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🔑 Key Takeaways

  1. Vanta streamlines SOC 2 certification for startups through automation and integration with existing tools, making security and compliance easier and faster to achieve.
  2. Sony's success began with the founders' love for technology and their ability to create innovative products consumers wanted, such as the transistor radio.
  3. Pursuing your passion can lead to unexpected opportunities and even save your life. Stay optimistic during uncertain times.
  4. Even amidst difficult circumstances, maintaining a passionate and optimistic attitude can lead to success. By identifying unfulfilled needs and using technology creatively, a company can revolutionize an industry.
  5. Seemingly unrelated events can shape the course of history, relationships and societal values play a role, preservation of history is important and perseverance is key to success.
  6. Sony was born out of a passion for tape recorder technology and a drive to innovate. The adoption of Bell Labs' transistor technology paved the way for Sony's future success in the industry.
  7. Sony's success story began with their determination to create a miniature transistor radio, which resulted in the TR-63, a pocketable radio that sold 1.5 million units and was a game-changer in the industry.
  8. Sony's commitment to being a direct-to-consumer company and maintaining their brand integrity was essential to their success, even leading to the establishment of their own corporation in America and contributing greatly to Japan's economy.
  9. Strategic market opportunities and effective leadership can result in substantial growth and diversification for a company, as seen with Sony's success in the music industry and expansion into television.
  10. Great technology is not always enough to ensure success. A well-planned marketing strategy and consideration of consumer needs are equally important. Features valued by consumers may change over time.
  11. Betamax's failure in the market did not stop Sony from taking risks and launching other successful products. Failure can be a stepping stone to success if we learn from it and keep moving forward.
  12. Technology development requires years of innovation and vision, resulting in revolutionary products that can change society. A successful CEO can lead the way in marketing concepts that others have introduced.
  13. Steve Jobs drew inspiration from Sony's crisp factories and rich history, and wanted Apple to emulate their taste. Jobs was fascinated by Sony's Walkman and its inventor Akio Morita, whose influence is still evident in Apple's success.
  14. Sony's life insurance and banking subsidiaries, including Sony Life and Sony Bank, have become the biggest profit generators for the company amidst stumbling home electronics sales. Startups can benefit from similar coverage from Insurtech companies like Vouch.
  15. Vouch's partnership and Sony's diverse acquisitions bring profitable growth, but strategic management is crucial. Learn from their successes and challenges to balance profitability and efficiency.
  16. Sony's focus on hardware and content without understanding software and computing led to misaligned incentives and infighting within the company. Their recent deal with Netflix shows a shift towards the arms dealer strategy in the streaming wars.
  17. Sony's decision to specialize in certain industries and maintain partnerships has allowed for the company's success and expansion into new territories such as the gaming industry.
  18. Nintendo's secret partnership with Philips led to Sony's abandonment of the gaming project and transfer to Sony Music. Sony's persistence in gaming resulted in the industry's explosive growth, with projected gaming revenue overtaking other entertainment industries.
  19. Sony's willingness to take losses on console sales and partnership with third-party developers, along with the use of CDs as a medium, broadened the gaming market and led to the massive success of PlayStation consoles.
  20. Understand the industry and market before making big investments and decisions to avoid disastrous financial losses.
  21. Sony focuses on exclusivity with in-house studios and third-party agreements, while Microsoft generates revenue through Game Pass with 18 million subscribers and access to more games.
  22. Sony could not keep up with evolving technology and failed to compete in the PC and smartphone markets, but managed to dominate in the image sensor market by constantly innovating.
  23. Sony's success in imaging and sensors is driven by their commitment to being the best in their core areas of expertise, rather than trying to compete with other companies in unrelated fields. Their commercially viable back-illuminated CMOS sensor has enabled low light photography and they continue to innovate in this area.
  24. Sony and Marvel have a rare joint ownership of Spider-Man, which allows Sony to produce Spider-Man films every 5 years and 9 months. Recent success of "No Way Home" means Marvel benefits from making the cost of movies as high as possible while Sony keeps 95% of revenue.
  25. Sony's diversification strategy has led to success in some areas, such as their exclusive deal with Spider-Man for PlayStation marketing and gaming, and growth in Sony Music. However, their bear case is that their gaming revenue and profit may be at risk as gaming moves to a subscription model, and it's uncertain what the future holds for the company.
  26. Sony's PlayStation's success is due to the network economies of developers and consumers. However, this success has not translated to other businesses where they compete with others in the market. Investing in new technology, like virtual reality systems, could present opportunities to challenge competitors like Apple.
  27. Sony's failure to communicate the superiority of their product justifies lower prices, and their brand has lost its credibility due to increased competition and decreased consumer emphasis on product origin.
  28. SoftBank Latin America Fund is empowering innovative founders in underserved sectors of the region by offering capital and expertise. VTEX, a portfolio company, achieved impressive growth during the pandemic by providing online storefronts for global brands. Focusing on integration of different components like hardware, software and services can give a business an edge over competitors.
  29. Apple's ability to consistently offer upgraded products with seamless compatibility creates a loyal consumer base and a true product ecosystem. Sony, once a highly respected brand, failed to achieve the same level of success and is no longer viewed as an innovator in the tech industry.
  30. Tesla's high-tech car experience is paralleled by Acquired.fm's platform, with opportunities to discuss acquisitions, participate in LP programs and find job opportunities curated by the show's hosts and friends.

