Lost Japan (17 page)

The visitor to Tenmangu soon finds himself becoming inexplicably drowsy. It is not because I have put something in the wine, but because the pace of life has suddenly slowed down. While talking or listening to music, my guest gradually begins to slouch to one side. From a chair, he moves over to the soft silk cushions on the
kang
, and lies down. Soon he is unable to prop up his head any longer, his face sinks down onto the pillow and he slips off to sleep. The ‘nest' has worked its magic again.

At the end of 1983, I visited Dallas, Texas, for Christmas. I was invited there by Trammell S. Crow, an old Yale classmate. Trammell S., with his long hair, bright orange jumpsuit, sports car and elfin grin, was one of my wilder college friends. He had promised to meet me at the airport, but when I arrived I couldn't find him. Then I realized with a shock that the clean-cut businessman in a blue suit holding out his hand to greet me was Trammell S.; I only recognized him by his grin. When I asked what had happened to him, he told me that he had gone to work for his father, Trammell Crow.

As our car approached downtown Dallas, Trammell S. pointed at the skyline ahead, and said, ‘That forty-story skyscraper on the right is ours, and that fifty-story building under construction is also. And the hotel we're passing – Dad let me design some of it myself.' I realized then that I really knew nothing about his father. Trammell S. began to tell me something about him.

Trammell Crow was a Texan, born in Dallas, and until the age of thirty-five he was an ordinary bank employee. However, one day he had a sudden inspiration to buy an old warehouse. He remodeled it, found tenants to rent it, and then bought up two or three warehouses nearby. He remodeled them, and rented them out also. He continued for forty years, expanding from warehouses into trade marts, office buildings, apartments, hotels and every other imaginable form of real estate. Eventually, the Trammell Crow Company became the largest real estate developer in the world.

The next day, Trammell S. took me to his father's office. Expecting to see dull, corporate Americana, I felt for a moment that we had mistakenly stepped into a museum: as far as the eye could see was a treasure house of Asian art. Khmer sculpture stood in the corridors, and Chinese jade carvings sat casually next to computers and on top of filing cabinets. ‘Dad loves Asian art,' Trammell S. said. ‘He likes using his collection to decorate the office, so his employees can enjoy it too. I'll introduce you to him.'

Trammell Crow sat at a long table covered with blueprints, in conference with his architects concerning the design of a new city. ‘Dad, I want you to meet a friend,' said Trammell S, but his father did not even lift his head. ‘He studied with me at Yale.' Still no interest. ‘He majored in Chinese and Japanese Studies.'

At this, Trammell Crow jumped up and said excitedly, ‘Chinese and Japanese? Wonderful!' He grabbed a jade carving from the shelf nearest at hand and asked me, ‘What do you think of this?' ‘It has the squared barrel shape of an ancient Chinese Song jade, but I don't think it could be so old,' I answered. ‘The style of the characters was popular at the end of the nineteenth century, so I would guess it's probably a nineteenth-century scholar's reconstruction.'

‘What?' Trammell shouted. ‘The folks at Sotheby's guaranteed that this was a genuine ancient artifact!' I tried to mumble an apology, but he brushed it aside. ‘How would you like to work
for me?' he suddenly asked. ‘We've recently opened a business in Shanghai, and I could use a manager there.' Taken aback by the sudden change of topic, all I could say was, ‘I'm very flattered, and there is nothing I would rather do than live in China for a while. But I've spent my whole life studying nothing but culture and art, and I have absolutely no knowledge of business. I'm sure I would make a mess of it, so I really can't accept.' Trammell replied, ‘No business experience? Fine. At any rate, let's make you an employee. Starting today.' And he turned to his secretary and said, ‘Send Mr Kerr a thousand dollars every month as a consulting fee.'

‘Thank you very much, but what's this fee for?' I asked. ‘Don't worry. You go back to Japan, and think about it. Then you write me a letter and let me know what you're going to do for me.' And with an abrupt ‘Good-bye', he turned back to his desk and the waiting plans. The entire exchange took only ten minutes.

