Masayoshi Son's $100 Billion Bet to Conquer the Future

Outside of Japan, he's usually just known as Massa. I just hate not being first. People want to sleep well at night, but I lose sleep thinking why am I not yet number one? What do I have to do. At the time, it was easy to laugh at Loss's big dreams. After all, becoming the world's top company it seemed outlandish. Massa himself had just turned thirty and his company, soft Bank, was all of six years old. But today

it's not so laughable. Over the years, Massa built soft Bank into a technology giant, and he's among the world's one hundred richest men. And now Massa is Onto, perhaps his biggest most during project yet talk about soft banks. Massa Yoshi Song has formally announced the first round of capital commitments for his tech investment fund that is worth more than billion dollars. It's called Vision Fund, and money has come in from Saudi Arabia, Abu Dhabi, Apple, Qualcom,

and Fox Con. Massa's plans to increase the amount to a hundred billion dollars in the next few months. Hi, I'm Brad Stone and I'm Peter Lstrom. And this week on Decrypted, we have the story of Masa Yoshi Son, the eccentric Japanese billionaire who conceived of and willed into reality an enormous fund that has both odd and terrified the global technology industry. Venture capital firms are worried that so much new money will drive up valuations for startups,

hurting returns for everyone. But no matter what happens, this fund has earned Massa place in the pantheon of the world's legendary investors. We'll speak to his biographer as well as his first employee, and we'll also play you some tapes of Massa as a young unknown businessman from thirty years ago that have never been released before. Massa has made an unlikely journey from being bullied as an outsider on the rural island of q Shu to becoming one

of the wealthiest men in the world. And after all that success, he's risking it all now for even greater returns. Stay with us, so, Peter. The tech industry has been bracing for a few months now for Massa's Vision Fund to close. It's a pretty heavy expression of optimism in the future of technology, not only for Massa but the other entities contributing to the fund, like Apple, Qualcomm and Fox count and the Saudi Arabian government. It's hard to

think of anything we can compare it to. Well, there hasn't been anything quite like this before. I talked to a professor at the University of Chicago who made the point that Sequoia Capital could raise ten billion dollars tomorrow, but they don't. Why because it's dangerous. It's hard to find enough promising deals to investing with that much money. But Massa has never been a conventional investor, right, I

mean he is. He He looks not only for startups but to invest in bigger companies, and his vision seems a little bit bigger and bolder than average. That's right. This is a man who speaks without irony about his three year plan. He looks for really big opportunities. He says he's interested now in artificial intelligence and based the Internet of things. And also this here's Mosses speaking to investors through a translator on an earnings call a few

months ago. We saw a big man in PC, we saw a big man in the Internet, and I believe the next big then is going to be even bigger with IoT and Singularity. One of the futuristic dreams will be investing in will be the integration of computers and humans, known among enthusiasts the singularity. The chip is going to exceed human brains, uh intelligence, and that to be connected with wireless and connected in the cloud for super intelligence. Um okay. These are ideas once thought of, perhaps still

thought of a science fiction. I kind of think there's still many technological, practical, and perhaps cultural barriers to the ship still though. In Japan, Massa Yoshi's son is one of these larger than life household names that everybody knows. Right, that's right. He's the second richest man in Japan. He's worth about fourteen billion dollars now. His company Soft Bank is a mobile operator, but also has a huge investment

portfolio with stakes and hundreds of companies. He backed Yahoo were early on, along with a bunch of early technology companies. His biggest hits so far has to be Ali Baba. He put in an initial investment of about twenty million dollars and that's grown to be worth more than ninety billion dollars. You've had a keen eye or what might be a successful investment. Yes, this was Massa talking to Charlie Rose in two thousand fourteen. Yeahoo, Japan and this