📝 Podcast Summary

From Electronics to Hollywood: The Diverse Empire of Sony Corporation

Sony Corporation, a company idolized by Steve Jobs, expands beyond just consumer electronics and is now a conglomerate owning divisions that make anything from professional cameras to tiny dog robots. They are the second-largest Japanese company by market cap, largest video game console company and publisher, largest music publisher, second-largest record label, and have the third-largest Hollywood film studio. The traditional way of getting a SOC 2 certification is a time-consuming and inefficient process that startup founders didn't prioritize until a few years ago. Vanta, the leader in automated security and compliance software, breaks down the SOC 2 standard and connects with the tools a company uses to provide a faster and easier certification process.

The Story of Sony's Founding Engineers

Japanese engineers Masaru Ibuka and Akio Morita, the founders of Sony, created a business out of their love for technology. They began working together in the 1940s, when they were tasked with creating a heat-seeking missile for Japan during World War II. They knew America had superior technology and were reluctant to fight them. After the war, they took their love for technology and started a radio repair shop that later turned into the wildly successful Sony. The founders, with Morita being the marketer and Ibuka the ‘engineer’s engineer,’ grew the company by creating innovative products that consumers wanted, like the transistor radio. Today, Sony remains a staple in the technology industry.

Morita's love for engineering saved him during WWII

Akio Morita, the eldest son of the Morita Family of Nagoya, was destined to take over the family's 400-year-old sake business. However, his interest in physics and engineering led him to study these subjects, which ultimately saved his life during World War II, as he was assigned to work on technology weapons research projects in 1944. His younger brothers, on the other hand, were actively training to be Kamikaze Pilots. Morita loved engineering and research so much that he signed up for lifetime employment with the Navy as an engineering researcher. Despite Japan losing the war and the uncertain future, Morita remained optimistic about himself and his future.

Ibuka's Irresponsible Optimism Leads to Sony's Success

Despite the devastation of WWII, Ibuka's irrational optimism led him to start a company, Sony, in a war-torn building with few engineers on board. He aimed to build a stable workplace where engineers could passionately work on technology that served social obligations. Struggling to find a product idea, the team finally fixed the radios that everyone owned in Japan, the market for which was consumer-only since the country was banned from having a military ever again. Ibuka's ingenious idea to channel technology meant for military use into serving the consumer market worked wonders, eventually building a brand that revolutionized electronics with innovative products that created value for customers worldwide.

