera’s amoeba system was introduced, accompanied with a new management accounting system so that each unit could manage their profit performance. This was put in place by April 2011 (Indo, 2013: 224). Such items as sales, expenses and costs would be reported on a monthly and even daily basis. The profit and loss of each route would be revealed on a real-time basis (in fact, the following morning); and responsibility would be clearly assigned to designated individu- als. As regards to maintenance and airport counters, the teams were divided into units that were as small as possible so that expenses could be watched and controlled. Information would be shared among the team members so that they could discuss how to reduce waste and seek the most efficient way to successfully complete their tasks. In the belief that JAL would not improve unless the front-line staff changed their mindset, Inamori often went to the airports to talk to them. Staff, such as those at the counters, cabin attendants, pilots and maintenance teams, were thus contacted. In August 2010 Inamori instructed that a poster be affixed in all work posts, quoting the part of his inaugural speech as chairman of JAL: ‘the achievement of the new plan lies in your dauntless and indomitable spirit; hence, raise your thought to what is noble and resilient’. Inamori intended, with this, to stress that the company revival plan could only be put into practice and take effect when each employee individually took charge of the situation and concentrated his or her attention on the attainment of the target for which they were responsible. The monthly newsletter for internal use began publishing its informa- tion on the progress of management. The JAL philosophy, including a new company mission statement, was published in January 2011, based on the discussions among man- agement team and Inamori. In its preparation, a group of ten executives from each division met over twenty times, taking into account the opinions expressed by 130 employees. The JAL philosophy has forty items (compared with Kyocera’s seventy- eight). It consists of two parts: the first part concerns how to spend a joyful life (four chapters and fifteen clauses); the second part concerns how to make JAL a superb company. The corporate mission of the JAL Group prioritises the pursuit of material and mental happiness in JAL employees, based on Kazuo Inamori’s conviction that the staff will only understand palpable and concrete ideas. Kazuo told JAL’s executives that only after they felt satisfied in material and mental aspects would JAL personnel concentrate on improving the service to their customers and on contributing to society (Indo, 2013: 78–79). Kazuo Inamori 291

The first year results (ended March 2011) recorded 1,362 billion yen revenue with 188 billion yen operational profit over the budgeted amount of 64 billion yen. These figures were the largest since JAL’s inception. The following year saw, despite the Eastern Japan Earthquake, 1,205 billion yen revenue, with 205 billion yen operational profit and 17 per cent return on sales. At the end of March 2010, JAL’s total assets amounted to 1,517.4 bil- lion and the net liabilities were 959.2 billion (1,517.4 + 959.2 = 2,476.6 billion). It was proposed in the rescue plan that the debts be cut by 595.6 billion, the resulting amount of the total debts being 1,881 billion. By the end of March 2011, the net worth of the JAL Group increased by 1,177.4 billion, broken down as follows: 583.7 billion-worth debts condoned; new subscription to its capital by 362.7 billion; the profit amounted to 76.7 billion; and the decrease of pension liabilities by 154.3 billion. As a consequence, the net worth at the end of March 2011 was 218.2 billion, and the debts 988.2 billion (Indo, 2013: 33–34). Inamori withdrew from JAL’s management in June 2013 in view of the progress in JAL’s performance in the first two years. (See Appendix 4b.)

Management philosophy

Philosophy-based management As Kyocera was a small company that might be toppled by any insignif- icant mistake in judgement, Inamori came to the opinion that decision- making must be based on certain principles and philosophy; specifically, judgements ought to be made by asking oneself ‘what is a right thing to do as a human being’, and this should be followed through by the conviction that ‘right things must be pursued if they are so’. Inamori’s belief consisted in his persuasion that this philosophy would help him not to deviate too greatly from right decisions despite his insufficient management experience and knowledge. Kyocera’s management system and organisation were designed in such a way that this philosophy might be fulfilled. Inamori’s idea was simple: the profit was the difference between the revenue and the expenses and cost, an unsophisticated idea cherished and followed by many uneducated merchants. Fixed ideas or accepted wisdom (or preconceptions) were to be avoided. For example, accepted wisdom held that when ROS (return on sales) stood at several percentage points, the company was doing passably well, and when over 10 per cent, it was deemed to be doing excellently. 292 Phronesis and Quiddity in Management

The pitfall for a company making a 5 per cent profit on sales, for instance, lay in the confidence that it was doing well in the face of exchange-rate fluctuations and other adverse circumstances. The attain- ment of 5 per cent ROS may create an atmosphere of complacency even if a more incessant effort may bring higher profitability. The 5 per cent target had become the accepted level or ‘fixed idea’, when in fact nei- ther 5% or 10% made any difference. Therefore, Inamori always made a point of avoiding fixed or accepted wisdom and sticking to his personal philosophy and principles. Another example of an accepted idea or preconception was the com- pulsory derivative deposit (buzumi ryodate) required by the banks upon discounting bills of exchange, consisting in the mandatory deposit of the discounted amount as a guarantee. Inamori protested against this as an unacceptable custom on the grounds that Kyocera had a greater amount of term deposits than the balance of the discounted amount. Banks insisted on this deposit as an accepted custom between the banks and their clients. It was ultimately abolished by the Ministry of Finance, justifying Inamori’s opinion that what was not reason- able when contrasted with the principles of goodness would not last for long.

Management responding customers’ needs Inamori encourages his staff to develop products that are to ‘be razor- sharp (teno kireru yona seihin)’ with the feel that one perceives when touching new bank notes. He stresses that otherwise customers will not be satisfied. Years ago a researcher came to Inamori’s office and showed him a sample product on which the engineer had spent months working; how- ever, Inamori flatly refused to approve it, stating that its colour was not what he expected. The engineer retorted that the product’s specifica- tions complied with the original requirement. Inamori replied that he visualised his image of the ideal product by referring to its need to be razor-sharp; this might be in excess of required specifications, but must be ‘razor-sharp’. The sample could be considered to be beyond economic feasibility if it had the best quality; mass production ought to be studied later, as a separate matter. Inamori holds that:

Products directly reflect the developer’s mind. If made by men of coarse fibre, the product would be coarse; if made by men of delicate turn of mind, the product would be subtle and delicate ...I believe that one should endeavour to ‘listen to what the product under Kazuo Inamori 293

development tells him’ and to concentrate one’s attention on this so as to achieve the development of razor-sharp products. (Inamori, 2012: 66–67)

Innovative management that offers challenges for the future Kyocera’s success is attributed by many to its early entry in a high- growth industry such as fine ceramics, and to its technology develop- ment capability, both of which enabled the firm to not just be aware of current trends in the field, but to also be fully active and involved within them. However, Inamori is firmly persuaded that Kyocera would have been successful even if it had entered another kind of business and industry, because it had been equipped with everything needed to garner success in a new business: the willingness to defy risks. He does not think that marketing skills, financial might and technology are the strengths that propel a firm to success; for him they are only necessary conditions: the condition required to supplement these factors to ultimately achieve business success is the willingness to face challenges. Due to this willingness to defy challenges, Kyocera did not limit its business domain to fine ceramics; nowadays it commands suc- cess in such consumer products as solar batteries, printers and mobile phones, as well as in other industries, including telecommunications through KDDI. Inamori argues that a defensive attitude portends for firms their declining stage; therefore, it is indispensable that a firm should make ongoing efforts to explore new businesses so as to avoid stultification. According to him, top executives have to continue to take up new chal- lenges, and, if they perish, their staff have to fight on with the same unflinching spirit. The important thing is, accordingly, to create this fighting spirit within the company. The taking up of new challenges must be supported by solid finan- cials. DDI, a telephone operator, was launched in 1984 by Kyocera to accelerate the liberation of telecommunication market thanks to the Japanese company’s rock solid financial situation (with over 100 bil- lion yen-worth of reserves), which would have guaranteed Kyocera’s survival even if the new business had failed. Inamori (2012: 73–74) stresses that ‘undertaking the challenge of new businesses without the financial guarantee is a mere reckless valour’.

Strong desire that penetrates the subconscious Inamori is adamant about the need to have strong determination in conducting R+D projects: the desire that ‘this must be so and so’, the 294 Phronesis and Quiddity in Management sense of responsibility that ‘this must be done without fail’, the will ‘not to fall into pessimism’ are essential. He always exhorts his staff to ‘stick to their objective and attain it by cherishing a desire that penetrates even the subconscious’ (Inamori, 2012: 77) in the conviction that such a desire is assiduously acted on without fail. The development of the multilayer IC (integrated circuit) package is a case in point.12 It provides protection to an IC, an essential part of electronic products. The investigation of protection for ICs began to arrive in Japan from Silicon Valley’s semiconductor manufacturers in the 1960s; in particular, in his visit to an electronic component pro- ducer in the spring of 1969, Inamori was consulted about a high density, multilayered package. It had to be composed of two ceramic plates, 25 millimetres square and 0.6 millimetres thick, on which ICs were printed and connected to each other by means of ninety-two holes of 0.25 millimetre diameter, containing thirty-six pins. The specification by far exceeded Kyocera’s technology level at that time. Moreover, only three months were given for its development. Inamori agreed to develop the package but soon discovered that his company had neither the equipment to print circuits nor skills to bore holes of even 0.3 millimetres on ceramic plates. To complicate the mat- ter, upon baking ceramic plates, the metal-forming integrated circuits were burnt; as a result, the two plates warped and could not be stuck together, and the electric connectivity through the ninety-two holes could not be established. The development team spent two months almost without sleep or rest. The engineers involved in the project, waking or sleeping, sought for a solution. Nevertheless, the technological hurdles were sorted out one by one. ‘It was as though God watched them and viewing their sincere attitude pitied them and extended his helping hand’ (Inamori, 2012: 81). This event convinced Inamori that ‘the god of creativity would only help people in the direst situation in which they tried to face a difficulty in an all-out manner, and the solutions reached in an atmosphere of ease might be simply an ideas without merit’ (Inamori, 2012: 81).

You can only get what you desire You tend to think that everything in this world moves not as you want it to – and as a consequence, you give up ...However, it is very important that you maintain your desire to reach your objective with all your heart. Kazuo Inamori 295

I learnt about this more than forty years ago when I attended Mr Konosuke Matsushita’s speech for the first time. At that time Mr Matsushita was not as famous as in years later when he was ‘deified’ ...

In that speech, Mr Matsushita talked about his famous dam-type management. Rivers without dams run uncontrolled when it rains and cause flooding, but they run dry at the time of drought. There- fore, it is necessary to construct dams to retain water and keep it under control independently of weather and climate. In the same manner, management has to prepare for rainy days when the economy is booming ... I sat in a row near the exit and could feel a discontented feeling spread in the audience that contained hundreds of small and medium enterprise owners.

Murmurs were heard to the following effect: ‘This is nonsense. We work hard day after day precisely because we cannot afford to spare our resources for later use. If we could, we would not be suffering like we do. What we wanted to know was how to build the dams, not the need to build them.’

A man stood up and expressed his frustration: ‘I grant that your dam-style management is ideal, but it is imprac- ticable. How can we do it? How can we have more money? Please teach us. That’s why we are here, to listen to and a learn from you.’

Mr Matsushita remained with an embarrassed smile on his gentle face and kept silent for some time and muttered to himself: ‘I don’t know how to do so myself. But even so, we have to build dams.’

The audience hall burst out laughing; obviously, the audience was not satisfied with his answer.

However, I was not disappointed nor mocked Mr Matsushita. On the contrary, I was profoundly shaken and could not budge a centimetre because of emotion. I thought Mr Matsushita’s opinion thrust on us the very truth of business. (Inamori, 2004: 40–41) 296 Phronesis and Quiddity in Management

Another example cited by Inamori (2004: 69–71) reads as follows:

Ceramic products are made by pressing pulverised metal oxides into a compact form and then by baking them in a high-temperature fur- nace. They are similar to porcelain but require more precision so as to be used for electronic devices. No small deviation from the design nor uneven baking, not to mention warping, are allowed. Shortly after the foundation of Kyocera we were developing a new product. Upon baking it warped here and there ...

Through our trials and errors we identified the cause of this prob- lem as the uneven exertion of compaction by a press with the result that the density of powder differed in the upper and lower surfaces, leading to the warping ...

Hard as we tried, the baking was not satisfactory. I decided to observe the baking process by making a hole in the furnace. As expected, with the increase in temperature the product started to warp as if it were a living creature ...I almost inserted my hand to prevent it from curving ...

Of course it was impossible to put my hand into the furnace, the temperature of which stood at over 1000 degrees. Even so, I wanted to do so. My desire to finish the product successfully ran so deep in my mind. The product ultimately responded to my desire. The impulsive reac- tion to put my hand into the furnace to press down the warping parts gave me a clue. I managed to avoid the warping by incorporating fire-resistant weights into the process ...

Inamori (2012: 110) emphasises that ‘in repeating in one’s mind all pos- sible alternatives of a successful process, one comes up with a vivid picture of how the best of them could be, even if one never saw it in reality ...in order to achieve the success of a new business, one has to strain until the success can be “visualised” in one’s mind ...’

No joy without alloy and no alloy without joy Inamori (2004: 146–147) marks out the importance of feeling joy at the time of success: Kazuo Inamori 297

As a young and inexperienced engineer, every success, no matter how small, in experiments made me literally leap up for joy. However, my assistant used to sneer at me. On one occasion I demanded him to share my joy and express his delight more openly. He gave me a black look and spat out: You always express your joy too easily, however slight the success may be. However, I think in one’s life there ought not to be more than two or three occasions in which a grown man can really manifest openly his joy. If you continue to do this you will end up by appearing cheap.

At this retort I felt a chill run through my body, but managed to answer him. I told him that what he had said was true, but it was also true that to be grateful of every success and achievement and express your joy at it would be the source of energy that drove you to continue in your effort.

High-mindedness is the source of energy Man seeks ‘a life full of its meaning ...’ and the ideal life is that in which ‘he can look back on it and say that he served the society and felt happy as a consequence’ (Inamori, 2012: 82). Otherwise, nobody would be motivated so as to spend many years of his life working, which signifies the importance of setting forth a high-minded objective of life. ‘They assume that with passion and pro-activeness one can achieve success, but in reality a distorted passion leads not to the final stage of success but to a failure, because unusual passion may bring about intoxicating wine but also create a pitfall of failure’ (Inamori, 2012: 83).

