by Akio Morita
Those first paper tapes were terrible, of course. Ibuka said the quality was so bad you could hardly hear anyone say “moshi-moshi,” the Japanese telephone greeting. But we were proud of it. At that time we had forty-five people working for us, and over a third of them were college graduates. We were top-heavy with brains, but we couldn’t make the high-quality product we wanted to without plastic for our tape. When we were able to get plastic, we developed our own technology for using it. We had the technology ready and were on the market with tape early on. (Ibuka was so determined to get into the tape field that we put a lot of extra effort into it, and some years later, in November 1965, he got his satisfaction—as we all did—when IBM chose our magnetic recording tape for data storage in its computers. It was thrilling for all of us when our company began to provide the technology for making magnetic tape to IBM and set up the machinery and installed the technicians at the IBM facility in Boulder, Colorado.)
In those early days, the tape was the key to the future of our business. As for the hardware, we had the tape recorder mechanism perfected to the state of the art. The machine we produced in 1950 was bulky and heavy, but it worked beautifully, in our estimation, and I was absolutely convinced that after all this work we were finally on the road to great success.
When our machine was ready for sale, we were confident that once customers saw it and heard it we would be swamped with orders.
We were in for a rude awakening. The tape recorder was so new to Japan that almost no one knew what a tape recorder was, and most of the people who did know could not see why they should buy one. It was not something people felt they needed. We could not sell it.
III
Looking back on it from today’s vantage point, I can see pretty clearly what some of our other problems were. That first big boxy machine weighed thirty-five kilos (about seventy-five pounds) and we put a price of one hundred and seventy thousand yen on it. That was a lot of money in Japan during the Occupation period, when the new yen was officially exchanged at three hundred and sixty to the U.S. dollar. Few individuals in Japan had that much money to spend on something they didn’t know they needed. (In those days, a university graduate working in industry earned less than ten thousand yen a month.) We made fifty of these recorders for a market that didn’t seem to exist. Neither Ibuka nor I had had any real training in the consumer end of things or any real experience in making consumer products or selling them. Ibuka had made only products for the government or for broadcasting, except for his early shortwave adapters and phonograph replacement parts. I had never made anything for sale to anyone. And although I had had a lot of management training as a boy from my father, which I could put to use in the navy, I had no experience in merchandising or salesmanship. It never occurred to Ibuka or me that there was any need for this. Ibuka believed strongly that all we had to do was make good products and the orders would come. So did I. We both had a lesson to learn.
We were engineers and we had a big dream of success. We thought that in making a unique product, we would surely make a fortune. I was determined to make this tape recorder a success; when it was ready I demonstrated it every day, wherever I could find an audience. I took it to businesses, to the universities. I loaded it into the truck and took it to friends and recorded their voices talking and singing, every day. I was like an entertainer, setting up this machine and recording people’s voices and playing them back to their delight and surprise. Everybody liked it, but nobody wanted to buy it. They all said, with variations, “This is fun, but the machine is too expensive for a toy.”
I then realized that having unique technology and being able to make unique products are not enough to keep a business going. You have to sell the products, and to do that you have to show the potential buyer the real value of what you are selling. I was struck with the realization that I was going to have to be the merchandiser of our small company. We were fortunate in having a genius like Ibuka who could concentrate totally on innovative product design and production while I learned the merchandising end of the business.
A fortunate chance incident helped me to see the light. I was still trying to figure out what we were doing wrong in trying, but failing, to sell our tape recorders, when I happened to stroll by an antique shop not far from my home in Tokyo. I had no real interest in antiques and I didn’t then appreciate their value. As I stood there looking at these old art objects and marveling at the high prices marked on them. I noticed a customer buying an old vase. Without hesitation, he took out his wallet and handed over a large number of bills to the antiques dealer. The price was higher than we were asking for our tape recorder! Why, I wondered, would someone pay so much money for an old object that had no practical value, while a new and important device such as our tape recorder could attract no customers. It seemed obvious to me that the value of the tape recorder was far greater than that of an antique because of its ability to enhance the lives of the many people who might come in contact with it. Few people could appreciate the fine lines of the vase, and something that expensive could hardly be handled by many people, for fear of breaking it. One tape recorder, on the other hand, could serve hundreds, or even thousands of people. It could entertain them, amuse them, educate them, help them improve themselves. To me there was no contest—the tape recorder was the better bargain—but I realized that the vase had perceived value to that collector of antiques, and he had his own valid reasons for investing that much money in such an object. Some of my ancestors had done the same, as I would do later. But at that moment, I knew that to sell our recorder we would have to identify the people and institutions that would be likely to recognize value in our product.
