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tv   Bloombergs Studio 1.0  Bloomberg  March 23, 2019 5:30am-6:01am EDT

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♪ emily: he started an e-commerce company in 1995, around the same time as amazon, when nobody believed anyone would buy anything from the internet. today, mickey mikitani's rakuten is known as the amazon withpan but also competes google, netflix, and airbnb, a streaming service, e-books, credit card and banking services, and more. though many outside of japan still do not know how to pronounce rakuten's name -- koo-ten."
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emily: they might recognize it from the jerseys of the golden state warriors and the barcelona football club as the company pushes for global recognition. joining me today on bloomberg's "studio 1.0," founder and ceo of rakuten. hiroshi mikitani, mickey. mickey: yes. emily: your grand plan is to launch japan's newest wireless network. the wireless network. fourth what is the strategy here? mickey: the strategy is simple. our credit card, which we started to issue 10 years ago, after 10 years, now we are the biggest credit card company in japan. and we are still growing close to 25% year on year. the power of our ecosystem is kind of proven. so using our network, we can
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reach out to them, give them a special package, and ask them to join our network. and with this new architecture, we can reduce our investment. isce everything self-controlled, mostly automated, our maintenance people is going to be less than 1% of our competitors'. emily: you say you can do this for ¥600 billion over 10 years -- $5.5 billion -- or so. investors are skeptical that you can pull that off. what makes you think you can? mickey: because we can. i cannot control the emotion of investors. but i know we can. emily: are you prepared to pay more if you have to? mickey: no, we are going to do it within our budget. i am confident. emily: how? we will get contracts,
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these are the costs, the software -- it is a totally different concept. everyone thinks it is impossible, but just wait another few months, and everybody will be very shocked. emily: how does this wireless network fit into the bigger story of rakuten versus amazon? mickey: our model is to create a membership program and use data so we can cross-sell our associates. -- we can services heavily discount. emily: in japan, some would say that you are losing share to amazon in e-commerce. is that fair? looking at the charts. no, i do not think so. i do not believe so. they are totally different aspects of how you count. emily: how would you characterize the competition in japan? mickey: they do not discuss any
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numbers, to the honest, so it is difficult for me to compare. but as far as our growth is concerned, we are growing at the right speed. the challenge is logistics. so now we are engaging in logistics, so i think we are in good shape. emily: jeff bezos might be a little distracted lately, so that could be an advantage? mickey: i just don't think he is concerned about japan that much. [laughter] emily: he has doubled down on india. do you think he has not taken advantage of japan? mickey: japan is a different market. the consumers are sophisticated. the variety of the product they want is very high. they want to receive a very clean package, not necessarily the amazon approach in the u.s. would do well in japan. we have more smaller stores, smaller merchants. we need to make them happy. conceptually, it is still very
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different. we are more partnership-driven than amazon. amazon wants to dominate everything. we would like to help small and medium-sized merchants. emily: who is a bigger threat, jeff bezos or masayoshi son? mickey: everybody is a rival. one thing i can tell you is we are well-positioned, because we are not only one single service provider. we provide our value as a package, including banking, telecom, credit card issuance, shopping, travel, content, as a package. so if you want to just focus on one vertical, i think it is very, very risky. emily: masa is a competitor in the wireless business. now he has a vision fund , investing huge amounts money in tech companies. which you also do. what do you think about what they are doing with the vision fund? mickey: i think he is an excellent investor. he may or may not make it.
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i do not know. the competition in japan, the quality, costs of our service, will be better than anybody, for sure. when we go to 5g, our network will be 5g from the beginning, the only company in the world. so i think the future looks very good to me. of course, there will be a competition. they will try to do everything to block their users moving to rakuten. maybe our growth will get less as we initiate plans, but i think, after all, the structure difference is very, very clear. and i don't think anybody can match our quality and our price. emily: one more question about the vision fund. do you think there are any ethics issues with their ties to
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the saudi government? mickey: that depends on the philosophy of the company. i am very careful about taking money from whom. some companies do not care, because money is money. but, you know, it depends on the character of the founders. some companies i have seen are becoming a little more careful about the source of the money, because, you know, these innovation companies are very, very emotionally-driven. it is more value driven. it is not just about money. so therefore, some people are more careful. some people don't care. it depends. emily: is that a mistake? not to care. mickey: not to care? emily: is it a mistake to take
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money from a government tied to the murder of an american journalist? mickey: first of all, we don't know the truth, so, to be honest, i don't think i can have a right answer. company,ur portfolio we would advise you to be careful. ♪ i decided not to use huawei or zte. ♪
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emily: you have been busy making investments yourself. you have taken stakes in companies around the world. you have a giant stake in pinterest, a big stake in lyft, your on the board in lyft. what is your strategy? mickey: we are not softbank. it is our side business. side business has two meanings.