Passion is an indispensable ingredient for success in business; how- ever, success, unless it is accompanied by the heightening of one’s character, view of life and philosophy of one’s own will not be sustained. Too much passion without these accompanying charac- teristics would result in unavoidable frictions with the people around you and too much single-mindedness in pursuit of one’s objective might lead to acts unaccepted by law, a step to the ultimate failure. (Inamori, 2012: 82–83)

Treasure trove Inamori (2004: 30–33) believes in the will of ‘Something Great’ that remunerates one’s effort to develop new products or businesses, and 298 Phronesis and Quiddity in Management points out that there may be a kind of ‘storehouse of wisdom’ in this universe:

[Success] may be attributed not to mere chance or to capability. Somewhere in this universe there ought to be a place that could be considered as a storehouse of wisdom or truth from which, without realising, we draw the ‘wisdom’ stored in it in the form of new ideas, creativity ... It is as if it were ‘a well of wisdom’ not belonging to men them- selves ...I may have hit on it in engaging myself in product develop- ments with the courage of despair ...

Altruism In September 1997 Inamori was ordained as a Buddhist monk at Empukuji temple in Kyoto.13 His spiritual teacher was Nishikata Tansetsu Roshi, a Zen monk of the Rinzai School. He had been operated on for stomach cancer two months before. In November he engaged himself in Buddhist practices in the same temple.

I had to visit the parishioners’ homes one by one and recite a sutra to beg alms every chilly morning, clad in blue cotton clothes, wear- ing a pair of straw sandals and a bamboo hat. The mendicancy was hard practice for me, unaccustomed as I was to it. My feet bled because some of my toes stuck out of the straw sandals and rubbed against the asphalt. After half a day walking around thus, I felt totally exhausted ...One evening I was going back to my temple dragging my feet and walking past a park. An aged lady who was cleaning the park came to me almost running and secretly put in my alms bag a five hundred yen coin. I was seized with a feeling of extreme and unexpected happiness ... (Inamori, 2004: 171–172)

Inamori argues that to earn profit is not a sin if it does not devi- ate from certain rules; namely, one must self-discipline oneself through the strict observance of ethics and act towards other people with an altruistic spirit. Benefiting others may degenerate quite often into an egotistic pursuit of the interests of the group to which one belongs. To work hard for one’s company may become an antisocial act if one’s view is bound only to the company’s benefit. ‘Therefore, to avoid falling into this kind of Kazuo Inamori 299 shortfall we have to nurture our capability to have a wider perspective and to relativise one’s interests’ (Inamori, 2004: 181).

Equation of life and work As early as at the founding of Kyocera, Inamori formulated an equation to express the relations between work and achievement to be accom- plished in life. This was a product of the way of thinking times zeal times capability. He determined that his capability was about average, so the means to achieve something in life would depend on the remaining two factors – his zeal and way of thinking. Zeal may also be considered to be effort. It can range from zero to 100 marks, and each person can decide on how much effort he would put based on their own choice. When at Shofu, Inamori undertook the development of new ceramics and, being aware of his limited talent, he tried to run at full tilt in a hope to get abreast of other researchers, at least at the beginning of his career. However, in the end he managed to be part of the leading group. Zeal was the explanation. A way of thinking may be equated to a person’s attitude towards life. Capability and zeal range between zero and a maximum of 100 marks, whereas the way of thinking exists between −100 and 100 marks. This explains why a negative attitude may often thwart people’s lives.

A person, physically fit, with well-developed motor nerves and sharp intelligence may be given 90 marks regarding his capability, but only 30 marks for his zeal if he is overconfident in himself and does not make due effort. The product of the two elements would then be 2700 marks. Contrary to this, another person expends his effort in the belief that ‘their capability is below average (for example, with 60 marks) and make up for it by employing every means of effort’. This brings up his zeal to 90 marks. If so, his score would be 5400 = 60 * 90; namely, double the score obtained by a person of innate capability but without much zeal. The difference may become higher if the attitude towards life ranges between −100 and +100. (Inamori, 2012: 102–103)

Inamori put emphasis on the combination of these three factors, because people comment on the importance of zeal and capability, but very few of them refer to the relevance of one’s attitude towards life. Inamori hit on this equation after overcoming his frustration over the difficulty of finding employment after graduating university. Inamori’s role models were Konosuke Matsushita, the founder of Panasonic, and Soichiro Honda, the founder of Honda Motors. Neither 300 Phronesis and Quiddity in Management of them had had any formal higher education, being forced to serve as apprentices from a young age. What set them apart was their zeal and high-minded ideals; that is, to contribute to society in general and to their employees in particular.

Laborare est orare [I]f the work that gives the greatest joy and carries the highest weight in the life of man does not give him the sense of fulfilment, he will always feel that something is missing.

The fruit of work is not only the sense of achievement. It sets the base for our existence and serves for us to practise ascetism and helps in our formation of character. In Zen Buddhism, monks have to do everything, trivial though it may seem, for themselves from the preparation of meals to the cleaning of garden, but these daily tasks are considered of the same importance as the practise of contemplation. They think that the spiritual concen- tration on the carrying of daily works is essential, and is the same as the attempt of mental concentration. Daily labour is therefore equiv- alent to spiritual practice, and doing one’s best at one’s work leads to satori,14 spiritual illumination ...satori comes as the last stage of elevating one’s spirit ... (Inamori, 2004: 159).

Inamori on quiddity What is the quiddity of being human? For what purpose are we born? These are the issues human beings try to answer while they live. Toshihiko Izutsu, an expert in the study of Islamic thought and Eastern philosophy, tells us, regarding the quiddity of being a man, as follows:

‘In trying to elucidate the quiddity of human beings by contem- plation, the consciousness starts to become subtle and infinitely transparent; one may still keep his awareness that he exists, but the five other senses entirely abandon him; finally, the consciousness feels its very existence, and becomes aware that everything and every phenomenon in this world are nothing but composed of what may be only called existence. This state of consciousness may be the quiddity of human beings.’

Following the opinion of Mr Izutsu’s, Professor Hayao Kawai ... expressed his view that ...upon looking at a flower one says that there Kazuo Inamori 301

is a flower, but one may better say that existence takes on the shape of a flower.

In other words, upon eliminating attributes – body and spirit, con- sciousness and perception – that characterise living things, there emerges something that can only be called ‘existence’. Life forms around it; this existential core is common to all lives and sometimes it takes the form of a flower and sometimes of human beings.

Therefore, a man called Kazuo Inamori does not exist as such; but a certain kind of existence chanced to take on the human form as me. It did not have necessarily to be me to found Kyocera or KDDI. I am only playing the role as their founder, assigned by Heaven. (Inamori, 2004: 240–242)

Inamori on satori or illumination or enlightenment As a Buddhist monk of the Zen School, Inamori seems to attach a great deal of importance to satori or spiritual awakening:

paradoxical as it may sound, we, normal men, will never be able to attain enlightenment however hard we may try. I am keenly aware that for a normal human being it is impossible to reach spiritual awakening.

In my ordaining ceremony, I was asked if I could observe the ten Buddhist commandments ...I do not think I can ever observe them perfectly.

No matter how hard I may strain, how many hours I may spend on practising contemplation exercises I will not be able to reach enlightenment. A person like me who is infirm of will and who can- not escape worldly passions (kle´sa15) will not be able to always keep present the altruistic spirit ...

However, I also came to understand that it was so and so will it be ...and to think that the effort to carry on with that intention in mind would be the most precious thing.

Satori and the capturing of quiddity through satori Kawakami (2010: 25) cites Kazuo Inamori’s ideas about the capturing quiddity:

• ‘I believe that the phenomena would adopt the shape our mind wants it to be.’ 302 Phronesis and Quiddity in Management

• ‘The reflection of one’s mind may lend a complicated form to the phenomena.’ • ‘The beautiful and limpid mind can see the truth. But a mind full of egoistic thinking can only see phenomena as complicated things.’

Wrapping up: Inamori’s philosophy according to Kawakami In his comparison of Konosuke Matsushita’s and Kazuo Inamori’s philosophies, Kawakami (2010) enumerates six common points:

1. Both of them believe in the existence of an entity that makes the existence of the universe possible. Matsushita called it the origin of the universe; and Inamori the Creator or Something Great. 2. There is a will in the universe that pushes the birth and development of the universe. Their vision of the world is therefore teleological. 3. Both of them believe in the existence of a supreme law that may be called the Law of the Universe (Matsushita) or the Law of Love (Inamori). 4. Because of the first point, the supreme law comprises the physical law for physical phenomena and ethical law as norms, but between these two laws there is no distinction. 5. Both of them consider man as the highest among living beings and therefore they believe that man is entrusted with the role to lead the development of the universe, though man has to follow the supreme law. 6. The mission of man is to make it possible that he or she realises him/herself materially and spiritually that may be called the happi- ness in material and spiritual aspects.

Inamori argues that the creator does not control everything but instead gives man the essential (something central in the soul) so that man should behave freely (Kawakami, 2010: 30). Inamori’s vision of the will of the universe does not ignore the impor- tance of each individual fulfilling, of his own accord, his or her mission assigned by the universe, because the development of human beings is derived from man’s determination to fulfil his mission. In Inamori’s philosophy this applies to management, too. Management ought to be performed with a will or desire to do it well but such a desire must not only be cherished, it must also be a strong desire and ought to be passionately embraced. Inamori insists that we must be aware of the role or mission assigned to us and in the process we have to elevate our soul constantly. For Kazuo Inamori 303 that, man does not have to abandon the world. The workplace may best serve as the location for the spiritual exercise to elevate one’s soul. To work is to lead an ascetic life. In this line of thought Inamori follows the Edo period Zen Monk Suzuki Shosan’s teaching (‘the daily work is the Buddha’s way’16). Zen teaching leads Inamori into attaching more importance to the elevation of the soul in the process of achieving one’s purpose than to the achievement itself. Egotism is thus overcome and altruism gains more importance; in addition, rigorous ethics and a sense of obligation carry primordial relevance in Inamori’s philosophy.

Appendix 1: Kazuo Inamori’s biography

1932 Born in Kagoshima City, Japan, on 30 January17 1959 Established Kyoto Ceramic Co., Ltd. (present Kyocera Corporation); Appointed to the Board of Directors 1966 Appointed President of Kyoto Ceramic Co., Ltd. 1969 Established Kyocera International, Inc., CA, USA; Appointed to the Board of Directors 1984 Established Inamori Foundation; Assumed Presidency 1984 Established DDI Corporation; Appointed Chairman of the Board 1985 Appointed Chairman of the Board of Kyocera Corporation 1987 Established Kansai Cellular Telephone Co., Ltd. (presently au Corporation – a subsidiary of KDDI); Appointed Chairman of the Board 1994 Established DDI Pocket Telephone Inc.; Appointed Chairman of the Board 1994 Established Hotel Kyocera Corporation; Appointed Chairman of the Board 1997 Resigned as Chairman of Kyocera Corporation; Retained the position of Non-Representative Director and appointed Founder and Chairman Emeritus; Resigned Chairman of the Board and Representative Director of DDI Corporation; Retained the position of Non-Representative Director and appointed Founder and Chairman Emeritus; Resigned Chairman of the Board and Representative Director of Kansai Cellular Telephone Co., Ltd. (present au Corporation); Retained the position of Non-Representative Director and appointed Chairman Emeritus 2000 DDI Corp. merged with IDO and KDD; the title was changed from Founder and Chairman Emeritus to Chairman Emeritus 2001 DDI Corporation changed its name to KDDI Corporation 2001 Resigned as Chairman Emeritus and was appointed an Honorary Adviser of KDDI Corporation 2003 Established Seiwa Social Welfare Association; Assumed Presidency 2003 Established Inamori Social Welfare Foundation; Assumed Presidency 2010 Appointed Chairman of Japan Airlines Corporation; Assumed post of Special Adviser to the Cabinet 2011 Japan Airlines International Co., Ltd changed its trade name to Japan Airlines Co., Ltd.; Inamori’s title was changed from Chairman to Representative Director, Chairman 304 Phronesis and Quiddity in Management

Current responsibilities Founder and Chairman Emeritus, Kyocera Corporation Honorary Advisor, KDDI Corporation President, Inamori Foundation President, Seiwa Social Welfare Association President, Inamori Social Welfare Foundation Representative Director, Chairman, Japan Airlines Co., Ltd.

