Growing Culture of Efficiency and Optimization

A culture of efficiency is deeply embedded in the everyday lives of the Japanese. For example, when going out for a sit down dinners, waiters typically bring the bill with the meal where customers can pay at a register on their way out. This allows for customers to leave when ready rather than waiting for a bill or change. Another example can be seen by searching for a local trash can to throw out garbage you’ve accumulated during the day. This is a difficult task given that public trash cans are few and far between since individuals are responsible for taking care of their own garbage; thus, no need for tax dollars going towards cleaning up after others. Efficiency can be observed in every walk of life.

The benefits to North American investors comes via the workplace where all employees despite their rank or place take their work seriously as they understand they are part of a larger network, and for that larger unit to remain on track, everyone needs to focus on completing their jobs efficiently and effectively. Take for example the automobile industry, Toyota and Honda employees have far fewer employee/union disputes than their counter parts in the United States (ex. GM, Ford, etc), though they’re in the same industry and face the same economic pressures. One could chalk this up to a different mentality towards their jobs between the US workers and those in Japan.

Well Developed and Extensive Transportation System

The Japan transportation system well known for its speed, reliability and extensiveness is highlighted by  the “Shinkansen”, or commonly referred to as the bullet train, which can reach commercial speeds of 300 km/h. Efficient transportation makes the average employee more productive as they spend less time commuting and traveling for business. Companies reap the benefit of this reward as the average employee can produce more output for the same level of time when compared to countries with transportation issues given they are generally happier, less tired individuals as they bypass the downtown grind that plagues workers in most metropolitan economies.

Innovation and Ingenuity

Japanese companies are known for being on the cutting edge in respect to technology, manufacturing and employee productivity. It is my argument that Japan’s leading advancements are a product of their culture, not vice versa. Japan’s culture is built around the respect of someone’s time, something that a lot of other Western nations could learn from to further their economic growth. The desire to be efficient, not just from a business practice, but from a social perspective is the engine that drives Japan’s innovative practices and developments.

Implication

Local North American investors can capitalize on the efficiency of the Japanese economy via the following methods:

(1)  Buying shares in US based companies that have significant operations in Japan; thus, receive the benefit of increased productivity that will flow to the company’s bottom line.

(2)  Investing directly in Japanese companies that are listed on the TSE (Tokyo Stock Exchange), which ranks as the second largest in the world in terms of aggregate market capitalization.

(3)  If investing directly into specific Japanese companies, buying ETFs that focus on the TSE may be more comforting as you’ll have ownership in a basket of stocks and avoid the problem of having to specifically select companies you wish to take a position in.