The story of Sony's founding and the lessons it teaches us

The story of Sony's founding shows how seemingly unrelated events and decisions can shape the course of history. From modifying radios to creating a haven for engineers, each step brought them closer to success. The story also highlights the importance of relationships, as Akio Morita's connection to Ibuka paved the way for Sony's success. But it wasn't just relationships that played a role - politics and societal values and norms also influenced the company's trajectory. Sony's meticulous preservation of its history serves as a reminder of the importance of remembering and learning from the past. And finally, the story is a testament to the power of perseverance and never giving up on one's dreams.

The Beginning of Sony: From Tape Recorders to the Transistor

Sony started with a 10% stake owned by Morita family in 1999 worth $5 billion. Ibuka became interested in tape recorder technology after seeing American tape recorder machine in 1949. Sony started manufacturing tape recorders and tapes in Japan which was initially replaced by Stenographers. During the early years of the company, a considerable amount of money was spent on building a sizable business in the Japanese market. In 1952, Ibuka heard that the transistor of Bell Labs was available for international licensing. The opportunity to license and use the technology commercially in their country was enormous.

Sony's Success with Pocketable Radios

Sony's success began with their bet on figuring out how to create a miniature transistor radio, in an era when it was believed to be impossible. The TR-55 portable radio was their first attempt at this which went well in Japan, but was still a first-generation product. Sony continued to refine and improve the product, eventually coming out with the TR-63, a truly pocketable radio that weighed slightly less than a standard man's dress shirt pocket. Sony's showmanship, which included outfitting their salesforce with custom shirts, helped consumers go nuts for it. The TR-63 ended up selling 1.5 million units at $25 each, making it orders of magnitude larger than the tape recorder business.

Sony's Decision to Turn Down Bulova's Order

Sony's decision to turn down the Bulova watch company's order for 100,000 units and refuse to put their brand name on the product was the single biggest and best business decision of Akio Morita's career. This decision defined the company culture and values, proving that they were committed to being a direct-to-consumer company and maintaining their brand integrity. Morita and Sony later established their own corporation in America, setting up business relations between Sony, US corporations, and the overall business environment in Japan and America. Sony's success was unprecedented and contributed massively to the Japanese economy, with Akio Morita being referred to as the engine that pulled the Japanese economy by the Prime Minister of Japan.

Sony's Success in Music and Television Industry

Sony's success in the Japanese music industry through CBS/Sony Records became a highly profitable division for both companies. This success was largely due to the pent-up demand for American recorded music in Japan and the low costs associated with distribution. Norio Ohga, a classically trained musician, was put in charge of running CBS/Sony Records and turned it into a cash cow, later becoming the CEO and chairman of Sony. The subsidiary had so much cash that they started buying citrus groves in California to park the money. This success helped Sony become a major player in the music industry, and around the same time, television was becoming a huge thing, leading to the development of colored television.

Sony's Betamax and Trinitron successes and misses

Sony's success in the TV market came with the invention of the Trinitron, which was the result of Ibuka's handpicking a team of engineers. However, their next attempt at utilizing the Trinitron's display technology for a video recording device, the Betamax, eventually lost to the competing format of VHS due to its limited recording capacity. Despite this, Sony's success in the TV market continued for decades and Betamax did initially become a hit product due to their marketing strategy which focused on the ability to record TV programs, also known as time-shifting. This shows the importance of a successful marketing strategy in addition to great technology, as well as the potential consequences of missing key features that consumers may value over time-shifting.

The legal battle between MCA and Sony over Betamax sales in 1976 led to a propaganda campaign against recording content. This ultimately led to the downfall of Betamax, despite it being great for sales. As MCA had clout in Hollywood, their decision to collaborate with Matsushita and endorse VHS as the winner led to the death of Betamax. This story is well-told and has become a classic example of technological market adoption. Sony, however, did not let the failure of Betamax hold them back. They went on to launch a few other impressive products like the compact disc, Walkman, and PlayStation. Sony was also the first Japanese company to be listed on the New York Stock Exchange in 1970.

