July 27, 2020 • 47 mins
Since the 1970s, Panasonic has moved further from the control of the Matsushita family. But the process hasn't always gone smoothly. From recessions and political events to a dependence on plasma televisions, we learn about the obstacles the company has had to deal with recently.
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Episode Transcript
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Speaker 1 (00:04):
Welcome to tex Stuff, a production from I Heart Radio.
Hey there, and welcome to tech Stuff. I'm your host,
Jonathan Strickland. I'm an executive producer with I Heart Radio
and I love all things tech. And welcome to the
third and and final, at least for now episode in
(00:27):
our series about the history of Pana Sonic a k a.
The Mattsushida Electrical Industrial Company. At the end of our
last episode, I talked about how Konosuke Matsushida, who founded
the company in nineteen eighteen, retired as chairman of the
company in nineteen seventy three. He stepped into a more
(00:49):
informal executive advisory role at that time. Now, I say that,
but executive advisors in Japan can exert and any formous
amount of control over companies even after they have officially
stepped out of leadership roles. More on that as we
go on. We also heard about allegations that Panasonic, along
(01:11):
with several other major electronics companies in Japan, had practiced
price fixing, both in Japan domestically, where the companies would
sell products at a premium, and in the US market,
where these same companies would sell products at a loss
in order to undercut American electronics companies and kind of
(01:31):
gain the market in the US. So while the company
history has a lot of positive elements, there are at
least a few smudges that warrant investigation. We'll talk about
a few more of those in this episode, but we
pick up in ninety three. Masaharu Matsushida, Kanasuke's son in law,
is still the president of the company at that time,
(01:52):
and uh Arataro Takahashi is chairman. Takahashi had played an
important role in establishing matsushi It's relationship with the Dutch
electronics company Phillips, and Phillips had really helped the Japanese
company get up to speed on the consumer electronics industry. Essentially,
Phillips was providing the technical know how and Matsushida was
(02:18):
providing the access to the Japanese market, and it was
a beneficial relationship. Phillips had retained a nearly thirty five
percent stake in the company as a result. Uh and
Takahashi was instrumental in getting that to happen. It's interesting
to see that he became the chairman while Masaharu remained president,
(02:41):
because typically it wouldn't work that way. So we need
to consider how Japanese businesses typically handle succession, and this
will become even more important as we go on in
this episode. Now, it's not that different from the way
many other companies handle succession, particularly those that tend to
look within the company itself as opposed to bringing in
(03:03):
a leader from some other company. In Japanese companies, it's
typical for a president to move to a chairman position
when the previous chairman retires, and it's not unusual for
a chairman to take on one of those informal executive
advisor roles on the board, so even when they're gone,
they aren't really gone, or as Red Letter Media likes
(03:24):
to say, nobody has ever really gone. Normally, one of
the most senior level executive vice presidents of the company
will then assume the role of president, and so seniority
plays a massively important part in succession in Japanese businesses,
as well as in wages. Typically, though, we learned there's
(03:45):
also a tendency for control of a company to remain
within a family, which could be another way that an
outgoing executive keeps one hand on the steering wheel even
after they've officially retired. Takahashi certainly had been around a
long time. He had worked at the company since the
nineteen thirties, and he played such an important role in
getting that relationship with Phillips established, But in this case
(04:09):
he sort of leap frogg massa Haru. I couldn't find
much information on what was going on at the executive
level at this time, but my assumption is that Konasuke
felt that Massaharu was best left in the president position
for a little while longer, and that he would move
up to chairman in the future. And perhaps there wasn't
(04:31):
someone that impressed Konosuke enough to step into the role
of president, so he won Masaharu to remain there. Because again,
while he was officially retired, Konosuke was still very much
involved with the operations of the company that he had
founded way back in nineteen eighteen. One of Kanasuke's directives
was having a profound impact upon the company and really
(04:53):
on the electronics industry in Japan in general, and that
was his goal of getting wages in Japan close sor
to what US companies paid their employees over here. And
this wasn't just an altruistic desire to reward employees, but
to encourage productivity and to be more competitive for skilled
and educated workers in an increasingly competitive industry. But it
(05:16):
also meant things had to change. From a production standpoint.
Raising wages would mean increasing the cost of doing business,
which would impact profits. So one of the things the
company focused on was streamlining processes as much as possible,
making them more efficient and economic. This included automating processes
(05:37):
whenever it made sense to do so, and the end
result was that by the nineteen seventies, Matsushido was one of,
if not the most efficient large company in Japan, even
over companies like Toyota. By nineteen seventy one, wages at
Matsushida were comparable to those in West Germany, and you know,
if you're young, you might not know that there used
(05:58):
to be an East and a West Germany. By nineteen
seventy two, just before Kanasuke would retire, the wages were
actually pretty close to what employees were doing in comparable
jobs in the United States. While this was happening, an
external crisis made things more complicated for the company. In
the autumn of nineteen seventy three, when a coalition of
(06:20):
Arabic forces launched a surprise attack on Israeli forces. It
created the yam Kapoor War. It took place during Yom Kippur,
a Jewish holiday, and sometimes it's called the yam Kappur War.
Sometimes it's called the Ramadan War. It was also coinciding
with the Muslim holy month of Ramadan. And this war
only lasted a few weeks, but the world was drawn
(06:43):
into it because of various alliances, including the Soviet Union
on one side in the United States on the other side.
And the complexities of that conflict are well beyond the
scope of this show, but the effects on industry are
what I hope to focus on. It does play a
part in techno oology. At the end of the war,
a coalition of Arab countries decided upon an oil embargo
(07:06):
against the US and other nations, and this led to
a global energy crisis. As oil production slowed down. Japan
was not immune to this crisis. The cost of raw
materials increased, as did the cost of shipping stuff from
one place to another. I mean that oil embargo was
going to have an impact on fuel prices, which would
(07:26):
make it more expensive to ship things, which meant that
you had to charge more for your products, and you
see how this becomes a ripple effect, and Mattsushida was
trying to be as strategic as it could be to
limit the effect that the crisis would have on sales figures.
But even so, the company posted a decrease in profits
in nineteen seventy four compared to nineteen seventy three. It
(07:50):
also had more sales during that time, but it wasn't
profiting as much. Even though it was selling more, it
was making less money, and both sales and profit would
be on the decline in nineteen seventy five. One product
the company introduced in nineteen would fail to get traction
in the market at all. So in the nineteen seventies
(08:11):
a few companies were battling it out to create the
definitive home entertainment media playback device, and this took a
lot of different forms, all of which were in some
level of competition against each other. Some of them were
playback only devices, like you would have to go out
and purchase a movie or TV show or rent one
and play it on a device. So the Capacitance Electronic disc,
(08:34):
which was made by our c A, was one of
those types of devices. I actually have one of those
literally at my feet right now, an old CD player,
the laser disc player from m C. A Disco vision
would also be another one, But I want to talk
about VCRs. So VCRs, or video cassette recorders, are one
of those technologies that had a huge impact on how
(08:56):
we consume entertainment, and I might do an episode of
out that in the near future about how the development
of the VCR changed entertainment itself. And there were a
few formats that all did the same general thing, but
with different approaches. Generally speaking, these machines used magnetic storage,
much as audio tape had. In order to store video
(09:18):
and audio information, a VCR has at the very least
an electro magnet that acts as a reading head, and
as tape moves below this reading head, the tape induces
a current to flow through that electro magnet because of
the magnetic particles that are in the tape, and that
flows through the VCR, and that current is a signal
it's meaningful, it can be decoded, and that decoded information
(09:42):
can be sent to a television and potentially an additional
sound system as well, and that will play the media
that is stored on the tape. Most VCRs also had
the capability to write to a blank tape or record
over an unprotected tape, and that meant this whole process
could be reversed and the electro magnet would generate a
magnetic field, and the magnetic field would be recorded onto
(10:05):
the plastic tape that passes by during the recording process.
I'm sure most of you have heard about the format
war that raged between Sony's Beta max format and j
v C S VHS format. But while those two would
be the primary candidates for home theater systems, there were
other formats that entered the fray, including one from Matt
(10:27):
Sushida slash Pana Sonic, and that format was called v X.
Matt Sushida only introduced a couple of models of VCR
that used the v X format. The version released in
North America was called the Quasar VR one thousand, also
known as the Great Time Machine. The v X format
(10:50):
used tapes that were kind of in a cassette form factor.
They were larger than VHS tapes twice as thick really,
and they would slide into the player lenkwise rather than widthwise,
the way a typical VCR works, and it was marketed
as the great time machine because you could set a
timer on the VCR and tape content off the television
(11:11):
and then watch it whenever you wanted to. So this
is an early example of time shifting. I've watched videos
of this technology and action, and it's pretty clunky stuff.
The tapes take up a lot of space. Uh. And
ultimately the format just didn't take off, and Matt Sushida
slash Panasonic discontinued the players a couple of years later.
(11:31):
It was clear that either Beta Max or VHS was
going to win out in that war. Now here's a
kind of crazy part of this story. I mean, sure,
a company introduces a new format and it doesn't pan out.
