Motley Fool Hidden Gems Investing - What Does Masayoshi Son Want?

Episode Date: February 1, 2025

The man behind SoftBank has now teamed up with OpenAI to invest up to $500 billion in American AI infrastructure over the next four years. Masayoshi Son has a vision for the future of the world. But what does that vision look like? Lionel Barber is the former Editor-in-Chief of The Financial Times and author of the book “Gambling Man: The Secret Story of the World’s Greatest Disruptor, Masayoshi Son.” Ricky Mulvey caught up with Barber to discuss: - Masa Son’s instincts as a salesperson and investor. - Why the founder is still driven by his roots. - Questions for anyone who’s tempted to put their life savings into SoftBank. Tickers mentioned: SFTBY, NVDA Host: Ricky Mulvey Guest: Lionel Barber Producer: Mary Long Engineer: Rick Engdahl Learn more about your ad choices. Visit megaphone.fm/adchoices

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all ready to go from day one so you can hit the ground running. Bring it with SAP Grow. AI Cloud ERP for any size business. it's a vision of a society transformed or soon to be transformed by artificial general intelligence i think he's now talking about super intelligence where i mean frankly the robots are going to be smarter than the human beings and they're going to take over an awful lot of tasks and what he wants to do is insert himself in the middle of this system

i'm mary long and that's lionel barber he's the former editor-in-chief of the financial times where he worked for several decades he's also the author of the new book gambling man biography about masayoshi san the storied founder and ceo of softbake my colleague ricky moldy caught up with barber for a conversation about what makes masayoshi san tick his skills as a salesperson life at the Vision Fund, and some important questions for anyone who's tempted to put their life savings into SoftBank. Heads up that this interview was recorded in early January before it was announced that SoftBank would be working to fund Stargate, the joint AI infrastructure venture between OpenAI, Oracle, and others. That announcement doesn't change any

of the information shared in this conversation, but we think it does make it all the more relevant. We hope you enjoy, Fools. As we dive into your biography, there's plenty of current events to talk about with Masa's son, but there is an easy place to start with your book because you describe him as a fool with a capital F, as a jester. And for the fools listening, I know they'll be interested to hear why. It's something we take seriously here at The Motley Fool is you want to be foolish with a capital F. So why is Masa's son a fool? Well, in the great King Lear tradition, the fool is the person who speaks truth to power but also is the kind of the fly in the ointment

and in japan which is a very hierarchical society top down they they're very ordered they don't like people who take big risks masa is the person who is running counter to the mainstream and in that sense and it was actually me quoting a top Japanese businessman who sort of said you know he is the jester Joshi Doshioki which is a terrible Japanese accent to describe that role of the outsider who has got runs against the current so praise be the fool and I think there is something interesting that changes in this because there is a part where he is the outsider and he is the fool where he's very little known and then later he becomes someone comparing himself to Genghis Khan and even even maybe Jesus Christ at which point I don't know if you can say

that person is a fool anymore you're definitely in the inside once you're making those uh those comparisons to historical figures yeah Napoleon let's not forget him he was also small and he was also an outsider Corsican who became the emperor of France and the emperor of Europe and Massa is an empire builder. I mean, remember, he's got businesses which stretch across the globe. You know, he invested in Alibaba in China. He invested in Yahoo in America. He built a computer publishing business. He's got big assets in Britain. So this is a guy who really does see himself in historical terms. But also, he is somebody who loves to make sure that people underestimate him and in that sense casting himself as a bit of a joker and a fool is a good

way to throw people off the scent we'll go to the cover now of your book which is that you give them this this heavyweight title the champion the world's greatest disruptor you could put a few people in that category steve jobs walt disney elon musk nikola tesla henry ford i'm sure i'm baiting you with some of those names, but why give him that heavyweight championship belt of the world's greatest disruptor when this is someone? He built an empire. He got more money into a fund than anyone else before, but he didn't invent anything. He wasn't building electric cars. He wasn't bringing light bulbs to America or the world. Yeah, he's not Steve Jobs in that he didn't produce the Apple Mac or the iPhone and these fantastic products. And he's not Henry Ford,

the great manufacturing innovator. But you don't have to be that. You can be a middleman. You can be the gateway for technology to come into Japan. And then you can take on the colossus. You know, no mean thing. NTT, Nippon Telegraph, was the most valuable company in the world in 2000 in Japan. And look, he then smashed up the party in Silicon Valley in the venture fund industry. Okay, you could say he was hosing away billions, and he lost away money. But in that sense, I think he deserves the title of the world's greatest recent disruptor, not least because he's not very well known. And that's the big secret about this book. He is someone who is should be known by when we talk about great investors on the show, we often go to folks like

