Legal Issues
Rethinking M&A in China
With China's new mergers and acquisitions rules in place, foreign and domestic investors need to find more creative ways to structure their investments
by Marcia Ellis and Auria Styles
Foreign private equity investors for the past several years have often invested in PRC companies by bringing the Chinese founders of such companies offshore and investing together with the founders in an offshore special purpose vehicle (SPV). The investors successfully exited their investments by listing the SPV on a foreign stock exchange or selling the shares—through a trade sale—to another fund or strategic investor. This investment strategy, commonly known as "round-tripping," was essentially prohibited when the Provisions on Acquisition of Domestic Enterprises by Foreign Investors (mergers and acquisitions [M&A] rules) took effect on September 8, 2006.
As a result, private equity investors must rethink their investment structures and move their joint ventures (JVs) with the Chinese founders of the investee companies from relatively unregulated tax havens, such as the Cayman Islands and British Virgin Islands, to the more restrictive environment of mainland China. These changes, however, have not deterred foreign investors and their Chinese partners from structuring investments in Chinese JVs that replicate, to the extent possible, the features of their offshore JVs.
Anatomy of the M&A rules
The final M&A rules are similar to the 2003 Interim Provisions on the Acquisition of Domestic Enterprises by Foreign Investors, which provided the first firm legal basis for the acquisition of the equity of a non-foreign-invested PRC company by a foreign investor and permitted a number of transaction structures that previously had been of dubious legality. For foreign investors, the most troubling aspect of the interim measures was the antitrust provisions that required the PRC Ministry of Commerce (MOFCOM) and the State Administration for Industry and Commerce to review acquisitions that met certain thresholds. In retrospect, however, these provisions appear largely to have been a trial balloon for China's long-awaited Antimonopoly Law—slated to pass this year—and have yet to be used by MOFCOM to block foreign acquisitions.
The final M&A rules retain most of the provisions of the interim measures but also include sections that attempt to control the various forms of round-tripping by requiring MOFCOM approval for such transactions, regardless of the size of the investment. The criteria that MOFCOM currently uses to determine which, if any, round-trip transactions it will approve remain unclear, and, to date, there have been few reported cases of such approvals. Thus, many private equity funds are seeking alternative means of structuring investments to avoid the requirement of MOFCOM approval.
Onshore investments
Structural challenges
To avoid MOFCOM approval for round-tripping transactions, companies can invest directly in JVs in China. The fundamental nature of foreign-invested enterprises (FIEs), however, renders onshore investments more difficult. For example, in the United States and offshore tax havens, it is possible to create two classes of stock—preferred and common—but in China, only one class of equity is available for FIEs. As a result, it is difficult to structure investments in a way that would allow funds to enjoy some of the basic preferential rights associated with private equity investments, such as preferential payment of dividends and liquidation proceeds. In addition, without two classes of shares it is impossible to effect a value adjustment—for instance, when the investee company fails to meet certain financial targets—by automatically adjusting the rate at which preferred shares are converted into common shares. Investors without these protections are relatively unprotected in a downside scenario, making these onshore investments in China inherently more risky.
Although it is possible to structure dividend preferences in an onshore investment in a cooperative JV (CJV), obtaining approval for such investment vehicles is becoming increasingly difficult in some areas of China. Some local PRC officials are now carefully scrutinizing CJV structures to ensure that investors do not abuse the flexibility of the structure for purposes of creating dividend preferences that are not otherwise permitted. Currently, PRC law allows for liquidation preferences in both equity and cooperative JVs, and in several localities in China, foreign investors have obtained approvals for favorable liquidation preferences in their onshore JVs.
Another difficulty with setting up mainland JVs is that conversion price adjustments (sometimes called valuation adjustment mechanisms [VAMs]) require skillful structuring in an onshore investment. VAMs essentially permit investors to exchange their preferred shares for a larger number of common shares if the investee company does not meet certain financial targets. For example, an investor generally calculates its purchase price based on a multiple of the investee company's earnings for the following year. If the investee's earnings do not meet that amount, a VAM will be triggered, and the percentage of the total number of the investor's preferred shares that can be converted into the common shares of the investee will increase. Because there is only one class of equity in FIEs, and thus no conversion of preferred shares into common shares, it is impossible to directly implement a VAM in an FIE.
To structure VAM-like mechanisms in FIEs, foreign investors must use either debt that is capitalized at a different rate, depending on whether the relevant financial targets are met, or use a holdback provision—which transfers a certain percentage of equity to the founder if and when the financial targets are met. Provisions incorporating these features into the transaction documents must be drafted carefully to avoid various pitfalls—such as potential conflicts with statutory rights of first refusal—and comply with PRC law. In some cases, these provisions must also comply with extra-legal requirements imposed by approval authorities when reviewing JV contracts. For example, investors must address officials' concerns that foreign parties are obtaining too many benefits and that an overall "fairness" requirement has been breached.
Finally, structuring and implementing call and put options—the rights to purchase or sell equity at a certain time at a certain price—in an FIE is also challenging. Although it is possible to receive approval for call and put provisions in a JV contract that comply with PRC law, implementing them proves more difficult. After the initial JV contract approval, the actual transfer of equity requires additional board and government approvals. If the JV partner is a state-owned enterprise, it may not determine, at the time of the original transaction, the exercise price because the value of the interest to be transferred must be appraised by a duly qualified asset valuation firm at the time of the transfer, and the exercise price cannot be less than the appraised value. Thus, such structuring requires creativity and deep knowledge of PRC regulations and how they are implemented.
Exit challenges
Perhaps the greatest challenge faced by a foreign private equity investor that invests in an onshore JV is finding a viable exit strategy. Without round-tripping, an overseas listing would be hard to accomplish. Although the M&A rules permit founders and investors to swap the equity of an onshore entity for the shares of an SPV incorporated for the purpose of a listing shortly before it lists, such an undertaking cannot occur unless other requirements in the M&A rules are met. For example, a minimum initial public offering price must be set months before it actually takes place. Because these requirements are so onerous, and the uncertainty of obtaining approval so great, most private equity funds are, for the moment, pursuing other methods.
A-share listing
One of those options is to list A shares on a Chinese domestic stock exchange. To do so, an FIE must first obtain MOFCOM approval at the national level to convert into a foreign-invested company limited by shares (FICLS), which must then apply to the China Securities Regulatory Commission (CSRC) for listing. If approval is obtained and the shares of the FICLS listed, each shareholder of the FICLS will be subject to lock-ups stipulated by law and the rules of the relevant stock exchange that prohibit the sale of shares of stock for a specified period—from one to three years depending on when each shareholder made its investment and the percentage interest it holds in the FICLS. After the lock-up period expires, an investor can either sell its shares on the A-share market or effect a private sale.
Because investors face long waiting periods for approvals and lock-ups, it is unclear whether the domestic stock markets will be developed enough to provide the desired liquidity at the time of exit. Despite these hurdles, a number of funds are optimistic about the possibility of exits through A-share listings.
Swap for shares of a listed entity
Another exit alternative permitted under the M&A rules is to make the original investment through a share swap, in which the equity of the domestic investee company is swapped for shares of an offshore listed company. Again, MOFCOM must approve such swaps, but once approved, the fund's ability to exit the investment is essentially guaranteed because it already holds listed shares.
Another possibility would be to swap the shares of an offshore special purpose acquisition corporation (SPAC) for the equity of a PRC domestic company. US securities regulations allow a SPAC to be incorporated and listed immediately, before it acquires any assets. In effect, the SPAC is simply a holding company with a plan to acquire assets but has no existing assets at the time of listing. After listing, the founders of the PRC domestic company could receive the SPAC's shares in exchange for their equity in the domestic company. In turn, the proceeds from the SPAC's listing could be used to expand the business of the domestic company. Implementing such a share swap under the M&A rules and relevant US regulations could present certain difficulties, not the least of which is that listed shares being swapped must have been steadily traded for the 12-month period prior to the swap—a requirement that many SPACs would be unable to meet.
The Internet structure
Some funds are adopting a structure that has been widely used in China's Internet sector to circumvent the need for MOFCOM approval of a round-trip transaction. Often called a Sohu, Sina, or NetEase structure after the PRC Internet giants that pioneered its use, the structure has been used in industries where foreign investment is restricted, such as telecom and media and publishing. Under this structure, the foreign private fund and the PRC founder establish an offshore SPV that in turn forms a wholly foreign-owned enterprise (WFOE) in China. The PRC founder continues to hold all of the equity of the actual onshore operating company, which then enters into a series of contractual arrangements with the WFOE that allows it to take over the operating company and to receive all the after-tax profits of the operating company as fees.
The advantages of this structure are that it does not require MOFCOM approval at the national level because it is not considered a round-trip investment and that the fund can obtain a VAM and enjoy all of the features normally associated with private equity investments through an SPV. In addition, the fund can achieve an exit through an SPV listing.
The disadvantage of this structure is that despite being replicated many times by Chinese media and Internet companies, it is confusing to some foreign investors that are unfamiliar with it. Moreover, MOFCOM could claim that such a transaction constitutes round-tripping since the M&A rules include a broad catch-all provision under which such contractual arrangements could fall. (This provision, set forth in Article 11 of the rules, prohibits parties from using domestic investment by an FIE "or any other means" to circumvent MOFCOM approval.) Finally, even if MOFCOM accepts this structure and does not regard it as "any other means" of circumventing approval, it is unclear whether CSRC will block the SPV listing because of the use of this structure. CSRC officials have stated that they would at least examine closely any such contractual arrangements that were entered into after September 8, 2006 to determine whether the contracts were intended to circumvent MOFCOM approval.
Next steps?
The M&A rules have, for the time being, achieved their unstated purpose: to curtail round-trip investment. In addition, they have slowed private equity investment in China because funds must now pause to consider options for structuring investments and become comfortable with the levels of risk involved in such structures. For now, however, with a bit of creativity and patience, investors are finding novel ways around the more onerous requirements of the M&A rules.
Thursday, September 27, 2007
Latest IMF report touches on global credit markets
Subprime fallout
Global Markets Face Protracted Adjustment
September 24, 2007
Synopsis:
- Markets face difficult period ahead
- Credit difficulties likely to have broader economic effects
- Market framework needs strengthening
Markets are likely to go through a protracted adjustment period following recent financial turbulence triggered by the collapse of the U.S. subprime mortgage market, according to the IMF's latest Global Financial Stability Report (GFSR).
The report, released on September 24, said the turbulence represents the first significant test of innovative financial instruments and markets used to distribute credit risks through the global financial system, with markets recognizing the extent that credit discipline has deteriorated in recent years. This has caused a repricing of credit risk and a retrenchment from risky assets that, combined with increased complexity and illiquidity, has led to disruptions in core funding markets and increased market turbulence in August.
Central banks in several countries have stepped in to help stabilize markets and mitigate the impact on the broader economy. But the GFSR said the period ahead may still be difficult as bouts of turbulence are likely to recur and the adjustment process will take time. "Credit conditions may not normalize soon, and some of the practices that have developed in the structured credit markets will have to change," it stated.
Slowing global growth
The report, prepared by the IMF's Monetary and Capital Markets Department twice a year, said the turbulence could impact global economic growth. "Although the dislocations, especially to short-term funding markets, have been large, and in some cases unexpected, the event hit during a period of above-average global growth. Our assessment is that credit losses and the liquidity constriction experienced to date will [nevertheless] likely slow the global expansion," it stated. The IMF will give its next forecast for world growth on October 17.
The GFSR noted that systemically important financial institutions began this episode with adequate capital to absorb the likely level of credit losses. "Corporations, have, for the most part, been able to secure the financing they need to maintain their operations. However, the adjustment period is continuing and if the intermediation process stalls and financial conditions deteriorate further, the global financial sector and real economy could experience more serious negative repercussions," the report added.
Risks to macroeconomy
The report said that tighter monetary and credit conditions could reduce economic activity through a number of channels. A tightening of the supply of credit to weaker household borrowers could exacerbate the downturn in the U.S. housing market, while falling equity prices could reduce spending through the wealth effect and a weakening of consumer sentiment. Capital spending could also be curtailed owing to a higher cost of capital for the corporate sector. In addition, the dislocations in credit and funding markets could slow the overall provision and channeling of credit.
So far, emerging markets have weathered the turbulence relatively well in part because global growth has been strong and domestic macroeconomic policymaking has improved, though vigilance is still needed. Lower sovereign risks and their improving balance sheets supported by strong fundamentals are balanced against rising risks in some economies experiencing rapid credit growth, particularly where banks are using capital markets to finance credit growth. Furthermore, some private sector borrowers in certain emerging markets are adopting relatively risky strategies to raise financing.
Building a stronger system
Jaime Caruana, the IMF's Financial Counsellor and Director of the Monetary and Capital Markets Department, told reporters in Washington that the task for policymakers and market participants now was to learn lessons from the turbulence and use them to help make the global financial system stronger. "This does not require, as some have suggested, a new regulatory paradigm, but we must be ready to reexamine some elements of the framework we have, and to enhance it where necessary," he stated.
Key components of that framework include:
• Greater transparency. Accurate and timely information about underlying risks is critical for the market's ability to properly differentiate and price risk. Importantly, financial institutions need to make sure that they have robust funding strategies appropriately suited for their business model and that such funding strategies can accommodate stressful conditions. Greater transparency is needed on links between systemically important financial institutions and some of their off-balance sheet vehicles.
• Better risk monitoring. While securitization—and financial innovation more generally—has made markets more efficient, enhanced risk distribution, and facilitated the ongoing globalization of markets, there is a need to understand how securitization contributed to the current situation. In particular, the incentive structure may have weakened credit discipline, including incentives for originating lenders to monitor risk. Generally, the "originate and distribute" business model may need to be re-evaluated to ensure that adequate incentives are present.
• Improvements by rating agencies. Ratings and rating agencies will continue to be a fundamental component in the functioning of financial markets. Differentiated ratings scales for structured products could alert investors to the scope for more rapid ratings deterioration in such instruments, compared to, for instance, traditional corporate or sovereign bonds. Similarly, investors should ensure their portfolio allocation decisions are not overly reliant on letter ratings, and that such ratings should not be used as a substitute for appropriate due diligence.
• Better valuation. The valuation of complex products in a market where liquidity is insufficient to provide reliable market prices requires more consideration, in particular when assessing the appropriate allowance for liquidity risk premiums and financial institutions holding such securities as collateral. More work on best practices in liquidity management is necessary.
• A wider risk perimeter. The relevant perimeter of risk consolidation for banks has proved to be larger than the usual accounting or legal perimeters. The result is that risks that appear to have been distributed may yet return in various forms to the banks that distributed them. Reputational risk may force banks to internalize losses of legally independent entities, and new instruments or structures may mask off-balance sheet or contingent liabilities.
Policymakers face a delicate balancing act, the report stated. They must refine their prudential frameworks to encourage investors and institutions to maintain high credit standards and strengthen risk management systems in good times as well as bad, while preserving the enormous benefits from financial innovation seen in recent years.
Global Markets Face Protracted Adjustment
September 24, 2007
Synopsis:
- Markets face difficult period ahead
- Credit difficulties likely to have broader economic effects
- Market framework needs strengthening
Markets are likely to go through a protracted adjustment period following recent financial turbulence triggered by the collapse of the U.S. subprime mortgage market, according to the IMF's latest Global Financial Stability Report (GFSR).
The report, released on September 24, said the turbulence represents the first significant test of innovative financial instruments and markets used to distribute credit risks through the global financial system, with markets recognizing the extent that credit discipline has deteriorated in recent years. This has caused a repricing of credit risk and a retrenchment from risky assets that, combined with increased complexity and illiquidity, has led to disruptions in core funding markets and increased market turbulence in August.
Central banks in several countries have stepped in to help stabilize markets and mitigate the impact on the broader economy. But the GFSR said the period ahead may still be difficult as bouts of turbulence are likely to recur and the adjustment process will take time. "Credit conditions may not normalize soon, and some of the practices that have developed in the structured credit markets will have to change," it stated.
Slowing global growth
The report, prepared by the IMF's Monetary and Capital Markets Department twice a year, said the turbulence could impact global economic growth. "Although the dislocations, especially to short-term funding markets, have been large, and in some cases unexpected, the event hit during a period of above-average global growth. Our assessment is that credit losses and the liquidity constriction experienced to date will [nevertheless] likely slow the global expansion," it stated. The IMF will give its next forecast for world growth on October 17.
The GFSR noted that systemically important financial institutions began this episode with adequate capital to absorb the likely level of credit losses. "Corporations, have, for the most part, been able to secure the financing they need to maintain their operations. However, the adjustment period is continuing and if the intermediation process stalls and financial conditions deteriorate further, the global financial sector and real economy could experience more serious negative repercussions," the report added.
Risks to macroeconomy
The report said that tighter monetary and credit conditions could reduce economic activity through a number of channels. A tightening of the supply of credit to weaker household borrowers could exacerbate the downturn in the U.S. housing market, while falling equity prices could reduce spending through the wealth effect and a weakening of consumer sentiment. Capital spending could also be curtailed owing to a higher cost of capital for the corporate sector. In addition, the dislocations in credit and funding markets could slow the overall provision and channeling of credit.
So far, emerging markets have weathered the turbulence relatively well in part because global growth has been strong and domestic macroeconomic policymaking has improved, though vigilance is still needed. Lower sovereign risks and their improving balance sheets supported by strong fundamentals are balanced against rising risks in some economies experiencing rapid credit growth, particularly where banks are using capital markets to finance credit growth. Furthermore, some private sector borrowers in certain emerging markets are adopting relatively risky strategies to raise financing.
Building a stronger system
Jaime Caruana, the IMF's Financial Counsellor and Director of the Monetary and Capital Markets Department, told reporters in Washington that the task for policymakers and market participants now was to learn lessons from the turbulence and use them to help make the global financial system stronger. "This does not require, as some have suggested, a new regulatory paradigm, but we must be ready to reexamine some elements of the framework we have, and to enhance it where necessary," he stated.
Key components of that framework include:
• Greater transparency. Accurate and timely information about underlying risks is critical for the market's ability to properly differentiate and price risk. Importantly, financial institutions need to make sure that they have robust funding strategies appropriately suited for their business model and that such funding strategies can accommodate stressful conditions. Greater transparency is needed on links between systemically important financial institutions and some of their off-balance sheet vehicles.
• Better risk monitoring. While securitization—and financial innovation more generally—has made markets more efficient, enhanced risk distribution, and facilitated the ongoing globalization of markets, there is a need to understand how securitization contributed to the current situation. In particular, the incentive structure may have weakened credit discipline, including incentives for originating lenders to monitor risk. Generally, the "originate and distribute" business model may need to be re-evaluated to ensure that adequate incentives are present.
• Improvements by rating agencies. Ratings and rating agencies will continue to be a fundamental component in the functioning of financial markets. Differentiated ratings scales for structured products could alert investors to the scope for more rapid ratings deterioration in such instruments, compared to, for instance, traditional corporate or sovereign bonds. Similarly, investors should ensure their portfolio allocation decisions are not overly reliant on letter ratings, and that such ratings should not be used as a substitute for appropriate due diligence.
• Better valuation. The valuation of complex products in a market where liquidity is insufficient to provide reliable market prices requires more consideration, in particular when assessing the appropriate allowance for liquidity risk premiums and financial institutions holding such securities as collateral. More work on best practices in liquidity management is necessary.
• A wider risk perimeter. The relevant perimeter of risk consolidation for banks has proved to be larger than the usual accounting or legal perimeters. The result is that risks that appear to have been distributed may yet return in various forms to the banks that distributed them. Reputational risk may force banks to internalize losses of legally independent entities, and new instruments or structures may mask off-balance sheet or contingent liabilities.
Policymakers face a delicate balancing act, the report stated. They must refine their prudential frameworks to encourage investors and institutions to maintain high credit standards and strengthen risk management systems in good times as well as bad, while preserving the enormous benefits from financial innovation seen in recent years.
Monday, September 24, 2007
Old McKinsey Article on Changes in China's Capital Markets
A quiet revolution in China’s capital markets
Reforms that attracted little attention in the Western world mark a major step forward in the modernization of China’s capital markets.
James Ahn and David Cogman
(McKinsey Quarterly) When China first began privatizing its state-owned enterprises in the 1990s, the intent resembled that of other privatization programs around the world: to use capital market pressures to improve the performance of a large number of state-owned companies, many of which had weak balance sheets and were not as commercially focused as publicly held companies elsewhere. However, the government wanted to retain substantial shareholdings in and influence over these companies, which precluded the full privatization of state assets. To allow such companies to raise capital in that context, a two-tier ownership structure was put in place. Essentially, the original equity remained legally distinct from the new equity and formed a separate class of shares held by the existing state-linked owners. Although both classes had the same theoretical rights to profits and votes, the nontradable shares could not be sold on the public markets.
As Chinese companies have grown in scale and complexity, this system has faced several challenges. With a two-tier equity structure to manage, state-owned enterprises understandably concentrated on their most important stakeholders: the government and one or two of their largest holders of nontradable shares. Smaller holders of nontradable shares and public-market shareholders had very limited influence either on the governance of these companies or their investment decisions. This arrangement had a negative effect on the development of the Shanghai stock market. After falling from its peak in 2001, when the first wave of IPOs was complete, it progressively declined until mid-2005, losing more than half of its value. Although the two-tier share structure did not cause the slump, the uncertainties it created prevented the market from recovering over the following five years, and it also affected the overall credibility of Chinese stock markets, both as a source of capital and as a vehicle for investment.
Now a second-wave reform effort that does away with the two-tier structure is showing signs that it could spark a revolution in China’s capital markets by affecting M&A activity, the equity markets, and corporate governance. Two years ago, the government instituted new policies requiring companies to merge the two classes of shareholdings—in essence, making the nontradable shares liquid. As of this spring, more than 90 percent of state-owned enterprises had already completed plans to that effect; shareholders at the last few companies are expected to finalize their reform plans this year.
This seemingly technical reform received little attention outside China at the time but will have a profound impact on the structure of its capital markets if implementation proceeds as planned. Depending on the specific agreements negotiated between shareholder classes at each company, over the next five years, all shares in China’s state-owned enterprises will become fully tradable (Exhibit 1)—thousands of majority and large-minority stakes, spread across the entire economy. In several sectors, they account for up to two-thirds of the equity of all listed companies (Exhibit 2). These reforms will also encourage the development of the country’s M&A market by allowing industries to consolidate, improving corporate governance at state-owned enterprises, and expanding the capital markets.
Already, investors who lost significant wealth in previous years have returned to the market en masse, sparking an 18-month rally that has already reversed the decline of the previous five years—and continues at the time of writing. Although the market’s performance still attracts considerable attention from investors and the media, as well as the interest and concern of policy makers, we believe that the longer-term implications of the latest round of reforms are potentially far more significant.
Setting the stage for reform
As the reforms of the 1990s ran into challenges, the government put forward several different plans for merging the two kinds of shareholdings and making the nontradable shares tradable. None of these early trial runs won the support of the companies and shareholders involved. Public shareholders—in the minority—worried about what would happen to them if the two-tier equity structure were dismantled. Many feared that shareholder value would be massively diluted or that the market would be flooded with more new equity than it could absorb, thus structurally depressing prices.
Owners of nontradable shares had their own concerns. Deals involving nontradable stakes achieved relatively low valuations and faced considerable regulatory difficulty. Transactions involving the nontradable shares required approval from the State-Owned Assets Supervision and Administration Commission of the State Council1 (SASAC), a government department created to oversee and supervise listed and unlisted state-owned enterprises, and the valuations for such deals were typically quite low—during 2003 and 2004, around a third of the value of the traded shares, on average. Moreover, approval requires an assessment by SASAC that the valuation is “fair”—a determination based on the implied premium or discount to the estimated net asset value in the deal rather than on market-based notions of valuation. Because this approach often created large disparities between the valuations offered by strategic investors and the prices that companies could accept, it prevented deals from going through.
In 2005 China’s State Council, the country’s chief administrative authority, asked SASAC and the China Securities Regulatory Commission (CSRC), which regulates stock markets, to come up with a def initive scheme to end the two-tier equity structure. The two entities put in place reforms requiring all companies to implement plans to merge shareholdings. Although the companies themselves could determine the specific form and implementation of the plans, every plan had to include two key elements. First, no more than 5 percent of the previously nontradable shares could be sold in the first year following the accommodate’ approval of an integration plan and no more than 10 percent in the next year. Thereafter, companies could specify longer, voluntary lockup periods, but for most there would be no mandated restriction on the sale of shares in public markets. This measure spreads the impact of the reforms over several years: the first wave of companies to pass a reform plan will see their shares become tradable only in late 2007 and early 2008.
Second, the plans had to involve some compensation paid by the holders of nontradable shares to the owners of tradable ones. A consensus quickly emerged that holders of tradable shares should receive a bonus worth 30 percent of their premerger stake. Most plans approved bonuses to be paid in equity, though many combined it with cash and options. This compensation was a high price for the holders of nontradable shares to pay in order to make their shares tradable. The reforms therefore represented a gamble that eliminating the two-tier structure would attract enough liquidity to make the price worthwhile.
Negotiations over these plans involved instances of shareholder activism that would have been inconceivable in China when state-owned enterprises were first privatized. Under the reforms, each plan had to gain the support of a two-thirds majority of the nontradable shares in a vote and, separately, a two-thirds majority of the tradable shares. Almost all the public debate around share reform centered on compensation for the latter. In several high-profile cases, when companies made offers that were viewed as too low, public figures organized to vote down the plans and forced the companies to make more generous proposals.
M&A market development
These reforms are an important enabler for the development of the domestic M&A market. Many people suppose that the state shareholding SASAC oversees is a single, monolithic block. In fact it is a complex web of different types of shareholders—different layers of government, other state-owned enterprises, banks, and investment companies—often with very different intentions. Around 20 percent of the non-tradable equity is in sectors viewed by the government as strategic, where investment is closely controlled. Slightly more than 55 percent is held by strategic investors with a long-term interest in the companies: for instance, those in an upstream or downstream industry or local governments that have invested because the companies are major employers in the local economy. The remaining 25 percent represents shareholdings primarily by state-owned financial investors. Of their holdings, more than 75 percent of the equity (by value) is in sectors open to foreign investment.
As the reform plans go into effect, these financial investors in nontradable shares will for the first time be able to rationalize their noncore investments—a development that could create a wave of M&A activity. That would provide a powerful stimulus for the longer-term development of China’s domestic M&A market by forcing companies to develop a sorely lacking experience and confidence in doing deals. The domestic M&A market and cross-border investment in China may well grow too.
The biggest winners will be some of the more aggressive domestic companies looking to consolidate their sectors. What’s more, many executives of state-owned enterprises we’ve spoken with view the reform as an opportunity to manage their shareholder base more actively by encouraging the departure of passive, nonstrategic investors and bringing in new strategic ones, often foreign companies, that can help them develop their capabilities—for instance, in accessing new markets or technologies. Astute foreign companies seeking to expand their footprint in China will no doubt use the “unfreezing” of ownership structures to find strategic partners of their own.
Uncertainties remain. First, the government also recently instituted a new policy to create a transparent environment for M&A. The policy extensively revises the framework for foreign companies investing in China, specifying which industries are considered strategic and thus not open to 100 percent ownership by private or foreign investors. Many details on the policy’s application are unclear, and the definition of “strategic” is so flexible as to accommodate a number of interpretations. Second, SASAC’s role will continue to be critical in M&A activity involving state-owned enterprises. Historically, it has acted as custodian of the state-linked portfolio. Although the commission will still be responsible for overseeing state-owned shares, it has signaled interest in concentrating its efforts on the subset of truly strategic companies and progressively opening the rest to market forces. However, it is hard to say how quickly it will proceed down this path.
Capital market expansion
By allowing formerly nontradable shares to be sold, share reform creates a huge pool of equity potentially seeking liquidity—nearly twice the capitalization of the market today and far greater than the new liquidity seen in recent years. The risk of a massive inflow of new shares was a major concern prior to reform. Yet the supply of liquidity into the domestic equity market could grow even more. By the time the last of the nontradable shares becomes fully tradable, in 2012, current plans to reform the pension system and social security, if implemented, will have generated new funds for investment into the equity market. Those funds will be worth two-thirds of the value of all nontradable equity, or around 75 percent excluding sectors with investment restrictions.
This increase will greatly enlarge the base of domestic institutional investors, which today account for only 10 percent of all investors. That huge shift will create a professional-investor segment with holdings that exceed the capitalization of China’s domestic equity market today. Indeed, McKinsey research suggests that from 2005 to 2015 the funds under management of China’s asset-management industry could grow by as much as 24 percent a year. A professional, organized investor base would also be a powerful force in advancing best-practice governance.
Furthermore, as Chinese middle-class investors gain greater confidence in the equity market, they could generate enormous amounts of new liquidity by shifting their assets to shares from their present low-yielding bank deposits, which now account for almost three-quarters of China’s financial assets, compared with around 20 percent in the United States. (Diana Farrell and Susan Lund, Putting China’s Capital to Work: The Value of Financial System Reform, McKinsey Global Institute, May 2006, available free of charge online.) Because of exchange controls on China’s currency, the renminbi, this capital is concentrated within the country. The level of investment activity in recent years in real estate, art, and equities suggests a desire for viable domestic investment opportunities. In that case, domestic stock exchanges would become much more attractive for listing. Already, some high-profile Chinese companies that had scheduled IPOs in Hong Kong have changed their plans, deciding instead to pursue a Shanghai listing. Aside from currently favorable pricing, this move has considerable public-relations value.
Over time, a healthy, liquid equity market will also take pressure off the banking system, which today is the principal allocator of capital. A gradual shift from bank debt to equity as the primary source of funding for companies would improve the allocation of capital, make the ability to produce profits more important, and reduce the economy’s reliance on the banking system.
The development of domestic equity markets might also make foreign companies with significant operations in China consider the strategic merits of a Shanghai IPO of minority stakes in their Chinese holding companies. Indeed, a few joint ventures have already started to explore this possibility. Although a Shanghai listing would be complex, it has potential strategic benefits: it could mitigate the implicit foreign-exchange risk in funding and send a very strong signal of commitment to China and of success in localizing foreign businesses.
One major uncertainty that remains is how access to the equity markets will be managed. Historically, a government committee approved IPOs, and state-owned enterprises found it far easier to gain approval than did China’s emerging private-sector companies. With the recent explosive growth of the Shanghai stock market, companies have become much more interested in new IPOs. Greater access to the capital markets would make private-sector companies less reliant on debt financing, reducing the risks both for them and for the banking system in the event of an economic downturn. It would also allow private enterprise to play a greater role in accelerating the consolidation of many industries.
The reform of China’s capital markets still faces significant obstacles. China must further improve the accounting, legal, and regulatory framework needed for equity markets to reach their full potential. Although the government implemented a completely new set of accounting and auditing standards earlier this year, there are simply not enough Chinese-speaking accountants to meet the needs of every listed state-owned enterprise; accounting firms cannot hire and train people fast enough. Similarly, although the legal framework is well designed, enforcement and support—courts, arbitration procedures, experienced lawyers—are still lacking or inconsistent. Finally, effective market regulation typically requires independence and objectivity, but in today’s China no government department really enjoys them.
Corporate governance
Currently, China is sailing in uncharted waters as it explores ways to develop its own approach to improving corporate governance.2 One of SASAC’s most heavily publicized initiatives is aimed at encouraging the companies it supervises to upgrade the quality and transparency of their governance. Under the two-tier equity structure, even companies that wanted to implement corporate-governance systems more inclusive of the holders of tradable shares found it extremely difficult to do so. The reforms facilitate a number of important changes. Companies are now allowed to implement share-incentive schemes to align the interests of managers and all groups of shareholders. With the legal distinction between investor classes removed, the importance of the public-market investors will increase and so will the role of the equity markets in allocating capital. Companies will feel pressure for greater transparency in their decision-making processes and will focus on generating returns for all equity investors.
It may be too early to say how the development of corporate-governance standards will affect overseas investors, but we are cautiously optimistic. In recent years many industries in China have seen intense competition to build production capacity, partly because mechanisms for allocating capital rewarded companies for top-line growth rather than generating returns on capital. These problems were most noticeable in commodity industries (such as steel, cement, and paper), several of which now have structural overcapacity in China and are destabilizing export markets. A greater role for equity shareholders and better governance will increasingly push management teams to run companies for profitability and not just growth.
Implementing high-quality governance will be a long, challenging process. China will need to address a serious shortage of executives in the mainland with the skill and independence to be competent board members. Because many state-owned enterprises are at an early stage of installing best-practice governance, executives and potential board members will need time to translate their academic understanding of it into practice.
Over the past 25 years, China’s market reforms have delivered impressive results in developing product and labor markets. This latest round of privatization lays the foundation for similarly dramatic changes in the country’s capital markets and the market for corporate control.
Reforms that attracted little attention in the Western world mark a major step forward in the modernization of China’s capital markets.
James Ahn and David Cogman
(McKinsey Quarterly) When China first began privatizing its state-owned enterprises in the 1990s, the intent resembled that of other privatization programs around the world: to use capital market pressures to improve the performance of a large number of state-owned companies, many of which had weak balance sheets and were not as commercially focused as publicly held companies elsewhere. However, the government wanted to retain substantial shareholdings in and influence over these companies, which precluded the full privatization of state assets. To allow such companies to raise capital in that context, a two-tier ownership structure was put in place. Essentially, the original equity remained legally distinct from the new equity and formed a separate class of shares held by the existing state-linked owners. Although both classes had the same theoretical rights to profits and votes, the nontradable shares could not be sold on the public markets.
As Chinese companies have grown in scale and complexity, this system has faced several challenges. With a two-tier equity structure to manage, state-owned enterprises understandably concentrated on their most important stakeholders: the government and one or two of their largest holders of nontradable shares. Smaller holders of nontradable shares and public-market shareholders had very limited influence either on the governance of these companies or their investment decisions. This arrangement had a negative effect on the development of the Shanghai stock market. After falling from its peak in 2001, when the first wave of IPOs was complete, it progressively declined until mid-2005, losing more than half of its value. Although the two-tier share structure did not cause the slump, the uncertainties it created prevented the market from recovering over the following five years, and it also affected the overall credibility of Chinese stock markets, both as a source of capital and as a vehicle for investment.
Now a second-wave reform effort that does away with the two-tier structure is showing signs that it could spark a revolution in China’s capital markets by affecting M&A activity, the equity markets, and corporate governance. Two years ago, the government instituted new policies requiring companies to merge the two classes of shareholdings—in essence, making the nontradable shares liquid. As of this spring, more than 90 percent of state-owned enterprises had already completed plans to that effect; shareholders at the last few companies are expected to finalize their reform plans this year.