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one is to understand what is going to happen in the world. so we invest in the ridesharing company to understand what does autonomous driving mean to our strategy in the future. also, we would like to know where the sharing economy will go. so now we have a very deep understanding of the sharing economy, not just limited to rideshares. we started at home business in japan. now we are talking a potential lyft in japan. emily: lyft has not done much internationally, so that would the of the deal. mickey: if it takes place, yes. i don't know. there are lots of issues still. emily: what needs to happen? the japanese taxi market is hard to crack. mickey: yes. legally speaking, pure ridesharing is still illegal in japan. so i think we need to be very, very smart.
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emily: are you talking to the japanese government? are you trying to create a space for them? mickey: i am constantly talking with the japanese government on many issues. this one, i have not been pushing it too hard, because the reaction from the taxi industry is so strong. so i just want to be a little bit careful. so we invest in the company's which has something to do, or we think will have something to do, with us in the future. that performance is expected. way better. emily: what are your returns? mickey: 28.5% a year. emily: softbank is an investor in uber and lyft. do you find that odd? mickey: uber is a much more ambitious company for sure. but i can't tell you the percentage. but when john logan came to my house, they were kind of desperate. a good friend of mine
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was trying to crash lyft. and i gave them $300 million. emily: what was their plea? what were they asking you for? uber was trying to crash them, so they needed help. but i did my homework. and i researched. ok, 50% of out, young people, millennials, in san francisco use lyft, not uber. i said, hold on. this is encouraging news. the younger share was rising up, even though the market share is small. so i thought, ok, this company has the potential to reach at least 20% market share, focusing on younger people.
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and they did it, and they did it so well, executed. they partnered with us for the marketing. and now, their market share is way bigger than what we intended. emily: so how do you think the uber versus lyft competition plays out? mickey: i talked to travis, long time ago, when he was very angry when i invested into lyft. atu know, you need to have least two players for this kind of totally new services, which is going to replace huge services. we are talking about converting car ownership to what we view as a service. this is big. i don't think just one company can do it. there need to be at least two or even three companies who do it
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competitively. otherwise, they are going to face many, many difficulties. antitrust, pushback from drivers. so i think it is healthy to have two companies competing against each other. emily: so is it healthy to have only one search engine or one social network or one e-commerce in the united states? google, amazon, and facebook have virtual monopolies. mickey: yeah, that is a problem. that is a problem. but, you know, people's behavior is also changing, right? for example, many people go to amazon instead of going to google in the u.s. in japan, they come to rakuten instead of going to google. some people have a different
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idea. so the platform is going to be, you need to think about how to democratize the platform. emily: you are also a huge investor in pinterest. they filed to go public. how big do you think pinterest can be? mickey: i don't know. i think when instagram came out, i thought, oh, my god. this is going to be a crisis for pinterest. but i was wrong, because instagram is about people, and pinterest is about product. so they are more product-focused rather than people-focused. so there are still many, many people who like pinterest. and they are diversifying their revenue source, and hopefully --
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and they are international. things are going well. emily: how closely are you following the u.s.-china trade war? mickey: one thing i can tell you is, when we are deciding what kind of network equipment we are going to use, i talk with the japanese government and ask about whether i should use chinese network equipment or not, and they said, no problem. use it. but, i kind of sense the potential risk, even if it is 1%. i told myself i cannot take 1% risk that something may happen, so to prohibit chinese network equipment to be used for a japanese mobile network. so i decided not to use huawei or zte because of the risk. so i don't know if it is true or not. but i'm very, very happy i did not choose them right now.
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because if i had chosen them, it means i have to go back one year and cannot launch my service. emily: who did you choose? mickey: nokia. but basically, we are building our own hardware. we just buy the antenna hardware from nokia. but maybe in the next generation, we will build our own. so it is a totally different concept. we are an i.t. company integrating, building core networks, radio station networks, all the technology by ourselves. versus other telecoms are asking system integrators to integrate everything. emily: so do you think that huawei's, zte's business, do you think those could be seriously compromised as a result? mickey: that is for sure. it is obvious, no? emily: they are still huge companies in the chinese market. mickey: they are good companies. but i don't know whether it will happened, to be honest, but as far as the telecom industry is
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concerned, it is very difficult to use chinese vendors for a while. ♪ mickey: my father had pancreatic cancer. i was crazy enough to believe i could find a fast cure somewhere in the world. ♪
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they: you are best known in bay area for sponsoring the golden state warriors. why did you decide to do that? rakuten is on every warriors jersey. mickey: yeah, i like that. that is the point. [laughter] emily: is this delivering for you? is the sports marketing, has it been a good bet? mickey: sure. yes. our brand awareness has risen so much. it is not as high as it is in europe yet, but i think it will get there.