That's not unusual. We've seen it in other formats like
HD DVD versus Blu Ray. But what is unusual in
(11:52):
this case is that Matt Soshida slash Pana Sonic had
a majority stake in the Victor Company of Japan also
known as j v C, also known as the company
behind the VHS format, which actually won the format war.
So JVC started off as a Japanese subsidiary to the
Victor Talking Machine company that was a US based company
(12:14):
that manufactured phonographs and later became a record label. For
a while, j v C was actually part of our
c A, which had purchased Victor and that came along
with it. But during World War Two, the Japanese part
of the company split away from the rest of Victor
and it became its own entity. In nineteen fifty three,
(12:35):
Matt Sushida purchased a majority stake in that company, and
so JVC was effectively a subsidiary of Matt Sushida. Now
this means that the parent company, Matt Sushida, was putting
forward a competing product against one from a company that
Matt Sushida also owned, and also that format lost because
(12:55):
ultimately the VHS format would win over VX and more
noteworthy opponents like Sony's Betamax. JVC would remain part of
the Matsushida slash Panasonic empire until the two thousand's. As
for the VHS style of VCR, Panasonic would develop and
sell those to great effect. The VX system not so much,
(13:17):
but VHS that one worked like a treat. In nineteen
seventy seven, the company released a brand of VCRs called
mac Lord Masaharu Matsushida, who had traveled to the US
and form agreements with various consumer electronics companies for VCR components.
And this was the dawn of the home theater era,
and so many things would change because of that, including
(13:39):
the entertainment industry and the rise of the video rental business.
But more than a format failure, the tumultuous events and
the global consequences were likely a big burden for the
executive team at Matsoshida. So perhaps it's not a huge
surprise that in nineteen seventy seven, just four years after
becoming chairman, Takaha she announced his retirement. And this is
(14:02):
where we get another exception to the typical Japanese success plan. Konosuke,
in his eighties and technically retired but still very much
calling high level shots, decided that his son in law
would become the new chairman, but an unlikely candidate would
become the next president of the company. That candidate was
Toshihiko Yamashita. He had been part of Matsushida's air conditioning division,
(14:27):
so he was a cool guy, I'm sorry before he
came into that role. The division, the air conditioning division
was struggling, but under Yamashita, it turned around and it
became the number one brand in the market in Japan. Now,
out of the twenty six director level executives at Matt
Sushida at the time, he was number twenty five in seniority.
(14:51):
There was only one other director who was more junior
than he. In other words, while he showed initiative and leadership,
typically you would not expect him to be a candidate
for the president of the company. That role would usually
go to someone who had much more seniority than he did.
But on January tenth, nineteen seventy seven, Konosuke Matsushita called
(15:13):
Yamashita into his office. Kona Suke was eighty two years
old at this point and he had been retired from
Matt Sushida for four years, but he was clearly still
calling or at least influencing, the shots at the company.
Yamashita wrote in his autobiography that he had no idea
what the meeting was going to be about. He was
actually really nervous about it, and he says that when
(15:33):
Kona Suke offered him the position of president, no one
was more surprised than Yamashita himself. But is that true.
We'll find out when we come back after these brief messages.
So that last bit that I mentioned before the break,
(15:56):
that Yamashita was the most surprised when it came to
the fact that Kona Suke had decided to offer him
the position of president of the company, that's actually debatable.
When news broke that Yamashita would become president and Masa
Haru would become the next chairman, the press pounced on
this and they called it the Yamashita Leap, which was
(16:16):
a sly reference to a different Yamashita. Haru Hiu Yamashita.
He was a gymnast who won a gold medal in
the nineteen sixty four Olympics. More than a few analysts
predicted that this would turn out to be a bad move,
that Yamashita was not senior level enough to really be
the proper leader. As Barakona Suke, he saw that the
(16:38):
company he founded had grown into a really enormous organization,
and he had also seen that other companies that went
through this process often struggled or they would even collapse
under their own weight. Even companies in the United States
where he had been so impressed during his tours, he
wanted to learn from the mistakes of others and avoid
(16:58):
the problems that often come along with explosive growth. Together,
he and Yamasheeta identified that the company had really just
grown too complacent. That while the electronics market in Japan
was different than years past, the lagging sales could not
all be blamed on market saturation or maturity, or economic recession. Rather,
(17:19):
they concluded that the company itself just wasn't innovating enough
or listening to customers as much as it should. Yamasheeta
definitely shook things up. He felt that the managerial levels
in the company were overlapping too much, and so he
actually eliminated an entire management level in order to remove redundancy.
He also encouraged employees who felt stagnant to switch to
(17:42):
a different division and thus bring new perspectives and approaches
to their new coworkers. He also gained a reputation for
trusting the divisional business decisions to the executive management teams
at the head of each division. He would only occasionally
step in himself and direct things, and when you did
step in, it could be more than a little disruptive. So,
(18:04):
for example, there was a time when Yamashita essentially made
a promise to our c A that Panasonic would create
a four hour long VHS tape, and at the time,
the internal teams at Matsushida had not yet even made
a two hour tape. But a promise is a promise,
and so their teams got to work feverishly tackling engineering
(18:26):
challenges and ultimately producing the four hour tape, and that
would go on to be one of the big successes
for the company at this time because customers loved having
that much tape to be able to record stuff. While
matt Sushida slash Panasonic was briefly in the business of
designing mainframe computers in the nineteen sixties, that environment was
(18:46):
a little too competitive and Kona Suke had decided to
withdraw from the computer industry. Yamasheeda took another look at
the field and decided that the main frame business was
still too competitive and it was also starting to peter out.
There was a transition moving toward many computers and then
micro computers, and so he decided that the company should
still be in the business, but not in mainframes. He
(19:08):
wanted to get into the semiconductor business. One of the
big procedural changes that happened under Yamashida's leadership was in
the way that the company would lay out its plans.
Had been creating year long plans for the company, but
they were finding that the volatility and markets, and the
(19:28):
various challenges and trade agreements for international trade, as well
as the fluctuations and currency value often meant that a
year long plan could easily be disruptive by a few changes.
It just was too hard to stay on track. He
gets sidetracked too quickly. So instead, Yamashida and his team
(19:49):
laid out a three year plan, and that gave them
enough room to allow for some volatility. Things could go
a little you know, Las Vegas crazy style for a while.
Then they could settle down. And if you have three
years to achieve a goal, even if it's a more
ambitious goal than a year long goal, and it gave
you more of a chance for success. This was all
(20:12):
in an attempt to be more proactive rather than reactive.
And the reason I bring this up is that we
often see tech companies, and honestly companies in all industries
give a fanatical dedication toward short term gains, and sometimes
that's at the cost of long term success. You could argue,
(20:33):
and I certainly have argued, that this is kind of
tied with the business strategy of catering all your decisions
in some way around returning value to shareholders, which is
a strategy I'm not terribly fond of because it frequently
isn't great for anyone in the long term, and it
really feeds into stuff like speculation, which is not generally
(20:55):
a good thing. In two, Panasonic was one of the
first companies to develop a compact disc player. Now, the
history of the CD actually dates all the way back
to the nineteen sixties, and mostly in the nineteen seventies.
Sony and Phillips were both independently developing this technology in
the seventies, but then ultimately they would join forces Vultron
(21:17):
style in order to further refine the technology and to
establish standards. That would be important as it would help
sidestep the issue of competing and incompatible formats on the market.
That's something that tends to be a great frustration to
consumers because there's nothing like going out and buying something
that's going to run on some form of media player
(21:38):
and find out that, oh, the media player you have
isn't compatible with the media you bought. That's a terrible
feeling and it does happen, so they wanted to get
around that. So once again, Panasonic did not have a
leadership role in the development of this technology, but the
company was able to build out a CD player and
launch it in two when player has first started hitting
(22:01):
the market. However, this does mean I should probably talk
a bit about how compact discs work, since I've done
that for magnetic storage in this series. And if you
look at a standard one sided compact disc, you'll likely
see some sort of label on one side and the
other side will be really shiny, almost like a mirror,
(22:23):
and you put the disc in a player label side
up or a CD drive and then the magic happens.
But how is the data actually stored on the disk. Well,
in this case, this is not a magnetic system. It's
an optical system. That means that this is a system
that uses light and optics like mirrors and lenses to
encode and decode information. It's also a digital format, not
(22:48):
an analog format. So let's start by talking about a
blank CD as nothing stored on that glossy side. When
a machine writes to c D, it uses a powerful
lazy or to carve out tiny indentations in a spiral
on that c D. The spiral actually starts near the
center of the c D, So this is kind of
(23:10):
the opposite of how a vinyl record works, where you
would set a needle toward the outer edge of the
record and the needle would spiral inward. So what you're
left with are if you were to look at this
under a microscope, you'd see a series of reflective surfaces
on that CD as well as some little bumps, and
(23:31):
those represent ones and zeros, respectively. A reflective segment is
called a land that would be a one, and a
bump is called a pit that would be a zero.