Warren Buffett, or even Benjamin Graham there. It's, it's sort of that older school value investing style approach, you say that basically you write, I shouldn't say you say basically, you write directly that, quote, his instincts as an investor were far superior to his skills as a trader. There's two questions there, Lionel. First, what made him, in your view, a great investor that deserves more attention in that regard? Well, he was the richest man in the world in February 2000 for three days. But he got to the top. And he came back. And he's had several moonshots that have come off. Take Alibaba. He spent $20 million, then $80 million. $100 million bet turns into $130 billion. He didn't sell out

like Goldman Sachs. He bought Arm Holdings, which is this, by the way, going to be the vehicle for developing the super chip to rival Nvidia's. Arm, he paid $32 billion. It's now worth $140 billion. Not bad. Similarly, Yahoo, he invested in early, and as a result, was able to invest during the dot-com bubble in 400 plus companies. So I think he has been a very good investor with a couple of caveats. I mean, WeWork, we're not going to skate over that. I don't. And also, just to be clear, Ricky, I think he is not Warren Buffett. And Warren Buffett is a far superior investor, much more savvy, and has not had these wild ups and downs that Masa has. And significantly, and I described this in detail, when Masa goes all the way to Omaha on a Sunday, arrives there

to see Warren Buffett and asks him to invest in the Vision Fund, Mr. Buffett says, no, thank you, after about 20 minutes. Long way to go around the world. I want to get to his skills as a salesperson in a bit. One of the things that also that we focus on here at The Fool is you want to be good at investing, but you're not a trader. So we'll get to the trading side of this. What makes Masa-san a less great trader? Well, I mean, if you look what he did when he was trying to mount a comeback during the COVID pandemic, where he almost got wiped out, I mean, had the WeWork losses. He starts, sets up this in-house hedge fund and starts trading billions on options trading, right? Futures, derivatives. By the way, he's just also sold out

on NVIDIA. He did have 5% of NVIDIA back in 2017, 18. He sells out in 19. He would have made a lot of money, he'd stuck with that. But this options trading, okay, he makes $7 billion in a few weeks. And then he runs up losses of, I don't know, SoftBank's very sensitive about this. Some say as much as $9 billion. I'm going net, he's down $6 billion in a matter of months. That's pretty bad trading. Yeah. The thing that he is truly great at, and I want to make sure we stay on this for a bit is his skills as a salesperson. You mentioned that he was not able to get Buffett's attention when he flew out to Omaha. Warren Buffett, very polite, giving him a tour of the headquarters. I think he got to meet all 12 people at the Berkshire Hathaway office. I think he only

met Mr. Buffett, who was there, especially there on a Sunday. I mean, nobody else was in the building as far as i could tell yeah my bad um however he is able uh to get a lot of money from muhammad bin salman um so if i were i'm not saying i am this life might be kind of nice i think it'd be difficult but it might be kind of nice if i were royalty in the gulf and masa's son has come to meet with me to try to get me to give him billions and billions of dollars for the vision fund What's that meeting like? What's he telling me to give up those billions of dollars? The secret to success can be summed up in four letters. FOMO, the fear of missing out. And with the crown prince of Saudi Arabia, Mohammed bin Salman, that's what he does. He says,

if you invest with me, I'm going to introduce you to all the significant movers and shakers in the tech ecosystem, you'll get in early with the likes of Uber and Lyft and all these companies growing up in Silicon Valley. And Mohammed bin Salman, MBS as he's known, is desperate to modernize the desert kingdom, wean himself, wean the country off oil, and he wants to modernize. And he sees, Masa positions himself as the modernizer. And if you don't give me the money, by the way, I am going to ask you for $45 billion. dollars, he thinks, I'm going to miss out. I'm prepared to spend that money. And by the way,

