Oct 2022 - Japanese Juxtaposition

Hi friends,

📣 Public service announcement

This week as I finalise my newsletter, my friend, Dr Amanda White (an educator in accounting & audit at the University of Technology Sydney) invited me as a co-host for her UTS accounting show that she does weekly during the school semesters where we talk about business news and try to relate industry to academia. We talked about SafetyCulture and Twitter. Link to my interview with Dr Amanda White here: "$62m loss is due to issuing equity" - WHAT? Things CEOs say 🤦‍♀️ + Accounting and Twitter's sale

Preview thumbnail from Dr Amanda White’s UTS accounting show on YouTube

📆 Back to my monthly newsletter...

Welcome to my 10th monthly email, in this segment called “Michael’s Monthly Musings”. If you missed my earlier monthly newsletters, please refer here.

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🗾 A trip to Japan?

Friends of mine will have noticed on my Facebook/Instagram stories that I had all of a sudden become a temporary travel blogger with pics of Japan... That was a holiday I was on recently for ~10 days. 

My mum has always had an eye for value (my mum having fashion experience helps in this department I've been led to believe). I remember many years ago, she helped me think about Afterpay, City Chic, and Lovisa as investments by simply pointing them out to me as she took me shopping in our local shopping centre. 

She stumbled upon another "bargain". She found a great tour via TripADeal online (which I would recommend people to check out here!), for 10 days in Japan with return Qantas flight, hotel and breakfast included, and tour guide included for AU$2500 (+$500 if single person like me). It also helped that 1 AUD could buy you nearly 100 JPY again (it was ~JPY95 for me). The last time JPY was this cheap that I could recall, was when my parents took me to Japan back in 2007 when I was in year 5...

Aussie school holidays were over, the hot weather was improving in Japan meaning less rainfall (whilst Sydney was the opposite with heavy rain), and the Chinese were still in lockdown (I found out from looking at travel data, the Chinese made up ~33% of the daily inbounds/outbounds at the Japanese airport pre COVID). The set up was great. In my work, I cover the Japanese internet and media stocks (like Sony, Nintendo, Z Holdings, Rakuten, etc), so being on the ground was an exciting prospect for me. Those who know me well, know I like observing consumer behaviour, and that includes the Japanese too.

Juxtaposition is the fact of two things being placed or seen together with contrasting effects. For this newsletter, I just wanted to share some juxtapositions that came to my mind whilst making some observations in Japan. Some reflections if you will…

🚅 Japanese technological marvels vs the un-technological way of transacting 💵

The Japanese are notorious for being timely. I was told by my tour guide that Japanese trains arrive with typically only 1 min of leeway. I witnessed that first hand. I had a friend who pointed out to me recently that if you come on time, that is considered late for the Japanese. That definitely has made me think twice about my own timeliness and strive to be better with my "lee-ways" (I currently give 5 mins leeway for myself in arriving to places still). The trains are also damn fast. On my tour I took the shinkansen from Tokyo to Kyoto and the speed of that train is the fastest in the world. It's an engineering marvel. The Japanese are very advanced in many ways.

Sitting inside the bullet train, headed to Kyoto

But something that boggles my mind is that they still transact with cash (vs card-less payments). In Japan today, still 75-80% of retail transactions for goods and services are STILL done with cash. In virtually every store you could not do card-less payments (except at bigger franchises like a 7/11 and McDonalds). It boggles my mind why I have to pay in cash still (whilst in Australia, you get away with 99% of stores just allowing me to "tap pay" with my Apple watch (thanks David for convincing me to buy one after many years). Many people in Japan did not understand what I meant when I said "tap pay". In Japan's defence, I can imagine a few reasons with why the Japanese continue to transact in cash. Japanese are very conservative, and some may not trust the idea of paying with a device like a phone or a watch. Also, Japan for the longest time since the property bubble of the late 1980s has been in a low rate/negative rate world, meaning it was better to keep cash under your bed than to keep it in a bank where it would "lose" money over time due to negative rates.

👌 Pursuit for perfection vs solving for efficiency 🎯

Something I respect a lot about the Japanese is there pursuit for perfection. The classic story are the Japanese sushi makers who spend years just washing rice before even making sushi… But perfection shows through in many other ways. A good example is when I went to Universal Studios Japan and Tokyo Disneyland. In both theme parks, the excruciating thought and attention to detail to how the Japanese designed the park throughout, and here's an example with the Super Mario theme park that recently opened in Japan in March 2021. Isn't it just "pleasing" to the eye? It's just so consistently perfect. Even the staff members were so in character in the Mario world in their costumes and storytelling. They are all selling the "story" which builds up to you eventually going to the Bowser's castle ride to play Mario Kart and defeat Bowser's team. Just perfect.

A picture inside Super Mario World in Universal Studios Osaka. Just perfect!

From an investor perspective, I can imagine the pursuit of perfection can mean more laborious hours to build the theme park or train staff workers or cost more than I expect. I have witnessed efficiency losses in the idea of being perfect at times with the Japanese. A good example (which is harder to "see" in a tour, but is something I know from my experience at work dealing with Japanese cos) is that corporate governance is slow moving. By that I mean boards are often dominated by older generation Japanese males without much diversity in thinking. By design, you can imagine that Japanese companies move quite slowly as such, given the lack of diverse opinion or creative thinking. This plagues a lot of Japanese companies and explains why from a "capital allocation" perspective, they move much slower, versus American companies which are much more active at "using capital" more productively, aka using cash sitting in bank for buying back shares, or paying dividends - whilst the Japanese will like to just sit on a fat pile of cash. I am in some ways sympathetic as a lot of this thinking is likely due to the lessons they've learnt from being excessively leveraged (aka borrowing too much) during the property bubble of the early 1980s. But in other ways, I think being "perfect" has stopped a lot of Japanese companies from being "efficient". 

