The Samurai Strategy Part 13

"No offense, friend, but you probably couldn't even get into the ball park where Noda and his boys are playing. We're talking the very big leagues here."

"Now hold on a second. Noda's not interested in companies. He's just shooting a little c.r.a.ps. From what I've seen so far, the guy seems to be completely on the up-and-up. In fact, looked at from the long view, you might even say he's putting money into this country, never mind it's just the Wall Street casino."

"Sure he is. It's like he first kicks the s.h.i.+t out of you, then hands you a c.o.ke so's you'll feel refreshed."

"What in h.e.l.l are you talking about?"

"Well, let's back up a notch. Since I don't want to bad-mouth your new client, why don't you let me give you what I'll call a purely hypothetical case." He sipped at his Scotch. "Let's suppose you were a j.a.panese guy, like Matsuo Noda for instance, and you wanted to take over some strategic American industry and s.h.i.+p it to j.a.pan. How'd you go about it?"

"Well . . ."

"Have a drink, counselor." He plunged forward. "And let me tell you a little fairy tale. About how Matsuo Noda ate the American semiconductor industry."

"Noda?"

"It was MITI actually. But Noda was running the Ministry when they did it, and he was the guy who set up the play."

"Noda ran MITI?" This was news to me.

"Yep. Vice minister. Then he went on to greener pastures, being the j.a.pan Development Bank, and left the details to another MITI honcho by the name of Kenji Asano. According to my sources, though, it was Noda who handled the tricky part, the money, after he went over to the bank.

Got it together, laundered it, and dispensed it."

"Laundered it?"

"Can't think of a better word. MITI carefully made sure the kickoff funding from the j.a.pan Development Bank got pa.s.sed through a sh.e.l.l organization called the j.a.pan Electronic Computer Company, hoping n.o.body would trace it back to the government."

"I think you're starting to see things, but I'd like to hear this little fantasy."

"Okay, off we go to the land of make-believe. Once upon a time not too long ago and not too far away, a few guys at Intel or Bell Labs or some d.a.m.n place got the mind-boggling idea you could shrink down a computer's memory and put it onto a little sliver of silicon no bigger'n a horsefly's a.s.s. Various outfits tinkered around with the concept and eventually it got commercialized. Lo and behold, Silicon Valley was born, where they start turning 'em out by the bucketful. By '78 we're talking a five-billion-dollar industry. Kids barely old enough to drink legal got so rich they just gave up counting the money."

"The American dream, Herr Doktor."

"That it was. Now, they were making a memory chip called a 16K RAM, that's sixteen thousand bits of Random Access Memory storage. Orders are pouring in, and they can't buy the BMW's fast enough out in Silicon Valley."

"I know all about that."

"Well, there's more. Seems Noda and Asano and their honchos at MITI had been watching this and thinking over the situation. They decided, probably rightly, that whoever's got the inside track on these computer chips has the future by the b.a.l.l.s. Twenty years from now there's nothing gonna be made, except maybe wheelbarrows, that don't use these gadgets. So round about '75 they concluded they ought to be the ones in the driver's seat. MITI 'targeted' integrated circuits."

"Well, why not? We're the ones told them they were supposed to be capitalists."

"In truth. But just like in fairyland, our princess had a problem. See, these chips weren't as simple to copy as an internal combustion engine, or even a transistor. They're a heck of a lot more complicated. And to make things worse, back when America was inventin' these silicon marvels, n.o.body in j.a.pan would've known one if it'd bit him on the b.u.t.t. So it's a tall order." He crumpled an empty cigarette pack and reached in his coat for another. "Now, imagine you're these guys in MITI. You want to take over an industry you don't know the first thing about. How're you gonna start?"

"I'd probably begin by licensing the patents."

"Nice try, but you don't want this job to be too straightforward. Then everybody'll suspect what's happening, and besides, it wouldn't be as much fun. So if you're this guy Noda, you decide to set up a sort of Manhattan Project, like America had to make the first A-bomb. You go over to see Nippon Telephone and Telegraph, their AT&T, and you say, 'Boys, we just decided you're gonna pitch in with all you got. After that, you commandeer some labs at Tos.h.i.+ba and NEC. Then you get yourself a batch of these little American gizmos and start trying to figure out how the h.e.l.l they work."

Henderson poured himself another drink, then turned back. "Now, since you need to catch up fast, you do a little 'reverse engineering,' which means you steal the other guy's R&D. You take a bunch apart and decide you'll go with the 16K RAM chip made by Mostek--a big outfit here that's since gone belly up, by the way, thanks to our friends at MITI. And by 1978 you've made yourself a Mostek clone. Bingo, you've got the technology."

"I think I'm beginning to get the drift."

"Whoa, buddy. You're just starting to get rolling." He forged on. "By this time everybody's wanting these chips, so all of a sudden Silicon Valley can't keep up. Now you and your boys at MITI are ready to move.

You've got the know-how, so all you need to do is start turning them out by the truckload. Of course that takes millions and millions in plant investment, so you do what Asano did, bring your old pal Noda back into the picture. Since he's now running the j.a.pan Development Bank, he obligingly lines up a whole s.h.i.+t-load of cheap money for these outfits gearing up to chop America's nuts off. All in all, he gets together what amounts to a subsidy of low interest bucks to the tune of about two billion dollars. All carefully laundered. Ready, set, go.

"Silicon Valley glances up from countin' its receipts and all of a sudden, from out of nowhere, here come your j.a.panese chips. Reeeal cheap, since you've got all these cheapo 'loans' to capitalize your plants. Inside a year you've got nearly half the market.

