I left my mountain lodge in Karuizawa and headed for Tokyo Station aboard an Asama bullet train. At Tokyo Station, I transferred to the Narita Express for Narita Airport. My flight connected through Washington DC, and upon arriving at Logan International Airport in Boston, I took a taxi to my hotel. I reached the hotel after about 21 hours of travel.

I Once in my room, I immediately showered, shaved, and changed into a suit, and then left for my alma mater, the Harvard Business School (HBS). The trees along the banks of the Charles River had started to show their autumn colors. I watched joggers running by and ducks playing in the water as I arrived at the HBS campus.

I noticed banners here and there across the campus announcing, HBS100. Yes, this year marks the 100th anniversary of HBS, and to commemorate this milestone, the HBS Centennial Global Business Summit was being held with about 2,000 participants. I was scheduled to participate as one of the speakers.

Who would have expected the Centennial Global Business Summit of HBS, a virtual symbol of capitalism, would take place on the weekend following the steepest collapse in stock market prices? And how ironic – every day, major stock indexes tumbled around the globe, one right after another; the US Dow Jones, Japan’s DAX, and the Hong Kong Hang Seng, with the final tally for a single week marking a 20–30% loss in value. Losses have been estimated at roughly 2,000 trillion yen, or almost four times Japan’s annual GDP.

During this same weekend, finance ministers, presidents, and prime ministers from various countries agreed to inject public funds into financial institutions. Meanwhile, a reception was held Sunday night for the HBS Centennial Global Business Summit, with the main speakers set to begin giving their speeches the following morning. Even during this time, I suspected participants held their collective breath as they kept a close eye on market developments.

The program of the HBS Centennial Global Business Summit was designed around three themes: Globalization, Leadership, and The Future of Capitalism.

The morning sessions were devoted to plenary keynote addresses followed by breakout sessions in the afternoons. The keynote panels were held in a temporary pavilion on the Baker Library lawn capable of accommodating around 2,000 people. It made for quite a luxurious venue.

The first keynote panel presented five Alumni Achievement Award winners. Five new awardees had been selected as part of the centenary celebrations.

The five awardees were John Doerr, venture capitalist; Meg Whitman, former President & CEO of eBay; Jeffrey R. Immelt, Chairman & CEO of General Electric; Anand G. Mahindra, Vice Chairman & Managing Director of the Indian multinational Mahindra & Mahindra; and James D. Wolfensohn, former President of the World Bank.

I personally felt that others were more deserving of recognition. For example, in place of Mr. Jeffrey R. Immelt and Mr. Anand G. Mahindra, I thought Louis V. Gerstner, Jr., former President & CEO of IBM, and Malaysia’s Ananda Krishnan, former part-owner of the PETRONAS Twin Towers, etc., had stronger claims to an award based on their extraordinary achievements.

If I had chosen someone from Japan, solely based on my own subjective judgment, I would have selected five alumni for business achievements up to the present: Akio Mimura, Representative Director and Chairman of Nippon Steel Corporation, as a manager of a major corporation; Takeshi Niinami, President & CEO of Lawson Inc., as a professional manager; Hiroshi Mikitani, Chairman & CEO of Rakuten and Tomoko Namba, CEO of DeNA, as entrepreneurs; and Kōichi Hori, as a consultant.

After the panel, speeches were given by Bill Gates and a history professor. Then, participants moved to breakout sessions after lunch.

The main theme of the breakout sessions on Day 1 was Globalization. This theme was broken down into about 20 different topics, each held in a different HBS classroom. For myself, I try to participate in topics that I know relatively little about. I think this approach provides greater educational benefit while also opening up new perspectives.

The breakout session I selected was “The Globalization of Innovation and R&D.” This session focused on how R&D could be globally distributed and advanced as well as achieving maximum returns with minimal R&D investment. Of course, R&D is a huge topic, encompassing a broad range from basic to applied research, product development and production technologies. The discussion focused on how, given this diversity, R&D could be leveraged for competitive advantage amid pressures from shareholders seeking short-term gains.

