Tatsuya Otsuka is the chairman of Earth Corporation, which has a share of over 50% in the Japanese insect-control product (insecticide) market. As a high school student he aspired to become a doctor, but he ended up as a businessman due to opposition from his father, the president of Earth Corporation. Toshio Motoya spoke with Otsuka about topics including the history of Otsuka Pharmaceutical and Otsuka’s feelings about carrying on these businesses.

 

(M) Thank you for joining me on Big Talk today.

(O) Thank you for inviting me.

(M) You are currently chairman of Earth Corporation. I understand that your family founded Otsuka Pharmaceutical, which has a stake in Earth Corporation.

(O) Yes, my grandfather was Busaburo Otsuka, who started Otsuka Pharmaceutical. He passed away at the age of 78 when I was 12 years old.

(M) I’ve heard it was founded during the Taisho period. Did he learn about medicines before launching his pharmaceutical business?

(O) No, he actually started with salt. My grandfather came from the seaside Satoura area of Naruto City in Tokushima Prefecture. It used to be a place with lots of wet-rice cultivation, but today the local specialty is Naruto Kintoki, a delicious variety of sweet potato. Lots of salt is also manufactured along the Seto Inland Sea. My grandfather worked at Naruto Salt Mfg., which still exists. His job was to make salt in a kama, a type of kettle, from seawater. The water was evaporated using solar heat and wind to increase the salinity of the liquid, which was simmered to crystallize the salt. It was purified to remove foreign matter like nigari (a coagulant) and magnesium nitrate, then shipped out. My grandfather started thinking about how to utilize the foreign materials left behind by this process. He began selling leftover magnesium carbonate, which was used as a foaming agent to make rubber for trailer and aircraft wheels. They were elastic and resistant to punctures, but very heavy. There was also military demand for this magnesium carbonate, which became a moderately sized business for him.

(M) I see. Speaking of military demand, my father ran Motoya Woodworking Factory in Komatsu City, Ishikawa Prefecture. It manufactured products like paulownia boxes and cabinets, and during the war it became a military factory for ship steering wheels. Many people wanted to work there because civilians in military employ would not be conscripted as quickly. There were 100 employees in the factory’s heyday. War plants were prioritized during food shortages, and I’ve heard that my father told his employees to bring empty bento boxes for lunch. He had them fill these boxes with rice and other foods to take to their families at home.

(O) It sounds like your father was a great businessman. My grandfather’s oldest son – my uncle, Masahito Otsuka – got involved in the business and started delivering silver compounds to FUJIFILM Corporation via MITSUI & CO. To make photographic film, plastic is coated with silver compounds. When exposed to light, a reaction occurs that turns the compounds into silver, creating an image. The company also grew bigger and more stable as this business expanded. World War II happened afterwards. My father was the youngest of Busaburo’s five sons. Masahito, the eldest son, was drafted into the army. The war ended before my father was called up for service, but my uncle, the second oldest son, died in action in Burma. My grandfather worried that his heir Masahito would also be killed in battle, so he pulled some strings to make sure he wouldn’t be sent overseas. However, Masahito deserted because he feared various dangers even in Japan, including the Great Tokyo Air Raid. He could have been shot to death if he was caught. He took refuge with the owner of Teikoku Seiyaku, a client company, and waited out the end of the war in Kagawa Prefecture.

(M) That’s quite a story! My father thought Komatsu might be the target of air strikes because of its navy base, so he temporarily moved the plant to Chokushi Village (currently Sakumi, Kaga City) in Ishikawa Prefecture, where he was born. I was born during that period in 1943. He was thrilled that his fourth child was finally a son, so he donated a ceremonial washbasin to the neighborhood shrine. It’s still there today.

(O) It seems like you heard a lot about the war from your father, and that he had a big impact on your character.

(M) That might be true. However, he contracted tuberculosis right after the war ended and suffered for the next decade. He died when I was in my second year of junior high.

(O) That was when penicillin and other antibiotics weren’t yet widely used in Japan.

(M) Yes, he might have been saved if he had been treated with penicillin at an earlier timing.

(O) Penicillin was discovered in 1928 by Dr. Alexander Fleming, a physician from the United Kingdom. This ground-breaking antibacterial agent was frequently given to injured American soldiers during World War II. While penicillin was brought to Japan after the war, many have commented that it would have been beneficial at an earlier stage. Society lost many people who died from diseases that could have been easily treated. It makes sense that Fleming’s discovery earned him the 1945 Nobel Prize in Physiology or Medicine. When I started working at Otsuka Pharmaceutical, I was involved in developing stronger antibacterial agents than antibiotics.

 

(M) Were you originally a pharmaceutical researcher?

(O) No, in junior high and high school I was studying with the goal of becoming a physician. My father, Masatomi Otsuka, was opposed to this. He worked at Otsuka Pharmaceutical and Otsuka Chemical before becoming president of Earth Corporation in 1970. Otsuka Pharmaceutical made an equity participation in Earth Corporation.

(M) Did he want you to take over Earth Corporation?

(O) I think so. I studied agricultural chemistry and organic chemistry in college and then went to graduate school, where I earned my doctorate.

