"For a guy from Japan," Bill Gates has said, "Kay's more like me than probably anybody I've ever met."
The dark day of bankruptcy loomed for Kay Nishi, Japan's most extraordinary entrepreneur. Last summer, his company - ASCII Corporation - was on the verge of collapse under a mountain of debt. Then, at the eleventh hour, ASCII (after the standard code for text) was rescued by a group of six banks led by the powerful Industrial Bank of Japan (IBJ), egged-on by the Ministry of International Trade and Industry (MITI). Yashushi Kajiwara, IBJ's managing director at the time, commented, "Nishi-San's talent is important for Japan - his firm cannot be allowed to go under."
The idea that keeping a particular individual's firm solvent should be in the national interest may sound odd. But Kazuhiko Nishi is no ordinary entrepreneur. His vision is valued throughout Japan's computer industry, which is currently struggling to cope with recession and rapid changes in technology. It was out of appreciation for this vision that the combined corporate forces of Japan stepped in to keep ASCII afloat.
Part I: The Fall
Kazuhiko (Kay) Nishi was born 37 years ago in the southern Japanese port city of Kobe. A precocious child, he might well have gone into the family business of running a private school. But while a student at Tokyo's elite Waseda University, Nishi fell in love - with personal computers.
Nishi dropped out of college - a most un-Japanese thing to do, especially from a top school like Waseda - to begin publishing a PC magazine called I/O. His hobby led, in 1978, to the foundation of ASCII Corporation. Publishing computer and video game magazines remains one of ASCII's core businesses, accounting for about US$140 million of the company's 1992 sales of US$350 million.
Having founded a company, Kay Nishi promptly caught a plane for the US. There, he met another bespectacled 22-year-old college drop-out who was also obsessed with PCs. His name: Bill Gates. The nerdlings hit it off immediately and ASCII soon after became Microsoft's Japanese agent.
"For a guy from Japan, Kay's more like me than probably anybody I've ever met," Gates would subsequently tell a reporter from The Wall Street Journal. The comparison does Nishi a disservice. The soft-spoken Nishi has none of Gates's aggressive, bullying manner. Rather, he is a courteous man who persuades via boyish enthusiasm and considerable charm.
Alike or not, the bond between the whiz kids from either side of the Pacific was to have at least one momentous consequence. Nishi was at Microsoft when an invitation arrived from IBM to provide an operating system for a new personal computer. His enthusiasm for the project persuaded Gates to enter a bid. "If I hadn't been there," Nishi says, "ms- DOS would never have happened."
Back home, Nishi talked NEC into building Japan's first indigenous personal computer, the PC 8001, a machine that went on to become the de facto personal computer standard in that country. It was Nishi too who dreamed up the Radio Shack model 100 - an early laptop computer much used by journalists and other globe-trotting vagrants.
Nishi's relationship with Gates helped ASCII grow big. But as Microsoft's Japanese sales expanded, Gates became increasingly impatient with Nishi's unorthodox approach to business. The last straw came when the flamboyant Nishi poured $1 million into a publicity stunt involving a life-size model of a brontosaurus. This was parked outside a major Tokyo railway station to promote MSX, a new PC format jointly developed by the two companies for the Japanese market.
The promotion was a success - "everybody remembers that dinosaur," chuckles Nishi - but Chairman Bill missed the joke. The partnership was formally dissolved in 1986, when Microsoft set up its own Japanese software subsidiary.
Speculation that ASCII would not survive the split with Microsoft was soon dispelled by ASCII's own rapid growth as a software-publishing powerhouse. In 1989, ASCII became the first Japanese software firm to go public on Tokyo's over-the-counter stock market.
The Japanese requirements for taking a company public are stiff and discouraging. Before qualifying for listing on the Tokyo Stock Exchange, a company must first be able to demonstrate annual sales of around US$50 million and profits of US$5 million. In the US, by contrast, a company can be losing money and still go public. Going public in Japan made Nishi a multi-millionaire in the process.
Personally extravagant - an oft-told tale describes him walking into a Los Angeles record store and ordering one of every laser disc in stock, some 2,000 titles in total - Nishi led ASCII into a slew of new businesses. He paid US$11 million for the Japanese subsidiary of Vestron, a movie distributor, and another US$7.5 million for a stake in a us-based movie production house. Other investments included a travel agency and a helicopter rental outfit (choppers have become Nishi's preferred mode of travel in over-congested Japan).