Without getting carried away with details, I can say that participants more often than the panelists came up with the most thought-provoking ideas. I realized once again that the best part of these panel discussions is the opinions and intellectual challenges raised by participants.

The morning of Day 2 of the HBS Centennial Global Business Summit began with a speech by Professor Drew Faust, the President of Harvard University. She had been quickly appointed to the position after her predecessor, Professor Lawrence Larry H. Summers, had been forced to resign in the wake of a series of issues, including comments he made that were seen to be sexist. As I had expected, Professor Faust’s presentation was a little uninspiring. Although it seemed unfair to compare this speech to one given later by Faust’s predecessor, Larry Summers, I couldn’t help doing so since I was personally impressed with the sheer power of Larry’s intellect.

Next on the agenda was a discussion on Leadership, the theme for Day 2. Panelists in the first discussion included: Jamie Dimon, CEO of JP Morgan Chase; G. Richard Wagoner, the CEO of General Motors Corporation (GM); Orit Gadiesh, the CEO of Bain & Company, Inc.; and as the Asian representative, Jaime Augusto Zobel de Ayala, CEO of Ayala Corporation of the Philippines. Given the recent turn of events, I felt this panel was struggling to articulate a coherent message, from start to finish. GM was getting low-interest loans from the government, and JP Morgan Chase was about to receive an injection of public funds.

For me personally, the real star was Professor Larry Summers, former President of Harvard University and a former Secretary of the United States Treasury. I had heard that he was regarded as a child prodigy. Given his background in both academia and the government, he is particularly well-suited for this topic. He also is somewhat of a pessimist (or, in my eyes, a realist), having predicted early on that the United States economy was heading for this current predicament and persistently sounding alarm bells.

Professor Summers’ presentation on future economic developments was very engaging; he opened with the following statement: When Warren McFarlan came to my office six months ago and asked if I would be willing to speak at this important event…neither of us expected that on the day the Harvard Business School celebrated its 100th anniversary, the United States Government would be investing US$150 billion in equity stakes in all of the country’s major financial institutions.

According to Professor Summers, there are currently five negative cycles for which self-correction mechanisms are not working. These five cycles are as follows:

1. A decline in stock prices ; leading to a loss of investor enthusiasm – resulting in further declines in stock prices

2. Asset value write-downs – write-downs of other assets due to market-price asset accounting

3. Credit contraction – leading to restrictive lending – resulting in loss of credit liquidity

4. Declining consumerism – leading to manufacturing declines – resulting in infrastructure investment declines

5. Panic – creating further panic – can be linked to specific instances of panic

Governments of different countries must act decisively to interrupt these cycles. Actions could include injections of public funds into financial institutions, savings guarantees, and asset purchases.

History repeats itself. Crises have occurred on seven occasions over the past 20 years or so. In 1987, we were confronted by Black Monday. This was followed by the S&L crisis, the Mexican peso crisis, the Asian financial crisis, the collapse of Long Term Credit Management (LTCM), the collapse of the IT bubble, and the Enron and WorldCom scandals. The roots of the current problem, however, seem to be much deeper.

In finance today, countries such as the United States, which emphasize democracy, liberalism, and free market economics, are about to be supplanted in terms of funding by mainly oil-exporting countries in which totalitarianism and monopolies have prevailed. Is this, however, a positive development?

The world now faces an agonizing dilemma. If a dynamic and healthy economy is desirable, then the forces of globalization must continue to evolve. Yet, the result is a widening of a gap between people with education and skills, and those who lack these advantages. While education offers a solution for the future, it is not the answer for those over 30 years old.

In addition, alarm bells are ringing with regard to the shaky position of the United States as a world leader. Indeed, listening to Professor Summers was like being showered by an intellectual fire hose; just too much information to include in this entry. His presentation was extremely fascinating.