Appendix 2: Twelve articles of Inamori’s management philosophy

1. Clearly state the purpose and mission of your business.18 Set high objectives that are noble, just and fair. 2. Set specific goals. Once targets are set, share them with all employ- ees. 3. Keep a passionate desire in your heart. Your desire must be strong and persistent to penetrate into your subconscious mind. 4. Strive harder than anyone else. Work steadily and diligently, one step at a time, never relenting in tedious tasks. 5. Maximize revenues and minimise expenses. Measure your inflow and control your outflow; don’t chase profit, but let it follow your effort. 6. Pricing is management. Pricing is the top management’s responsi- bility: to find that one point where customers are happy and the company is most profitable. 7. Success is determined by willpower. Business management requires a persistent, ‘rock-piercing’ will. 8. Possess a fighting spirit. Management requires a more combative mentality than any martial art. 9. Face every challenge with courage. Be fair and never deceive others. 10. Always be creative in your work. Innovate and improve continu- ously. Today should be better than yesterday; tomorrow, better than today. 11. Be kind and sincere. Business is based on partnerships and must bring happiness to all parties. 12. Always be cheerful and positive; hold great dreams and hopes in the pureness of your heart. Kazuo Inamori 305

Appendix 3: Kyocera’s financial statements

Appendix 3a

31 March Increase (Decrease)

2012 2013

Amount % Amount %

(Yen in millions) Current assets: Cash and cash equivalents 273,288 305,454 32,166 Short-term investments in debt 47,175 43,893 (3,282) and equity securities Other short-term investments 158,765 179,843 21,078 Trade notes receivables 19,349 27,061 7,712 Trade accounts receivables 225,578 268,927 43,349 Less allowances for doubtful (4,583) (4,705) (122) accounts and sales returns Inventories 270,336 296,450 26,114 Advance payments 68,685 65,812 (2,873) Deferred income taxes 45,049 47,349 2,300 Other current assets 40,961 38,299 (2,662)

Total current assets 1,144,603 57.4 1,268,383 55.6 123,780

Non-current assets: Investments and advances: Long-term investments in 372,779 506,490 133,711 debt and equity securities Other long-term investments 19,098 12,661 (6,437)

Total investments and 391,877 19.6 519,151 22.7 127,274 advances Property, plant and equipment: Land 60,600 61,808 1,208 Buildings 301,911 323,014 21,103 Machinery and equipment 719,146 788,692 69,546 Construction in progress 17,035 13,546 (3,489) Less accumulated (838,155) (918,236) (80,081) depreciation

Total property, plant and 260,537 13.1 268,824 11.8 8,287 equipment Goodwill 89,039 4.5 103,425 4.5 14,386 Intangible assets 49,653 2.5 54,583 2.4 4,930 Other assets 58,394 2.9 68,487 3.0 10,093

Total non-current assets 849,500 42.6 1,014,470 44.4 164,970

Total assets 1,994,103 100.0 2,282,853 100.0 288,750

Source: Kyocera Annual Report. 306

Appendix 3b

31 March Increase (Decrease)

2012 2013

Amount % Amount %

(Yen in millions) Current liabilities: Short-term borrowings 4,062 3,135 (927) Current portion of long-term 10,610 9,817 (793) debt Trade notes and accounts payable 102,699 111,249 8,550 Other notes and accounts payable 60,993 52,018 (8,975) Accrued payroll and bonus 49,880 52,420 2,540 Accrued income taxes 13,496 22,214 8,718 Other accrued liabilities 29,940 39,135 9,195 Other current liabilities 29,368 36,642 7,274

Total current liabilities 301,048 15.1 326,630 14.3 25,582

Non-current liabilities: Long-term debt 21,197 20,855 (342) Accrued pension and severance 32,441 36,322 3,881 liabilities Deferred income taxes 90,179 146,229 56,050 Other non-current liabilities 14,997 37,875 22,878

Total non-current liabilities 158,814 8.0 241,281 10.6 82,467

Total liabilities 459,862 23.1 567,911 24.9 108,049

Kyocera Corporation shareholders’ equity: Common stock 115,703 115,703 – Additional paid-in capital 162,617 163,062 445 Retained earnings 1,324,052 1,368,512 44,460 Accumulated other (81,639) 50,138 131,777 comprehensive income Treasury stock, at cost (51,228) (51,258) (30)

Total Kyocera Corporation 1,469,505 73.7 1,646,157 72.1 176,652 shareholders’ equity

Non-controlling interests 64,736 3.2 68,785 3.0 4,049

Total equity 1,534,241 76.9 1,714,942 75.1 180,701

Total liabilities and equity 1,994,103 100.0 2,282,853 100.0 288,750

Note: Accumulated other comprehensive income is as follows: 307

Appendix 3c

Years ended 31 March Increase (Decrease)

2012 2013

Amount % Amount % Amount %

(Yen in millions and shares in thousands, except per share amounts) Net sales 1,190,870 100.0 1,280,054 100.0 89,184 7.5 Cost of sales 870,143 73.1 952,350 74.4 82,207 9.4

Gross profit 320,727 26.9 327,704 25.6 6,977 2.2 Selling, general and administrative 223,052 18.7 250,778 19.6 27,726 12.4 expenses Profit from operations 97,675 8.2 76,926 6.0 (20,749) (21.2) Other income (expenses): Interest and dividend income 13,966 1.2 14,666 1.1 700 5.0 Interest expense (2,042) (0.2) (1,890) (0.2) 152 – Foreign currency transaction 4,533 0.4 5,136 0.4 603 13.3 gains, net Gains on sales of securities, net 337 0.0 4,542 0.4 4,205 – Other, net 424 0.0 1,983 0.2 1,559 367.7

Total other income 17,218 1.4 24,437 1.9 7,219 41.9 (expenses)

Income before income 114,893 9.6 101,363 7.9 (13,530) (11.8) taxes Income taxes 30,135 2.5 34,012 2.6 3,877 12.9

Net income 84,758 7.1 67,351 5.3 (17,407) (20.5) Net income attributable to (5,401) (0.4) (878) (0.1) 4,523 – non-controlling interests Net income attributable to 79,357 6.7 66,473 5.2 (12,884) (16.2) shareholders of Kyocera Corporation Earnings per share: Net income attributable to shareholders of Kyocera Corporation: Basic 432.58 362.36 Diluted 432.58 362.36 Average number of shares of common stock outstanding Basic 183,451 183,442 Diluted 183,451 183,442

Note: Basic earnings per share attributable to shareholders of Kyocera Corporation was com- puted based on the average number of shares of common stock outstanding during each period, and diluted earnings per share attributable to shareholders of Kyocera Corporation was computed based on the diluted average number of shares of stock outstanding during each period. 308 Phronesis and Quiddity in Management

Appendix 4a: KDDI’s financial figures

FY 2013 ended March

Capital 141,851 million Turnover 3,572,098 million Consolidated 3,307,070 million Total assets 4,004,009 million Consolidated 3,851,891 million Employees 19,670 Consolidated 10,842 Shareholders Kyocera: 12.76% Toyota: 11.09%

Source: KDDI’s Annual Report.

Appendix 4b: JAL’s financial figures

FY 2013 ended March

Capital 175,000 million as of 1 December 2010 Turnover 1,204,813 million Consolidated 969,030 million Total assets 1,087,627 million Consolidated 1,070,486 million Employees 30,875 Consolidated 9,495

Source: JAL’s Annual Report.

References

Chemical Heritage Foundation. (2010). Kazuo Inamori, interviewed by Thomas R. Tritton on 19 April and 13 November. Philadelphia, PA. Inamori, K. (2004). One’s Way of Life (ikikata). Tokyo: Sunmark Shuppan. Inamori, K. (2011). How to Make Your Company Stronger (koshite kaisha wo tsuyoku suru).Tokyo:PHP. Inamori, K. (2012). New Edition of Respect for Heaven and Love of Man: Challenge from Zero (Shimban Keiten Aijin: Zero karano chosen).Tokyo:PHP. Indo, M. (2013). The Revival of JAL: The Turnaround into a High-Profitability Firm (JAL saisei: koshueki kigyo eno henkan). Tokyo: Niho Keizai Shimbun. Izutsu, T. (2001). Toward a Philosophy of Zen Buddhism. Boulder, CO: Prajña Press. Kazuo Inamori 309

Kawakami, T. (2010). Konosuke Matsushita and Kazuo Inamori – a Comparison of Their Philosophies (sono tetsugaku no hikaku). Ronso Matsushita Konosuke, 14 (April), 15–37. Suzuki, D. T. (1949). Essays in Zen Buddhism (First Series). New York: Grove Press. Suzuki, D. T. (1964). An Introduction to Zen Buddhism. New York: Grove Press. Suzuki, D. T. (2000a). Essay in Zen Buddhism (Second Series). New Delhi: Munshiram Manoharial Publishers Pvt. Suzuki, D. T. (2000b). Essays in Zen Buddhism (Third Series). New Delhi: Munshiram Manoharlal Publishers. Annex 3: La Fageda: Knowledge Generation in Social Business

La Fageda is a co-operative in the province of Catalonia, a region in the north-east of Spain. With 45 million units sold per year and sales of EUR 10M in 2010, it has managed to position itself as the third-largest seller of yoghurt in the Catalonian market, behind Danone and Nestle, and was the first to produce and sell organic yoghurt. This has occurred in spite of La Fageda’s additive-free products being 40 per cent more expen- sive than their competitors’ goods, a difference that is justified because of the superior quality of La Fageda’s products. However, something else makes La Fageda different from its competitors: the company was born not to please shareholders, but to provide a place for those with men- tal and physical conditions that would otherwise prevent them finding employment, particularly a job with meaning. The founder of La Fageda, Cristóbal Colón, a psychologist with a broad working experience in psychiatric institutions in Catalonia, refers to an ‘enlightening’ episode he experienced some 20 years ago. He realised that therapy through craftwork in institutions housing such afflicted individuals fell dramatically short of its purpose of ‘normal- ising’ the patients. The reason was that the occupations such people were engaged in were not real-life jobs, and thus these pursuits lacked the motivational force those people needed to establish a positive self- image and meaning in life. Together with a group of patients and his wife, another psychologist, Cristóbal left the hospital at which he was employed at that time, and started working his way through the Catalonian bureaucracy to obtain the aid and funding needed in order to set up a company that would provide a meaningful workplace for those with mental and physical issues. Today, Cristóbal and his col- leagues’ dream is a reality. The patients/workers find pride in two main areas. First, they market one of the most highly appreciated products in

310 La Fageda: Knowledge Generation in Business 311 the region through a well-established capillary distribution net which includes the Mercadona supermarket chain. Second, they have achieved this success with their product through a company that they themselves own. What is of greatest importance, however, is that these two fac- tors provide the owner–employees of La Fageda with the satisfaction of their integration into mainstream society through their participation in a successful company. Their lives are enriched through the recognition of their work by their customers, as well as the cash that flows into their company on a daily basis. La Fageda is comprised of three bodies. La Fageda, SCCL is the ‘special employment centre’ and carries out production activities. The Foun- dation Care Services of La Garrotxa (Fundación Servicios Asistenciales de la Garrotxa) is in charge of the caretaking activities of their patients/workers (or, as they are commonly referred to, ‘users’), primar- ily through the ‘occupational centre’. La Fageda also offers housing for some of its ‘users’, distributed across three buildings and forty hous- ing units. Finally, Fundació Sentit is in charge of real estate and central services management. About 250 people take part in their activities, of whom 187 are co-operative members. Among these, eighty-six are employees with various psychiatric conditions (those with 65% or less disability1) and fifty others receive total care (those above 66%). The remaining fifty-one are workers without disabilities who offer support for the various production and care activities. Additionally, La Fageda operates a visitor centre which the public can attend at no charge; this centre is the only ‘marketing’ activity in which La Fageda engages. It must be noted, however, that in this centre, owner–worker ‘users’ are not ‘on display’ to the public; this would run counter the philosophy of the enterprise which is that the ‘users’ be recognised as conventional members of La Fageda. This structure is costly to maintain (even with the subsidies La Fageda receives from the regional government for its social goals), a fact which makes the company less profitable than its competitors. However, this is indicative of its main purpose, which is social. In addition, the relatively small gap in pay between the CEO and the lowest-skilled worker in La Fageda reinforces the idea that managerial talent will not be attracted by financial gains but by the company’s spirit.2 Within La Fageda, the composition of business-related activities spans from livestock holdings, to the dairy plant, through to gardening for nearby communities, as well as the recent introduction of fruit trees for the production of jam. Their preeminent product, the yoghurt line, comprises eighty varieties of lactic products, including fat-free and 312 Phronesis and Quiddity in Management favoured yoghurts, puddings and custards. La Fageda also entered the ice-cream market in 2010 and the jam market in 2012, the latter in order to put to use a nursery plant for forestation that had become unprofitable throughout the 1990s. Some lessons can be drawn from this entrepreneurial experiment that could fall under a phronetic approach to business on the part of its founder, Cristóbal Colón, as well as this enterprise as a whole standing as a valuable case of knowledge creation. First, Cristóbal’s business drive has an ethical purpose. In 1982 Cristóbal said, ‘in La Fageda, we established an internal, formal, and real commitment [...] to eradicate the problem for this social group in this region’. Normally, the first consideration is the business, and then people are hired. In La Fageda’s case, the company was set up ‘back- wards’: in the beginning was the purpose (‘to provide some people with a job with meaning’) and, thereafter, the business. Values drive busi- ness in La Fageda. This explains the many innovative aspects across different areas of the firm (e.g. operations, human resources, organisa- tional design, corporate and competitive strategies) that could not be adequately explained purely in terms of profit-seeking. For example, as regards product innovation, the idea of selling out- standing yoghurt products can be traced back to Cristóbal’s particular understanding of one’s own death: ‘Starting out from the principle “Death is certain, yet its time is uncertain”, one mustn’t do many things, but instead, do them well. It’s all about doing what you have to do with as much honesty and goodness as possible.’ The idea of manufactur- ing a natural, high-quality yoghurt – made with pure cow’s milk, free of additives, by taking care of the livestock almost with tenderness and respectful of the environment – grows out of the idea of ‘doing as much good as possible in what you are doing’. Also La Fageda’s innovative human resources management practices are derived from Cristóbal’s deep-seated ideas about human beings. It must be noted again that La Fageda’s respectable business track record is based on employing people whose mental and physical capabilities are severely impaired. It can be assumed that doing this takes out- standing leadership skills that, in Cristóbal’s case, are grounded in a well-articulated concept of human beings. Cristóbal thinks that ‘man is a spiritual being and the desire for beauty and perfection and good- ness are innate to the spiritual essence, not to the animal one’. This is also true for those with psychiatric conditions. Cristóbal’s concern for humans’ spiritual nature led him to believe people should not be labelled and categorised by their physical or mental constraints, but La Fageda: Knowledge Generation in Business 313 always be treated simply as a individuals. Instead of labelling people as ‘normal’ or ‘abnormal’, he suggests the line is less clear than it might seem: the people La Fageda employs ‘suffer from the same things we all suffer from. It’s just that they suffer from them more intensely. And it is this quantity that overwhelms them and makes them see a different reality.’ This allows him to realise everyone has unique capacities. He often refers to La Fageda’s ‘users’ as people ‘with different capabilities’, who can contribute to the company just as any other person (and, in some respects, more). By allowing the ‘users’ to recognise he believes in their unique capabilities as human beings on equal footing to oth- ers, he brings out the best in them and helps them to develop their hidden potential. His ethos is: people will become who they are treated. Through employment in La Fageda, these individuals are not only finan- cially remunerated and possess a fulfilling occupation, they also have a life project and a sense of their own worth. Strategy is also advanced by Cristóbal’s vision in La Fageda. A point in case is the decision to enter the ice-cream market in 2010. The deci- sion to do this followed the acquisition of an ice-cream factory, in which those with psychiatric issues worked, which had gone bankrupt. Cristóbal was motivated by the fact the factory’s employees were being left in a disastrous situation by the closure of the plant. Regarding growth, Cristóbal is not willing to compromise the entrepreneurial spirit of ‘new beginnings’ by entering larger markets. Furthermore, his ini- tial plan was not to save the world, but just aid a small portion of the Spanish county of La Garrotxa. At the same time, the experience of this ‘social’ business has proved so remarkable he does not want to eliminate the possibility of future opportunities, and wants this positive momen- tum to continue. In order to balance both the necessity of keeping the business small and the desire to reach out to more and more people, La Fageda is approaching the matter in another way. Recently the company set up ‘Clade’, the first Catalan group of co-operatives that share in this ‘social vocation’ vision and that are engaged in a variety of industries. Hopefully, they will help La Fageda to further promote its mission. A second point that characterises Cristóbal’s approach to leadership as phronetic is his ability to utilise knowledge from different sources, most prevalently from his own experience, in business. Before reaching the age of 20, Cristóbal owned a tailor’s shop. In his own words, from his experience in his teens, ‘I have never given up my training as an artisan.’ After years of volunteering in psychiatric institutions while studying at nights, he became a psychologist and tried to apply his earlier expe- rience as a worker, bound to the conviction ‘that work was the most 314 Phronesis and Quiddity in Management powerful way to restore self-esteem’. The profitability of an enterprise is then not only a means to sustain an activity over time; it runs far deeper than that. Business success is ‘the best medicine for all our work- ers, myself included’, says Cristóbal. ‘When you work for a successful company, in the part that concerns you, you are being successful too.’ A final point is that Cristóbal learnt his approach step by step, practis- ing the ‘learning by doing’ process that has been the mark of phronesis since Aristotle. Cristóbal explains he and his colleagues did not have a definite business project at the outset. Thus, La Fageda developed itself incrementally: from traditional therapy in the hospital, through to a welfare workshop with a plan for it to be integrated with the job market, to an actual company. In this ‘learning by doing’ process, incre- mental changes are achieved by trial and error. Thus, their first failure was to manufacture such things as ashtrays and penholders, and to sell them at a low cost to intermediaries. Their second failure was to invest in the business of vermicomposting, a natural fertiliser, a deci- sion that turned out to be a fiasco. Subsequent failures were to focus on selling milk to manufacturers of lactic products, such as Danone, and the acquisition of a plant nursery for reforestation, at a time when the European Union imposed milk quotas and the reforestation sector suffered a slowdown. After all that, it only seemed sensible to create a product with added value: a homemade, natural yoghurt. Looking back, Cristóbal is con- vinced that he and his colleagues’ project was impossible, but they were able to carry it out ‘because they did not know it was impossible’. In par- ticular, had they known the specific features of the yoghurt industry and how major distributors determine the evolution of the market, they would have never ventured into it. However, it is the prerogative of the phronetic leader to identify opportunities where the average manager sees only an impossibility. Furthermore, not only did the company lack a business plan, they had to improvise as they went. Another concern was also that the whole project might appear as sheer folly to others. As Cristóbal himself states (half-jokingly), the business card he used in his first interview with a city major in which he asked for funding read ‘My name is Cristóbal Colón and I come with 13 crazy people to launch a business.’ A less pejorative term for ‘craziness’ may be dialec- tics. Cristóbal Colón has proved his phronetic capacities in ably bringing together poles that exist in opposition to one another. Innovation, knowledge transfer, purposeful vision, thriving in dialec- tics ...those are characteristics of phronetic leadership that are very much apparent in La Fageda. La Fageda: Knowledge Generation in Business 315