We noted, or rather Tamon Maeda did, that during that early postwar period there was an acute shortage of stenographers because so many people had been pushed out of school and into war work. Until that shortage could be corrected, the courts of Japan were trying to cope with a small, overworked corps of court stenographers. With Maeda’s help, we were able to demonstrate our machine for the Japan Supreme Court, and we sold twenty machines almost instantly! Those people had no difficulty realizing how they could put our device to practical use; they saw the value in the tape recorder immediately; to them it was no toy.
It seemed to me a logical step to go from the courts into the schools of Japan. Ibuka pointed out to us in one of the many meetings we had on the subject of sales that Japanese education had traditionally been centered on reading, writing, and abacus skills. But when the Americans came at the end of the war, they felt that verbal communications and audio/visual training were very important, and the Japanese Education Ministry followed their lead. But there was little media available in Japan, only some sixteen-millimeter films with English language soundtracks, which were of very little use because English had been banned and its instruction prohibited during the years of war. As a consequence few, if any, instructors had the language facility to understand the audio portion of those films. And of course none of the students did. The idea of using tape recorders to play prerecorded language tapes and then to use them for practice was accepted quickly, and the idea soon spread to schools all across the country. Every prefecture, or state, in Japan had set up a film center, but all the materials were in English. Ways had to be found to do the instruction in Japanese. The tape recorder was the logical medium.
With this kind of instruction going on at the prefectural level, we felt that soon every school would need and want a tape recorder. Ibuka discovered that the schools had a budget for this kind of equipment, so we tried to design a smaller unit just for schools that we could price within the reach of an individual school. Our first success was a medium-sized machine, bigger than an attache case but smaller than a small suitcase. We called it the H-type recorder. It was simple—only one tape speed of seven and a half inches per second— and sturdy. As a wedding present in 1951, the staff gave my bride Yoshiko and me the first production model of this recorder we called the H-type.
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sp; We began to make portable units of more attractive design and to gain confidence. Our company was beginning to expand and we moved into an adjacent and more substantial building on Gotenyama. New ideas were finally being accepted, perhaps some of them too eagerly, but Japan was building its new society—it was not rebuilding the old one.
As we matured, we were soon embroiled in a new kind of war that taught me a lot about the international business we were to develop. In order to get a high-quality recorded signal onto the tape of our recorders, we had been using Dr. Kenzo Nagai’s patented high-frequency AC Bias system. This system demagnetized the tape before it reached the recording head, applied an alternating current to the recording signal, and produced a recording with much less noise and distortion than earlier, direct current (DC) biased systems. We were so dedicated to a future in recording technology that we wanted to buy the patent, which was then owned by Anritsu Electric, then, as now, a subsidiary of Nippon Electric Company, known as NEC. We couldn’t afford to buy 100 percent of the patent, but we bought half of it in 1949, sharing the ownership with NEC. Dr. Nagai had registered the patent in Japan, and we learned later that he had also applied for a patent in the United States just before the war began, in December 1941—and had sent data on his invention to the Library of Congress and other places earlier that year. His patent was never registered in the United States, I guess because the timing couldn’t have been worse, but his research was available to interested parties there.
When we bought the patent, we sent out letters to tape-recorder makers all over the world, informing them that we had the patent on the AC Bias system and offering to license it. We also told them that if they wanted to sell tape recorders using this system in japan, they would have to have a license from us. We got back letters from several companies saying they had no intention of selling tape recorders in Japan and therefore didn’t see any point in buying a license from us. We knew the system was being used abroad by makers who had not licensed it, but we saw no way to do anything about it. One day an officer from the patent department at GHQ called Ibuka and said he wanted to see him. In those days, if you were called by GHQ you had to worry about the possibility of going to prison for some infraction you might not know about or something that had happened in the past. Ibuka was so worried he even called his wife and told her of the summons just to prepare her. He took Maeda with him as interpreter. The officer wanted to know all about our claim to the patent. Ibuka had had the foresight to bring with him all the papers he could put together that pertained to our patent purchase. As the officer went through the papers, the tension mounted, and when he had examined everything he sat back and confirmed with a smile that the patent seemed to be complete. There were grins of relief all around, and the officer ended it happily by serving coffee.
Soon after that we learned that Balcom Trading Company of Tokyo was importing tape recorders from the United States, and we sent them our letter, warning them about our license on the recording system used in those machines. They ignored our letter, and so we considered going to court for an injunction against the trading company. It was an important decision for us because in the Japanese courts a plaintiff in a civil suit must pay a large and nonrefundable filing fee based on the amount of money for which he is suing. This is one way of discouraging frivolous lawsuits. If we decided to go ahead with a lawsuit, we would have to make a big investment in it. But we felt bold enough and sure enough of our case to file. Besides, our patent now had the approval of the Occupation, in a manner of speaking.
The court heard our plea and granted the injunction. We marched down to the customs warehouse with the proper officials and boldly put a court seal on the door, prohibiting Balcom from moving their tape recorders until the case was aired. The local newspapers thought it was a fine story and it made headlines. The papers saw it as a rare show of Japanese independence, a small Japanese company defiantly challenging big American manufacturers. The people at Balcom were furious, of course, because they reported our contention to the manufacturer in the States, and the maker of the tape recorders said they had licensed their system from Armour Research, which had its own patent on the AC Bias system.