(M) Those are some impressive academic credentials.

(O) Not at all – I actually didn’t do much research in my doctoral program. But my professor liked me, perhaps because I was a useful jack-of-all-trades, such as my ability to enliven parties. I also think favoritism was the reason my doctoral dissertation was accepted. I was more dedicated to my work at Kawaijuku than to my graduate studies.

(M) Kawaijuku is a Nagoya-based preparatory school for students studying to get into college.

(O) Yes, I applied to teach there when I moved to Tokyo as a graduate student. I was initially hired as an assistant. The school taught test-taking techniques with a focus on classroom learning. However, Kawaijuku was unusual because it also used experiments to practically demonstrate these teachings. Some students had never seen these phenomena in their high school classes. I think this method was designed to enhance the effects of their studies through first-hand experience. For example, we added hydrochloric acid to tin to produce hydrogen, then lit it on fire to create an explosion. As the assistant, I was in charge of arranging the experimental implements and specimens. Kawaijuku teachers were strictly evaluated based on questionnaires filled out by their students, which determined if their contract would be extended the following year. The teacher I assisted was fired due to a poor evaluation, and I was promoted the following year.

(M) So you worked as a prep school teacher while also attending graduate school.

(O) I did. Kawaijuku paid its teachers well – I earned twice as much as a regular salaried worker. But I was quite busy with my graduate research and experiments, too. I’d put a specimen in the laboratory reactor and leave it there while I graded Kawaijuku tests at my desk and wrote mock exams.

(M) Still, you were talented enough to earn your doctoral degree.

(O) No, I’m rather ashamed about the whole thing. But while I was a clear failure as a researcher, I was proud of my skills as a prep school teacher. I wanted to continue working there after graduation, but my parents resisted that idea and I ended up employed at Otsuka Pharmaceutical. I was assigned to the synthesis research lab, which develops drugs by creating new chemical substances combining various materials. Because I had my doctorate and did graduate research in organic synthesis, people assumed that I would be an immediate asset to the lab.

 

(M) What was your dissertation about?

(O) I researched pheromones that attract mosquitos. Culex quinquefasciatus, a mosquito in Thailand and other parts of Southeast Asia, lays its eggs on water. These eggs emit pheromones that other females can detect, which attracts them to lay their eggs in the same spot. If we could chemically synthesize these pheromones, we could use them to draw mosquitos to a specific location and kill them all at once. I first analyzed the structure of these natural pheromones, and then synthesized them in test tubes. The professor in my graduate school lab came up with all of our research plans, and students merely carried them out. This method of artificially synthesizing chemical substances is used for pheromones, fragrances, and even medicines. We drew up plans and performed chemical modifications, such as changing some elements of the substances, to create new compounds. There was a structure in place for administering the new substance to laboratory rats and measuring the results, like blood pressure variations, mental illness improvements, and bactericidal effects. My job was to create the new compound and hand it to the person in charge of animal testing. People at my new job had great expectations of me because I had earned a doctorate, but in graduate school I simply did what my professor told me, and I wasn’t able to design new substances or come up with new ideas. I somehow managed to do my work by desperately asking senior employees to teach me what they knew.

(M) Human subjects are used later during the drug development process, is that right?

(O) They are, but it’s not easy to recruit members of the general public for pharmaceutical tests. That’s why we conduct testing on employees who volunteer to take part. After receiving medicines or injections they are monitored, including blood concentration measurements. Although they are employees, they are also paid for these tests. Some earn 100,000 yen for staying overnight, making it a lucrative type of part-time work. Many people apply to take part. I’ve submitted myself as a candidate as well, but I was disqualified due to my electrocardiogram QT measurement. You can’t have any abnormalities because the goal is to administer the medicine to healthy subjects and see if there are any safety issues or adverse reactions.

(M) I think drug development is an extremely valuable job because it can save lives, and because it allows people to live out their lives. My father closed his factory when he was confined to his bed because of his illness, and the factory was divided up and rented out. We also made ends meet by leasing out another house we owned. I helped collect rent and walked around to post fliers advertising our rentals on utility poles. I feel like my current business is an extension of that.

(O) You must have learned a lot about business at a young age, since you’ve been so successful today. Much like someone who studied golf as a child and became a professional golfer, I don’t think other people can emulate that easily.

(M) After my father passed away when I was in junior high, I got a scholarship to high school and then found a job at a credit union after graduation. I also did a correspondence course from Keio University’s Faculty of Economics. The chairman of the credit union had been transferred from the Ministry of Finance’s Finance Bureau. I proposed to him that we offer long-term loan products paid off over 15 years with equal redemption of principal and interest, the first of their kind in Japan. Mortgages weren’t yet available to the general public, merely regular loans with equal redemption of principal.

(O) That was a great accomplishment. Perhaps you would have become chairman if you’d remained at the credit union.

(M) I had no desire to do that; from the beginning I wanted to strike out on my own and be a businessman like my father. I started working at the credit union because I thought financial knowledge was necessary for an entrepreneur. After the mortgage system was created, I used this to my advantage by leaving the credit union and starting a built-to-order housing business. Our slogan was, “You can build a house for 100,000 yen.” Many customers contacted us. It was as if they had been waiting a long time for that type of loan.