References

Abad, M. (2010). La Fageda: la empresa de discapacitados que amenaza a los yogures de Danone. www.yorokobu.es/la-fageda-la-empresa-de-discapacitados -que-amenaza-a-los-yogures-de-danone/ accessed 5 March 2010. Baño, M. (2013). La Fageda, historia de una locura. ReGenera. 4 February, http:// regeneraconsciencia.org/la-fageda-historia-de-una-locura/ accessed 23 February 2013. Camós, J. (2012). La Economía del bien común, en formato yogur: el ejem- plo de La Fageda. 24 September, http://www.ennaranja.com/es-noticia/la -economia-del-bien-comun-en-formato-yogur-el-ejemplo-de-la-fageda accessed 22 February 2013. Corporate Excellence. (2011). La Fageda: Un estilo de liderazgo responsable y positivo, el caso de un proyecto social. Documentos de Estrategia, C05.Corporate Excellence: Madrid. Domingo Pérez, S. (2007). La Fageda. Revista de contabilidad y dirección, 5, 207–216. Galende, R. (2003). La Fageda, del éxito social al éxito impresario. AECOC, 10 October. Montes, A. (2009). Lácteos concienciados. Emprendedores.es. 20 January, http:// www.emprendedores.es/casos-de-exito/la-fageda-yogures-elaborados-por -discapacitados-que-compiten-contra-danone-y-nestle accessed 3 March 2013. Ochoa, I., Segarra, M. and Segarra, J. A. (2010). La Fageda: An Outrageous Initiative. IESE Publishing, July, M-1218-E. Ritoré, J. A. (2009). Cristóbal Colón y los yogures que dan sentido a la vida. lainformacion.com. 2 June, http://blogs.lainformacion.com/laregladewilliam/ 2009/06/02/cristobal-colon-y-los-yogures-que-dan-sentido-a-la-vida/ accessed 15 February 2013. RTVE. (2013). Crónicas – Una fábrica con sentido. 31 January, http://www. rtve.es/alacarta/videos/cronicas/cronicas-fabrica-sentido/1680211/ accessed 27 February 2013. RTVE. (2013). Entrevista con la Directora Asistencial de La Fageda. 31 Jan- uary, http://www.rtve.es/alacarta/videos/cronicas/directora-asistencial-fageda/ 1677285/ accessed 27 February 2013. San Martín, J. (2013). ‘La Fageda’: Un proyecto empresarial excepcional. 6 March, http://aloyn.wordpress.com/2013/03/06/la-fageda-un-proyecto-empresarial -excepcional/ accessed 4 April 2013. Soria, L. (2007). La Fageda, una historia de éxito. Compromiso empresarial,May– June. http://www.compromisoempresarial.com/actualidad/2007/06/la-fageda -una-historia-de-exito/. accessed 7 February 2013. Sosa, V. (2012). La Fageda planta frutales para elaborar mermeladas. elE- conomista.es, 18 June. http://www.eleconomista.es/catalunya/noticias/ 4050571/06/12/La-Fageda-planta-frutales-para-elaborar-mermeladas.html accessed 22 February 2013. Vernis, A. and Iglesias, M. (2010). Empresas que inspiran futuro. Ocho casos de emprendedores sociales. Instituto de Innovación Social (ESADE).ESADE: Barcelona. We Dream Business. (2008). La Fageda 6 November. http://wedreambusiness.org/ La-Fageda.html accessed 31 March 2013. Notes

1 Introduction

1. As Nonaka has suggested in personal communication, we prefer the use of the expression ‘judgement-making’ rather than ‘decision-making’ in order to rid the ideas of choice and action of their rational choice theory undertones (see Chapter 2). It must be borne in mind, however, that ‘judgement-making’ is not only about judgement-passing but also about taking action. 2. Hiroyuki Ogino points out that Ikujiro Nonaka, a management professor and one of the co-authors of this book, was one of the first scholars in the world who directed our attention to the concept of phronesis, raising the question of what ought to be the essence of knowledge required of managers (Ogino, 2013: 3). 3. In lieu of ‘practical wisdom’ or phronesis Chris Brown advocates the concept of ‘practical turn’, namely, practices ‘understood as produced by inarticu- late, practical, common-sense knowledge rather than by the application of theoretical knowledge’ (Brown, 2012: 440).

2 The Rationalist Approach to Judgement-Making: Description and Critique

1. Abduction is ‘a form of logical inference that goes from observation to a hypothesis that accounts for the reliable data (observation) and seeks to explain relevant evidence’ (Magnani, 2001: xvii). 2. ‘A rule in science and philosophy stating that entities should not be multi- plied needlessly. This rule is interpreted to mean that the simplest of two or more competing theories is preferable and that an explanation for unknown phenomena should first be attempted in terms of what is already known. Also called law of parsimony’ (American Heritage Dictionary). 3. Anscombe seems to indicate that one kind of reason relates to the agent’s desires for a certain state of affairs. If I intend to do y,mustitbethecase that I, all things considered, want y to come about; or merely that I, all things considered, want to do y? Michael Bratman (1987) would query this by not- ing that the belief/desire model of intention fails to adequately model the organisational role intentions play in practical deliberation. Another of her insights is that when we describe intentional action we are pointing to something for which reasons can be given, and by ‘reasons’ we do not mean ‘causes’. Her example is that when someone knocks a glass off of a table, he may give an explanation that he saw a face in the window and that made him jump. This provides a causal explanation as to why he knocked the glass off the table, but it doesn’t give a reason. The knocking of the glass off the table was not intentional, though it was caused by his being startled.

316 Notes 317

In Anscombe’s view, a particular action can be intentional under one description, but not intentional under another. When I turn on the coffee machine in the morning, it is intentional under the description of ‘turn on the coffee machine’ – that’s what I intend to do. I will also, let’s say, as a side effect, get my husband to come into the kitchen when he hears the coffee machine go on. That is not intentional though. The movement of my hand that turns on the coffee machine is not intentional under the description ‘get husband to come into the kitchen’. For a bodily movement to be an action it must be intentional under some description. Further, in her view, intentional action is prior to intention to act. That is, to understand what it is to intend to act, one must understand inten- tional action. In performing an intentional act we act on reasons (specified by ‘why?’ questions, as described above). Anscombe herself uses the example of someone who is sawing a plank. In sawing the plank, his action is inten- tional under one description, that of ‘sawing the plank’, though not under the description ‘making noise’. So, he is intentionally sawing the plank, though not intentionally making noise since he has no intention to make the noise (his reasons for performing the action have nothing to do with making noise). We understand the claim that ‘intentions are necessary for intentional action. Nonetheless, there can be unintentional action, but it will be intentional under some other description’ (Driver, 2011). 4. Friedrich von Hayek carries out a complete historical review of the influence exerted by Comte on the intellectual circle of his time (Hayek, 1979: 185–356). 5. As cases in point to give a feeling of what neoclassical economics has been up to: Jevons equates economics to Newton’s static mechanics (Jevons, 1888: vii); Walras affirms that pure economic theory is a science similar in every- thing to physic-mathematic sciences (Walras, 1952: 29); and Pareto argues his economic theory enjoys the rigour of rational mechanics (Pareto, 1971: 36). 6. For an overview of this process, see Schick (1982: 251), Harsanyi (1982: 54), Sen (2002: 303) and Archer (2000: 56). 7. We are thankful to William Magee for drawing attention, in our private corre- spondence exchanged on 22 December 2013, to this fact during a discussion in the Emonet List managed by Neal Ashkanasy. 8. The terms ‘feeling’, ‘emotion’, ‘sentiment’, ‘passion’, ‘mood’ and so on, although quite different in meaning, can be used as synonyms when showing the specificity of the knowledge provided by all these phenomena as opposed to ‘reason’. 9. This argument is akin to Sen’s notion of ‘positional objectivity’: agent’s perceptions are dependent upon many factors – such as education, relative position and so on, – but at the same time are amenable to improvement upon access to additional information, which ensures its objectivity (Sen, 2009: 165).

3 The Metaphysics of Judgement-Making: Contingency

1. This chapter originally formed Chapter 17 of the following book, which was reproduced and adapted with permission: G. von Krogh, H. Takeuchi, K. Kase and C. González-Cantón (Eds.). (2013). Towards Organizational Knowledge: The Pioneering Work of Ikujiro Nonaka. London: Palgrave Macmillan. 318 Notes

2. ‘[T]he second form of uncertainty in our taxonomy is subjective uncer- tainty ...characterised by an inability to apply appropriate moral rules [that] can lead to societal anxiety ...which Emile Durkheim called “anomie” ’ (Tannert et al., 2007: 894), therefore it is out of our purview, which is concerned with management judgement and judgement-making. 3. http://en.wikipedia.org/wiki/De_dicto_and_de_re accessed on 2 August 2012. 4. ‘A syllogism in which one of the premises or the conclusion is not stated explicitly’, American Heritage Dictionary. 5. ‘The sequence of acts of a nurseryman who plants a tree, on the one hand, and the acts of a thief who hides a treasure in the earth, on the other hand, being independent, the relationship of any kind that is positively established between them is less than final.’ 6. ‘Contingency is the disjunctive relationship between the whole and the parts. The whole has the absolute identity by its very nature of whole. As much as it is determinate as being complete, the whole is definitely iden- tical to itself and therefore its existence is accompanied by necessity. The part is, on the contrary, by its very nature of being a part, lacks absolute identity to itself: being only part, it presupposes the existence of other parties ...The part has in itself the nature of being able to be the part it is or another part: in this consists the contingency of the party of the game. In itself the nature of being both a party other than the part it is: in this consists the contingency of the part’ (Kuki, 1966: 111). 7. ‘[I]t has no cause outside itself ...from which everything else that is acciden- tal derives’ (Schelling, Friedrich Wilhelm Joseph, 1894). However, Urzufall seems to refer to the world of sense that came into existence as a conse- quence of the original sin. Therefore, it cannot be identified with God nor with Spinoza’s God. That is why it can be contingent, while Spinoza’s God is necessary. 8. ‘ ...contingency is defined as an encounter, a situation. In Japanese, the gu of guzen,¯ contingency, has the meaning of “double”, pair, couple, meeting, the same as its homonym signifies reencounter. The gu of guzen¯ (contin- gency), is the gu of Guza, (face to face encounter), the gu haigu¯ (marriage). The meaning of contingency is closed related to the meeting of A and B which denies the principle of identity A is A. We could define contingency as “the encounter of two independent elements”.’ 9. ‘Given certain conditions, the mean of a sufficiently large number of inde- pendent random variables, each with finite mean and variance, will be approximately normally distributed’ (http://en.wikipedia.org/wiki/Central_ limit_theorem accessed on 3 August 2012). 10. Relatum, pl. relata, is ‘each of two or more objects between which a relation subsists’. Shorter Oxford Dictionary, 6th Edition. 11. http://en.wikipedia.org/wiki/St._Petersburg_paradox accessed on 27 July 2012. 12. Shinagawa brings to our notice in personal communication (an email mes- sage dated 6 August 2012) that about that time a group of researchers were developing a similar two-flow-type device (Matloubian and Gershenzon, 1985: 640), and attributes it to the possibility that, among researchers, sim- ilar ideas might tend to arise. Shinagawa does not know if Nakamura was aware of the competing research and influenced by it. Notes 319

13. MOVPE is alternatively called metalorganic chemical vapor deposition or MOCVD (Kakanakova-Georgieva, Ciechonski, Forsberg, Lundskog, & Janzén, 2009, p. 880). Therefore, MOVPE and MOCVD are the same device. 14. Based on the Takeda Foundation (Akasaki, 2002, 2005a, 2005b). 15. Based on Mizobuchi (n.d.) and Science Watch (2000) and Johnstone (2004). 16. The Hall effect is defined as ‘generation of an electric potential perpendicular to both an electric current flowing along a conducting material and an exter- nal magnetic field applied at right angles to the current upon application of the magnetic field’ (American Heritage Dictionary). 17. (Takeda Foundation, 2005: 9). 18. In his personal communications with the authors of this book during June and July 2012 by means of email messages and a PowerPoint presentation, Shinagawa contends that the following circumstances may intervene in the researchers’ decision-making: The experience, accumulated in the past, more often than not allows researchers to extrapolate with relative ease towards the future; The elimination of technological certainty may be in place because of a relatively small number of technological alternatives;

Exhaustion of possible combinations of elements leading to a solution may be more relevant in this field than mere inspiration, namely, perse- verance rather than the sharpness of intelligence, which may work out in favour of people of unfailing ‘optimism’.