Everybody got angry and Armour sent their lawyer, Donald Simpson, to Japan. It was the first time I had ever met an American lawyer and I was quite impressed with how tough a competitor he was. But we were able to prove that an English-language version of Dr. Nagai’s work had been available to the public in the United States before the Armour patent was granted. If Dr. Nagai’s technique could be considered general knowledge, then it would seem to put the AC Bias system in the U.S. into the public domain and perhaps make it no longer patent worthy. I threatened to go to the U.S. and invalidate the Armour patent. Actually I didn’t know how I would go about doing that, but it must have seemed possible to them because when our case was presented they recognized the validity of Dr. Nagai’s patent. The dispute dragged on for three years, but our victory in March 1954 meant that all tape recorders using the AC Bias system sold in Japan—even a big Ampex unit sold to a broadcasting station—would produce a royalty for us.
I agreed in the settlement that we would not attack Armour. We got the right to use the Armour patent in the U.S., and therefore we could export to the United States without paying a license fee. Furthermore, we could sublicense the technology to other Japanese makers, and when they wanted to export to the U.S., we would get half the license fee. We held these rights for many years. It was my first negotiation with the Americans, and it ended so well I began to feel new encouragement about the future. Oh, yes, I also later hired Donald Simpson to work for us.
IV
The idea of an international market for Tokyo Tsushin Kogyo had been on our minds from early on, and it was inevitable that Ibuka and I would have to travel. In 1952 the tape recorder business was very good, and Ibuka thought he wanted to go to the United States to see what uses were being made of the tape recorder and to learn more about the manufacture of tape itself. He spoke virtually no English, but he managed to get around and observe things. He came away disappointed because, while he found some language laboratories using tape recorders, he saw that we were making wider use of them in our schools than they were in the U.S. Another disappointment for Ibuka was that none of the tape manufacturers would allow visitors into their plants. But the trip turned out to be of great benefit to us. In 1948, we had both read about the work of William Shockley and others at Bell Laboratories in the “Bell Laboratory Record,” and we had been curious about their discoveries ever since. That year small articles began to appear in the American press and elsewhere about the device invented at Bell Labs called the transistor, and on Ibuka’s trip he first learned that a license for this marvelous gadget might soon be available. He began to make plans.
This solid-state device was something completely new to our experience, and learning about it and deciding what we could do with it was a job for more than an electronics engineer or two. During one sleepless night in a noisy room in New York’s old Taft Hotel near Times Square, it occurred to Ibuka that our company now had about one hundred and twenty employees, about a third of them graduate engineers— electronic, metallurgical, chemical, mechanical—and developing the transistor for our use would be a job that would challenge the skills of all of them. He didn’t know then just what we would make with the transistor if we got the technology, but he was excited by the technological breakthrough it represented. Ibuka tried to get an interview with the Western Electric patent license manager the next day, as Western Electric was the patent holder for Bell Labs, but was told the man was too busy to see him, so he asked a friend of his, Shido Yamada, who lived in New York and had worked for a Japanese trading company, to make some inquiries. Then Ibuka went home.
I must make it clear that the transistor being made at that time wasn’t something that we could license and produce and use right off the shelf. This miraculous device was a breakthrough in electronic technology, but it could on
ly handle audio frequencies. In fact, when I finally signed the patent agreement a year later, the people at Western Electric told me that if we wanted to use the transistor in consumer items, the hearing aid was the only product we should expect to make with it. In those days there were no transistors made for use in radios. Of course we were not interested in the hearing aid market, which is very limited. We wanted to make something that could be used by everybody, and we had plans to put our research scientists and technicians to work developing our own high-frequency transistor for use in radios.
We started to consider what kind of radio we could make with transistors. At that time, the worldwide trend in the radio field was toward a new concept. The new phrase, “high fidelity,” or hi-fi, was soon to be in vogue. People would be listening for purity of sound, for realistic reproduction, or at least for sonically exciting reproduction. Some early hi-fi fans were already buying records of locomotive noises, airplanes taking off, horses galloping, police sirens, old weapons being fired, and all kinds of other sound effects to show off their new systems. Speakers were getting bigger, sound was getting bigger, and the words “woofer,” “tweeter,” “distortion,” and “feedback” were entering the language. Amplifiers using many vacuum tubes were thought to give the purest sound. We envisioned the transistor replacing the bulky, hot, and unreliable vacuum tube. It would give us a chance not only to miniaturize electronic products but also to lower the power consumption. If we could devise a transistor that could deliver a high enough frequency, we could make a very small radio powered by batteries. We hoped to get realistic sound using a minimum of power.