if you've got the public investment fund from Saudi Aramco going public, and that's what you want to sell to investors, you're going to raise a couple of trillion, then maybe $45 billion is chump change. Maybe not quite. I would have a difficult time saying anything in the tens of billions is chump change in the lower numbers of billions sure we can call that chump change um one of the things though is i i there are savvy players on both ends of this and one of the things that this that the vision fund has is that it basically functions is a dividend stock where it's paying its limited partners a fixed seven percent regardless of fund performance and for those listening, a 7% dividend, you're talking about old school companies, you're talking

tobacco stocks, you're talking Verizon, Pfizer, these are these high dividend companies. And you don't see a lot of high growth tech companies paying out large dividends like this. There are tech companies paying smaller dividends now, but these large dividends are not paid out because a lot of these companies need room to run to make mistakes and to chase high growth opportunities. um why is this promise put into the fund well ricky you've actually nailed the key point about the vision fund which is that even though the saudis and by the way also the gulf states of uae or united arab emirates that's abu dhabi better known as abu doshi um they they want to get into the tech business and in these stocks,

but they want some security. And that 7% coupon, you know, dividend annually guaranteed, I mean, that's their security. And anything else is on top of that. But second point, you know, he therefore is actually quite stretched. uh and it also means that it's not a classic venture fund because venture funds don't give that guaranteed return right it's supposed to be you know it either works or it doesn't and that's the third difference is guess what we work that they invested in he won't let it go bankrupt

When the IPO is called off, Masa says, okay, I'll make you sweet to the Gulf investors. So all this actually means that although he was competing, force-feed with Silicon Valley venture funds and force-feeding these companies with cash, it wasn't at all a classic venture operation. When you said it stretched the fund, what does that mean at a granular level for the lieutenants that are trying to make these investment decisions at SoftBank when they have to get this constant 7% yearly return for their investors? Very simply, it means craziness. It means ill discipline. It means that the investors, believe it or not, and I report this in the book, were actually latterly being measured about how much money they were putting out through the door, rather than looking at returns. returns. It was all done in a tremendous rush, as one of the top SoftBank Vision Fund people told me. And do you know something, and we're going to talk about this, what he's doing now, I think

he has drawn some lessons from that hubristic period of the Vision Fund, sort of 2016 to 22. We can get to that, because one of the things throughout Masa-san's career that he is intensely skilled at is creating a vision and having people buy into that vision directionally he's been correct on a number of very big things uh mobile internet telecoms um in japan the internet um in in his deals with yahoo and creating uh basically seeing what's going on in silicon valley and creating distribution deals uh in japan and then beyond that even even with computer trade shows where he understands overpaying for networking may not be overpaying if you're running the networking show. Now the vision is AI. He says $100 billion is coming into

the US. You have our president, Donald Trump, saying we'd like $200 billion. Why not negotiate that way? When you talk to him, you interviewed him for the book, to the best you can, what is his vision for ai what's what's the masa sun vision of ai over the next um few decades well i want to talk about ar but let me just reinforce what you were saying which is quite right that he's ridden this technological wave and he's been fundamentally right about the direction of technology which has shaped modern societies you know irreparably i mean he he's like you know we talked about him being the fool but i i would like i i think he's more a forrest gump like character who's sort of there always, you know, either the microchip or the internet, mobile internet,

and, you know, venture capital, turbocharging these companies with money. And now it is AI. And in the conversation that I had with him in Tokyo, the fourth interview, he kind of sketched some of the vision. And really, it's a vision of a society transformed or soon to be transformed by artificial general intelligence, I think he's now talking about super intelligence, where, I mean, frankly, the robots are going to be smarter than the human beings, and they're going to take over an awful lot of tasks.

And what he wants to do is insert himself in the middle of this system. So there's going to be a lot of focus on logistics, autonomous vehicles, distribution, robotics. I mean, he's investing in these companies all around the world, particularly in America, though. And I think the other big play, which we're going to hear a lot about in 2025, is the development of a super chip to rival NVIDIA's.