This seemingly technical reform received little attention outside China at the time but will have a profound impact on the structure of its capital markets if implementation proceeds as planned. Depending on the specific agreements negotiated between shareholder classes at each company, over the next five years, all shares in China’s state-owned enterprises will become fully tradable (Exhibit 1)—thousands of majority and large-minority stakes, spread across the entire economy. In several sectors, they account for up to two-thirds of the equity of all listed companies (Exhibit 2). These reforms will also encourage the development of the country’s M&A market by allowing industries to consolidate, improving corporate governance at state-owned enterprises, and expanding the capital markets.
Already, investors who lost significant wealth in previous years have returned to the market en masse, sparking an 18-month rally that has already reversed the decline of the previous five years—and continues at the time of writing. Although the market’s performance still attracts considerable attention from investors and the media, as well as the interest and concern of policy makers, we believe that the longer-term implications of the latest round of reforms are potentially far more significant.
Setting the stage for reform
As the reforms of the 1990s ran into challenges, the government put forward several different plans for merging the two kinds of shareholdings and making the nontradable shares tradable. None of these early trial runs won the support of the companies and shareholders involved. Public shareholders—in the minority—worried about what would happen to them if the two-tier equity structure were dismantled. Many feared that shareholder value would be massively diluted or that the market would be flooded with more new equity than it could absorb, thus structurally depressing prices.
Owners of nontradable shares had their own concerns. Deals involving nontradable stakes achieved relatively low valuations and faced considerable regulatory difficulty. Transactions involving the nontradable shares required approval from the State-Owned Assets Supervision and Administration Commission of the State Council1 (SASAC), a government department created to oversee and supervise listed and unlisted state-owned enterprises, and the valuations for such deals were typically quite low—during 2003 and 2004, around a third of the value of the traded shares, on average. Moreover, approval requires an assessment by SASAC that the valuation is “fair”—a determination based on the implied premium or discount to the estimated net asset value in the deal rather than on market-based notions of valuation. Because this approach often created large disparities between the valuations offered by strategic investors and the prices that companies could accept, it prevented deals from going through.
In 2005 China’s State Council, the country’s chief administrative authority, asked SASAC and the China Securities Regulatory Commission (CSRC), which regulates stock markets, to come up with a def initive scheme to end the two-tier equity structure. The two entities put in place reforms requiring all companies to implement plans to merge shareholdings. Although the companies themselves could determine the specific form and implementation of the plans, every plan had to include two key elements. First, no more than 5 percent of the previously nontradable shares could be sold in the first year following the accommodate’ approval of an integration plan and no more than 10 percent in the next year. Thereafter, companies could specify longer, voluntary lockup periods, but for most there would be no mandated restriction on the sale of shares in public markets. This measure spreads the impact of the reforms over several years: the first wave of companies to pass a reform plan will see their shares become tradable only in late 2007 and early 2008.
Second, the plans had to involve some compensation paid by the holders of nontradable shares to the owners of tradable ones. A consensus quickly emerged that holders of tradable shares should receive a bonus worth 30 percent of their premerger stake. Most plans approved bonuses to be paid in equity, though many combined it with cash and options. This compensation was a high price for the holders of nontradable shares to pay in order to make their shares tradable. The reforms therefore represented a gamble that eliminating the two-tier structure would attract enough liquidity to make the price worthwhile.
Negotiations over these plans involved instances of shareholder activism that would have been inconceivable in China when state-owned enterprises were first privatized. Under the reforms, each plan had to gain the support of a two-thirds majority of the nontradable shares in a vote and, separately, a two-thirds majority of the tradable shares. Almost all the public debate around share reform centered on compensation for the latter. In several high-profile cases, when companies made offers that were viewed as too low, public figures organized to vote down the plans and forced the companies to make more generous proposals.
M&A market development
These reforms are an important enabler for the development of the domestic M&A market. Many people suppose that the state shareholding SASAC oversees is a single, monolithic block. In fact it is a complex web of different types of shareholders—different layers of government, other state-owned enterprises, banks, and investment companies—often with very different intentions. Around 20 percent of the non-tradable equity is in sectors viewed by the government as strategic, where investment is closely controlled. Slightly more than 55 percent is held by strategic investors with a long-term interest in the companies: for instance, those in an upstream or downstream industry or local governments that have invested because the companies are major employers in the local economy. The remaining 25 percent represents shareholdings primarily by state-owned financial investors. Of their holdings, more than 75 percent of the equity (by value) is in sectors open to foreign investment.
As the reform plans go into effect, these financial investors in nontradable shares will for the first time be able to rationalize their noncore investments—a development that could create a wave of M&A activity. That would provide a powerful stimulus for the longer-term development of China’s domestic M&A market by forcing companies to develop a sorely lacking experience and confidence in doing deals. The domestic M&A market and cross-border investment in China may well grow too.
The biggest winners will be some of the more aggressive domestic companies looking to consolidate their sectors. What’s more, many executives of state-owned enterprises we’ve spoken with view the reform as an opportunity to manage their shareholder base more actively by encouraging the departure of passive, nonstrategic investors and bringing in new strategic ones, often foreign companies, that can help them develop their capabilities—for instance, in accessing new markets or technologies. Astute foreign companies seeking to expand their footprint in China will no doubt use the “unfreezing” of ownership structures to find strategic partners of their own.
Uncertainties remain. First, the government also recently instituted a new policy to create a transparent environment for M&A. The policy extensively revises the framework for foreign companies investing in China, specifying which industries are considered strategic and thus not open to 100 percent ownership by private or foreign investors. Many details on the policy’s application are unclear, and the definition of “strategic” is so flexible as to accommodate a number of interpretations. Second, SASAC’s role will continue to be critical in M&A activity involving state-owned enterprises. Historically, it has acted as custodian of the state-linked portfolio. Although the commission will still be responsible for overseeing state-owned shares, it has signaled interest in concentrating its efforts on the subset of truly strategic companies and progressively opening the rest to market forces. However, it is hard to say how quickly it will proceed down this path.
Capital market expansion
By allowing formerly nontradable shares to be sold, share reform creates a huge pool of equity potentially seeking liquidity—nearly twice the capitalization of the market today and far greater than the new liquidity seen in recent years. The risk of a massive inflow of new shares was a major concern prior to reform. Yet the supply of liquidity into the domestic equity market could grow even more. By the time the last of the nontradable shares becomes fully tradable, in 2012, current plans to reform the pension system and social security, if implemented, will have generated new funds for investment into the equity market. Those funds will be worth two-thirds of the value of all nontradable equity, or around 75 percent excluding sectors with investment restrictions.
This increase will greatly enlarge the base of domestic institutional investors, which today account for only 10 percent of all investors. That huge shift will create a professional-investor segment with holdings that exceed the capitalization of China’s domestic equity market today. Indeed, McKinsey research suggests that from 2005 to 2015 the funds under management of China’s asset-management industry could grow by as much as 24 percent a year. A professional, organized investor base would also be a powerful force in advancing best-practice governance.
Furthermore, as Chinese middle-class investors gain greater confidence in the equity market, they could generate enormous amounts of new liquidity by shifting their assets to shares from their present low-yielding bank deposits, which now account for almost three-quarters of China’s financial assets, compared with around 20 percent in the United States. (Diana Farrell and Susan Lund, Putting China’s Capital to Work: The Value of Financial System Reform, McKinsey Global Institute, May 2006, available free of charge online.) Because of exchange controls on China’s currency, the renminbi, this capital is concentrated within the country. The level of investment activity in recent years in real estate, art, and equities suggests a desire for viable domestic investment opportunities. In that case, domestic stock exchanges would become much more attractive for listing. Already, some high-profile Chinese companies that had scheduled IPOs in Hong Kong have changed their plans, deciding instead to pursue a Shanghai listing. Aside from currently favorable pricing, this move has considerable public-relations value.
Over time, a healthy, liquid equity market will also take pressure off the banking system, which today is the principal allocator of capital. A gradual shift from bank debt to equity as the primary source of funding for companies would improve the allocation of capital, make the ability to produce profits more important, and reduce the economy’s reliance on the banking system.
The development of domestic equity markets might also make foreign companies with significant operations in China consider the strategic merits of a Shanghai IPO of minority stakes in their Chinese holding companies. Indeed, a few joint ventures have already started to explore this possibility. Although a Shanghai listing would be complex, it has potential strategic benefits: it could mitigate the implicit foreign-exchange risk in funding and send a very strong signal of commitment to China and of success in localizing foreign businesses.
One major uncertainty that remains is how access to the equity markets will be managed. Historically, a government committee approved IPOs, and state-owned enterprises found it far easier to gain approval than did China’s emerging private-sector companies. With the recent explosive growth of the Shanghai stock market, companies have become much more interested in new IPOs. Greater access to the capital markets would make private-sector companies less reliant on debt financing, reducing the risks both for them and for the banking system in the event of an economic downturn. It would also allow private enterprise to play a greater role in accelerating the consolidation of many industries.
The reform of China’s capital markets still faces significant obstacles. China must further improve the accounting, legal, and regulatory framework needed for equity markets to reach their full potential. Although the government implemented a completely new set of accounting and auditing standards earlier this year, there are simply not enough Chinese-speaking accountants to meet the needs of every listed state-owned enterprise; accounting firms cannot hire and train people fast enough. Similarly, although the legal framework is well designed, enforcement and support—courts, arbitration procedures, experienced lawyers—are still lacking or inconsistent. Finally, effective market regulation typically requires independence and objectivity, but in today’s China no government department really enjoys them.
Corporate governance
Currently, China is sailing in uncharted waters as it explores ways to develop its own approach to improving corporate governance.2 One of SASAC’s most heavily publicized initiatives is aimed at encouraging the companies it supervises to upgrade the quality and transparency of their governance. Under the two-tier equity structure, even companies that wanted to implement corporate-governance systems more inclusive of the holders of tradable shares found it extremely difficult to do so. The reforms facilitate a number of important changes. Companies are now allowed to implement share-incentive schemes to align the interests of managers and all groups of shareholders. With the legal distinction between investor classes removed, the importance of the public-market investors will increase and so will the role of the equity markets in allocating capital. Companies will feel pressure for greater transparency in their decision-making processes and will focus on generating returns for all equity investors.
It may be too early to say how the development of corporate-governance standards will affect overseas investors, but we are cautiously optimistic. In recent years many industries in China have seen intense competition to build production capacity, partly because mechanisms for allocating capital rewarded companies for top-line growth rather than generating returns on capital. These problems were most noticeable in commodity industries (such as steel, cement, and paper), several of which now have structural overcapacity in China and are destabilizing export markets. A greater role for equity shareholders and better governance will increasingly push management teams to run companies for profitability and not just growth.
Implementing high-quality governance will be a long, challenging process. China will need to address a serious shortage of executives in the mainland with the skill and independence to be competent board members. Because many state-owned enterprises are at an early stage of installing best-practice governance, executives and potential board members will need time to translate their academic understanding of it into practice.
Over the past 25 years, China’s market reforms have delivered impressive results in developing product and labor markets. This latest round of privatization lays the foundation for similarly dramatic changes in the country’s capital markets and the market for corporate control.
Dated Article from Minyanville - Perspectives on the Credit Markets
Minyan Mailbag: A Bird's-Eye View of the Credit Conundrum
Minyanville Staff
Aug 28, 2007 9:02 am
This letter comes from Minyan Peter, writing to Todd in response to his column yesterday, "Petty Morning Quarterback", and is reprinted here with permission for the benefit of the Minyanville community.
Todd, I am a new Minyan, but in my former life I helped build and ultimately ran a Wall Street asset-backed securities business, was treasurer of a top credit card company and treasurer of one of the largest banks in the Midwest. In light of the past several weeks in the markets, and in the interest of sharing, here are some observations that I think may be helpful to you and the Minyanville community at large.
First, having been there at the beginning, the genesis of the asset-backed commercial conduits was regulatory capital arbitrage. Through the conduits’ convoluted structures, banks were able to "lend" huge amounts off-balance sheet and collect fees on no-capital-required lines of credit. No one - and I mean no one - ever expected these conduits to move from off-balance sheet back on-balance sheet and I don't think the market yet understands the earnings, capital and liquidity impact of this migration. If you figure you need anywhere from 6-8% capital per dollar of loans, then a move of $1.0 trln from off-balance sheet to on requires $60-80 bln in additional equity capital. I don't know about you, but I don't see this kind of free capital sitting around.
Second, I don't think people appreciate the significance of the change in Fed policy that took place on Friday involving the brokerage affiliates of several money center banks. In the asset-backed commercial paper market, maturing commercial paper is normally either rolled over or replaced by loans from standby liquidity banks when it can't be rolled over. With Friday’s change, it would appear that investors now have the ability to "put" unmatured commercial paper back to the bank affiliated brokers - who in turn will pass it along through the Discount window to the Fed. In doing this, I believe the Fed has established a very dangerous precedent. If investors can now put unmatured CP to the banks (instead of waiting for the standby liquidity banks to fund at maturity), it may not be long before investors pressure the bank-affiliated brokers to accept MTNs and who knows what else further out the curve.
Third, the last consumer led recession was around 1990. Since then, the SEC has placed enormous pressure on the banks to minimize their loan loss reserves. The SEC hates earnings management and the loan loss provision has historically been a key way for banks to "save for a rainy day." I don't think the market yet appreciates the fact that banks are currently provisioned for the top of the market. (And, in fact, up until recently, most major banks reported net provision reductions over the last several quarters.) As credit continues to deteriorate, the earnings/capital hits will be enormous as provisions need to reflect higher and higher delinquency and loss rates. And, experience suggests, that when the banking regulators finally do begin to act (as they did in New England during the late 1980’s), the pendulum will push banks to over-reserve at what will ultimately be the bottom of the credit cycle.
Finally, no one is talking about it yet, but I think the market will soon begin to realize that the credit card lenders have in essence become the consumer lenders of last resort. As consumers have been shut out of the mortgage and home equity world, the last available credit is plastic. One statistic that I have found very troubling is the degree to which credit card balance growth is running ahead of retail sales growth - a key sign that the consumer is stretched. In normal times, you would expect aggregate credit card balance growth to run about in line with GDP and retail sales growth. This year it is running almost 2.5 times that. Clearly consumers are using their cards for far more than purchases. And my guess is that for many Americans their credit cards have become the latest, but potentially last, source of financing available. Because of the oversized credit card balance growth, however, I think the market is missing what is really happening within card issuer portfolios – particularly loss and delinquency data.
Today, no one seems to be very concerned about the increases in reported losses and delinquencies. However, when you start to normalize these statistics for the enormous balance growth we’ve seen, the increases in both are quite dramatic. To put this all together, take Target’s (TGT) latest financial results and you can see the numbers for real.
First, credit card balance growth was up 14% year-on-year - almost 1.5 times Target sales growth of 9.5%. Second, thanks to this balance growth, reported year-on-year delinquency ratios are up only a little bit (60+ days delinquencies of 3.5% versus 3.4% a year ago), but the dollars of delinquent accounts are up almost 18% - to $242 mln from $205 mln – and, as an aside, “late fees and other revenue” are up more than 36% year-on-year. Digging even deeper, you come away with more unanswered questions.
First, annualized net write-offs for the quarter were up 17% - 5.4% of loans versus 4.6% during the year ago quarter. But behind that, masked by 14% balance growth, there is a 32% increase in the dollars charged off. Further, and to me more troubling, Target dropped its loan loss allowance from 8.3% of loans at the end of July 2006 ($501 mln) to 7.4% at the end of July 2007 ($509 mln). Had Target kept its provision at 8.3% of loans, the incremental cost would have been over $64 mln or almost 40% of the pre-tax quarterly earnings of Target’s credit card business. Alternatively, had Target kept its provision at the same 1.8 times net charge-offs as last year (an 8.3% allowance on 4.6% in net write-offs), the required ending provision would have been over 9.7% of loans - at an incremental cost to the company of almost $144 mln – all but eliminating earnings from the credit card operation for the quarter. Put simply, when measured in dollars (rather than percentages of balances) Target’s nearly flat year-on-year loan loss allowance does not synch with the increase in loan balances, delinquencies, charge-offs, and late fees. And while I have used Target as an example, I don’t think Target is alone. As we have seen already in other parts of the credit markets, many banks and finance companies are managing their businesses as if today’s increases in credit deterioration are merely a “blip”, rather than the beginning of a broader, potentially more serious, decline. From where I sit, it looks like it is only going to get worse, and “it’s already in the cards.”
-Minyan Peter(Minyan Peter has positions in SPY, SKF, COF and TGT)
Minyanville Staff
Aug 28, 2007 9:02 am
This letter comes from Minyan Peter, writing to Todd in response to his column yesterday, "Petty Morning Quarterback", and is reprinted here with permission for the benefit of the Minyanville community.
Todd, I am a new Minyan, but in my former life I helped build and ultimately ran a Wall Street asset-backed securities business, was treasurer of a top credit card company and treasurer of one of the largest banks in the Midwest. In light of the past several weeks in the markets, and in the interest of sharing, here are some observations that I think may be helpful to you and the Minyanville community at large.
First, having been there at the beginning, the genesis of the asset-backed commercial conduits was regulatory capital arbitrage. Through the conduits’ convoluted structures, banks were able to "lend" huge amounts off-balance sheet and collect fees on no-capital-required lines of credit. No one - and I mean no one - ever expected these conduits to move from off-balance sheet back on-balance sheet and I don't think the market yet understands the earnings, capital and liquidity impact of this migration. If you figure you need anywhere from 6-8% capital per dollar of loans, then a move of $1.0 trln from off-balance sheet to on requires $60-80 bln in additional equity capital. I don't know about you, but I don't see this kind of free capital sitting around.
Second, I don't think people appreciate the significance of the change in Fed policy that took place on Friday involving the brokerage affiliates of several money center banks. In the asset-backed commercial paper market, maturing commercial paper is normally either rolled over or replaced by loans from standby liquidity banks when it can't be rolled over. With Friday’s change, it would appear that investors now have the ability to "put" unmatured commercial paper back to the bank affiliated brokers - who in turn will pass it along through the Discount window to the Fed. In doing this, I believe the Fed has established a very dangerous precedent. If investors can now put unmatured CP to the banks (instead of waiting for the standby liquidity banks to fund at maturity), it may not be long before investors pressure the bank-affiliated brokers to accept MTNs and who knows what else further out the curve.
Third, the last consumer led recession was around 1990. Since then, the SEC has placed enormous pressure on the banks to minimize their loan loss reserves. The SEC hates earnings management and the loan loss provision has historically been a key way for banks to "save for a rainy day." I don't think the market yet appreciates the fact that banks are currently provisioned for the top of the market. (And, in fact, up until recently, most major banks reported net provision reductions over the last several quarters.) As credit continues to deteriorate, the earnings/capital hits will be enormous as provisions need to reflect higher and higher delinquency and loss rates. And, experience suggests, that when the banking regulators finally do begin to act (as they did in New England during the late 1980’s), the pendulum will push banks to over-reserve at what will ultimately be the bottom of the credit cycle.
Finally, no one is talking about it yet, but I think the market will soon begin to realize that the credit card lenders have in essence become the consumer lenders of last resort. As consumers have been shut out of the mortgage and home equity world, the last available credit is plastic. One statistic that I have found very troubling is the degree to which credit card balance growth is running ahead of retail sales growth - a key sign that the consumer is stretched. In normal times, you would expect aggregate credit card balance growth to run about in line with GDP and retail sales growth. This year it is running almost 2.5 times that. Clearly consumers are using their cards for far more than purchases. And my guess is that for many Americans their credit cards have become the latest, but potentially last, source of financing available. Because of the oversized credit card balance growth, however, I think the market is missing what is really happening within card issuer portfolios – particularly loss and delinquency data.
Today, no one seems to be very concerned about the increases in reported losses and delinquencies. However, when you start to normalize these statistics for the enormous balance growth we’ve seen, the increases in both are quite dramatic. To put this all together, take Target’s (TGT) latest financial results and you can see the numbers for real.
First, credit card balance growth was up 14% year-on-year - almost 1.5 times Target sales growth of 9.5%. Second, thanks to this balance growth, reported year-on-year delinquency ratios are up only a little bit (60+ days delinquencies of 3.5% versus 3.4% a year ago), but the dollars of delinquent accounts are up almost 18% - to $242 mln from $205 mln – and, as an aside, “late fees and other revenue” are up more than 36% year-on-year. Digging even deeper, you come away with more unanswered questions.
First, annualized net write-offs for the quarter were up 17% - 5.4% of loans versus 4.6% during the year ago quarter. But behind that, masked by 14% balance growth, there is a 32% increase in the dollars charged off. Further, and to me more troubling, Target dropped its loan loss allowance from 8.3% of loans at the end of July 2006 ($501 mln) to 7.4% at the end of July 2007 ($509 mln). Had Target kept its provision at 8.3% of loans, the incremental cost would have been over $64 mln or almost 40% of the pre-tax quarterly earnings of Target’s credit card business. Alternatively, had Target kept its provision at the same 1.8 times net charge-offs as last year (an 8.3% allowance on 4.6% in net write-offs), the required ending provision would have been over 9.7% of loans - at an incremental cost to the company of almost $144 mln – all but eliminating earnings from the credit card operation for the quarter. Put simply, when measured in dollars (rather than percentages of balances) Target’s nearly flat year-on-year loan loss allowance does not synch with the increase in loan balances, delinquencies, charge-offs, and late fees. And while I have used Target as an example, I don’t think Target is alone. As we have seen already in other parts of the credit markets, many banks and finance companies are managing their businesses as if today’s increases in credit deterioration are merely a “blip”, rather than the beginning of a broader, potentially more serious, decline. From where I sit, it looks like it is only going to get worse, and “it’s already in the cards.”
-Minyan Peter(Minyan Peter has positions in SPY, SKF, COF and TGT)
Das speaks on future of credit derivatives
SuperModels
Are we headed for an epic bear market?
The credit bubble is just starting to unwind, a credit-derivative insider says. And while U.S. borrowers are being blamed for the mess, they were really just pawns in a global game.
By Jon Markman 9/20/2007 12:01 AM ET
Satyajit Das is laughing. It appears I have said something very funny, but I have no idea what it was. My only clue is that the laugh sounds somewhat pitying.
One of the world's leading experts on credit derivatives, Das is the author of a 4,200-page reference work on the subject, among a half-dozen other tomes. As a developer and marketer of the exotic instruments himself over the past 30 years. He seemed like the ideal industry insider to help us get to the bottom of the recent debt crunch -- and I expected him to defend and explain the practice.
I started by asking the Calcutta-born Australian whetherthe credit crisis was in what Americans would call the "third inning." This was pretty amusing, it seemed, judging from the laughter. So I tried again. "Second inning?" More laughter. "First?"
Still too optimistic. Das, who knows as much about global money flows as anyone in the world, stopped chuckling long enough to suggest that we're actually still in the middle of the national anthem before a game destined to go into extra innings. And it won't end well for the global economy.
An epic bear market Das is pretty droll for a math whiz, but his message is dead serious. He thinks we're on the verge of a bear market of epic proportions.
The cause: Massive levels of debt underlying the world economy system are about to unwind in a profound and persistent way.
He's not sure if it will play out like the 13-year decline of 90% in Japan from 1990 to 2003 that followed the bursting of a credit bubble there, or like the 15-year flat spot in the U.S. market from 1960 to 1975. But either way, he foresees hard times as an optimistic era of too much liquidity, too much leverage and too much financial engineering slowly and inevitably deflates.
Like an ex-mobster turning state's witness, Das has turned his back on his old pals in the derivatives biz to warn anyone who will listen -- mostly banks and hedge funds that pay him consulting fees -- that the jig is up.
Rather than joining the crowd that blames the mess on American slobs who took on more mortgage debt than they could afford and have endangered the world by stiffing lenders, he points a finger at three parties: regulators who stood by as U.S. banks developed ingenious but dangerous ways of shifting trillions of dollars of credit risk off their balance sheets and into the hands of unsophisticated foreign investors; hedge and pension fund managers who gorged on high-yield debt instruments they didn't understand; and financial engineers who built towers of "securitized" debt with math models that were fundamentally flawed.
"Defaulting middle-class U.S. homeowners are blamed, but they are merely a pawn in the game," he says. "Those loans were invented so that hedge funds would have high-yield debt to buy."
The liquidity factory Das' view sounds cynical, but it makes sense if you stop thinking about mortgages as a way for people to finance houses and think about them instead as a way for lenders to generate cash flow and create collateral during an era of a flat interest-rate curve.Although subprime U.S. loans seem like small change in the context of the multitrillion-dollar debt market, it turns out these high-yield instruments were an important part of the machine that Das calls the global "liquidity factory." Just like a small amount of gasoline can power an entire truck given the right combination of spark plugs, pistons and transmission, subprime loans became the fuel that underlays derivative securities many, many times their size.
Here's how it worked: In olden days, like 10 years ago, banks wrote and funded their own loans. In the new game, Das points out, banks "originate" loans, "warehouse" them on their balance sheet for a brief time, then "distribute" them to investors by packaging them into derivatives called collateralized debt obligations, or CDOs, and similar instruments. In this scheme, banks don't need to tie up as much capital, so they can put more money out on loan.
The more loans that were sold, the more they could use as collateral for more loans, so credit standards were lowered to get more paper out the door -- a task that was accelerated in recent years via fly-by-night brokers now accused of predatory lending practices.
Buyers of these credit risks in CDO form were insurance companies, pension funds and hedge-fund managers from Bonn to Beijing. Because money was readily available at low interest rates in Japan and the United States, these managers leveraged up their bets by buying the CDOs with borrowed funds.
So if you follow the bouncing ball, borrowed money bought borrowed money. And then because they had the blessing of credit-ratings agencies relying on mathematical models suggesting that they would rarely default, these CDOs were in turn used as collateral to do more borrowing.
In this way, Das points out, credit risk moved from banks, where it was regulated and observable, to places where it was less regulated and difficult to identify.
Turning $1 into $20 The liquidity factory was self-perpetuating and seemingly unstoppable. As assets bought with borrowed money rose in value, players could borrow more money against them, and it thus seemed logical to borrow even more to increase returns. Bankers figured out how to strip money out of existing assets to do so, much as a homeowner might strip equity from his house to buy another house.
These triple-borrowed assets were then in turn increasingly used as collateral for commercial paper -- the short-term borrowings of banks and corporations -- which was purchased by supposedly low-risk money market funds.
According to Das' figures, up to 53% of the $2.2 trillion commercial paper in the U.S. market is now asset-backed, with about 50% of that in mortgages.
When you add it all up, according to Das' research, a single dollar of "real" capital supports $20 to $30 of loans. This spiral of borrowing on an increasingly thin base of real assets, writ large and in nearly infinite variety, ultimately created a world in which derivatives outstanding earlier this year stood at $485 trillion -- or eight times total global gross domestic product of $60 trillion.
Without a central governmental authority keeping tabs on these cross-border flows and ensuring a standard of record-keeping and quality, investors increasingly didn't know what they were buying or what any given security was really worth.
A painful unwinding Now here is where the U.S. mortgage holder shows up again. As subprime loan default rates doubled, in contravention of what the models forecast, the CDOs those mortgages backed began to collapse. Because they were so hard to value, banks and funds started looking at all CDOs and other paper backed by mortgages with suspicion, and refused to accept them as collateral for the sort of short-term borrowing that underpins today's money markets.
Through late last month, according to Das, as much as $300 billion in leveraged finance loans had been "orphaned," which means that they can't be sold off or used as collateral.
What the Fed can’t do
Investors are abuzz over the Fed’s interest-rate decision, but the Federal Reserve can’t fix everything, cautions MSN Money’s Jim Jubak. Lower interest rates alone won’t boost confidence in the debt market.
One of the wonders of leverage is that it amplifies losses on the way down just as it amplifies gains on the way up. The more an asset that is bought with borrowed money falls in value, the more you have to sell other stuff to fulfill the loan-to-value covenants. It's a vicious cycle. In this context, banks' objective was to prevent customers from selling their derivates at a discount because they would then have to mark down the value of all the other assets in the debt chain, an event that would lead to the need to make margin calls on customers already thin on cash.
Now it may seem hard to believe, but much of the past few years' advance in the stock market was underwritten by CDO-type instruments which go under the heading of "structured finance." I'm talking about private-equity takeovers, leveraged buyouts and corporate stock buybacks -- the works.
So to the extent that the structured finance market is coming undone, not only will those pillars of strength for equities be knocked away, but many recent deals that were predicated on the easy availability of money will likely also go bust, Das says.
That is why he considers the current market volatility much more profound than a simple "correction" in prices. He sees it as a gigantic liquidity bubble unwinding -- a process that can take a long, long time.
While you might think that the U.S. Federal Reserve can help prevent disaster by lowering interest rates dramatically, as they did Wednesday, the evidence is not at all clear.
The problem, after all, is not the amount of money in the system but the fact that buyers are in the process of rejecting the entire new risk-transfer model and its associated leverage and counterparty risks.
Lower rates will not help that. "At best," Das says, "they help smooth the transition."
The fine print Das notes that Japan in the 1990s lowered interest rates to zero and the country still suffered through a prolonged recession. His timetable for the start of the next serious phase of the unwinding is later this year or early 2008. . . . Das' most readable book for laypeople is "Traders, Guns & Money," an amusing exposé of high finance, published last year. Das occasionally writes a blog at his publisher's Web site. Also available are a boxed set of his reference books on derivatives and his book specifically on CDOs. . . .
Perhaps the oddest line on the subject by a world leader was uttered by Luiz Inacio Lula da Silva, the president of Brazil. Asked if he was worried about the effects of the credit crunch in his country, he dismissively called it "an eminently American crisis" caused by people trying to make a lot of "third-class money." . . . CDOs were first widely used back in the late 1980s by Drexel Burnham Lambert junk-bond king Michael Milken to sell off damaged and previously unsellable debt in a way that was more palatable to customers.
Are we headed for an epic bear market?
The credit bubble is just starting to unwind, a credit-derivative insider says. And while U.S. borrowers are being blamed for the mess, they were really just pawns in a global game.
By Jon Markman 9/20/2007 12:01 AM ET
Satyajit Das is laughing. It appears I have said something very funny, but I have no idea what it was. My only clue is that the laugh sounds somewhat pitying.
One of the world's leading experts on credit derivatives, Das is the author of a 4,200-page reference work on the subject, among a half-dozen other tomes. As a developer and marketer of the exotic instruments himself over the past 30 years. He seemed like the ideal industry insider to help us get to the bottom of the recent debt crunch -- and I expected him to defend and explain the practice.
I started by asking the Calcutta-born Australian whetherthe credit crisis was in what Americans would call the "third inning." This was pretty amusing, it seemed, judging from the laughter. So I tried again. "Second inning?" More laughter. "First?"
Still too optimistic. Das, who knows as much about global money flows as anyone in the world, stopped chuckling long enough to suggest that we're actually still in the middle of the national anthem before a game destined to go into extra innings. And it won't end well for the global economy.
An epic bear market Das is pretty droll for a math whiz, but his message is dead serious. He thinks we're on the verge of a bear market of epic proportions.
The cause: Massive levels of debt underlying the world economy system are about to unwind in a profound and persistent way.
He's not sure if it will play out like the 13-year decline of 90% in Japan from 1990 to 2003 that followed the bursting of a credit bubble there, or like the 15-year flat spot in the U.S. market from 1960 to 1975. But either way, he foresees hard times as an optimistic era of too much liquidity, too much leverage and too much financial engineering slowly and inevitably deflates.
Like an ex-mobster turning state's witness, Das has turned his back on his old pals in the derivatives biz to warn anyone who will listen -- mostly banks and hedge funds that pay him consulting fees -- that the jig is up.
Rather than joining the crowd that blames the mess on American slobs who took on more mortgage debt than they could afford and have endangered the world by stiffing lenders, he points a finger at three parties: regulators who stood by as U.S. banks developed ingenious but dangerous ways of shifting trillions of dollars of credit risk off their balance sheets and into the hands of unsophisticated foreign investors; hedge and pension fund managers who gorged on high-yield debt instruments they didn't understand; and financial engineers who built towers of "securitized" debt with math models that were fundamentally flawed.
"Defaulting middle-class U.S. homeowners are blamed, but they are merely a pawn in the game," he says. "Those loans were invented so that hedge funds would have high-yield debt to buy."
The liquidity factory Das' view sounds cynical, but it makes sense if you stop thinking about mortgages as a way for people to finance houses and think about them instead as a way for lenders to generate cash flow and create collateral during an era of a flat interest-rate curve.Although subprime U.S. loans seem like small change in the context of the multitrillion-dollar debt market, it turns out these high-yield instruments were an important part of the machine that Das calls the global "liquidity factory." Just like a small amount of gasoline can power an entire truck given the right combination of spark plugs, pistons and transmission, subprime loans became the fuel that underlays derivative securities many, many times their size.
Here's how it worked: In olden days, like 10 years ago, banks wrote and funded their own loans. In the new game, Das points out, banks "originate" loans, "warehouse" them on their balance sheet for a brief time, then "distribute" them to investors by packaging them into derivatives called collateralized debt obligations, or CDOs, and similar instruments. In this scheme, banks don't need to tie up as much capital, so they can put more money out on loan.
The more loans that were sold, the more they could use as collateral for more loans, so credit standards were lowered to get more paper out the door -- a task that was accelerated in recent years via fly-by-night brokers now accused of predatory lending practices.
Buyers of these credit risks in CDO form were insurance companies, pension funds and hedge-fund managers from Bonn to Beijing. Because money was readily available at low interest rates in Japan and the United States, these managers leveraged up their bets by buying the CDOs with borrowed funds.
So if you follow the bouncing ball, borrowed money bought borrowed money. And then because they had the blessing of credit-ratings agencies relying on mathematical models suggesting that they would rarely default, these CDOs were in turn used as collateral to do more borrowing.
In this way, Das points out, credit risk moved from banks, where it was regulated and observable, to places where it was less regulated and difficult to identify.
Turning $1 into $20 The liquidity factory was self-perpetuating and seemingly unstoppable. As assets bought with borrowed money rose in value, players could borrow more money against them, and it thus seemed logical to borrow even more to increase returns. Bankers figured out how to strip money out of existing assets to do so, much as a homeowner might strip equity from his house to buy another house.
These triple-borrowed assets were then in turn increasingly used as collateral for commercial paper -- the short-term borrowings of banks and corporations -- which was purchased by supposedly low-risk money market funds.
According to Das' figures, up to 53% of the $2.2 trillion commercial paper in the U.S. market is now asset-backed, with about 50% of that in mortgages.
When you add it all up, according to Das' research, a single dollar of "real" capital supports $20 to $30 of loans. This spiral of borrowing on an increasingly thin base of real assets, writ large and in nearly infinite variety, ultimately created a world in which derivatives outstanding earlier this year stood at $485 trillion -- or eight times total global gross domestic product of $60 trillion.
Without a central governmental authority keeping tabs on these cross-border flows and ensuring a standard of record-keeping and quality, investors increasingly didn't know what they were buying or what any given security was really worth.