So why is a bump called a pit? Well, it
all depends on how you're looking at the c D.
You look at the CD one way, you're looking at bumps.
You turn the c D and you look at it
a different way. You're looking at pits. And this is
(23:55):
binary information ones and zeros, So that's a binary unit.
You can think of this like a series of light switches,
where one is a switch in the on position. And
zeros in the switch in an off position. Using lots
of bits, like millions of them, you can describe all
sorts of stuff, including audio. So this brings us to
(24:17):
digital versus analog, and analog recording is a record of
a continuous input signal, but a digital recording is more
like a very detailed description of an original input. So
in a way, we can think of an analogy in
which an analog signal is a script from a play.
It's got all the stage directions in it, character and descriptions,
(24:40):
it's got all the dialogue in it. Everything's in the script,
But a digital signal is more like someone goes to
the play and takes very detailed notes of everything they
see and hear, and so they create as best a
description of the play as they possibly can. So digital
recording describe stuff like audio by breaking it down, So
(25:04):
they might break it down into things like pitch and
loudness and other values that can be expressed as bits. Moreover,
there's also a concert we have to talk about called
a sample rate. This describes how frequently every second the
system is analyzing this signal in an effort to describe it.
Higher sample rates require a lot more data, but they
(25:27):
also result in a more faithful representation of the original sound.
So to go back to our play analogy, let's say
we've got two digital like observers, so this is two
note takers. But our two note takers aren't able to
just sit in the theater the whole time. They actually
have to duck in and out. So one of the
(25:47):
two observers is allowed to jump in every thirty seconds
and they can stick around for a few seconds and
jot down all the notes, and then they have to
duck back out until the next thirty seconds comes around.
The other one can only go win every five minutes
for a few seconds at a time and take very
detailed notes, but then they have to leave and wait
another five minutes. At the end of this very strange experience,
(26:11):
the one who ducked in more frequently will probably have
a better understanding of what was going on in the
play from moment to moment. And that's kind of like
sample rates. The more frequently you sample, the more accurate
the copy is to the original, you know, performance. When
you put a CD into a player, the player uses
(26:32):
a laser to read the c D. This is not
as powerful a laser as the one that was used
to write to the c D in the first place.
And you need a laser because you have to focus
a very fine beam of light to pick up these
pits and lands on the c D. A sensor registers
the zeros and ones, and the Dakota takes the information
(26:54):
and turns it into something meaningful that can be sent to,
you know, amplifiers and speakers. So CDs are very different
from stuff like magnetic tape. They also are not affected
by magnets, whereas you can wipe out recording on tape
if you bring that tape too close to a really
powerful magnet. However, because CDs rely on light, it means
(27:17):
that if you get any scratches or dirt or smudges
on the reflective side of a c D, it causes
problems because the laser won't be able to effectively read
those pits and lands on that side of the disk.
There's a lot more I could go into, such as
how rewrite herble CDs work, but we're gonna leave off
of this for now and carry on with our history.
(27:39):
CD players were really expensive when they first debuted. In fact,
I didn't get my first CD player until maybe the
early nineteen nineties, and even then it was a little
portable CD player unit. But eventually the CD would overtake
and largely replace other formats like cassette tapes and vinyl records,
and it all would launch endless arguments among audio files
(28:03):
about whether a digital recording can ever match the fidelity
of an analog recording, and I'll just back away from
that particular hornets nest. By the mid nineteen eighties, international
trade agreements were putting the squeeze on Japan. Yamashida agreed
to resign his position as president, becoming an executive advisor,
and the new president of the company was a man
(28:24):
who had played a fundamental part in the most recent
three year strategic planning phase. His name was Akio Tony.
Tani defined four areas that the company would focus on
semiconductors the next generation and audio visual electronics, automated manufacturing equipment,
and communications equipment like cell phones and stuff. He also
(28:46):
expanded the sales department and he specialized them, and in
seven he introduced a concept to the company called human Electronics,
which I thought at first met they were going to
make cyborgs, and I got really excited, but no. What
he meant by that was a product design process that
would pay more attention to what people needed and wanted
(29:08):
and less on being flashy or throwing in features just
to have them included in the product. In seven, the
company established its first manufacturing facility in China. The new
facility would make CRT s or cathode ray tubes. These
were used in television's at the time, though it wouldn't
be much longer before the industry would kind of move
(29:28):
away from CRT television's toward other options like l C
D s and plasma TVs. Also in night seven, Tani
announced that the Matt Sushida Electrical Industrial Company and the
Matt Sushida Electric Trading Company, which technically were two separate entities,
would consolidate in a merger. And this was all part
(29:48):
of the strategy to step up the international sales in
the company, and part of this was to try and
overcome increasingly challenging obstacles that came with intense trade disagreements
between Japan and other nations. Japanese companies, as a general rule,
we're finding it challenging to export goods, and so they
began to establish branches in other countries where they could
(30:10):
have manufacturing facilities and sales teams there who worked on
a more local level that would get around some of
those pesky trade obstacles. All right, we're gonna blast through
the rest of the history of this company very very shortly,
but first let's take another quick break. On April nine,
(30:38):
Kona Suke Matsushida, the founder of Matsushida slash Panasonic, passed
away at the age of ninety four. Even after his
retirement in the nineteen seventies, he had continued to play
an important role in directing the course of the company
he had founded. He had a rather lauded reputation in
the company and in Japan. Though we can't nor the
(31:00):
fact that his company also got involved in some fairly
questionable activities involving price fixing and unfair competitive practices. Still,
he legitimately established a global company from extremely humble beginnings,
so you can't ignore that in nineteen nine, matts Ashida
slash Panasonic made what in retrospect you could call a
(31:22):
bone headed mistake. The company, eager to keep up with
their major competitor, Sony sort of the Darth Vader, to
panasonicx Luke Skywalker decided to get into the content business
the entertainment industry. Sony had acquired Columbia Pictures Entertainment in
nine and fun fact, that company had previously been owned
(31:44):
by Coca Cola. Because companies are weird. The movie business
is super weird, and there was this crazy idea of
synergy that really made more sense and concept than an execution.
But to keep up with Sony, Panasonic went and acquired
a different entertainment company, m c A. M c A
(32:08):
and I mean the company, not the Beastie Boy started
out as the Music Corporation of America that had been
founded in nineteen twenty four. Over the years, uh it
changed a great deal. When it first started, it was
a talent agency, but by it had become a fully
fledged entertainment company complete with movie and music and television studios.
(32:32):
In fact, it was the owner of Universal Studios. The
deal amounted to somewhere between six point six and seven
point five billion dollars. It all depends on which source
you're looking at. The love affair between Matsushida and Hollywood
didn't last very long. In fact, you could cynically joke
that it was on par for Hollywood marriages in general.
(32:54):
Mattsshida would sell off eighty percent of its steak in
m c A just five years years after the acquisition.
And here's another crazy thing. Seagram was the buyer. Yeah, Seagram,
the whiskey company. Seagram would turn around in two thousand
and sell off its stake to Vivendi, and then Vivendi
(33:16):
would ultimately purchase the remaining interest in m c A
that was still held by Matt Sushida in two thousand six.
So ultimately two thousand six is when Matt Sushida completely
got out of the entertainment industry business. Now, the time
that Matt Sushida owned m c A was turbulent. There
were stories of executive level disputes, and the company struggled
(33:39):
with low profits. The movie business was far more volatile
than the electronics company had anticipated, and it certainly was
more volatile than they cared for, and it was a
really a bad fit from the start. It pointed to
the danger of diversifying your business without real strategy behind
the diversification. It's it's one thing to make sure you're
(34:01):
not completely dependent upon one business, but it's another to
just grab any business that happens to be nearby, and
ultimately Mattsoshida paid for this. Upon selling their steak, the
company brought in five five billion yen, but it had
purchased m c A for eight hundred fifty billion yen,
(34:25):
and the value of m c A actually went up
during its tenure as part of Matt Sushida if you
look at it from a dollar value, but the value
of the yen changed dramatically in that same span of time,
so overall it became a loss, but back to very quickly.
That's also when Panasonic released the panic Com Pro note
(34:46):
This was the first notebook computer Panasonic ever released. If
you look at a picture of the thing, it's really
chunky looking. It's one of those big laptops that you
probably wouldn't actually want to have on your lap. Panasonic
also introduced a cellular phone called the mo of a
P the following year, and a rewriteable optical disc recorder
that this was more of an industrial thing, not a
(35:07):
home electronics thing. That also came out in ninety three.
After many decades of partnership Matt Sushida and Phillips, the
Dutch electronics company called it quits. Panasonic purchased the stake
that Phillips owned in Mattsshida Electronics Corporation, which was again
about thirty five percent of the ownership of the company,
(35:30):
and they did it for a hundred eighty five billion yen.
