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Profile: Hiroshi Yamauchi

Monday, April 16, 2001

Profile: Hiroshi Yamauchi
The Mind Behind the Empire

Hiroshi YamauchiHiroshi Yamauchi, the president of Nintendo Co., Ltd., has been running the company with an iron hand ever since he took over his grandfather's family business back in 1949. He took the Kyoto-based firm through a fascinating journey spanning over half a century, from hanafuda playing cards and imaginative gadgets to handheld gaming devices and cutting-edge video-game systems.

Yamauchi's life-long dedication to Nintendo was rewarded with year after year of record-breaking sales and profits, not to mention a personal wealth of two-and-a-half billion dollars. In no small part due to his unique business tactics and remarkably intuitive product sense, Nintendo has become one of the most successful companies in Japan's history, and was even praised by one Japanese author as better run than Sony, Mitsubishi, and Toyota.

Leaving Luck to Heaven

Hiroshi Yamauchi was born on November 7, 1927, and was the son of Kimi and Shikanojo Yamauchi. Kimi Yamauchi, the granddaughter of the Nintendo founder, had married Shikanojo Inaba, a man from a respected family of craftsmen who agreed to adopt the Yamauchi family name. Although it was assumed he would take over his bride's family business when the current president retired, he mysteriously abandoned his family in 1933. Kimi Yamauchi felt disgraced and moved in with her sister, leaving her son in the care of her parents, Sekiryo and Tei Yamauchi, who raised him with the same severity with which they ran Nintendo. Hiroshi Yamauchi turned into an arrogant and imprudent young man whose disregard for his grandparents grew with his age.

Waseda UniversityAt the age of twelve, Yamauchi was sent to a preparatory school in Kyoto, and although he was supposed to study law or engineering at a university, the Second World War came, putting his plans on hold. As he was too young to fight, he was kept in school, where he was given an assignment in a military factory. After the end of the war in 1945, Yamauchi went to Waseda University to study law. He soon married Michiko Inaba (no relation to his father), a descendant of a samurai who had opened a small business in Kyoto, making cloisonn pieces. In accordance with tradition, the couple's parents would meet to discuss the match, but since Yamauchi's father was absent, his grandparents arranged the marriage.

In 1949, Hiroshi Yamauchi's grandfather had a stroke. Being the president of Nintendo, the old man asked for his grandson, as he would have to leave school and immediately come to Nintendo to assume the position as president. Without emotion, Hiroshi Yamauchi insisted on several conditions, one being that he must be the only family member working at Nintendo, meaning his cousin had to be fired. The elder Yamauchi reluctantly agree to his terms, and died soon thereafter, never witnessing the success his business would have.

Only twenty-one years old, Hiroshi Yamauchi was appointed the third president of Nintendo, a position that was supposed to have been his father's. Because of his youth and inexperience, Yamauchi was resented by the employees of the company. He had planned a clean sweep of longtime employees and fired every manager, one by one. He wanted to get rid of Nintendo's conservative past; even the old guards who might question his authority had to leave the company.

The name of the distribution company was soon changed to Nintendo Karuta (Nintendo Playing Cards), and Yamauchi established a new corporate headquarters in Kyoto. Even though Nintendo made a licensing agreement in 1959 with Walt Disney, allowing Nintendo to sell an astonishing 600,000 Disney-decorated packs in one year, the young president was still discontented. He felt the market Nintendo was in had little room for growth, and thus changed the company name once again, to Nintendo Company, Limited (NCL), dropping the word Karuta. As Yamauchi needed financing to branch out into new businesses, he took Nintendo public and became the company's chairman.

Among the ideas Yamauchi came up with for the new company were a line of individually portioned instant rice, a taxi company called Daiya, and a love hotel with rooms rented by the hour. The instant rice was a failure, Yamauchi grew tired of negotiating with taxi-driver unions, and although the love hotel was a personal passion___he was said to be his own best customer___he decided to close it down. Instead, Yamauchi wanted to take advantage of Nintendo's distribution system which reached into toy and department stores throughout the country. Nintendo was thus set as an entertainment company.

In 1969, Yamauchi set his company on its new course and created a department called simply Games. Set up in a warehouse in a Kyoto suburb, it was Nintendo's first research-and-development office. He assigned a newly hired employee, Gunpei Yokoi, to a new project in the Games division. Upon being asked by Yokoi what to make, Yamauchi responded "Something great." The toy Yokoi came up with was the Ultra Hand, which became a resounding success.

Half a decade later, Nintendo had grown into a successful toy manufacturer with products like the Ultra series, Love Tester, and a light gun using solar cells as targets. However, the popularity of Nintendo's latest brainchildren, the Laser Clay ranges, became affected by Japan's oil shortage a couple of years earlier, and Yamauchi desperately needed a new breakthrough product.