A painful unwinding Now here is where the U.S. mortgage holder shows up again. As subprime loan default rates doubled, in contravention of what the models forecast, the CDOs those mortgages backed began to collapse. Because they were so hard to value, banks and funds started looking at all CDOs and other paper backed by mortgages with suspicion, and refused to accept them as collateral for the sort of short-term borrowing that underpins today's money markets.
Through late last month, according to Das, as much as $300 billion in leveraged finance loans had been "orphaned," which means that they can't be sold off or used as collateral.
What the Fed can’t do
Investors are abuzz over the Fed’s interest-rate decision, but the Federal Reserve can’t fix everything, cautions MSN Money’s Jim Jubak. Lower interest rates alone won’t boost confidence in the debt market.
One of the wonders of leverage is that it amplifies losses on the way down just as it amplifies gains on the way up. The more an asset that is bought with borrowed money falls in value, the more you have to sell other stuff to fulfill the loan-to-value covenants. It's a vicious cycle. In this context, banks' objective was to prevent customers from selling their derivates at a discount because they would then have to mark down the value of all the other assets in the debt chain, an event that would lead to the need to make margin calls on customers already thin on cash.
Now it may seem hard to believe, but much of the past few years' advance in the stock market was underwritten by CDO-type instruments which go under the heading of "structured finance." I'm talking about private-equity takeovers, leveraged buyouts and corporate stock buybacks -- the works.
So to the extent that the structured finance market is coming undone, not only will those pillars of strength for equities be knocked away, but many recent deals that were predicated on the easy availability of money will likely also go bust, Das says.
That is why he considers the current market volatility much more profound than a simple "correction" in prices. He sees it as a gigantic liquidity bubble unwinding -- a process that can take a long, long time.
While you might think that the U.S. Federal Reserve can help prevent disaster by lowering interest rates dramatically, as they did Wednesday, the evidence is not at all clear.
The problem, after all, is not the amount of money in the system but the fact that buyers are in the process of rejecting the entire new risk-transfer model and its associated leverage and counterparty risks.
Lower rates will not help that. "At best," Das says, "they help smooth the transition."
The fine print Das notes that Japan in the 1990s lowered interest rates to zero and the country still suffered through a prolonged recession. His timetable for the start of the next serious phase of the unwinding is later this year or early 2008. . . . Das' most readable book for laypeople is "Traders, Guns & Money," an amusing exposé of high finance, published last year. Das occasionally writes a blog at his publisher's Web site. Also available are a boxed set of his reference books on derivatives and his book specifically on CDOs. . . .
Perhaps the oddest line on the subject by a world leader was uttered by Luiz Inacio Lula da Silva, the president of Brazil. Asked if he was worried about the effects of the credit crunch in his country, he dismissively called it "an eminently American crisis" caused by people trying to make a lot of "third-class money." . . . CDOs were first widely used back in the late 1980s by Drexel Burnham Lambert junk-bond king Michael Milken to sell off damaged and previously unsellable debt in a way that was more palatable to customers.
Saturday, September 22, 2007
Infrastructure Finance in India - Case Study of Bangalore Airport
India: Greenfield Airports In India – A Case Study Of The Bangalore International Airport
19 September 2007
Article by Sumeet Kachwaha
*Transcript of talk delivered by Sumeet Kachwaha at the Inter Pacific Bar Association Annual Conference; Beijing, 2007.
Introduction and background:
When one looks at the current huzzle and buzzle around privatization of infrastructure in India, it is difficult to imagine that just about six years back, privatization was virtually unknown in India. The story started with the Road sector in the late 1990’s but that too initially was not under the BOT Model. The project was funded by the Government through a 1% cess on diesel. Infrastructure bonds were floated where the Public Sector Corporations invested. It was only in this millennium that privatization, as properly understood was adopted as a Government policy.
Why privatize?
Look at the Airport sector alone. This sector has witnessed a growth of 35% on an average year upon year for the last six years (global growth is only about 9% per annum). The growth is fuelled by the robust economy and indeed infrastructure leads to economic growth thus completing the cycle. It is estimated that had the infrastructural gap not been there, India’s GDP would have been 2% higher per annum - and indeed would have been at about par with the phenomenal growth China has achieved.
Currently the airport infrastructure is totally inadequate. It is fairly common for flights to hover around airports due to congestion, waiting to get landing permission or waiting at the ground in the queue to take off. To give an idea of infrastructure gap, the Delhi Airport as of now has a capacity to handle 12 million passengers per annum but it is actually carrying 16.5 million passengers per annum, which is expected to grow to 20 million passengers by next year.
Airport modernization is therefore some thing which we could have done with as of yesterday. The Government cannot cope up with the demand - and hence privatization is necessary.
Snap shot of the future:
We have two "green field" airport projects where the concession agreements have already been signed. These are for the international airports at Bangalore and Hyderabad, expected to be completed next year. We have two "brown field" airport projects for Delhi and Mumbai to be completed by 2010. We are in the process of inviting bids for 6 more green field airports in metro cities and 35 brown field airports in the non-metro cities. So one can see what a happening sector this is currently in India.
The Bangalore International Airport:
In this talk, I propose to take up the Bangalore green field airport which was signed off by India in July 2004 as the model for our discussion. In fact the next concession agreement for Hyderabad which was entered into six months later was virtually on the same lines and these two are the only green field concession agreements signed so far. There is no "Model Concession Agreement" announced by the Government for future projects (though it is proposed to come out with one some time in the future).
Structuring:
Though the concessionaire for the Bangalore airport is a private limited company, the Government through its agencies and instrumentalities holds 26% shareholding – (the break up being 13% by the Central Government and 13% by the State Government). This 26% shareholding ensures that the Government is able to veto certain "fundamental resolutions" which as per the Indian Companies Act require a minimum of 75% shareholders vote. For instance, issuance of new shares; change of directors; change of auditors etc. all require at least 75% shareholders vote. Hence the Government does retain some sort of control in the venture. Amongst the private players in Bangalore airport, Siemens of Germany have the majority 40%. Zurich airport holds 17%.
Description of the project:
Let me begin by briefly sketching salient features of the Bangalore Airport. The site is situated about 29 k.m. from Bangalore and covers about 4300 acres. The airport design allows a second runway to come up in the near future with a separation distance of about 2 k.m. between the two run ways. The run way would be approximately 4000 mtrs. in length with a width of 60 mtrs. The airport would be at par with a world class international airport.
A significant part of the project is permissible for "Non-Airport" activities. The concessionaire can develop up to 300 acres land commercially for any activity not connected with the airport. In this 300 acres the concessionaire is free to set up not only hotels or malls - it can even go for Special Economic Zones, manufacturing factories, country clubs, golf courses, power plant etc. Considering that this huge chunk of prime land comes to the concessionaire on a long term lease, virtually free of cost, it is easy to imagine that this would be the commercial backbone of the project.
Nature of the concession:
Basically the concession is for Development, Construction, Operation & Maintenance of the airport. The agreement allows the concessionaire to develop, construct, operate and maintain the Bangalore International Airport for a period of 30 years, extendable at its sole option for another 30 years (i.e. total 60 years). The land for the same is leased by the State Government.
The concessionaire has the burden to independently evaluate the scope of the project and be responsible for all risks which may exist in relation thereto. It is obliged to follow good industry practices and all applicable laws.
The Government on the other hand, undertakes to support the project. Article 5.4 of the concession agreement states that in so many words: ("GOI acknowledges and supports the implementation of the project"). It further states that the Government of India will not take any steps or action in contradiction with the Concession Agreement which results in or would results in its shareholders or the lenders being deprived or substantially deprived of their investment or economic interest in the project. Further all statutory and non-statutory bodies under the control of the Central Government will act in compliance with the concession agreement as if they are a party thereto and the Government of India shall ensure that all statutory compliances as may be required in relation to the project are granted promptly. This is a unique feature of the Airport concession agreements In fact the concession agreements in the Port sector or Road sector do not have similar obligations on the Government. The Concession Agreement also insulates the concessionaire against competition by stating that no new airport would be allowed to be set up within 150 k.m. radius for a period of 25 years from the date of airport opening and further the Government of India will ensure that no other airport in India gets any unfair competitive advantage as compared to the Bangalore airport. Again a unique feature to be found in the airport concession agreements alone.
Monitoring of the project:
It is provided that the Government shall not intervene in or interrupt in the design, construction, completion, commissioning, maintenance, monitoring or developing of the airport unless it is on account of national emergency or as per any existing law or for public safety. If intervention is on account of public safety, it shall be limited in time and for a period to be mutually agreed between the parties. The parties agree to set up a joint Co-ordination Committee comprising of representatives of the State and private parties to monitor the implementation of the project at all stages including post-completion.
The airport performance shall be monitored through passenger survey and as per the IATA Global Airport Monitoring survey standards.
Charges which can be levied:
As mentioned earlier the concessionaire is free to develop approximately 300 acres for non- airport activities (which indeed is to fund and finance the project). The charges here are not subject to Government control and will be free market driven. However Airport Charges i.e. which ultimately fall on the passengers shall be fixed with the approval of the Ministry of Civil Aviation. This would include passengers fees, landing charges, user development fees etc. These charges would be fixed on the basis of the current charges in place for other airports in India and shall be consistent with the International Civil Aviation Organisation’s policies on charges for airports.
Heads of risks:
Before we get into an evaluation and allocation of risks let’s just pause and see what is the nature of the contract. We are not looking at an ordinary construction contract. Airports are not mere place for aero-planes to land or take off. They involve public interest, convenience and safety. Besides construction of airport building, ATC tower, administrative buildings etc. they can encompasses mini-townships, commercial areas, Special Economic Zones (modeled on China’s experience) and indeed manufacturing factories, golf course, country clubs etc. Therefore the project is both mammoth and diverse. Then we are not only looking at a mammoth and diverse project - we are looking at it over a period of 60 years!
How large is a period of 60 years in the life of a nation can perhaps be best illustrated if we consider that India was not even an independent nation 60 years back and indeed the history of civil aviation is probably not much more than 60 years. Unimaginable changes can and will take place in 60 years. So the public element; complexity and diversity of the project and the length of the concession agreement are all so vast, that it would be some what naïve to try and enumerate all risks associated with the project or indeed to try and address them through a contractual process of allocation of risks.
With this note of self – caution, I propose to briefly deal with allocation of risks in green-field airport privatization under the following 5 heads:
- delays and consequences of delay in the airport opening;
- change in law and the risks involved therein;
- termination of agreement due to default of either party;
- The role of the regulatory authority; and
- dispute resolution.
i. Delays:
The target date for airport opening is stipulated as 33 months from the date of financial closure and from this date (i.e. date of airport opening) the concession period is to start running. In other infrastructure sectors like Roads or Ports, the concession period starts to run from the date of signing of the concession agreement. This is the greatest incentive and at the same time coercive measure to ensure timely completion of the project. For example, if the concessionaire is able to complete the project even before the target date of opening, it gets its reward automatically in the form of the extra concession period it "earns" for itself and if he delays it, he eats into the concession period and therefore the profits. One would have thought this to be a fairly sensible approach of reward and punishment. However in the airport sector one finds the provision for delays to be rather soft on the concessionaire. Firstly the 33 months period for completion can be extended by as much as six months if it can be shown that the delay was on account of failure by Government of its obligations under the agreement (surely a very vague ground for extension, which if invoked would probably end up in dispute). After the six months extension liquidated damages kick in which are around US$ 2250 per day (once again a fairly nominal amount one would think considering the public interest involved in expediting the opening). Further, if for another six months the airport does not open then it becoming an "event of default", which has its own cure period etc. Finally – it will lead to termination of the contract. This gives easily up to 2 years or so to a defaulting concessionaire to extend the deadline without having the project cancelled on account of delay.
One would think that where the total time for opening is 33 months, to allow such a large period before termination is perhaps not justified.
ii. Change in law:
It is obvious that a concession agreement over a long period of time cannot guarantee against change of law. The concession agreement divides and treats the subject of change of law in two categories – the first is where a change in law entitles the concessionaire to some compensation and the second is where it does not entitle the concessionaire to any compensation.
The "no compensation" cases or case where the concessionaire is not entitled to any benefit on account of change in law are those which relate to any of the following 4 types of statutes.
- any non – Federal (or State) law
- any environmental law
- any labour law, or
- any tax law
Hence change of law under any of these statutes would not entail any compensation to the concessionaire for any loss which may be occasioned to it. In tax laws however there is a further refinement. If there is any tax benefit which is currently allowed to the concessionaire, it cannot be taken away by change of law without corresponding compensation. For instance, one benefit the infrastructure sector (including private airports) enjoy is a 10 year income tax holiday which can be availed of at any time during a 15 year period. Save for such current tax benefits, the Legislature is free to amend its tax laws to the detriment of the concessionaire and the concessionaire has no relief against the same.
As regards the second category laws i.e. other than the above four, it is envisaged that if there is any change of law, which results in a financial loss or burden in connection with the development or operation of the airport and the affect to which exceeds over US$ 200000 in any given year, then the concessionaire may notify the Government and propose amendments to the contract so as it is put in the same financial position it would have been, had there been no such change in law. If the parties do not agree to the amendments necessary, the matter would be settled through the Dispute Resolution Mechanism.
It would be noticed that this some what limited insulation against change in law is only in relation to "airport activities" and does not cover the "non-airport activities". More significantly it leaves it to the parties to hammer out an agreement as would suffice restitution. This is not very satisfactory, as typically Government bureaucrats are ill-suited and may be naturally reluctant to take upon themselves the delicate balancing act. There would be delays in decision making or decision making would not be free from controversy or it may be ad hoc and lack transparency and invariably it would be short of expectations. All this would lead to dispute. Perhaps a more efficient mechanism to deal with this may have been to set up Dispute Review Boards (DRBs) till such time as the Independent Regulator is in place.
iii. Termination of the agreement due to default:
The Agreement enumerates the "events" which would tantamount to "events of default" for either party. Once an event of default (as defined) takes place, a 120 days cure, period is stipulated in the first instance. If there is no cure a notice of termination may follow. Once notice of termination is issued, two consequences would follow: (i) Government would acquire the airport and all rights, interest and titles of the concessionaire relating thereto, and (ii) have the option to acquire and take over the non – airport activities. It is to be noted that the airport would be taken over even though the termination may be due to the Government’s own default.
After take over of airport comes the issue of compensation. If it is the concessionaire’s default then the only compensation allowed to it is: (i) 100% of the outstanding debt and (ii) value of investment of the concessionaire in the non-airport activities taken over by the Government consequent upon take over.
If on the other hand, it is a Government’s default (and yet the airport is taken over) then the compensation is more liberal. It includes: (i) the outstanding debt or "Settlement Amount" (as defined) whichever is higher. Settlement Amount would include the net current asset; gross fixed asset; intangible asset etc. (ii) value of investment in the non - airport activities which the Government decides to take over and (iii) damages.
iv. Role of Regulatory Authorities:
In infrastructure projects involving the public an independent regulatory authority has become necessary. Accordingly the Concession Agreement envisages that an Independent Regulatory Authority would be set up to regulate any aspect of the airport activity. Very vast powers are envisaged to be cast upon the Regulator. The Regulator would not only lay down or regulate standards, approve charges, impose penalties etc. – it would also settle disputes - not only between public and the Government and / or concessionaire in relation to the airport but also between the concessionaire and the Government.
Two points are noteworthy here – the first is that extremely vast powers have been cast upon the Regulator, to the extent which would ultimately lead to fading away of the parties contract. Ultimately the Regulator will be the bed rock on which would depend the fate of the project. The second point is that the Regulator is not yet in place. The draft for enacting the law in this regard is still at the discussion level with the Government. Once the Cabinet approves it, a Bill will be drafted and placed before Parliament, which will then be debated. It will go through several sub-committees of Parliament. So we are at perhaps 3 years or so away from the stage when an Independent Regulator is constituted. Further, the history of an Independent Regulator in India is not very encouraging. Roads were the earliest to go for privatization and it was envisaged that they would have a Regulator – but there is not even a draft Act in place here. Same is the story for Ports and Oil and Gas. The radio broadcasting sector has been privatized for about 15 years now but there is no Regulator there as well. In the power sector Regulators are there in the State as well as the Centre level but the track record is not very encouraging. In short, we are years away from setting up an Independent Regulator (ensuring foremost his independence) then providing for transparency, accountability etc. in its working. The nuances of airport governance through Regulators is yet to be worked out. What will be the regulatory philosophy has yet to be developed. There is yet to be consolidation and standardization in the field. The Government is still debating preliminary issues as to the constitution and composition of the Regulators. One set of thinking is that instead of multiple regulators for multiple sectors, we should have only 2 or 3 Regulators. One would for instance deal with all types of carriage e.g. roads, airports, ports and even transmission lines – the other would deal with electricity, voice data etc. Another theory is that energy, communication and transportation should be under one Regulator. It would seem that we are years away from having an independent Regulator as can fulfill the enormous and all compassing role visualized for it is under the Concession Agreement and till that happens there will be ad hoc decision making lacking transparency and leading to disputes which may hamper the growth and privatization in the sector.
v. Dispute resolution:
Normally one would not except to hear about Dispute Resolution on the subject of risk allocation but here we have a some what unusual situation. The Concession Agreement envisages that Dispute Resolution shall be through ad hoc arbitration, under the UNCITRAL Rules and under the Indian Arbitration Act with the venue at New Delhi. This is of course not unusual by itself – as ad hoc arbitration is more common in India, compared to Institution arbitration. The peculiar feature in dispute resolution is that once an independent Regulator is put in place, the arbitration agreement shall stand overridden and disputes shall be referred to the Regulator. In other words, parties would no longer be able to go for arbitration. The only exception envisaged (to resort to the Regulator) is where sums are payable under an indemnity guarantee by the Government of India, to the concessionaire relating to Airport Charges (as defined). Here resort to arbitration is permissible (but not otherwise). There are two types of problems I envisage. First, international parties committing huge funds in a foreign jurisdiction will have far greater confidence in arbitration in a neutral country under the Rules of a neutral Arbitral Institute. This basic expectation is taken away under the airport Concession Agreement. The second issue is that once the Regulator is put in place (even if it is assumed that it would be independent and would efficiently deal with the disputes) it would naturally be subject to the hierarchy of the Indian legal system - which would mean that it would be subordinate to and amenable to the Writ jurisdiction of the High Court. Besides, writs by High Court, any decision of his can be appealed to the appellate authority. In short, one is therefore looking at three or four stages in dispute resolution. First, the decision by the regulatory authority, followed by decision of the appellate authority, followed by a Writ to the High Court followed by a discretionary appeal to the Supreme Court. Given the delays under the legal system, dispute resolution would become inefficient and expensive. Perhaps the Government should have segregated pure contractual disputes between the concessionaire and the Government and reserved these for international arbitration (which would have been as per the expectations of the international investing community also). The Regulator should step in only where public interest is involved. Dispute Review Boards should have also been envisaged in the Concession Agreement in a project of this type.
Conclusion:
To briefly conclude, India is firmly on the path of privatization in the airport sector. However the Concession Agreements do need a further in-depth look. Hopefully there would be a Model Concession agreement in the near future which would bring uniformity and address some of the issues which need a second look.
19 September 2007
Article by Sumeet Kachwaha
*Transcript of talk delivered by Sumeet Kachwaha at the Inter Pacific Bar Association Annual Conference; Beijing, 2007.
Introduction and background:
When one looks at the current huzzle and buzzle around privatization of infrastructure in India, it is difficult to imagine that just about six years back, privatization was virtually unknown in India. The story started with the Road sector in the late 1990’s but that too initially was not under the BOT Model. The project was funded by the Government through a 1% cess on diesel. Infrastructure bonds were floated where the Public Sector Corporations invested. It was only in this millennium that privatization, as properly understood was adopted as a Government policy.
Why privatize?
Look at the Airport sector alone. This sector has witnessed a growth of 35% on an average year upon year for the last six years (global growth is only about 9% per annum). The growth is fuelled by the robust economy and indeed infrastructure leads to economic growth thus completing the cycle. It is estimated that had the infrastructural gap not been there, India’s GDP would have been 2% higher per annum - and indeed would have been at about par with the phenomenal growth China has achieved.
Currently the airport infrastructure is totally inadequate. It is fairly common for flights to hover around airports due to congestion, waiting to get landing permission or waiting at the ground in the queue to take off. To give an idea of infrastructure gap, the Delhi Airport as of now has a capacity to handle 12 million passengers per annum but it is actually carrying 16.5 million passengers per annum, which is expected to grow to 20 million passengers by next year.
Airport modernization is therefore some thing which we could have done with as of yesterday. The Government cannot cope up with the demand - and hence privatization is necessary.
Snap shot of the future:
We have two "green field" airport projects where the concession agreements have already been signed. These are for the international airports at Bangalore and Hyderabad, expected to be completed next year. We have two "brown field" airport projects for Delhi and Mumbai to be completed by 2010. We are in the process of inviting bids for 6 more green field airports in metro cities and 35 brown field airports in the non-metro cities. So one can see what a happening sector this is currently in India.
The Bangalore International Airport:
In this talk, I propose to take up the Bangalore green field airport which was signed off by India in July 2004 as the model for our discussion. In fact the next concession agreement for Hyderabad which was entered into six months later was virtually on the same lines and these two are the only green field concession agreements signed so far. There is no "Model Concession Agreement" announced by the Government for future projects (though it is proposed to come out with one some time in the future).
Structuring:
Though the concessionaire for the Bangalore airport is a private limited company, the Government through its agencies and instrumentalities holds 26% shareholding – (the break up being 13% by the Central Government and 13% by the State Government). This 26% shareholding ensures that the Government is able to veto certain "fundamental resolutions" which as per the Indian Companies Act require a minimum of 75% shareholders vote. For instance, issuance of new shares; change of directors; change of auditors etc. all require at least 75% shareholders vote. Hence the Government does retain some sort of control in the venture. Amongst the private players in Bangalore airport, Siemens of Germany have the majority 40%. Zurich airport holds 17%.
Description of the project:
Let me begin by briefly sketching salient features of the Bangalore Airport. The site is situated about 29 k.m. from Bangalore and covers about 4300 acres. The airport design allows a second runway to come up in the near future with a separation distance of about 2 k.m. between the two run ways. The run way would be approximately 4000 mtrs. in length with a width of 60 mtrs. The airport would be at par with a world class international airport.
A significant part of the project is permissible for "Non-Airport" activities. The concessionaire can develop up to 300 acres land commercially for any activity not connected with the airport. In this 300 acres the concessionaire is free to set up not only hotels or malls - it can even go for Special Economic Zones, manufacturing factories, country clubs, golf courses, power plant etc. Considering that this huge chunk of prime land comes to the concessionaire on a long term lease, virtually free of cost, it is easy to imagine that this would be the commercial backbone of the project.
Nature of the concession:
Basically the concession is for Development, Construction, Operation & Maintenance of the airport. The agreement allows the concessionaire to develop, construct, operate and maintain the Bangalore International Airport for a period of 30 years, extendable at its sole option for another 30 years (i.e. total 60 years). The land for the same is leased by the State Government.
The concessionaire has the burden to independently evaluate the scope of the project and be responsible for all risks which may exist in relation thereto. It is obliged to follow good industry practices and all applicable laws.
The Government on the other hand, undertakes to support the project. Article 5.4 of the concession agreement states that in so many words: ("GOI acknowledges and supports the implementation of the project"). It further states that the Government of India will not take any steps or action in contradiction with the Concession Agreement which results in or would results in its shareholders or the lenders being deprived or substantially deprived of their investment or economic interest in the project. Further all statutory and non-statutory bodies under the control of the Central Government will act in compliance with the concession agreement as if they are a party thereto and the Government of India shall ensure that all statutory compliances as may be required in relation to the project are granted promptly. This is a unique feature of the Airport concession agreements In fact the concession agreements in the Port sector or Road sector do not have similar obligations on the Government. The Concession Agreement also insulates the concessionaire against competition by stating that no new airport would be allowed to be set up within 150 k.m. radius for a period of 25 years from the date of airport opening and further the Government of India will ensure that no other airport in India gets any unfair competitive advantage as compared to the Bangalore airport. Again a unique feature to be found in the airport concession agreements alone.
Monitoring of the project:
It is provided that the Government shall not intervene in or interrupt in the design, construction, completion, commissioning, maintenance, monitoring or developing of the airport unless it is on account of national emergency or as per any existing law or for public safety. If intervention is on account of public safety, it shall be limited in time and for a period to be mutually agreed between the parties. The parties agree to set up a joint Co-ordination Committee comprising of representatives of the State and private parties to monitor the implementation of the project at all stages including post-completion.
The airport performance shall be monitored through passenger survey and as per the IATA Global Airport Monitoring survey standards.
Charges which can be levied:
As mentioned earlier the concessionaire is free to develop approximately 300 acres for non- airport activities (which indeed is to fund and finance the project). The charges here are not subject to Government control and will be free market driven. However Airport Charges i.e. which ultimately fall on the passengers shall be fixed with the approval of the Ministry of Civil Aviation. This would include passengers fees, landing charges, user development fees etc. These charges would be fixed on the basis of the current charges in place for other airports in India and shall be consistent with the International Civil Aviation Organisation’s policies on charges for airports.
Heads of risks:
Before we get into an evaluation and allocation of risks let’s just pause and see what is the nature of the contract. We are not looking at an ordinary construction contract. Airports are not mere place for aero-planes to land or take off. They involve public interest, convenience and safety. Besides construction of airport building, ATC tower, administrative buildings etc. they can encompasses mini-townships, commercial areas, Special Economic Zones (modeled on China’s experience) and indeed manufacturing factories, golf course, country clubs etc. Therefore the project is both mammoth and diverse. Then we are not only looking at a mammoth and diverse project - we are looking at it over a period of 60 years!
How large is a period of 60 years in the life of a nation can perhaps be best illustrated if we consider that India was not even an independent nation 60 years back and indeed the history of civil aviation is probably not much more than 60 years. Unimaginable changes can and will take place in 60 years. So the public element; complexity and diversity of the project and the length of the concession agreement are all so vast, that it would be some what naïve to try and enumerate all risks associated with the project or indeed to try and address them through a contractual process of allocation of risks.
With this note of self – caution, I propose to briefly deal with allocation of risks in green-field airport privatization under the following 5 heads:
- delays and consequences of delay in the airport opening;
- change in law and the risks involved therein;
- termination of agreement due to default of either party;
- The role of the regulatory authority; and
- dispute resolution.
i. Delays:
The target date for airport opening is stipulated as 33 months from the date of financial closure and from this date (i.e. date of airport opening) the concession period is to start running. In other infrastructure sectors like Roads or Ports, the concession period starts to run from the date of signing of the concession agreement. This is the greatest incentive and at the same time coercive measure to ensure timely completion of the project. For example, if the concessionaire is able to complete the project even before the target date of opening, it gets its reward automatically in the form of the extra concession period it "earns" for itself and if he delays it, he eats into the concession period and therefore the profits. One would have thought this to be a fairly sensible approach of reward and punishment. However in the airport sector one finds the provision for delays to be rather soft on the concessionaire. Firstly the 33 months period for completion can be extended by as much as six months if it can be shown that the delay was on account of failure by Government of its obligations under the agreement (surely a very vague ground for extension, which if invoked would probably end up in dispute). After the six months extension liquidated damages kick in which are around US$ 2250 per day (once again a fairly nominal amount one would think considering the public interest involved in expediting the opening). Further, if for another six months the airport does not open then it becoming an "event of default", which has its own cure period etc. Finally – it will lead to termination of the contract. This gives easily up to 2 years or so to a defaulting concessionaire to extend the deadline without having the project cancelled on account of delay.
One would think that where the total time for opening is 33 months, to allow such a large period before termination is perhaps not justified.
ii. Change in law:
It is obvious that a concession agreement over a long period of time cannot guarantee against change of law. The concession agreement divides and treats the subject of change of law in two categories – the first is where a change in law entitles the concessionaire to some compensation and the second is where it does not entitle the concessionaire to any compensation.
The "no compensation" cases or case where the concessionaire is not entitled to any benefit on account of change in law are those which relate to any of the following 4 types of statutes.
- any non – Federal (or State) law
- any environmental law
- any labour law, or
- any tax law
Hence change of law under any of these statutes would not entail any compensation to the concessionaire for any loss which may be occasioned to it. In tax laws however there is a further refinement. If there is any tax benefit which is currently allowed to the concessionaire, it cannot be taken away by change of law without corresponding compensation. For instance, one benefit the infrastructure sector (including private airports) enjoy is a 10 year income tax holiday which can be availed of at any time during a 15 year period. Save for such current tax benefits, the Legislature is free to amend its tax laws to the detriment of the concessionaire and the concessionaire has no relief against the same.
As regards the second category laws i.e. other than the above four, it is envisaged that if there is any change of law, which results in a financial loss or burden in connection with the development or operation of the airport and the affect to which exceeds over US$ 200000 in any given year, then the concessionaire may notify the Government and propose amendments to the contract so as it is put in the same financial position it would have been, had there been no such change in law. If the parties do not agree to the amendments necessary, the matter would be settled through the Dispute Resolution Mechanism.
It would be noticed that this some what limited insulation against change in law is only in relation to "airport activities" and does not cover the "non-airport activities". More significantly it leaves it to the parties to hammer out an agreement as would suffice restitution. This is not very satisfactory, as typically Government bureaucrats are ill-suited and may be naturally reluctant to take upon themselves the delicate balancing act. There would be delays in decision making or decision making would not be free from controversy or it may be ad hoc and lack transparency and invariably it would be short of expectations. All this would lead to dispute. Perhaps a more efficient mechanism to deal with this may have been to set up Dispute Review Boards (DRBs) till such time as the Independent Regulator is in place.
iii. Termination of the agreement due to default:
The Agreement enumerates the "events" which would tantamount to "events of default" for either party. Once an event of default (as defined) takes place, a 120 days cure, period is stipulated in the first instance. If there is no cure a notice of termination may follow. Once notice of termination is issued, two consequences would follow: (i) Government would acquire the airport and all rights, interest and titles of the concessionaire relating thereto, and (ii) have the option to acquire and take over the non – airport activities. It is to be noted that the airport would be taken over even though the termination may be due to the Government’s own default.
After take over of airport comes the issue of compensation. If it is the concessionaire’s default then the only compensation allowed to it is: (i) 100% of the outstanding debt and (ii) value of investment of the concessionaire in the non-airport activities taken over by the Government consequent upon take over.
If on the other hand, it is a Government’s default (and yet the airport is taken over) then the compensation is more liberal. It includes: (i) the outstanding debt or "Settlement Amount" (as defined) whichever is higher. Settlement Amount would include the net current asset; gross fixed asset; intangible asset etc. (ii) value of investment in the non - airport activities which the Government decides to take over and (iii) damages.
iv. Role of Regulatory Authorities:
In infrastructure projects involving the public an independent regulatory authority has become necessary. Accordingly the Concession Agreement envisages that an Independent Regulatory Authority would be set up to regulate any aspect of the airport activity. Very vast powers are envisaged to be cast upon the Regulator. The Regulator would not only lay down or regulate standards, approve charges, impose penalties etc. – it would also settle disputes - not only between public and the Government and / or concessionaire in relation to the airport but also between the concessionaire and the Government.
Two points are noteworthy here – the first is that extremely vast powers have been cast upon the Regulator, to the extent which would ultimately lead to fading away of the parties contract. Ultimately the Regulator will be the bed rock on which would depend the fate of the project. The second point is that the Regulator is not yet in place. The draft for enacting the law in this regard is still at the discussion level with the Government. Once the Cabinet approves it, a Bill will be drafted and placed before Parliament, which will then be debated. It will go through several sub-committees of Parliament. So we are at perhaps 3 years or so away from the stage when an Independent Regulator is constituted. Further, the history of an Independent Regulator in India is not very encouraging. Roads were the earliest to go for privatization and it was envisaged that they would have a Regulator – but there is not even a draft Act in place here. Same is the story for Ports and Oil and Gas. The radio broadcasting sector has been privatized for about 15 years now but there is no Regulator there as well. In the power sector Regulators are there in the State as well as the Centre level but the track record is not very encouraging. In short, we are years away from setting up an Independent Regulator (ensuring foremost his independence) then providing for transparency, accountability etc. in its working. The nuances of airport governance through Regulators is yet to be worked out. What will be the regulatory philosophy has yet to be developed. There is yet to be consolidation and standardization in the field. The Government is still debating preliminary issues as to the constitution and composition of the Regulators. One set of thinking is that instead of multiple regulators for multiple sectors, we should have only 2 or 3 Regulators. One would for instance deal with all types of carriage e.g. roads, airports, ports and even transmission lines – the other would deal with electricity, voice data etc. Another theory is that energy, communication and transportation should be under one Regulator. It would seem that we are years away from having an independent Regulator as can fulfill the enormous and all compassing role visualized for it is under the Concession Agreement and till that happens there will be ad hoc decision making lacking transparency and leading to disputes which may hamper the growth and privatization in the sector.
v. Dispute resolution:
Normally one would not except to hear about Dispute Resolution on the subject of risk allocation but here we have a some what unusual situation. The Concession Agreement envisages that Dispute Resolution shall be through ad hoc arbitration, under the UNCITRAL Rules and under the Indian Arbitration Act with the venue at New Delhi. This is of course not unusual by itself – as ad hoc arbitration is more common in India, compared to Institution arbitration. The peculiar feature in dispute resolution is that once an independent Regulator is put in place, the arbitration agreement shall stand overridden and disputes shall be referred to the Regulator. In other words, parties would no longer be able to go for arbitration. The only exception envisaged (to resort to the Regulator) is where sums are payable under an indemnity guarantee by the Government of India, to the concessionaire relating to Airport Charges (as defined). Here resort to arbitration is permissible (but not otherwise). There are two types of problems I envisage. First, international parties committing huge funds in a foreign jurisdiction will have far greater confidence in arbitration in a neutral country under the Rules of a neutral Arbitral Institute. This basic expectation is taken away under the airport Concession Agreement. The second issue is that once the Regulator is put in place (even if it is assumed that it would be independent and would efficiently deal with the disputes) it would naturally be subject to the hierarchy of the Indian legal system - which would mean that it would be subordinate to and amenable to the Writ jurisdiction of the High Court. Besides, writs by High Court, any decision of his can be appealed to the appellate authority. In short, one is therefore looking at three or four stages in dispute resolution. First, the decision by the regulatory authority, followed by decision of the appellate authority, followed by a Writ to the High Court followed by a discretionary appeal to the Supreme Court. Given the delays under the legal system, dispute resolution would become inefficient and expensive. Perhaps the Government should have segregated pure contractual disputes between the concessionaire and the Government and reserved these for international arbitration (which would have been as per the expectations of the international investing community also). The Regulator should step in only where public interest is involved. Dispute Review Boards should have also been envisaged in the Concession Agreement in a project of this type.