is the most recently Alive Baba. Alive Baba is gonna be a huge pay day for you. This it'll be one of the largest I pos around. Yeah. Yeah, we are lucky. Yeah, well yeah, you need that lack a lot of mass Ushi's son grew up on q Shoe, which sits at the southern end of the main islands of Japan. His family had come from Korea, and his

heritage made his early years difficult. Right. For all its reputation for being such a polite country, Japan is also a really difficult place to be as an outsider, even more so if you come from China or Korea, which both have long troubled histories with Japan. They all met. Moss's classmates would sometimes pick on him. He was pelted with rocks and left bloodied. He talked about the challenge

of being an immigrant in Japan with Charlie Rose. Japan is a homogeneous in a race country, one culture with one race, So if you are considered outsider, it's not easy. Nowaday, I stick up enough so people know that I am I am, you know, just myself. But one thing Massa and his two brothers had going for them was their father. He was the kind of man who praised his children endlessly,

especially the young Massa, who was particularly precocious. Here's Massa talking about what his father would say to him, You are a genius number one in Japan. He would say, there's no one better in your age group, the smartest. You'll be a big shot. He keeps saying that like it's brainwashing me for any silly little thing. As a kid, even before I started elementary school, I started to think,

maybe I'm actually the real deal boy Peter. I thought the conventional wisdom and parenting that was that you weren't supposed to overly praise your kid, I may have to start over with my kids. Here's how Atsuo in a way explained it. He wrote a biography of Massa called Aiming High. The secrecy of his success sounds success. I would say, from his days, how do phase up the Keiths? So that's why I would say he had American with a mind. Aso first met Maso when Atso was a

journalist here in Tokyo. He interviewed Massa for a profile he wrote for a local magazine. Atso agreed to be interviewed for this episode, and when he stopped into our offices, he had quite a surprise. I love this. This is true internet history about to be made. I didn't know what to expect when I reached out to him. He showed up here in our Tokyo office. He's a dapper, older gentleman with long silver hair and impeccable manners. He was carrying a big black backpack and he started to

pull all this stuff out of it. Oh my gosh. Well, he had magazine articles that he had written decades ago in Japanese. Of course, he had a new copy of the sown biography that he had just finished up. But the biggest surprise was when he pulled out a fistful of cassette tapes, old fashioned cassette tapes. He had brought in the recordings that he had done with Massa thirty years ago. He said that he had never shared them with anyone else before. Wow, the lost tapes of Masa

Yoshi's son. It gives you a sense of what Massa was like at that age. Those clips of Massa at the very start of the show and that clip of Massa talking about his dad both come from these tapes more than anything, to help me understand how ambitious, how incredibly ambitious, this guy was from an early age. So that's why, Peter, So, I'm just brote the that's the treasure. Yeah, so I think it's I'm just suggested you could just rue part of you know, one minute or so. Uh,

Younger boys, I don't know. Her family was very poor when I was young. Grandpa and Grandma came over from Korea. Both were very anti business. Buying something cheap and selling it at a higher price was a moral to them. Even as a young kid, I saw how hard my dad worked, how much he suffered. I remember thinking that I wanted to make him comfortable one day. Massa has made many surprising moves throughout his life, but the first one was moving to the United States when he was

just sixteen years old. He had studied English there for a few months and then decided to quit school in Japan and move all together. From there, En ruled at the University of California at Berkeley, and that changed his life. He learned English, he met his wife, and he became an entrepreneur for the first time. Here he is with