4 Consciousness and Quiddity

1. The argument of this section is mainly based on Izutsu (1991) and, unless specifically indicated otherwise, it summarises it and other books by the same author. Other books by Izutsu and interpretations by other scholars are also reviewed such as (Izutsu, 1956, 1971, 1991, 1992, 2001, 2002, 2008a, 2008b, 2009a; Nakamura, 2009; Sawai, 2009). 2. ‘Archaic Heritage: phylogenetic remnants of the species’ mental functioning such as inherited dispositions, ideational contents and memory traces from former generations. Unlike Jung, who coined the term ‘collective uncon- scious’ (now often referred to as the ‘objective psyche’), Freud gave these inherited remnants little more than a mention; for him, the wishes, feelings and aggressions derived from the present life held much more importance. However, he does discuss them as a link between group and individual psy- chology, a repository of the ancestral memory of the murdered primal father (see Primal Horde), and the reason why Oedipal and castration fears are often excessive in comparison to actual family-of-origin dynamics. Chalquist, Craig, ‘A Glossary of Freudian Terms’ (http://www.terrapsych.com/freud .html accessed on 5 January 2014). 3. Knowledge of the laws of nature. 4. In our explanation of Husserl we follow closely Beyer (2013) and Landgrebe (2013). 5. The Munsell scale is: ‘[a]n orb around whose equator runs a band of colours. Theaxisoftheorbisascaleofneutralgreyvalueswithwhiteasthe 320 Notes

north pole and black as the south pole. Extending horizontally from the axis at each grey value is a gradation of colour progressing from neutral grey to full saturation. With these three defining aspects, any of thousands of colours could be fully described. Munsell named these aspects, or qual- ities, Hue, Value, and Chroma’ (http://dba.med.sc.edu/price/irf/Adobe_tg/ models/munsell.html accessed on 19 January 2013). 6. ‘A category, (2) or kind, is a set of things. Membership in the category may be (1) all-or-none, as with “bird”: Something either is a bird or it isn’t a bird; a penguin is 100% bird, a dog is 100% not-bird. In this case we would call the category “categorical”. Or membership might be (2) a matter of degree, as with “big”: Some things are more big [sic] and some things are less big. In this case the category is “continuous” (or rather, degree of membership corresponds to some point along a continuum). There are range or context effects as well: elephants are relatively big in the context of animals, rela- tively small in the context of bodies in general, if we include planets’ (http:// en.wikipedia.org/wiki/Categorical_perception accessed on 24 January 2013). 7. ‘All of our categories consist in ways we behave differently toward differ- ent kinds of things – things we do or don’t eat, mate-with, or flee-from, or the things that we describe, through our language, as prime numbers, affor- dances, absolute discriminable, or truths. That is all that cognition is for, and about’ (Harnad, 2003, abstract). 8. http://en.wikipedia.org/wiki/Ndom_language accessed on 28 January 2012. 9. http://www.ethnologue.com/show_language.asp?code=faa accessed on 24 January 2012. 10. ‘Guugu Yimithirr ...is an Australian Aboriginal language, the traditional lan- guage of the Guugu Yimithirr people of Far North Queensland. It belongs to the Pama-Nyungan language family’ (http://en.wikipedia.org/wiki/Guugu _Yimithirr_language accessed on 25 January 2013). 11. See Whishaw et al. (2001) in relation to dead reckoning (the process of cal- culating one’s current position by using a previously determined position). 12. [C]lassifier languages classify all nouns (both countable and uncountable) by using special grammatical markers such as ‘a piece of’ in English (Imai et al., 1997: 7). 13. http://en.wikipedia.org/wiki/Dani_languages accessed on 25 January 2012. 14. ‘In the philosophy of language, a natural language (or ordinary language) is any language which arises in an unpremeditated fashion as the result of the innate facility for language possessed by the human intellect. A nat- ural language is typically used for communication, and may be spoken, signed, or written’ (http://en.wikipedia.org/wiki/Natural_language accessed on 30 January 2012).

5 Phronesis and Quiddity

1. As we explained in Chapter 1, we prefer to use the expression ‘judgement- making’ rather than decision-making to refer to the decision process. The rea- son for this is that ‘decision-making’ has been used to a great extent in rational choice theory and we wish to avoid its connotations. It must be noted, how- ever, that ‘judgement-making’ is not only about judgement-passing but also taking action. As can be seen earlier in this book, we have delivered a very critical analysis of rational choice theory in Chapter 2. Notes 321

2. ‘The Tower of Hanoi puzzle was invented by the French mathematician Edouard Lucas in 1883. We are given a tower of eight disks [...], initially stacked in increasing size on one of three pegs. The objective is to transfer the entire tower to one of the other pegs [...], moving only one disk at a time and never a larger one onto a smaller’ (http://www.cut-the-knot.org/recurrence/ hanoi.shtml accessed on 28 February 2014). 3. By way of a caveat: the world of emotions is very complex, not the least because of differences in terminology. Words such as ‘emotion’, ‘feeling’, ‘affect’, ‘sentiment’, ‘passion’, ‘mood’ are often deemed interchangeable. When greater clarity is needed, and in line with their usage in neuroscience, we will use ‘affect’ and ‘feeling’ in the loose sense of automatic, primitive emotional reflexes; ‘passion’ will be used to highlight the strength of some emotional occurrences; ‘mood’ will be used as an emotional state with a loose relationship to an external object; and ‘emotion’ will be used in a sense close to our habitual experience of (for example) being sad or happy. Further elaborations will be made when necessary. 4. Translated from Japanese by Kimio Kase. 5. We would like to express here our appreciation of Marcos Sáenz’s comments on Idemitsu Sazo case. 6. See Annex 1. 7. ‘Percentage of disability’ is determined at the local level. Those designated as having ‘100% disability’ are individuals who can perform no tasks by themselves and need full assistance. Those individuals with lesser constraints and greater independence are designated with a lower percentage of disability. 8. The CEO’s salary is six times that of the lowest skilled worker, while it is com- monly in the industry that a CEO would receive a salary 20 times greater than that of such an employee.

6 Conclusions and Discussions

1. In a Jungian sense. 2. As was said in Chapter 1, we prefer the use of the term ‘judgement-making’ to avoid the association of phronesis with the model of practical rationality defended in rational choice theory. We employ ‘decision-making’ in this case to highlight the closeness of the concept to RCT.

Annex 1: Idemitsu Sazo (1885–1981)

1. An IESE Business School case, published with permission. 2. Mainly based on Idemitsu Kosan’s annual reports, Idemitsu (1956), Nishida (1987: 32), Kimoto (2013) and Hyakuta (2012a, 2012b), and Wikipedia (http: //ja.wikipedia.org/wiki) accessed on 22 April 2013. 3. http://en.wikipedia.org/wiki/Idemitsu accessed on 29 July 2013. 4. http://www.idemitsu.com/company/profile/index.html accessed on 29 July 2013. 5. [T]he professor interviewed all the students one by one, inviting them to his home and learnt about their families, characters, and professional 322 Notes

wishes, trying to help them in their job search. He felt a great affection towards his students ...If I’m insistent on educating with affection for my staff and paying respect to other people, I learnt it from him. (‘My Sixty Years’ (Vol. II), cited by Kimoto (2013: 24–25))

6. ‘The Tripartite Intervention or Triple Intervention ( Sangoku Kansho¯) was a diplomatic intervention by Russia, Germany and France on 23 April 1895 over the terms of the Treaty of Shimonoseki signed between Japan and Qing dynasty China that ended the First Sino-Japanese War’ (http://en.wikipedia.org/wiki/Triple_Intervention accessed on 12 July 2013). 7. Suzuki Shoten declared bankruptcy in 1929 during the Showa Financial Cri- sis, ‘a financial panic in 1927, during the first year of the reign of Emperor Hirohito of Japan, [which] was a foretaste of the Great Depression’ (http: //en.wikipedia.org/wiki/ShpercentC5percent8Dwa_financial_crisis accessed on 15 July 2013). 8. ‘Hida did not seem overly concerned about his finances. He was kind to other people and did not care overly about his own welfare. He travelled third class by train. But he did not spare money if it was for other people’s sake ...’ (Hyakuta, 2012a, 2012b). 9. ‘But after the war my customers were sold on our reliability. I had not made money but my customers did. This was of great importance. I learnt that this was the mission of a merchant. To keep the consumers informed of the demand and supply situation of the petroleum: this was our mission. To advise the producers of the demand situation so that they might be guided: this was also our mission. Thus, I realised that the merchants had a mission; and learnt why one man’s gain is another man’s loss (if this mission is missing)’ (Idemitsu, 1956: 64). 10. Five articles of credo since its inception were: ‘the staff are a family’, ‘no listing on the stock market’, ‘no attendance book’, ‘retirement by age is unnecessary’ and ‘no labour union’ (Hyakuta, 2012a: 96). 11. . 12. http://en.wikipedia.org/wiki/Mukden_Incident accessed on 22 July 2013. 13. Because of Idemitsu’s objection to the Japanese Army’s oil policy (state con- trol instead of free trade) ‘the ambitious army officers at the Equipment Department invented all kinds of nasty things. They threw sand and peb- bles into our oil tanks. They prevented me from procuring tank materials in Japan. So I had buy them from the US. The Japanese Army’s Equipment Department and I moved along different tracks’ (Idemitsu, 1956: 66). 14. or . 15. . 16. In support of his estimation of 200 people, Idemitsu contended that ‘men would not become motivated when the results of their work are not visibly palpable. Work ought to be given only to the front-line people. With too many (indirectly-connected) people they cannot understand what their area of responsibility is. Thus, they would stop working efficiently’ (Idemitsu, 1956: 65–66). 17. The farewell speech by Idemitsu upon sending his staff to South-East Asia on 8 July 1942, cited by Kimoto (Idemitsu, 1956: 70): Notes 323

Mission: serve the country drawing upon your firm conviction and superb experience accumulated during the past thirty years. Send-off message: Thanks to thirty years of tribulations, I attained the firm conviction that goes beyond any ups and downs in political and economic situations. The only way to serve the nation at this juncture consists in making the best of this conviction for the new land in South Asia. In the land of old, I did not have a chance to render my best service to the nation due to the shackles of convention. The new land in South Asia is like a sheet of blank paper. Thus, in this new land we will attempt to carry out any project that may be considered complicated in a simple and effective way to demonstrate the great potential of human beings. This is not only the question of distributing oil products but rather it relates to the effort to offer society an example to follow. The new land, like a sheet of blank paper, is the place where we can demonstrate this heaven-sent potential. Thus, you are expected to carry out this great mis- sion. It is beyond dispute that you should not take notice of people’s criticism and advance Idemitsu’s interest. 18. Ozawa Shokai buys petroleum by cash from Nippon Sekiyu. And in exchange for the cash payment it demands a discount. It gets orders by telegraph or by letter, and delivers the order to an indefinite num- ber of secondary or tertiary distributors. From them Ozawa collected cash payment or sight drafts ...[Ozawa people] never meet their customers. No personal rapport, no sympathy ...Aren’t they the very ‘slaves to gold’? Unlike our people who have personal relations with the customers. Sympathy is mutually felt. Those dealing with Idemitsu will stay for long time as our customers. It’s obvious which way is better in the long run. (2013: 170–171). 19. ‘The Taisei Yokusankai ( , “Imperial Rule Assistance Associ- ation” or “Imperial Aid Association”) was Japan’s para-fascist organization created by Prime Minister Fumimaro Konoe on October 12th, 1940 to promote the goals of his Shintaisei (“New Order”) movement’ (http://en .wikipedia.org/wiki/Taisei_Yokusankai accessed on 24 July 2013). 20. Idemitsu’s stance towards the oil majors and their cartel was clear: ‘according to my experience in Korea, Manchuria, China, and Taiwan, oil markets tend to be dominated by monopolistic or oligopolistic powers ...Japan was able to escape from such a situation and the world petroleum cartel thanks to cheap oil our and our predecessors’ (effort) to provide the market with low price petroleum. I don’t say that the world petroleum cartel is always bad. Thanks to it the world’s oil resources were exploited and the market grew to be as it is today. The Oil Majors and their cartel are to be thanked for it. However, if we let them, we would be dominated by them and expensive oil would be forced upon us. That means that if Japan does not show any weakness and knows how to make use of the majors, they are willing to help us. This is the reality of the cartel. We have to be strong and well prepared’ (Kimoto, 2013: 111). 21. The ‘Seven Sisters’ was a term coined in the 1950s by businessman Enrico Mattei, then-head of the Italian state oil company Eni, to describe the 324 Notes

seven oil companies which formed the ‘Consortium for Iran’ cartel and dominated the global petroleum industry from the mid-1940s to the 1970s. The group comprised Anglo-Persian Oil Company (now BP); Gulf Oil, Standard Oil of California (SoCal) and Texaco (now Chevron); Royal Dutch Shell; and Standard Oil of New Jersey (Esso) and Standard Oil Company of New York (Socony) (now ExxonMobil). Prior to the oil crisis of 1973, the members of the Seven Sisters con- trolled around 85 percent of the world’s petroleum reserves, but in recent decades the dominance of the companies and their successors has declined as a result of the increasing influence of the OPEC cartel and state-owned oil companies in emerging-market economies. (http:// en.wikipedia.org/wiki/Seven_Sisters_(oil_companies) accessed on 31 July 2013).

