By Vitaliy Katsenelson
What would you get if you crossed Warren Buffett, Richard Branson and Steve Jobs?
Masayoshi Son, the Korean-Japanese, University of California, Berkeley–educated founder of one of Japan’s most successful companies, SoftBank Group. /zigman2/quotes/207303954/delayed JP:9984 -0.38% /zigman2/quotes/207137761/delayed SFTBY +2.52%
Like Buffett, Son is a tremendous capital allocator with a highly impressive record: Over the past nine and a half years, SoftBank’s investments have delivered a 45% annualized rate of return. A big chunk of this success can be attributed to one stock: Chinese e-commerce giant Alibaba /zigman2/quotes/201948298/composite BABA +1.51% , a $100 million investment SoftBank made in 2001 that is worth about $80 billion today.
Though you may put Alibaba in the (positive) black swan column, Son’s success as an investor goes well beyond it — the list of his investments that have brought multibagger returns is long. The 57-year-old Son is Japan’s richest person, and SoftBank, which he started in 1981 and owns 19% of, has a market capitalization of $72 billion.
Like Apple /zigman2/quotes/202934861/composite AAPL +0.36% co-founder Jobs, Son is blessed with clairvoyance. He saw the internet as an transformative force well before that fact became common knowledge. In 1995 he invested in a then-tiny company, Yahoo!, earning six times his investment. But he didn’t stop there; he created a joint-venture with Yahoo! by forming Yahoo! Japan /zigman2/quotes/200590997/delayed YAHOF +1.01% , putting about $70 million into a company that today is worth around $8 billion. (Yahoo! Japan is a publicly traded company listed in Japan).
What is shocking is that Son saw that the iPhone would revolutionize the telecom industry before Apple announced it or even invented it. See for yourself in this excerpt from an interview with Charlie Rose , where Son describes his conversation with Jobs in 2005 — two years before the iPhone was introduced:
“I brought my little drawing of [an] iPod with mobile capabilities. I gave [Jobs] my drawing, and Steve says, “Masa, you don’t give me your drawing. I have my own.” I said, “Well, I don’t need to give you my dirty paper, but once you have your product, give me for Japan.” He said, “Well, Masa, you are crazy. We have not talked to anybody, but you came to see me as the first guy. I give to you.”
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Like Virgin Group founder Branson, who created Virgin Atlantic Airways in the U.K. to compete against the state-owned behemoth British Airways, Son started two telecom businesses in Japan — one fixed-line and one wireless — with which he challenged the state-owned NTT monopoly. In 2001, disgusted with Japan’s horrible broadband speeds, he convinced the government to deregulate the telecom industry. When no other companies emerged to rival NTT, Son took it upon himself to start a fixed-line competitor, Yahoo! BB (Broadband). Thanks to him, now Japan enjoys one of the highest broadband speeds in the world and Yahoo! BB is a leading fixed-line telecom.
It took Son four years to bring his broadband business to profitability. This is how the Wall Street Journal described that period in 2012: “The problems at the broadband unit contributed to losses for the entire company for four consecutive years. Mr. Son set up an office in a meeting room 13 floors below his executive suite to be closer to the problem unit. He slept in the office at times and routinely summoned executives and partners for meetings late at night. . . . He worked out of the meeting room for 18 months, until the broadband unit had cut enough costs and moved enough customers to more lucrative plans.”
A normal person might have taken a break and enjoyed the fruits of his labor at that point, but not Son. Just as his broadband business went into the black, Son executed on his vision for the internet and bought Vodafone K.K., a struggling, poorly run wireless telecom in Japan. SoftBank paid about $15 billion, borrowing $10 billion.
Fast-forward eight years, and SoftBank Mobile is a success. It is one of the largest mobile companies in Japan, even faster growing than NTT DoCoMo /zigman2/quotes/202061250/delayed JP:9437 -1.11% (a subsidiary of almighty NTT). Today it spits out about $5 billion in operating profits annually — not bad for a $5 billion equity investment.
Son has a highly ambitious goal for SoftBank: He wants it to become one of the largest companies in the world. Unlike the average Wall Street CEO, whose time horizon has shrunk to quarters, Son thinks in centuries: He has a 300-year vision for SoftBank. Practically speaking, 300 years is a bit challenging even for long-term investors, but at the core of his vision Son is building a company that he wants to last forever (or 300 years, whichever comes first).
Son views SoftBank as an internet company and is committed to investing in internet companies in China and India. He believes that as these countries develop, their GDPs will eclipse those of the U.S. and Europe.