Innovation and Vision in Technology Development

The development of technologies takes years to be productizable and involves innovation of various fields. The CD format, for instance, traces its roots back to laser innovations of the late 60s, and it took until 1980 for it to be ready for licensing and manufacturing. The Walkman by Sony was initially doubted upon due to its non-existent market behavior, but it completely changed human history forever, allowing people to walk around with their headphones and listen to music. The success of these products was largely credited to the CEOs' vision and innovation, which also parallels Steve Jobs' success in marketing concepts that had already been introduced by Akio Morita.

Steve Jobs' admiration for Sony and its influence on Apple

Steve Jobs was greatly inspired by Sony's crisp and pristine factories, and even had a collection of their letterheads and marketing materials. Jobs wanted Apple to emulate Sony, which he viewed as having taste and a rich history. This reverence for Sony is evident through the Think Different campaign and admiration for Akio Morita, who invented the consumer electronics marketplace with the transistor radio, Trinitron television, and Walkman audio CD. Sony's Walkman, which to date has sold a quarter billion units, fascinated Jobs, who took it apart and scrutinized every part. While Apple now sells a quarter billion iPhones annually, Sony continues to occupy a special place in Jobs' heart.

The Unexpected Profit Generation of Sony's Financial Arm

Sony was a giant conglomeration that sold diverse products ranging from home electronics to life insurance. In recent years, Sony Life, Sony's life insurance company, has contributed 50% or more of their operating cash flow. As Sony's other businesses stumbled, the financial arm, which included Sony Life, Sony Bank, among others, became their biggest profit generator. Sony Bank came into existence in 2001 as the first neobank in Japan. Therefore, the company was in the insurance business much before Apple or Disney. Vouch, an insurance company, is an excellent option for startup coverage for employment claims because they take care of everything, from recommending the right law firms to resolving the situation as they have processes for these things.

Vouch and Sony's Business Moves

Vouch, a quality insurer, can help turn a gigantic, expensive problem into no big deal kind of thing by partnering with their clients and resolving the matter, whether it means settling or litigating. Insurance, as they say, can help you learn some hard lessons the easy way. Another great business move by Sony was buying CBS Records in the 80s for $2 billion, which turned out to be a great financial purchase. As of recent years, Sony Music, which comes from CBS Records, does over $2 billion in operating cash flow every year. However, from a strategic perspective, there was a big open question mark on whether Sony could effectively manage a growing electronics business, a life insurance company, a music label, and a movie studio altogether.

Sony's Failure to Embrace Software

Sony's acquisition of Columbia Pictures for $6 billion in 1989 was driven by their need for leverage in the industry against competitors. However, misaligned incentives and infighting between the hardware and movie teams caused a huge problem. Additionally, Sony thought of content as software, and consumer devices as hardware, which led to the company's demise in the coming decades. Even though Sony had an incredible run, the company didn't understand computing and software, and this still shows up in their cameras and frustrating menu system. Sony set their strategy as hardware and content, but they missed the true software element. Sony has played the arms dealer strategy in recent years by doing a first-look deal with Netflix, a smart move in the streaming wars.

Sony's Role as an Arms Dealer and Gaming Industry Journey

Netflix has a licensing deal with Disney and Sony Pictures to stream their contents. Sony declined to vertically integrate and is playing the arms dealer role well with image sensors. Furthermore, Sony had a history of secretly building Super Nintendo's sound chip and allowed the project to continue even after receiving backlash from management. Later on, Nintendo and Sony had a partnership in developing a CD-based gaming console, the Sony PlayStation, that combined the Super Nintendo with a disc drive. The partnership opened new doors for Sony and marked the start of their journey in the gaming industry.

