Led by the charismatic Masayoshi Son, Japanese conglomerate SoftBank’s Vision Fund is taking over tech, one company at a time. This is the story of what happens if the disruptors are disrupted
)n the morning of July 20, 2017, at the luxurious Prince Park Tower hotel in Tokyo, Masayoshi Son emerged on stage in front of a packed conference hall, his diminutive silhouette backlit by bright white lights. Son, the CEO of Japanese internet, energy and financial conglomerate SoftBank Group, was dressed simply, as is his habit, in a grey suit and a striped shirt. He smiled and introduced himself in Japanese.
Son is known for his fanciful analogies and long speeches. In 2010, his talk about his “300-year plan for the future” opened with a reflection on the nature of sorrow, with Son asking rhetorically, “What is the saddest thing in life? What gives you utmost happiness?” In 2016, he equated the Internet of Things (IoT) to the Cambrian era’s explosion of life, comparing the evolutionary advantage conferred to the first species with eyes to the combination of sensors and AI enabled by the IoT.
Addressing hundreds of technologists and entrepreneurs, he compared SoftBank to the gentry of the Industrial Revolution, a privileged class that invested in technology and science for the common good. Two months earlier, SoftBank had launched a $100 billion investment arm, the Vision Fund – the biggest tech fund in history. In Son’s metaphor, the Vision Fund was the gentry of the information revolution. “I really don’t want to go to sleep,” he said. “I don’t want to waste time. These are very exciting times.”Many of the CEOs in the audience that day were recipients of the fund’s investment. Without exception, they had all met Son privately, either in his office in Shiodome, Tokyo, or in his $117.5 million mansion in Woodside, California. Most describe the legendary investor – known as Masa – as soft-spoken, a man with a modest bearing and a prescient vision of the future: a reputation substantiated by his achievements.In the 1970s, Son emigrated to America to study. At the time, he had only a rudimentary knowledge of English, and made his first million by importing Japanese arcade games such as Space Invaders. It was Son who, in 1996, offered budding entrepreneur Jerry Yang, then CEO of a struggling startup called Yahoo!, $100m in investment. His insight paid off. By 2000, Yahoo! had become the dominant web search engine in the pre-crash era of the internet.That was the year Son met a young Chinese teacher and founder of an e-commerce firm called Alibaba. He told Jack Ma to accept $20m in investment, with the promise that he would transform Ma’s company into the next Yahoo! Today, when Son makes a new investment, he sometimes tells founders that they too can be as big as Alibaba, as big as one of the biggest companies in the world. “In 2000, he already knew that China was going to be big so he just decided to invest,” Eugene Izhikevich, CEO of the AI startup Brain, says. “After the dot.com bubble collapse, he was investing in China. You had to drive on a dirt road between Hong Kong and Shenzhen. He has a gift of seeing things before they become reality. What’s obvious to him becomes, ten years later, obvious to everyone else.”
At the event in Tokyo, Son proceeded to introduce CEOs to the stage. First, he welcomed the founder of robotics company Boston Dynamics, Marc Raibert, a man who wants to change the world by building robots with biomechanical abilities superior to those of humans. (SoftBank bought the company from Alphabet for an undisclosed sum.) Raibert brought with him Spot Mini, a four-legged robot that promptly started demonstrating its locomotor skills. “Masa, I think you may have to back up because you’re in the way,” Raibert warned Son. “We don’t have it detecting people yet.” Raibert finished by stating his belief that “robots will be bigger than the internet”, and thanked SoftBank for backing him up. Son thanked him in return and said: “We’re going to change the world together. We’re going to put lots of AI into robots.”Next was Greg Wyler, founder of OneWeb, who pointed out that, for all the talk about a hyperconnected future, the reality is that 54 per cent of the planet had no access to the internet. He detailed his plan to deploy 900 non-geostationary satellites that would ensure the remotest corners of the world would have access to the internet by 2027. As he finished, Wyler thanked SoftBank for its support. “We’re going to change the world, we’re going to connect everybody into this internet,” Son responded as he accompanied him off stage.
