Let's hear U.S. elites talk about Japan

U.S. industrial revival needs a Japan-focused cognitive narrative to succeed

Here some serious food-for-thought by my friend and fellow Japan investor Andrew McDermott: As U.S. national policy priorities have evolved towards a de-facto war-footing, U.S. elites are increasingly divided. On Japan, the up-and-coming national economic security advocates now clash with the established and entrenched financialization evangelists. Can U.S. style financial capitalism actually nurture a stable, cutting-edge industrial base? Or is Japan-style capitalism a role model for how to maintain national industrial sovereignty, economic resilience, and social stability?

The RAPIDUS cutting edge semiconductor factory being built in in Hokkaido — daring technology, meticulous on-time execution, a pragmatic and realistic path towards a new Made-in-Japan global technology standard

Clearly, the narrative in the U.S. is beginning to shift. The implication for the global Japan narrative are significant. Can the U.S. move from ‘stronger-than-you bullying’ towards ‘admire-your-achienvemts partnership’? Imagine a world where American elites will unite and begin to openly advocate the positive examples of Japan’s ‘Capitalism that works’…..more than anything, this would be a key signal that the U.S.-Japan alliance is indeed evolving towards a new phase of genuine mutual respect. Andrew does not just dream, but frames the arguments expertly — enjoy & many cheers ;-j

Let’s get Asymmetrical - let me hear your College talk about Japan

By Andrew McDermott

Last month, as I prepared to journey to Tokyo to join the Asia Society’s panel on What’s Next for Japan’s Financial Markets?, I attended Vanderbilt’s conference on National Security in the age of Asymmetry. Listening to talks by national security experts, I was struck by the disconnect between what global investors seem to want for Japan (a financial system that looks more like America’s) and what the national security world wants for America (a financial system that looks more like Japan’s). The below quotes and commentary are exploratory. My tentative conclusion:

The PRC’s most powerful asymmetric weapon is the influence it wields through its generational displacement of Japan in our leading financial and educational institutions. Oddly, this has happened even as Japan has won the hearts and minds of average citizens. Most elite leaders don’t know what they don’t know. They are so fixated on China that they miss the alternative Japan provides: an alternative that combines market incentives and individual liberty with a recognition that supply chain security and technological security are national security. Japan’s successes, properly cultivated and communicated, could provide the antidote for what ails us. For this to happen, global investors and the schools that produce them need to change more than Japan’s markets need to change. That, at least, is the view of Warren Buffett, Les Vadasz and Palmer Luckey. What are they missing?

I’ll let the quotes speak for themselves, then add some proposals that will hopefully provoke discourse in Tokyo.

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The most powerful asymmetric weapon used by our adversaries is cognitive warfare, the reframing of narrative to support their national interest. Frederick Kagan, The American Enterprise Institute

We need to see investors thinking differently and willing to pay for resiliency… We need a new type of capital that has a 10 to 15 year horizon…We need more public/private partnerships. Sara O’ Rourke, JP Morgan Security and Resiliency Initiative (and McKinsey veteran)

The market does not price in national security. The US Government needs to have an office of national security. How are we going to win vs. China? We have to play our game with allies. Supply chain security…technological security is national security. Gina Raimondo, former Secretary of Commerce in conversation with General (Ret) Nakasone, former head of Cybercommand at Vanderbilt’s Summit on Asymmetric Warfare, 2026

We need a culture change in our industrial base that focuses on outcomes versus activities. We need more industrial collaboration and more government collaboration with the private sector. We need not just capabilities, but capacity. We need to raise the game not just of our defense industrial complex, but of our national industrial complex. I saw this first hand working in a machine shop. Gen. Dan Caine, Chairman of Joint Chiefs of Staff, in conversation with Chancellor Dan Diermeier (Vanderbilt Summit)

Despite bipartisan recognition in Washington DC today that the US partnership with Japan is uniquely vital for the United States’ efforts to address a wide array of pressing global challenges, at America’s “top 100” universities, faculty expertise and course offerings on contemporary US-Japan relations and Japanese foreign/security policy are on the verge of a generational collapse. Adam Liff, US-Japan Friendship Society

NB: compare Duke/China, Princeton/China, MIT/China, etc.