The two companies did agree to a cross patent licensing deal,
so it's not like there were hard feelings. Also, this
gets into how Panasonic is more nebulous than as a
single entity. It's really a lot of different companies that
are all related to one another, some having ownership and
(35:52):
other companies in the group. But the more I looked
into it so I could try and explain it, though
more I was convinced that I'm just not had out
for that level of madness. It's why I really like
describing technology. Technology either works or it doesn't work. There's
not a lot of ambiguity there. Corporate structures and governance
though that stuff, I mean, you might as well call
(36:13):
it magic to me. Anyway. Japan was going through an
economic recession in ninety three and Panasonic was hurting. President
Audio Tani facing pressure with Panasonic's poor performance, particularly from
Chairman Masaharu Matsushida, who is still in charge of that point,
This is by the way uh Konoski's son in law,
(36:35):
so Tani would resign his position and his replacement was
Yoichi Morishita. And Morishida, unlike his predecessors, was not someone
that had studied under Konosuke. He he was not a
candidate that had been groomed by the founder. He would
go through the process of trying to shed some of
the bloat that the Matsushida Company had accumulated, including selling
(36:59):
off that stake in m C a in. During his tenure,
the company also got into the business of digital television
sets and DVD players, navigation systems, plasma TVs, which would
kind of come back to haunt them, and more. The
Panasonic brand became more popular in the US, though the
company had not yet launched a defining technology the way
(37:21):
Sony had done was say the Walkman. A lot of
Morishida's work was in course corrections and attempts to return
to profitability. In Japan, it was still a struggle. In
nineteen nine, for example, the company's operating profit fell eighteen percent,
which is not good. We get another big change in
(37:41):
leadership in two thousand, Chairman Masaharu Matsushida retired that essentially
ended the Matsoshida domination of the company. Yoichi Motorshita would
become the new chairman of the company, and there was
talk originally of Konosuke's grandson, Masayuki Matsushita takeing over the
position of president, but the board of directors had concerns
(38:03):
that perhaps Masayuki lacked the leadership qualities that they wanted,
and that maybe it was a better idea to move
away from the Matsushida dynasty, so instead they chose the
former CEO of Matsushida Electric Corporation of America, Kunio Nakamota.
Nakamotora had a huge challenge. At this point, Matsushida slash
(38:23):
Panasonic had become truly gargantuan in Japan alone. The company
had one hundred forty divisions, and like a lot of
bigger companies grown haphazardly, there was a lot of redundancy.
There was a lot of bureaucracy. It was becoming increasingly difficult,
if not impossible, to operate the company in a nimble way,
so he needed to simplify things quite a bit. He
(38:46):
also made some controversial decisions within the company. For example,
he pulled design decisions away from engineering teams and he
gave them to marketing teams. And the idea was that
engineers were reluctant to jump onto new things or apt
to current trends. They were more comfortable doing things the
way they had done them, whereas the marketing team knew
(39:06):
what customers were looking for. And I feel a little
conflicted about this because I've seen what can happen when
marketing teams have a lot of say and things that
does not always go well. But at the time, Matsushida
was really starting to lag behind other electronics companies, so
it was probably a needed change there. Under Nakamura, more
(39:29):
younger executives and more women executives got opportunities. Nakamura said
that he wanted to reward performance and hard work over
stuff like seniority or title. At the same time, he
made some pretty drastic cuts to the company. He oversaw
the closing of thirty factories in Japan, which was nearly
a quarter of all the company's production facilities there. He
(39:50):
oversaw layoffs, some thirteen thousand layoffs, and he sold off
a lot of company assets that he saw as being
kind of unnecessary and di acting and this was all
within his first year as president. The electronics market was
not doing so hot at the time, and even with
all those changes, Nakamura was kind of swimming against a
(40:11):
very strong current. He pushed the company to get into
more service industries kind of offset the declining demand for
physical products. But by two thousand two, the company had
posted its first actual loss, not just a fall in profits,
but I mean an actual loss, Like the company lost money,
and it was a doozy. It's not a little bit
(40:32):
of money. It was three point four billion dollars. Nakamura, however,
just kept making changes. He spun off five group companies
to become full subsidiaries. Panasonic would retain ownership of the companies,
but they would be able to operate much more independently.
By two thousand three, the extensive changes were starting to
show results, with Panasonic gaming the lead as the largest
(40:55):
consumer electronics company. Profits went from having a total loss
into thousand two to a seven hundred seventeen million dollar
profit in two thousand three. Several divisions became leaders in
the market, including Panasonic Thin Plasma Television's Boy. That was
a great victory for the time, but they would come
(41:17):
back to bite them. In two thousand six, we get
another change. Nakamura would become the chairman of the company,
you know, once again moving from president to chairman, and
Fumio Altsuba, former managing director, would become the new president
of the company. That same year, Matsushida planned to spin
off JVC. They sold it to Kinwood Corporation. That would
(41:39):
take about two years for it to complete, and the
company once again came under scrutiny along with several other
electronics companies, and not just in Japan, there were other
ones as well. But the charge was that a large
number of these companies, Panasonic included, we're part of a
cartel that was controlling the price of liquid crystal displays
or l c d s. So not that different from
(42:01):
previous charges that have been leveled against Panasonic back in
the nineteen sixties. The European Union would find Panasonic guilty
of this and along with five other firms, the companies
were ordered to pay a very large fine. The total
fine was around one point nine billion dollars, but Panasonics
share was a relatively small one fifty seven and a
(42:24):
half million euros. And in two thousand eight we finally
get to the moment where Matt Sushida officially changed its
name to Panasonic, and the company was no longer under
the direction of the Mattsshida family for the most part,
and the Panasonic brand was far better known in the
United States than Matt Sushida was, so it made sense.
(42:45):
In two thousand nine, Panasonic acquired Sanyo Electric Company, turning
it into a subsidiary. And if you've been listening to
this series from the beginning, you might remember that Sanio
was actually founded by Konosuke Matsushida's brother in law, uh
He had worked for the Matsushida company, but then left
the company after the US government began to get involved
(43:07):
after World War Two. For decades, Sano had actually competed
in some of the same markets as Panasonic, but now
the two companies were coming together. While Panasonic built upon
its name recognition, it also was making big cuts. In
two thousand eleven, the company announced it would cut around
forty thousand jobs in an effort to eliminate redundancy, improve efficiency,
(43:31):
and to deal with some massive losses that were once
again mounting. In two thousand twelve, Otsubo stepped up to
the position of chairman and Nakamura would become an executive advisor,
and the new president of the company was Katsuhira Suga,
and he actually remains the president of the company today,
although Otsuba would not be chairman for very long in
(43:54):
he was replaced by Shusaku Naga, and Shusaku is still
and to this day. Panasonic has had to deal with
more than a few instances of allegations that the company
has been engaged in price fixing, collusion, and corruption over
the last few years. The avionics division has been under
(44:15):
scrutiny for that, the Automotive Systems Corporation with under scrutiny
for that, and the company has had a few cases
pop up that point to it attempting to fix the
game in one way or another. Whether or not that
was the knowledge of the top levels of the company
is another matter, but certainly divisions of the company have
(44:35):
come under suspicion a few times in the past few years.
In addition, the story that tends to go with each
incoming president is how that president is charged with saving
Pana Sonic. It's interesting to hear how each president comes
in and they're supposed to try and save the company
that's not a great narrative. You would prefer to build
(44:56):
on success rather than have to be known as someone
who's correcting the course of a compan the one of
Suga's priorities was getting Panasonic out of producing plasma televisions.
That was an example of him saving the company because
consumers had already moved on they were more interested in
l C D t vs, l E ED t vs.
But Panasonic had invested billions of dollars in producing plasma sets,
(45:19):
so this was not an easy decision. But it was
clear that trying to sell plasma sets in the world
that just wasn't interested in them was ultimately a losing proposition,
and Suga really did have a tough job ahead of him.
The year before he became president, Panasonic had posted a
monumental loss of nine point eight billion dollars. Now, to
(45:40):
be fair, Panasonic wasn't the only Japanese electronics company to
post massive losses around that time. Others were doing the same,
like Sony, and that has led to a conversation about
whether or not Japanese companies in general are too reliant
upon tradition and they're not capable of responding more quickly
(46:01):
to a changing market. But honestly, that's a discussion that
would require more investigation in a few future episode. Maybe
the thing to remember now is that Panasonic is a
truly huge company with lots of divisions, only a few
of which are related to consumer electronics. So people like
me who associate Panasonic with that we're only seeing a
(46:24):
small slice of the overall company. All of this grew
out of the work of a humble electrician who made
light sockets out of a little office that was in
a dirt floor building back in That to me is
truly phenomenal, and that wraps up the Panasonic story so far.
(46:46):
There are a lot of elements I didn't go into
deep detail about. Obviously, if I had, we would have
been stretching onto like seven or eight episodes. But I'll
probably have future episodes that look into stuff that relate
back to these, whether they're directly about Panasonic or Panasonic
plays a part in the story that remains to be seen.
(47:07):
But in the meantime, if you guys have suggestions for
future topics I should cover in tech stuff, whether it's
a technology, a trend in tech company, a person, whatever
it may be, if it's related to tech let me know.
