Interview with Kathy Matsui, the pioneer of Womenomics and a general partner in MPower Partners!
In this ICONfront interview, we listened to the story of Kathy Matsui, who studied at ICU from 1986 to 1987 as a Rotary Scholarship student.
From the perspective of Womenomics and ESG, she talked to us mainly about the activities of MPower Partners, which she co-founded in 2021, and topics in which many ICU students are interested, such as diversity.
Kathy Matsui
MPower Partners General Partner
Former Goldman Sachs Japan Vice Chair and Chief Japan Equity Strategist
She advocated the concept of “womenomics” in 1999, which has spread all over the world. Consequently, the Japanese government established the promotion of women’s participation in society as an economic growth strategy. She analyzes diversity, corporate governance, and sustainability from the perspective of economic rationality and has influenced many companies and investors. She published 『女性社員の育て方、教えます』 in 2020. Graduated from Harvard University. She graduate school at Johns Hopkins University School of Advanced International Studies.
Q1. Please introduce yourself first.
I’m Kathy Matsui, and I am a second-generation (Nissei) of Japanese American. My parents migrated to California, the West Coast of the US, from Nara prefecture and were engaged in agriculture. Since I was born one year after my parents moved there, I have American nationality. Daily conversations at home were in Japanese and English as I was born and raised in the US.
Soon after graduating from Harvard University on the East Coast, I received a Rotary Scholarship and went to ICU, where I studied Japanese intensively with other 13 scholarship students. This was my experience at ICU though it was short. Although I don’t remember clearly, I spent my time in the women’s fourth dormitory. Before the pandemic, I saw the dormitory during a reunion and found that the cafeteria had changed. It was a memorable time since my first time in Japan was at the ICU campus.
Q2. Could you tell us specifically about the activities that you are doing in MPower Partners?
MPower Partners founded in May 2021 is a global venture capital fund that invests in start-up companies. It is Japan’s first ESG-oriented fund. ESG means Environment, Social, and Governance, so “ESG-oriented” means helping start-ups integrate Environmental, Social, and Governance considerations.
Although the Japanese economy is enormous, as it is the third-largest in the world, start-ups and the venture ecosystem are still relatively small. It is odd that there are not many start-ups in Japan despite many talented people, resources, money, and technologies. For example, the number of companies called “unicorns*” is still relatively small in the Japanese start-up world. There are some, of course, but relatively few as a country.
My longtime friends who co-founded the fund, Yumiko Murakami-san and Miwa Seki-san, and I share a common sense of what is missing and what the issues are facing Japan.
We believe the solution to this problem is the incorporation of more diverse points of view, ideas and globalization. Many Japanese start-ups tend to think it is enough to succeed only within Japan. However, we believe they can think more globally and more ambitiously.
Part of our fund’s mission is making Japan’s start-up ecosystem more globalized and more scalable, and we believe ESG integration can help start-ups achieve this.
The fund doesn’t invest only in female or minority entrepreneurs. Nevertheless, it is relatively rare in the existing venture ecosystem for a fund to be founded by three women.
*unicorns
“A start-up company in the technology sector quickly achieves a valuation of $1 billion or above. Typically, such companies use venture capital to fund very rapid growth, in the hope that acquiring high visibility and a large market share will lead to profits.” Law, Jonathan, 2018, “Unicorn,” A Dictionary of Finance and Banking (6 ed.), (https://go.exlibris.link/xvSnH2gp, retrieved July 4, 2022).
Q3. Could you tell us your activities other than MPower Partners?
I have been serving as an external director of FAST RETAILING CO., LTD, since late 2021.
I have also supported numerous non-profit organizations, one of them is Asian University for Women, a women’s university founded 12 years ago in Bangladesh. The university was founded for female students in countries and regions where higher education for women is difficult to access, unlike Japan or the US. Now students from 19 countries from South Asia and the Middle East, including Afghanistan, are studying there. The university provides a Liberal Arts education to these talented, high-potential students. I have been supporting and serving on the university support foundation board for a long time, helping to raise scholarship funds.
In addition, I’m constantly engaged in activities related to womenomics,* which is my life’s work.