How capable is your education to produce future specialists? How popular in the US is physics, R&D Technology experts, chemicals …how many students do you have in your universities who are not legal guys, not law, not economics, but those who in a future conflict who will be able to create, operate and modernize future combat systems in 48 to 72 hours? So it is a complex question for those in charge of the campus and your educational system. Col. Oleksii Nozdrachov, Ukraine, Drone specialist

In science and engineering-based companies, engineers know the art of the product possible. Finance majors don’t. Sir George Buckley (former CEO of 3M, former chair of Smiths, first foreign board member of Hitachi)

The decline in Japan’s [US] presence extends beyond human exchange [which declined to lows in 2025]. Japan’s capacity to articulate and project its national positions remains limited. … In contrast, China and South Korea have strengthened their governmental communications capabilities, established their own media outlets and think tanks, and strategically provided funding to Washington-based policy institutions. Their messaging often contains criticism of Japan, and in some cases criticism of Japan appears to be an explicit component of their broader public diplomacy efforts. Kazuhiro Maeshima, JFIR 2026

I asked …if it is possible for Duke to take a big group of students to China without it being an organized propaganda trip. “No,” said [Prof.] Osborne,...We weren’t simply participants on a cultural exchange program; we were being showcased to project China’s cultural influence and international appeal. Account of Duke-DKU China Exchange Trip, 2025: How I Accidentally Became Part of China’s PR Campaign, The Assembly.

What should we teach our students?

Vanderbilt Chancellor Diermeir to Gen. Caine. His response is worth watching

There is [a] formerly secret and almost unknown, story of the Japanese American sensei at the US Navy Japanese Language School at the University of Colorado. These sensei, through the teaching of Japanese, made a large contribution to both the war effort and the peace through their teaching of the Japanese language and the actions of their students…If graduates contributed so greatly to the American academic, intelligence, and diplomatic understanding of Japan and Asia, were not the most important contributors those who taught them and turned their minds and understanding to matters Japanese? Are not the bridge-builders of that intellectual arch across the Pacific the sensei of the [WWII] US Navy Japanese Language School? David Hays, 2008. Cf: GoLaxy

MIT 2025 enrollment (undergrad, total):

Japan (4, 71), PRC+HK (69, 832), Russia (4, 33)
NB: Japan leads the G7 in math/science scores.

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It is a strategic relationship…we think of [our Japanese investments] as forever because it goes beyond the investment and is very much around the relationships we want to build there. We really hope to do big things with them globally. It’s super long term. Japan’s record has been extraordinary actually. They have different customs…that’s true around the world. We don’t have any intention in any way of trying to change what they do, because they do it very successfully. There have been moments of learning. Warren Buffett and Greg Abel on Berkshire’s Investments in Japan (2024, 2025, 2026)

The Japanese taught us that quality doesn’t have to be expensive. One thing for sure: we were never, and I mean NEVER were guided by what the market felt was the right amount of cash to hold. It had to be comfortable from an operating point of view. All of us in top management roles would have defended this position, if needed. I do not know how to operate a company with the kind of leverage that some do. At times it feels like they are building a house of cards. If Japanese companies operate with more cash on hand, more power to them. It just feels intuitively obvious that they are more shock proof than the highly leveraged ones. Les Vadasz, Intel Employee #4, builder of first microprocessor, founder of Intel Capital (email to author)

At Anduril’s Japan launch event last December, @PalmerLuckey unveiled a drone called Kizuna. American brand, American software. Every physical component: Japanese. James Riney, Coral Capital

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Paradox:

Almost everyone inside the financial markets wants Japan to act more like America. Almost everyone outside the financial markets wants America to act more like Japan. Almost everyone inside the financial markets continues to see China as a risk diversifier. Almost everyone outside the financial markets sees China as a risk multiplier.

Recent forums at Vanderbilt’s Institute for National Security, the Asia Society and the Capital Allocators mediaplex highlight this division. These worlds need to talk.

Asymmetry:

The PRC’s cognitive capture of leading international financial and educational markets has been its most potent asymmetric weapon. The leaders of our schools, their donors, and our financiers built careers on supporting China’s growth, ignoring or mischaracterizingJapan, and deindustrializing the USA. They based their actions on a flawed cognitive model that denied borders and worshiped apparent efficiency while penalizing redundancy and resilience. Japan alone did not take this path. Recognizing and improving upon Japan’s successes, not criticizing its failures, is the best path for all democracies.

Strategy:

Reframe the Japan narrative. The “capitalism that works“ in Japan can work elsewhere…and the “capitalism that doesn’t work” elsewhere will ruin Japan.

Finance used to represent less than 5% of our GDP and take about 5% of our elite human capital. Today, finance-related fields magnetize the majority of our most elite human capital. Japan’s best students still make things, and it shows up on the factory floor. Japan’s model works better for the same reason that America’s “worked” better when finance was in the back seat: you cannot finance yourself to prosperity or to national security.