And we know that NVIDIA has transformed in the last 10 years into a company worth $3 trillion plus. I'm not saying that Masa will get to that scale, but he certainly wants to get into that business of superchips to power the AGI revolution. And what's interesting is he doesn't want to do that by investing in a public company that may be doing that already, NVIDIA.

It reminds me of a story when he wanted to invest in Yahoo in the earlier internet days, and Jerry Yang is trying to turn him down. wants to overpay. And basically, he says, you know what, if you don't want me to invest in your company, I'm going to bring up this other company and just try to kill you. And I wonder, looking at his history and seeing what's going on with this next super chip, do you think a little bit of that's going on with him trying to create the new chip for artificial super intelligence, if he's not investing in NVIDIA? Well, you have to remember, Ricky, that the big vision

in 2018-19 was to merge NVIDIA with Arm Holdings, which was the designer, the British-based, where it's got a big operation in California, designer of huge numbers of different chips supplied to the likes of Apple, Qualcomm. And he wanted to merge the design skills of NVIDIA with the kind of technical superpower state qualities of, sorry, he wanted to merge the design expertise of ARM,

which was a supplier to all the major big tech companies with NVIDIA that would have these advanced graphics chips. So it was a sort of horizontal and vertical integration play. when regulators block that he's now saying okay i'm actually going to compete but i i think he's also a frenemy of nvidia he's never going to go head to head he likes the frenemy game um you mentioned that you interviewed masayoshi son four times you've interviewed a number of world leaders and one of the things you like to do when you're interviewing a big dog is you got to get their attention. You want to unlock them and you want to get their attention. One

story I've heard you tell before is you interviewed Vladimir Putin and you started speaking to him in German because he was he was a KGB agent in Germany and you knew that he spoke German and he took it with stride. He wasn't surprised. He was just able to handle it. When you're talking to Masayoshi Son, how are you getting his attention? Well, the first time I turned up in tokyo i was told he was too busy to see me and initially i took that as a bit affronted but then i said you know get over it you're not the editor of the ft anymore and you know use the time to your own advantage so what i was able to do was i said to the softbank people i'm going to kyushu where he was born and remember it's crucial to understand that he came from a korean immigrant

family. He is an outsider. This is all about where he gets his motivation. So by walking around Kyushu for two days, and by the way, I would have gone by car, but I didn't have a foreign driver's license. And then I found out my researcher, who's Korean-Japanese, didn't have a foreign driving license. So I wore out a pair of shoes in Kyushu. But crucially, when I did the first interview, I was able to immediately say, I went to your school. And I remember here in Kuma, Kurume, and that got his attention. Like this gaijin, this foreigner has bothered to actually examine my roots. And I think that helped to unlock him. How do you think his roots are still driving? He's pushing tens of billions of dollars into

high tech companies. He still has this background of, and I've heard you bring up the book Pachinko before, which is appropriate. It's a Korean immigrant to Japan, family opening a pachinko parlor and slot machine parlor. Yeah. Yeah. But even in these later years, how are you seeing that sort of tough upbringing driving him? You have to remember that the Japanese corporate establishment regards this guy with great suspicion. They don't particularly like him because he's a disruptor, but they also don't like him because he's Korean. He comes from a Korean immigrant family. His grandfather came over in 1917. His grandmother, who's a very influential figure, came out in the late 20s. And this was a time when Korea was a colony of Japan,

imperial Japan. So, I mean, there's still racial prejudice in Japan. And even though he's made his money and he's as rich maybe sometimes the richest guy in japan sometimes it's mr uniclo the fast the retailer um so that's that's really why he wants to drive home that you know i i've seen the prejudice i suffered it as a as a kid the only way i escaped it was to go to america where he did spend five years plus six years, five to six years as a student, laterally at Berkeley where he did a degree and he majored in economics.