Reach out on Twitter. The handle is tech stuff hs
W and I'll talk to you again really soon. Text
(47:32):
Stuff is an I Heart Radio production. For more podcasts
from my Heart Radio, visit the i Heart Radio app,
Apple Podcasts, or wherever you listen to your favorite shows.
Welcome to tex Stuff, a production from I Heart Radio.
Hey there, and welcome to tech Stuff. I'm your host,
Jonathan Strickland. I'm an executive producer with I Heart Radio
and I love all things tech. And welcome to the
third and and final, at least for now episode in
(00:27):
our series about the history of Pana Sonic a k a.
The Mattsushida Electrical Industrial Company. At the end of our
last episode, I talked about how Konosuke Matsushida, who founded
the company in nineteen eighteen, retired as chairman of the
company in nineteen seventy three. He stepped into a more
(00:49):
informal executive advisory role at that time. Now, I say that,
but executive advisors in Japan can exert and any formous
amount of control over companies even after they have officially
stepped out of leadership roles. More on that as we
go on. We also heard about allegations that Panasonic, along
(01:11):
with several other major electronics companies in Japan, had practiced
price fixing, both in Japan domestically, where the companies would
sell products at a premium, and in the US market,
where these same companies would sell products at a loss
in order to undercut American electronics companies and kind of
(01:31):
gain the market in the US. So while the company
history has a lot of positive elements, there are at
least a few smudges that warrant investigation. We'll talk about
a few more of those in this episode, but we
pick up in ninety three. Masaharu Matsushida, Kanasuke's son in law,
is still the president of the company at that time,
(01:52):
and uh Arataro Takahashi is chairman. Takahashi had played an
important role in establishing matsushi It's relationship with the Dutch
electronics company Phillips, and Phillips had really helped the Japanese
company get up to speed on the consumer electronics industry. Essentially,
Phillips was providing the technical know how and Matsushida was
(02:18):
providing the access to the Japanese market, and it was
a beneficial relationship. Phillips had retained a nearly thirty five
percent stake in the company as a result. Uh and
Takahashi was instrumental in getting that to happen. It's interesting
to see that he became the chairman while Masaharu remained president,
(02:41):
because typically it wouldn't work that way. So we need
to consider how Japanese businesses typically handle succession, and this
will become even more important as we go on in
this episode. Now, it's not that different from the way
many other companies handle succession, particularly those that tend to
look within the company itself as opposed to bringing in
(03:03):
a leader from some other company. In Japanese companies, it's
typical for a president to move to a chairman position
when the previous chairman retires, and it's not unusual for
a chairman to take on one of those informal executive
advisor roles on the board, so even when they're gone,
they aren't really gone, or as Red Letter Media likes
(03:24):
to say, nobody has ever really gone. Normally, one of
the most senior level executive vice presidents of the company
will then assume the role of president, and so seniority
plays a massively important part in succession in Japanese businesses,
as well as in wages. Typically, though, we learned there's
(03:45):
also a tendency for control of a company to remain
within a family, which could be another way that an
outgoing executive keeps one hand on the steering wheel even
after they've officially retired. Takahashi certainly had been around a
long time. He had worked at the company since the
nineteen thirties, and he played such an important role in
getting that relationship with Phillips established, But in this case
(04:09):
he sort of leap frogg massa Haru. I couldn't find
much information on what was going on at the executive
level at this time, but my assumption is that Konasuke
felt that Massaharu was best left in the president position
for a little while longer, and that he would move
up to chairman in the future. And perhaps there wasn't
(04:31):
someone that impressed Konosuke enough to step into the role
of president, so he won Masaharu to remain there. Because again,
while he was officially retired, Konosuke was still very much
involved with the operations of the company that he had
founded way back in nineteen eighteen. One of Kanasuke's directives
was having a profound impact upon the company and really
(04:53):
on the electronics industry in Japan in general, and that
was his goal of getting wages in Japan close sor
to what US companies paid their employees over here. And
this wasn't just an altruistic desire to reward employees, but
to encourage productivity and to be more competitive for skilled
and educated workers in an increasingly competitive industry. But it
(05:16):
also meant things had to change. From a production standpoint.
Raising wages would mean increasing the cost of doing business,
which would impact profits. So one of the things the
company focused on was streamlining processes as much as possible,
making them more efficient and economic. This included automating processes
(05:37):
whenever it made sense to do so, and the end
result was that by the nineteen seventies, Matsushido was one of,
if not the most efficient large company in Japan, even
over companies like Toyota. By nineteen seventy one, wages at
Matsushida were comparable to those in West Germany, and you know,
if you're young, you might not know that there used
(05:58):
to be an East and a West Germany. By nineteen
seventy two, just before Kanasuke would retire, the wages were
actually pretty close to what employees were doing in comparable
jobs in the United States. While this was happening, an
external crisis made things more complicated for the company. In
the autumn of nineteen seventy three, when a coalition of
(06:20):
Arabic forces launched a surprise attack on Israeli forces. It
created the yam Kapoor War. It took place during Yom Kippur,
a Jewish holiday, and sometimes it's called the yam Kappur War.
Sometimes it's called the Ramadan War. It was also coinciding
with the Muslim holy month of Ramadan. And this war
only lasted a few weeks, but the world was drawn
(06:43):
into it because of various alliances, including the Soviet Union
on one side in the United States on the other side.
And the complexities of that conflict are well beyond the
scope of this show, but the effects on industry are
what I hope to focus on. It does play a
part in techno oology. At the end of the war,
a coalition of Arab countries decided upon an oil embargo
(07:06):
against the US and other nations, and this led to
a global energy crisis. As oil production slowed down. Japan
was not immune to this crisis. The cost of raw
materials increased, as did the cost of shipping stuff from
one place to another. I mean that oil embargo was
going to have an impact on fuel prices, which would
(07:26):
make it more expensive to ship things, which meant that
you had to charge more for your products, and you
see how this becomes a ripple effect, and Mattsushida was
trying to be as strategic as it could be to
limit the effect that the crisis would have on sales figures.
But even so, the company posted a decrease in profits
in nineteen seventy four compared to nineteen seventy three. It
(07:50):
also had more sales during that time, but it wasn't
profiting as much. Even though it was selling more, it
was making less money, and both sales and profit would
be on the decline in nineteen seventy five. One product
the company introduced in nineteen would fail to get traction
in the market at all. So in the nineteen seventies
(08:11):
a few companies were battling it out to create the
definitive home entertainment media playback device, and this took a
lot of different forms, all of which were in some
level of competition against each other. Some of them were
playback only devices, like you would have to go out
and purchase a movie or TV show or rent one
and play it on a device. So the Capacitance Electronic disc,
(08:34):
which was made by our c A, was one of
those types of devices. I actually have one of those
literally at my feet right now, an old CD player,
the laser disc player from m C. A Disco vision
would also be another one, But I want to talk
about VCRs. So VCRs, or video cassette recorders, are one
of those technologies that had a huge impact on how
(08:56):
we consume entertainment, and I might do an episode of
out that in the near future about how the development
of the VCR changed entertainment itself. And there were a
few formats that all did the same general thing, but
with different approaches. Generally speaking, these machines used magnetic storage,
much as audio tape had. In order to store video
(09:18):
and audio information, a VCR has at the very least
an electro magnet that acts as a reading head, and
as tape moves below this reading head, the tape induces
a current to flow through that electro magnet because of
the magnetic particles that are in the tape, and that
flows through the VCR, and that current is a signal
it's meaningful, it can be decoded, and that decoded information
(09:42):
can be sent to a television and potentially an additional
sound system as well, and that will play the media
that is stored on the tape. Most VCRs also had
the capability to write to a blank tape or record
over an unprotected tape, and that meant this whole process
could be reversed and the electro magnet would generate a
magnetic field, and the magnetic field would be recorded onto
(10:05):
the plastic tape that passes by during the recording process.
I'm sure most of you have heard about the format
war that raged between Sony's Beta max format and j
v C S VHS format. But while those two would
be the primary candidates for home theater systems, there were
other formats that entered the fray, including one from Matt
(10:27):
Sushida slash Pana Sonic, and that format was called v X.
Matt Sushida only introduced a couple of models of VCR
that used the v X format. The version released in
North America was called the Quasar VR one thousand, also
known as the Great Time Machine. The v X format
(10:50):
used tapes that were kind of in a cassette form factor.
They were larger than VHS tapes twice as thick really,
and they would slide into the player lenkwise rather than widthwise,
the way a typical VCR works, and it was marketed
as the great time machine because you could set a
timer on the VCR and tape content off the television
(11:11):
and then watch it whenever you wanted to. So this
is an early example of time shifting. I've watched videos
of this technology and action, and it's pretty clunky stuff.
The tapes take up a lot of space. Uh. And
ultimately the format just didn't take off, and Matt Sushida
slash Panasonic discontinued the players a couple of years later.
(11:31):
It was clear that either Beta Max or VHS was
going to win out in that war. Now here's a
kind of crazy part of this story. I mean, sure,
a company introduces a new format and it doesn't pan out.