In the US, Nishi gained a reputation as a friend to needy start-ups. It was he who provided crucial seed capital for PC chip-set makers Chips & Technologies, sparking his fascination with semi-conductors that continues to this day. us semiconductor firms that ASCII helped bankroll include Crosspoint Solutions (US$20 million), and NexGen Microsystems (US$20 million).
Nishi's interest in start-ups was not confined to software and semiconductors. Under his direction, ASCII's venture capital portfolio ballooned to 25 investments in total, worth around US$1 billion, and running the gamut of the electronics industry.
Some of these stakes were acquired more or less on the spur of the moment. A participant at one meeting designed to raise several million dollars for a us computer start-up recalls how Nishi, growing impatient as other investors hesitated, offered to put up the whole amount himself.
But investment on this epic scale could not go on forever, especially not under Japan's worsening economic conditions. By mid 1992, ASCII was in hock to the tune of US$320 million, more than the company's usual annual sales. Its share price plummeted from a peak of US$175 to just over US$5. Unable to borrow any more on the bond market, Nishi was forced to seek succor from Japanese banks.
Part II: The Rise
Today, bloodied but unbowed, Kay Nishi is back from the brink. Having a senior executive from the Industrial Bank of Japan on board seems to have reassured investors, and ASCII's stock has bounced back to US$27 and is still (at this writing) rising. On March 31, 1993 the company repaid US$100 million of its debt. Nishi says that now, all he has to do is make more profit, a task "which is easy," he confides.
In keeping with the austere spirit of the times, ASCII has imposed a hiring freeze and is moving its headquarters from Tokyo's plush Aoyama district (the only place in Japan where European automobiles outnumber Toyotas) to cheaper premises in another part of the city. The company has regrouped to focus on its four core businesses: publishing, personal software (including video games), business software, and semiconductors. And even within those areas, ASCII is aiming for a higher hit rate, exploiting proven strengths rather than attempting to develop new ones.
Typically, the irrepressible Nishi sees limited resources and tight financial discipline as a virtue. "It's a more effective way of running the business," he comments. "After spending a lot of money, I learned that the amount of spending is not proportional to the amount of satisfaction."
The realization extends to his personal spending habits. The former owner of Rolls-Royces, Bentleys, and Aston Martins now professes himself bored with expensive luxury cars. These days, Nishi says he is happy with the most advanced consumer models, like the latest Honda. He still buys a new car each season, and admits, "It's fun to see what kind of intelligence the makers put into them."
One thing that has not changed is Nishi's determination to continue investing in hot new technologies. For example, he is currently preoccupied with producing chip sets and compression algorithms for digital high- definition video and audio. His vehicle is a Tokyo-based start-up called Graphic Technology, in which ASCII is the largest investor.
Thus far, GT has been successful selling its codes to Nippon Telegraph and Telephone for use in the giant firm's video-conferencing systems. The company is about to branch out into audio and video via an MPEG-based encoder for a compact-disc-based karaoke machine. This will be capable of storing ten times as much music as a regular (analog) karaoke laser disc, as well as a full-motion video accompaniment. A somewhat prosaic product perhaps, but a stepping stone on the way to what Nishi predicts will be "the next big hit" for the consumer electronics industry. These will be digital video discs that can store two hours of HDTV-quality programming on a 5-inch plastic platter.
Participation in the compression-chip-set market is useful for ASCII strategically, he says, "because it really helps us understand to what extent our dream of a digital future is going to come true."
That dream extends well beyond digital video discs, which Nishi reckons should take off (if enabling technology such as green lasers permit) around 1995. It also encompasses digital HDTV recorders (by the year 2000, he suggests), personalized audio - in which the computer saves your choice of music, news, or whatever out of hundreds of audio channels (by 2005) - and, ultimately, personalized TV and video (by 2010).
Involved in the compression start-ups with ASCII are some of Japan's largest companies, including Hitachi, JVC, and NTT. Such firms tend to use ASCII "like an experimental mouse," Nishi says, because "we're always doing something new."
Nishi is a great believer in the invigorating powers of the novel: "New things," he says, "are like brain athletics." To keep his own gray matter in good shape, for the past three years he has taught a course in Media System Engineering at the Tokyo Institute of Technology.
"Nicholas Negroponte (director of the MIT Media Lab and Wired columnist) encouraged me to do it," he explains, adding that "teaching students gives you perspective... It has been a very important experience for me." Like so many other things in Nishi's remarkable career, it has also been "really fun."