Nintendo's Betrayal of Sony and Its Impact on the Video Game Industry

Nintendo betrayed Sony by secretly partnering with Philips to bring CD gaming to Nintendo, which ultimately led to Sony abandoning the gaming project and transferring the whole division to Sony Music. Nintendo did this to retain licensing rights to the Super Nintendo disc-based games as Sony was to get most of that money. Sony had three options, completely give up, partner with Sega or do it themselves, Sony board and management team voted to abandon the gaming project but Kutaragi quested within Sony to make it happen. The video game industry is now a $180 billion industry compared to Hollywood, which is $50 billion, with Sony projecting 30% of their revenue coming from gaming in 2021.

Sony's Strategy and Third-Party Developers Led to PlayStation's Success

In the games and console business, the money is made from selling games. Sony's strategy of taking large losses on console sales enabled them to gain a significant market share to sell more games. Sony's pitch to developers to use CDs as a medium and develop games on PC massively broadened the market. Whereas, Nintendo's relationship with Silicon Graphics, forcing developers to invest in a big chunk of hardware, repelled third-party developers. This led to one of Sony's biggest strengths, its ability to win over all the major third-party developers. PlayStation became a huge success with 8000 unique games sold with over 1 billion copies sold for the original PlayStation. The PlayStation 2 became the most successful console of all time with over 150 million units sold worldwide.

Sony's Expensive Mistakes in Misunderstanding the Market

Sony's lack of understanding computers led to the PS3 being too expensive and difficult to develop for, giving Microsoft a chance to capture a market that was meant to be a Trojan horse for Blu-ray. Despite fixing many of these issues, Sony lost $5 billion on the PS3 and failed to recoup their investment in Blu-ray due to streaming taking off. They also lost money for eight years on the television division, once a main crown jewel of the company, and ultimately got out of the business in 2011. This highlights the importance of understanding the industry and market before making big investments and decisions to avoid losing huge amounts of money.

Sony and Microsoft's strategies to dominate the gaming industry.

Even though Sony failed to recoup costs through format licensing with Blu-ray, they continue to create brand new engineering products that will give consumers a new experience. Gaming is the largest medium of revenue, and companies like Sony and Microsoft are now focused on improving their services to gamers. Sony is doubling down on exclusivity with in-house studios and exclusive agreements with third parties, while Microsoft is focusing on generating revenue through Game Pass, which has 18 million subscribers and generates $2-3 billion annually. Gamers can save money by subscribing to Game Pass and get access to more games, making it a no-brainer for many consumers.

Sony's Success and Struggle in the Technology World

Sony struggled because they failed to adapt to the changing technology landscape where computers became smaller and more versatile, and eventually evolved into modern PCs that we know today. They couldn't compete with Microsoft and were ill-equipped to handle the rise of smartphones, which took over the camera market too. However, Sony's image sensor market is a success story. They are the sole supplier to the iPhone for the little sensor that enables computational photography and have 50% market share in the broader image sensor market. By continually innovating on sensors and putting them in lots of phones, they've managed to stay competitive.

Sony's diversification strategy and focus on innovation in imaging and sensors.

Sony is a highly diversified company with a variety of revenue streams. They have had success in gaming, electronics, and imaging and sensors. While gaming and electronics make up a large portion of revenue, their imaging and sensor business is growing rapidly, making up 11% of their revenue and 14% of their profits. The success of their imaging and sensor business is due in part to their commercially viable back-illuminated CMOS sensor, which enabled low light photography. Sony continues to innovate in this area, and rumors suggest that the next generation of sensors will have significant improvements. Sony's approach is to focus on being the best in their core areas, like making the best sensors, as opposed to trying to compete with companies like Apple or Netflix with their own phones or content.

The Unique Deal Between Sony and Marvel for Spider-Man Movie Rights

Sony's deal with Marvel for the rights to Spider-Man may have been a boneheaded decision, but it allowed them to produce Spider-Man movies forever as long as they release one every five years and nine months. With the recent success of Spider-Man: No Way Home, Sony is keeping 95% of the revenue while Marvel is making the movie, but only earning 5%. Marvel's deal with Sony allows them to put Spider-Man into the MCU, but only if they make the movies. This joint ownership of Spider-Man is unprecedented, and the success of this shared IP has been incredibly good. Marvel now has an incentive to make the cost of the movies as high as possible.