*womenomics is a concept that “out of economic necessity or as a result of lifestyle choices, an increasing proportion of Japanese women are actively participating in the workforce and becoming a very important source of income and consumption growth” (https://www.goldmansachs.com/insights/investing-in-women/bios-pdfs/womenomics-pdf.pdf, 2022年7月8日取得)
Q4. How did you feel when you started MPower Partners? And please tell us if any chances brought you to start MPower Partners.
I thought it was about time to start something different since I had worked in investment research for 30 years, 4 years at Barclays de Zoete Wedd Securities, and 26 years at Goldman Sachs. My two friends I mentioned earlier and I happened to be born in the same month in the same year. Yumiko-san/Ms. Murakami was my colleague and Miwa-san/Ms. Seki was actually one of my clients at Goldman Sachs.
We have celebrated our birthdays every year for the past several years, and around three years ago, we discussed what we wanted to do for the rest of our lives and what we could do to shape a brighter future in Japan.
We had all built careers in the financial industry and we had extensive knowledge and passion for topics such as diversity and corporate governance. Another commonality was that we had worked in public equity markets for a long time, but we realized that it was not easy to change the mindset and behaviours of large, established corporations.
For example, in a world where new business models such as GAFA* companies in the US have emerged, more new and disruptive business models should have been produced from Japan. Therefore, we wondered thought if there’s anything we can do in the intersection between finance x ESG x start-ups, and we ultimately decided to launch an ESG-focused venture capital fund.
During Covid, we took the time to speak with many people, and after receiving helpful advice and guidance, we decided to move forward. We obviously faced many uncertainties, but I think we were able to do it because we did it together as a team.
*GAFA
“Amazon, Apple, Facebook, and Google currently are the four dominant platforms in the digital markets industry and consequently, have the greatest impact on the community of users. Collectively known as GAFA, these four digital platforms provide a variety of services built on transnational infrastructures that sustain their leading positions and create a gulf in relation to any new entrants in their markets.” (Rosa, F. R., & Hauge, J. A. (2022;2021;). GAFA’s information infrastructure distribution: Interconnection dynamics in the global north versus global south. Policy and Internet, 14(2), 424-449. https://doi.org/10.1002/poi3.278, 2022年7月8日取得)
One other thing we have in common is that our parents were entrepreneurs.
Seki-san’s family was the founder of Chiroru-Choko, originally Matsuo-Seika, and Yumiko-san’s mother opened a drugstore in Shimane at the age of 48 after raising five children. My parents worked in agriculture. They had a hard time in America at first but eventually became the largest commercial orchid producer in the US. So, we watched our parents struggle as entrepreneurs and gained much respect for them because we saw how hard it was to start a business and keep it going. We dreamt about walking the same entrepreneurial path as our parents because we had only worked in large organizations.
Also, the meaning of the “M” in MPower is the first letter of our maiden names: Matsui, Murakami, and Matsuo (Seki-san’s maiden name).
ICONfront member: Three of you had similar connections from their backgrounds.
The two assist me a lot, and I trust and love them both. And it’s wonderful that we can share our personal concerns related to our families and children too.
Q5. You touched on this a little earlier, but can you tell us about the differences between when you were at the top of a large company and when you started your own business, and what difficulties you faced and how you overcame them?
In a large organization, one is supported with substantial infrastructure. In my case, I had an assistant, an office, and an IT help desk. Now I just have a laptop, and if my computer breaks down, I can’t call someone to fix it right away. The company now is like a “third child” to me, so I feel like I have no choice but to raise it like a parent!
The various tasks involved in starting a company were challenging, such as raising funds from investors as well as dealing with a variety of legal-related issues. Nevertheless, I enjoy my current job because it is fun to create something from scratch. Although there are many challenges, it is very rewarding to realize our dreams through our own organization.
When we first announced Mpower Partners, we received positive and encouraging reactions from the media, other venture investors, and female entrepreneurs. We now have more opportunities to explain to young women that this kind of work (venture capital) is available to them.
Can you tell us about the organizational structure of Mpower Partners?
We are currently a team of 9 people. Most of the team is involved in investment, meeting with startups that are raising money and conducting due diligence with companies that look interesting. If we finally decide to invest, we provide post-investment support, such as helping identify new clients, HR-related support, and of course on top of that, ESG implementation. We often serve on the boards of the portfolio companies, so we also participate in board meetings. We are also obligated to summarize our activities and report to the fund’s investors.