Conclusion:
To briefly conclude, India is firmly on the path of privatization in the airport sector. However the Concession Agreements do need a further in-depth look. Hopefully there would be a Model Concession agreement in the near future which would bring uniformity and address some of the issues which need a second look.
Saturday, September 15, 2007
Perspectives - Approaching management from a programmer's perspective
Interview with Nintendo's president
Reported by Hobo Nikkan Itoi Shinbun
Itoi
Remember talking about the definition of "idea" before?
Iwata
The words of Mr.(Shigeru) Miyamoto, right?
Itoi
He said that ideas are "something which solves multiple issues at once". This notion seemed eye-opening to my staffs. Can you explain us a bit more about the intention of his words, and your analysis of it?
Iwata
Those words came out when we were designing a video game software. I think Mr.Miyamoto said it as an example of a method for designing video games. I actually perceive this as a very versatile concept, which can be applied to many aspects of life.
Itoi
Uh-huh.
Iwata
There's always the dilemma of "damned if you do, damned if you don't" when creating something. There are options that improve the product, and there are also options that work the other way. The thing is that you barely have cases in which there exists only a single problem. You usually have problems occurring everywhere, lots of them.
Itoi
Yes, yes.
Iwata
I'm not talking solely about designing a product. The same happens in organizations, or in personal relationships. Presenting a single antidote for a single problem doesn't get you anywhere. It always causes side effects. It sometimes even raises trouble to issues which were fine until then. People come up with many suggestions, but usually it only gives a solution to a single problem, and only that. A project doesn't advance much with a solution like that.
Itoi
I know what you mean.
Iwata
Often times, the game not being entertaining enough are the problems you face when designing video games. The more ideas put in, the more fun it brings forth, and people enjoy the game more. However, the amount of time and human resources that can be put into creation is always limited. It's not realistic to simply propose "more" of something when you have limitations. Sometimes, one single idea solves one problem, then another, and even issues that were thought to be totally unrelated.
Itoi
That does happen sometimes. (to the staffs) Interesting, isn't it?
All
(laugh)
Iwata
Mr.Miyamoto is constantly trying to find that kind of "idea". I mean, constantly. Persistently. One day he called me up suddenly, it was when I used to live in Yamanashi. (Mr.Iwata had been president of HAL Laboratory, Inc., which is located in Yamanashi Prefecture) Do you know what the first thing he said was?
"I got it!"
(laughing) I had no idea what he was talking about.
Itoi
(laugh)
Iwata
What he "got" was an idea for a game we were designing together. This idea was something that solved multiple issues, all at once.
Itoi
That's what he called an "idea".
Iwata
Exactly. One single inspiration that makes so many things work. That's what you call a "great idea", and finding that moves things forward, moves it towards the goal. Mr. Miyamoto thinks that it's the game director's task to find those "ideas".
Itoi
He didn't actually say this, right? You've picked this up working with him for a long time, observing his ways.
Iwata
Yes. I've seen him "get it" many times. Through those instances, I've come to learn his emphasis on that method, and how he guides projects to goals using that method.
Itoi
That's really interesting. (laugh)
Iwata
This really isn't limited to game design. The world is full of "damned if you do, damned if you don'ts". You call it "trade-off". Everyone is confronted with trade-offs. The more budget, the better. The more human resource, the better. The more time, the better. That's obvious. However, doing the obvious means doing the same thing with everyone else. That doesn't nurture competitiveness.
Itoi
It becomes a matter of who does it more.
Iwata
But when you find a solution by combining issues, the more unique it is, the more value it brings. When Mr.Miyamoto said "that's what you call an idea", it came to me. It's such a concept that applies to various aspects of life, so I really wanted to incorporate it into my way of thinking. I remember talking about this the other time we met.
Itoi
If you're looking for a solution that solves only a single issue, and not multiple issues, it's easy.
Iwata
It really is.
Itoi
(Pointing at Sato sitting next to him, and Nagata sitting across him)
See, if Sato's life is in danger, it's easy to find a way to save him at the cost of Nagata's life. The more leeway an enterprise or an organization has, the more they tend to choose such solutions. They solve issues one by one. First they save Sato, then they realize Nagata's in danger, so they choose to save Nagata, and on and on.
Iwata
By putting in an endless amount of time and energy.
Itoi
Exactly.
Iwata
Everyone can solve problems one by one. "If there's too much of something, just make it less", or the other way around. That's just responding to each issue. For example, if a customer complained at a restaurant that a dish is "too much", what is he/she really saying? Maybe the real problem may be how the dish tastes, and not the amount.
All
Ah....
Iwata
If the chef only sees the amount of his dish as the problem, changing the amount doesn't solve anything. He has to be able to find the real issue and improve the taste to truly solve this problem.
Itoi
That's true.
Iwata
When you dig deep down until you hit the root of the problem, you sometimes find that what seems to be isolated matters are actually connected. A single change can have impact on matters that were thought having no relation. Different problems can be solved at once. When a single idea solves various matters, those are the times when Mr.Miyamoto "get it", and calls you up all of a sudden. You have a much clearer vision when you "get it".
Itoi
Mr. Miyamoto said that an idea is "something which solves multiple issues", and you mentioned that it opened your eyes to a new way of thinking. However, as a programmer, I'm sure you have solved problems in the same way?
Iwata
Actually, yes. Fixing a bug in a program often solves many problems, or visa versa.
Itoi
Does everyone who has studied in the science field experience such way of utilizing "single ideas"?
Iwata
There are people who solve problems via symptomatic treatments, of course. Such as "Let's turn down the air conditioner since it's hot", or "I'll drink some water because I'm thirsty". People like this may actually be the majority.
Itoi
I see.
Iwata
I don't think it's a matter of coming from the science field. I think it's just the type of person you are. There are those who are satisfied knowing that thirst is the reason for wanting something to drink, and there are those who want to unfold the cause of their thirst.
Itoi
I wonder where that difference comes from. Where those two types branch.
Iwata
I have a nature of pursuing the reason of things.
Itoi
I know you do. (laugh)
Iwata
(laughing)Yes, as you know very well. During my initial years as a video game designer, when the game I created didn't sell as expected, I would look for the reason why. Technologically, my game wasn't inferior to others, but it didn't sell as much.
Itoi
Uh-huh. (laugh)
Iwata
But the games Mr.Miyamoto designed sold like crazy. I mean, its sales were multiplied by dozens compared to that of the game I designed.
Itoi
But the quality of the technology of the game wasn't much different, right?
Iwata
Well, at least that was what I thought. But the facts were clear. His game just sold much more.
Itoi
I'm sure there are many people who draw the conclusion that their games are just as good as Mr.Miyamoto's.
Iwata
But I wanted my games to become popular, just like his.
Itoi
I like how you think. (laugh)
Iwata
My piece of work wasn't popular as his. Everyone seemed to be playing his game. That's frustrating. Frustration made me observe closely.What was the difference between him and me? This wasn't an easy question to answer.
Itoi
It must have been difficult.
Iwata
After starting to work with Mr.Miyamoto for a while, I started to see. I was only looking from the "designer's point of view", but he was different. His aim does have a higher percentage of becoming a hit, but he does make mistakes. After all he's not God, you know. The difference lies in how he corrects his mistakes. He brings an employee who has nothing to do with the game he's designing, and hands him/her the controller and says, "Go ahead, try it." This was before he was acknowledged as a renowned video game designer, when he still was assistant manager or manager.
Itoi
(laughing)When he was "The world-class assistant manager".
Iwata
(laughing)Yes, he was "The world-class assistant manager" for quite a long time.
Itoi
(laughing)Yes, quite long.
Iwata
So he hands him/her the controller and tells him/her to go at it, and all he does is watch him/her from behind.I used to call it "Mr. Miyamoto's View over Someone Else's Shoulder". I didn't realize how important it was until I started to work with him. Only then it occurred to me that this was it. We're not able to go to customers explaining the details of the game's intention, or how they should enjoy it.
Itoi
Of course not.
Iwata
The product is all you've got. But a product is incomplete when it comes to explaining something in detail. Every detail of the design of the game is not always understood by the players.
Itoi
Mr.Miyamoto is trying to find that gap through his "View over Someone Else's Shoulder".
Iwata
Exactly. He watches them play and checks in detail how they respond, playing it without any previous knowledge. He finds out what they don't understand, what they let past, which triggers they miss. There are tons you can find from the view from behind. However experienced he may be, he never drops the notion that "if the players don't understand it, there's fault in the design I made".
Itoi
How interesting.
Iwata
It's easy to say it's the "customer's point of view" that counts, but it's the fact that he drew a method of how to find it very early. On the other hand, I was interested whether my program was cool or not, but not really aware of the players' response.
Itoi
So at the time, you thought you were cool.
Iwata
Actually, yes. (laugh)I, the novice game designer, thought I was cool.
Itoi
"The program works, and it looks cool too", right?
Iwata
(laughing)Must have been like that.Mr.Miyamoto's way came upon me as a total shock. I remember going back to my office and writing a report on it, how his method works, and it being the reason we can't win.
Itoi
Like Kaishu Katsu on Kanrin-maru, seeing America for the fist time.
Iwata
Ha ha ha.In those days, there were few people around me who understood this concept. A lot of times I ended up thinking all by myself.
Itoi
Those pursuit for the reason why must have made you who you are today.
Iwata
I think so.
Itoi
Mr.Miyamoto has been unique to think that "if the players don't understand it, their's fault in the design I made". Were there many designers who thought that way?
Iwata
No, I think he was very unique. Often, people only look from the designer's point of view.
Itoi
Must be so.
Iwata
Many designers put their personal perspective into their design as if it represents everyone's opinion. In reality, based on the fact on how the player reacts, you should draw a hypothesis, and then you should figure out how to solve the problem from the root. But, people often mix the facts and presumptions, and push that mixed opinion through without solving the problem based on the fact.
Itoi
That just leads to throwing subjective opinions at each other in the development meetings, doesn't it?
Iwata
Yes, although that's not totally useless. Creation always has an aspect of expressing one's ego. Mr.Miyamoto's no different. He does have that side in him. As long as you're creating something, you can't avoid being an egoist. What's special about Mr.Miyamoto is that he is unthinkably egocentric in one way, but he never loses an objective point of view. He's always alert about people's initial response to his creation. If he finds they don't get it, he simply drops it and looks for an alternative.
Itoi
He must be talented in shifting his viewpoint.
Iwata
Exactly. He can examine something very closely, and the next second he can switch to a macroscopic point of view, and make a fresh start from there.
Itoi
You think he's using a magnifying lens, but he may already be switching to a view from 10,000 meters high.
Iwata
He can do that instantly.It's often the case that when you examine something closely, you keep on getting closer to the subject but not alter your viewpoint.
Itoi
True.
Iwata
I think the "idea which solves multiple issues at once" can't be found when you're looking at something real close. You need to be able to switch your point of view. That's not an easy thing to do. Mr.Miyamoto can do it easily. He's the type of person that can come up with a solution that can truly save someone when he/she's in danger, and not rescuing him/her at the cost of another.
Itoi
I can see why you call yourself "the researcher of Miyamoto studies". (laugh)
Iwata
(laughing)Oh, yes, I'm the world's number one researcher of Miyamoto studies.
Itoi
You've been calling yourself that for quite a long time. (laugh)
Iwata
He must be sneezing now.
Itoi
Didn't Mr.Miyamoto major in industrial design in college? That's something significant that makes him who he is now, isn't it?
Iwata
I think so. I think it's a huge factor that he used to study ID(Industrial Design). It's not about how artistic it is, it's all about how the product meets its objective.
Itoi
He is really making use of what he studied.
Iwata
Knowing Mr.Miyamoto as he is today, it seems to me that it sort of was inevitable that he studied ID, and not by coincidence.
Itoi
The logics he acquired through studying ID must make up a significant part of him, how he picks out the correct answers through people's responses.
Iwata
Definitely.The majority of people think he's the person of art, full of inspiration, with a natural talent coming up with ideas one after another, as if he was guided by God.
Itoi
But that's not how it is, right?
Iwata
Not at all.He's extremely logical, but that's not all. He creates a mixture of left-prefrontal-oriented elaborate logic, and dramatic ideas that people are blown away by.To be honest, I have to say I envy this.
Itoi
You always talk like you don't have that kind of mixture, but I think every programmer has that within himself.
Iwata
Well, I don't say I lack it, but surely I wouldn't want to compete with right-prefontal-oriented people like you or Mr.Miyamoto on your grounds.
All
(laugh)
Itoi
Really? (laugh)
Iwata
I know I only have a slim chance of winning. (laugh)I'd rather compete in my own field, than someone else's.
Itoi
That's another thing you've been saying for a long time.
Itoi
Do you remember the time I asked you the definition of management? It was around when I just started up Hobonichi, when you were president of HAL Laboratory.
Iwata
Of course.
Itoi
I would never have guessed you'd become president of Nintendo at that time.
岩田
わたしだって知りませんでしたよ。
Iwata
Neither had I.
一同
（笑）
All
(laugh)
糸井
つまり、大企業の社長の岩田さんじゃなくて、当時は「このままだと倒れちゃうぞ」っていわれてたＨＡＬ研究所の社長を31歳で引き受けて建て直した人に対して、「さぞかし苦労しただろう」という気持ちと、「そういう苦労はできればしたくないな」という気持ちが自分の中にあって、それで、岩田さんに「経営ってなんなんでしょうね？」という質問をしたんですよ。
Itoi
I remember the reason why I asked you that question. Having putting back together HAL Laboratory, I wanted to hear your opinion, thinking of the difficulties you went through, and partly because I didn't want to go through the same situation.
岩田
それで、けっきょくわたしは、「自分たちは、なにが得意なのか。 自分たちは、なにが苦手なのか。 それをちゃんとわかって、 自分たちの得意なことが活きるように、 苦手なことが表面化しないような方向へ 組織を導くのが経営だと思います」と、たしか言ったと思います。
Iwata
I remember answering "You have to know your strength and your weakness. You need to lead your organization where you can enhance your strength, not where your weakness becomes exposed."
糸井
そうです。それも、「それしかないです」というくらいの勢いで言ってましたよ。
Itoi
You then sounded as if there could possibly be no other answers at all.
岩田
うん。けっきょく、突き詰めるとそれしかないです、と。あとは、わたし、優先度の話をしましたよね。
Iwata
You just have to stick to that until the end. I also remember talking about priorities.
糸井
はい。
Itoi
Yes.
岩田
物事って、やった方がいいことの方が、実際にやれることより絶対多いんですよ。やったほうがいいよねっていうことが山ほどあるんです。だから、やった方がいいことを全部やると、みんな倒れちゃうんです。なので、オレたちはなにが得意なんだっけ、ということを自覚したうえで、「なには、なにより優先なのか」をはっきりさせること。順番をつけること。それが経営だと思いますって、当時若造だったわたしは言ったんですけど、じつは、いまも考え方はぜんぜん変わってません。
Iwata
You have to set your priorities being aware of what you're good at. There are always so many things that you ought to do, but what you "can" do is limited. If you try to do everything you ought to do, you end up falling over.That's what I told you then as my own definition of management when I was wet behind the ears, but I still believe in this idea today.
糸井
うん。いまも同じだよね。
Itoi
Yes, I still see it in you.
岩田
はい。いまでも、この考え方は通用すると思ってやってます。
Iwata
It's a theory that works.
糸井
ぼくが岩田さんから経営について直接に学んだのはそのふたつしかないくらいなんだけど、いろんな人に話を聞く中でも、それはずっと忘れなかったんですよ。で、最近はとくに思い返すようになっていて。ふっと思ったのは、自分たちがなにを得意としていて、なにを不得意としているのか、漠然とはいえるけれどもはっきりとわかってないなと思ったんです。じつはいま、社内メールで「うちの得意なことはなんだろう」というのを社員全員で出し合っていて、もう、150くらい挙がってるんですよ。でも、やっぱり完全にはわからない。そういうこともそうなんだけど、まだ、なんかあるんだよなっていう感じなんです。
Itoi
Those are probably the two things you taught me directly. I always kept them in mind when I discussed management with other people. I've been going over it again recently. I know vaguely our strength and weakness, but not so clearly. Actually, our employees are discussing our strength through e-mail right now. We've got like 150 opinions, but it's still not completely clear to us. I feel we're missing something.
岩田
ああ、なるほど。
Iwata
I see.
糸井
だいたい出たような気がするんだけど、まだ、ある場所をごっそり見逃しているようなそういう感じがあって。たとえば、ＨＡＬ研究所だったら、「景色がいいよね」っていうのもいいところですよね？
Itoi
I think most of it has been said, but I feel we're still missing a whole lot.One of the strengths of HAL Laboratory was that it had a fantastic view, right?
岩田
「富士山の見えるソフトハウス ＨＡＬ研究所」。
Iwata
"HAL Laboratory, Inc., the software vendor where you can view Mt.Fuji"
糸井
はははははは。（まわりの社員に向かって）いまのはね、ぼくが『ＭＯＴＨＥＲ２』の中に出てくる看板に書いた文章なんですよ。
Itoi
Ha ha ha. That's a phrase I wrote on a sign in "MOTHER 2" (EarthBound).
岩田
（笑）
Iwata
(laugh)
糸井
当時のＨＡＬ研究所のことでいうと、圧倒的にプログラムが得意な会社だったんですよ。
Itoi
HAL Laboratory was definitely specialized in programming.
岩田
当時はそうでしたね。
Iwata
At the time, yes.
糸井
そこに岩田さんがいたせいもあるだろうけど、絵を描くのが得意ですか？プログラムが得意ですか？って言ったら、絶対プログラムが得意な会社だった。で、うちみたいな会社の場合は、それが非常に見えにくいんです。
Itoi
It was partly because you were there. HAL Laboratory was definitely good at programming, not art. A company like ours, on the other hand, has difficulties when it comes to defining our strengths.
岩田
うん、うん。
Iwata
I can assume that.
糸井
ムードとして、こうだということは、いっぱいあるんだけど、具体的に突き詰めると、それは、なんなんだろう。極端に言えば、投資してでも伸ばしていく必要があることを得意なことというわけで、それをまだ発見しきれてないんですね。探すことがいまの大切な仕事だと思ってるので、ずっと探してるんですけど、そこで、探し方のヒントみたいなものがあれば、ちょっと聞いてみたいなと思って。ＨＡＬ研のときは、どうだったのかとかそういうところも含めて。
Itoi
We can come up with many abstract concepts, but it becomes unclear when you try to break it down into concrete concepts. To be extreme, you call something your strength when you want to nurture it even at the expense of investment. We haven't completely found that yet. I think it's an important task for us to find it, thus we've been searching for a long time. It would be nice if you can share some hints on how to search such strength, including how it was at HAL Laboratory.
岩田
そうですね‥‥。まず、自分たちがいろんなことをやりますよね。それを、お客さんなり、取引先なりが受け止めて反応してくれる。そういう基本的な動きがありますよね。ＨＡＬ研のときは、任天堂からソフトの受託を受けているから、任天堂の担当者がある意味ではお客さんなわけです。そのときに、同じくらいのエネルギーをかけているはずなのに、妙に喜んでもらえるときと、あんまり喜んでもらえないときがあるんですよ。自分たちとしては、かけている苦労は同じくらいなのに。同じ100の苦労をしたときでも、こっちのお客さんは100喜んで、こっちのお客さんは500喜んだ、みたいなことが起こるんですよ。
Iwata
Let's see... First, it is ourselves that takes action. Then, the customers or our business acquaintances receive it and respond to it. This is the basic set of action.HAL Laboratory used to receive orders from Nintendo. In a way, the person in charge at Nintendo was our customer. Sometimes they were satisfied with our output, but sometimes not. The interesting thing is that this wasn't related to the amount of effort we put in. With the same amount of effort, sometimes we got 5 times the satisfaction than other times.
糸井
はい。
Itoi
Interesting.
岩田
それをずっと見てると、ある共通パターンがあることに気づいたんです。簡単にいうと、仕事をやっていて、ものすごくつらいときと、そうでもないときがあるんです。仕事だから、当然つらいことも混ざります。というより、つらくないわけがない。そのときに、つらさに見合ったぶんだけ喜んでもらえないと、さらにつらくなるんです。で、苦労以上の評価をしてもらっているときは、社員も、どんどん元気になって、どんどん伸びていくように感じる。逆に、悪い循環になると、見る見る社員がしおれていって「これは、面談をしなければ」というふうになる。つまり、自分たちがすごく苦労したと思ってないのに、妙に評価してもらえるときというのは、ほっといても、どんどんいい結果が出て、いい循環になって、どんどん力が出て行く状態。それが自分たちに向いている得意なこと。そうじゃないことは向いてないことだというふうに、だいたい判断していたような気がしますね。
Iwata
I found out a pattern, observing this. To put it in short, when you are doing your job, there are times when you feel extremely exhausted and times when you feel it not so hard. Businesses are always accompanied by hardships and difficulties, needless to say. When you have completed a challenging job, if the customer's satisfaction level is not more than the level of the hard works you've been through, you feel even more exhausted. On the other hand, when the customer evaluates us highly, higher than what our hardship deserves in our analysis, employees become more encouraged and motivated to grow further. However, in bad cycles, the employees wear out, and the necessity of having to sit down and listen to their thoughts starts popping up. In summary, if they can feel that they were rewarded more than they deserve in the form of the customer's appraisal, it's the good cycle in which employees can voluntarily grow without the need of the management to intervene.That is something they are good at. If things cannot work out that way, these are not the things they are good at. I think that is how I have been distinguishing the two.
糸井
はーーー。なるほど。
Itoi
Ah, I get it.
岩田
それは、いまの任天堂でも同じようにやっていますね。
Iwata
It's the same at Nintendo too.
糸井
なるほどなぁ。いま、聞きながら思い返してみたんですけど、それは、いまの自分はできているかもしれない。
Itoi
I think that's something I'm already doing.
岩田
ええ。糸井さんはやってるんじゃないですか。
Iwata
Yes, I think so.
糸井
やってますね。苦しそうなことを、どうやめさせるか、みたいなことばっかり考えてますから。
Itoi
I don't want my people to go through meaningless agony.
岩田
苦しそうなことは、やめた方がいいんですよ。だって、それは向いてないので。
Iwata
If it's too painful, just drop it. It's not what you're good at.
糸井
苦しそうなこと、および、つまんないこと。
Itoi
Drop the painful stuff, quit the things you don't find interesting.
岩田
そうですね。
Iwata
You can say that again.
糸井
つらそうなことをやめさせて、得意に思えることだけをやらせたいけれども、一方で、いまの会社って、「苦しそうなことをやっているからえらい」っていう変な価値観がありますよね。
Itoi
There exists an odd value that "the more pain you put in, the better", don't you think? I think you should just do what you're good at, and drop the opposite.
岩田
ありますね。残業してないやつより残業してるやつの方がえらい、みたいなね。あいつは早く帰ってるけど、オレは遅くまでがんばってる、みたいな言い方をしたりしますけど、本当は、それ、間違いなんですよ。だいたい人間って、自分の得意なことと他人の不得意なこと比べて不公平だって文句を言うんですよ。それは、自分でも、知らず知らずのうちにやってしまうことがあります。
Iwata
I know what you mean. People working overtime are somewhat thought to be working harder than those who can finish work on time, right? People complain about their colleagues leaving work early, but that's just wrong. People tend to complain comparing their strong points with other person's weakness.
糸井
「糸井はプログラムもできないのに」ってね。
Itoi
It's like saying "Itoi can't even code programs."
岩田
それはちょっと極端ですけど（笑）。
Iwata
(laughing)Well, that's a pretty extreme example.
糸井
でも、よくわかりますよ。
Itoi
Getting back on the subject, I understand your point.
岩田
これはわたしの勝手な説ですけど、生き物って自分の子孫を残すのが最終目的でしょ。子孫を残すためになにをしなければならないかというと、「自分は、他の個より、この部分が優れています」というプレゼンをしないといけないんですよ。ということはつまり、「わたしという個は、他の個よりも優れています」というアピールをするのが上手なＤＮＡがいま生き残ってるんですよ。そうでなかったＤＮＡは子孫を残せずに死に絶えてるはずなんだから。
Iwata
This is my personal theory, but all living creatures bear the task of passing down their DNA through reproduction. To reproduce, there's the necessity to show your superiority. The individuals who can do this well are the ones that were able to pass down their DNA.
糸井
なるほど、なるほど。
Itoi
I see, I see.
岩田
だから、自分の得意なことをアピールする性質が生き物には必ずあるわけで、自然とそうなってしまうんだと思うんです。会社という組織の中でも、みんな、都合よく、自分の得意なことと、人の不得意なことをつい比較してしまう。だから、逆に、会社全体のことを考えるときには、こういうふうに考えて、こういう軸で、比較や評価をしていきましょうという共通認識を持たないと、すぐに「不公平だ」となるんですよね。
Iwata
So I think it's natural for us to try to show that we're better than others. That's why we tend to compare our strengths with other people's weakness. This happens in any type of social organizations, such as in companies. Therefore, it becomes a priority to define an axis, a mutual agreement on evaluation. There is a need to create a fair basis.
糸井
その理論はすばらしいですね。
Itoi
That' a persuasive theory.
岩田
いまのところ、この理論に矛盾を感じたことはありません。
Iwata
I've never felt any contradictions so far.
糸井
明石家さんまさんが、「男は、都合のいい女が好きなんだ」って言ってるのと同じですね。
Itoi
It's like Sanma Akashiya (Japanese comedian) saying "Men like women who can slip us into self-complacency."
岩田
表現は違いますけど（笑）。根本的に言いたいことは共通してますね。
Iwata
(laughing)I don't know about that, but I guess yes, in a way.
糸井
つまり、自分が生きるのを有利にしてくれる存在、という意味だからね。
Itoi
Existence that gives them advantage among others.
岩田
だけど、そうは言っても「我慢せなあかん」ということはある。じゃあ、嫌いなことを全部やめようっていうと社会生活が破綻するわけですよ。
Iwata
There are times when you just have to grit your teeth and do it. Society will fall apart if everyone just quits doing what they don't want to do.
糸井
そうですね。
Itoi
It will, yes.
岩田
基本的には、その会社が「得意なことをする集団であろう」ということを目指すとしても、人と人がいっしょに仕事をするためには、最低限、苦手だろうがなんだろうが、やってもらわないと困るということを決めないといっしょに働けないんですね。というときに、その「最低限のこと」をなるべく小さくすることが、経営者として正しいんじゃないかなとわたしは思うんです。たとえば、同じ会社の中に、ほかの人と話してくれない人がいたら困りますよね。意思を伝えあうということに対して努力してくれないと、いっしょに仕事なんかできないじゃないですか。そもそも会社というのは、持ち味のちがう普通の人が集まって、ひとりでは実行できないような巨大な目的を達成するためにあるわけだから、最低限のコミュニケーションはしてくれないと、ひとつの方向に向かって全員が歩けないんですよね。
Iwata
Even when everyone can agree to make our company "the group of people who will devote our efforts to do things we are good at," we still have to identify and assign the minimum amount of works that employees have to do even when they know they are not good at. Otherwise, we cannot work together. It is the management's job to make efforts to minimize this "minimum amount of necessary works that employees are not good at," I believe. For example, some people just cannot communicate with the others. But things won't work out if there's someone in the company who will never try to communicate his or her thoughts with the colleagues.After all, a company is a group of individuals with different talents. That group of people tries to accomplish something large that an individual can't do. For everyone to move forward, the least amount of communication must always be made by each individual even when he or she is not good at talking with the others.
糸井
だから、そういう「最低限のこと」をなるべくコンパクトにして、あとは、みんなが得意なことをどう伸ばしていくか。
Itoi
So you try to contain the "minimum amount of labors" and encourage people to grow by doing things they are good at.
岩田
それが大切なんじゃないかと思うんですよね。あと、もうひとつつけ加えると、本当は得意になる才能を持ってるんだけど、「オレは苦手だ、わたしは苦手だ」って本人が勝手に思ってることってあるんですよ。たとえば、世の中に、「オレはマネージメントが得意だ」って最初から思ってる人なんていないんですよ。
Iwata
Yes, I think it's very important. There's also one other thing. There are people with talent that they themselves haven't realized. They may even think they're not good at it. For example, nobody thinks that they're talented in management from the start.
糸井
あーーー、そうですね。マネージメントの概念って、小学生にはないもんね。
Itoi
Come to think of it, that's true. Nobody in grade school understands the notion of management completely.
岩田
それが最初から選択肢に入ってる人なんていないんですよ。
Iwata
No. No one chooses management from the start.
糸井
それはそうでしょう。
Itoi
Probably not.
岩田
わたしだって、最初は苦手でしたよ。でも、そこで、わたしは苦手なんだ、って思い込んでいたら、苦手なままじゃないですか。だけど、わたしの場合は、自分がやる以外にないなという強いめぐり合わせによってそれをやることになったんですけど。
Iwata
I didn't think I had talent in management at first. It's easy to keep on thinking you're not made for it. However, in my case, there was nobody else up for it. It was like destiny that the position came to me.
糸井
思えば、岩田さんは二度もそういうめぐり合わせで社長を引き受けているんですね。
Itoi
That happened twice in your life, becoming president.
岩田
もちろん、どちらの場合もいやいややったわけではなくて、きちんと自分で決断して社長になったんですけどね。でも、最初からそれを目指したわけではない。その一方で、ほかの人に対しては、その人が苦手だと思っていることに対してポテンシャルを感じ取って、あえてやってもらったこともあるんですよ。その人は、最初のうちは、つらそうにするんです。だけど、「こういう見方もあるよ」「こういうふうに考えるといいよ」と少しずつ伝えていくことで、結果的に「おもしろくなってきました」というふうになるんですね。
Iwata
Of course it was my decision in the end to become president. But it wasn't my initial aim. I've given the same kind of opportunity to other people. Although they might consider themselves as "not the type", I assign tasks when I see their potential. They seem to find it tough in the beginning, but by advising them with new ways of thinking or new views to look at matters, they discover themselves getting interested in it as a result.
糸井
それは、最近のことで？
Itoi
Is this something that occurred recently?
岩田
最近も、ありますよ。もともとは、マネージメントなんか大きらい、「ぼくはものをつくるのが好きだから、 ものづくり一筋の職人としてやっていきたい」と言ってたような人が、「人にものを教えるのは、おもしろいなぁ」って、変わっていく人を何人も見ました。それは、その人が気づいてないだけでじつはその人がもともと持っている才能なんですね。その人自身は気づいてなかった部分を誰かが探すことができたとき、人は思いがけない方向に伸びていくことができるんですよ。
Iwata
Yes. There were people who thought they weren't the "manager type". They used to declare that they loved to make games so much so that they would like to make it their sole career. But they have changed. I've heard them say how fascinating it was to teach others and watch them grow.It's a potential they already had. It's just that they didn't realize it. When you help others find that potential, you see people bloom in such a way you never expected.
糸井
苦手だと思っているけど本当は得意になるかもしれないこと。それを見極めるときに、ヒントになることってなんでしょうね。
Itoi
What's something you keep in mind when you're trying to find a new potential in someone?
岩田
人って、あることを続けられるときと、続けられずにやめちゃうときってあるじゃないですか。たとえば、「英語くらいしゃべれた方がいいよな」っていままでまったく思ったことのない人っていないと思うんですよ。
Iwata
There are those things that you can continue doing, and those that you end up quitting. For example, I think everyone has tried to become fluent in English, at least once in their life.
糸井
いいとこ、つくなあ（笑）。
Itoi
Definitely. (laugh)
岩田
だけど、非常に高い割合で挫折するんですよね。
Iwata
But often times, you end up quitting.
糸井
そうそう。「もう、英語はいいわ！」ってね。
Itoi
It's like, "Heck with English!"
岩田
そこに、「自分が得意かもしれないこと」を見極めるヒントがあるように思うんですよ。じつはこれは、ゲームを開発するときに発見したことなんですけど。ゲームって、すぐにやめちゃうゲームと「なんかやっちゃうんだよね」っていうゲームがあるんですよ。同じように丁寧に仕上げたゲームでも、本質的なおもしろさとは別の次元で、続くゲームと続かないゲームがある。このことと、いろんな習慣が継続するかということは、すごく似てるんですよ。
Iwata
I think there's an important point in this. It's something I've found out when designing video games. There are two types of games, those that you toss instantly, and those that you continue playing. It's not a matter of how fine the game is made, or the essential excitement of the game. In my opinion, this has something in common with whether or not you can continue a variety of other habits.
糸井
ほう。
Itoi
I'd love to hear more about this.
岩田
共通することがなにかというと、人は、まずその対象に対して、自分のエネルギーを注ぎ込むんですね。時間だったり、労力だったり、お金だったり。そして、注ぎ込んだら、注ぎ込んだ先から、なにかしらの反応が返ってきて、それが自分へのご褒美になる。そういうときに、自分が注ぎ込んだ苦労やエネルギーよりも、ご褒美の方が大きいと感じたら、人はそれをやめない。だけど、帰ってきたご褒美に対して、見返りが合わないと感じたときに、人は挫折する。これは「やめずに続けてしまうゲーム」の条件としても成り立ちますし、「英語を学ぶときに挫折しないかどうか」も、同じ理屈で説明ができると思うんです。
Iwata
If the reward that you receive is worth more than the effort and energy you put in, people don't quit. If it's the other way around, people feel discouraged. This applies to those games you continue playing, or being able to keep on studying English.People put in energy such as time, labor, or money. The feedback you receive is your reward.
糸井
なるほど。
Itoi
I see.
岩田
自分の得意なものが、放っておいても、どんどんうまくなることも同じ仕組みだと思うんです。たとえば、絵を描く人は、誰に頼まれるでもなく絵を描いて、それをまわりの人がほめてくれる。そういうくり返しのなかで、どんどんうまくなる。あるいは、わたしだったら、昔はわからなかったコンピュータのことが徐々にわかっていって、わかっていくことでさらにおもしろくなる。糸井さんだったら、世の中を見て、自分がおもしろいと思うことをどんどんそこに投げ込んでいって、それが受け入れられたときに快感が生じて、そういうことがどんどん得意になる。この循環を成立させられることこそがおそらくその人の才能だと思うんです。つまり、才能というのは、「ご褒美を見つけられる能力」のことなんじゃないだろうかと。
Iwata
This is why you become good at what you like.Artists draw paintings, and people compliment it. Through that cycle, he/she progresses. As for me, knowing more about computers makes it more interesting. For you, you find what's interesting, and you get involved with it. When you feel accepted, you feel a kind of pleasant stimulation, and you get better at it.Being able to establish this cycle is in fact probably his or her talent. I believe that talent is thus the ability to find your reward.
糸井
「なしとげること」よりも、「なしとげたことに対して 快感を感じられること」が才能。
Itoi
So being talented is about "feeling the excitement of accomplishment", and not "just accomplishing".
岩田
そうじゃないかと思うんですよね。ご褒美を見つけられる、「ご褒美発見回路」のようなものが開いている人。
Iwata
I think so. Finding your reward with your inner "circuit that responds to rewards".