A Haven for Artists

While talking to a friend who was an executive with one of Japan's largest electronics conglomerates, Yamauchi realized that the technological breakthroughs in the electronics industry were becoming cheap enough to be used in entertainment products. Companies like Atari and Magnavox were selling devices that played electronic games on home television sets, and Yamauchi negotiated a license with the latter to manufacture and sell its video-game system in Japan.

The machine, which could play variations on Pong, was followed by Color TV Game 6 and a more powerful sequel, Color TV Game 15. Still, the video-game systems were not the revolutionary product Yamauchi had been looking for___they were not novel and versatile enough. He asked his engineers to come up with new ways of making video games, to throw away all their old ideas and come up with something new. Once again, Yokoi came up with an ingenious product, this time the Game & Watch series, a collection of miniature video-game devices the size of calculators.

While the Game & Watch devices were selling like hot cakes and customers were pouring in 100-yen coins into Nintendo's arcade machines, Hiroshi Yamauchi had endless meetings with a group of engineers under Masayuki Uemura. The R&D team was working on a video-game system more sophisticated than Color TV Game 6 and 15. Yamauchi wanted something other companies couldn't copy for at least a year, but at the same time something so cheap almost everyone could buy it.

Nintendo FamicomBecause of the low price of the game system, the only way suppliers would agree to produce components for Nintendo was if it ordered a huge amount of chips. Yamauchi was so sure of the success Nintendo's video-game system would gain that he promised one electronic company a three-million-unit order within two years. Nintendo's video-game device, dubbed the Famicom (Family Computer), accomplished more than that. After several million units had been sold at a cost of about $100 each, there was still no sign of a slowdown.

Yamauchi knew that a video-game system was only as useful as the software it could run, no matter how powerful it might be. He had wisely anticipated the importance of games and had instructed Uemura to make the system easy to program for. Yamauchi wanted Nintendo to become a place where his employees would be encouraged and inspired. According to him, it was artists, not technicians, who made excellent games, and he wanted his company to become a haven for video-game artists.

Even though he had no engineering background and had never played a single video game in his life, Yamauchi was the only one deciding which game Nintendo would release. He was praised for his remarkable intuition, as he could seemingly read a few years in advance, knowing what would become hot and popular. Yamauchi in those days believed the marketing people would only look at what was popular at the time, and therefore did not allow them to see the games before they were completed.

Yamauchi set up three R&D groups, run by his chief engineers. Ignoring the textbook corporate examples, he let them compete among themselves for his praise. Designers would become overjoyed when they came up with a game idea that delighted him. On the other hand, a rejection could be devastating; employees occassionally left the company, and others were sent on sabbatical. Most commonly, though, designers who were turned down would only work harder, determined to have their game chosen the next time.

Setting Eyes on America

Yamauchi rarely saw his mother, who had become more like an aunt to him. He never saw his father again, and all that was ever said about him was that he was worthless and deceitful. When he later returned, desperate to speak to his only son, Hiroshi Yamauchi refused to see him. One day in his late twenties, Yamauchi heard his father had died of a stroke, and he sat alone for a full day before deciding to attend the funeral. The death of his father changed him, and he grieved for months after the funeral. Yamauchi has since forgiven his father and now makes regular visits to his grave.

Hiroshi and Michiko Yamauchi had their first child in 1950, a daughter named Yoko. After she was born, Michiko had a series of miscarriages and was often ill in bed. Not until seven years later did she have other children___a daughter, Fujiko, and then a son, Katsuhito. Michiko Yamauchi soon regained her health and often talked with Yoko about Hiroshi Yamauchi and Nintendo. Yamauchi's children were terrified by their father and always found him elusive and angry. Nintendo became a wedge between him and his family, and they hated the company for consuming him.

Yoko Yamauchi eventually married Minoru Arakawa, a man whose respected Kyoto family had been in the textile business for many generations. He worked for a company that developed hotels and office buildings around the world. While Yoko moved to Canada with her husband, her sister Fujiko stayed in Japan, where she married a doctor. Meanwhile, Katsuhito Yamauchi went off to work for an advertising agency called Dentsu (coincidentally the same company that came to form NDCube with NCL in 2000).

One of Hiroshi Yamauchi's dreams was to go to the United States and succeed there like he had succeeded in Japan. Unfortunately, he felt he was too old, and thus needed someone else to manage the American operation. His son was too young and inexperienced to be given such a responsibility, so Yamauchi turned to Arakawa, whose international experience made him the right man for the job. The NCL chairman soon convinced his son-in-law to run the American subsidiary.

Yamauchi gave Arakawa far more autonomy in running Nintendo of America than most chairmen of Japanese companies gave their foreign subsidiaries. Even though he still made Nintendo's most significant decisions affecting its future, Yamauchi often consulted with Arakawa and spoke with him on a regular basis. The two men came to respect one another and learned how to take advantage of each other's strengths.