Charlie Rose again. I wanted to stop my own company, so when when I was a student at Berkeley at ninety years old, I only this that a small company and made the first electronic fictions and sold it to shop Yeah for one point seven million dollars for Ust ninete years old. Kids, it's it's not bad. I wanted to find out more about this period and how Massa got his start as an entrepreneur, so I tracked down the man he worked with while he was in California, a man by the name of Hong Lu. They met

while Hong was managing an ice cream shop. My waitress was trouble a lot, and just by saying, Pong, we gotta we got a customer says if we do not do exactly what he wants, he would refuse to pay and said, oh my gosh. I said, you know, I've been working there for already four years already, and I have never run into that kind of a customer. I say. It turned out what Massa wanted was a particular They're kind of milkshake. Hong made it the way he wanted

and the two started talking. They found out that they had both grown up in Japan and became fast friends. I met with Hong in Hong Kong, where he spends most of his time. He's tall, with wire rim glasses, who were jeans. We talked at the Shango Law Hotel in Kowloon. There was tight security around the hotel that day, an enormous fountain in the lobby. It turns out Hong was the first employee that Massa hired while he was still an undergraduate at Berkeley. He was Berkeley student. He

lives in Oakland, So I went to his apartment. Are you asking me to do the next three years plan? I just say, why don't we start from what are we going to do for us? So I can make a plan. Massa always had big ideas, and he had successes. Besides selling an early translation machine to Sharp, he got into game machines. Space Invaders became a big hit in Japan, and Massa wanted to bring that idea to the United States.

So he bought one of the machines from Japan and he put it into the ice cream shop where home used to work in the late nineteen seventies. And then my boss called me as to say, wow, your machine was broken. I said, okay, broke, and then then I went into two to see it wasn't broken. The money was overthrown and it could not put it in anymore. It was. It was very successful. So Space Invaders took off. Yeah, became a hit in the US like it had been in Japan. It was a sign of things to come.

Massa saw opportunities and businesses that generated a steady stream of cash when we were running the game Marque. The reason he likes it is because you can't get the cash every every day, and so he always believed in the cash cow business. He repeated that approach as he moved into software distribution, magazines, then broad band and wireless service. So you always telling me that his dream is in the future to run the infrastructure business. So I said,

what is the infrastructure? What? What do you what? What kind of business in victuals? And he said, it's a you know, a rear road or or the highway or gas, water and etcetera. So so those are infrastructures and and and so he he always have a very early stage vision of what he wants to do, and so later on he became UM the broadband operator. Monster's entry into the broadband and mobile world marked a significant new chapter of growth and success in his career. But it came

after a serious fall. We'll get into that right after this word from our sponsor. You know where you want to be. Red Hat has the broad portfolio of open source technologies to get you there. Meet your evolving business challenges head on with secure solutions for the enterprise, including Linux platforms and containers, hybrid cloud infrastructure, application integration and development, operations management, and beyond. Visit red hat, dot com slash

opentech to learn more. Red Hat the open technology to help you realize your vision. Okay, we're back. So Masa Yoshi Son as a young man with huge dreams. He's been to the U S sold his first company to the major Japanese electronics maker Sharp and is writing a wave of success after taking the Space Invaders video game to the US. Peter what came next? Well, he was in business with Hung in California, but he ends up

moving back to Japan after college. He founded his company's soft bank in one It began as a software distributor, and that was just the start. Here he is from most tape thirty years ago. My dream isn't to be number one in PC software sales. My dream is information industry with PC at the center. Going forward, there will be no difference between a PC and a mainframe absolutely. From there, he moved into magazine publishing, first in Japan and then globally. He bought Ziff Davis, the publisher of

titles like PC Magazine in PC Week. He bought the Condex Trade Show, and he used those businesses to gather more intelligence on the up and coming companies in technology, and he began investing in startups. That's right. He backed more than eight d companies during the dot com boom, and he saw his share price soar along with THEIRS. At one point he was closing in on Bill Gates is the world's richest person. And then the crash his stock fell. He lost more than sixty billion dollars on paper.

So maybe he was a little humbled by all that. Maybe, but not gun shy. In two thousand and six, he announced his decision to buy Vota Phone in Japan, which was the third largest carrier at the time. What people didn't know back then was that Massa had already talked with Apple about making his company the only carrier for the iPhone. Later on, even before he bought the carrier.