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most importantly, the warriors r an iconic team in silicon valley -- the warriors are an iconic team in silicon valley. it works very well for hiring and partnering with other companies, also just pure exposure of our brand to the consumer, so we are extremely happy. emily: you have also got a multiyear partnership with steph curry. what do you hope to get out of that? mickey: steph will be our brand ambassador, showing up in our tv commercial. also, we are sponsoring his unrated tour to discover a kind of hidden player who can potentially become very big. so it is very aligned with our concept. emily: you also sponsored the barcelona soccer team. what is that delivering for you? mickey: barcelona is the biggest sports club in the world, right? and not just the performance of the team, but also the culture
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and philosophy of the team is very important for us. emily: you made a big splash by switching all your internal communications to english. mickey: yes. emily: how has that worked out? mickey: it is working very, very well, as a matter of fact. emily: and you do this because you thought that was the only way you could become a truly global company, right? mickey: yes. and even to survive in japan. because it is obvious that advancement of i.t. technology is just speeding up, accelerating, and just doing business with japanese engineers and scientists is impossible. i am talking about why we are so strong in japan is because our ai engineers in japan, and most of them are japanese. emily: but i imagine it was hard to switch everyone to english. mickey: yes. it was very hard. we still struggle a little bit, but mostly done.
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was commitment, never compromise, and patience. emily: i understand you have got a new commitment, and you want everyone to have a certain level of digital literacy, programming skills. mickey: yes. emily: tell me about that. mickey: for sure, if you are working for toyota, for example you know about how the automobile works. if you work for an i.t. service company, you need to have the basic knowledge of what is in the computer. that is very, very basic stuff. understand how computer program, how processing power, processing units, cpu, gpu, what is the difference between cpu and gpu, what is ai, what is deep learning? 10 years from now, the world is going to be totally
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different. most of the services we do by humans will be replaced by ai. and if our managers are not aware of it, it will be a big problem. emily: you are also pouring money into cancer research. mickey: yes. emily: tell me about that. iskey: the story about that my father had pancreatic cancer. we found out five years ago. and i was crazy enough to believe that i can find a fast cure somewhere in the world, so i traveled all around the world. ucsf, harvard, columbia. i went literally everywhere to look for a cure. fortunately, i couldn't find any effective one, but one day, my friend, who is also a good friend of my late father, called hey, mickey, i heard
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your father has bad cancer. by the way, my cousin is doing this very interesting project. to pancreatic cancer. i ask what it is. he said it is using lights to cure the cancer. so i flew over to washington, d.c. and had a meeting with him, and i find out, oh, my god, this is going to work. i do not know how much, the extent it is going to work, but i am instantly confident this is going to work. emily: so you think we are going to find a cure? you think you found the cure? mickey: i personally think we already found the secret key to unlock your immune programming, specifically targeting to the type of cancer you have, either a protein or dna. so what we do is we target the
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cancer cells. we light and make scratches to the surface of the cancer, and the cell will explode. once the cancer cancer explodes, there is no defense system for cancer, so your immune system it, basically start to attack your cancer cells. we finished our phase two clinical trial, about to get into phase three clinical trial in japan, u.s., europe, and asia. the result has been outstanding. sometimes, drugs are strong enough to cure everything. sometimes, we need to combine it with other drugs. but long story short, whatever combination people want to do, our drug is going to be key. emily: that is incredible. mickey: yeah.
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so maybe i will be known as former intrapreneur, not i.t. entrepreneur, in history. emily: yeah, wow. mickey, thank you so much for joining us. mickey: thank you. ♪
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manus: you are watching the "best of bloomberg daybreak: middle east." the major stories driving the headlines this week. oil hits a new 2019 high as opec and allies agreed to extend their production cuts, but is there tension in the saudi-russia alliance? saudi stocks finally gaining collusion to a key emerging market index. billions of dollars are expected to flow in, but what are the risks for investors? and the uae banking sector has been under the microscope this year amid a space of mergers and consolidations. we speak to the author of a new report on the industry.

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