In the early nineties, the owner of the Seattle Mariners baseball team announced that he was selling the team. Since the most likely buyer planned to move the club to Florida, Nintendo of America was asked if it could find investors in Japan who would take a majority interest in the team and keep it in Seattle. Arakawa told his father-in-law about the Mariners, and even though he had no interest whatsoever in baseball, Yamauchi said he would buy the team.

Ready for Another HomerunThe Mariners owner was ecstatic about the offer and accepted it before the baseball commissioner and ownership committe had the chance to approve it. The commissioner announced in early 1992 that the deal would not be approved, claiming baseball could not allow foreign ownership. Since Canadians owned baseball teams, his opinion made no sense, so the commissioner qualified his stance: baseball could not be allowed owners outside of North America. The Seattle citizens were furious and found the requirement ludicrous, decrying the commissioner's attitude as racist.

Seemingly influenced by the popular support in the press and public for the Nintendo-led offer, the acquisition was formally approved by the club owners in mid 1992. The NCL chairman would have a majority ownership, although he had agreed to have less than a fifty percent vote. Nintendo was viewed as Seattle's savior and gained favorable attention on the sports pages of newspapers around the country.

A New Nintendo

Hiroshi Yamauchi, now 73 years old and past the age when most western chairmen retire, has announced his retirement plans at several occassions. Originally planning to slip into retirement after the launch of Nintendo's ill-fated 64DD add-on, Yamauchi recently revised his plans and now intends to see the company's latest video-game system, the Nintendo GameCube, hit its stride before stepping down as the president of NCL.

While Yamauchi does not intend to announce his successor until next year at the earliest, there are a couple of possible contenders for his position. One of them is Atusho Asada, the former vice president of Sharp and now NCL's executive vice president. Another candidate is Yamauchi's right-hand man Hiroshi Imanishi, though Imanishi himself admits he is better to serve the president.

Minoru Arakawa, the president of Nintendo of America, is another likely successor. If he was to take over Nintendo after Yamauchi, the company would certainly become more open-minded. However, the differences between Yamauchi and Arakawa have worried some people, who felt Arakawa was too nice. Still, the success of NOA has proven Arakawa's determination and efficiency, making him a likely contender to take over NCL, though his recent resignation from the NCL board of directors might have decreased his chances of becoming the president of the Kyoto giant.

Katsuhito Yamauchi, the son of the NCL chairman, had entered Nintendo in Canada, but lasted only a year, mainly because of language barriers and limited experience in the business. When it didn't work out, Arakawa helped him form a company in Vancouver that would sell Nintendo products. He has since joined his father's company and recently worked on the Pokmon movies as an associate producer. Now in his early forties, Katsuhito Yamauchi should have the sufficient experience to assume his father's hot seat.

Opposing the traditionally respectful world of Japanese business, Hiroshi Yamauchi is notorious for his harsh business ethics. Instead of hiding behind a polite facade, he regularly lashes out at companies like Sony, Square, and Microsoft. Ever since he took over Nintendo more than fifty years ago, he has played by his own rules and refused to listen to anyone. While his autocratic behaviour has earned him a bad reputation in the gaming media, Yamauchi is nonetheless respected and, more importantly, feared by his competitors.

King of the CastleWhen Yamauchi eventually relinquishes his presidential position to his successor, a new Nintendo will definitely be born. Still, Hiroshi Yamauchi will always be appreciated for turning a card-manufacturing family business into the leading company in the multi-billion dollar industry of interactive entertainment, something he accomplished by possessing the dynamism required to lead a successful corporation.

Jeton Grajqevci


Artwork copyright Annie Navarro 2001.

Special thanks to David Sheff for writing Game Over - Press Start to Continue, a fascinating book about the history of Nintendo and its rise to dominance of the gaming industry.

Appendage: Work in Progress

Yamauchi suggested the Nintendo DS as a direction for Nintendo to take.

In November 2003, Yamauchi became the president and chief financial sponsor of Ogura Hyakunin Isshu Project foundation, a group dedicated to promoting and preserving the "Ogura Hyakunin Isshu". The Ogura Hyakunin Isshu is a collection of 100 poems written by 100 different Japanese poets between the 7th and 13th centuries. The foundation hopes to build a museum in Kyoto and start an informational tour to be sent throughout Japan, rekindling interest in this ancient collection of poems. When asked why he joined the foundation, Yamauchi said that he thought it was a wonderful effort, and that Kyoto needed more tourist attractions.

In late September 2004, Yamauchi said he would like Nintendo to look into the production of movie animation and in particular a film based on the Ogura Hyakunin Isshu series. He will present the idea to the Nintendo board of directors on October 29. Yamauchi feels that making games is similar to movie making.