糸井
なるほどねー。
Itoi
I see.
岩田
たまにね、ご褒美を見つけられる寸前まで行ってるのに、その回路が開いていない人がいるんですよ。そのときに、「こういうふうに考えてみれば？」とか「だまされたと思ってあと３回我慢してみたら？」みたいなことを言うと、うまくいくときがあるんです。自分が注ぎ込んだものよりも、ご褒美のほうを大きく感じる瞬間がくれば、よい循環がはじまるし、それが続くんです。
Iwata
Some people are so close to finding that reward, but their circuit may not be active. Their circuit can turn on with some advice, or just by simply telling them to "keep on trying three more times."A positive cycle begins when your circuit is turned on, when you feel that the reward you receive is worth more than the energy put in.
糸井
それは、さっきおっしゃった、「自分が苦労したと思わないのに 評価してもらえるものが得意なことだ」という話とつながりますね。
Itoi
Just like you said, "Your strength lies in those areas where you are highly evaluated, even if you don't think you've put in extreme effort."
岩田
そうです。ですから、やっぱり、「ご褒美を見つけること」が才能なんですよ。もっというと、それは、宮本さんや糸井さんとおつき合いしたなかで見つけたことでもあるんです。おふたりといっしょに仕事をするうちに、わたしが見つけた「天才の定義」があります。「人がいやがるかもしれないことや、 人が疲れて続けられないようなことを、 延々と続けられる人」、それが「天才」だとわたしは思うんです。
Iwata
Being able to find that reward is a gift itself. Furthermore, I think those people who can continue doing what people don't like, or what may be too tiresome for others, are those people you call a genius. This is something I found through my relationship with you and with Mr.Miyamoto.
糸井
ああー。
Itoi
Hmmm.
岩田
考えるのをやめないこととか、とにかく延々と突き詰めていくこと。それは、疲れるし、見返りがあるかもわからないし、たいへんなことだと思うんです。でも、それは、それができる人にとっては苦行じゃないんですよ。それを苦行だと思う人は、苦行じゃない人には絶対勝てない。だから、それが才能なんだと。だから、自分が苦労だと思わずに続けられることで、価値があることを見つけることができた人は、それだけでとても幸せだと思います。
Iwata
It's not easy to do something for a long time. First of all, its' tiring, plus you never know if you'll receive something in return. However, for some people, there's no pain in doing it. Those are the people who can win.You're lucky if you have found it. You've found your talent.
糸井
ご褒美とか、快感について、似たようなことを、ぼくも考えたことがあります。そのときにぼくは「あ、これが境界なんだな」と感じたことがあって、それがなにかというと、「快感には、ふつうの快感と、 ぴりぴりする快感がある」ということなんですよ。
Itoi
I've also been thinking about rewards and pleasure. There are two types of pleasure, there's the normal pleasure, and there are those that feel stimulus.
岩田
あ、なるほど！
Iwata
Ah!
糸井
つまり、ご褒美とか快感っていうと、おいしいものだったり、甘いものだったり、それこそお金だったりというような漠然としたイメージがあると思うんですけど、たとえば指圧なんかで「いたたたた、痛いけど気持ちいー」っていうのがあるのと同じで、ぴりぴりする快感があるんですよ。で、そこの部分に味をしめちゃうと、天才領域にいくんですよ、おそらく。
Itoi
There's that pleasure that's stimulus, just like when you're receiving Shiatsu massage, that "Ouch, it hurts but it feels good" type of pleasure. When you can keep on working in that kind of area, you can become a genius. Rewards don't only come in forms of sweets or good food or money.
岩田
すげー、わかりますわ、それ（笑）。
Iwata
(laughing)I know what you mean.
糸井
でしょ。ちょっとマゾっぽいっていうかね。いいんだけど、いやなんだけど、いいんだけど、このいやないいは、オレしかわかんないなっていう。
Itoi
It's sort of masochistic. It's good, it hurts, but it's good, and only I know the pleasure of this.
岩田
そもそも、そんなに無闇に甘いだけのご褒美ってないですからね。
Iwata
Rewards aren't just sweets or snacks.
糸井
ご褒美の形をわかりやすくするために、いまの企業だったら、お金とか地位とかお休みをあげるんでしょうけど、それって、刺激の法則からしたら無限に必要とされるものですから、なんていうか、ドラマがないですよね。続けるからには、ドラマが欲しいですよね。感覚の中にドラマってすでにあってさ、苦い、しょっぱい、からい、みたいな一見マイナスのものがよかったりさ。
Itoi
Enterprises give money or positions or vacations as a clear form of reward. Those rewards are limitless, and you have to keep giving more of it. There's no drama to it. I'd rather see more drama. Drama lies even within our senses. Sometimes the sour, salty, hot flavor tastes good.
岩田
「この渋みがたまらん」みたいな。
Iwata
Like, "this tanginess is delicious."
糸井
そうそうそう（笑）。隠し味というか、ぴりぴりする部分があって、そこを感じ取ったときに、「ほかの人にはわからないだろうけど」ってなったら、しめたものですよね。
Itoi
Exactly. There's those hidden flavors that stimulates us. When you're the only one that feels that way, you're in a good spot.
岩田
たぶん、人が自分の人生の中で、「ここが得意かも」って思ってることって絶対ご褒美回路が開いてますよ。
Iwata
The things you think you're good at, your reward circuit is definitely active.
糸井
うん。
Itoi
Yes.
岩田
で、それがひとつあると、できることが増えていくんです。そのご褒美回路のそばに、似たようなことで自分が新たにご褒美だと感じられるものってあるんですよ、きっと。いままで得意だとは思ってなかったことで、「じつは、これも同じじゃん」って思えるようなことで出てくる。たとえば、プログラムをつくることと会社経営はよく似たところがあるぞってわたしは発見していくわけですよ。
Iwata
When you've found something like that, you expand your capabilities. Your circuit responds to other related stimulation. You find yourself talented in other areas. As for me, I keep finding how management is similar to designing software.
糸井
ああ、それは、いまの岩田さんを見ているとよくわかりますよ。
Itoi
I see what you mean.
糸井
いまの岩田さんを見ていると、規模やジャンルは違うけれどもプログラムを組んでいたころと同じような、一貫した方法論で動いているように思えることがあるんですよ。
Itoi
To me, it seems that your methodology has been consistent as a programmer, and as president of Nintendo.
岩田
ああ、そうですか。
Iwata
You think so?
糸井
ちょっと古い話になるけど、『ＭＯＴＨＥＲ２』というゲームの開発が破綻しかかっていたときに、岩田さんが助っ人として現れて、ぼくらに向かってこう言ったんです。「これを、いまある形のままで、 直していくなら、２年かかります。 でも、イチからつくっていいなら １年以内にやります。 どちらにしますか？」って。
Itoi
When the MOTHER 2 (EarthBound) project was about to fall apart, you came in to help, and this is what you said to us."It will take 2 years to fix this keeping what you have built up. If we start from scratch, it will take only a year. What do you say?"
岩田
言いましたね（笑）。
Iwata
Yes, I remember. (laugh)
糸井
結果的には、イチからつくってもらうほうを選んだわけですけど、あれ、岩田さんの中では「イチからつくったほうがいい」って答えは出てたわけですよね？
Itoi
We decided to start from scratch. You knew this was the best choice from the beginning though, didn't you?
岩田
最善の方法を選べと言われたならそうしたと思います。でも、あのときは、プロジェクトを建て直す立場としてわたしはあとから加わったわけですから、どちらの選択肢でもやるつもりでいましたよ。そして、実際、どちらの方法でも仕上げられたと思います。
Iwata
If I were to choose the best way at that time, yes, I would've started from scratch. But I wasn't in the project from the start, so I would've respected whatever decision you made. My task was to pull the project back together. Anyway, I think it was possible to do either way.
糸井
「イチからつくったほうがいい」という答えがわかっていたのに、どちらの方法でもやるつもりでいたんですか。
Itoi
You thought it was best to start from scratch, and still you would've have gone either way?
岩田
だって、いままでつくってきた人たちがそこにいるわけですからね。いきなり現れた人間が「イチからつくり直します！」って宣言しても、納得がいかない人が出てきます。現場の雰囲気が壊れてしまったら、うまくいくものもダメになってしまう。ですから、可能性のある選択肢を提示して、選んでもらうほうが正しいとわたしは思ったんです。
Iwata
It was important not to ruin the atmosphere of the project team. You can't show up all of a sudden and destroy everything people have created until then. People aren't persuaded by such ways. The positive atmosphere of the team is crucial in order to succeed. I decided it was best to present the team with suggestions, and have them take the pick.
糸井
あー、もっともですね（笑）。で、そのときに岩田さんがなにからはじめたかというと、まず、道具をつくりはじめたんですよね。つまり、目の前に大きな問題がごろごろあって、すごくたいへんだぞ、というときに、直接は、それに取りかからなかった。だから、離れたところから見ると、ぜんぜん手をつけてないように見えたんです。ところが、それは、問題を片づけていくための道具をつくっていたんだよね。
Itoi
Now I understand.When you joined the team the first thing you did was to make tools. There were huge problems left unsolved, but you didn't touch them. It seemed to us you weren't doing anything productive, but actually you were creating tools to solve those problems.
岩田
はい。
Iwata
Right.
糸井
（まわりのスタッフに向かって）おもしろいんだよ、これは。問題を１個ずつ片づけていくかというとそうじゃないんだ。いったん、道具をつくっておいて、「みんなが使える道具をつくりましたから、 これで、あなたはここをつくってください」というふうに建て直していったんだ。つまり、道具さえできたら、あとはやるだけなんですっていうやり方をしていましたよね。
Itoi
(to the staffs)What he did was really interesting. He didn't try to solve the problems one by one. He made a tool, and said to us "Here's a tool that you all can use", and assigned us which parts to build with that tool. Now that the tool was there, all we had to do was to get down to work.
岩田
やりましたね。
Iwata
Yes, I remember.
糸井
それをそばで見ていたぼくは、任天堂の社長になっても大きな意味ではそれをやってるんだな、って思えることがあるんですよ。たとえば、ニンテンドーＤＳが出るときに、岩田さんはまず、新しい部署をつくりましたよね。
Itoi
Experiencing those times, I see you doing the same as president of Nintendo. You made a new department when Nintendo DS came out, right?
岩田
そうですね。それまでもＤＳの部署はあったんですけど、非常に重要な役割を果たす場所として、なかった部署をひとつつくったんですね。そのときは予想もしていなかったのですが、のちにその部署が『脳トレ』や『えいご漬け』をつくることになるんです。
Iwata
Yes. There already was a department that was in charge of Nintendo DS, but I made a new one, and assigned them with an important task. This department later designs games such as "Brain Age" and "DS English Training". I didn't foresee this at the time though.
糸井
あとからその話を聞いたときにね、それは、『ＭＯＴＨＥＲ２』を建て直したときと同じじゃないかと思った。
Itoi
When I heard about this later on, I thought it was the same way you put MOTHER 2 (EarthBound) back on track.
岩田
まあ、ワンパターンですね（笑）。よく言えば一貫性があるというか。
Iwata
Well, not so much of a variation there (laugh), or you can take the positive side and say that there's consistency.
糸井
というか、思考のパターンってそんなにたくさんは増やせないと思うんですよ。
Itoi
Actually, I don't believe that people can have that much of a variation in their logical patterns.
岩田
そうかもしれませんね。
Iwata
Maybe not.
糸井
岩田さんはプログラマー時代に、プログラマーとしての思考モデルを確立して、それがいまも活きているというか。
Itoi
I think you established your logical pattern as a programmer, and have been making use of it ever since.
岩田
そうかもしれませんね。プログラムというのは、純然たる、純粋なロジックなので、そこに矛盾がひとつでもあったら、そのシステムはちゃんと動かないんですね。機械の中で間違いは起こらないんですよ。間違いは全部、機械の外にある。だから、システムが動かないとしたら、それは明らかに自分のせいなんですよ。でも、プログラマーって全員、プログラムができた瞬間には、「これは一発完動するに決まってる」と思って実行してみるんですよ。でも、絶対一発完動しないんですね。だけど、その瞬間だけは、「オレは全部正しく書いたに決まってる」って思い込んで実行キーを押すんです。
Iwata
Maybe. Programming is pure logic. It won't work if there's an inconsistency in the logic. The errors aren't produced inside the system. They are produced from the outside. If the system doesn't work, it's definitely your fault.The funny thing is that every programmer thinks his logic will work when they finish coding a program. It never does, but at that moment, everyone believes there's no error in the logic they have written, and confidently hits the "Enter" key.
糸井
（システム担当の佐藤に向かって）そうなの？
Itoi
(to Sato, the system engineer)Is that true?
佐藤
すごくよくわかりますよ（笑）。
Sato
Very true. (laugh)
岩田
プログラムの世界は、理詰めです。だから、もしも完動しないとしたら、原因は全部、プログラムしたこっちにある。わたしは人と人とのコミュニケーションにおいても、うまく伝わらなかったらその人を責めずに自分の側に原因を探すんです。それはきっと、プログラムをやっていたおかげですね。
Iwata
The world of programming is all logic. If it doesn't work, you're the one to blame. I also apply this to communication among people. If my message isn't conveyed as intended, I search for the reason on my side, and not blame the other.
糸井
ああー。
Itoi
Ah.
岩田
だって絶対間違ってるんだもん、プログラムが。だから、人と話してうまくいかなかったら、「わからない人だな」と思う前に、こっちが悪かったんだろうと思う。そこに気づけるのは、きっと、過去に組んできたプログラムのおかげですね。
Iwata
If it doesn't work, you're the reason for it. If there's miscommunication between someone, I don't blame them for not understanding. There are always factors on my side. Having been a programmer enables me to think this way.
糸井
やっぱり、思考のパターンやモデルって、増やそうと思って勉強しても増えるものではないというか。
Itoi
All in all, logical patterns can't be learned through books.
岩田
自分の身のまわりにあることとつながっていないことを無理に勉強しても身につかないんですよ。だったら、それに時間を費やすより、あっちで火がついてるプロジェクトがあるからそれの火を消しに行こう、みたいなことのほうが優先するんですね。
Iwata
You can't really learn something if it's not related to what you do. Handling troubles in your project is much a higher priority than trying to study something irrelevant to you.
糸井
そっちのほうが、ぴりぴりする快感があるんだよね。
Itoi
Probably because it gives you that stimulus pleasure, too.
岩田
そのとおりです。みんなが困っててオロオロしてるところに、落下傘で降りていくの大好きですからね。『ＭＯＴＨＥＲ２』の出会いもまさにそうでしたし（笑）。
Iwata
I like flying down with an umbrella to where people seem lost. Just like how it was with the "MOTHER 2" (EarthBound) project. (laugh)
糸井
（まわりのスタッフに向かって）この人はね‥‥本当にそういうことが好きみたい。
Itoi
(to the staffs)You know.... I think he really enjoys it.
一同
（笑）
All
(laugh)
糸井
宮本さんの話に戻りますけど、「お客さんは、わかってくれない」というのを前提にしてものをつくっていくという宮本さんの姿勢は、ふだん、ぼくがやっていることに近いんです。「コミュニケーションの前提は ディスコミュニケーションである」って、ぼくはよく言うんだけど、お客さんって身内ではなくて、いわばすれ違う通行人のようなものだから、理解してくれないのがふつうだと思うんですよ。だから、宮本さんが「ポンと渡しただけで遊べるようにつくる」というのとまったく同じで、まずは絶対、誰にでもわかるようにつくりたい。
Itoi
Bringing the subject back to Mr.Miyamoto, his premise when creating something seems to be "Don't think your consumers are willing to understand your points", and I feel this is very close to how I think. I often say that "dis-communication is the premise of communication."The consumers are not your family, they're more like people passing by on the streets. But I want what I create to be understood by everyone, just like Mr.Miyamoto wants his games to be enjoyable from the start.
岩田
はい。
Iwata
Uh-huh.
糸井
もっというと、最初に「あきらめ」があるというか、「人はオレを愛してくれないんじゃないか？」という叫びのようなところからものづくりがはじまるんです。
Itoi
I think creation starts from a despairing cry from within, "Will no one love me?"
岩田
わたしたちもそうですね。自分たちがつくるものに対して、最初、お客さんは、たいして興味がないどころか、まったく興味がない。そこから、はじまる。そこから、愛してもらうというか、わたしたちのつくったものに触れてニコニコしてくれる状態にまで線をつないでいかないとこっちの負けだって思ってますね。
Iwata
That's the same for us. The consumers are not "not that much interested" in our games, they're "completely not interested" in the beginning. We need to bring them to a state where they pick up our product and smile, where they come to love it.That's the battle we're fighting, and we want to win it.
糸井
「愛されていない」というあきらめの状態からはじめるのって、自分を卑下しているように聞こえるかもしれないけど、そこからはじめるしかないですよね。
Itoi
"Will no one love me?" may sound low self esteemed, but that's the only place where you can really start.
岩田
そうですね。わたしは、糸井さんが昔、ＨＡＬ研に来てくれたときに、「王様と奴隷」の話をしてくれたのをすごく覚えてるんです。
Iwata
It makes me remember the story you told us before, when you came to HAL Laboratory. The story of "the King and the Slave".
糸井
あ、わかった。「教育される側が王様である」という話だ。
Itoi
The story that it's the King who needs to be educated, right?
岩田
そうです。
Iwata
Yes.
糸井
（まわりのスタッフに向かって）これはね、いいんだよ。
Itoi
(to the staffs)This is a good one.
一同
（笑）
All
(laugh)
岩田
いや、ほんとに、すごくいい話ですよ。「ものをつくる人」と「お客さん」は、王様と奴隷の関係にある。でも、王様は「ものをつくる人」じゃない。「お客さん」のほうが王様。で、「ものをつくる側」は奴隷の役。王様は「もういらない」って言うことも、「つまらない」って言うことも「わからない」って言うことも自由にできる、超わがままな立場で、その超わがままな王様に、どうしたら喜んでもらえるかな、まえのものは飽きちゃってるけど、つぎはこうしたら喜んでもらえないかな、ということを、奴隷の側は考える。「その『考える奴隷の仕事』の おもしろさをわかりなさい」っていう話だったんですけど、すごく印象に残ってますね。
Iwata
Seriously, it's a good story. It's about the relation between the creator and the customer. The king isn't the creator. He's the customer. The king is free to say anything about what is given to him, that it's boring, or that he doesn't understand it, or even decline the offer. He has the privilege of being super selfish. The slave has to think how to satisfy the king, how to make him happy. Mr.Itoi's point was to understand that the job of the slave is intellectual and interesting.
糸井
それは、恋愛における、口説く側と、口説かれる側も同じで。
Itoi
The same can be said about relationships, the one who makes the approach, and the other.
岩田
主導権が向こうにあるんですよね。
Iwata
The initiative lies in the other.
糸井
そうなんです。基点になる側は必ず主導権を持てない、というのが基本で、いろんなことにあてはめられる考え方なんです。たとえば、誰かに仕事をお願いしたり、誰かから仕事をお願いされるときも同じで、誰かに仕事を頼むときは、「自分が逆側だったら引き受けるかな？」っていう発想がなきゃいけない。頼まれる側がそれを引き受けるとしたら、逆に「頼んででもやりたい仕事」に一回変換して考えてみないといけない。なぜかというと、引き受ける側は、全部つらいに決まってるんだから、「そのままじゃつらいだけだけど、 こういう形がありなんだったらやりたい」というふうに変換してはじめて、後悔せずに一所懸命取り組めるんです。そういうふうに考えずに漫然とやっていると、つくり手が自分を王様だと思っちゃうんです。王様としてつくったものを、本来は王様であるはずのお客さんが奴隷側の立場できゃーきゃー言って受け取るだけだと、つくり手はなにも進化しない。つくり手が進化しなければ、お客さんはすぐに「飽きた」って言っておしまいになっちゃうんです。その悪い循環に陥っているものが世の中に増えてるんじゃないかって最近、とみに感じますね。消費者がすぐに「飽きた」って言うようになったでしょ。
Itoi
Exactly. The one who takes action can never take the initiative. For example, when you ask someone to perform a task for you, you have to think about whether you'll take it if it was offered to you. When you work for someone, it usually involves hard work. People work hard because you think it's worth it, and that's the only way people will put in their full energy into it. So you always have to think, "will I accept this job if it was offered to me?" You need that point of view.If the creator's not aware of that point of view, he starts to misconceive that he is the king. If the consumers don't act as king, the creator is deprived of the opportunity to improve. When the creators don't improve, the customers will get easily bored of what they get. And that's the end of it.It seems that this malignant cycle seems to be increasing. The consumers get bored very easily.
岩田
ものが古くなるスピードがものすごく速いんですよね。
Iwata
The speed of things getting out of date has become extremely fast.
糸井
「つまんない」とか、「飽きた」とか、「もっと持ってこい」とか言われたあとで、それに合わせてあわててぺこぺこしながらつくってもいいものができるわけがないんですよ。だから、ＤＳ以降に任天堂がやってることって、王様たちが、既存の価値観の延長線上で、どんどん飽きながら「こういうのをもっともってこい」ってわがままを言ってるようなときに、「王様、こういうのもありますよ」って、奴隷の側から新しいものを差し出したんですよ。しかも、その新しいものに対して「こんなのは、わからん」って、言わせないようにしたわけでしょ。それは、やっぱりすごいことですよ。
Itoi
If you just keep on responding to the customer's requests, you're not going to come up with something with quality.What Nintendo has been doing since they came out with DS is to keep bringing something new to the kings, who were tired of games that were a mere extension of traditional and conventional ones. Plus, Nintendo made it so that the kings understood it.It's just amazing, what you did.
岩田
ありがとうございます。
Iwata
Thank you.
糸井
Wiiについても同じですよね。世間はWiiが大成功したと思ってるけど、任天堂はちっとも王様になってない。だって、岩田さんは「Wiiが成功した」って一度も言ってないんですよ。
Itoi
Everyone thinks Wii is such a success, but Nintendo hasn't become overproud of it. Actually, I don't think I ever heard you say "Wii is a success."
岩田
まだです。
Iwata
Not yet.
糸井
ね。
Itoi
Not yet, I see.
岩田
いい出足ですよ。いい出足ですけど、まだです。
Iwata
It's a good start. It's been a good start, but it's only the beginning.
糸井
このへんが、おもしろいよなぁ（笑）。
Itoi
(laughing)Is that so.
岩田
いや、まだですよ。これが永続的に波及していくかどうかはまだ答えが出てません。半年後、１年後と、新しい提案を出し続けていって、お客さんが「ああ、気がついたら遊び続けてたわ」っていうことが起こらないとだめです。そうしないと、ほんとうの意味での目的を果たしたことになりませんから。
Iwata
We want to have the customers continue playing. We want to continue coming up with new proposals to them, and have them keep playing. Only then can we say that we've accomplished our goals.
糸井
すばらしい冷静さだね、それは。
Itoi
That's a great point of view, very objective too.
岩田
もちろん、そうなるための準備をつねにやってるわけですが。
Iwata
We've been preparing to make things happen.
糸井
二の矢、三の矢があるからこそ、こういうことが平気で言えるんだろうけど。
Itoi
I'm sure you have new plans coming up.
岩田
二の矢、三の矢があって、それが本当にちゃんと当たるのか。お客さんの心を射抜けるのかどうか。お客さんに遊び続けていただけるのかどうか。まだその答えは出てません。大丈夫だと思ってやってるんですけどね。
Iwata
We need to see if our new approaches will grab the customer's hearts, if they will keep on playing our games.The answer's not out yet, but I believe we're getting there.
糸井
Wiiがこれだけヒットしていると、「『Wiiスポーツ』の続編には どんな種目が入るんですか？」っていう質問を何度もされるでしょう？
Itoi
With Wii being such a big hit, I'm sure you've been asked many times what new sports will be included in the sequel of Wii Sports.
岩田
ええ（笑）。
Iwata
Many times. (laugh)
糸井
これまでの流れからいえば、当然、『Wiiスポーツ２』のようなものがすぐにリリースされるだろうと思いますからね。もちろん、それは、今後、なにかのかたちで出てくるかもしれませんけど、「じゃあ、競技を増やしてすぐにつぎを出そう」というふうには、いまの任天堂は考えていないわけですよね。
Itoi
It's probably the traditional way to release a sequel, but I suppose Nintendo isn't planning to do that. Maybe a sequel may be released sometime in the future, but probably not soon, and probably not by simply adding a couple of new sports.
岩田
安易にそこへ流れることはないですね。『Wiiスポーツ』には５つの種目が入っていたからつぎは７種目にしてすぐに出そう、というふうには考えていません。もちろん、永遠につくらない、ということはありませんが。
Iwata
We're not going to take such an easy way, not by including seven new sports in the game since Wii Sports has five. We're not closing our doors to the possibility of a sequel, but it's definitely not coming out soon.
糸井
そうすると、誰もが予想できる競争になっちゃいますからね。
Itoi
The contents will be so predictable if it came out soon..
岩田
ええ。「絵はもうちょっときれいにしようか」とかね。
Iwata
Yes, like "let's improve the graphics a bit more".
糸井
「リモコンを足につけて サッカーをするんです」みたいな。
Itoi
Or, "let's stick the controllers to our feet and play soccer".
岩田
「プロのスポーツ選手と契約して、 そっくりのMiiをいっぱい入れよう」とか。
Iwata
Or maybe sign contracts with professional athletes and create Mii that looks just like them.
糸井
なるほど（笑）。
Itoi
Why not? (laugh)
岩田
そういうことを、深く考えずにやると、「それで本当におもしろくなるのか？」ということから離れて、どんどん易きに流れていくんですよ。
Iwata
If you start making such decisions without thinking, you start doing the easy stuff. You disengage yourself with the pursuit of true entertainment.
糸井
いまの任天堂は流れないですよね。
Itoi
Nintendo won't do the easy.
岩田
大丈夫だと思います。
Iwata
No.
糸井
どうして大丈夫なんだろうね。というか、そっちへいくのがふつうですよ。売れた商品の延長を考えること自体は間違っているわけではないですし。でもね、任天堂と「ほぼ日」を比べるのはあまりにも規模が違いすぎて失礼だと思いますけど、うちのバカな子たちを見てても、そこは大丈夫だろうって思えるんですよ。まえと同じようなことをやりはじめたときに、「つまんないよね？」って言うと、「そうだね」っていう声がすぐに返ってくる。
Itoi
Why is that? It's so common to do the easy. It's not totally incorrect to think of the extension of the product that sold well.Sorry to compare us with a huge company like Nintendo, but I feel the same when I look at my staff. If I tell them that what they started seems the same as something they did before, they agree. Instantly.
岩田
わかりますよ。
Iwata
I can see that.
糸井
それができる人とできない人の差はなんなんだろうね。
Itoi
What's the difference between those who can do this, and those who can't?
岩田
近視眼的な賢さっていうかね、単純に、なにかとなにかを比べて「こっちの方が得じゃん」っていうことでだけで選んでいくと、どうしてもそれは安易な道へ流れていってしまうと思うんです。
Iwata
You end up doing the easy if you compare one thing with another, and choose the one that seems to have more gain. That's sort of a short sighted cleverness.
糸井
そうですね。
Itoi
Uh-huh.
岩田
いま、任天堂がそうなっていない大きな理由は、自分たちの目的がはっきりしているからです。「けっきょく、自分たちのミッションは、 いい意味で人を驚かすことだ」ということが、ニンテンドーＤＳやWiiをつくることですごくはっきりしたんです。「人を驚かす」ということができなければ、新しいお客さんの数は増えないんです。
Iwata
The reason why Nintendo isn't doing the easy is because our goal is clear. Our mission is to surprise people in a good way, and this became very clear as we made Nintendo DS and Wii. You can't open up a new market of customers if you can't surprise them.
糸井
岩田さんが任天堂の社長に就任したとき、まっさきに目標として掲げたのが「ゲーム人口の拡大」でしたね。
Itoi
Expanding the game population was the initial target you set when you became president of Nintendo.
岩田
はい。新しいお客さんが増えなければ、「いいもの」をつくっても届かないですから。そこがはっきりと見えたので、たぶん、易きに流れにくいんですね。だって、そういったことを考えないのであれば、いまヒットしているＤＳのソフトの別バージョンをどんどんつくればいいんですよ。一度システムができているわけですから、新しいものをつくるより手間もかからずにできるわけです。
Iwata
Yes. Even if we make great products, if the number of new customers doesn't increase, it won't reach people. That was clear to us, so doing the easy was not an option. If we could do away with such goals, all we have to do is make new version of games that are already a hit. That's much easier than creating a new game.
糸井
でしょうね。外野から無責任に言っていいなら、「売れるにきまってるでしょ」ということになる。
Itoi
I'm sure they will sell though.
岩田
もちろん、未来永劫、いまヒットしているものの続編を出さないというわけではありません。ただ、安易にそこへ流れるよりも、「脳」や「英語」や「料理」に続く新しいテーマを探して新しいお客さんを増やしていきたいと思いますね。
Iwata
I'm not saying that we won't create sequels to our hit games forever. However, we want to pioneer more new customers by searching new themes that succeed genres such as "brain training", "English training", or "cooking navigator".
糸井
それは、会社のトップの人だけじゃなく、いまの任天堂の人たち全員がそういうふうに思っているんでしょうね。
Itoi
Is that a goal that everyone at Nintendo shares, or does only the leaders of the company have this in mind?
岩田
いまは、そういう状態になってると思います。ただ、現実的な話に踏み込んでいうと、「安易な道へ流れない」というのは、いま会社が食えてるから言えるんでしょうね。
Iwata
I believe everyone shares it now. But realistically, I think we can say "we won't do the easy" because we are currently making profit.
糸井
ああー。
Itoi
Ah.
岩田
そうは言っても食えなかったら、まずは確実に売れるほうを選ぶかもしれない。
Iwata
If we were having a hard time, maybe we will chose the easy, so that we can make profit for certain.
糸井
かといって、それをくり返すだけだと市場そのものは広がらないわけですよね。なるほどなぁ。易きに流れないと言うのは簡単だけど、そこの現実的な見極めはものすごくむつかしいですね。
Itoi
It's easy to say "not to do the easy", but to asses it realistically is a tough job. But on the other hand, the market won't expand by doing the easy.
岩田
そうですね。象徴的な例を挙げると、『脳トレ』と『もっと脳トレ』をつくったディレクターは、つぎの『脳トレ』をつくるのではなくて、Wii本体の製作チームに入ったんです。そこで彼がつくったのが、Wiiの「写真チャンネル」と「お天気チャンネル」と「ニュースチャンネル」なんです。
Iwata
Here's what happened when creating Wii. The director of "Brain Age" and "Brain Age 2" didn't create another sequel but was assigned to the team that was developing built-in software of Wii console.What he did there was creating the Photo, Weather and News Channels of Wii.
糸井
あーー、なるほどね。じゃあ、もしも岩田さんがその人に「つぎの『脳トレ』をすぐにつくれ」って言ってたら‥‥。
Itoi
Wow... If you had assigned him to make the next "Brain Age"...
岩田
Wiiは、いまの形をしてなかったでしょうね。
Iwata
Wii wouldn't have been what it is now.
糸井
スリリングですねぇ、それは。
Itoi
Interesting.
糸井
岩田さんの思考モデルというのは、専門的な領域で培われたはずなのに、言われるとすぐに自分の役に立つというか、普遍的な力を持ってますよね。
Itoi
Your model of thinking was nurtured in a technical field, but it's versatile at the same time. It's a very practical model.
岩田
山のようにあるデータの中のどこに目をつけるかというような具体的なことは、自分にしかわからないことだと思いますけど、方法論としては、自分のやっていることはすごく普遍的であるような気がします。といっても、わたしは、経営学の本を読んで体系的に勉強したわけではまったくないですが。
Iwata
I've never studied management or enterprise organizations through books, but I think my method can be applied generally. The specifics, though, such as finding which data to pay attention to is probably something only I understand.
糸井
そうですよね（笑）。これは、不勉強であるとかそういう話じゃないんだけど、（まわりのスタッフに向かって）昔の岩田さんはね‥‥本を読まなかったんだよ。
Itoi
(to the staffs)It's not that he was lazy or anything, but...he never used to read books.
岩田
あははははは。
Iwata
(laugh)
糸井
だから、昔はよく、岩田さんに本をあげてたんだよ。それが、最近では逆になって、岩田さんからおすすめされるほうがずっと多くなった（笑）。
Itoi
I used to hand you my recommendations, but now you seem to recommend me a lot more than I do. (laugh)
岩田
やっぱり、こういう立場になると、本に出てくることと自分の身のまわりにあることがつながるようになったんですよ。プログラムを専門にしていたときは、組織や経営の本を読んでも、つなｪってないから入ってこないんですね。たしかに知識は増えるんですけど、知識が増えるだけだと達成感がないんです。「明日、これが使えるぞ」っていうことがないんですね。そうすると、さっきの話でいうところの「ご褒美」が感じられないわけです。
Iwata
Now that I'm in my position, I can connect what's written in books and what happens around me. When I was specializing in programming, reading books on management or enterprise organization only helped me gain information. It was only information, so the knowledge didn't soak in. Gaining information doesn't give you a sense of accomplishment if it's not something you can try tomorrow. You don't feel the "reward".
糸井
そうだね。なるほどね。もっと昔はどうだったんですか？たとえば子どものころなんかは本を読んだんですか？
Itoi
How about when you were a child? What books did you read, if any?
岩田
子どものころは、百科事典を端っこから読んでました。
Iwata
I used to read the encyclopedia, from end to end.
糸井
それは覚えたんですか？
Itoi
Did you memorize what you read?
岩田
覚えません。覚えないけど、わからないことどうしがつながるのがおもしろかったんですね。それが自分にとってのご褒美だった。
Iwata
No, but finding the connection between things that I didn't understand until then was very interesting. That was my reward.
糸井
いまと同じだ。
Itoi
Isn't that the same as you are now?
岩田
そうですね（笑）。知らないことと知らないことがつながってわかっていくことってすごくおもしろいんですよ。
Iwata
Actually, yes. (laugh).It's interesting when things that I didn't understand connect, and I gain new knowledge.
糸井
ぼくがいつもおもしろいなぁと思うのは、岩田さんって、急に質問したときに、なんとか答えようとしてくれるんですよ。その「答えようとする力」ってすごいんです。だいたい、オレが岩田さんに質問して、答えてもらえなかったことなんてないんだよ。
Itoi
What I find amazing is the effort you put in answering questions. I don't think there was a time when you didn't answer my question. Every time I ask one, you answer it.
一同
（笑）
All
(laugh)
糸井
「どうして海外の電話って、 遅れて聞こえるんでしょうね？」って質問したの、覚えてます？
Itoi
Remember when I asked why lags are caused in international phone calls?
岩田
はい、覚えてますよ。
Iwata
Yes.