Artificial intelligence – and its accessory components of ubiquitous data, high-speed connections and autonomous robots – was the common denominator between the speakers that day: Helmy Eltoukhy, chief executive of Guardant Health, wanted to conquer cancer with data; Matt Barnard, founder of indoor farming platform Plenty, was using machine learning to grow plants in an optimised environment; and Bill Huang, the entrepreneur behind startup Cloud Minds, wanted to build the world’s first cloud-based robot. “All of a sudden we could help guide a blind person with sensors,” he proclaimed. “We can replace guide dogs!”Before the final talks, Son took to the stage again and reminisced: “When I was 17 years old, the very first time I saw a photo of a microprocessor made me cry. I was overwhelmed.” He then introduced Simon Segars, the CEO of British chip-design firm Arm Holdings. “Our first processors were the size of a shirt button,” Segars began. “Now we can deliver thousands of times more processing power with a chip the size of a pinhead.” Arm microprocessors were being used in robotic surgery, autonomous vehicles and smart cameras, but the AI future would be unrealistic – too power-hungry and beset by time lags – if all that data had to be sent to the cloud for processing and then back. “If every person with an Android does three minutes of voice recognition a day, Google would have to double their data centres,” Segars said. The next generation of microprocessors would have to incorporate AI and process data on the sensor itself. “We can’t do it on our own,” he told the audience. “We have to work together in partnership with other companies to deploy these technologies.”At the end of the talk, Son shook Segars’ hand. He said that Arm is indispensable not just to SoftBank, but to the whole of humankind. “And now they are a member of our family,” Son continued, turning to the crowd.“If we can join forces, we can be the gentry of this new generation, making the future a better place to live.” He then bowed and left the stage.Son has obsessively been trying to make SoftBank the world’s biggest company since the day he founded it in 1981, as a PC software distributor (SoftBank stands for Bank of Software) – the day when he, a 24-year old entrepreneur, stood on a crate in front of his two employees and excitedly promised that one day they would be the greatest in the world. Those employees quit a few days later, but Son, now 61, relentlessly pursued his ambition, his “300-year vision”: a technology revolution that will ultimately culminate in the singularity, a point in history where AI supersedes human intelligence and redefines every single industry in the global economy.In that version of the future, SoftBank won’t be the next Google, the next Apple, or the next Microsoft – Son doesn’t believe that one brand or one business model could ever be capable of delivering the singularity. What will do so is what Son calls the “cluster of number ones” strategy: a SoftBank-led ecosystem of AI companies, spanning all industries from healthcare to transportation, from ride-hailing to robotics, a diversity that underpins the Vision Fund’s investment portfolio.“We want to form a coalition of like-minded comrade entrepreneurs,” Son told the audience at the 2017 conference. “A revolution can never be realised with the power of one.” And at the centre of that ecosystem is the company that designs the small, low-power processors present in 95 per cent of all smartphones, not to mention most smart speakers, health trackers, drones and TVs: Arm Holdings.
Son became familiar with Segars in 2006, when he first met the then CEO of Arm, Warren East, and Segars was one of the firm’s first employees. At the time, Arm already enjoyed a dominant stake in the nascent mobile market. This fact alone impressed Son. He knew that mobiles would soon outperform PCs, and as a result the internet’s centre of gravity would move from desktops to the smartphone. Son envisaged that the low-power, high-processing architecture of the Arm microchips would be the centre of the future digital economy.
That insight was behind SoftBank’s acquisition of Vodafone Japan, a struggling mobile carrier beset by connectivity issues and unfashionable handsets, a few weeks prior to his meeting with the Arm executives. SoftBank’s board had been sceptical about the acquisition, but Son was adamant. Besides, he had a strategic advantage. Prior to the acquisition, Son had travelled to California to meet Steve Jobs. He brought with him a hand-drawn sketch of a smartphone and showed it to the Apple CEO. (“It looked like a toad with the battery stuck out,” Son said in a 2016 interview with The Nikkei.) Jobs hated the ugly sketch but he told Son that his intuition was right. Jobs had been developing the first prototypes of the iPhone. Son left from the meeting with a commitment that, in case the Vodafone acquisition went ahead, he would be granted an exclusive deal to distribute the iPhone in Japan.
Segars and Son kept in contact, meeting a couple more times in 2006, then again in 2014 and 2015. By the time Segars replaced East as chief executive in 2013, Arm – just as Son predicted – had consolidated its marketshare in the chip industry, licensing its product to Apple, Samsung, Nvidia and Qualcomm. And as Son determined, Vodafone Japan (now SoftBank Mobile) had become one of Japan’s leading mobile companies – thanks to its exclusivity deal with Apple’s iPhone.
In June 2016, Segars met Son for dinner at the latter’s mansion in California. Segars would later describe it as the most important job interview of his life. He just didn’t know it at the time. During that meeting, Segars shared with Son the dilemma that he was facing at Arm – but noted that it also presented multiple huge opportunities. With the smartphone market saturated and growth margins reduced, Arm would have to significantly lower profit margins in order to make long-term investments in areas such as AI, sensors, 5G and autonomous vehicles. “We had to have tough conversations with our stakeholders,” Segars says. “I remember being asked why all our margins were going down, and explaining that we’re investing in the long-term opportunities. I still vividly remember the look of shock on one guy’s face.”
A few days after their meeting, Son called Segars: “I need to speak to your chairman as soon as I can.” “I’m sorry, It’s not going to happen,” Segars replied. Arm’s chairman, Stuart Chambers, was holidaying on a yacht in the Mediterranean. But Son insisted: “No, no, no. You’ve got to make this happen. I am going to fly you out. Get into the nearest port, I will fly you there and I will fly out – and we will have this meeting.”......MUCH MORE