I went back to Japan, and sure enough a payment of $1000 arrived in my bank account each month; but I was at a loss as to what I could do for Trammell Crow. Since my specialty was art, all I could think of was art collecting. So I wrote him a letter proposing that if I acted as his agent at the Kyoto auctions, he could develop a collection of Japanese art very affordably. Trammell liked the idea, and soon I was buying an enormous volume of screens and scrolls for him. To pay for them, he wired me sums of money far greater than I had ever dealt with before. I soon reached the limits of my old informal mode of operations: taxes had to paid, screen-repair expenses ballooned, employees had to be hired and the accounting became complicated. I had no choice but to establish a company, so in the fall of 1984 Chiiori Ltd was born. I took the name from my house in Shikoku, but Chiiori Ltd's focus was far removed from the romance of Iya: it was all about taxes, accounting and the filing of official documents.

Trammell seemed satisfied with the artworks I was choosing for him, and would occasionally invite me to Dallas. I later
learned that he was regarded as a maverick in American business. According to one famous anecdote, when he was asked during a speech to the Harvard Business School what the secret of his success was, he simply answered, ‘Love.'

Before meeting Trammell, all my efforts to understand Japan were filtered through the medium of classical literature and traditional arts such as Kabuki. In my opinion, business was a sideline from which there was little to be learned. But one day, Trammell said to me, ‘Alex, what you need is some lessons in reality!', and he invited me to sit in on business meetings when I was in Dallas. One such meeting involved the representative of an Italian company from which Trammell Crow was ordering marble for the face of a new office building. Negotiations over the price were heated: first the Italian side named a unit price of thirteen, then Trammell proposed nine, and eventually the price was set at ten. The marble company representative was about to leave when Trammell stopped him, ‘You brought the price down to ten for us,' he said, ‘but that gives you very little profit and you'll be unable to return home feeling good about this. Let's make it eleven. In exchange, I expect you'll put extra effort into this for us.' And the marble salesman went home happy.

In the summer of 1986, I received a fax from Trammell S., telling me that the Trammell Crow Company was planning on jointly developing a wholesale mart in Kobe with the Sumitomo Trust Bank, and that I was required to meet with the manager of the development section of the bank in Osaka. Digging a little-used suit out of the back of my closet, I fearfully made my way there. Except for when I founded Chiiori Ltd, I had never spoken to a bank manager before, so I was extremely nervous.

The manager of Sumitomo Trust's development section was a man named Nishi. Looking back now, I see that Nishi was emblematic of the so-called ‘bubble' of the 1980s. At heart an entrepreneur like Trammell rather than a staid banker, he had become involved in the Kansai area's mega real estate
developments early on, and was the mastermind behind projects such as the Nara Technopolis. Riding the wave of the real estate boom, Nishi had realized enormous success. Brimming with excitement, he explained that Sumitomo Trust had won the bidding for a contract to develop Kobe's Rokko Island, a large plot of landfill in the middle of the harbor. It was not, of course, open bidding: the city, as is customary in Japanese construction, had made a cozy deal with Sumitomo Trust, but one of the conditions was that a wholesale fashion mart be constructed on the site. The largest mart facility in the world at that time was Trammell Crow's Dallas Market Center, so Sumitomo Trust wanted to link up with Trammell Crow to develop the Kobe mart.

Thus began a long interchange between Sumitomo Trust and the Trammell Crow Company. The project manager assigned from Dallas was Bill Starnes, a big Texan with genial manners belying a killer business instinct. My job was to interpret, but it was very rough because the financial terminology being used was lost on me in both English and Japanese. For instance, Starnes kept talking about something called IRR (internal rate of return). This calculates the overall profit that a real estate venture is going to earn, incorporating debt repayment, annual rental income and the projected rise in land value. In America, IRR is the standard measure for all real estate developments, and so naturally Starnes put great emphasis on it. But I had no idea what he was talking about. There was nothing for it but to follow Starnes back to his hotel each evening, where he gave me a crash course in IRR and general real estate know-how. Before joining Trammell Crow, Starnes had been a professor at Rice University, so he made a good teacher. He bought textbooks for me to read, drew up lists of vocabulary and even gave me mathematics homework to do.

