What We Can Learn From The Warren Buffett Of The Web
Paul X. McCarthy, 14 Nov 17
       

SoftBank Group Corp Chairman and CEO Son attends a news conference in Tokyo in February 2017. reuters

Softbank’s founder and chief executive Masayoshi Son, or “Masa” as he is known outside Japan, has often been called “the Bill Gates of Japan”. Today, I suggest a more appropriate moniker may be the Warren Buffett of the Web.

Strategic and with an eye for long-term value, Masa has led Softbank to become an online giant now valued at more than US$100 billion (A$130.44 billion), as the result of many investments, joint ventures and strategic decisions — and not simply from the proceeds of one dominant network business.

Therefore, Softbank’s business model can offer valuable lessons for how to make it in the high-stakes world of tech. And although his recent investments in WeWork have seen some industry observers questioning his fiscal wisdom, the evidence suggests that it too will ultimately reap rewards.

Who is Masayoshi Son?

Masa is a Japanese businessman with Korean ancestry who studied Economics at the University of California, Berkeley in the late 1970s. While still a university student, Son brought Japanese coin-operated arcade games such as Space Invaders, Scrambler and Pacman to California.

His approach to his first arcade games business reveals his Buffet-like mind. Atsuo Inoue’s biography explains how Son recorded a log of daily cash received for each video game machine and its trends. Some games were popular at the beginning and quickly tapered off, while others were perennial hits. Analysis of this data helped him decide which machines to keep and which to replace in order to optimise daily returns.

Seeing the value of centrecourt

In many games like chess, the centre of the board is prime real estate. Anyone who has played squash or racquetball also knows that positioning yourself at the central ‘T’ puts you at a distinct advantage. Similarly, with many multi-sided marketplaces, being in the centre as the “market maker” is often the most powerful and stable position.

Great squash players understand the importance of centre court. Here world champions Mohamed El Shorbagy and Gregory Gaultier.https://www.flickr.com/photos/mariannebevis/

After University, Masa returned to Japan to create Softbank in 1981. He got his start creating packaged wholesale software distribution businesses but soon expanded into people-networkbusinesses such as technology magazine publishers (Ziff Davis) and events (Comdex) that connected many parts of the industry together. He called this information “industry infrastructure”.

Softbank strategically positioned itself for three waves of technology growth by early investment in information industry Author

Softbank began in technology magazine publishing, as well as hosting large trade shows for the tech sector. They did this first in Japan, but in the 1990s expanded into the US via large acquisitions including the biggest trade show (Comdex) and technology magazines including PC Week and many other titles.

This really put him in the “centre of the squash court”.

An eye for investment

In the earliest days of the web, Masa invested in some 800 companies during the dot-com boom, including well-known brands like Yahoo. For three days Masayoshi Son was the richest person in the world — richer than Bill Gates.

But this was short-lived, and in the dot-com crash of 2000 his stock fell 99%, costing him more than US$60 billion (A$78.44 billion) in personal wealth. But despite the crash, one of his investments in 2000 was a US$20 million (A$26.1 million) placement in Alibaba. That stake is now valued at around US$90 billion (A$117 billion).

Masa thinks his largest investment to date, the acquisition last year of UK Chip designer ARM for £23.4 billion (A$40.1 billion), will one day become more valuable than Google. As the Internet of Things takes off and chips become a part of everything, the dominant position of ARM will pay off big time.

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