糸井
電波の速度って速いのに、海外と電話すると届くのが遅れるじゃない？なんでこんなに遅れるんだろうって岩田さんに突然訊いたんだよ。そしたら、納得のいく答えをすぐに答えてくれた。
Itoi
Electronic waves are transmitted instantly, but when you make international calls, there's a lag. I remember asking this question out of the blue, but you gave me an answer right away.
岩田
えーっと、昔の電話のほうが、いまよりも遅れて聞こえていました。いまの国際電話は海底のケーブルを使うことが多いんですが、昔は衛星でした。静止衛星というのは、地球の表面から36000km離れた場所にあります。つまり、一度、上空36000kmまで行って、そこから36000kmかけて帰ってくるので、合わせて70000km余りかかるんですね。「もしもーし」「はいはーい」というやり取りをする場合は、衛星とのあいだを信号が２往復するんです。そうすると140000km強になるんですね。光とか電波は１秒に約300000km動きますから、140000kmの距離を動く場合はだいたい、0.4秒の間になるんですよ。ですから、現実に「もしもーし」「はいはーい」を体験すると、0.4秒のタCムラグができるんです。
Iwata
Let's see... phone calls used to have more lags in the old days. Although underwater cables are frequently used for international calls now, satellites were used before. Stationary satellites are located about 36000km away from the surface of the earth. So the voice is transmitted to 36000km above, and then 36000km down, which is over 70000km in total. When someone says "Hello", and the other answers "Hello", the signal makes two round trips, which is a total of a little over 140000km. Light and electronic waves are transmitted about 300000km per second, so the signal takes about 0.4 seconds to be transmitted 140000km. So when you say "Hello" and the other answers "Hello" back, there is approximately a 0.4 second lag.
糸井
これを、一気に答えたんだよ。
Itoi
And he answered this instantly.
一同
おおー（笑）。
All
Wow. (laugh)
糸井
あきれるだろう？で、とくにオレが好きだったのは、それぞれの数値を即答したこともさることながら、「もしもし」だけじゃなくて「はいはい」が聞こえるまでにはもう１往復ある、という考え方だったんだよ。そこにね、惚れたの。
Itoi
Isn't it amazing? What caught me was not only the numerical figures that he answered, but that he included the "Hello" back in his calculation.
岩田
はははははは。「もしもーし」「はいはーい」なんですね。
Iwata
(laughing)Yes, "Hello" to and fro is a set.
糸井
その言い回しは、いいよね。コミュニケーションを往復運動で考えること自体が、やっぱり画期的ですよね。向こうに行くだけのこととして考えないで、戻ってくるのを待つというところまで考えてる。だから、苛立ちになるという。やっぱり、いま聞いても、おもしろいのはそこですね。しかも即答するわけだからね。いまならネットで調べればわかるのかもしれないけど、即答じゃないと、おもしろくないんだよ。
Itoi
"Hello" to and fro. That's good. I thought it was novel to think of communication as a round trip action. The reason why people are irritated is because of the lag that is caused in that round trip action. You include the response in your concept of communication. I find this very interesting. The numerical figures can probably be found on the Internet, but the fact that you gave me these facts immediately makes it amazing.
岩田
なぜ、すぐに答えられたかというと、昔考えたことがあるからなんですよ、きっと。
Iwata
I was able to give you an immediate answer because it was a subject I've thought about.
糸井
そっか。
Itoi
Really?
岩田
なぜ海外と電話すると気持ち悪いんだろうって。遅れるときでも、妙に長く遅れるときと、そうでもないときがあるぞ、とか。そういう疑問を感じたら、きっとこうだからだ、って仮説をたてる。そして、思いつくかぎりのパターンを検証して、「どういう角度から考えても、 これだったら全部説明がつく」というときに考えるのを止めるんですよ。「これが答えだ」と。
Iwata
Yes. I was wondering why it was uncomfortable when calling overseas. Sometimes the lag is not as bad as other times. When I draw a hypothesis, I test it against every possible pattern. When I find the hypothesis that can explain every pattern, that's when I can stop thinking, because that's the answer.
糸井
それもプログラム的な思考ですね。
Itoi
That's a program oriented thought too.
岩田
そうですね。だから、説明できない「なぜ？」があると、究明せずにはいられないんですね。なにか説明できないことがあるとすると、その仮説は間違ってるということになる。だとしたら、別な理由があるはずだ。別の仮説を考えなきゃいけない。ということで、また考え始めます。
Iwata
Probably. When there's a question that I can't answer, I can't stop myself pursuing it. If a hypothesis doesn't work against a certain pattern, it means that it's not correct. That means that there should be another reason, so I need to draw another hypothesis, and I keep on thinking.
糸井
だからね、岩田さんがまだ整理しきってないことを質問すると、答えるまえにちょっと間ができる。
Itoi
That's why when I ask something that you haven't thoroughly thought, there's a pause before you answer.
岩田
（笑）
Iwata
(laugh)
糸井
本気で考えるときは、ちょっと止まるんだよね。
Itoi
You stop and think.
岩田
すでに考えたことがあって、整理がついてることはそれを答えればいいだけですからね。でも、未整理の課題を突きつけられると、その場で仮説を思いついたとしてもつい、検証をはじめてしまうんですね。というのも、自分はずっとコンピュータをやってきてますから、論理に矛盾がないのが好きなんです。だから、はじめての質問をされたときは、「自分がここで答えることは、 自分が今までやってきたすべてのことと 一貫してるかどうか？」ということを考える。自分が自信を持って「これが正しいと思う」ということがあっても、いろんな角度から考えてみないと言えないんです。
Iwata
If it's a question that I have already pursued, all I need to do is give you my answer. But when it's something that I haven't come up with an answer yet, I need to check my hypothesis before I open my mouth. I like consistent logic, I'm from the computer field.When someone asks me a question I don't have an answer to, I verify if my answer is consistent with everything that I've done and known. Even if I feel confident that an answer is correct, I still need to test it from every angle.
糸井
おもしろいだろう？
Itoi
He's amazing, isn't he?
一同
（笑）（
All
(laugh)
糸井
そうそう、うちの新しいスタッフは知らないかもしれないけど、岩田さんは「ほぼ日」の創刊メンバーのひとりでもあるんですよ。
Itoi
Some of our new staffs may not know, but Mr.Iwata was one of the start-up members of Hobonichi.
岩田
「電脳部長」という肩書きをいただいてました（笑）。あれは、いまでも？
Iwata
I was the IT manager of Hobonichi. (laugh) Is it still valid?
糸井
もちろんそうですよ。クビにした覚えはないから（笑）。
Itoi
Of course, yes. I don't remember firing you. (laugh)
一同
（笑）
All
(laugh)
岩田
知らない人もいらっしゃるでしょうから、当時の話をしておきましょうか。ほぼ日刊イトイ新聞は1998年６月６日に始まったんですが、その１ヶ月ほど前のゴールデンウィークに用事があって、わたしは糸井さんと会ったんです。それで、そのまま鼠穴（当時、東京糸井重里事務所があった場所）に連れて行かれたんですね。で、糸井さんがおっしゃるには、「ここでホームページを始めたい」と。それが創刊の１ヵ月前です。で、わたしは「こりゃ、たいへんだ！」って。
Iwata
For those who don't know, Hobo Nikkan Itoi Shinbun started on June 6th, 1998. About one month before that, I met Mr.Itoi. He took me to Nezumiana (where the office of Tokyo Itoi Shigesato Office was located at the time), and he said "I want to start up a web site here". I was knocked off of my feet. This was only one month before the start up!
一同
（笑）
All
(laugh)
糸井
よくわかってないんだよね、自分で（笑）。なにしろ、知識が、まぁ、いまもないけど、いまよりも圧倒的にないからさ。
Itoi
I didn't know what I was saying. (laugh)I don't have much knowledge now, but at that time, I had close to zero.
岩田
ぼんやりとしかおわかりじゃなかったからこそ、「１ヵ月後にホームページをはじめる」なんて言えたんだと思うんです。で、わたしは、すぐコンピュータの手配をして、プロバイダーと契約して、床を這いずりまわってＬＡＮの配線して、「こうすれば、最低ﾀのことは はじめられるんじゃないでしょうか」みたいなことをしてました。
Iwata
I think it was because that you had such small knowledge that you were able to say you were going to start up a web site in a month.From then I arranged computers and Internet providers, put together a LAN, and said "I think you can start now."
糸井
‥‥ひどい（笑）。
Itoi
Pretty bad, huh? (laugh)
一同
（笑）
All
(laugh)
岩田
いやー、おもしろかったですよ。それ以来、わたしは「ほぼ日」の電脳部長なんですよ。
Iwata
No, I had fun. I've been the IT manager of Hobobnichi ever since.
糸井
だから、そのころからいる茂木なんかに言わせると、岩田さんは任天堂の社長じゃなくて、「コンピュータを教えてくれるおじさん」なんだよ。いまだに。
Itoi
If you ask Mogi sitting there, Mr.Iwata's still the "guy that knows about computers", rather than the top of Nintendo.
茂木
うん。
Mogi
Yes.
一同
（笑）
All
(laugh)
岩田
メモリが足りないっていうことになったら、マシンをいちいち開けて増設ＲＡＭを挿したりしてね。
Iwata
If I heard that there's not enough memory on the computers, I would open up the machines adding more RAM.
糸井
「そうやって力任せに外すもんなんですか？」「そうです‥‥バコン！」みたいな。
Itoi
I was like "Are you supposed to pull that out like that?" and he was like "Yes... (bang!)"
一同
（笑）
All
(laugh)
岩田
当時の糸井さんはね、役割として、どの程度たいへんかということを漠然と知りつつも、「なんとかなる」という前提でいるんです。リーダーって、そうじゃなきゃいけないんですよ。「なんとかなる」という前提ですべてが動いているからこそ、みんなが「なんとかしなきゃ」って思うんです。それは、わたしもときどきやるんですよ。たとえばWiiをつくるときに、わたしは「本体をＤＶＤケース３枚分の厚さにしてほしい」ってスタッフに言ったんです。もちろん、そうとうたいへんなのはわかってるんですけど、わからない振りしてやるんですよ。
Iwata
Mr.Itoi thought that it would work out somehow, although he sensed that it would be a tough job. A leader should be that way. People try to figure out a way, because the project lies on the premise that "it should work out somehow". I do this sometimes. When we were developing Wii, I told my staff that I want the body to be the size of 3 DVD cases stacked together. I knew it was an extremely difficult demand, but I said it like I didn't know that.
糸井
うん。わかるわ、その気持ち。難しさは知ってるんだよね。
Itoi
I understand this very well. It's not that you aren't aware of the difficulties.
岩田
難しいに決まってるんですよ。で、もちろん、そればっかりじゃダメで、無理難題を言うときと、そうじゃないときと、メリハリは、つけないといけない。つねにトップが無理難題を言うばっかりじゃ、組織が回っていかないですから。
Iwata
Of course not. However, it's also very important to strike a proper balance. Organizations fall apart if the people in charge only demand the impossible.
糸井
無理難題を言わざる得ない局面が、ときどきあるんですよね。
Itoi
Sometimes, you've got to ask for the impossible though.
岩田
あのときは、そういうときだったんですよ。だから、わたしは、いまの「ほぼ日」を見て、1998年６月６日を選んだというのは神がかり的な選択だったなと感心するんです。ワールドカップと同時にはじめるという意味もあったにせよ、「あそこしかない」っていまでも思うんです。断言しますけど、「ほぼ日」って、あれより半年早くても、半年遅くてもいまの姿になってないんですよ。すなわち、糸井さんは天の時をつかんでるんです。あのタイミングではじめたからこそ、先駆者達の失敗の轍を踏まずに済んだ。逆に、もっと遅れてはじめていたら、いま、この規模に育ってないんです。あの時期にスタートしていたからこそ、こういう存在になれてるんですよ。「なんてすごい判断をするんだろう」って、わたしは、あとから思うんですよね。だから、当時、わたしは、「糸井さんが『ここだ』って思ってるんなら、 それはなんとかしなきゃ」っていう一心で電脳部長をやってたんです。
Iwata
Yes, and when I said it, it was that kind of situation.The fact that you chose June 6th 1998 to establish Hobonichi seems divine to me. Of course, it was synchronized with the opening date of the World Cup, but still, there's no other date than that day. I can swear that Hobonichi wouldn't have been what it is now if you have started half a year earlier, or half a year later. That timing was great, you started late enough where you were able to avoid the predecessors' mistakes, and it was early enough so that it could grow to a scale it is now. You were able to seize the moment. The timing you started up Hobonichi makes it what it is today. I was just amazed at your decision, and I wanted to make it happen, to make it work. That's why I devoted in being the IT manager.
糸井
岩田さんはね、よくその話をするんだよ。あのタイミングのすごさというのを何回オレに言ったかわかんないんだけど、正直に言うと、ぼくは、いまでもほんとにはわかってない。だって、なにをやっても、人って逆のこと言うからさ。「遅すぎる」って言う人と、「早すぎる」って言う人がいつでもいるんだよ。
Itoi
I've heard him talk about this "timing" so many times, but I still don't understand the value of it. There are always people who say the opposite, that it's "too late" or "too early". You always have to listen to both.
岩田
ええ。
Iwata
I know.
糸井
当時のことでいうと、「いまさらやるんですか！」っていう言われ方をよくされた。「まあ、でも、やるっていうんなら なんか手伝いますよ」みたいなね。つまり、かわいそうだから手伝いましょうか、みたいなことを言う先輩がいっぱい現れたんだよ。全部会ったんです、オレ。だけど、なんにもいいことなかったですね。そのときに会った人たちは、逆にいまなにしてるのかねって思う。
Itoi
I remember people saying "What, are you starting up now?" as if it was too late. I had lots of people telling me that they would help, but it was like out of pity. I talked with all of them, but gained nothing from them. I wonder what they are doing now.
岩田
当時、糸井さんがよく言われていたのは、「広告の世界であれだけの実績があるのに、 どうしてそれを捨てて こんなことはじめるんですか」ということでしたよね。
Iwata
I'm sure tons of people said "You have such a career in the advertisement field. Why toss that and start something like this?"
糸井
さんざん言われましたね。
Itoi
Tons.
岩田
あのころ、糸井さんはすでに、「『いま売れてます』が いちばん効果的なコピーになったいま、 広告の仕事は自分にとって、もう意味がない」というふうに明言されてましたから、わたしには糸井さんがそこへ踏み出した意味がわかっていたんです。でも、そういう考えを知らない人から見たら、「なぜ糸井重里がインターネットを？」って思いますよね。それって、ちょうど、任天堂が「２画面とタッチパネルの ゲーム機をつくります」って言ったときと同じなんですよ。
Iwata
I remember you saying that "Since 'It's Popular Now' has become the most effective advertisement phrase, I can find any meaning in advertisement anymore". I understood why you started up Hobonichi. People who didn't see what you were thinking must have thought "Why the Internet, Itoi? "The same happened when Nintendo announced we're making a portable game machine with dual-screen and touch panel.
糸井
あー、なるほどね。
Itoi
Interesting.
岩田
多くの人はあの発表を聞いて、「あちゃー、任天堂、変になっちゃった」っていうふうに感じたと思うんです。わたしたちからしたら、現在の延長上に未来はない、と思って決断したんですが、ふつうに考えている人にしてみれば、ただの常識外れに思えるんです。
Iwata
A lot of people thought Nintendo had gone nuts when they heard this. For us, our future was not in a continuous line of what we were doing then. The decision came from that point of view, but to people out there, what we said seemed offbeat.
糸井
そうですね。ぼくは岩田さんほどはっきりと未来を見ていたわけじゃないと思うけど、インターネットというのはものすごく大きくなるんじゃないか、というのは思ってた。それは、山っ気とは違う意味でね。いろんな人たちがいろんなことを教えてくれようとしていたけど、そのうちに急に、ふつうの人たちがみんな、インターネットを「知ってる状態」になるような気がしてたんです。
Itoi
I didn't see things as clearly as you did, but I sensed that the world of Internet would grow, not that it would be a risky field. Although people tried to teach me many things, what I felt was that one day, normal people would just come to "know" about the Internet.
岩田
事実、そうなりましたしね。
Iwata
It came true.
糸井
だから、いま思うと、当時ぼくは、意外と落ち着いてたのかもしれない。だってさ、ネットの歴史なんて、実質的には1995年くらいからのものでしょう？３年や５年、先に知ってるからって、「インターネットというものはね‥‥」って語られてもさ。つまり、コミュニケーションを知らない人がネットをいくら語っても、説得力を感じなかったんですよ。あとは、ほら、なんとなくぼくは、岩田さんのことをなんでも知ってる人だと思ってたから、「うちは岩田さんもいるし‥‥」って思い込んでた（笑）。
Itoi
Maybe I was calm at that time, come to think of it. The history of the Internet virtually starts around 1995, right? When people who didn't know anything about communication came up to me and started preaching about the Internet, it didn't persuade me at all. After all, all they knew was only a couple of years more than what I knew.Plus, at that time, I thought you as someone who knew everything. I thought, "And we do have Mr.Iwata..." (laugh)
岩田
ははははははは。
Iwata
Ha ha ha.
糸井
ＲＡＭも挿してくれるし、って。意味がぜんぜん違うよね（笑）。
Itoi
He can even add RAM to our computers! (laugh)
一同
（笑）
All
(laugh)
糸井
まぁ、そういうわけですから、岩田さんも「電脳部長」として、たまにこうやって遊びにきてください。さすがにもう、ＲＡＭを挿したりはしなくていいですから。
Itoi
Well, you don't have to check our computers anymore, but please drop by our office every now and then. You're still our IT manager.
岩田
わかりました（笑）。
Iwata
Sure. (laugh)
Reported by Hobo Nikkan Itoi Shinbun
Itoi
Remember talking about the definition of "idea" before?
Iwata
The words of Mr.(Shigeru) Miyamoto, right?
Itoi
He said that ideas are "something which solves multiple issues at once". This notion seemed eye-opening to my staffs. Can you explain us a bit more about the intention of his words, and your analysis of it?
Iwata
Those words came out when we were designing a video game software. I think Mr.Miyamoto said it as an example of a method for designing video games. I actually perceive this as a very versatile concept, which can be applied to many aspects of life.
Itoi
Uh-huh.
Iwata
There's always the dilemma of "damned if you do, damned if you don't" when creating something. There are options that improve the product, and there are also options that work the other way. The thing is that you barely have cases in which there exists only a single problem. You usually have problems occurring everywhere, lots of them.
Itoi
Yes, yes.
Iwata
I'm not talking solely about designing a product. The same happens in organizations, or in personal relationships. Presenting a single antidote for a single problem doesn't get you anywhere. It always causes side effects. It sometimes even raises trouble to issues which were fine until then. People come up with many suggestions, but usually it only gives a solution to a single problem, and only that. A project doesn't advance much with a solution like that.
Itoi
I know what you mean.
Iwata
Often times, the game not being entertaining enough are the problems you face when designing video games. The more ideas put in, the more fun it brings forth, and people enjoy the game more. However, the amount of time and human resources that can be put into creation is always limited. It's not realistic to simply propose "more" of something when you have limitations. Sometimes, one single idea solves one problem, then another, and even issues that were thought to be totally unrelated.
Itoi
That does happen sometimes. (to the staffs) Interesting, isn't it?
All
(laugh)
Iwata
Mr.Miyamoto is constantly trying to find that kind of "idea". I mean, constantly. Persistently. One day he called me up suddenly, it was when I used to live in Yamanashi. (Mr.Iwata had been president of HAL Laboratory, Inc., which is located in Yamanashi Prefecture) Do you know what the first thing he said was?
"I got it!"
(laughing) I had no idea what he was talking about.
Itoi
(laugh)
Iwata
What he "got" was an idea for a game we were designing together. This idea was something that solved multiple issues, all at once.
Itoi
That's what he called an "idea".
Iwata
Exactly. One single inspiration that makes so many things work. That's what you call a "great idea", and finding that moves things forward, moves it towards the goal. Mr. Miyamoto thinks that it's the game director's task to find those "ideas".
Itoi
He didn't actually say this, right? You've picked this up working with him for a long time, observing his ways.
Iwata
Yes. I've seen him "get it" many times. Through those instances, I've come to learn his emphasis on that method, and how he guides projects to goals using that method.
Itoi
That's really interesting. (laugh)
Iwata
This really isn't limited to game design. The world is full of "damned if you do, damned if you don'ts". You call it "trade-off". Everyone is confronted with trade-offs. The more budget, the better. The more human resource, the better. The more time, the better. That's obvious. However, doing the obvious means doing the same thing with everyone else. That doesn't nurture competitiveness.
Itoi
It becomes a matter of who does it more.
Iwata
But when you find a solution by combining issues, the more unique it is, the more value it brings. When Mr.Miyamoto said "that's what you call an idea", it came to me. It's such a concept that applies to various aspects of life, so I really wanted to incorporate it into my way of thinking. I remember talking about this the other time we met.
Itoi
If you're looking for a solution that solves only a single issue, and not multiple issues, it's easy.
Iwata
It really is.
Itoi
(Pointing at Sato sitting next to him, and Nagata sitting across him)
See, if Sato's life is in danger, it's easy to find a way to save him at the cost of Nagata's life. The more leeway an enterprise or an organization has, the more they tend to choose such solutions. They solve issues one by one. First they save Sato, then they realize Nagata's in danger, so they choose to save Nagata, and on and on.
Iwata
By putting in an endless amount of time and energy.
Itoi
Exactly.
Iwata
Everyone can solve problems one by one. "If there's too much of something, just make it less", or the other way around. That's just responding to each issue. For example, if a customer complained at a restaurant that a dish is "too much", what is he/she really saying? Maybe the real problem may be how the dish tastes, and not the amount.
All
Ah....
Iwata
If the chef only sees the amount of his dish as the problem, changing the amount doesn't solve anything. He has to be able to find the real issue and improve the taste to truly solve this problem.
Itoi
That's true.
Iwata
When you dig deep down until you hit the root of the problem, you sometimes find that what seems to be isolated matters are actually connected. A single change can have impact on matters that were thought having no relation. Different problems can be solved at once. When a single idea solves various matters, those are the times when Mr.Miyamoto "get it", and calls you up all of a sudden. You have a much clearer vision when you "get it".
Itoi
Mr. Miyamoto said that an idea is "something which solves multiple issues", and you mentioned that it opened your eyes to a new way of thinking. However, as a programmer, I'm sure you have solved problems in the same way?
Iwata
Actually, yes. Fixing a bug in a program often solves many problems, or visa versa.
Itoi
Does everyone who has studied in the science field experience such way of utilizing "single ideas"?
Iwata
There are people who solve problems via symptomatic treatments, of course. Such as "Let's turn down the air conditioner since it's hot", or "I'll drink some water because I'm thirsty". People like this may actually be the majority.
Itoi
I see.
Iwata
I don't think it's a matter of coming from the science field. I think it's just the type of person you are. There are those who are satisfied knowing that thirst is the reason for wanting something to drink, and there are those who want to unfold the cause of their thirst.
Itoi
I wonder where that difference comes from. Where those two types branch.
Iwata
I have a nature of pursuing the reason of things.
Itoi
I know you do. (laugh)
Iwata
(laughing)Yes, as you know very well. During my initial years as a video game designer, when the game I created didn't sell as expected, I would look for the reason why. Technologically, my game wasn't inferior to others, but it didn't sell as much.
Itoi
Uh-huh. (laugh)
Iwata
But the games Mr.Miyamoto designed sold like crazy. I mean, its sales were multiplied by dozens compared to that of the game I designed.
Itoi
But the quality of the technology of the game wasn't much different, right?
Iwata
Well, at least that was what I thought. But the facts were clear. His game just sold much more.
Itoi
I'm sure there are many people who draw the conclusion that their games are just as good as Mr.Miyamoto's.
Iwata
But I wanted my games to become popular, just like his.
Itoi
I like how you think. (laugh)
Iwata
My piece of work wasn't popular as his. Everyone seemed to be playing his game. That's frustrating. Frustration made me observe closely.What was the difference between him and me? This wasn't an easy question to answer.
Itoi
It must have been difficult.
Iwata
After starting to work with Mr.Miyamoto for a while, I started to see. I was only looking from the "designer's point of view", but he was different. His aim does have a higher percentage of becoming a hit, but he does make mistakes. After all he's not God, you know. The difference lies in how he corrects his mistakes. He brings an employee who has nothing to do with the game he's designing, and hands him/her the controller and says, "Go ahead, try it." This was before he was acknowledged as a renowned video game designer, when he still was assistant manager or manager.
Itoi
(laughing)When he was "The world-class assistant manager".
Iwata
(laughing)Yes, he was "The world-class assistant manager" for quite a long time.
Itoi
(laughing)Yes, quite long.
Iwata
So he hands him/her the controller and tells him/her to go at it, and all he does is watch him/her from behind.I used to call it "Mr. Miyamoto's View over Someone Else's Shoulder". I didn't realize how important it was until I started to work with him. Only then it occurred to me that this was it. We're not able to go to customers explaining the details of the game's intention, or how they should enjoy it.
Itoi
Of course not.
Iwata
The product is all you've got. But a product is incomplete when it comes to explaining something in detail. Every detail of the design of the game is not always understood by the players.
Itoi
Mr.Miyamoto is trying to find that gap through his "View over Someone Else's Shoulder".
Iwata
Exactly. He watches them play and checks in detail how they respond, playing it without any previous knowledge. He finds out what they don't understand, what they let past, which triggers they miss. There are tons you can find from the view from behind. However experienced he may be, he never drops the notion that "if the players don't understand it, there's fault in the design I made".
Itoi
How interesting.
Iwata
It's easy to say it's the "customer's point of view" that counts, but it's the fact that he drew a method of how to find it very early. On the other hand, I was interested whether my program was cool or not, but not really aware of the players' response.
Itoi
So at the time, you thought you were cool.
Iwata
Actually, yes. (laugh)I, the novice game designer, thought I was cool.
Itoi
"The program works, and it looks cool too", right?
Iwata
(laughing)Must have been like that.Mr.Miyamoto's way came upon me as a total shock. I remember going back to my office and writing a report on it, how his method works, and it being the reason we can't win.
Itoi
Like Kaishu Katsu on Kanrin-maru, seeing America for the fist time.
Iwata
Ha ha ha.In those days, there were few people around me who understood this concept. A lot of times I ended up thinking all by myself.
Itoi
Those pursuit for the reason why must have made you who you are today.
Iwata
I think so.
Itoi
Mr.Miyamoto has been unique to think that "if the players don't understand it, their's fault in the design I made". Were there many designers who thought that way?
Iwata
No, I think he was very unique. Often, people only look from the designer's point of view.
Itoi
Must be so.
Iwata
Many designers put their personal perspective into their design as if it represents everyone's opinion. In reality, based on the fact on how the player reacts, you should draw a hypothesis, and then you should figure out how to solve the problem from the root. But, people often mix the facts and presumptions, and push that mixed opinion through without solving the problem based on the fact.
Itoi
That just leads to throwing subjective opinions at each other in the development meetings, doesn't it?
Iwata
Yes, although that's not totally useless. Creation always has an aspect of expressing one's ego. Mr.Miyamoto's no different. He does have that side in him. As long as you're creating something, you can't avoid being an egoist. What's special about Mr.Miyamoto is that he is unthinkably egocentric in one way, but he never loses an objective point of view. He's always alert about people's initial response to his creation. If he finds they don't get it, he simply drops it and looks for an alternative.
Itoi
He must be talented in shifting his viewpoint.
Iwata
Exactly. He can examine something very closely, and the next second he can switch to a macroscopic point of view, and make a fresh start from there.
Itoi
You think he's using a magnifying lens, but he may already be switching to a view from 10,000 meters high.
Iwata
He can do that instantly.It's often the case that when you examine something closely, you keep on getting closer to the subject but not alter your viewpoint.
Itoi
True.
Iwata
I think the "idea which solves multiple issues at once" can't be found when you're looking at something real close. You need to be able to switch your point of view. That's not an easy thing to do. Mr.Miyamoto can do it easily. He's the type of person that can come up with a solution that can truly save someone when he/she's in danger, and not rescuing him/her at the cost of another.
Itoi
I can see why you call yourself "the researcher of Miyamoto studies". (laugh)
Iwata
(laughing)Oh, yes, I'm the world's number one researcher of Miyamoto studies.
Itoi
You've been calling yourself that for quite a long time. (laugh)
Iwata
He must be sneezing now.
Itoi
Didn't Mr.Miyamoto major in industrial design in college? That's something significant that makes him who he is now, isn't it?
Iwata
I think so. I think it's a huge factor that he used to study ID(Industrial Design). It's not about how artistic it is, it's all about how the product meets its objective.
Itoi
He is really making use of what he studied.
Iwata
Knowing Mr.Miyamoto as he is today, it seems to me that it sort of was inevitable that he studied ID, and not by coincidence.
Itoi
The logics he acquired through studying ID must make up a significant part of him, how he picks out the correct answers through people's responses.
Iwata
Definitely.The majority of people think he's the person of art, full of inspiration, with a natural talent coming up with ideas one after another, as if he was guided by God.
Itoi
But that's not how it is, right?
Iwata
Not at all.He's extremely logical, but that's not all. He creates a mixture of left-prefrontal-oriented elaborate logic, and dramatic ideas that people are blown away by.To be honest, I have to say I envy this.
Itoi
You always talk like you don't have that kind of mixture, but I think every programmer has that within himself.
Iwata
Well, I don't say I lack it, but surely I wouldn't want to compete with right-prefontal-oriented people like you or Mr.Miyamoto on your grounds.
All
(laugh)
Itoi
Really? (laugh)
Iwata
I know I only have a slim chance of winning. (laugh)I'd rather compete in my own field, than someone else's.
Itoi
That's another thing you've been saying for a long time.
Itoi
Do you remember the time I asked you the definition of management? It was around when I just started up Hobonichi, when you were president of HAL Laboratory.
Iwata
Of course.
Itoi
I would never have guessed you'd become president of Nintendo at that time.
岩田
わたしだって知りませんでしたよ。
Iwata
Neither had I.
一同
（笑）
All
(laugh)
糸井
つまり、大企業の社長の岩田さんじゃなくて、当時は「このままだと倒れちゃうぞ」っていわれてたＨＡＬ研究所の社長を31歳で引き受けて建て直した人に対して、「さぞかし苦労しただろう」という気持ちと、「そういう苦労はできればしたくないな」という気持ちが自分の中にあって、それで、岩田さんに「経営ってなんなんでしょうね？」という質問をしたんですよ。
Itoi
I remember the reason why I asked you that question. Having putting back together HAL Laboratory, I wanted to hear your opinion, thinking of the difficulties you went through, and partly because I didn't want to go through the same situation.
岩田
それで、けっきょくわたしは、「自分たちは、なにが得意なのか。 自分たちは、なにが苦手なのか。 それをちゃんとわかって、 自分たちの得意なことが活きるように、 苦手なことが表面化しないような方向へ 組織を導くのが経営だと思います」と、たしか言ったと思います。
Iwata
I remember answering "You have to know your strength and your weakness. You need to lead your organization where you can enhance your strength, not where your weakness becomes exposed."
糸井
そうです。それも、「それしかないです」というくらいの勢いで言ってましたよ。
Itoi
You then sounded as if there could possibly be no other answers at all.
岩田
うん。けっきょく、突き詰めるとそれしかないです、と。あとは、わたし、優先度の話をしましたよね。
Iwata
You just have to stick to that until the end. I also remember talking about priorities.
糸井
はい。
Itoi
Yes.
岩田
物事って、やった方がいいことの方が、実際にやれることより絶対多いんですよ。やったほうがいいよねっていうことが山ほどあるんです。だから、やった方がいいことを全部やると、みんな倒れちゃうんです。なので、オレたちはなにが得意なんだっけ、ということを自覚したうえで、「なには、なにより優先なのか」をはっきりさせること。順番をつけること。それが経営だと思いますって、当時若造だったわたしは言ったんですけど、じつは、いまも考え方はぜんぜん変わってません。
Iwata
You have to set your priorities being aware of what you're good at. There are always so many things that you ought to do, but what you "can" do is limited. If you try to do everything you ought to do, you end up falling over.That's what I told you then as my own definition of management when I was wet behind the ears, but I still believe in this idea today.
糸井
うん。いまも同じだよね。
Itoi
Yes, I still see it in you.
岩田
はい。いまでも、この考え方は通用すると思ってやってます。
Iwata
It's a theory that works.
糸井
ぼくが岩田さんから経営について直接に学んだのはそのふたつしかないくらいなんだけど、いろんな人に話を聞く中でも、それはずっと忘れなかったんですよ。で、最近はとくに思い返すようになっていて。ふっと思ったのは、自分たちがなにを得意としていて、なにを不得意としているのか、漠然とはいえるけれどもはっきりとわかってないなと思ったんです。じつはいま、社内メールで「うちの得意なことはなんだろう」というのを社員全員で出し合っていて、もう、150くらい挙がってるんですよ。でも、やっぱり完全にはわからない。そういうこともそうなんだけど、まだ、なんかあるんだよなっていう感じなんです。
Itoi
Those are probably the two things you taught me directly. I always kept them in mind when I discussed management with other people. I've been going over it again recently. I know vaguely our strength and weakness, but not so clearly. Actually, our employees are discussing our strength through e-mail right now. We've got like 150 opinions, but it's still not completely clear to us. I feel we're missing something.
岩田
ああ、なるほど。
Iwata
I see.
糸井
だいたい出たような気がするんだけど、まだ、ある場所をごっそり見逃しているようなそういう感じがあって。たとえば、ＨＡＬ研究所だったら、「景色がいいよね」っていうのもいいところですよね？
Itoi
I think most of it has been said, but I feel we're still missing a whole lot.One of the strengths of HAL Laboratory was that it had a fantastic view, right?
岩田
「富士山の見えるソフトハウス ＨＡＬ研究所」。
Iwata
"HAL Laboratory, Inc., the software vendor where you can view Mt.Fuji"
糸井
はははははは。（まわりの社員に向かって）いまのはね、ぼくが『ＭＯＴＨＥＲ２』の中に出てくる看板に書いた文章なんですよ。
Itoi
Ha ha ha. That's a phrase I wrote on a sign in "MOTHER 2" (EarthBound).
岩田
（笑）
Iwata
(laugh)
糸井
当時のＨＡＬ研究所のことでいうと、圧倒的にプログラムが得意な会社だったんですよ。
Itoi
HAL Laboratory was definitely specialized in programming.
岩田
当時はそうでしたね。
Iwata
At the time, yes.
糸井
そこに岩田さんがいたせいもあるだろうけど、絵を描くのが得意ですか？プログラムが得意ですか？って言ったら、絶対プログラムが得意な会社だった。で、うちみたいな会社の場合は、それが非常に見えにくいんです。
Itoi
It was partly because you were there. HAL Laboratory was definitely good at programming, not art. A company like ours, on the other hand, has difficulties when it comes to defining our strengths.