(O) It seems like you know what people want. That remarkable deed might earn you the People’s Honor Award today.

(M) The credit union had a scheme for offering this sort of long-term mortgage to employees, but we expanded it to the general public.

(O) Your success stems from your innovative way of thinking.

(M) Another factor in my success was my habit of reading the newspaper, which I began in my fifth year of elementary school. My father subscribed to three papers: a local newspaper, national newspaper, and an economic publication, which we kept receiving even after he was hospitalized. I carefully perused the three newspapers every day and looked up words I didn’t know in The Year Book of the Contemporary Society. I learned a great deal that way. My teachers frequently started class by talking about subjects from that day’s newspaper, and I often revealed the important points before they could.

(O) A young person who reads newspapers for fun must have a great thirst for knowledge.

(M) Maybe I inherited that from my father. He was a very curious and wise man. He told me to read between the lines by comparing the three papers and thinking about the intentions behind their articles.

 

(O) As president of Earth Corporation, my father was tasked with reorganizing this company experiencing poor business performance. In 1973 it released Gokiburi Hoi-Hoi roach traps, a major hit product that brought about a successful recovery. From the time when I was young, my father often told me about his job, as well as the company’s current and past products. He also asked me my opinions about the products. He passed away in February of this year. I am sure he was desperate to grow the company, since it was part of his family’s business, and I imagine he shared his experience and ways of thinking with me for that reason. Some of Earth Corporation’s products did fail, but Gokiburi Hoi-Hoi is its foundation today. Unlike my father, I didn’t have these conversations with my own children. They felt absolutely no desire to take over the business and ended up choosing entirely different paths. Now I think I should have cultivated this in a more systematic way.

(M) That’s a pretty difficult thing.

(O) Today I am chairman of Earth Corporation, and the president & representative director is Katsunori Kawabata, who is fully responsible for the day-to-day business. He does a great job. We’re not related, but I think of him as my little brother.

(M) You must trust him a lot. How old is he?

(O) He’s 15 years younger than me. He loves Earth Corporation a great deal and regards it as his own home. I do my best to share my experiences with Kawabata.

(M) He sounds like a good successor.

(O) As a young employee, I was deeply impressed by listening to what the chairman and president had to say. I think it’s important to want to learn and gain experience under people like that. To achieve growth, a business leader must possess a good human character and abilities.

(M) I agree entirely. I started my Shoheijuku academy 11 years ago as a way to share my business wisdom. “Shohei” means “victorious warrior,” and was inspired by a passage in Sun Tzu’s The Art of War: “Victorious warriors win first and then go to war.” Our monthly meetings in Tokyo, Kanazawa, and Osaka are attended by paying members as well as scholarship students. This academy is unique because each meeting features multiple short speeches of 10 minutes each, rather than having one person speak for a long time. I thought this would encourage the audience to consider many different things. Our participants include businesspeople, salaried workers, scholars, politicians, and many other types of people.

(O) I think you’re doing a very important thing. I’ve heard that Shoheijuku meetings cover topics like politics and history.

(M) They do. One of my “Words to Live By” is, “A person who chases two rabbits will catch both.” I work to conduct business while also expressing my views, and I think these two efforts have positive effects on each other. Our number of hotels keeps growing, and our total assets exceed one trillion yen.

(O) Your hotels are in great locations. You must be skilled at gathering information to find these properties.

(M) People, things, and money are drawn to the best locations in the world. The same is true of information. That’s why it’s so important to be number one.

(O) You must also receive some peculiar offers at times.

(M) I think you need to be able to recognize these at a single glance. Thanks to my keen discernment, all APA Hotels are superior buildings. Many hotel chains have different companies in charge of branding, management, and ownership, but APA fundamentally operates its own hotels as part of our brand. That’s how we maintain an extremely high profit ratio. When we do take out loans to build a hotel, we earn enough to pay them off quickly. Our financial situation is quite healthy.

(O) Now that Kazuo Inamori has passed away, perhaps you will become the leader of the economic world.

(M) No, no, but I will do my best to reach that level. At the end of the interview, I always ask for a “word for the youth.”

(O) I hope they will work to enhance their human character and skills to become leaders. It’s important to earn money and manage people, but what naturally draws others to you is your personality and abilities. They can also help you when you struggle.

(M) Thank you for sharing such an interesting conversation with me today.

(O) Thank you.

 

BIOGRAPHY
Tatsuya Otsuka

After completing a graduate program at the University of Tokyo, Otsuka worked at Otsuka Pharmaceutical Co., Ltd. before joining Earth Corporation in 1990. As its president he introduced many new ideas about manufacturing and customer communication to drastically increase sales, and the company was listed on the 1st Section of the Tokyo Stock Exchange (currently Prime Market). He was appointed chairman in March 2014. Today he is also active in the golf industry, such as putting on the Earth Mondahmin Cup for professional female golfers and serving as chairman of the Japan Golf Tour Organization.