Here's Massa talking with Charlie Rose again. So I said, you know, if I would enter into the mobile business, you know, mobile carrier business, I need a weapon and the fool can create the best weapon in the world.

I said, it's only one guy, Steve Jobs. I called him up and went to see him, and I brought my little drawing of iPod with you know mobile, and I gave him my drawing and Steve says, Massa, you don't give me, Massa, you don't give me, you a going I have my own, don't give me your drawing post. I said, well, I don't need to give you my you know daddy paper. But once you have your own products, give me, give me for Japan. He said, Massa, you're crazy.

You know, we have not talked to anybody, but you came to see me as a first guy I give to you. Is that right? So you walked away as the carrier in Japan that would be affiliated with the iPhone before I acquired bot Um Japan, before you got upon Japan. Yeah. So, so I said to him, you know, if you can give me exclusively for Japanese market, that would be fantastic, right, And so I said, writing down,

signed for me. He said no, Massa, Massa, I'm not gonna sign for you because because you don't even get mobile carrier yet. I said, well, look, Steve, you probably can you give me your bore I bring you. Know.

Our colleague and co host Akiedo used to work out of the Tokyo office, and I remember her telling me that she signed a soft Bank contract in her first year of Bloomberg back in two thousand nine, specifically because she wanted an iPhone, even though her editors told her to go with one of the bigger carriers that had better signal range. She probably wasn't the only one willing to make the leap to soft Bank for the iPhone. The deal was instrumental in making soft Bank the carrier

that it is today in a household name. But soft Bank has grown to be so much more than a mobile carrier like we talked about earlier and now with stakes and hundreds of companies, including it's hugely successful steak

in Ali Baba. Even in the way that he talks about his decision to invest in Ali Baba, Massa clearly revels in making himself an outsider, someone who directly goes against what everyone else is doing, which might not seem that unusual for our listeners in the US, but you really don't hear a lot of people talk that way in Japan. Here he is on an earnings call from earlier this year, speaking through a trance later. Sixteen years ago,

I invested into Ali Baba sixteen years ago. At the time in making that investment, at the time in Japan, the top leaders as the business circles in Japan. When I sat, I invested in Chinese company Ali Baba, What is that company with the name of a Robbert? You can at trust China. You will feel if you're invested in China. So many people cautioned me. But at the time I said, no, I don't agree. Just a year ago,

Massa was talking about retiring. He had brought in a former Google executive as president and named him heir apparent. Massa didn't end up stepping down, of course, and that didn't surprise Atsu, the biographer. That's what had sent Massa an email on his day a couple of years back, and Moss's reply was telling. He wrote that he's ashamed he hasn't been able to do more in his career, that even now he hasn't been able to accomplish even

one percent of what he hopes to do. It's hard to take in the full scale of Masayoshi's ambitions with the Vision Fund. Here in the US, the CEOs who run the biggest companies are always looking for ways to make their shareholders richer today. But Massa is a long term guy. I mean seriously long term. Here he is talking about PCs back in in his conversation with the journalist Atsu. In the past twenty years, the capacity of

computer is doubling for the same price. This will continue in the next twenty years, which means more than a millionfold increase in power. That computer will be more powerful than a supercomputer now out and he was right. And now he's thinking long term again. Here's what he said in an earnings called earlier this year. What happened to this quota? It's not really the focus, but rather we are focusing on a ten years later. How are we gonna form our company ten years later, thirty years later?

So I am seriously thinking to sustain the company or a group towards a three hundred years so that the way you would like to sit such the foundations to sustain three hundred years. Wow, So he's planning for three centuries into the future. That's the mental hoy you that he's applying here. Peter, do you know where the idea for the fund came from? Well, it came together as it began to bump up against the limitations for soft

Bank on its own. Soft Bank is one of the most heavily indebted companies in Japan and last year he went out and he agreed to pay thirty two billion dollars for chip maker arm Holdings. His shareholders sort of freaked out. This was outlandish even by his standards. And then a Saudi prince came to town. That's right. Massa met the Saudi Arabian Deputy Crown Prince last September. At the same time Massa was looking for capital, Saudi Arabia was hunting for ways to diversify its economy beyond oil.