That's not unusual. We've seen it in other formats like
HD DVD versus Blu Ray. But what is unusual in
(11:52):
this case is that Matt Soshida slash Pana Sonic had
a majority stake in the Victor Company of Japan also
known as j v C, also known as the company
behind the VHS format, which actually won the format war.
So JVC started off as a Japanese subsidiary to the
Victor Talking Machine company that was a US based company
(12:14):
that manufactured phonographs and later became a record label. For
a while, j v C was actually part of our
c A, which had purchased Victor and that came along
with it. But during World War Two, the Japanese part
of the company split away from the rest of Victor
and it became its own entity. In nineteen fifty three,
(12:35):
Matt Sushida purchased a majority stake in that company, and
so JVC was effectively a subsidiary of Matt Sushida. Now
this means that the parent company, Matt Sushida, was putting
forward a competing product against one from a company that
Matt Sushida also owned, and also that format lost because
(12:55):
ultimately the VHS format would win over VX and more
noteworthy opponents like Sony's Betamax. JVC would remain part of
the Matsushida slash Panasonic empire until the two thousand's. As
for the VHS style of VCR, Panasonic would develop and
sell those to great effect. The VX system not so much,
(13:17):
but VHS that one worked like a treat. In nineteen
seventy seven, the company released a brand of VCRs called
mac Lord Masaharu Matsushida, who had traveled to the US
and form agreements with various consumer electronics companies for VCR components.
And this was the dawn of the home theater era,
and so many things would change because of that, including
(13:39):
the entertainment industry and the rise of the video rental business.
But more than a format failure, the tumultuous events and
the global consequences were likely a big burden for the
executive team at Matsoshida. So perhaps it's not a huge
surprise that in nineteen seventy seven, just four years after
becoming chairman, Takaha she announced his retirement. And this is
(14:02):
where we get another exception to the typical Japanese success plan. Konosuke,
in his eighties and technically retired but still very much
calling high level shots, decided that his son in law
would become the new chairman, but an unlikely candidate would
become the next president of the company. That candidate was
Toshihiko Yamashita. He had been part of Matsushida's air conditioning division,
(14:27):
so he was a cool guy, I'm sorry before he
came into that role. The division, the air conditioning division
was struggling, but under Yamashita, it turned around and it
became the number one brand in the market in Japan. Now,
out of the twenty six director level executives at Matt
Sushida at the time, he was number twenty five in seniority.
(14:51):
There was only one other director who was more junior
than he. In other words, while he showed initiative and leadership,
typically you would not expect him to be a candidate
for the president of the company. That role would usually
go to someone who had much more seniority than he did.
But on January tenth, nineteen seventy seven, Konosuke Matsushita called
(15:13):
Yamashita into his office. Kona Suke was eighty two years
old at this point and he had been retired from
Matt Sushida for four years, but he was clearly still
calling or at least influencing, the shots at the company.
Yamashita wrote in his autobiography that he had no idea
what the meeting was going to be about. He was
actually really nervous about it, and he says that when
(15:33):
Kona Suke offered him the position of president, no one
was more surprised than Yamashita himself. But is that true.
We'll find out when we come back after these brief messages.
So that last bit that I mentioned before the break,
(15:56):
that Yamashita was the most surprised when it came to
the fact that Kona Suke had decided to offer him
the position of president of the company, that's actually debatable.
When news broke that Yamashita would become president and Masa
Haru would become the next chairman, the press pounced on
this and they called it the Yamashita Leap, which was
(16:16):
a sly reference to a different Yamashita. Haru Hiu Yamashita.
He was a gymnast who won a gold medal in
the nineteen sixty four Olympics. More than a few analysts
predicted that this would turn out to be a bad move,
that Yamashita was not senior level enough to really be
the proper leader. As Barakona Suke, he saw that the
(16:38):
company he founded had grown into a really enormous organization,
and he had also seen that other companies that went
through this process often struggled or they would even collapse
under their own weight. Even companies in the United States
where he had been so impressed during his tours, he
wanted to learn from the mistakes of others and avoid
(16:58):
the problems that often come along with explosive growth. Together,
he and Yamasheeta identified that the company had really just
grown too complacent. That while the electronics market in Japan
was different than years past, the lagging sales could not
all be blamed on market saturation or maturity, or economic recession. Rather,
(17:19):
they concluded that the company itself just wasn't innovating enough
or listening to customers as much as it should. Yamasheeta
definitely shook things up. He felt that the managerial levels
in the company were overlapping too much, and so he
actually eliminated an entire management level in order to remove redundancy.
He also encouraged employees who felt stagnant to switch to
(17:42):
a different division and thus bring new perspectives and approaches
to their new coworkers. He also gained a reputation for
trusting the divisional business decisions to the executive management teams
at the head of each division. He would only occasionally
step in himself and direct things, and when you did
step in, it could be more than a little disruptive. So,
(18:04):
for example, there was a time when Yamashita essentially made
a promise to our c A that Panasonic would create
a four hour long VHS tape, and at the time,
the internal teams at Matsushida had not yet even made
a two hour tape. But a promise is a promise,
and so their teams got to work feverishly tackling engineering
(18:26):
challenges and ultimately producing the four hour tape, and that
would go on to be one of the big successes
for the company at this time because customers loved having
that much tape to be able to record stuff. While
matt Sushida slash Panasonic was briefly in the business of
designing mainframe computers in the nineteen sixties, that environment was
(18:46):
a little too competitive and Kona Suke had decided to
withdraw from the computer industry. Yamasheeda took another look at
the field and decided that the main frame business was
still too competitive and it was also starting to peter out.
There was a transition moving toward many computers and then
micro computers, and so he decided that the company should
still be in the business, but not in mainframes. He
(19:08):
wanted to get into the semiconductor business. One of the
big procedural changes that happened under Yamashida's leadership was in
the way that the company would lay out its plans.
Had been creating year long plans for the company, but
they were finding that the volatility and markets, and the
(19:28):
various challenges and trade agreements for international trade, as well
as the fluctuations and currency value often meant that a
year long plan could easily be disruptive by a few changes.
It just was too hard to stay on track. He
gets sidetracked too quickly. So instead, Yamashida and his team
(19:49):
laid out a three year plan, and that gave them
enough room to allow for some volatility. Things could go
a little you know, Las Vegas crazy style for a while.
Then they could settle down. And if you have three
years to achieve a goal, even if it's a more
ambitious goal than a year long goal, and it gave
you more of a chance for success. This was all
(20:12):
in an attempt to be more proactive rather than reactive.
And the reason I bring this up is that we
often see tech companies, and honestly companies in all industries
give a fanatical dedication toward short term gains, and sometimes
that's at the cost of long term success. You could argue,
(20:33):
and I certainly have argued, that this is kind of
tied with the business strategy of catering all your decisions
in some way around returning value to shareholders, which is
a strategy I'm not terribly fond of because it frequently
isn't great for anyone in the long term, and it
really feeds into stuff like speculation, which is not generally
(20:55):
a good thing. In two, Panasonic was one of the
first companies to develop a compact disc player. Now, the
history of the CD actually dates all the way back
to the nineteen sixties, and mostly in the nineteen seventies.
Sony and Phillips were both independently developing this technology in
the seventies, but then ultimately they would join forces Vultron
(21:17):
style in order to further refine the technology and to
establish standards. That would be important as it would help
sidestep the issue of competing and incompatible formats on the market.
That's something that tends to be a great frustration to
consumers because there's nothing like going out and buying something
that's going to run on some form of media player
(21:38):
and find out that, oh, the media player you have
isn't compatible with the media you bought. That's a terrible
feeling and it does happen, so they wanted to get
around that. So once again, Panasonic did not have a
leadership role in the development of this technology, but the
company was able to build out a CD player and
launch it in two when player has first started hitting
(22:01):
the market. However, this does mean I should probably talk
a bit about how compact discs work, since I've done
that for magnetic storage in this series. And if you
look at a standard one sided compact disc, you'll likely
see some sort of label on one side and the
other side will be really shiny, almost like a mirror,
(22:23):
and you put the disc in a player label side
up or a CD drive and then the magic happens.
But how is the data actually stored on the disk. Well,
in this case, this is not a magnetic system. It's
an optical system. That means that this is a system
that uses light and optics like mirrors and lenses to
encode and decode information. It's also a digital format, not
(22:48):
an analog format. So let's start by talking about a
blank CD as nothing stored on that glossy side. When
a machine writes to c D, it uses a powerful
lazy or to carve out tiny indentations in a spiral
on that c D. The spiral actually starts near the
center of the c D, So this is kind of
(23:10):
the opposite of how a vinyl record works, where you
would set a needle toward the outer edge of the
record and the needle would spiral inward. So what you're
left with are if you were to look at this
under a microscope, you'd see a series of reflective surfaces
on that CD as well as some little bumps, and
(23:31):
those represent ones and zeros, respectively. A reflective segment is
called a land that would be a one, and a
bump is called a pit that would be a zero.
So why is a bump called a pit? Well, it
all depends on how you're looking at the c D.