"Now, you figure somebody's surely going to blow the whistle, so you can't believe your luck when Silicon Valley thinks you're some kind of joke. Come on in, they say, and sell as many of those c.r.a.ppy 16K models you can, since we've got ourselves a hot 64K version cooking, and that's where we're gonna make our real killing. When you hear this, you do a quick retool. And while the Valley is seeing how s.e.xy and expensive a design they can come up with, your thrifty gang back home just sticks together a bigger version of that 16K chip you stole from Mostek in the first place--and you're out front with a 64K. Now it's time for hardball, so you flood America with these things. You drop the price of your 64K RAM chips from thirty dollars down to half a buck when they still cost over a dollar to make. Before you know it, you've got seventy percent of the American market."

"You're selling at a loss. Dumping."

"Exactly. 'Cause at this stage you don't care beans about profit. What you're going for is the big fish, market share." Henderson lit yet another Dunhill. "And sure enough, when it comes to the next generation, the 256K memory chip, you've got ninety percent of the action. In very short order most of your American compet.i.tion folds.

You ate them. Matter of fact, Intel, which started it all, dropped out of RAM chips altogether--which is kind of like Xerox throwing in the towel on copiers. This is less than a decade after MITI's start-up, in an industry born in the USA. Hi ho, silicon, away."

"But it cost a bundle."

"Short term, sure, but now the future's wide open. You live happily ever after, my friend, just like in fairyland, because big, bad America's dead and gone in the high volume end of semiconductors."

"But MITI can't use dumping as a regular strategy. After all, it is illegal."

"Well, now, ain't that a fact." He exhaled a lungful of smoke and coughed. "So's selling your a.s.s. But just take yourself a cruise down Eleventh Avenue and you'll meet up with a lot of entrepreneurial ladies who understand the reality of market forces. You've gotta get caught, tried, convicted. If it ever does get that far, the most that's gonna happen is a fine. A lot of folks claim MITI's dumped TVs, cars, steel, textiles, you name it. So when they decided to move on memory chips, Asano was given a free hand to do it the quickest way he knew how. And your buddy Noda ain't exactly a p.u.s.s.ycat either, the way he laundered the j.a.panese taxpayer's money into them low-interest, _manana _loans."

As he returned to his Scotch, I sat there trying to think. What Henderson had just described was a fundamental insight into how high- tech industries operate.

"Henderson, do you realize what you're saying? That's a beautiful way to knock out a country's high-tech research capability. Take away the volume end of an operation and there goes your cash. Pretty soon you can't afford to finance any more R&D. Which means that sooner or later you're selling yesterday's news. You can kiss good-bye to your technological edge, right across the board."

"Correct. America's semiconductor boys were figuring to use the profits from memory chips to pay for research in logic chips, where you put a whole computer's wiring on a chip. But now the money's gone. What it really means is, end of ball game in information processing. Maybe it won't happen tomorrow, but there's no doubt it's just a matter of time.

You dominate semiconductors, sooner or later you're just naturally gonna control computer technology and all that goes with it. I even met a guy a while back who claimed that whoever's ahead in computers is eventually going to have the say-so about who has advanced weapons technology."

Could be, I thought. But that last extrapolation was a stretch. "Bill, I think you're talking a pretty long line of dominoes. For one thing, we've still got plenty of computer research here. The U.S. has a big lead in logic chips."

"True, true. Who the h.e.l.l can crystal-ball this one? All I know is, Intel was claiming exactly the same thing about memory chips a few years back, just before Asano and Noda and their pals chewed them up and spit them out. All I'm saying is, you'd better watch your backside." He examined his drink and reached for the ice bucket.

About that time Ben came lumbering up the stairs to observe our maudlin ruminations. I watched as he settled himself near my feet with a grunt, then plopped his chin down on his paws.

"Well, your fairy tale about MITI may or may not be true. But that's water over the dam. Besides, who are we to be pointing a finger? The U.S. has done its share of tinkering with foreign governments, making the world safe for American shareholders."

"Hey, I make a profession of separating pious p.r.o.nouncements from reality. I never take an official story at face value."

"Okay, so Noda says he's just playing the market. But if he's actually planning something else, then what is it?"

"Don't have the foggiest. Wish I did." He glanced at his watch. "But I do know duty's about to call. I'd better get uptown if I expect to have any female companions.h.i.+p for the apocalypse."

"Take it easy. n.o.body flies on schedule anymore." I settled back into my chair and glanced up at the large j.a.panese screen I had mounted on the wall opposite. It was Momoyama, around 1600, the time when the most recent crowd of shoguns took over j.a.pan. Against a gilded background was a fierce eagle, perched menacingly on a pine branch. The thing was so powerful I just kept the rest of the room bare; nothing else I owned could stand up to it. "You know, Henderson, the trouble with your pattern is that it doesn't quite fit this time. Shorting Treasury futures is not exactly going after an industry. So what's the new angle?"

"d.a.m.ned good question." He stared at his gla.s.s, probably

wondering if one more for the road would impair his performance later on. I guess he concluded yes because he didn't budge. "Speaking of angles, what do you make of that sword business last week? Caused one h.e.l.l of a flap in j.a.pan, so I hear."

"Major event. That sword should tell us a lot about early j.a.panese metal technology. I've been trying to find out more about it, but n.o.body's talking. No pictures, anything." I reached over and gave Ben a pat. "Curious though. I think I remember Noda's mentioning that sword the night I met him. Eight hundred years ago, the emperor gets caught at sea and loses the imperial symbol. But he didn't breathe a word about having a project underway to locate it."