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U.S. Shouldn’t Let Japan Win Race by Default

The question spoke impatience and a certain exhaustion with the whole subject of U.S. competitiveness with Japan: “Does it really matter if a Japanese company makes more money than one of ours?” the young American asked.

Yes, it does matter, and in more than money terms. But the American’s question was not unusual these days.

Competitiveness is getting to be like public housing or welfare, a problem we talk to death but don’t do much about. Even worse, says Peter T. Jones, who heads an executive program on the competitive challenge at the University of California at Berkeley, we have begun to deny the problem. We engage in wishful thinking, saying that “we’re moving into a service economy, so we can comfortably go beyond making things.” Really developed people, in other words, don’t get dirt under their fingernails.

A Caricature That Hurts

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But they can get poorer. The bad news came last week on the cover of the Economist magazine, which showed a sumo wrestler holding Uncle Sam in the palm of his hand and saying, “Now, I’m richer than you.” The accompanying article confirmed that in terms of gross national product per person, the average Japanese makes $17,000 a year, compared to $16,000 for the average American. As recently as 1965, the Economist noted, Japan’s GNP per person was one-quarter that of America’s.

What happened? We ignored manufacturing, says John Young, the president of Hewlett-Packard, who headed the White House Commission on Industrial Competitiveness two years ago and has been speaking out on the subject ever since. Young, whose firm makes electronic instruments and computers, thinks the idea of a services-only economy is bunk. “You need to make things to keep ahead in technology,” he said.

Akio Morita, the chairman of Japan’s Sony Corp., would no doubt agree. Morita’s company seems about to pull ahead of Ampex Corp., the last major U.S. competitor in the professional videotape-equipment business. That’s a $4-billion market to sell to TV stations and industrial film makers the equipment they need for taping and editing programs or commercials.

It is an industry practically invented by Ampex, a company formed in 1944 by a Russian immigrant to California. And Ampex, which has revenue of $500 million a year and is now a subsidiary of the Allied Signal Inc. conglomerate, has hung in there while far larger firms such as RCA and Hitachi have faded from the business. It did so by spending on research and development and by dedicating itself to product innovation.

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Makes a Big Difference

But business mistakes--past poor management of costs--have hurt Ampex, and it has had to cut back its line of products. Meanwhile, Sony, which has $7 billion in revenues, has poured on the steam. It has brought out 1/2-inch videotape and machines to work with it, while Ampex equipment works with one-inch tape.

The half-inch makes a large difference in cost: One hour of taping with one-inch videotape costs about $135, while an hour with half-inch costs $12 or $14, says Steve de Satnick, director of the School of Cinema-Television at the University of Southern California.

And the economies don’t stop there. The narrower product, with more information on less tape, allows equipment to be more portable, easier and cheaper to bring on location. Thus, Sony sales increase while Ampex starts to fade.

More than equipment sales is involved. Ampex, which is based in Redwood City, Calif., is an innovator of techniques and services for television. It invented instant replay, for example. “We also invented the fly-in images and rollouts you see on ‘Entertainment Tonight,’ ” says Ampex Vice President Mark Sanders. “We’re working now on features for 1991.”

But techniques are hard to sell apart from equipment, hard to originate when your competitor controls the pace of the equipment’s development. Does it matter to a TV station or a commercial video maker whether Ampex or Sony makes the equipment? Possibly not.

But it makes a difference in how the next generation of video equipment is developed, and by whom. Think of that the next time you hear of Japan leading in the advanced technology called opto-electronics. It makes a difference in how many jobs and what kind of jobs a nation can train its youngsters for. And it makes a difference in the worldwide market, where Ampex is now respected as a standard of quality.

If it fades, then the standard begins to come from elsewhere. And the revenues and profits go elsewhere, to finance a higher standard of living elsewhere.

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The nation of Yankee Traders, who got their name from people so unstoppable that they cut the ice of Walden Pond, covered it with sawdust and sailed it halfway around the world to sell to China, had better get back to business.


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