They met for about forty five minutes and they came away with a handshake deal. Then it took a long time to finalize the fundraising. So what happened, well, partly was the sheer scale. You had a huge amount of money at stake, Apple and qual Calm and the others had to negotiate their pieces. In addition, the Saudis wanted more than just financial returns. They wanted to learn about the technology industry. They didn't want to be seen as just dumb money. So what did they end up getting.

It's not clear how active the limited partners will be in the Vision Fund, but the head of the Saudi Sovereign Wealth Fund was just named a soft bank's board last week. Let's talk about the fund itself. How does the rest of the ven our capital community feel about this. There's a lot of concern already. Venture capital and private equity firms have record amounts of money just looking for good investment opportunities. So the idea of another hundred billion

dollars is a serious concern, right. And the reason too much money moving around the industry can be a problem is because there's a risk too many startups will get funded in venture investors will see their returns get crushed. I've already heard from rattled vcs who sees soft Bank pushing up valuations for startups and they're worried. Remember, there's already a lot of investors with cash doing tons of deals in the tech industry, and yet Massa is already

being pretty aggressive. He led the five point five billion dollar funding round a d D, the largest venture fundraising yet, and he's put big slugs of money into India's Paytm, grab in Southeast Asia, Improbable Worlds in the UK, and the satellite startup one Web in the US. So, Peter, I've got to ask, does all this mean we're heading for another dot com crash? Well? I talk with David Brophy, a finance professor at the University of Michigan, and he made the case that having such a large pot of

money does give you some advantages. You can take on more ambitious projects than anyone else and you can support those investments for longer. If they're going to successfully employ all of this money, they have to have some pretty sure concepts of areas and spaces in which they're going to make investments. Massa certainly does like to stay focused

on the long term, that's right. One good example is the concept that Massa keeps talking about the idea of the singularity, right, the word we heard from Massa himself earlier, the idea that machine intelligence will one day surpass human capabilities. As you said, it's the stuff of science fiction, literally, and it's the logical endpoint for many of the areas that he's interested in backing through the Vision Fund. This singularity is a meaning that computer pass mankind intelligence. Okay,

so what does it mean? The computer intelligence is buying that assistant zero Juana bunch of zero one mankind brain is accenting also a buying that assistant new on at that this at that we all have about thirty billion buying that a system in the head. Mossa in that clip sounds a little nuts, but he's used to that kind of criticism. Well. In today's show, with this philosophy

he shared in Otso's tapes from threte years ago. People will continue to call me stupid with every new thing I do, he missed a step and stuff like that. But to keep the venture spirit and keep growing, you need to keep trying new things. There will be some successes and some failures. Just be careful of fatal wounds, of course, but need to always push the envelop Without that, you can't become a champion in this industry. You won't become a powerful company twenty thirty years from now. And

that's it for this week's Decrypted. Thanks for listening. Please let us know what you thought of this episode. You can record a voice message and send it to us at Decrypted at Bloomberg dot net or I'm on Twitter It's at p lstromp and I'm bat brad Stone. If you haven't already subscribed to our show wherever you get your podcast. While you're there, please leave us a rating in the review. It really helps more listeners find our show. This episode was produced by Pia gud Kari, Aki Ito,

Liz Smith, and Magnus Henrikson. A special thanks to Nico Grant and Pavel Alpf who helped me with research and translation for today's show. Alec McCabe is head of Bloomberg Podcasts. We'll see you next week. Decrypted is brought to you by red Hat, whose broad portfolio of open source technologies for the enterprise helps you get from where you are to where you want to be. Red Hat the open technology to help you realize your vision. Learn more at red hat dot com, slash open tech