Tech innovation can supersede Trump's shortsighted view
Market needs long-term perspective to withstand anti-globalization tide
ATSUSHI NAKAYAMA, Nikkei senior staff writer
TOKYO -- An executive at Toyota Motor expressed concern about the future once U.S. President-elect Donald Trump takes office, saying, "There are a lot of disturbing issues, such as his anti-globalization views and 'America First' posture."
He is also keeping a close eye on the capital market. Capitalism has been eroded by a trend toward placing top priority on securing profit -- a shift that has widened income gaps. Excessive focus on short-term results is considered to be a factor behind Brexit and rising populism in the U.S. Will such short-termism spill over to other countries in the future?
The Toyota official attributes Trump's victory to his starkly candid remarks rather than his anti-globalization stance. But the combination of Trump's immoderate language and vast wealth indicates that short-termism could gain momentum.
However, when asked about which direction capitalism will take in the future -- short-termism or a focus on long-term interests -- the Toyota executive answered unequivocally: "the long term."
As evidence, he pointed to recent technological advances. With dramatic improvement in the processing capability of computers, an array of new businesses, including self-driving cars guided by artificial intelligence and still unknown, high value-added services using such cars, is projected to spring up in the next five to 20 years.
AI will be even more instrumental in the fields of physics and chemistry, accelerating research and development in those sectors, he said. Until recently, computers merely processed information. But now analysis is becoming possible using deep learning technology and, furthermore, that analysis is going to be processed progressively faster.
With these two developments, "There will be a flurry of technological innovations and birth of new industries that will make inventions and discoveries in the 20th century obsolete," the Toyota official predicted. "Japanese companies, including automakers, are closest to that point," he added.
Since 2014, Toyota has instituted an approach called "tree-ring management" that focuses on a long-term perspective. The company budgets 1 trillion yen ($8.9 billion) annually for the research and development of AI and similar technologies, which are expected to flourish in the 2020s to 2030s, in a bid to cope with increasingly strict environmental regulations.
The market does not seem to fully understand Toyota's vision of the future, however. That misreading surfaced last year when the automaker issued a new type of stock called Model AA class shares.
The stock provides a guarantee on principal and offers high dividends based on certain conditions, such as not selling the shares for five years. Toyota intended to raise funds by issuing the shares in order to finance the next 20-30 years of research and development activities for the so-called disruptive technologies. But Western and other investors, who prefer short-term trade, criticized Toyota's new stock, claiming that by favoring calm Japanese retail investors, the company is being selective about the type of people investing in it.
There are signs that this attitude is changing, however. Toyota has conscientiously responded to each of about 1,000 questions the company received regarding the Model AA shares. As a result, some two-thirds of questioners showed understanding of Toyota's long-term standpoint, according the company.
In the U.S., Dominic Barton, global managing partner of McKinsey & Co., a major U.S. consulting company, wrote a paper titled "Focusing Capital on the Long Term" in the same year that Toyota launched its tree-ring management approach. Barton has since been telling companies' boards of directors and institutional investors that sufficient time should be taken to reeducate people to prepare them for job losses and changes that are increasingly occurring in the information revolution.
Short-termism may provide industry with a quick shot in the arm. However, without a long-term perspective under which technological innovation can be nurtured over time, capitalism will not be sustainable. It is clear that more and more companies and individuals are becoming convinced of this.