岩田
うん、うん。
Iwata
I can assume that.
糸井
ムードとして、こうだということは、いっぱいあるんだけど、具体的に突き詰めると、それは、なんなんだろう。極端に言えば、投資してでも伸ばしていく必要があることを得意なことというわけで、それをまだ発見しきれてないんですね。探すことがいまの大切な仕事だと思ってるので、ずっと探してるんですけど、そこで、探し方のヒントみたいなものがあれば、ちょっと聞いてみたいなと思って。ＨＡＬ研のときは、どうだったのかとかそういうところも含めて。
Itoi
We can come up with many abstract concepts, but it becomes unclear when you try to break it down into concrete concepts. To be extreme, you call something your strength when you want to nurture it even at the expense of investment. We haven't completely found that yet. I think it's an important task for us to find it, thus we've been searching for a long time. It would be nice if you can share some hints on how to search such strength, including how it was at HAL Laboratory.
岩田
そうですね‥‥。まず、自分たちがいろんなことをやりますよね。それを、お客さんなり、取引先なりが受け止めて反応してくれる。そういう基本的な動きがありますよね。ＨＡＬ研のときは、任天堂からソフトの受託を受けているから、任天堂の担当者がある意味ではお客さんなわけです。そのときに、同じくらいのエネルギーをかけているはずなのに、妙に喜んでもらえるときと、あんまり喜んでもらえないときがあるんですよ。自分たちとしては、かけている苦労は同じくらいなのに。同じ100の苦労をしたときでも、こっちのお客さんは100喜んで、こっちのお客さんは500喜んだ、みたいなことが起こるんですよ。
Iwata
Let's see... First, it is ourselves that takes action. Then, the customers or our business acquaintances receive it and respond to it. This is the basic set of action.HAL Laboratory used to receive orders from Nintendo. In a way, the person in charge at Nintendo was our customer. Sometimes they were satisfied with our output, but sometimes not. The interesting thing is that this wasn't related to the amount of effort we put in. With the same amount of effort, sometimes we got 5 times the satisfaction than other times.
糸井
はい。
Itoi
Interesting.
岩田
それをずっと見てると、ある共通パターンがあることに気づいたんです。簡単にいうと、仕事をやっていて、ものすごくつらいときと、そうでもないときがあるんです。仕事だから、当然つらいことも混ざります。というより、つらくないわけがない。そのときに、つらさに見合ったぶんだけ喜んでもらえないと、さらにつらくなるんです。で、苦労以上の評価をしてもらっているときは、社員も、どんどん元気になって、どんどん伸びていくように感じる。逆に、悪い循環になると、見る見る社員がしおれていって「これは、面談をしなければ」というふうになる。つまり、自分たちがすごく苦労したと思ってないのに、妙に評価してもらえるときというのは、ほっといても、どんどんいい結果が出て、いい循環になって、どんどん力が出て行く状態。それが自分たちに向いている得意なこと。そうじゃないことは向いてないことだというふうに、だいたい判断していたような気がしますね。
Iwata
I found out a pattern, observing this. To put it in short, when you are doing your job, there are times when you feel extremely exhausted and times when you feel it not so hard. Businesses are always accompanied by hardships and difficulties, needless to say. When you have completed a challenging job, if the customer's satisfaction level is not more than the level of the hard works you've been through, you feel even more exhausted. On the other hand, when the customer evaluates us highly, higher than what our hardship deserves in our analysis, employees become more encouraged and motivated to grow further. However, in bad cycles, the employees wear out, and the necessity of having to sit down and listen to their thoughts starts popping up. In summary, if they can feel that they were rewarded more than they deserve in the form of the customer's appraisal, it's the good cycle in which employees can voluntarily grow without the need of the management to intervene.That is something they are good at. If things cannot work out that way, these are not the things they are good at. I think that is how I have been distinguishing the two.
糸井
はーーー。なるほど。
Itoi
Ah, I get it.
岩田
それは、いまの任天堂でも同じようにやっていますね。
Iwata
It's the same at Nintendo too.
糸井
なるほどなぁ。いま、聞きながら思い返してみたんですけど、それは、いまの自分はできているかもしれない。
Itoi
I think that's something I'm already doing.
岩田
ええ。糸井さんはやってるんじゃないですか。
Iwata
Yes, I think so.
糸井
やってますね。苦しそうなことを、どうやめさせるか、みたいなことばっかり考えてますから。
Itoi
I don't want my people to go through meaningless agony.
岩田
苦しそうなことは、やめた方がいいんですよ。だって、それは向いてないので。
Iwata
If it's too painful, just drop it. It's not what you're good at.
糸井
苦しそうなこと、および、つまんないこと。
Itoi
Drop the painful stuff, quit the things you don't find interesting.
岩田
そうですね。
Iwata
You can say that again.
糸井
つらそうなことをやめさせて、得意に思えることだけをやらせたいけれども、一方で、いまの会社って、「苦しそうなことをやっているからえらい」っていう変な価値観がありますよね。
Itoi
There exists an odd value that "the more pain you put in, the better", don't you think? I think you should just do what you're good at, and drop the opposite.
岩田
ありますね。残業してないやつより残業してるやつの方がえらい、みたいなね。あいつは早く帰ってるけど、オレは遅くまでがんばってる、みたいな言い方をしたりしますけど、本当は、それ、間違いなんですよ。だいたい人間って、自分の得意なことと他人の不得意なこと比べて不公平だって文句を言うんですよ。それは、自分でも、知らず知らずのうちにやってしまうことがあります。
Iwata
I know what you mean. People working overtime are somewhat thought to be working harder than those who can finish work on time, right? People complain about their colleagues leaving work early, but that's just wrong. People tend to complain comparing their strong points with other person's weakness.
糸井
「糸井はプログラムもできないのに」ってね。
Itoi
It's like saying "Itoi can't even code programs."
岩田
それはちょっと極端ですけど（笑）。
Iwata
(laughing)Well, that's a pretty extreme example.
糸井
でも、よくわかりますよ。
Itoi
Getting back on the subject, I understand your point.
岩田
これはわたしの勝手な説ですけど、生き物って自分の子孫を残すのが最終目的でしょ。子孫を残すためになにをしなければならないかというと、「自分は、他の個より、この部分が優れています」というプレゼンをしないといけないんですよ。ということはつまり、「わたしという個は、他の個よりも優れています」というアピールをするのが上手なＤＮＡがいま生き残ってるんですよ。そうでなかったＤＮＡは子孫を残せずに死に絶えてるはずなんだから。
Iwata
This is my personal theory, but all living creatures bear the task of passing down their DNA through reproduction. To reproduce, there's the necessity to show your superiority. The individuals who can do this well are the ones that were able to pass down their DNA.
糸井
なるほど、なるほど。
Itoi
I see, I see.
岩田
だから、自分の得意なことをアピールする性質が生き物には必ずあるわけで、自然とそうなってしまうんだと思うんです。会社という組織の中でも、みんな、都合よく、自分の得意なことと、人の不得意なことをつい比較してしまう。だから、逆に、会社全体のことを考えるときには、こういうふうに考えて、こういう軸で、比較や評価をしていきましょうという共通認識を持たないと、すぐに「不公平だ」となるんですよね。
Iwata
So I think it's natural for us to try to show that we're better than others. That's why we tend to compare our strengths with other people's weakness. This happens in any type of social organizations, such as in companies. Therefore, it becomes a priority to define an axis, a mutual agreement on evaluation. There is a need to create a fair basis.
糸井
その理論はすばらしいですね。
Itoi
That' a persuasive theory.
岩田
いまのところ、この理論に矛盾を感じたことはありません。
Iwata
I've never felt any contradictions so far.
糸井
明石家さんまさんが、「男は、都合のいい女が好きなんだ」って言ってるのと同じですね。
Itoi
It's like Sanma Akashiya (Japanese comedian) saying "Men like women who can slip us into self-complacency."
岩田
表現は違いますけど（笑）。根本的に言いたいことは共通してますね。
Iwata
(laughing)I don't know about that, but I guess yes, in a way.
糸井
つまり、自分が生きるのを有利にしてくれる存在、という意味だからね。
Itoi
Existence that gives them advantage among others.
岩田
だけど、そうは言っても「我慢せなあかん」ということはある。じゃあ、嫌いなことを全部やめようっていうと社会生活が破綻するわけですよ。
Iwata
There are times when you just have to grit your teeth and do it. Society will fall apart if everyone just quits doing what they don't want to do.
糸井
そうですね。
Itoi
It will, yes.
岩田
基本的には、その会社が「得意なことをする集団であろう」ということを目指すとしても、人と人がいっしょに仕事をするためには、最低限、苦手だろうがなんだろうが、やってもらわないと困るということを決めないといっしょに働けないんですね。というときに、その「最低限のこと」をなるべく小さくすることが、経営者として正しいんじゃないかなとわたしは思うんです。たとえば、同じ会社の中に、ほかの人と話してくれない人がいたら困りますよね。意思を伝えあうということに対して努力してくれないと、いっしょに仕事なんかできないじゃないですか。そもそも会社というのは、持ち味のちがう普通の人が集まって、ひとりでは実行できないような巨大な目的を達成するためにあるわけだから、最低限のコミュニケーションはしてくれないと、ひとつの方向に向かって全員が歩けないんですよね。
Iwata
Even when everyone can agree to make our company "the group of people who will devote our efforts to do things we are good at," we still have to identify and assign the minimum amount of works that employees have to do even when they know they are not good at. Otherwise, we cannot work together. It is the management's job to make efforts to minimize this "minimum amount of necessary works that employees are not good at," I believe. For example, some people just cannot communicate with the others. But things won't work out if there's someone in the company who will never try to communicate his or her thoughts with the colleagues.After all, a company is a group of individuals with different talents. That group of people tries to accomplish something large that an individual can't do. For everyone to move forward, the least amount of communication must always be made by each individual even when he or she is not good at talking with the others.
糸井
だから、そういう「最低限のこと」をなるべくコンパクトにして、あとは、みんなが得意なことをどう伸ばしていくか。
Itoi
So you try to contain the "minimum amount of labors" and encourage people to grow by doing things they are good at.
岩田
それが大切なんじゃないかと思うんですよね。あと、もうひとつつけ加えると、本当は得意になる才能を持ってるんだけど、「オレは苦手だ、わたしは苦手だ」って本人が勝手に思ってることってあるんですよ。たとえば、世の中に、「オレはマネージメントが得意だ」って最初から思ってる人なんていないんですよ。
Iwata
Yes, I think it's very important. There's also one other thing. There are people with talent that they themselves haven't realized. They may even think they're not good at it. For example, nobody thinks that they're talented in management from the start.
糸井
あーーー、そうですね。マネージメントの概念って、小学生にはないもんね。
Itoi
Come to think of it, that's true. Nobody in grade school understands the notion of management completely.
岩田
それが最初から選択肢に入ってる人なんていないんですよ。
Iwata
No. No one chooses management from the start.
糸井
それはそうでしょう。
Itoi
Probably not.
岩田
わたしだって、最初は苦手でしたよ。でも、そこで、わたしは苦手なんだ、って思い込んでいたら、苦手なままじゃないですか。だけど、わたしの場合は、自分がやる以外にないなという強いめぐり合わせによってそれをやることになったんですけど。
Iwata
I didn't think I had talent in management at first. It's easy to keep on thinking you're not made for it. However, in my case, there was nobody else up for it. It was like destiny that the position came to me.
糸井
思えば、岩田さんは二度もそういうめぐり合わせで社長を引き受けているんですね。
Itoi
That happened twice in your life, becoming president.
岩田
もちろん、どちらの場合もいやいややったわけではなくて、きちんと自分で決断して社長になったんですけどね。でも、最初からそれを目指したわけではない。その一方で、ほかの人に対しては、その人が苦手だと思っていることに対してポテンシャルを感じ取って、あえてやってもらったこともあるんですよ。その人は、最初のうちは、つらそうにするんです。だけど、「こういう見方もあるよ」「こういうふうに考えるといいよ」と少しずつ伝えていくことで、結果的に「おもしろくなってきました」というふうになるんですね。
Iwata
Of course it was my decision in the end to become president. But it wasn't my initial aim. I've given the same kind of opportunity to other people. Although they might consider themselves as "not the type", I assign tasks when I see their potential. They seem to find it tough in the beginning, but by advising them with new ways of thinking or new views to look at matters, they discover themselves getting interested in it as a result.
糸井
それは、最近のことで？
Itoi
Is this something that occurred recently?
岩田
最近も、ありますよ。もともとは、マネージメントなんか大きらい、「ぼくはものをつくるのが好きだから、 ものづくり一筋の職人としてやっていきたい」と言ってたような人が、「人にものを教えるのは、おもしろいなぁ」って、変わっていく人を何人も見ました。それは、その人が気づいてないだけでじつはその人がもともと持っている才能なんですね。その人自身は気づいてなかった部分を誰かが探すことができたとき、人は思いがけない方向に伸びていくことができるんですよ。
Iwata
Yes. There were people who thought they weren't the "manager type". They used to declare that they loved to make games so much so that they would like to make it their sole career. But they have changed. I've heard them say how fascinating it was to teach others and watch them grow.It's a potential they already had. It's just that they didn't realize it. When you help others find that potential, you see people bloom in such a way you never expected.
糸井
苦手だと思っているけど本当は得意になるかもしれないこと。それを見極めるときに、ヒントになることってなんでしょうね。
Itoi
What's something you keep in mind when you're trying to find a new potential in someone?
岩田
人って、あることを続けられるときと、続けられずにやめちゃうときってあるじゃないですか。たとえば、「英語くらいしゃべれた方がいいよな」っていままでまったく思ったことのない人っていないと思うんですよ。
Iwata
There are those things that you can continue doing, and those that you end up quitting. For example, I think everyone has tried to become fluent in English, at least once in their life.
糸井
いいとこ、つくなあ（笑）。
Itoi
Definitely. (laugh)
岩田
だけど、非常に高い割合で挫折するんですよね。
Iwata
But often times, you end up quitting.
糸井
そうそう。「もう、英語はいいわ！」ってね。
Itoi
It's like, "Heck with English!"
岩田
そこに、「自分が得意かもしれないこと」を見極めるヒントがあるように思うんですよ。じつはこれは、ゲームを開発するときに発見したことなんですけど。ゲームって、すぐにやめちゃうゲームと「なんかやっちゃうんだよね」っていうゲームがあるんですよ。同じように丁寧に仕上げたゲームでも、本質的なおもしろさとは別の次元で、続くゲームと続かないゲームがある。このことと、いろんな習慣が継続するかということは、すごく似てるんですよ。
Iwata
I think there's an important point in this. It's something I've found out when designing video games. There are two types of games, those that you toss instantly, and those that you continue playing. It's not a matter of how fine the game is made, or the essential excitement of the game. In my opinion, this has something in common with whether or not you can continue a variety of other habits.
糸井
ほう。
Itoi
I'd love to hear more about this.
岩田
共通することがなにかというと、人は、まずその対象に対して、自分のエネルギーを注ぎ込むんですね。時間だったり、労力だったり、お金だったり。そして、注ぎ込んだら、注ぎ込んだ先から、なにかしらの反応が返ってきて、それが自分へのご褒美になる。そういうときに、自分が注ぎ込んだ苦労やエネルギーよりも、ご褒美の方が大きいと感じたら、人はそれをやめない。だけど、帰ってきたご褒美に対して、見返りが合わないと感じたときに、人は挫折する。これは「やめずに続けてしまうゲーム」の条件としても成り立ちますし、「英語を学ぶときに挫折しないかどうか」も、同じ理屈で説明ができると思うんです。
Iwata
If the reward that you receive is worth more than the effort and energy you put in, people don't quit. If it's the other way around, people feel discouraged. This applies to those games you continue playing, or being able to keep on studying English.People put in energy such as time, labor, or money. The feedback you receive is your reward.
糸井
なるほど。
Itoi
I see.
岩田
自分の得意なものが、放っておいても、どんどんうまくなることも同じ仕組みだと思うんです。たとえば、絵を描く人は、誰に頼まれるでもなく絵を描いて、それをまわりの人がほめてくれる。そういうくり返しのなかで、どんどんうまくなる。あるいは、わたしだったら、昔はわからなかったコンピュータのことが徐々にわかっていって、わかっていくことでさらにおもしろくなる。糸井さんだったら、世の中を見て、自分がおもしろいと思うことをどんどんそこに投げ込んでいって、それが受け入れられたときに快感が生じて、そういうことがどんどん得意になる。この循環を成立させられることこそがおそらくその人の才能だと思うんです。つまり、才能というのは、「ご褒美を見つけられる能力」のことなんじゃないだろうかと。
Iwata
This is why you become good at what you like.Artists draw paintings, and people compliment it. Through that cycle, he/she progresses. As for me, knowing more about computers makes it more interesting. For you, you find what's interesting, and you get involved with it. When you feel accepted, you feel a kind of pleasant stimulation, and you get better at it.Being able to establish this cycle is in fact probably his or her talent. I believe that talent is thus the ability to find your reward.
糸井
「なしとげること」よりも、「なしとげたことに対して 快感を感じられること」が才能。
Itoi
So being talented is about "feeling the excitement of accomplishment", and not "just accomplishing".
岩田
そうじゃないかと思うんですよね。ご褒美を見つけられる、「ご褒美発見回路」のようなものが開いている人。
Iwata
I think so. Finding your reward with your inner "circuit that responds to rewards".
糸井
なるほどねー。
Itoi
I see.
岩田
たまにね、ご褒美を見つけられる寸前まで行ってるのに、その回路が開いていない人がいるんですよ。そのときに、「こういうふうに考えてみれば？」とか「だまされたと思ってあと３回我慢してみたら？」みたいなことを言うと、うまくいくときがあるんです。自分が注ぎ込んだものよりも、ご褒美のほうを大きく感じる瞬間がくれば、よい循環がはじまるし、それが続くんです。
Iwata
Some people are so close to finding that reward, but their circuit may not be active. Their circuit can turn on with some advice, or just by simply telling them to "keep on trying three more times."A positive cycle begins when your circuit is turned on, when you feel that the reward you receive is worth more than the energy put in.
糸井
それは、さっきおっしゃった、「自分が苦労したと思わないのに 評価してもらえるものが得意なことだ」という話とつながりますね。
Itoi
Just like you said, "Your strength lies in those areas where you are highly evaluated, even if you don't think you've put in extreme effort."
岩田
そうです。ですから、やっぱり、「ご褒美を見つけること」が才能なんですよ。もっというと、それは、宮本さんや糸井さんとおつき合いしたなかで見つけたことでもあるんです。おふたりといっしょに仕事をするうちに、わたしが見つけた「天才の定義」があります。「人がいやがるかもしれないことや、 人が疲れて続けられないようなことを、 延々と続けられる人」、それが「天才」だとわたしは思うんです。
Iwata
Being able to find that reward is a gift itself. Furthermore, I think those people who can continue doing what people don't like, or what may be too tiresome for others, are those people you call a genius. This is something I found through my relationship with you and with Mr.Miyamoto.
糸井
ああー。
Itoi
Hmmm.
岩田
考えるのをやめないこととか、とにかく延々と突き詰めていくこと。それは、疲れるし、見返りがあるかもわからないし、たいへんなことだと思うんです。でも、それは、それができる人にとっては苦行じゃないんですよ。それを苦行だと思う人は、苦行じゃない人には絶対勝てない。だから、それが才能なんだと。だから、自分が苦労だと思わずに続けられることで、価値があることを見つけることができた人は、それだけでとても幸せだと思います。
Iwata
It's not easy to do something for a long time. First of all, its' tiring, plus you never know if you'll receive something in return. However, for some people, there's no pain in doing it. Those are the people who can win.You're lucky if you have found it. You've found your talent.
糸井
ご褒美とか、快感について、似たようなことを、ぼくも考えたことがあります。そのときにぼくは「あ、これが境界なんだな」と感じたことがあって、それがなにかというと、「快感には、ふつうの快感と、 ぴりぴりする快感がある」ということなんですよ。
Itoi
I've also been thinking about rewards and pleasure. There are two types of pleasure, there's the normal pleasure, and there are those that feel stimulus.
岩田
あ、なるほど！
Iwata
Ah!
糸井
つまり、ご褒美とか快感っていうと、おいしいものだったり、甘いものだったり、それこそお金だったりというような漠然としたイメージがあると思うんですけど、たとえば指圧なんかで「いたたたた、痛いけど気持ちいー」っていうのがあるのと同じで、ぴりぴりする快感があるんですよ。で、そこの部分に味をしめちゃうと、天才領域にいくんですよ、おそらく。
Itoi
There's that pleasure that's stimulus, just like when you're receiving Shiatsu massage, that "Ouch, it hurts but it feels good" type of pleasure. When you can keep on working in that kind of area, you can become a genius. Rewards don't only come in forms of sweets or good food or money.
岩田
すげー、わかりますわ、それ（笑）。
Iwata
(laughing)I know what you mean.
糸井
でしょ。ちょっとマゾっぽいっていうかね。いいんだけど、いやなんだけど、いいんだけど、このいやないいは、オレしかわかんないなっていう。
Itoi
It's sort of masochistic. It's good, it hurts, but it's good, and only I know the pleasure of this.
岩田
そもそも、そんなに無闇に甘いだけのご褒美ってないですからね。
Iwata
Rewards aren't just sweets or snacks.
糸井
ご褒美の形をわかりやすくするために、いまの企業だったら、お金とか地位とかお休みをあげるんでしょうけど、それって、刺激の法則からしたら無限に必要とされるものですから、なんていうか、ドラマがないですよね。続けるからには、ドラマが欲しいですよね。感覚の中にドラマってすでにあってさ、苦い、しょっぱい、からい、みたいな一見マイナスのものがよかったりさ。
Itoi
Enterprises give money or positions or vacations as a clear form of reward. Those rewards are limitless, and you have to keep giving more of it. There's no drama to it. I'd rather see more drama. Drama lies even within our senses. Sometimes the sour, salty, hot flavor tastes good.
岩田
「この渋みがたまらん」みたいな。
Iwata
Like, "this tanginess is delicious."
糸井
そうそうそう（笑）。隠し味というか、ぴりぴりする部分があって、そこを感じ取ったときに、「ほかの人にはわからないだろうけど」ってなったら、しめたものですよね。
Itoi
Exactly. There's those hidden flavors that stimulates us. When you're the only one that feels that way, you're in a good spot.
岩田
たぶん、人が自分の人生の中で、「ここが得意かも」って思ってることって絶対ご褒美回路が開いてますよ。
Iwata
The things you think you're good at, your reward circuit is definitely active.
糸井
うん。
Itoi
Yes.
岩田
で、それがひとつあると、できることが増えていくんです。そのご褒美回路のそばに、似たようなことで自分が新たにご褒美だと感じられるものってあるんですよ、きっと。いままで得意だとは思ってなかったことで、「じつは、これも同じじゃん」って思えるようなことで出てくる。たとえば、プログラムをつくることと会社経営はよく似たところがあるぞってわたしは発見していくわけですよ。
Iwata
When you've found something like that, you expand your capabilities. Your circuit responds to other related stimulation. You find yourself talented in other areas. As for me, I keep finding how management is similar to designing software.
糸井
ああ、それは、いまの岩田さんを見ているとよくわかりますよ。
Itoi
I see what you mean.
糸井
いまの岩田さんを見ていると、規模やジャンルは違うけれどもプログラムを組んでいたころと同じような、一貫した方法論で動いているように思えることがあるんですよ。
Itoi
To me, it seems that your methodology has been consistent as a programmer, and as president of Nintendo.
岩田
ああ、そうですか。
Iwata
You think so?
糸井
ちょっと古い話になるけど、『ＭＯＴＨＥＲ２』というゲームの開発が破綻しかかっていたときに、岩田さんが助っ人として現れて、ぼくらに向かってこう言ったんです。「これを、いまある形のままで、 直していくなら、２年かかります。 でも、イチからつくっていいなら １年以内にやります。 どちらにしますか？」って。
Itoi
When the MOTHER 2 (EarthBound) project was about to fall apart, you came in to help, and this is what you said to us."It will take 2 years to fix this keeping what you have built up. If we start from scratch, it will take only a year. What do you say?"
岩田
言いましたね（笑）。
Iwata
Yes, I remember. (laugh)
糸井
結果的には、イチからつくってもらうほうを選んだわけですけど、あれ、岩田さんの中では「イチからつくったほうがいい」って答えは出てたわけですよね？
Itoi
We decided to start from scratch. You knew this was the best choice from the beginning though, didn't you?
岩田
最善の方法を選べと言われたならそうしたと思います。でも、あのときは、プロジェクトを建て直す立場としてわたしはあとから加わったわけですから、どちらの選択肢でもやるつもりでいましたよ。そして、実際、どちらの方法でも仕上げられたと思います。
Iwata
If I were to choose the best way at that time, yes, I would've started from scratch. But I wasn't in the project from the start, so I would've respected whatever decision you made. My task was to pull the project back together. Anyway, I think it was possible to do either way.
糸井
「イチからつくったほうがいい」という答えがわかっていたのに、どちらの方法でもやるつもりでいたんですか。
Itoi
You thought it was best to start from scratch, and still you would've have gone either way?
岩田
だって、いままでつくってきた人たちがそこにいるわけですからね。いきなり現れた人間が「イチからつくり直します！」って宣言しても、納得がいかない人が出てきます。現場の雰囲気が壊れてしまったら、うまくいくものもダメになってしまう。ですから、可能性のある選択肢を提示して、選んでもらうほうが正しいとわたしは思ったんです。
Iwata
It was important not to ruin the atmosphere of the project team. You can't show up all of a sudden and destroy everything people have created until then. People aren't persuaded by such ways. The positive atmosphere of the team is crucial in order to succeed. I decided it was best to present the team with suggestions, and have them take the pick.
糸井
あー、もっともですね（笑）。で、そのときに岩田さんがなにからはじめたかというと、まず、道具をつくりはじめたんですよね。つまり、目の前に大きな問題がごろごろあって、すごくたいへんだぞ、というときに、直接は、それに取りかからなかった。だから、離れたところから見ると、ぜんぜん手をつけてないように見えたんです。ところが、それは、問題を片づけていくための道具をつくっていたんだよね。
Itoi
Now I understand.When you joined the team the first thing you did was to make tools. There were huge problems left unsolved, but you didn't touch them. It seemed to us you weren't doing anything productive, but actually you were creating tools to solve those problems.
岩田
はい。
Iwata
Right.
糸井
（まわりのスタッフに向かって）おもしろいんだよ、これは。問題を１個ずつ片づけていくかというとそうじゃないんだ。いったん、道具をつくっておいて、「みんなが使える道具をつくりましたから、 これで、あなたはここをつくってください」というふうに建て直していったんだ。つまり、道具さえできたら、あとはやるだけなんですっていうやり方をしていましたよね。
Itoi
(to the staffs)What he did was really interesting. He didn't try to solve the problems one by one. He made a tool, and said to us "Here's a tool that you all can use", and assigned us which parts to build with that tool. Now that the tool was there, all we had to do was to get down to work.
岩田
やりましたね。
Iwata
Yes, I remember.
糸井
それをそばで見ていたぼくは、任天堂の社長になっても大きな意味ではそれをやってるんだな、って思えることがあるんですよ。たとえば、ニンテンドーＤＳが出るときに、岩田さんはまず、新しい部署をつくりましたよね。
Itoi
Experiencing those times, I see you doing the same as president of Nintendo. You made a new department when Nintendo DS came out, right?
岩田
そうですね。それまでもＤＳの部署はあったんですけど、非常に重要な役割を果たす場所として、なかった部署をひとつつくったんですね。そのときは予想もしていなかったのですが、のちにその部署が『脳トレ』や『えいご漬け』をつくることになるんです。
Iwata
Yes. There already was a department that was in charge of Nintendo DS, but I made a new one, and assigned them with an important task. This department later designs games such as "Brain Age" and "DS English Training". I didn't foresee this at the time though.
糸井
あとからその話を聞いたときにね、それは、『ＭＯＴＨＥＲ２』を建て直したときと同じじゃないかと思った。
Itoi
When I heard about this later on, I thought it was the same way you put MOTHER 2 (EarthBound) back on track.
岩田
まあ、ワンパターンですね（笑）。よく言えば一貫性があるというか。
Iwata
Well, not so much of a variation there (laugh), or you can take the positive side and say that there's consistency.
糸井
というか、思考のパターンってそんなにたくさんは増やせないと思うんですよ。
Itoi
Actually, I don't believe that people can have that much of a variation in their logical patterns.
岩田
そうかもしれませんね。
Iwata
Maybe not.
糸井
岩田さんはプログラマー時代に、プログラマーとしての思考モデルを確立して、それがいまも活きているというか。
Itoi
I think you established your logical pattern as a programmer, and have been making use of it ever since.
岩田
そうかもしれませんね。プログラムというのは、純然たる、純粋なロジックなので、そこに矛盾がひとつでもあったら、そのシステムはちゃんと動かないんですね。機械の中で間違いは起こらないんですよ。間違いは全部、機械の外にある。だから、システムが動かないとしたら、それは明らかに自分のせいなんですよ。でも、プログラマーって全員、プログラムができた瞬間には、「これは一発完動するに決まってる」と思って実行してみるんですよ。でも、絶対一発完動しないんですね。だけど、その瞬間だけは、「オレは全部正しく書いたに決まってる」って思い込んで実行キーを押すんです。
Iwata
Maybe. Programming is pure logic. It won't work if there's an inconsistency in the logic. The errors aren't produced inside the system. They are produced from the outside. If the system doesn't work, it's definitely your fault.The funny thing is that every programmer thinks his logic will work when they finish coding a program. It never does, but at that moment, everyone believes there's no error in the logic they have written, and confidently hits the "Enter" key.
糸井
（システム担当の佐藤に向かって）そうなの？
Itoi
(to Sato, the system engineer)Is that true?
佐藤
すごくよくわかりますよ（笑）。
Sato
Very true. (laugh)
岩田
プログラムの世界は、理詰めです。だから、もしも完動しないとしたら、原因は全部、プログラムしたこっちにある。わたしは人と人とのコミュニケーションにおいても、うまく伝わらなかったらその人を責めずに自分の側に原因を探すんです。それはきっと、プログラムをやっていたおかげですね。
Iwata
The world of programming is all logic. If it doesn't work, you're the one to blame. I also apply this to communication among people. If my message isn't conveyed as intended, I search for the reason on my side, and not blame the other.
糸井
ああー。
Itoi
Ah.
岩田
だって絶対間違ってるんだもん、プログラムが。だから、人と話してうまくいかなかったら、「わからない人だな」と思う前に、こっちが悪かったんだろうと思う。そこに気づけるのは、きっと、過去に組んできたプログラムのおかげですね。
Iwata
If it doesn't work, you're the reason for it. If there's miscommunication between someone, I don't blame them for not understanding. There are always factors on my side. Having been a programmer enables me to think this way.
糸井
やっぱり、思考のパターンやモデルって、増やそうと思って勉強しても増えるものではないというか。
Itoi
All in all, logical patterns can't be learned through books.
岩田
自分の身のまわりにあることとつながっていないことを無理に勉強しても身につかないんですよ。だったら、それに時間を費やすより、あっちで火がついてるプロジェクトがあるからそれの火を消しに行こう、みたいなことのほうが優先するんですね。
Iwata
You can't really learn something if it's not related to what you do. Handling troubles in your project is much a higher priority than trying to study something irrelevant to you.
糸井
そっちのほうが、ぴりぴりする快感があるんだよね。
Itoi
Probably because it gives you that stimulus pleasure, too.
岩田
そのとおりです。みんなが困っててオロオロしてるところに、落下傘で降りていくの大好きですからね。『ＭＯＴＨＥＲ２』の出会いもまさにそうでしたし（笑）。
Iwata
I like flying down with an umbrella to where people seem lost. Just like how it was with the "MOTHER 2" (EarthBound) project. (laugh)
糸井
（まわりのスタッフに向かって）この人はね‥‥本当にそういうことが好きみたい。
Itoi
(to the staffs)You know.... I think he really enjoys it.
一同
（笑）
All
(laugh)
糸井
宮本さんの話に戻りますけど、「お客さんは、わかってくれない」というのを前提にしてものをつくっていくという宮本さんの姿勢は、ふだん、ぼくがやっていることに近いんです。「コミュニケーションの前提は ディスコミュニケーションである」って、ぼくはよく言うんだけど、お客さんって身内ではなくて、いわばすれ違う通行人のようなものだから、理解してくれないのがふつうだと思うんですよ。だから、宮本さんが「ポンと渡しただけで遊べるようにつくる」というのとまったく同じで、まずは絶対、誰にでもわかるようにつくりたい。
Itoi
Bringing the subject back to Mr.Miyamoto, his premise when creating something seems to be "Don't think your consumers are willing to understand your points", and I feel this is very close to how I think. I often say that "dis-communication is the premise of communication."The consumers are not your family, they're more like people passing by on the streets. But I want what I create to be understood by everyone, just like Mr.Miyamoto wants his games to be enjoyable from the start.
岩田
はい。
Iwata
Uh-huh.
糸井
もっというと、最初に「あきらめ」があるというか、「人はオレを愛してくれないんじゃないか？」という叫びのようなところからものづくりがはじまるんです。
Itoi
I think creation starts from a despairing cry from within, "Will no one love me?"
岩田
わたしたちもそうですね。自分たちがつくるものに対して、最初、お客さんは、たいして興味がないどころか、まったく興味がない。そこから、はじまる。そこから、愛してもらうというか、わたしたちのつくったものに触れてニコニコしてくれる状態にまで線をつないでいかないとこっちの負けだって思ってますね。
Iwata
That's the same for us. The consumers are not "not that much interested" in our games, they're "completely not interested" in the beginning. We need to bring them to a state where they pick up our product and smile, where they come to love it.That's the battle we're fighting, and we want to win it.
糸井
「愛されていない」というあきらめの状態からはじめるのって、自分を卑下しているように聞こえるかもしれないけど、そこからはじめるしかないですよね。
Itoi
"Will no one love me?" may sound low self esteemed, but that's the only place where you can really start.
岩田
そうですね。わたしは、糸井さんが昔、ＨＡＬ研に来てくれたときに、「王様と奴隷」の話をしてくれたのをすごく覚えてるんです。
Iwata
It makes me remember the story you told us before, when you came to HAL Laboratory. The story of "the King and the Slave".
糸井
あ、わかった。「教育される側が王様である」という話だ。
Itoi
The story that it's the King who needs to be educated, right?
岩田
そうです。
Iwata
Yes.
糸井
（まわりのスタッフに向かって）これはね、いいんだよ。
Itoi
(to the staffs)This is a good one.