22. Later on, Showa Sekiyu allied with Royal Dutch Shell, Koa Sekiyu with Caltex, Maruzen Sekiyu with Union. The majority of these alliances were established in a humiliating way, yielding 50 per cent of shares to the for- eign allies. In the case of Toa Nenryo, 51 per cent had to be given to Stanvac, and Toa Nenryo merely became a refinery department of Stanvac (Idemitsu, 1956: 73). 23. .

Annex 2: Kazuo Inamori

1. http://en.wikipedia.org/wiki/Kyocera_Corporation accessed on 10 May 2013. 2. An IESE Business School case, reproduced with permission. 3. Based on Inamori (2004, 2011, 2012) unless otherwise indicated. 4. We call the company Kyocera throughout this section. 5. To sinter means: ‘of powder or particulate material: coalesce into a solid or porous mass under the influence of heat or pressure without liquefaction, esp. after compression in a shaped die’ (Shorter Oxford Dictionary, 5th ed.). 6. Chemical Heritage Foundation (2010). 7. ‘The capital amounted to 3 million: Miyaki Electric’s Mr Otoya Mikaki and his friends subscribed 1.3 million, Mr Nishieda 0.4 million, Mr Majikata 0.3 million with the balance (1 million) being subscribed by Mr Nishida and me, who paid in kind ...’ (http://digital.asahi.com/articles/ ASG3D4Q32G3DPLFA009.html?iref=comkiji_txt_end_s_kjid_ASG3D4Q32G 3DPLFA009 accessed 7 April 2014). 8. ‘ ...I started Kyocera with the 10 million yen Mr Ichie Nishieda had con- tributed ...Mr Nishieda revealed that he had borrowed that money from a bank by taking out a mortgage on his house and land but that he did not care too much about the risk because his wife agreed to it. She believed that if her husband thought it worthwhile to wager on a young promising per- son, it must be a good deed. It meant that if I had failed Mr Nishieda would have lost his house. I was scared ...’ (Inamori, 2011: 80). 9. http://global.kyocera.com/inamori/management/amoeba/purpose.html accessed on 14 May 2013. Notes 325

10. ‘In Amoeba Management, each amoeba unit makes its own plans under the guidance of an amoeba leader. All members of the amoeba unit pool their wisdom and effort to achieve targets. In this way, each employee takes an active role in the workplace and spontaneously participates in management. The outcome is “management by all” ’ (http://global.kyocera.com/inamori/ management/amoeba/index.html accessed on 14 May 2013.) 11. The Table A2.1 is an example of a simplified hourly efficiency report for a production amoeba unit.

Table A2.1 Example of hourly efficiency report

Item

Gross Production 6,500,000 ($) Production Outside 4,000,000 ($) Total Internal Sales 2,500,000 ($) Total Internal Purchases 2,200,000 ($) Net Production 4,300,000 ($) Deductions 2,400,000 ($) Added Value 1,900,000 ($) Total Working Hours 35,000 (hours) Hourly Efficiency this Month 54.28 ($) Production per Hour 122.85 ($)

Gross Production ($6.5 million) is obtained by adding Production Outside ($4 million) and Total Internal Sales ($2.5 million). Total Internal Purchases ($2.2 million), representing the cost of components and other purchases from amoebas within the company, is subtracted from Gross Production to yield Net Production ($4.3 million). Net Production is the total revenue for this manufacturing amoeba unit. Added Value is the profit created by the amoeba. This figure is the balance remaining after subtracting Deductions (total expenses other than amoeba labour costs, shown as $2.4 million) from Net Production ($4.3 million). Recorded as Added Value, the difference between revenue and expenditure equals $1.9 million and represents the added value created by the amoeba. Dividing Added Value by Total Working Hours (35,000 hours) results in Hourly Efficiency this Month ($54.28). ‘Calculating hourly efficiency makes it possible for each amoeba unit to be aware of exactly how much added value it is creating per hour. An amoeba’s business activities reflect efforts to raise this profit indica- tor’ (http://global.kyocera.com/inamori/management/amoeba/system.html accessed on 13 May 2013). 12. ‘Integrated circuits are often contained in multilayer packages such as chip carriers, dual-in-line packages, and pin-grid arrays. These structures serve to house semiconductor devices in strong, thermally stable, hermetically sealed environments’ Encyclopaedia Britannica (http://global.britannica .com/) accessed on 13 May 2013. 326 Notes

13. ‘I always thought life should be divided into three stages. Supposing that we can enjoy eighty years in this world, the first twenty years cover the period in which we are born and brought up so as to be able to live one’s own life; the next years covering from 20 to 60 years of age correspond to the period in which we join the working population and work for oneself and for the society while we try to improve ourselves. And the third stage covers twenty years from 60 to 80 years of age in which we ought to prepare for our death or the departure from this world. We need twenty years for this preparation for death, the same as the first stage for the preparation for life’ (Inamori, 2004: 228). 14. See Izutsu (2001) and Suzuki (1949, 1964, 2000a, 2000b). 15. ‘Kleshas (Sanskrit, also kle´sa; Pali: kilesa; Tibetan: nyon mongs), in Buddhism, are mental states that cloud the mind and manifest [themselves] in unwhole- some actions. Kleshas include states of mind such as anxiety, fear, anger, jealousy, desire, depression, etc. Contemporary translators use a variety of English words to translate the term kleshas, such as: afflictions, defile- ments, destructive emotions, disturbing emotions, negative emotions, mind poisons, etc.’ (http://en.wikipedia.org/wiki/Kleshas_(Buddhism) accessed on 18 May 2013. 16. . 17. Drawing on Chemical Heritage Foundation (2010). 18. http://global.kyocera.com/inamori/management/twelve.html accessed on 14 May 2013.

Annex 3: La Fageda: Knowledge Generation in Social Business

1. ‘Percentage of disability’ is determined at the local level. Those designated as having ‘100% disability’ are individuals who can perform no tasks by them- selves and need full assistance. Those individuals with lesser constraints and greater independence are designated with a lower percentage of disability. 2. The CEO’s salary is six times that of the lowest-skilled worker; it is common in the industry that a CEO would receive a salary 20 times greater than that of such an employee. Index

abduction, 60 Ariño, M.A., 85 abductive thinking, 153 Aristotelian efficient theory, 74 Abe, M., 89 Aristotle, 1, 3, 6–7, 10, 45, 65–7, 73–4, Abhidharma, 137 104, 112, 114, 116, 118–20, acausality, 63, 76 125–6, 135–6, 143, 149–51, 154, accounting system, 198, 200, 230, 157–61, 172–3, 176–9, 184–5, 262, 283–5 187, 192–3 Ackerman, F., 23 Arregui, J.V., 119–20, 164, 173, 176, act of being, 117, 174 185, 187 Adam, B., 78 Arrow, K.J., 27, 35, 47 Adolphs, R., 174 articulation, 111, 124, 135, 140, 142, agent, 32–3, 42–3, 45–7, 73, 87–8, 125, 158, 162, 185, 189–90 152, 161–2, 179, 180, 183 Ashford, E., 13 economic, 28, 31 Ashkanasy, N.M., 165 moral, 29, 126 associative-learning, 86 rational, 35, 48, 175, 184 asymmetric relationship, 172 sales, 251 Aumann, R.J., 42 wise, 193 axioms of consistency, 48 Aiso, Major, John F., 248 Ayer, A.J., 23 Akasaki, I., 92–8, 100–1 Akerlof, G., 181 Ba, 49–50, 152, 190–1 akrasia, 171 Baaz, M., 161 Allan, L.G., 86 Bacon, F., 16 Allen, K., 18 Bank of Tokyo Mitsubishi UFJ, 222 Alsberg, P., 127 Barley, S.R., 78 Alvira, R., 155 Battles of Khalkhin Gol, 238 Amano, 92–8, 100–2 Bayesianism, 81–2 ambiguity, 64, 81, 103, 170, 185 Becchetti, L., 180, 182 amoeba management, 200, 282–3 Bechara, A., 88 Anagrapsai, 160 Becker, G.S., 11, 29, 43–5, 181–2 ancient Greece, 14 Beckert, J., 43 Anscombe, G.E.M., 15, 125 behaviour, 17–19, 21, 23, 25, 27, Ansoff, H.I., 31 29–30, 32–3, 36, 44, 61–2, 73, 84, appraisal theories, 121 120, 151, 165, 167–9, 171–4, 176, approach 179–81, 183, 186, 189, 193, phenomenological, 4, 37, 171 233, 265 rationalist, 10–36 being, 15, 117, 121, 136–7 Aquinas, T., 174, 179, 184 Bell Inequalities, 77 Arbib, M.A., 167 Bentham, J., 13–14, 25, 29–31 Archer, M.S., 11, 29, 32, 34, 36, 44–5, Berkowitz, L., 171 48, 125, 160, 164, 166, 170, Bernouilli, D., 83 173, 178 Berridge, K.C., 175 Arendt, H., 161 Bewusstsein,1

327 328 Index

Bewustssein und Wesen, 4, 110 category Beyer, C., 121–4, 127 colour spectrum, 129, 134 Bigelow, J., 82 contingency-necessity, 89 binariness, 41–2 empirical contingency, 86, 101 biolinguistics, 135 leadership, 189 Blumenberg, H., 10, 21, 37, 123, object, 130 136–7, 164, 174 personal value, 194, 198–200 Boeckx, C., 135 Phronesis vs RCT, 11 Bolton, S., 32, 34–5, 165, 169 practical wisdom, 193–4 Bonner, J., 25 rationalism, 14 Book of Change, 78, 103 of reason, 150 Booth, J., 171 substantive theory, 64 Boroditsky, L., 132 category-mistake, 44 Botturi, F., 174–5 causal chain, 69, 76, 78 bounded rationality, 42, 159, 169 causal contingency, 68, 74 Boutroux, E., 79 causality, 23, 62–3, 67, 74–6, 78–86, Bovens, L., 171 88–9 Bowles, S., 171 cause-effect, 68 Boyd, R., 171 cencillo, 164, 190 branding, 34 Central limit theorem, 74, 84 Bratman, M., 316 certainty, 16, 21, 61, 64, 101, 103, Braud, W., 141 190, 196, 242 Brecher, R., 13 Chandler, D., 128 chaos, 84–5 Brennan, T., 41 Chemical Heritage Foundation, 281 Brescoll, V.L., 168 Cheng, P.W., 157 Bridgman, P.W., 23 Chermack, T., 78 Bright, G., 78 Choza, J., 119–20, 164, 173, 185, 187 Brown, C., 316 Chrisley, R., 176 Bryman, A., 34, 168 Chronicle, E.P., 155 Buddhism, 2, 110–11, 113, 137–8, Cima, L.R., 179 140, 142, 199, 217, 300 Clark, C.M., 23 Buddhist meditation, 139, 218 classical liberalism, 13–14, 20 Buroker, J., 17 Cloak theories, 128 business education, 10, 36, 60, 216–17 Clore, G.L., 173 Bewusstsein und Wesen, 4, 110 cognition, 11, 19, 25, 71, 73, 90, 111–12, 131, 134, 174 Cabbala, 111 cognitive biases, 42–3 calculus felicificus,29 cognitive Science, 25 Calhoun, C., 33, 39, 169–70, 187, 190 cognoscent subject, 216 Callister, R.R., 171 Cohen, J.B., 239 Camerer, C., 25 Cohen, M.D., 4 Campbell, T., 21 Cohen, M.R., 82 Carnap, R., 23 coherence theory, 64–5 Cartesian school of rationalism, 10 Collison, R.D.B., 25 Caruso, D., 35 Colón, Cristobal, 186, 200, 202, 204, Cassirer, E., 176 310, 314 categorical contingency, 66–7 common good, 177–8 categorical necessity, 66–7 completeness, 31, 42–3 Index 329 complexity, 42–3, 132, 174, 231 Deshpande, S.P., 165 Comte, A., 22 design theory, 70 conditionalisation, 81–2 de Sousa, 33, 164, 169, 174 conductism, 167–8 Deutsch, 123, 165 Confucianism, 110, 114 Diaconis, 75 consciousness, 12, 15–17, 21, 37, 76, dialectics, 111, 141, 204, 314 162–4, 167, 180, 185–6, 188–90, dichotomy, 2, 24, 37, 39–40, 114, 192, 218, 300–1 136–7 and quiddity, 1, 4, 110–43, 149, 199 fact-and-value, 24, 37, 40 consistency, 30, 32–3, 35, 40, 43, 46, subject/object, 2, 136 48–9, 160–1, 179 discernment, 4 consistency of choice, 32–3, 40 disjunctive contingency, 68–9 contingency, 1–3, 7, 49, 60–104, 117, disjunctive necessity, 66 136–43, 150, 152, 159, 176, 205, Disneysation, 34, 68 215, 218, 220 Distributed Practical Wisdom, 8, 56, categorical, 66–7 211, 220 causal, 68, 74 doctrine, 14, 121, 137–9, 143, 205 disjunctive, 68–9 Domingo Pérez, S., 201 empirical, 63, 68–74, 85–6, 89, 101 Donaldson, T., 20, 24 hypothetical, 67–8 Dostoyevsky, F.M., 166, 186 logical, 67 Drake, S.M., 34, 169 metaphysical, 66–9, 87, 139 Dreyfus, S.E., 3, 4, 154, 156–9 copy theory, 16, 65 Driver,J., 317 corporate management, 194, 202, 263, Drucker, P.F., 102, 155–6, 218 284, 288, 290, 312 dualism, 16–17, 120 correspondence theory, 64 Dulewicz, V., 35 counteradaptive preference Dunfee, T., 20, 24 formation, 44 Crespo, R.F., 161 economics, 13, 23–9, 33, 43, 47, 61, 125, 168, 177, 180–2 Daft, R.L., 190, 199 Edgeworth, F., 26 daichiiki kourigyou, 222 Ehrsucht, 175 Damasio, A.R., 88 Einai, 117 Darkness of infinity, 83 Eisner, E.W., 153 Davidson, K.R., 54 Elster, J., 34, 43–4, 164, 168–70 DDI, 198, 286–7, 293 emotion, 17, 19, 32–3, 35–6, 165–75, decisional inescapability, 43 180, 186, 189, 197, 218, 248, 295 decision-making, 2, 10, 30–1, 33, 35, emotional intelligence (EI), 35 46, 74, 85, 135, 153–4, 168–9, emotional manipulation, 34 216, 218–19 empirical contingency, 63, 68–74, Decouliagos, C., 43 85–6, 89, 101 de dicto,65 empiricism, 14, 16–17, 23, 117 deflationary theory, 64 encephalisation, 175 DeMartino, G., 47 Endsley, M.R., 155 de re, 64–5, 71 enthymeme, 65 Descartes, 10, 13–18, 21, 26, 60, 117, Entwurf,73 119, 121, 167, 172, 216 Epicureanism, 28 description, 19, 24, 37–40, 101, 117, epiphany, 75–6 122, 131, 137, 139, 163–4, 172 episteme,6,125 330 Index epistemic theories, 64 Gehlen, A., 127, 183 epistemology/cal, 16 Gentner, D., 128–30, 133 realism, 65 Georgescu-Roegan, N., 40 uncertainties, 61–2 gé wù zhì zh¯ı, 113 epoché, 122 Ghil, R., 115 Esoteric Buddhism, 113, 140 Ghoshal, S., 5, 10, 13, 16, 24, 34, 179, essence, 1–3, 7, 15, 21, 43, 46, 69, 73, 183, 217 76, 104, 111, 113, 115, 117–18, GHQ, 197, 242–3, 245–60, 267 121–2, 124, 126–7, 137, 139, Gick, M.L., 156 141–2, 149, 152, 160, 174, 188–9, Gigerenzer, G., 62 193–4, 199, 202, 312 Gilkey, L., 22 essentia, 116–17 Gintis, H., 171 Ethica Nichomachea,3 Goldstone, R.L., 134 eudaimonia, 185 Goleman, D., 35, 165 excentricity, 120 González, A.M., 185–6 exclusion Principles for González-Cantón, C., 317 synchronicity, 76 Goodwin, M.N.R., 26–7 external reality, 15, 17, 165, 219 Gordon, R.H., 171 extravagant preference, 46 Gough, I., 47 Gowdy, J.M., 34, 180–1 fact-and-value dichotomy, 24, 37, 40 Graham, L.R., 26 falsifiability, 78 Granovetter, M., 181 fate, 67, 71–3, 87, 101, 103, 242 Grant, R., 26, 39, 176, 231, 238, 260, Feeling rules, 168–9 287, 295 Fehr, E., 171 greatest happiness principle, 25 Feigl, H., 10, 24 Greenspan, P., 171 Felder, G., 77 Greenwood, J.D., 187 Fellous, M.A., 167 Griffin, J., 27 Fineman, S., 34, 168–9 Griffiths, P.E., 165, 167, 172 Finnis, J., 3 Gross, D.M., 176 Fischer, K.W., 40, 173 Gueldenberg, S., 43 Flyvbjerg, B., 2–3, 6, 10, 24, 153, Gui, B., 182 161, 215 Gumpertz, J., 120 Fontrodona, J., 192 guzen,¯ 106 Force, P., 28 framing effect, 33, 43 Habsucht, 175 Freeman, R.E., 24, 27 Haecceictas, 111, 116–17, 189 Freie variation, 123 Hagakure, 139 Freud, S., 112 Hahn, F., 43–5 Friedman, M., 182 Hájek, A., 84 Fulton, R.L., 34, 163, 169 Halévy, E., 23 Hall, E.T., 78 Gadamer, C., 121 Hambrick, D.C., 10, 24, 30 Gale, D., 40 happiness, 25–6, 39, 166, 170, 173–4, gallium nitride (GaN), 90–1, 93, 183, 185, 191, 198–200, 280, 282, 95–102, 104 290, 298, 302 Gambetta, D., -181 Hare, R.M., 11, 27 Gapper, J., -30 Harré, H.R., 172, 191 Geddes, D.D., 171 Harsanyi, J., 27–9, 34, 165 Index 331