After his talk, Professor Summers stayed to participate in a panel discussion on The Future of Capitalism, which was moderated by Professor Michael Porter. While the other panelists were certainly competent, the force of their arguments simply did not compare with Larry Summers. It was delightful to watch him say exactly what he believed, confident in his logical approach and without fear of confrontation.

At the same time, however, I can somewhat understand why Professor Summers was chased from the position of President of Harvard University. He himself has admitted that he sometimes goes too far in dismantling the arguments of others. From his point-of-view, he no doubt intends to engage in a rational exchange of opinions; others, however, could experience his in-your-face style as a little humiliating. During the panel, he himself alluded to this perception, saying, I have recently gotten smarter in terms of not necessarily saying what I really think. Nevertheless, he proceeded to tear apart other people’s argument, with the words, Today, however, let me tell it the way it is. I think this approach tended to captivate the audience.

There were two sessions after lunch on Day 2. The first one in which I participated was entitled, Value-Based Health Care Delivery. The session was moderated by Professor Michael Porter. Driven by my desire to engage as much as possible with unfamiliar topics, I joined this session and actually did learn a number of things. However, as health care delivery is the province of governmental decisions, I was did not have sufficient passion for being drawn into the discussion. I would be interested in seeing how academics and the private sector could influence government decision-making.

According to Professors Summers and Porter, business leaders should get more involved in politics, and have more of an impact. It’s OK for people of influence to concentrate on entrepreneur activities. However, if that’s all they do, then something is missing. It could appear to be hypocritical to exhibit no willingness to get involved in issues that have a major impact on society as a whole, issues such as education systems, fiscal systems and social welfare systems, and so on.

This is, perhaps, an era in which business leaders should become more deeply involved in public policy. A gap between the government and private sectors could prevent feedback from the workplace on what’s going on there from reaching those who are making decisions. When you think about it this way, I believe private sector leaders are indeed responsible for getting involved in politics.

I was scheduled to appear as a panelist for the final session of Day 2. It was a great honor to be invited as a panelist at the HBS Centennial Global Business Summit. Only one other panelist from Japan shared this honor, Mr. Mikitani of Rakuten.

The theme of my session was very broad. The title was “Active Management: Private Equity, Venture Capital, and Hedge Funds.” Indeed, this covered just about the entire playing field of alternative investments.

At the same time, this is one of the shakiest business categories right now. Because of declining markets, hedge funds are under extreme pressure from investors for returns. And it is nearly impossible to secure private equity financing. Moreover, since many private equity-investment firms are themselves reeling under massive debt, a dramatic economic downturn could result in losing everything. With regard to venture capital, the market has been cooling off, with fewer IPO opportunities and the direct impact of stalling economies. So the focus of discussion was, “What does the future hold? “

With Professor Bill Sahlman as the moderator, I was the first panelist to speak. I started off by introducing GLOBIS. Then, based on the situation in Japan, I commented on how things might develop in the US going forward. I observed that the current situation in the US was just the first or second chapters of the collapse of a bubble economy. Still ahead, the future could include asset deflation, a downturn in consumption, the bankruptcies of many businesses including the Big 3 auto makers, and an increase in the ratio of bad loans held by banks as a result of corporate financing. I also warned of a potential worldwide economic recession that could go on for years. I could tell that my comments sent a chill through the room. But I genuinely believed these things could happen.

Next, someone from Bain Capital discussed the current situation in the private equity industry. He was followed by a hedge fund representative. It may have been just my imagination, but I thought these speakers were somewhat stepping back from the discussion, which would be understandable. From their perspective, the world we are now entering is full of unknowns. We in Japan, on the other hand, have already been there. That’s why I feel it’s possible to predict what could happen.

At the same time, I am alarmed by the following three developments. As a panelist, I expressed my concern on these issues.

(1) Unlike the collapse of previous economic bubbles, the current situation is global in scale. During the previous bubble, even though Japan had limited excess funds, resources were available in the European and US markets. This inflow of funds allowed Japan to recover. Who can lend a hand this time? As Professor Summers says, the main sources of any relief may well be the oil-exporting countries.