Sony's Diversification Strategy and Bull vs. Bear Case

Sony's attempt to create an MCU-type universe failed due to the odd assortment of IPs they owned. However, their exclusive deal with Spider-Man for PlayStation marketing and gaming has been a success. Sony's diversification strategy is a play to their strength, evidenced by their impressive growth in Sony Music. The labels are a predictable, defensible business, and record labels like Sony Music and UMG stand to benefit greatly from the growth of streaming. Sony's bull case is a turnaround story, as they're undoing the damage from the late 90s and early 2000s, and their diversity is a strength. However, the bear case is that their gaming revenue and profit are at risk as gaming moves to a subscription model. Additionally, Sony is fully out of the business they used to be in, and it's hard to get excited about anything in the future.

Sony PlayStation's success and challenges in network economies.

Sony's PlayStation's success story is an example of network economies in the developers' and consumers' two-sided network economy, where the more the install base PlayStation got, the more attractive the platform became to developers. The more developers on the platform, making better games, the more attractive it was to consumers. This has resulted in outsized profits for Sony's gaming division. However, the same cannot be said for Sony's other businesses like music, movies, and electronics, where they compete with other players in the market. Nevertheless, Sony has had brand power in the past, where it could command a premium for its products, but that power has dimmed over time. Sony's investment in the next versions of the Meta Quest, a virtual reality system, and their success in that field, could be an exciting opportunity for them and challenge competitors like Apple.

Sony's Product and Brand Challenges

Sony has a superior product, but they fail to communicate it effectively to justify higher prices. Their financial services are profitable, but their gaming segment has significant switching costs for consumers and developers, which may reduce their power in the future. Sony's brand, once associated with high quality, has lost its ascendancy due to the dynamic nature of global supply chains and the success of similar playbooks used by other countries. Consumers now expect products from anywhere to be made in lower labor cost locations. The importance of where a product is made to consumers has decreased over time.

SoftBank's Investment in LatAm's Future & VTEX's Success Story during the Pandemic

SoftBank Latin America Fund is partnering with innovative founders in LatAm to build the future by bringing the capital and expertise that they need. The region is underserved in almost every category, including banking, transportation, and ecommerce. VTEX, the portfolio company of SoftBank, witnessed 98% growth during the pandemic and today powers over 3000 online storefronts for global brands. The phenomenal growth of Apple compared to Sony in the same starting line of opportunity is due to Apple's strategy of focusing on the integration of hardware, software, and services, as well as the App Store's monopolistic distribution channels. Sony was not able to differentiate itself as an electronics manufacturer and eventually lost every market like PCs, tablets, and headphones.

Apple vs Sony: A Comparison of Product Ecosystems

Apple consistently creates better reasons for consumers to upgrade to their latest products, while maintaining seamless compatibility between them, creating a true ecosystem for users. Sony, on the other hand, failed to achieve the same level of success in creating a meaningful product ecosystem, although they were a highly respected brand for quality and innovation for decades. While Sony continues to be an important global company, they are no longer seen as innovators in the way that Apple and other major tech companies are. Despite this, Sony may still make significant profits in the future, but they may not experience the rapid growth that newer, more innovative companies do.

Tesla's Integrated Buying and Delivery Experience and Acquired.fm's Networking and Job Opportunities

The experience that Tesla provides, from the buying process to the delivery process, is amazing and integrated. The car is like a computer on wheels, as it has so many features that can be controlled through the app. The experience is similar to that of Sony in the 90s, which represents the company's outstanding quality and success. By joining the acquired.fm/slack platform, people can find someone to talk to about various topics, including acquisitions. The platform also offers an LP program that provides people with some helpful episodes and LP-only Zoom calls. Furthermore, if someone wants to apply for a job, acquired.fm/jobs presents job openings that David and Ben curated themselves with their friends who made the show.