You look at the CD one way, you're looking at bumps.
You turn the c D and you look at it
a different way. You're looking at pits. And this is
(23:55):
binary information ones and zeros, So that's a binary unit.
You can think of this like a series of light switches,
where one is a switch in the on position. And
zeros in the switch in an off position. Using lots
of bits, like millions of them, you can describe all
sorts of stuff, including audio. So this brings us to
(24:17):
digital versus analog, and analog recording is a record of
a continuous input signal, but a digital recording is more
like a very detailed description of an original input. So
in a way, we can think of an analogy in
which an analog signal is a script from a play.
It's got all the stage directions in it, character and descriptions,
(24:40):
it's got all the dialogue in it. Everything's in the script,
But a digital signal is more like someone goes to
the play and takes very detailed notes of everything they
see and hear, and so they create as best a
description of the play as they possibly can. So digital
recording describe stuff like audio by breaking it down, So
(25:04):
they might break it down into things like pitch and
loudness and other values that can be expressed as bits. Moreover,
there's also a concert we have to talk about called
a sample rate. This describes how frequently every second the
system is analyzing this signal in an effort to describe it.
Higher sample rates require a lot more data, but they
(25:27):
also result in a more faithful representation of the original sound.
So to go back to our play analogy, let's say
we've got two digital like observers, so this is two
note takers. But our two note takers aren't able to
just sit in the theater the whole time. They actually
have to duck in and out. So one of the
(25:47):
two observers is allowed to jump in every thirty seconds
and they can stick around for a few seconds and
jot down all the notes, and then they have to
duck back out until the next thirty seconds comes around.
The other one can only go win every five minutes
for a few seconds at a time and take very
detailed notes, but then they have to leave and wait
another five minutes. At the end of this very strange experience,
(26:11):
the one who ducked in more frequently will probably have
a better understanding of what was going on in the
play from moment to moment. And that's kind of like
sample rates. The more frequently you sample, the more accurate
the copy is to the original, you know, performance. When
you put a CD into a player, the player uses
(26:32):
a laser to read the c D. This is not
as powerful a laser as the one that was used
to write to the c D in the first place.
And you need a laser because you have to focus
a very fine beam of light to pick up these
pits and lands on the c D. A sensor registers
the zeros and ones, and the Dakota takes the information
(26:54):
and turns it into something meaningful that can be sent to,
you know, amplifiers and speakers. So CDs are very different
from stuff like magnetic tape. They also are not affected
by magnets, whereas you can wipe out recording on tape
if you bring that tape too close to a really
powerful magnet. However, because CDs rely on light, it means
(27:17):
that if you get any scratches or dirt or smudges
on the reflective side of a c D, it causes
problems because the laser won't be able to effectively read
those pits and lands on that side of the disk.
There's a lot more I could go into, such as
how rewrite herble CDs work, but we're gonna leave off
of this for now and carry on with our history.
(27:39):
CD players were really expensive when they first debuted. In fact,
I didn't get my first CD player until maybe the
early nineteen nineties, and even then it was a little
portable CD player unit. But eventually the CD would overtake
and largely replace other formats like cassette tapes and vinyl records,
and it all would launch endless arguments among audio files
(28:03):
about whether a digital recording can ever match the fidelity
of an analog recording, and I'll just back away from
that particular hornets nest. By the mid nineteen eighties, international
trade agreements were putting the squeeze on Japan. Yamashida agreed
to resign his position as president, becoming an executive advisor,
and the new president of the company was a man
(28:24):
who had played a fundamental part in the most recent
three year strategic planning phase. His name was Akio Tony.
Tani defined four areas that the company would focus on
semiconductors the next generation and audio visual electronics, automated manufacturing equipment,
and communications equipment like cell phones and stuff. He also
(28:46):
expanded the sales department and he specialized them, and in
seven he introduced a concept to the company called human Electronics,
which I thought at first met they were going to
make cyborgs, and I got really excited, but no. What
he meant by that was a product design process that
would pay more attention to what people needed and wanted
(29:08):
and less on being flashy or throwing in features just
to have them included in the product. In seven, the
company established its first manufacturing facility in China. The new
facility would make CRT s or cathode ray tubes. These
were used in television's at the time, though it wouldn't
be much longer before the industry would kind of move
(29:28):
away from CRT television's toward other options like l C
D s and plasma TVs. Also in night seven, Tani
announced that the Matt Sushida Electrical Industrial Company and the
Matt Sushida Electric Trading Company, which technically were two separate entities,
would consolidate in a merger. And this was all part
(29:48):
of the strategy to step up the international sales in
the company, and part of this was to try and
overcome increasingly challenging obstacles that came with intense trade disagreements
between Japan and other nations. Japanese companies, as a general rule,
we're finding it challenging to export goods, and so they
began to establish branches in other countries where they could
(30:10):
have manufacturing facilities and sales teams there who worked on
a more local level that would get around some of
those pesky trade obstacles. All right, we're gonna blast through
the rest of the history of this company very very shortly,
but first let's take another quick break. On April nine,
(30:38):
Kona Suke Matsushida, the founder of Matsushida slash Panasonic, passed
away at the age of ninety four. Even after his
retirement in the nineteen seventies, he had continued to play
an important role in directing the course of the company
he had founded. He had a rather lauded reputation in
the company and in Japan. Though we can't nor the
(31:00):
fact that his company also got involved in some fairly
questionable activities involving price fixing and unfair competitive practices. Still,
he legitimately established a global company from extremely humble beginnings,
so you can't ignore that in nineteen nine, matts Ashida
slash Panasonic made what in retrospect you could call a
(31:22):
bone headed mistake. The company, eager to keep up with
their major competitor, Sony sort of the Darth Vader, to
panasonicx Luke Skywalker decided to get into the content business
the entertainment industry. Sony had acquired Columbia Pictures Entertainment in
nine and fun fact, that company had previously been owned
(31:44):
by Coca Cola. Because companies are weird. The movie business
is super weird, and there was this crazy idea of
synergy that really made more sense and concept than an execution.
But to keep up with Sony, Panasonic went and acquired
a different entertainment company, m c A. M c A
(32:08):
and I mean the company, not the Beastie Boy started
out as the Music Corporation of America that had been
founded in nineteen twenty four. Over the years, uh it
changed a great deal. When it first started, it was
a talent agency, but by it had become a fully
fledged entertainment company complete with movie and music and television studios.
(32:32):
In fact, it was the owner of Universal Studios. The
deal amounted to somewhere between six point six and seven
point five billion dollars. It all depends on which source
you're looking at. The love affair between Matsushida and Hollywood
didn't last very long. In fact, you could cynically joke
that it was on par for Hollywood marriages in general.
(32:54):
Mattsshida would sell off eighty percent of its steak in
m c A just five years years after the acquisition.
And here's another crazy thing. Seagram was the buyer. Yeah, Seagram,
the whiskey company. Seagram would turn around in two thousand
and sell off its stake to Vivendi, and then Vivendi
(33:16):
would ultimately purchase the remaining interest in m c A
that was still held by Matt Sushida in two thousand six.
So ultimately two thousand six is when Matt Sushida completely
got out of the entertainment industry business. Now, the time
that Matt Sushida owned m c A was turbulent. There
were stories of executive level disputes, and the company struggled
(33:39):
with low profits. The movie business was far more volatile
than the electronics company had anticipated, and it certainly was
more volatile than they cared for, and it was a
really a bad fit from the start. It pointed to
the danger of diversifying your business without real strategy behind
the diversification. It's it's one thing to make sure you're
(34:01):
not completely dependent upon one business, but it's another to
just grab any business that happens to be nearby, and
ultimately Mattsoshida paid for this. Upon selling their steak, the
company brought in five five billion yen, but it had
purchased m c A for eight hundred fifty billion yen,
(34:25):
and the value of m c A actually went up
during its tenure as part of Matt Sushida if you
look at it from a dollar value, but the value
of the yen changed dramatically in that same span of time,
so overall it became a loss, but back to very quickly.
That's also when Panasonic released the panic Com Pro note
(34:46):
This was the first notebook computer Panasonic ever released. If
you look at a picture of the thing, it's really
chunky looking. It's one of those big laptops that you
probably wouldn't actually want to have on your lap. Panasonic
also introduced a cellular phone called the mo of a
P the following year, and a rewriteable optical disc recorder
that this was more of an industrial thing, not a
(35:07):
home electronics thing. That also came out in ninety three.
After many decades of partnership Matt Sushida and Phillips, the
Dutch electronics company called it quits. Panasonic purchased the stake
that Phillips owned in Mattsshida Electronics Corporation, which was again
about thirty five percent of the ownership of the company,
(35:30):
and they did it for a hundred eighty five billion yen.