And that's where he set up his first business. And for America was a great liberation to him. But guess what? He went back to Japan because he wanted to essentially stuff those Japanese. I'm actually going to show that I'm going to be the big guy. And I think he really still wants to be that. you know, the great global figure in Japan

still feels probably a little bit underestimated given his role, I think. And that's a big motivation. I want to be number one. He kept saying it to me. New from Nespresso. Blend wellness into your coffee routine with the Coffee Plus range,

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Discover Coffee Plus on Nespresso.com. As we wrap up this part of the conversation on SoftBank and Masa's son, a lot of people have put a lot of money into SoftBank. His longtime confidant, Ron Fisher, put his entire family's net worth into SoftBank when he just got started working there. That ended up working out fabulously well for him for a number of reasons, but that was a while ago.

Let's talk about today. Let's say I'm considering a similar move. Maybe not my whole family's net worth, but let's say half. I want to give half my family. I'm thinking about giving half my family's net worth to Masayoshi's son because he's going to invest it for the next five to 10 years.

You've researched this investment organization. You've researched Matsuyoshi-san for a while. This is enough to make me sweat if it all goes poorly. My life could be changed if it goes downhill. What would you say to me? I'd say, how strong is your stomach? Have you got iron filings in the stomach mixed with maybe a little bit of milk?

Because you really do need a strong stomach to stay with SoftBank. you've got to go through what I describe in the title as the wild ride in this company. I mean, you're going to have real gyrations. You're going to have the highs and the deep lows. So stick with it. Over time, you're probably not going to do much better than the S&P, maybe a little bit worse over, say, the last 10 years. I would buy on the dip. I mean, that's what he told everybody, by the way, when he lost 97% of his wealth in 2000. He actually seriously went out to Japanese investors and said, you know, now's the time to buy and it

would have been a good buy. Amazing to me how Japanese retail investors have stuck with him. He's got a lot of loyalty. Maybe that's partly because he's got that joker quality that you described at the beginning people like him uh but you know i wouldn't put all my savings but i might put some okay i'll move on to a few other topics while we have a little bit of time as we wrap up here you mentioned something earlier in uh when we were talking before the the interview one of your concerns is as we move over across the atlantic ocean over to europe is that you're concerned that europe is a museum is europe a museum um i'm hoping you can expand on that question and where it comes from for you? Well, I'm using a phrase that was around in the Clinton

administration in the Treasury at the time, sort of Bob Rubin, Larry Summers. And I think that's how they described it. And of course, we've got great museums, the Louvre, the Uffizi, British Museum, but we do have a few other things. The reason that we call it or risk becoming a museum is that as an engine of innovation and technological innovation and venture capital, deep capital markets, we are being left behind by a turbocharged America. And the industrial policy adopted by the Biden administration, offering billions of subsidies,

that's drawn European companies to shift operations into America. And also now the drill, baby, drill philosophy, when Europe's still committed to net zero, climate change, we take very, very seriously. You know, we're going to therefore be at an energy disadvantage. I mean, this is the danger of why we might become a museum. We're not quite yet, though. Is there any great pieces of financial journalism or great stories that have been on your radar that you've been thinking about lately? The first great story is the future of Indian capitalism and the Adani Empire to rival Mukesh Ambani, who created the huge multi-billionaires in energies and mobile internet and everything. But Adani was a great beneficiary of the Modi government.

He's in big time in public sector infrastructure. But that report by Hindenburg, which devastated the share price, has rocked Adani. And now the stock markets fall off a little bit in India, and the growth may be a tail off. Big question about India in 2025. I think the other story which I would just focus on more and more is just the role of private markets and the eclipse of public markets. It's really being seen in the city of London. You're seeing people migrating to New York and just writing more about private markets would be something I would focus on. Yeah. Lionel Barber, book gambling man, happy to recommend it to listeners of Motley Fool Money,

well-researched, and it's going to give you a great look at, as you said, an investor that maybe hasn't gotten enough attention. Thank you for your time, for your insight, and for joining us on Motley Fool Money. As always, people on the program may have interest in the stocks they talk about, and The Motley Fool may have formal recommendations for or against, so don't buy or sell stocks based solely on what you hear. All personal finance content follows Motley Fool editorial standards and are not approved by advertisers. The Motley Fool only picks products that it would personally recommend to friends like you. I'm Mary Long. Thanks for listening. We'll be back on Monday.