Sunday, October 28, 2007

How General MacArthur allowed Japan to become First Quality Industrial Nation - part I

This is not a story you expect. And it's the sort of lesson that's so important that we as a society have already forgotten it.

Homer Sarasohn, who lives with his wife in a retirement complex in Scottsdale, Arizona, is a gentle man with an owl-like face, Sarasohn never planned to go to Japan. He really wanted to be a gynecologist, but couldn't afford to go to medical school during the Depression. So Sarasohn fell back on his undergraduate physics degree, and went to work before the war designing radio transmitters. 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.

The Rad Lab, as it was called, was the major U.S. development center for Radar during the war, and it was Sarasohn's job to take laboratory prototypes of new radar equipment and turn them into products that could be mass produced by the radio manufacturers of the day. 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's headquarters was divided into several sections. Each section served as a branch of the Japanese government, though with an American administrator in each leadership role. The U.S. government was MacArthur's nominal model, though he adapted it in places to suit the very different needs of both Japanese society and his own military background. There was no true president, for example; MacArthur played, instead, the role of emperor, which suited him.

When he got to Japan, Sarasohn was made chief of the Industry Branch within the Civil Communications Section. That meant he was in charge of rebuilding the communication infrastructure of Japan. MacArthur wanted to use radio as a tool of occupation — to communicate directly with the people of Japan — and that meant setting-up transmitters, as well as building hundreds of thousands of radio receivers. Radios would be the first appliances available to the public in post-war Japan.

"There were fewer than 100 people in the Civil Communications Section, and none of us knew anything about Japan," Sarasohn said. "American bombing had laid bare the country. There were refugees everywhere. The factories were all gone. What electronics production equipment hadn't been destroyed was dispersed to the countryside. We had to find equipment and people with experience to run it, then set up factories wherever we could. The easiest way to get up and running was to bring back to life the companies that had been operating during the war — NEC, Matsushita, Furukawa, Fujitsu, Toshiba, and others. Within a year we got them organized in a primitive way."

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.

Those were the days of vacuum tube radios, and when vacuum tube production finally began in the makeshift plants, the American was appalled to see that yields were typically less than 10 percent. Ninety percent of the vacuum tubes would not work. To the Japanese running the factories, this was no surprise, nor was it a cause for concern; it had always been this way, even before the war.

"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."

Eventually, the managers began to talk with each other, while Sarasohn waited. According to the translator, they were trying to decide what answer to give that would most please the American. That was when Homer Sarasohn decided to become the Japanese electronics czar. "I had to become a dictator to get anything done," he said. "It's part of the Japanese psyche that they follow the leader. The expression they used then translated to 'pay the man in power,' which was a holdover from the culture of submission popular during the Tokagawa era of the 19th century. If I was going to get the industry back on its feet, I would have to take complete charge."

In order to play his dictator role, Sarasohn first had to learn Japanese. "Our translators were Nisei GIs, mainly farm-boys from Hawaii," he said. "They couldn't understand the technical materials they were being asked to translate. Worse still, they were distrusted by the native Japanese, who saw them as traitors since they were not really Japanese and weren't loyal to the emperor. It was easier for me to rule directly as a representative of the conquering horde than to try to rule through translators. For the first time in its history, invincible Japan had been conquered, the emperor had been forced to say he was not a god, and I represented the force that had made those changes happen. My power was unquestioned."

Frustrated with Japanese language courses offered by MacArthur's staff, the American moved-in with a Japanese family, embracing their culture, and living as a Japanese until 1950.

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.

"I remember visiting the Hirakawa Electric Company in Osaka (the company is today called Sharp Electronics). The manager wanted to show me that he understood my lectures about having a clean workplace," Sarasohn said. "He had hired a man specifically to keep the place clean. We found him in one of the big assembly areas. This fellow had a stick with a string coming from the end of it, and on the end of the string were a couple of pieces of ribbon. He was going around the assembly benches, flicking this stick, using the ribbons to push the dust around a little. The plant manager looked on proudly, thinking that his man was 'cleaning' the plant, and that I would be impressed."

On another occasion, Sarasohn made a surprise visit to the Tokyo Communication Engineering Company. He'd given the small company an important job, building a special piece of electronic equipment, but the project was long overdue. Travelling alone across Tokyo, he appeared without warning at the electronics factory, demanding to see the equipment he'd ordered. The owners were absent, parts were scattered everywhere and covered with dust. The special project, a radio station studio mixing console, lay about in pieces, barely begun. Furious with what he saw, Sarasohn exited without a word, leaving the workers in disgrace.

When they heard about the disastrous visit, the two founders of the Tokyo Communication Engineering Company hurried across the city to mollify Sarasohn. Their business was only a couple years old, and they didn't want its history to end that day.

The issue was quality. The plant was a mess. The special project was not only unfinished, the quality of work that its parts displayed was bad. Sarasohn gave them one last chance. "I told them to either mend their ways or lose their jobs," he said.

The Tokyo Communication Engineering Company later changed its name to Sony Corporation. The two men who came to plead for the survival of their company were Sony co-founders Masaru Ibuka and Akio Morita.

When the Second World War ended, American leaders thought their occupation of Japan might last forever. But by 1949, it was clear to Sarasohn that the Korean War was coming, and that the American occupation of Japan would soon end. If his work was to survive, he had to find a way of permanently instilling in Japanese industry some regard for quality.

First, Sarasohn set up the Electrical Test Laboratory, which was used to test prototype radios and other electrical gear before they could be approved for production. Later, random samples of the same goods would be taken off production lines for further testing to guarantee that quality remained at an acceptable level. If quality dropped, the production lines would be shut down, tying the success of management directly to its control of quality. The people in charge were thus personally committed to product quality, and could not delegate this responsibility.

The Electrical Test Laboratory still operates in Japan, fulfilling the same function set up by Homer Sarasohn in 1949. It serves new functions that Sarasohn could never have predicted, too, including acting as a barrier for the entry of American electronic goods that must first pass a tedious battery of superfluous tests before they are allowed in the country. Every electric fan, stereo component, and room air conditioner must be tested again in a Japanese facility, despite carrying Federal Communications Commission or Underwriters' Laboratory approvals.

After he set up the Electrical Test Laboratory, Sarasohn wanted to develop a course in American management techniques specifically for Japanese plant managers. But some members of the occupation forces opposed spreading U.S. production know-how to the Japanese.

The issue was decided in a 20-minute presentation before General MacArthur. The General had long before stopped following the letter of his original orders, which told him specifically to "not assume any responsibility for the economic rehabilitation or strengthening of the Japanese economy." Sarasohn argued that without better management, Japan would be a long-term drain on U.S. taxpayers. His opposition, the head of the Economics and Social Section, argued that the program Sarasohn was proposing could turn Japan into an economic monster that would threaten the U.S. in world markets.

"Go do it," MacArthur said casually on his way out the door, changing the course of world history.

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