As a side note, close friends who know me well, will know that I often don't see eye to eye with perfection. Maybe it comes from my background having made so many failures in my past that I don't bother going for it. The phrase I commonly quote from my mentor is "approximately right, is better than precisely wrong". That said, I think I've evolved a bit in my way of thinking about this. More on that for another time, but I will say the 2 words whilst uniquely different, can be strived for simultaneously.

🗻The beauty of Mt Fuji vs the horror of the suicide forest 💀

I'm ending this with my 2nd last day in Japan. Whilst I tell many people that my favourite part of Japan was Universal Studio's "Super Mario World", in reality Mount Fuji was probably my most memorable moment. I thank my tour guide, Mike, because he had a lot of knowledge about many different parts of Japan (interestingly he used to work in an investment bank in a former life before retiring and now doing tours part time). As we took the bus on the trail towards the 5th station (which is the highest station that buses can reach, aka ~2300m above sea level, though the total Mt Fuji is like ~3800m tall) I was in awe at the beauty of Mt Fuji.

Me at the 5th station of Mt Fuji (~2300m above sea level)

But what snapped me back to reality was as we were passing the 3rd/4th stations and Mike pointed out that those forests on the road next to us, was where people actually suicided. I didn't realise we were passing the suicide forest. As much as you can be enamoured by the beauty of Mt Fuji as a whole, I think I've been humbly and soberingly reminded by the suicide forest that beauty doesn't come without ugliness elsewhere. I probably need to think about how to better articulate this, but this'll do for now and I hope my readers get the point.  

👍 To conclude for now… 

Thanks for reading my ramble if you got this far for my October 2022 thoughts. Please do hit <reply> to this email if you have anything to add / any questions. I quite enjoy replying to comments/emails as a source of procrastination. Please share this email with others if you found it value-adding.

Thanks for reading,

Michael

🚀 Some of my favourite memories from October 2022

• When travelling to Japan on the plane, I finally got to watch "Minions - The Rise of Gru", and I found it a family fun film. Give it a solid 8/10. Helped to see the "Minions" land in Universal Studios Osaka to "consolidate" my understanding of the franchise.

• When travelling back to Sydney, I got excited to finally watch "Top Gun - Maverick", and I absolutely loved the movie! I got so engrossed in the dog fight and felt the intensity of Tom Cruise in the scenes (whilst I was in a plane myself). Never got so engrossed in a movie before (to the point I forgot I was in the plane). Easily 9.5/10, and best movie I've watched for 2022. That puts it in the same realm as movies for me like Batman Begins, Inception, The Prestige, Up, and Inside Out.

• Celebrated end of another fiscal year at work, and had Italian dinner with parents in Angelo's at Cabarita! Give it an 8/10. Rarely go out to that area, but really like the waterside walks.

• Found the latest earnings season tough personally for me. Can't win them all. Want to spend more time reflecting on this and need to refine my investment process better (and sticking to it).

• Watched Moulin Rouge musical at Capitol Theatre with mum. Was worried after the 1st Act, but 2nd Act brought it home when the leads sang one of my favourite classic songs "Come What May" (I still think back to the first time I heard it sung with Nicole Kidman and Ewan McGregor). Gets an 8.5/10 from me.

• First time I tried archery tag in Redfern, which was at my friend's bachelor party (aka "bucks") as he's getting married in December! I loved it, but was surprised how much cardio was involved. At least when arrows hit you it doesn't hurt as much as paintball.

• Watched Black Adam with a close friend, and felt it was better than I expected. Definitely think Dwayne Johnson deserves credit for the passion he put into the main character, along with the casting, twists and turns to the plot, and humour in the film, that make me give it an 7.5/10.

• Taken up a voluntary role as Head of Fundraising Team at Scripture Union NSW (SUNSW), after weeks of deliberation and prayer with family/mentors/friends from church and getting to know the team at SUNSW. I also play a role (similar to the investment team at MBC) to assist in proposing ideas for generating side income and allocating capital efficiently to generate a better risk adjusted return for SUNSW. I've spent the last 4 weeks thinking about a proposal and I've got a draft one to present to the management/board now I think (baby steps...)!

📣 Special shout out for the month

To Atlas Academia's founders Anthony, Wayne and Jeff (and the rest of their team including Jenn, Damon, Alice, and Mel). I've been incredibly inspired by the student growth in the Atlas community. Basically about to reach ~100 students now. The growth has been tremendous given I have only known the founders for the last 12+ months now (since meeting them back in September 2021). In Wayne's words, they were a lot more "scrappy" back then (which I agree with), but now are more refined, with a much bigger team now, with more progress in their office space. What a difference 12+ months makes. I continue to support the guys in ad hoc donations and in my advisory role. I'm so thankful for being a small part of their story (with potentially maybe more involvement in the future…). They've recently revamped the website so check them out! Anybody know yr 9-12s interested in getting solid science education should check these guys out here.

Taking a BeReal with Wayne and Mel today at Atlas Academia in Epping