一同
（笑）
All
(laugh)
岩田
いや、ほんとに、すごくいい話ですよ。「ものをつくる人」と「お客さん」は、王様と奴隷の関係にある。でも、王様は「ものをつくる人」じゃない。「お客さん」のほうが王様。で、「ものをつくる側」は奴隷の役。王様は「もういらない」って言うことも、「つまらない」って言うことも「わからない」って言うことも自由にできる、超わがままな立場で、その超わがままな王様に、どうしたら喜んでもらえるかな、まえのものは飽きちゃってるけど、つぎはこうしたら喜んでもらえないかな、ということを、奴隷の側は考える。「その『考える奴隷の仕事』の おもしろさをわかりなさい」っていう話だったんですけど、すごく印象に残ってますね。
Iwata
Seriously, it's a good story. It's about the relation between the creator and the customer. The king isn't the creator. He's the customer. The king is free to say anything about what is given to him, that it's boring, or that he doesn't understand it, or even decline the offer. He has the privilege of being super selfish. The slave has to think how to satisfy the king, how to make him happy. Mr.Itoi's point was to understand that the job of the slave is intellectual and interesting.
糸井
それは、恋愛における、口説く側と、口説かれる側も同じで。
Itoi
The same can be said about relationships, the one who makes the approach, and the other.
岩田
主導権が向こうにあるんですよね。
Iwata
The initiative lies in the other.
糸井
そうなんです。基点になる側は必ず主導権を持てない、というのが基本で、いろんなことにあてはめられる考え方なんです。たとえば、誰かに仕事をお願いしたり、誰かから仕事をお願いされるときも同じで、誰かに仕事を頼むときは、「自分が逆側だったら引き受けるかな？」っていう発想がなきゃいけない。頼まれる側がそれを引き受けるとしたら、逆に「頼んででもやりたい仕事」に一回変換して考えてみないといけない。なぜかというと、引き受ける側は、全部つらいに決まってるんだから、「そのままじゃつらいだけだけど、 こういう形がありなんだったらやりたい」というふうに変換してはじめて、後悔せずに一所懸命取り組めるんです。そういうふうに考えずに漫然とやっていると、つくり手が自分を王様だと思っちゃうんです。王様としてつくったものを、本来は王様であるはずのお客さんが奴隷側の立場できゃーきゃー言って受け取るだけだと、つくり手はなにも進化しない。つくり手が進化しなければ、お客さんはすぐに「飽きた」って言っておしまいになっちゃうんです。その悪い循環に陥っているものが世の中に増えてるんじゃないかって最近、とみに感じますね。消費者がすぐに「飽きた」って言うようになったでしょ。
Itoi
Exactly. The one who takes action can never take the initiative. For example, when you ask someone to perform a task for you, you have to think about whether you'll take it if it was offered to you. When you work for someone, it usually involves hard work. People work hard because you think it's worth it, and that's the only way people will put in their full energy into it. So you always have to think, "will I accept this job if it was offered to me?" You need that point of view.If the creator's not aware of that point of view, he starts to misconceive that he is the king. If the consumers don't act as king, the creator is deprived of the opportunity to improve. When the creators don't improve, the customers will get easily bored of what they get. And that's the end of it.It seems that this malignant cycle seems to be increasing. The consumers get bored very easily.
岩田
ものが古くなるスピードがものすごく速いんですよね。
Iwata
The speed of things getting out of date has become extremely fast.
糸井
「つまんない」とか、「飽きた」とか、「もっと持ってこい」とか言われたあとで、それに合わせてあわててぺこぺこしながらつくってもいいものができるわけがないんですよ。だから、ＤＳ以降に任天堂がやってることって、王様たちが、既存の価値観の延長線上で、どんどん飽きながら「こういうのをもっともってこい」ってわがままを言ってるようなときに、「王様、こういうのもありますよ」って、奴隷の側から新しいものを差し出したんですよ。しかも、その新しいものに対して「こんなのは、わからん」って、言わせないようにしたわけでしょ。それは、やっぱりすごいことですよ。
Itoi
If you just keep on responding to the customer's requests, you're not going to come up with something with quality.What Nintendo has been doing since they came out with DS is to keep bringing something new to the kings, who were tired of games that were a mere extension of traditional and conventional ones. Plus, Nintendo made it so that the kings understood it.It's just amazing, what you did.
岩田
ありがとうございます。
Iwata
Thank you.
糸井
Wiiについても同じですよね。世間はWiiが大成功したと思ってるけど、任天堂はちっとも王様になってない。だって、岩田さんは「Wiiが成功した」って一度も言ってないんですよ。
Itoi
Everyone thinks Wii is such a success, but Nintendo hasn't become overproud of it. Actually, I don't think I ever heard you say "Wii is a success."
岩田
まだです。
Iwata
Not yet.
糸井
ね。
Itoi
Not yet, I see.
岩田
いい出足ですよ。いい出足ですけど、まだです。
Iwata
It's a good start. It's been a good start, but it's only the beginning.
糸井
このへんが、おもしろいよなぁ（笑）。
Itoi
(laughing)Is that so.
岩田
いや、まだですよ。これが永続的に波及していくかどうかはまだ答えが出てません。半年後、１年後と、新しい提案を出し続けていって、お客さんが「ああ、気がついたら遊び続けてたわ」っていうことが起こらないとだめです。そうしないと、ほんとうの意味での目的を果たしたことになりませんから。
Iwata
We want to have the customers continue playing. We want to continue coming up with new proposals to them, and have them keep playing. Only then can we say that we've accomplished our goals.
糸井
すばらしい冷静さだね、それは。
Itoi
That's a great point of view, very objective too.
岩田
もちろん、そうなるための準備をつねにやってるわけですが。
Iwata
We've been preparing to make things happen.
糸井
二の矢、三の矢があるからこそ、こういうことが平気で言えるんだろうけど。
Itoi
I'm sure you have new plans coming up.
岩田
二の矢、三の矢があって、それが本当にちゃんと当たるのか。お客さんの心を射抜けるのかどうか。お客さんに遊び続けていただけるのかどうか。まだその答えは出てません。大丈夫だと思ってやってるんですけどね。
Iwata
We need to see if our new approaches will grab the customer's hearts, if they will keep on playing our games.The answer's not out yet, but I believe we're getting there.
糸井
Wiiがこれだけヒットしていると、「『Wiiスポーツ』の続編には どんな種目が入るんですか？」っていう質問を何度もされるでしょう？
Itoi
With Wii being such a big hit, I'm sure you've been asked many times what new sports will be included in the sequel of Wii Sports.
岩田
ええ（笑）。
Iwata
Many times. (laugh)
糸井
これまでの流れからいえば、当然、『Wiiスポーツ２』のようなものがすぐにリリースされるだろうと思いますからね。もちろん、それは、今後、なにかのかたちで出てくるかもしれませんけど、「じゃあ、競技を増やしてすぐにつぎを出そう」というふうには、いまの任天堂は考えていないわけですよね。
Itoi
It's probably the traditional way to release a sequel, but I suppose Nintendo isn't planning to do that. Maybe a sequel may be released sometime in the future, but probably not soon, and probably not by simply adding a couple of new sports.
岩田
安易にそこへ流れることはないですね。『Wiiスポーツ』には５つの種目が入っていたからつぎは７種目にしてすぐに出そう、というふうには考えていません。もちろん、永遠につくらない、ということはありませんが。
Iwata
We're not going to take such an easy way, not by including seven new sports in the game since Wii Sports has five. We're not closing our doors to the possibility of a sequel, but it's definitely not coming out soon.
糸井
そうすると、誰もが予想できる競争になっちゃいますからね。
Itoi
The contents will be so predictable if it came out soon..
岩田
ええ。「絵はもうちょっときれいにしようか」とかね。
Iwata
Yes, like "let's improve the graphics a bit more".
糸井
「リモコンを足につけて サッカーをするんです」みたいな。
Itoi
Or, "let's stick the controllers to our feet and play soccer".
岩田
「プロのスポーツ選手と契約して、 そっくりのMiiをいっぱい入れよう」とか。
Iwata
Or maybe sign contracts with professional athletes and create Mii that looks just like them.
糸井
なるほど（笑）。
Itoi
Why not? (laugh)
岩田
そういうことを、深く考えずにやると、「それで本当におもしろくなるのか？」ということから離れて、どんどん易きに流れていくんですよ。
Iwata
If you start making such decisions without thinking, you start doing the easy stuff. You disengage yourself with the pursuit of true entertainment.
糸井
いまの任天堂は流れないですよね。
Itoi
Nintendo won't do the easy.
岩田
大丈夫だと思います。
Iwata
No.
糸井
どうして大丈夫なんだろうね。というか、そっちへいくのがふつうですよ。売れた商品の延長を考えること自体は間違っているわけではないですし。でもね、任天堂と「ほぼ日」を比べるのはあまりにも規模が違いすぎて失礼だと思いますけど、うちのバカな子たちを見てても、そこは大丈夫だろうって思えるんですよ。まえと同じようなことをやりはじめたときに、「つまんないよね？」って言うと、「そうだね」っていう声がすぐに返ってくる。
Itoi
Why is that? It's so common to do the easy. It's not totally incorrect to think of the extension of the product that sold well.Sorry to compare us with a huge company like Nintendo, but I feel the same when I look at my staff. If I tell them that what they started seems the same as something they did before, they agree. Instantly.
岩田
わかりますよ。
Iwata
I can see that.
糸井
それができる人とできない人の差はなんなんだろうね。
Itoi
What's the difference between those who can do this, and those who can't?
岩田
近視眼的な賢さっていうかね、単純に、なにかとなにかを比べて「こっちの方が得じゃん」っていうことでだけで選んでいくと、どうしてもそれは安易な道へ流れていってしまうと思うんです。
Iwata
You end up doing the easy if you compare one thing with another, and choose the one that seems to have more gain. That's sort of a short sighted cleverness.
糸井
そうですね。
Itoi
Uh-huh.
岩田
いま、任天堂がそうなっていない大きな理由は、自分たちの目的がはっきりしているからです。「けっきょく、自分たちのミッションは、 いい意味で人を驚かすことだ」ということが、ニンテンドーＤＳやWiiをつくることですごくはっきりしたんです。「人を驚かす」ということができなければ、新しいお客さんの数は増えないんです。
Iwata
The reason why Nintendo isn't doing the easy is because our goal is clear. Our mission is to surprise people in a good way, and this became very clear as we made Nintendo DS and Wii. You can't open up a new market of customers if you can't surprise them.
糸井
岩田さんが任天堂の社長に就任したとき、まっさきに目標として掲げたのが「ゲーム人口の拡大」でしたね。
Itoi
Expanding the game population was the initial target you set when you became president of Nintendo.
岩田
はい。新しいお客さんが増えなければ、「いいもの」をつくっても届かないですから。そこがはっきりと見えたので、たぶん、易きに流れにくいんですね。だって、そういったことを考えないのであれば、いまヒットしているＤＳのソフトの別バージョンをどんどんつくればいいんですよ。一度システムができているわけですから、新しいものをつくるより手間もかからずにできるわけです。
Iwata
Yes. Even if we make great products, if the number of new customers doesn't increase, it won't reach people. That was clear to us, so doing the easy was not an option. If we could do away with such goals, all we have to do is make new version of games that are already a hit. That's much easier than creating a new game.
糸井
でしょうね。外野から無責任に言っていいなら、「売れるにきまってるでしょ」ということになる。
Itoi
I'm sure they will sell though.
岩田
もちろん、未来永劫、いまヒットしているものの続編を出さないというわけではありません。ただ、安易にそこへ流れるよりも、「脳」や「英語」や「料理」に続く新しいテーマを探して新しいお客さんを増やしていきたいと思いますね。
Iwata
I'm not saying that we won't create sequels to our hit games forever. However, we want to pioneer more new customers by searching new themes that succeed genres such as "brain training", "English training", or "cooking navigator".
糸井
それは、会社のトップの人だけじゃなく、いまの任天堂の人たち全員がそういうふうに思っているんでしょうね。
Itoi
Is that a goal that everyone at Nintendo shares, or does only the leaders of the company have this in mind?
岩田
いまは、そういう状態になってると思います。ただ、現実的な話に踏み込んでいうと、「安易な道へ流れない」というのは、いま会社が食えてるから言えるんでしょうね。
Iwata
I believe everyone shares it now. But realistically, I think we can say "we won't do the easy" because we are currently making profit.
糸井
ああー。
Itoi
Ah.
岩田
そうは言っても食えなかったら、まずは確実に売れるほうを選ぶかもしれない。
Iwata
If we were having a hard time, maybe we will chose the easy, so that we can make profit for certain.
糸井
かといって、それをくり返すだけだと市場そのものは広がらないわけですよね。なるほどなぁ。易きに流れないと言うのは簡単だけど、そこの現実的な見極めはものすごくむつかしいですね。
Itoi
It's easy to say "not to do the easy", but to asses it realistically is a tough job. But on the other hand, the market won't expand by doing the easy.
岩田
そうですね。象徴的な例を挙げると、『脳トレ』と『もっと脳トレ』をつくったディレクターは、つぎの『脳トレ』をつくるのではなくて、Wii本体の製作チームに入ったんです。そこで彼がつくったのが、Wiiの「写真チャンネル」と「お天気チャンネル」と「ニュースチャンネル」なんです。
Iwata
Here's what happened when creating Wii. The director of "Brain Age" and "Brain Age 2" didn't create another sequel but was assigned to the team that was developing built-in software of Wii console.What he did there was creating the Photo, Weather and News Channels of Wii.
糸井
あーー、なるほどね。じゃあ、もしも岩田さんがその人に「つぎの『脳トレ』をすぐにつくれ」って言ってたら‥‥。
Itoi
Wow... If you had assigned him to make the next "Brain Age"...
岩田
Wiiは、いまの形をしてなかったでしょうね。
Iwata
Wii wouldn't have been what it is now.
糸井
スリリングですねぇ、それは。
Itoi
Interesting.
糸井
岩田さんの思考モデルというのは、専門的な領域で培われたはずなのに、言われるとすぐに自分の役に立つというか、普遍的な力を持ってますよね。
Itoi
Your model of thinking was nurtured in a technical field, but it's versatile at the same time. It's a very practical model.
岩田
山のようにあるデータの中のどこに目をつけるかというような具体的なことは、自分にしかわからないことだと思いますけど、方法論としては、自分のやっていることはすごく普遍的であるような気がします。といっても、わたしは、経営学の本を読んで体系的に勉強したわけではまったくないですが。
Iwata
I've never studied management or enterprise organizations through books, but I think my method can be applied generally. The specifics, though, such as finding which data to pay attention to is probably something only I understand.
糸井
そうですよね（笑）。これは、不勉強であるとかそういう話じゃないんだけど、（まわりのスタッフに向かって）昔の岩田さんはね‥‥本を読まなかったんだよ。
Itoi
(to the staffs)It's not that he was lazy or anything, but...he never used to read books.
岩田
あははははは。
Iwata
(laugh)
糸井
だから、昔はよく、岩田さんに本をあげてたんだよ。それが、最近では逆になって、岩田さんからおすすめされるほうがずっと多くなった（笑）。
Itoi
I used to hand you my recommendations, but now you seem to recommend me a lot more than I do. (laugh)
岩田
やっぱり、こういう立場になると、本に出てくることと自分の身のまわりにあることがつながるようになったんですよ。プログラムを専門にしていたときは、組織や経営の本を読んでも、つなｪってないから入ってこないんですね。たしかに知識は増えるんですけど、知識が増えるだけだと達成感がないんです。「明日、これが使えるぞ」っていうことがないんですね。そうすると、さっきの話でいうところの「ご褒美」が感じられないわけです。
Iwata
Now that I'm in my position, I can connect what's written in books and what happens around me. When I was specializing in programming, reading books on management or enterprise organization only helped me gain information. It was only information, so the knowledge didn't soak in. Gaining information doesn't give you a sense of accomplishment if it's not something you can try tomorrow. You don't feel the "reward".
糸井
そうだね。なるほどね。もっと昔はどうだったんですか？たとえば子どものころなんかは本を読んだんですか？
Itoi
How about when you were a child? What books did you read, if any?
岩田
子どものころは、百科事典を端っこから読んでました。
Iwata
I used to read the encyclopedia, from end to end.
糸井
それは覚えたんですか？
Itoi
Did you memorize what you read?
岩田
覚えません。覚えないけど、わからないことどうしがつながるのがおもしろかったんですね。それが自分にとってのご褒美だった。
Iwata
No, but finding the connection between things that I didn't understand until then was very interesting. That was my reward.
糸井
いまと同じだ。
Itoi
Isn't that the same as you are now?
岩田
そうですね（笑）。知らないことと知らないことがつながってわかっていくことってすごくおもしろいんですよ。
Iwata
Actually, yes. (laugh).It's interesting when things that I didn't understand connect, and I gain new knowledge.
糸井
ぼくがいつもおもしろいなぁと思うのは、岩田さんって、急に質問したときに、なんとか答えようとしてくれるんですよ。その「答えようとする力」ってすごいんです。だいたい、オレが岩田さんに質問して、答えてもらえなかったことなんてないんだよ。
Itoi
What I find amazing is the effort you put in answering questions. I don't think there was a time when you didn't answer my question. Every time I ask one, you answer it.
一同
（笑）
All
(laugh)
糸井
「どうして海外の電話って、 遅れて聞こえるんでしょうね？」って質問したの、覚えてます？
Itoi
Remember when I asked why lags are caused in international phone calls?
岩田
はい、覚えてますよ。
Iwata
Yes.
糸井
電波の速度って速いのに、海外と電話すると届くのが遅れるじゃない？なんでこんなに遅れるんだろうって岩田さんに突然訊いたんだよ。そしたら、納得のいく答えをすぐに答えてくれた。
Itoi
Electronic waves are transmitted instantly, but when you make international calls, there's a lag. I remember asking this question out of the blue, but you gave me an answer right away.
岩田
えーっと、昔の電話のほうが、いまよりも遅れて聞こえていました。いまの国際電話は海底のケーブルを使うことが多いんですが、昔は衛星でした。静止衛星というのは、地球の表面から36000km離れた場所にあります。つまり、一度、上空36000kmまで行って、そこから36000kmかけて帰ってくるので、合わせて70000km余りかかるんですね。「もしもーし」「はいはーい」というやり取りをする場合は、衛星とのあいだを信号が２往復するんです。そうすると140000km強になるんですね。光とか電波は１秒に約300000km動きますから、140000kmの距離を動く場合はだいたい、0.4秒の間になるんですよ。ですから、現実に「もしもーし」「はいはーい」を体験すると、0.4秒のタCムラグができるんです。
Iwata
Let's see... phone calls used to have more lags in the old days. Although underwater cables are frequently used for international calls now, satellites were used before. Stationary satellites are located about 36000km away from the surface of the earth. So the voice is transmitted to 36000km above, and then 36000km down, which is over 70000km in total. When someone says "Hello", and the other answers "Hello", the signal makes two round trips, which is a total of a little over 140000km. Light and electronic waves are transmitted about 300000km per second, so the signal takes about 0.4 seconds to be transmitted 140000km. So when you say "Hello" and the other answers "Hello" back, there is approximately a 0.4 second lag.
糸井
これを、一気に答えたんだよ。
Itoi
And he answered this instantly.
一同
おおー（笑）。
All
Wow. (laugh)
糸井
あきれるだろう？で、とくにオレが好きだったのは、それぞれの数値を即答したこともさることながら、「もしもし」だけじゃなくて「はいはい」が聞こえるまでにはもう１往復ある、という考え方だったんだよ。そこにね、惚れたの。
Itoi
Isn't it amazing? What caught me was not only the numerical figures that he answered, but that he included the "Hello" back in his calculation.
岩田
はははははは。「もしもーし」「はいはーい」なんですね。
Iwata
(laughing)Yes, "Hello" to and fro is a set.
糸井
その言い回しは、いいよね。コミュニケーションを往復運動で考えること自体が、やっぱり画期的ですよね。向こうに行くだけのこととして考えないで、戻ってくるのを待つというところまで考えてる。だから、苛立ちになるという。やっぱり、いま聞いても、おもしろいのはそこですね。しかも即答するわけだからね。いまならネットで調べればわかるのかもしれないけど、即答じゃないと、おもしろくないんだよ。
Itoi
"Hello" to and fro. That's good. I thought it was novel to think of communication as a round trip action. The reason why people are irritated is because of the lag that is caused in that round trip action. You include the response in your concept of communication. I find this very interesting. The numerical figures can probably be found on the Internet, but the fact that you gave me these facts immediately makes it amazing.
岩田
なぜ、すぐに答えられたかというと、昔考えたことがあるからなんですよ、きっと。
Iwata
I was able to give you an immediate answer because it was a subject I've thought about.
糸井
そっか。
Itoi
Really?
岩田
なぜ海外と電話すると気持ち悪いんだろうって。遅れるときでも、妙に長く遅れるときと、そうでもないときがあるぞ、とか。そういう疑問を感じたら、きっとこうだからだ、って仮説をたてる。そして、思いつくかぎりのパターンを検証して、「どういう角度から考えても、 これだったら全部説明がつく」というときに考えるのを止めるんですよ。「これが答えだ」と。
Iwata
Yes. I was wondering why it was uncomfortable when calling overseas. Sometimes the lag is not as bad as other times. When I draw a hypothesis, I test it against every possible pattern. When I find the hypothesis that can explain every pattern, that's when I can stop thinking, because that's the answer.
糸井
それもプログラム的な思考ですね。
Itoi
That's a program oriented thought too.
岩田
そうですね。だから、説明できない「なぜ？」があると、究明せずにはいられないんですね。なにか説明できないことがあるとすると、その仮説は間違ってるということになる。だとしたら、別な理由があるはずだ。別の仮説を考えなきゃいけない。ということで、また考え始めます。
Iwata
Probably. When there's a question that I can't answer, I can't stop myself pursuing it. If a hypothesis doesn't work against a certain pattern, it means that it's not correct. That means that there should be another reason, so I need to draw another hypothesis, and I keep on thinking.
糸井
だからね、岩田さんがまだ整理しきってないことを質問すると、答えるまえにちょっと間ができる。
Itoi
That's why when I ask something that you haven't thoroughly thought, there's a pause before you answer.
岩田
（笑）
Iwata
(laugh)
糸井
本気で考えるときは、ちょっと止まるんだよね。
Itoi
You stop and think.
岩田
すでに考えたことがあって、整理がついてることはそれを答えればいいだけですからね。でも、未整理の課題を突きつけられると、その場で仮説を思いついたとしてもつい、検証をはじめてしまうんですね。というのも、自分はずっとコンピュータをやってきてますから、論理に矛盾がないのが好きなんです。だから、はじめての質問をされたときは、「自分がここで答えることは、 自分が今までやってきたすべてのことと 一貫してるかどうか？」ということを考える。自分が自信を持って「これが正しいと思う」ということがあっても、いろんな角度から考えてみないと言えないんです。
Iwata
If it's a question that I have already pursued, all I need to do is give you my answer. But when it's something that I haven't come up with an answer yet, I need to check my hypothesis before I open my mouth. I like consistent logic, I'm from the computer field.When someone asks me a question I don't have an answer to, I verify if my answer is consistent with everything that I've done and known. Even if I feel confident that an answer is correct, I still need to test it from every angle.
糸井
おもしろいだろう？
Itoi
He's amazing, isn't he?
一同
（笑）（
All
(laugh)
糸井
そうそう、うちの新しいスタッフは知らないかもしれないけど、岩田さんは「ほぼ日」の創刊メンバーのひとりでもあるんですよ。
Itoi
Some of our new staffs may not know, but Mr.Iwata was one of the start-up members of Hobonichi.
岩田
「電脳部長」という肩書きをいただいてました（笑）。あれは、いまでも？
Iwata
I was the IT manager of Hobonichi. (laugh) Is it still valid?
糸井
もちろんそうですよ。クビにした覚えはないから（笑）。
Itoi
Of course, yes. I don't remember firing you. (laugh)
一同
（笑）
All
(laugh)
岩田
知らない人もいらっしゃるでしょうから、当時の話をしておきましょうか。ほぼ日刊イトイ新聞は1998年６月６日に始まったんですが、その１ヶ月ほど前のゴールデンウィークに用事があって、わたしは糸井さんと会ったんです。それで、そのまま鼠穴（当時、東京糸井重里事務所があった場所）に連れて行かれたんですね。で、糸井さんがおっしゃるには、「ここでホームページを始めたい」と。それが創刊の１ヵ月前です。で、わたしは「こりゃ、たいへんだ！」って。
Iwata
For those who don't know, Hobo Nikkan Itoi Shinbun started on June 6th, 1998. About one month before that, I met Mr.Itoi. He took me to Nezumiana (where the office of Tokyo Itoi Shigesato Office was located at the time), and he said "I want to start up a web site here". I was knocked off of my feet. This was only one month before the start up!
一同
（笑）
All
(laugh)
糸井
よくわかってないんだよね、自分で（笑）。なにしろ、知識が、まぁ、いまもないけど、いまよりも圧倒的にないからさ。
Itoi
I didn't know what I was saying. (laugh)I don't have much knowledge now, but at that time, I had close to zero.
岩田
ぼんやりとしかおわかりじゃなかったからこそ、「１ヵ月後にホームページをはじめる」なんて言えたんだと思うんです。で、わたしは、すぐコンピュータの手配をして、プロバイダーと契約して、床を這いずりまわってＬＡＮの配線して、「こうすれば、最低ﾀのことは はじめられるんじゃないでしょうか」みたいなことをしてました。
Iwata
I think it was because that you had such small knowledge that you were able to say you were going to start up a web site in a month.From then I arranged computers and Internet providers, put together a LAN, and said "I think you can start now."
糸井
‥‥ひどい（笑）。
Itoi
Pretty bad, huh? (laugh)
一同
（笑）
All
(laugh)
岩田
いやー、おもしろかったですよ。それ以来、わたしは「ほぼ日」の電脳部長なんですよ。
Iwata
No, I had fun. I've been the IT manager of Hobobnichi ever since.
糸井
だから、そのころからいる茂木なんかに言わせると、岩田さんは任天堂の社長じゃなくて、「コンピュータを教えてくれるおじさん」なんだよ。いまだに。
Itoi
If you ask Mogi sitting there, Mr.Iwata's still the "guy that knows about computers", rather than the top of Nintendo.
茂木
うん。
Mogi
Yes.
一同
（笑）
All
(laugh)
岩田
メモリが足りないっていうことになったら、マシンをいちいち開けて増設ＲＡＭを挿したりしてね。
Iwata
If I heard that there's not enough memory on the computers, I would open up the machines adding more RAM.
糸井
「そうやって力任せに外すもんなんですか？」「そうです‥‥バコン！」みたいな。
Itoi
I was like "Are you supposed to pull that out like that?" and he was like "Yes... (bang!)"
一同
（笑）
All
(laugh)
岩田
当時の糸井さんはね、役割として、どの程度たいへんかということを漠然と知りつつも、「なんとかなる」という前提でいるんです。リーダーって、そうじゃなきゃいけないんですよ。「なんとかなる」という前提ですべてが動いているからこそ、みんなが「なんとかしなきゃ」って思うんです。それは、わたしもときどきやるんですよ。たとえばWiiをつくるときに、わたしは「本体をＤＶＤケース３枚分の厚さにしてほしい」ってスタッフに言ったんです。もちろん、そうとうたいへんなのはわかってるんですけど、わからない振りしてやるんですよ。
Iwata
Mr.Itoi thought that it would work out somehow, although he sensed that it would be a tough job. A leader should be that way. People try to figure out a way, because the project lies on the premise that "it should work out somehow". I do this sometimes. When we were developing Wii, I told my staff that I want the body to be the size of 3 DVD cases stacked together. I knew it was an extremely difficult demand, but I said it like I didn't know that.
糸井
うん。わかるわ、その気持ち。難しさは知ってるんだよね。
Itoi
I understand this very well. It's not that you aren't aware of the difficulties.
岩田
難しいに決まってるんですよ。で、もちろん、そればっかりじゃダメで、無理難題を言うときと、そうじゃないときと、メリハリは、つけないといけない。つねにトップが無理難題を言うばっかりじゃ、組織が回っていかないですから。
Iwata
Of course not. However, it's also very important to strike a proper balance. Organizations fall apart if the people in charge only demand the impossible.
糸井
無理難題を言わざる得ない局面が、ときどきあるんですよね。
Itoi
Sometimes, you've got to ask for the impossible though.
岩田
あのときは、そういうときだったんですよ。だから、わたしは、いまの「ほぼ日」を見て、1998年６月６日を選んだというのは神がかり的な選択だったなと感心するんです。ワールドカップと同時にはじめるという意味もあったにせよ、「あそこしかない」っていまでも思うんです。断言しますけど、「ほぼ日」って、あれより半年早くても、半年遅くてもいまの姿になってないんですよ。すなわち、糸井さんは天の時をつかんでるんです。あのタイミングではじめたからこそ、先駆者達の失敗の轍を踏まずに済んだ。逆に、もっと遅れてはじめていたら、いま、この規模に育ってないんです。あの時期にスタートしていたからこそ、こういう存在になれてるんですよ。「なんてすごい判断をするんだろう」って、わたしは、あとから思うんですよね。だから、当時、わたしは、「糸井さんが『ここだ』って思ってるんなら、 それはなんとかしなきゃ」っていう一心で電脳部長をやってたんです。
Iwata
Yes, and when I said it, it was that kind of situation.The fact that you chose June 6th 1998 to establish Hobonichi seems divine to me. Of course, it was synchronized with the opening date of the World Cup, but still, there's no other date than that day. I can swear that Hobonichi wouldn't have been what it is now if you have started half a year earlier, or half a year later. That timing was great, you started late enough where you were able to avoid the predecessors' mistakes, and it was early enough so that it could grow to a scale it is now. You were able to seize the moment. The timing you started up Hobonichi makes it what it is today. I was just amazed at your decision, and I wanted to make it happen, to make it work. That's why I devoted in being the IT manager.
糸井
岩田さんはね、よくその話をするんだよ。あのタイミングのすごさというのを何回オレに言ったかわかんないんだけど、正直に言うと、ぼくは、いまでもほんとにはわかってない。だって、なにをやっても、人って逆のこと言うからさ。「遅すぎる」って言う人と、「早すぎる」って言う人がいつでもいるんだよ。
Itoi
I've heard him talk about this "timing" so many times, but I still don't understand the value of it. There are always people who say the opposite, that it's "too late" or "too early". You always have to listen to both.
岩田
ええ。
Iwata
I know.
糸井
当時のことでいうと、「いまさらやるんですか！」っていう言われ方をよくされた。「まあ、でも、やるっていうんなら なんか手伝いますよ」みたいなね。つまり、かわいそうだから手伝いましょうか、みたいなことを言う先輩がいっぱい現れたんだよ。全部会ったんです、オレ。だけど、なんにもいいことなかったですね。そのときに会った人たちは、逆にいまなにしてるのかねって思う。
Itoi
I remember people saying "What, are you starting up now?" as if it was too late. I had lots of people telling me that they would help, but it was like out of pity. I talked with all of them, but gained nothing from them. I wonder what they are doing now.
岩田
当時、糸井さんがよく言われていたのは、「広告の世界であれだけの実績があるのに、 どうしてそれを捨てて こんなことはじめるんですか」ということでしたよね。
Iwata
I'm sure tons of people said "You have such a career in the advertisement field. Why toss that and start something like this?"
糸井
さんざん言われましたね。
Itoi
Tons.
岩田
あのころ、糸井さんはすでに、「『いま売れてます』が いちばん効果的なコピーになったいま、 広告の仕事は自分にとって、もう意味がない」というふうに明言されてましたから、わたしには糸井さんがそこへ踏み出した意味がわかっていたんです。でも、そういう考えを知らない人から見たら、「なぜ糸井重里がインターネットを？」って思いますよね。それって、ちょうど、任天堂が「２画面とタッチパネルの ゲーム機をつくります」って言ったときと同じなんですよ。
Iwata
I remember you saying that "Since 'It's Popular Now' has become the most effective advertisement phrase, I can find any meaning in advertisement anymore". I understood why you started up Hobonichi. People who didn't see what you were thinking must have thought "Why the Internet, Itoi? "The same happened when Nintendo announced we're making a portable game machine with dual-screen and touch panel.
糸井
あー、なるほどね。
Itoi
Interesting.
岩田
多くの人はあの発表を聞いて、「あちゃー、任天堂、変になっちゃった」っていうふうに感じたと思うんです。わたしたちからしたら、現在の延長上に未来はない、と思って決断したんですが、ふつうに考えている人にしてみれば、ただの常識外れに思えるんです。
Iwata
A lot of people thought Nintendo had gone nuts when they heard this. For us, our future was not in a continuous line of what we were doing then. The decision came from that point of view, but to people out there, what we said seemed offbeat.
糸井
そうですね。ぼくは岩田さんほどはっきりと未来を見ていたわけじゃないと思うけど、インターネットというのはものすごく大きくなるんじゃないか、というのは思ってた。それは、山っ気とは違う意味でね。いろんな人たちがいろんなことを教えてくれようとしていたけど、そのうちに急に、ふつうの人たちがみんな、インターネットを「知ってる状態」になるような気がしてたんです。
Itoi
I didn't see things as clearly as you did, but I sensed that the world of Internet would grow, not that it would be a risky field. Although people tried to teach me many things, what I felt was that one day, normal people would just come to "know" about the Internet.
岩田
事実、そうなりましたしね。
Iwata
It came true.
糸井
だから、いま思うと、当時ぼくは、意外と落ち着いてたのかもしれない。だってさ、ネットの歴史なんて、実質的には1995年くらいからのものでしょう？３年や５年、先に知ってるからって、「インターネットというものはね‥‥」って語られてもさ。つまり、コミュニケーションを知らない人がネットをいくら語っても、説得力を感じなかったんですよ。あとは、ほら、なんとなくぼくは、岩田さんのことをなんでも知ってる人だと思ってたから、「うちは岩田さんもいるし‥‥」って思い込んでた（笑）。
Itoi
Maybe I was calm at that time, come to think of it. The history of the Internet virtually starts around 1995, right? When people who didn't know anything about communication came up to me and started preaching about the Internet, it didn't persuade me at all. After all, all they knew was only a couple of years more than what I knew.Plus, at that time, I thought you as someone who knew everything. I thought, "And we do have Mr.Iwata..." (laugh)
岩田
ははははははは。
Iwata
Ha ha ha.
糸井
ＲＡＭも挿してくれるし、って。意味がぜんぜん違うよね（笑）。
Itoi
He can even add RAM to our computers! (laugh)
一同
（笑）
All
(laugh)
糸井
まぁ、そういうわけですから、岩田さんも「電脳部長」として、たまにこうやって遊びにきてください。さすがにもう、ＲＡＭを挿したりはしなくていいですから。
Itoi
Well, you don't have to check our computers anymore, but please drop by our office every now and then. You're still our IT manager.
岩田
わかりました（笑）。
Iwata
Sure. (laugh)
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