The two companies did agree to a cross patent licensing deal,
so it's not like there were hard feelings. Also, this
gets into how Panasonic is more nebulous than as a
single entity. It's really a lot of different companies that
are all related to one another, some having ownership and
(35:52):
other companies in the group. But the more I looked
into it so I could try and explain it, though
more I was convinced that I'm just not had out
for that level of madness. It's why I really like
describing technology. Technology either works or it doesn't work. There's
not a lot of ambiguity there. Corporate structures and governance
though that stuff, I mean, you might as well call
(36:13):
it magic to me. Anyway. Japan was going through an
economic recession in ninety three and Panasonic was hurting. President
Audio Tani facing pressure with Panasonic's poor performance, particularly from
Chairman Masaharu Matsushida, who is still in charge of that point,
This is by the way uh Konoski's son in law,
(36:35):
so Tani would resign his position and his replacement was
Yoichi Morishita. And Morishida, unlike his predecessors, was not someone
that had studied under Konosuke. He he was not a
candidate that had been groomed by the founder. He would
go through the process of trying to shed some of
the bloat that the Matsushida Company had accumulated, including selling
(36:59):
off that stake in m C a in. During his tenure,
the company also got into the business of digital television
sets and DVD players, navigation systems, plasma TVs, which would
kind of come back to haunt them, and more. The
Panasonic brand became more popular in the US, though the
company had not yet launched a defining technology the way
(37:21):
Sony had done was say the Walkman. A lot of
Morishida's work was in course corrections and attempts to return
to profitability. In Japan, it was still a struggle. In
nineteen nine, for example, the company's operating profit fell eighteen percent,
which is not good. We get another big change in
(37:41):
leadership in two thousand, Chairman Masaharu Matsushida retired that essentially
ended the Matsoshida domination of the company. Yoichi Motorshita would
become the new chairman of the company, and there was
talk originally of Konosuke's grandson, Masayuki Matsushita takeing over the
position of president, but the board of directors had concerns
(38:03):
that perhaps Masayuki lacked the leadership qualities that they wanted,
and that maybe it was a better idea to move
away from the Matsushida dynasty, so instead they chose the
former CEO of Matsushida Electric Corporation of America, Kunio Nakamota.
Nakamotora had a huge challenge. At this point, Matsushida slash
(38:23):
Panasonic had become truly gargantuan in Japan alone. The company
had one hundred forty divisions, and like a lot of
bigger companies grown haphazardly, there was a lot of redundancy.
There was a lot of bureaucracy. It was becoming increasingly difficult,
if not impossible, to operate the company in a nimble way,
so he needed to simplify things quite a bit. He
(38:46):
also made some controversial decisions within the company. For example,
he pulled design decisions away from engineering teams and he
gave them to marketing teams. And the idea was that
engineers were reluctant to jump onto new things or apt
to current trends. They were more comfortable doing things the
way they had done them, whereas the marketing team knew
(39:06):
what customers were looking for. And I feel a little
conflicted about this because I've seen what can happen when
marketing teams have a lot of say and things that
does not always go well. But at the time, Matsushida
was really starting to lag behind other electronics companies, so
it was probably a needed change there. Under Nakamura, more
(39:29):
younger executives and more women executives got opportunities. Nakamura said
that he wanted to reward performance and hard work over
stuff like seniority or title. At the same time, he
made some pretty drastic cuts to the company. He oversaw
the closing of thirty factories in Japan, which was nearly
a quarter of all the company's production facilities there. He
(39:50):
oversaw layoffs, some thirteen thousand layoffs, and he sold off
a lot of company assets that he saw as being
kind of unnecessary and di acting and this was all
within his first year as president. The electronics market was
not doing so hot at the time, and even with
all those changes, Nakamura was kind of swimming against a
(40:11):
very strong current. He pushed the company to get into
more service industries kind of offset the declining demand for
physical products. But by two thousand two, the company had
posted its first actual loss, not just a fall in profits,
but I mean an actual loss, Like the company lost money,
and it was a doozy. It's not a little bit
(40:32):
of money. It was three point four billion dollars. Nakamura, however,
just kept making changes. He spun off five group companies
to become full subsidiaries. Panasonic would retain ownership of the companies,
but they would be able to operate much more independently.
By two thousand three, the extensive changes were starting to
show results, with Panasonic gaming the lead as the largest
(40:55):
consumer electronics company. Profits went from having a total loss
into thousand two to a seven hundred seventeen million dollar
profit in two thousand three. Several divisions became leaders in
the market, including Panasonic Thin Plasma Television's Boy. That was
a great victory for the time, but they would come
(41:17):
back to bite them. In two thousand six, we get
another change. Nakamura would become the chairman of the company,
you know, once again moving from president to chairman, and
Fumio Altsuba, former managing director, would become the new president
of the company. That same year, Matsushida planned to spin
off JVC. They sold it to Kinwood Corporation. That would
(41:39):
take about two years for it to complete, and the
company once again came under scrutiny along with several other
electronics companies, and not just in Japan, there were other
ones as well. But the charge was that a large
number of these companies, Panasonic included, we're part of a
cartel that was controlling the price of liquid crystal displays
or l c d s. So not that different from
(42:01):
previous charges that have been leveled against Panasonic back in
the nineteen sixties. The European Union would find Panasonic guilty
of this and along with five other firms, the companies
were ordered to pay a very large fine. The total
fine was around one point nine billion dollars, but Panasonics
share was a relatively small one fifty seven and a
(42:24):
half million euros. And in two thousand eight we finally
get to the moment where Matt Sushida officially changed its
name to Panasonic, and the company was no longer under
the direction of the Mattsshida family for the most part,
and the Panasonic brand was far better known in the
United States than Matt Sushida was, so it made sense.
(42:45):
In two thousand nine, Panasonic acquired Sanyo Electric Company, turning
it into a subsidiary. And if you've been listening to
this series from the beginning, you might remember that Sanio
was actually founded by Konosuke Matsushida's brother in law, uh
He had worked for the Matsushida company, but then left
the company after the US government began to get involved
(43:07):
after World War Two. For decades, Sano had actually competed
in some of the same markets as Panasonic, but now
the two companies were coming together. While Panasonic built upon
its name recognition, it also was making big cuts. In
two thousand eleven, the company announced it would cut around
forty thousand jobs in an effort to eliminate redundancy, improve efficiency,
(43:31):
and to deal with some massive losses that were once
again mounting. In two thousand twelve, Otsubo stepped up to
the position of chairman and Nakamura would become an executive advisor,
and the new president of the company was Katsuhira Suga,
and he actually remains the president of the company today,
although Otsuba would not be chairman for very long in
(43:54):
he was replaced by Shusaku Naga, and Shusaku is still
and to this day. Panasonic has had to deal with
more than a few instances of allegations that the company
has been engaged in price fixing, collusion, and corruption over
the last few years. The avionics division has been under
(44:15):
scrutiny for that, the Automotive Systems Corporation with under scrutiny
for that, and the company has had a few cases
pop up that point to it attempting to fix the
game in one way or another. Whether or not that
was the knowledge of the top levels of the company
is another matter, but certainly divisions of the company have
(44:35):
come under suspicion a few times in the past few years.
In addition, the story that tends to go with each
incoming president is how that president is charged with saving
Pana Sonic. It's interesting to hear how each president comes
in and they're supposed to try and save the company
that's not a great narrative. You would prefer to build
(44:56):
on success rather than have to be known as someone
who's correcting the course of a compan the one of
Suga's priorities was getting Panasonic out of producing plasma televisions.
That was an example of him saving the company because
consumers had already moved on they were more interested in
l C D t vs, l E ED t vs.
But Panasonic had invested billions of dollars in producing plasma sets,
(45:19):
so this was not an easy decision. But it was
clear that trying to sell plasma sets in the world
that just wasn't interested in them was ultimately a losing proposition,
and Suga really did have a tough job ahead of him.
The year before he became president, Panasonic had posted a
monumental loss of nine point eight billion dollars. Now, to
(45:40):
be fair, Panasonic wasn't the only Japanese electronics company to
post massive losses around that time. Others were doing the same,
like Sony, and that has led to a conversation about
whether or not Japanese companies in general are too reliant
upon tradition and they're not capable of responding more quickly
(46:01):
to a changing market. But honestly, that's a discussion that
would require more investigation in a few future episode. Maybe
the thing to remember now is that Panasonic is a
truly huge company with lots of divisions, only a few
of which are related to consumer electronics. So people like
me who associate Panasonic with that we're only seeing a
(46:24):
small slice of the overall company. All of this grew
out of the work of a humble electrician who made
light sockets out of a little office that was in
a dirt floor building back in That to me is
truly phenomenal, and that wraps up the Panasonic story so far.
(46:46):
There are a lot of elements I didn't go into
deep detail about. Obviously, if I had, we would have
been stretching onto like seven or eight episodes. But I'll
probably have future episodes that look into stuff that relate
back to these, whether they're directly about Panasonic or Panasonic
plays a part in the story that remains to be seen.
(47:07):
But in the meantime, if you guys have suggestions for
future topics I should cover in tech stuff, whether it's
a technology, a trend in tech company, a person, whatever
it may be, if it's related to tech let me know.
Reach out on Twitter. The handle is tech stuff hs
W and I'll talk to you again really soon. Text
(47:32):
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