There were many points of controversy between Sumitomo Trust and Trammell Crow, but the most memorable of all had to do with this IRR calculation. After some time I finally got to the
point where I understood IRR, but I soon discovered that the Sumitomo bank officers I had been in such awe of had no idea what it was! ‘We don't need IRR in Japan,' they told Starnes. ‘Who cares about rental income? The main thing is that land prices will always go up. Japan is different from America.' ‘In that case,' Starnes replied, ‘you must have some other method of calculation in order to evaluate real estate projects here?' And slowly the strange truth emerged: Sumitomo had precise criteria for establishing mortgage rates or determining collateral for loans, but they had absolutely no method of evaluating the aggregate merit of a new real estate venture. They had never needed one. For forty years since the war, land and rents in Japan had risen uninterruptedly. If one just had enough money to acquire land, everything else would go smoothly. Large banks like Sumitomo Trust, protected and coddled by a financial system which stifled both domestic and foreign competition, had had a particularly easy time of it.

In Trammell Crow's swashbuckling youth, real estate moguls had simply made deals which felt right and had then sealed them with a handshake. But after suffering the consequences of several disastrous real estate booms and busts – the so-called ‘real estate cycle' of America – they had called in experts to run their companies for them, and the experts had brought tools of analysis like IRR with them. Japan, however, had not made this adjustment, and there were no brilliant analysts like Bill Starnes in the Sumitomo Trust Bank. The management of large financial institutions had become soft, because they had failed to learn the next generation of real estate know-how that had become common knowledge in the rest of the world. The fact that the bank did not understand IRR should have been a danger sign to us; from that alone we could perhaps have predicted the impending crash.

In 1987 the long year of negotiations came to an end, and Sumitomo Trust and Trammell Crow finalized a joint-venture contract. Until then I had only been working part time, but from
that autumn I came to work at the planning office in Osaka as a full-time employee. I put Tenmangu in the hands of a student caretaker, and rented a house in Okuike, in the hills of Ashiya between Kobe and Osaka. Every day I would commute into Osaka, joining delegations of experts from Dallas in meetings with prospective tenants, architects and so on. IRR was not the only communications gap I experienced. Once, in a conference about floor space, a Dallas expert burst out, ‘We're talking about square footage here. We don't even know yet how many tenants we'll have; isn't it a bit premature to bring up soup bowls?' ‘Soup bowls? Nobody said anything about soup bowls,' answered a bewildered Sumitomo architect. The offending word turned out to be
tsubo
, the standard unit of land measurement in Japan.

When the Kobe Fashion Mart opened, it was the largest building in Kansai – and its financial planning, design, leasing and negotiation had been my ‘business school'. During that lengthy process, Trammell's purchases of art had slowed, my art dealing had faded into the background, and I had devoted myself full time to the mart. Every once in a while I would receive an encouraging phone call from Trammell, saying, ‘Business is fun, isn't it!' And it was. One of the reasons was Trammell's personal charm, including his colorful Texan turn of phrase. One time I was escorting a group of Singaporean bankers around the Dallas headquarters. Trammell saw them off at the elevator, and then turned to me and said, ‘Now you take care of those men, Alex. They have money in the bank and cattle out west!'

In 1988 we lost our energetic overachiever Nishi. He collapsed from overwork, and was replaced by a traditionalist from the Sumitomo Trust staff. At the same time, Dallas assigned an American manager to the project. The antagonism between the American manager and the Japanese staff was a sight to behold. As the buffer between them, it was fairly rough on me, but it was also a great learning opportunity. Until the American manager's arrival, I had always thought of workplace relations in the US as
being equal, and those in Japan as hierarchical. But the Japanese-division chief guided his subordinates with a very gentle hand. Nishi, for instance, would frequently say to Starnes, ‘I understand your point, but until I can convince my subordinates, I can't move. Give me time.' Of course, this was often no more than a negotiating ploy, but I noticed that Nishi really did consult with his staff, and often left important decisions up to them. The American corporate structure, on the other hand, is far more authoritarian. It's modeled on boot camp: the manager gives commands, and his subordinates carry them out. In terms of company organization, the Japanese way is much more democratic.