Hart, S.L., 32 hypothetical contingency, 67–8 Hartel, N.M., 165 hypothetical necessity, 66 Hasnas, J., 20 Hausman, D.M., 26, 31, 39, 46, 48, Ichinose, M., 64, 81–4 165, 181–2 Ideen, 123 Haviland, J.B., 131 Idemitsu Kosan, 196, 221, 239, 241–2, Hayek, F.A.v., 5, 22, 33 247–8, 251, 261–3, 267, 272–4 Heath, J., 168 Idemitsu, S., 5, 7, 80, 85, 188–90, hedonic calculus, 29 193–7, 199, 221–77 Heidegger, M., 66, 73, 136–7 Imai, M., 127 Helting, H., 43 immanentism, 15 Henderson, J.M., 163, 180 Inamori, K., 5, 7, 61, 84–5, 149, Henderson, W., 28 188–91, 197–9, 278–303 Hendrickson, A.T., 134 Inciarte, F., 161 Henrich, J., 171, 181 incorrigibility, 64 Herman, A.E., 165 individual quiddity, 111, 189 hermeneutics, 78 individualisation, 13, 116 Herrigel, E., 138 Indo, M., 288, 290–1 Herrsucht, 175 inference, 86, 135, 171 heuristic, 7, 10, 43, 86, 155, 160 information gathering, 43 hexagram, 78–9, 113 innate, 16 , 19, 202, 299, 312 Hicks, J.R., 26–7 innovation, 3, 42–3, 49, 88–90, 101, Hilty, C., 185 204, 312, 314 Hirschman, A.O., 44 instrumental reason, 5–6, 28, 150, historicism, 37, 121 161, 184 Hitchcock, C., 62, 81, 83 intellect, 66, 117, 120 Hobbes, T., 13, 19–21, 35, 178 intentional event, 15 Hochschild, A., 34, 168 internal consistency, 32 Hodgkinson, G.P., 165 internal marketing, 34 Hodgson, G.M., 44 intertemporal, 182 Hoffman, H., 88 intuition, 4–5, 15–16, 60, 62, 85, 87, holistic view, 141 103, 120, 122–4, 127, 153–5, Holland, J.G., 32 157–8, 160, 162, 165, 172, 190–1 Hollis, M., 178 Iranian Crude Oil, 261 Holyoak, K.J., 154, 156–7 Izutsu, T., 1–2, 4, 10, 110–17, 119, homo oeconomicus, 12–14, 19–23, 25, 121, 124, 126–7, 136–42, 149–50, 28, 30, 32–3, 35–6, 43, 149, 177 162–3, 188–90, 204–5, Honda, S., 156, 299 217–18, 300 hourly profit system, 200, 282 Hume, D., 13–14, 16–19, 21, 26, 49, Jacobi, J., 163 60, 78, 117, 167, 172, 176 Jaffé, A., 75, 163 Humphrey’s Paradox, 82 James, W., 32, 166–7, 172 Husserl, E., 36–7, 114, 120–4, 126–7, Japan Airlines, 191, 278, 288 136–7, 164, 216 Jarret, C., 69 Husted, B.W., 185 Jeffrey, R.C., 81 Huw¯ıyah, 111–17, 120, 126, 135–6, Jensen, M.C., 30 140, 189 Jevons, W.S., 26 Hyakuta, 222, 232–3, 237–43, 245–53, Joas, K., 161, 185 255–9, 261–3 Johnson, C., 185 332 Index judgement-making, 1–2, 4–5, 7, 139–43, 149–51, 153–5, 157–60, 10–50, 60–103, 110, 149, 154–6, 162–6, 169–72, 174–6, 182–7, 160, 162, 165–6, 168, 171, 177, 189, 192, 198, 200, 202–4, 206, 186, 189, 197, 204, 216–17, 219 216–18, 249, 251, 265, 279, emotional intelligence, 165–6, 177 284, 291 ethical response, 171 practical, 3, 125, 150, 154–5, 158, excellence issue, 1, 5, 165, 189, 176, 187 197, 217 procedural, 87, 126 intuitive knowledge in, 154 representational view, 18 managerial, 2, 110, 156, 160–2, scientific, 6, 16, 21–2, 36–7, 39, 49, 186, 219 112, 119, 164, 187 meta-physics, 60–104 social business, 310–14 phronesis-informed, 4, 149, tripartite division of, 118 162, 216 Knowles, E., 48 rationalist approach, 10–50, 204 Kobe Commercial High School, 221–3, Jung, K., 62–3, 74–6, 78–9, 112, 141, 225, 266 143, 163 kokusaku kaisha, 240 Konno, N., 88 Kahneman, D., 26–7, 33, 43, 179 Koopmans, T.C., 43–4 kaigun koku honbu, 238 Koslowski, P., 13, 21 Kaitsu, 186 Kreps, D.M., 43–4 Kammerer, P., 74–5 Kuhn, T.S., 89, 156 Kangas, O.E., 41 Kuhnian-Kuhn, 89 Kant, I., 121, 124, 175, 195, 230, 234, Kukai, 141 248, 252 Kuki, S., 66–9, 71–3, 87, 106, 136 Kaplan, C.A., 155 Kyocera, 61, 84–5, 149, 191, 197, 199, Karmarkar, U.R., 29 278–87, 290–4, 296, 299, 301 Kase, K., 4, 78, 141 Kawakami, T., 301–2 La Fageda, 7, 186, 200–4, 310–14 Kay, P., 134 Laibson, D., 43, 183 Kazuo-Inamori, 5, 7, 61, 85, 149, Laibson and Zeckhauser, 43, 183 188–9, 191, 197, 278–303 Lamprecht, S.P., 28 KDDI, 197, 278, 283, 287, 293, 301 Landgrebe, L., 123 Kelcimas, 278–80 Latham, G.P., 32 Kelley, A.E., 167 law of large numbers, 74, 84, 104 Kempton, W., 134 law of series, 74–5 Kenny, A., 17, 136, 171, 173 Lazarus, R.S., 33, 157, 169–70, Keynes, J.M., 87 174, 218 Kida, G., 67–9, 72–3, 103 leadership, 2, 25, 30, 152, 186, 189, Kim, T., 40 194, 202–4, 234, 289, 312–14 Kimoto, S., 222, 224–5, 227–8, 234, Lebenswelt, 164 237, 239, 243–6, 264, 266 LED, 63, 88–90, 94, 99 Kiron, J.M., 46–7, 179 Lee, L., 88 Klimoski, R.J., 165 Leishman, J.B., 115 Knight, F., 43–4 Leonardi, P.M., 78 knowledge, 1, 3–4, 6, 12–18, 21–2, 30, Lerner, J.S., 171 33, 36–40, 49, 60–2, 65–6, 70–1, Levenson, R.W., 173 79, 87–9, 102–3, 110–12, 114, Leviathan,20 116, 118–21, 124–6, 131, 135, Levinas, E., 124, 136 Index 333

Levine, D.P., 26 Markie, P., 16, 18 Levinson, S.C., 131 Marshall, A., 26 Lewicki, P., 88 Mas-Collel, A., 40–1 lexicographic preferences, 41, 45, 48 Mascolo, M.F., 173–4 Li, J., 173 Masuda, T., 128–30, 132–3 liberalism, 13–14, 20 materiality, 78 life-world, 164 Matt, S., 27 Little, I., 27 Mayer, J., 35 Llano, A., 15 Mayer, R.E., 78 Lloyd, S.A., 20 MBE (molecular beam epitaxial) Locke, E.A., 20–1, 32 method, 96, 99 Locke, J., 16–18, 117 McClennen, E.F., 31 logic, 23, 29, 48, 80, 138–9, 157 McCracken, J., 161 logical contingency, 67 Mcelreath, R., 171 logical empiricism, 23 McKay, T., 65 logical positivism, 19, 23–6 mechanistic view, 21 Lord, R.G., 165 Meckling, W.H., 30 Lovejoy, A.O., 19 Meister Eckhart, 142 Lowe, E.J., 64 Melé, D., 118 Lyons, W., 18, 167, 171 memory, 66, 127, 131, 135, 163, 167 Menger, C., 28, 33, 44, 46, 182 Macarthur, General, 242 mental satisfaction, 26 MacGregor, J.N., 155 Merleau-Ponty, M., 120, 124 machine oil, 80, 195, 223, 225, 228 Mermin, N.D., 77 Macintosh, J., 65 Mervis, C.B., 78 MacIntyre, A., 3, 171, 215 Mesmer-Magnus, J., 165 Maddock, R.C., 34, 163, 169 Metaphor, 25, 142–3, 162, 176–7, Magnani, I., 316 185, 192 Mah¯ ¯ıyah, 111–17, 120, 126, 135–6, metaphysical contingency, 66–9, 140, 157, 174, 189 87, 139 Mahoney, J.T., 30, 56 metaphysical, necessary-reality, 69 Malinas, G., 82 metaphysics, 1–2, 5–6, 60–104, 112, Mallarmé, S., 114–15 118, 136–7, 142–3, 150, 163, 191, Malo, A., 172, 175 215, 217 management method of natural sciences, 22 amoeba, 200, 282–3 Michikawa oilfield, 230 corporate, 194, 202, 263, 284, 288, Mickel, A.E., 165 290, 312 Milgram, E., 18 philosophy, 278, 289, 291, 304 Mill, J.S., 25, 28 strategic, 8, 56, 211, 220 Miller, F., 178 theory, 2, 17, 24, 34, 60, 166 Mintzberg, H., 160, 218 See also Kazuo-Inamori Mises, L.v., 23, 26–9, 46 managerial decisions, 1, 215 mission statement, 199–200, 290 Mann, S., 171 Mita, 285–6 Manshu Sekiyu, 235 Mitchell, W.C., 29 Maraldo, J.C., 66–7, 69–71 Mizobuchi, Y., 94 March, J.G., 4 MOCVD, 95–6, 99 Marian, D., 64 modalities, 72–3 Maritain, J., 22 modernity, 13, 28 334 Index