Simply put, we raise money for our fund, invest that money into Japanese and overseas startups, with the aim of delivering some multiple returns over the duration of the fund’s life, which is 10 years. Of course, not all companies will provide a good return, but we hope that a majority of our investments will. We will then return a portion of the fund’s overall returns to our investors. Compared to mutual funds or bond investments, the investment risk is higher in venture capital, but in our opinion is more exciting since we are investing in the future.
Q6. I know this has been asked often, but why did you focus on ESG?
Well, it just happens to be that three-letter acronym, but every company has to have good governance, right? For example, a CEO can do something very bad and if there is no accountability, then this presents serious risks for the companies’ stakeholders. Bad governance should not be tolerated by anyone, but it is also not easy to implement good/healthy governance.
I have been a strategist analyzing the Japanese stock market for over three decades, and, nowadays, it is perfectly normal for large companies to have outside directors. But that didn’t use to be the norm in the past. During the 1990s, for instance, most boards were comprised of mainly corporate insiders. While governance with only insiders can make quick decisions when there is a problem and, no one points it out this can cause serious problems down the road.
S(Social) is very broad, but diversity is one example. Like with the previous point, if all the decision makers belong to one race or gender, it would be difficult to catch potential risks that might face the company. In addition to risk management, since Japan’s working population is projected to decrease by 40% by 2055, we need to maximize the potential of the existing population, don’t we? This includes, for example, people with disabilities, LGBTQ persons, foreign nationals, and, of course, women. There are so many talented people in this country, but we are not maximizing their potential, and in a word, I think it is “mottainai (a waste)”.
The “S” also includes factors such as employee satisfaction and well-being. After all, since Japan’s greatest resource is its human resources companies need to clarify and articulate the purpose of the company in order to attract and retain talented people for the long term. Without that, today’s younger generation probably won’t join the company.
Specifically, companies need to answer such questions as: What is the purpose of this company? What kind of contribution does it make to society? What kind of impact does it have? Is there any child labor involved? What type of character does the company’s leadership have? ESG considerations are vital in terms of attracting and retaining high-quality talent for any organization, and it is also a critical driver of sustainable growth.
Q7. You were born and raised in the US all through college, but since starting your career, you have focused on the growth of Japan. Why did you focus on Japan?
There are two reasons. First, to be honest, I wasn’t that interested in Japan when I was in college. Originally, I was accepted into graduate school because I wanted to become a diplomat in the US foreign service. At the same time, however, I was awarded a Rotary scholarship, so I postponed graduate school for two years and decided to study in Japan. There I met many of my relatives in Japan for the first time. Although I could speak only broken Japanese back then, it was interesting to discover my roots. At the time, it was the so-called bubble economy era, and everyone in the world wanted to learn about Japan.
The other reason is that I came to Japan a second time as an intern in the summer during my master’s program. At that time, I was an intern at the former Mitsui Bank, (now Sumitomo Mitsui Banking Corporation). I even wore a uniform at the Hibiya headquarter office (laughs). It was then that I met my husband, a German, in Tokyo and fell in love. Until I met him, I had no intention of returning to Japan to find a job after graduate school, but I immediately returned to Japan and started job hunting. I sent my resume to various companies.
So the real story of why I am in Japan today is I fell in love – in other words, serendipity!
Q8. Going back to ESG, I think many people are convinced that ESG is important, but on the other hand, I also think that the term “ESG” has become a mere buzzword and has become a mere formality.
As you say, there is an aspect that ESG is becoming a so-called buzzword. This makes companies feel like they are being forced to do things, and there is a lot of pressure from investors and from the market. As I mentioned earlier, we believe that ESG factors must be incorporated into the business strategies of start-up companies. However, I think there are still cases where people say, “We checked this box,” but they aren’t really convinced that ESG can help their business grow.
It is not enough to advertise that you are doing ESG without understanding what the implementation of ESG will improve your business and what the benefits will ultimately be.
I have been promoting diversity and womenomics for many years, but in talking with various management teams, I found that they were quite divided on the issue. For example, one CEO would say, “This is something I truly believe in, and diversity is positive for our business,” and they would establish a diversity division and set explicit diversity targets and implement initiatives to achieve those goals. At the same time, however, there were quite a few companies that were just doing diversity as an “extracurricular activity,” like a box-ticking exercise, just so they can claim “We have done diversity.” In this latter case, diversity ends up becoming a superficial exercise rather than something core to the business. It’s also important to remember that embedding diverse thinking into an organization takes time
I always say “It’s a marathon, not a sprint” to implement it without that happening, so I think it will be a really time-consuming process.