Where to start?

In our schools…by partnering more with Japan than China, teaching less about financial engineering and more about how to make things and why our values matter. Prime the pump with a Marshall Plan to revitalize educational links among democracies. Complicate the PRC’s ability to leverage a few billion dollars of annual tuition into narrative control. Flip the script at MIT…and Tokyo University. Teach a more balanced Asia narrative and use it to attract the PRC students we do educate. Learn from Run Ri- the accelerating exodus from China to Japan.

And require more of Japan’s own investors: if they disagree with Buffett and the GPIF on the attractiveness of Japanese equities, have that discussion in public. Don’t let commission-driven intermediaries undermine Japan’s best companies by underwriting inferior rivals. Do encourage frank conversations between companies and domestic investors about how Japan’s markets can reflect underlying value.

What to stop doing:

Letting “global investors” call Japan’s tune…unless they work for Berkshire Hathaway or Coral Capital and want to partner with Japan. Global investors, a class that did not exist a generation ago, are uniquely ill-equipped to appreciate what Japan has done. For most, professional success was built on backing China directly or indirectly while denying that Japan has been mostly right. The PRC’s cognitive capture of this group skews its incentives. Yet this small cohort wields great power: the top 100 asset owners control over 50% of global assets, an influence magnified by the growth of passive investing to nearly 50% of global markets. If they dictate Japan’s future, “we’re cooked.” If they stand down and finance returns to a supporting role, we can rebuild a system able to resist and, hopefully, coexist with the PRC.

What else?

Continue recent progress in protecting critical national assets from purchase by PRC-linked financial firms. More MBK/Makino Milling and Rohm decisions, less KKR/Houdaille, KKR/Calsonic and Sextant/Magnequench. Avoid the trend of CFOs becoming CEOs. Resist the textbook financial preference for “pure plays” in favor of the real-world industrial preference for “whatever works.” Note that pure plays are not always best…”maker-led” conglomerates from Amazon to the old Westinghouse to BYD to Berkshire to Hitachi to the old ATT are innovation labs when properly led. Demonstrate the efficiency and efficacy of innovation within the public market, funded by industrial partnerships and M&A when necessary to generate appropriate scale.

Who?

Cultivate leaders like Hirokai Nakanishi and George Buckley and investors like Warren Buffett who know what they don’t know. Ignore “global investors” when they stray from their core competencies of appraisal and assisting price discovery. Don’t fetishize the “Silicon Valley model”: remember that much of it was/is built on Japan’s expertise. Get paid more for what Japan provides now rather than negotiating it away or paying it in fees to financial “helpers.” Share higher revenues with employees, nurturing Japan’s human capital and protecting Japan’s national interests.

Speak:

Face the demographic reality that a global Japan needs global leaders who can communicate fluidly in English or risk ceding the economics of the future to those who can. This necessitates a Swiss approach to language education. Look to the US Navy Language School for inspiration. Remember that in 1940, Harvard said the Navy approach could never work. Success came from unexpected places like Berkeley and Colorado. This success laid the groundwork for post-war partnership. Look to America’s interior for partners, starting with Tennessee, to forge a new reality…closer to the heart.

Reflect:

On how shareholders have changed over the past generation from mostly long-only, “democracy first” investors to a more complex mix. Consider “Mochai 2.0” transactions like Berkshire/Tokio, Berkshire/Shosha, Rapidus, Rohm/Melco/Toshiba/Denso. Compare these to high frequency traders, passive indexers, leveraged speculators and a consultant/investors with a PRC bias: who is best placed to tend the Japanese market with an eye to fecundity?

Note:

Japan’s successes where the others have failed despite spending much more, including hypersonic missiles, Navy frigates, Rapidus chips and key parts of nuclear, robotics, power grid, defense, aerospace and space industries supply chains. These successes have happened outside the US VC/PE ecosphere.

Remember:

The lesson from history and industry is clear: leadership by engineers and builders produces lasting strategic strength; leadership by financiers alone optimises for short-term gains at the expense of long-term readiness. David Murrin

Andrew McDermott, Nashville May, 2026

The opinions expressed are my own. They are not intended as investment advice. I currently own and may in the future own positions in securities mentioned in this article. You may contact Mission Value Partners LLC for a complete list of portfolio holdings. operations@missionvalue.com.

Here a link to Andrew’s previous guest contribution What if Japan is winning? Buffett & Japan which include his bio & photo

And here a link to our debate on “Japan Public Markets under Attack”