(2) I see two significant differences between the current bubble economy of the US and the earlier bubble in Japan. On one hand, in spite of everything else, Japan was enjoying balance-of-trade surpluses. On the other hand, the US faces balance-of-trade deficits. Secondly, the value of personal assets in Japan is reported to be 1500 trillion yen, while many individuals in the US are saddled with personal debt. Moreover, since those assets are dominated by share holdings, the impact of stock market declines is huge. Then again, the United States does have the advantage of possessing the key currency. What will happen next?

(3) On another front, the United States government is about to take on massive debt by bailing out the American International Group (AIG), government-supported enterprises, financial institutions, and perhaps even the Big 3 auto makers including GM. Would it helpful to print more US$? But then, what about the US$ position as the world ‘s key currency? What strategy will the United States Government pursue?

Indeed, there are many issues of concern. Yet it could also be said that Japan finds itself in a relatively good position. Going forward, I believe Japan’s presence in the world economy is likely to strengthen

All in all, I felt the discussions were focused at the macro-economic level. It also appeared that participants experienced insights from Japan as a fresh perspective. I was deeply impressed by Professor Sahlman comments at the end of the discussion.

A low price does not necessarily mean something is cheap. Truly grasping the essence of a situation can be complicated and difficult. This means it is probably better for the amateur to avoid investment activities.

At the conclusion of the session, I expressed my thanks to both Professor Sahlman and my fellow panelists and proceeded to the site of the closing reception. Several session participants told me I had done well, and I was grateful for their feedback.

I really appreciated this chance to think about so many topics. Managing a venture capital business and a Graduate School of Management as an entrepreneur puts me in touch with many perspectives from new technologies, new industries, the global flow of funds, developments in markets and creating businesses from scratch as well as organization and management principles. Education and policy also come into play.

Continuously aligning this knowledge at a global scale is intellectually stimulating and provides opportunities for significant learning. Of course, these speaking engagements are clearly valuable for raising the profile of GLOBIS and strengthening our network of contacts.

Fortunately, even without intentionally marketing myself, I am receiving more and more invitations to appear as a speaker. In just the past two years, I have spoken at CEO conferences held by Forbes and BusinessWeek; I have also attended the summer Davos meeting of the World Economic Forum, the East Asia Economic Summit, and a summit held in India. Next up are a venture capital conference and a speech at the Clinton Global Initiative.

The topics on which I have been asked to speak encompass a wide range of issues; I feel I have been given great opportunities for learning about a wide variety of subjects.

My recent business trips have, in principle, tended to be short and arranged to coincide with my conference speaking schedule. This latest trip was also a bit of a slog over two nights and three days. I am actually writing this entry during my return flight, and the cabin attendant and other crew seem to be the exactly the same ones who were on duty when I flew to the US. Over the course of their layover in Washington DC, I had traveled to Boston and returned, presented a speech, and broadened my network of contacts.

My schedule for the evening after my panel discussion included dining with several Japanese HBS students at a hotel restaurant on the other side of the river. So, after sipping some champagne at the HBS reception, I said goodbye to the other participants and started to walk across the campus, feeling a little tipsy.

I noticed they had already started disassembling the temporary pavilion that had served as the main conference venue. The scenery from above the bridge was truly breathtaking. Boats were gliding across the surface of the river without creating waves. Green and golden trees had started to display their autumn colors along both sides of the river. At the far side of the bridge, I could observe the brilliant orange of the setting sun.

I have crossed this same bridge for nearly 20 years. Until now, however, I had never felt such a sense of beauty. Perhaps these feelings reflect my own growth, or maybe I have gained the mental space to enjoy these things.

With these thoughts, I looked back again to the setting sun. It had already dropped to the point where it was now disappearing behind the trees, with its orange rays appearing between dark silhouettes. I momentarily closed my eyes, took a deep breath, and headed off for the hotel restaurant.

Yoshito Hori
October 16, 2008
On the return flight to Narita