Short-term sight and long term consequence for Economy

Discussion in 'Economics' started by harrytrader, Jan 18, 2004.

  1. What American and Japenese industries forgot: learn from History

    "How Homer Sarasohn Brought Industrial Quality to Japan and Why It Took Japan So Long to Learn"

    [I have cut off too long paragraphs]

    Homer Sarasohn, who lives with his wife in a retirement complex in Scottsdale, Arizona, is among many other things the father of the Japanese electronics industry. A gentle man with an owl-like face, Sarasohn never planned to go to Japan. When the Second World War came along, he served as a paratrooper, then later resumed his radio work, joining the staff of the MIT Radiation Laboratory. He was still working at the Rad Lab in 1946, when a telegram came from Washington, summoning him to Tokyo. The telegram said he was wanted by General Douglas MacArthur, head of the occupation forces in Japan.

    "I thought it was a joke," Sarasohn said. He was 29 years old.

    MacArthur had abolished the Zaibatsu -- the confederations of companies that had dominated the pre-war Japanese economy. These groups, the remnants of which survive today in the form of Japan's enormous trading conglomerates, created domestic cartels, manipulated supplies and prices, and generally established the long Japanese tradition of building a robust economy on the backs of submissive consumers. MacArthur blamed the war on the Zaibatsu and its leaders, who he banned from participating in their old companies, taking virtually all top managers out of the labor pool (they later returned, following the end of U.S. occupation of Japan, and ex-Zaibatsu leaders were mainly responsible for Japan's economic resurgence in the 1960s). With all the leaders gone, Sarasohn had to promote middle managers, when he could find them, into the top jobs.

    "The Japanese had no sense of quality," Sarasohn said. "With the exception of the Zero fighter and some aircraft engines, their designs were bad and their manufactured goods were shoddy. Having come from the Rad Lab, I was particularly appalled to see the primitive nature of Japanese naval radar. Their vacuum tubes were bad and the radios were even worse, since each was hand-wired by untrained, often unsupervised, workers. They produced goods in mass quantities, ignoring quality. The factories were filthy, and with the exception of some technology picked up from Germany early in the war, most of their production techniques dated from the Meiji Restoration of 1868."

    Sarasohn called in the plant managers, asking them to identify one problem they could work on to improve quality.

    "There was utter silence," he said. "They were not expected to make meaningful contributions to their companies in this sense."

    Under Sarasohn's control, the Japanese electronics industry began to make slow progress. Yields rose over time as new production methods were adopted, eventually reaching around 75 percent for vacuum tubes (Sylvania, which set the world standard for vacuum tubes, had an 85 percent yield at the time). But there still wasn't a deep understanding of the need for quality.

    Working with Charles Protzman, an engineer from Western Electric who had been brought in to run the Japanese telephone system, Sarasohn wrote a textbook and prepared a syllabus for what they called the Civil Communication Section Management Seminar. It was a required seminar for senior electronics industry executives, meeting eight hours per day, four days per week for eight weeks.

    "The course was quality control, management concepts, and philosophy," Sarasohn remembered. "We'd ask them why their companies were in business, and they'd either look at us blankly or say that they were in business to make a profit, which was incorrect. The right answer was that they were in business to achieve some appropriate long-term goal, like taking the technical lead in manufacturing radio equipment. Unless you can come up with a reason, a motto, a clear statement of why you are in business, then you aren't in business. And we taught them that that motto had to be understood at all levels of the company."

    The CCS Management Seminar was taught in Tokyo and Osaka, and covered a systems approach to manufacturing, integrating customer satisfaction into continued product development. The seminars taught industrial engineering, cost control, and the value of investing in research and development. They taught that workers on all levels of the company should be included in product development. But mainly the course stressed quality control, that it is a state of mind that can't be inspected into a product. Quality, the managers were taught, is a measure of the worthiness of their companies.

    Managers who had finished the CCS course were required to teach the same lessons again to executives at their own factories, using the textbook written by Sarasohn and Protzman. After both men left Japan in 1950, the CCS Management Seminar was given for the next 25 years by the Japan Management Association. Their textbook, Fundamentals of Industrial Management, is still in print in Japan.

    Why haven't we ever heard of Homer Sarasohn or Charles Protzman? Because we have heard of American quality guru W. Edwards Deming, a master of self-promotion who was brought to Japan to continue their work after these two men returned to the U.S. at the end of 1950. Deming, who did early work in statistical quality control at the U.S. Department of Agriculture, Census Bureau, and War Department has been, in large part, taking credit for the work of others.

    "Deming was actually our second choice," Sarasohn recalled. "We wanted Walter Shewart from AT&T Bell Labs to be our quality guru, because he virtually invented statistical quality control in the 1930s, but Shewart wasn't available at the time -- he was in poor health -- so we settled for Deming. He's capitalized on it. I was too dumb or naive, or too busy earning a living to bother."

    Sarasohn and Protzman specifically wanted an American to continue their quality campaign. There was a statistical group at Tokyo Imperial University that wanted a crack at the job, but the two Americans were wary. "The university group had elder statesman status in Japanese society, which made them risky for us," Sarasohn explained. "One really remarkable thing about Japan is the achievement of its craftsmen, who are really artists, trying to produce perfect goods without concern about time or expense. We saw some of the same artistic tendency in these statisticians, who might have got so caught up in the intellectual appreciation of the task that they could forget the point of it all, which was production. This effect shows, too, in many large-scale Japanese computer programming projects, like their work on fifth generation knowledge processing. The team becomes so involved in the grandeur of their concept that they never finish the program."

    But where Sarasohn and Protzman represented Japan's conquerors and ruled by decree, Deming actually worked for the Japan Union of Scientists and Engineers. That Union eventually established the Deming Prize, which is given each year to the Japanese company judged to have made the most advanced use of statistics in quality control. While Sarasohn was MacArthur's man, Deming was perceived as the Japan Union of Scientists and Engineers' man, which helped insure his place in history.

    "I was proud of the work I did in Japan," Sarasohn said, "but I never imagined the Japanese electronics industry would become dominant. I had confidence in the American business establishment, which seemed at the time to have a healthy head start. But somewhere along the line we lost our way. We forgot the very lessons we taught the Japanese. Business in this country today is done the wrong way, always thinking in the short term, trying to get rich quick. Where did we get all these MBAs? Senior Japanese executives come from the factory floors and engineering labs while we promote our executives from sales and marketing and finance. That's the wrong way."

    "Where is quality today in American business?" Sarasohn asked, shaking his head. "It can't be Donald Trump, can it?"

    No, it isn't Donald Trump. And it isn't some innate superiority of Japan, either. When was it, after all, that Japanese electronics and automobiles got so good? In the 1970s, right? Surely by the 1980s -- 30 years and more after Sarasohn and Protzman returned to America. We can't blame those men for Japan's success anymore than we can blame them for America's apparent failure. They may have laid a foundation, but something else had to happen to explain how Japanese companies came suddenly to dominate the world electronics and automobile businesses, a full generation after they were taught how.

    The rest of the answer lies in what it is we're in business to do.