What is missing to convince them?
When I was an analyst, I tried to use as much objective data and analysis as possible to prove a point. For example, in my Womenomics research, my analysis demonstrated that more diverse leadership is positively correlated with higher corporate performance and stock prices. There is similar analysis around the world, and we need to use it to persuade the diversity skeptics.
Q9.How has the current situation changed compared to Ted Talks‘ Womenomics (2011)’? What challenges remain?
It is not so different from what I wrote in my most recent report, Womenomics 5.0, but I think the most dramatic change was that Japan’s female labor participation rate actually surpassed that of both the US and Europe.
Also, while you may not realize it when you are in Japan, Japan’s national parental leave benefit system is actually one of the most generous in the world. In the U.S., there is no parental leave benefit system at the national level. Japan is in a leading position in this respect. However, while all mothers take childcare leave in Japan, there is an issue of not many fathers taking childcare leave. Nevertheless, the system itself is very generous.
Third, transparency around diversity has improved. In 2015, the Act on Promotion of Women’s Participation and Advancement in the Workplace came into effect, requiring companies and organizations to disclose their gender-related, allowing everyone to see the actual status of gender diversity within organizations for the first time. Since the law also strongly recommends the establishment of gender targets, the number of companies setting explicit targets for female manager ratios, for example, has increased considerably.
On the other hand, there is still a dearth of women in leadership positions, both in the private and public sectors, and the percentage of full-time female employees is also relatively low.
Q10. Can you tell us about the challenges you faced while working as a female manager in an investment bank and how you overcame them?
Fortunately, since I worked at a foreign investment bank, I never experienced unequal treatment or discrimination simply for being a woman. The most challenging point was that I felt disadvantaged early on my career because I was young, female, and not Japanese. My competitors were all middle-age Japanese men, so I struggled trying to figure out how I could compete with them.
One day, I realized that it was impossible to compete on the basis of quantity or speed of my research because my team was much smaller than those of Japanese brokerage firms. Initially I tried to imitate what they were doing, but that was impossible due to my small team’s size, and I began to consider what I needed to do to differentiate myself from them. Since I was a research analyst, I thought I should write about something totally different, a subject they were not writing about.
From there, my team and I started analyzing and reporting in depth on topics that our competitors didn’t write about, such as underfunded corporate pensions, Womenomics, etc. This differentiation was key to becoming a successful analyst.
Aside from my job as an analyst, times were challenging when I was appointed the co-head of macro research within Asia-Pacific. While I was fine being in control of my own team, it was not easy to suddenly have to manage a much larger team across the Asia region. However, I learned a great deal about management in this role, and for this I am very grateful.
Q11. Regarding ICU students’ future, what kind of axis do you think should be possessed?
Since ICU students have a global perspective, it is essential to seek opportunities to go overseas. Japan is frankly a “heaven” for living and working in, but I always think that while you’re young, it’s critical to be slightly uncomfortable and challenged, since this is how one grows and learns about life. So find an ‘uncomfortable’ place and I assure you that you will not regret the experience.
Q12. Many university students worry because making friends during the pandemic is difficult. What does friend mean to you?
My life is somewhat abnormal as I left my home country of America when I was 21, and came to Japan. For me, the friends whom I made in Japan are priceless, and I frankly believe I could not survive life without my friends (laughs).
Relationships with friends should not be “one-way,” but always “give and take.” One of the best pieces of advice I’ve received is to create your own “personal boards of directors” comprised of friends who know you holistically and can be very frank with you. You should value your friends and invest in those relationships because as one gets older, you’ll find that fewer friends can speak honestly with you. It is better to have friends you can talk to about concerns you will face at every life stage, such as having children or making an important career decision.
Q13. From your experiences, is there anything you would like to tell university and ICU students?
Yet, it is “GO OUT AND EXPERIENCE THE WORLD.”
【Further Readings】
What is ESG? What do we mean by ESG at MPower Partners?
TEDxTokyo – Kathy Matsui – Womenomics (2011)
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