Moore, G.E., 19, 24 Nonaka, I., 3–5, 8, 10–11, 24, 49–50, Morcol, G., 10, 24 56, 88, 92, 141–2, 149, 151–3, Mosaddeq, M., 261 156, 158, 162, 177, 184, 187–92, Mosteller, F., 75 211, 215, 220 motivation, 138, 160, 165, 167, 169, non-objectifiable realities, 124 174, 177, 181, 200, 282, 310 non rivalry, 182 motivational potential, 167–8 non-separability, 77 mould theories, 128–9 Norman, D.A., 174 Mumby, D.K., 165 Norman, R., 24 Munsell scale, 129, 133 normative statement, 24 Murphy, M.C., 3, 161 NTT DoCoMo, 287 NTT group, 287 Nagai, K., 243 n-type, 94, 97–8, 100 Nagel, E., 82 Nussbaum, M.C., 171–2, 174, 177 Nagel, T., 22 Nakamura, 88, 92–5, 98–102, Objectivity, 14, 17, 22, 38, 60, 119–20, 140–1, 287 123–4, 126, 170, 216 naphthene, 230 O’Boyle, E.J., 27 Natura, 116–17 Occam, W., 13–14 necessity Ochoa, I., 200 categorical, 66–7 Ockham, W.O., 13–17, 21, 60, disjunctive, 66 114, 118 hypothetical, 66 Offenheit, 160 metaphysical-reality, 69 Ogino, H., 316 of things, 65 Oita Godo Bank, 232–3 of words, 65 Okun, A.M., 181 neo-Augustinism, 28 ontological thinking, 110 neopositivism, 17, 19, 23–4, 28–9, 32, ontological uncertainties, 61–2 37–8, 49, 117, 168 original impressions, 127 Neu, J., 187 Orlikowski, W.J., 78 Neurath, O., 23 Ormerod, T.C., 155 neuroeconomics, 25 Ortony, A., 174 neuromarketing, 25 Ozcelik, H., 165, 171 neuroscience, 24–5, 127, 167, 171, 173, 174, 176 PAJ, 261 Nichia Chemical, 98 Pandian, J.R., 30, 56 Nietzsche, F., 136 Pangle, L.S., 179 nihilism, 137–8 The Panther (poem), 115 nihility, 138 paradigm, 13, 22, 29, 34, 156, 183 Nijusan Bank, 231–2 Pareto, V., 27, 47 Nippon Sekiyu, 195, 221, 225–9, Parfit, D., 160, 169 234–6, 253, 256–7 Parmenides, 126 Nishida, K., 114 Parsons, T., 35 Nisshomaru, 259–61 partial ordering of pay-offs, 43 Nitsch, T.O., 12 Pauli, W.E., 76 Niyaya Vaisesika,´ 114 Pauli Exclusion Principle, 76 Noema, 122 Pearl, J., 62 Nomen,15 Peat, F.D., 75–8 nominalism, 13–15, 114, 117 Pelloni, A., 180, 182 Index 335 perceptual schemata, 155 a priori,16 perigraphon, 160 probabilistic causality, 62–3, 80–3, St. Petersburg Paradox, 83 85–6, 88–9 Pham, M.T., 88 procedural knowledge, 87, 126 phenomenological approach, 4, product innovation, 3, 89–90, 312 37, 171 profit maximisation paradigm, 266 phenomenology, 37, 121–4, 137, 164 profit-seeking, 193, 202, 312 Phronesis, 3, 11, 118, 149–204 project, 20, 23, 73, 95–6, 100, 167, Physis, 178 203–4, 246, 255, 259, 286, 293–4, pictorial semantics, 19, 23, 65, 313–14 117, 124 proneness, 44 pictorial theory of content, 18–19, 114 propensity, 44 Pigou, A.C., 26 protentions, 127 Plato, 114–16 prudence, 88, 151, 184, 192 Platonic Ideas, 15 prudential, 3 pleasure, 27 psychology, 25, 34, 37, 43, 61, Plessner, H., 127 127, 166 Poiesis, 125, 192 pure experience, 114 Polimeni, R.I., 34, 180–1 Puritanism, 28 political skills, 192 Putman, L.L., 39, 165, 169 Popper, K., 36–8, 78 Putnam, H., 18–19, 23, 26, 30–1, 37–9, positive feelings, 34 41–2, 48, 160–1, 167, 173 positivism, 19, 22–6 Poulsen, A.B., 217 Quandt, R.E., 180 practical knowledge, 3, 125, 150, Quidditas, 116–17, 140 154–5, 158, 176, 187 quiddity, 1, 3–4, 7, 102, 110–43, practical rationality, 3, 216 149–205, 218, 300 practical wisdom, 1, 3, 7, 49–50, 139, consciousness and, 1, 4, 110–43, 151–3, 157, 162, 184, 187–9, 193, 149, 199 198, 204–5, 237 individual, 111, 189 pragmatic reasoning schema, 154, universal, 111, 114–15, 189 157–8 quietus, 83 praxis, 151, 185, 187, 192 Quine, W.V.O., 39, 133 predictability, 78 preference, 27–8, 30–1, 41–7, 96 Ramsey, F.P., 26 counteradaptive formation, 44 rational choice theory (RCT), 2, 5, 10, extravagant , 46 32, 40, 60, 114, 124, 149–50, 153, for flexibility, 44 204, 216 lexicographic, 41, 45, 48 rationalist approach , 10–36 revealed, 27, 31, 47 rationalistic deduction, 111 prescription, 19, 24 rationality, 3, 5, 7, 12–13, 15, 17, 19, pre-Socratic, 126 21–3, 25–6, 28–32, 34–6, 39, 42–3, price-setting, 236, 281 46, 48–9, 60, 149–50, 154, 157, principium rationis sufficientis, 67–8 159, 164–9, 171–2, 175, 182, 191, principle of contradiction, 158–9 216–17 principle of no contradiction, 117, rationality of emotions, 164, 166, 126–7, 137, 141, 143, 164 171, 175 principle of omnipotence, 14–15 rationally foolish, 48 Prinz, J., 32, 168 rationes, 66 336 Index

RCT, see Rational choice theory (RCT) Scholastic philosophy, 116 reality, 21–3, 136–43, 184–6 Schopenhauer, A., 88, 103, 136, 155 reason, 5, 17–19, 28–30, 36–40, Schrodinger’s Equation, 76 119–26, 150, 184–7 Schubeck, T.L., 179 recursivity, 78 science, 5–6, 10, 14, 16–17, 21–5, 29, Reed, M.I., 34, 64, 169 37–8, 61, 66, 89–90, 93, 95, 99, reformed scholasticism, 28 118, 121, 127, 149–50, 164, 167, Reichenbach, H., 80–1 171, 173–4, 176, 182, 217 relational goods, 177, 181–4 scientific knowledge, 6, 16, 21–2, representational view of 36–7, 39, 49, 112, 119, 164, 187 knowledge, 18 scientific seed theory, 90 representation theory, 15–16, 65 Scientism, 5, 7, 16, 22–3, 36–8, 40, 119 Republic of Korea, 253 Scopus, 90 res cogitans, 16, 117 Scott, J., 28–9, 35–6 res extensa, 16, 117 Scotus, 111, 116, 189 residuum, 167 Searle, J.R., 23, 39–40 residuum thesis, 122 SECI process, 92 Resource-Based View, 56 Second Sino-Japanese War, 234, 237 revealed preference, 27, 31, 47 Sekiren, 236–9 Richter, M.K., 40 Sekito, 239, 247–9, 251 Ridling, Z., 123 self-interest, 11, 13, 19–20, 28, 33, Rikugunsho, 240 35–6, 177, 179–80, 183–4 Rilke, R.M., 114–15 self-preservation, 20–1 Ritzer, G., 168 Sen, A.K., 11, 26–7, 29, 31–2, 41–3, 45, Robbins, L., 26, 182 47–9, 161–2, 171, 179–80 Robinson, J., 47, 167 Senior, N.W., 26 Rocha, H.O., 13, 179, 183 sense of identity through time, 127 role of language, 117, 139 Shafer, W.J., 41 Rosch, E.H., 2, 9, 25, 78, 133–4 Shaw, B., 61, 182 Rosen’s puzzle, 82 shen,79 Rossetti, F., 180, 182 Shimada, K., 113 Rotmans, J., 62 Shimamoto, M., 263–4 routine, 126, 139 Shinagawa, K., 89–92 Russell, S., 46, 165, 185 Silverman, A., 116 Simon, H.A., 24, 29–30, 32–4, 42–3, Sadler-Smith, E., 165 155–6, 158, 168, 170 Sagoff, M., 47 Simon, Y.R., 3 Saito, T., 69, 236 Simons, R., 168 Sakai Shokai, 222–5 simple payoff functions, 43 Salovey, P., 35 Simpson, E.H., 82 Samuelson, P., 27 Simpson’s Paradox, 60, 80–3 Sapientia, 189 Sinaceur, M., 168 Sartre, J.P., 136–7 Sinclair, M., 165 Sawai, Y., 111, 319 Skinner, B.F., 32, 167 Scheler, M., 120, 160, 163, 166, 183 Sleigh, R.C., 70 Schelling, F.W.J., 69 Slocum, A., 4 Scherer, L.L., 165 Sloman, A., 176 Schick, F., 317 Smith, K., 17 Schlick, M., 23 Smolin, L., 70 Index 337 sociability, 12–13, 20–1, 23, 28, 33, 36, Takeuchi, K., 74, 84–5, 104 151–3, 177–9, 183–4, 191, 204 Tanigawa, S., 188 social business, 200, 203, 310, 313 Tannert, C., 61–2 social contract, 20–1 Taoism, 110 sociology, 34, 61 taxonomy, 61–2 Solomon, R.C., 171 Taylor, C., 161, 174 somatic theory, 32, 166–8, 176 Taylor, S., 169 South Manchuria Railway Company Techné,6,125 (Mantetsu), 195, 228 temporalisation, 73 Spade, P.V., 14–15 temporality, 60, 72–3, 78, 126–7 Spaemann, R., 161, 178 Ten Berge, T., 87 Spelke, E.S., 135 Texas Oil, 229, 235, 247 Spiegelberg, H., 121 Thaler, R.H., 165, 171 Spinoza, B., 69–70 theoretical linguistic, 135 spiritual awakening, 199, 301 theoretical reason, 2, 5–6, 32, 118–20, spurious cause, 81 149–50, 157, 163–4, 174–5, Sreedhar, S., 20 189–90, 215 Standard Oil, 229–30, 235, 250 theory/theories Stanvac (Standard-Vaccum Oil), 235, appraisal, 121 249–50, 256–7 Aristotelian efficient, 74 statistical hypothesis testing, 74, 84 Cloak theories, 128 Stephen, A.T., 88 coherence theory, 64–5 Stocker, M., 164 copy, 16, 65 Storm, I., 141 correspondence, 64 Strack, F., 165, 175 deflationary, 64 strategic management, 8, 56, 211, 220 design, 70 subject/object dichotomy, 2, 136 epistemic, 64 subjectivism, 13–14, 16, 26 of modalities, 72 subjectivistic interference, 169 mould, 128–9 subjectivity, 16–18, 40, 60, 170, pictorial theory of content, 186, 192 18–19, 114 sufism, 2, 110–11, 140, 217 rational choice theory (RCT), 2, 5, Sung xue, 113 10, 32, 40, 60, 114, 124, Suzuki, D.T., 222–3 149–50, 153, 204, 216 Swan Bakery, 186 representation, 15–16, 65 synchronicity, 62–3, 73–80, 85–6, scientific seed, 90 88–9, 103, 140 substantive , 64 theory of modalities, 72 tacit, 11, 20, 125, 153–4, 158, 161, thing-in-itself, 124 163–4, 184 thisness, 111, 117 Taisei Yokusankai, 247, 323 Thompson, E.T., 2, 25 Takagi, S., 141 Tiedens, L.Z., 168, 171 Takahashi, 236 time, space and causality, 75, 78 Takechi, 249, 251, 253–4, 262 time-consciousness, 127 Takeda Foundation, 94, 101 Toyama, R., 3, 8, 10–11, 24, 56, 152–3, take-off period, 91 211, 215, 220 Takeuchi, H., 4, 49–50, 141–2, 149, Tranel, D., 88 151–2, 156, 158, 162, 177, 184, transcendental consciousness, 123 187–90, 192 transitivity, 31, 40–2, 45 338 Index

Trigg, R., 20 Vining, J., 165 tripartite division of knowledge, 118 Virtue ethics, 186, 193 tripartite intervention or triple Viswesvaran, C., 165 intervention, 322 Von Franz, M.-L., 163 two-flow method, 100 type Walras, L.M.E., 317 I view, 113 Walsh, V., 45, 48 II view, 113 Wardy, R., 191 III view, 113 Watson, J.B., 167 Weber, M., 168 Uchiike, 222, 225, 227 Weick, K.E., 103, 157, 159, 190, 199 Uebel, T., 23 Werth, L., 165 Uhlaner, C.J., 182 White, P.A., 86 Uhlmann, E.L., 168 Whorf, B.L., 128–9, 132 ultimatum dilemma, 33, 35, 181, 183 Whorfian Hypothesis, 128, 131–2, 134 ultimatum game, 33, 165, 171 Wilhelm, R., 103 un-actionable, 166 Willey, B., 21 uncertainties, 61–2 Williams, B., 18 The unconscious (Jung’s theory), Williamson, J., 81 141, 163 wisdom, 1–3, 5–7, 49–50, 61, 79, 85, universal quiddity, 111, 114–15, 189 139, 142–3, 149–53, 157, 159–62, universalist, 128, 131, 133–4 184, 187–91, 193–4, 198, 204–5, Urzufall, 69, 318 237, 291–2, 298 Util, 26 Distributed Practical Wisdom, 8, 56, utilitarianism, 14, 25, 28, 162 211, 220 utility, 19, 24–8, 30, 32, 42, 45–7, wise leader, 2, 4, 7, 12–13, 20, 49, 161–2, 179–80, 183 141–2, 151–3, 158, 177, 186–7, utility-maximising, 30 190–3, 205, 216–17 Wittgenstein, L., 17, 23–4, 129, 172–3 valuational exercise, 39 Woller, G.M., 181 value-free, 11, 27, 29, 153 World War II, 234, 265–7 values, 17–18, 24, 26–7, 36, 48–9, 155, 159, 174, 179, 184, 193–4, 198, Yagyu Tajima, 138 202, 312 Yamamoto, T., 139, 194, 196, 241 Van Asselt, M.B.A., 62 Yokohama Specie Bank, 222 Van Hezewijk, R., 87 Young, J.O., 65 Varela, F.J., 2, 25, 38–9, 138–40, 142, 218 Zabriskie, B., 76 Vickers, G., 154–5, 161 Zen, 111, 113, 136–7, 139–40, 199, Vidaver-Cohen, D., 185 232, 298, 300–1, 303 Vienna Circle, 19, 23 Zerbe, W.J., 165 Vienna School, 23 Zhang, Y., 4 view of reality, 21 zinc selenide (ZnSe), 90, 93, 96, 99