Just as the “Breaking News” first reported yesterday at dinner time, police arrested Livedoor CEO Horie Takafumi and three other executives on suspicion of financial fraud. For those new to the story, check the excellent coverage on Joi Ito’s blog. This is a gigantic news event with significant economic and cultural ramifications. Although Livedoor’s self-destruction will not cause any huge ripples in the practical workings of the Internet infrastructure, there does seem to be a huge psychological shock. When the stock market crashed last week on news of the well-televised Livedoor office raid, completely unrelated tech stocks like Softbank also lost huge amounts of worth. The whole New Economy is now on the table for criticism and dissection.
Whether Horie is innocent or guilty, framed by massive Statist conspiracy or done in by his own greed, last year’s Livedoor saga certainly has created a new mental framework for thinking about the future of the Japanese economy. On one side of the ring, the Old Cabal, and on the other side, the New Capitalists. After a shock victory in the Fuji TV battle, things looked good for Livedoor. But the bureaucrats and their O.B.s in charge at the ancien medias have now clearly won the war. Not only has Livedoor been taught a lesson, the maverick company’s leader is literally in jail — with only the formality of trial to prove his guilt to an already angry mob public.
Culturally this is a big moment. The horses had been galloping asunder, and now the Old Men have tightened the reigns. Horie was perhaps a terrible representative of the New Economy, but few others have been so bold to standout and give a face to this important new business sector. If Steve Jobs is arrested tomorrow for falsifying data, I’m not sure all of the Siilcon Valley companies would suffer. Japan has caught up somewhat with Korea and the U.S. in terms of internet diffusion, but there seems to be no broad understanding that this IT world is something more than annoying trend.
In an issue of last year’s CanCam, one of the weird photographic “manga” pieces had a fashionable young female character proudly working at Livedoor. The New Economy had a certain cachet, especially with young people. The newest issue of CanCam will probably show Ebihara Yuri working at METI. Power is sexy, and a bureaucratically-run Japan has never looked hotter.
Yes, this scandal is just the fall of one not-particularly great company, but I fear the coming malaise upon realization that Horie’s experiment was a massive failure. The suits will out be drinking Blue Label in Ginza tonight, certain that Japan has been saved from a scandalous horde. Others may be feeling the despair of a symbolic defeat, drinking can after can of happoshu bought at 7/11.