Latest / The CEO Diary with Fexingo: Leadership Lessons, Executive Decisions, and Corner Office Stories / How Hiroshi Mikitani Built Rakuten Into a Tech Empire
Transcript
- Lucas: So, in 2010, Hiroshi Mikitani, founder and CEO of Rakuten, sent an email to all ten thousand employees. Subject line: 'Englishnization.' The message was simple: from now on, all internal meetings, memos, and performance reviews would be conducted in English. Within two years, if you couldn't pass a standardized English test, you wouldn't get promoted. Luna: I remember reading about this. It was wildly controversial in Japan, where English proficiency isn't exactly widespread. Did he actually lose employees over it? Lucas: He did. About a quarter of the staff—roughly twenty-five hundred people—left the company over the next three years. Some by choice, some because they couldn't meet the standard. But Mikitani's logic was that Rakuten couldn't become a true global player if everyone was operating in Japanese. He wanted the company to compete with Amazon and Alibaba on a global stage, and you can't do that if your internal language is one that only one hundred twenty-five million people speak. Luna: It's a brutal but very clear strategic bet. I mean, Amazon was already eating the world's retail, and Alibaba was dominating China. Rakuten was big in Japan—about twenty-seven percent of e-commerce—but tiny globally. Mikitani realized that if he didn't force the shift, the company would stay regional forever. Lucas: Exactly. And that's the thread we're pulling today—how Mikitani built Rakuten from a small online mall startup in 1997 into a sprawling tech conglomerate with fingers in e-commerce, fintech, digital content, and even telecommunications. His leadership style is deeply contrarian, especially for Japan. He's outspoken, he picks fights with regulators, and he's obsessed with speed over consensus. Luna: Let's start at the beginning. He founded Rakuten right after graduating from Harvard Business School, right? He was a banker before that? Lucas: Yeah, he worked at the Industrial Bank of Japan, which is now part of Mizuho. But he saw the internet's potential early—this was 1997, when e-commerce in Japan was basically nonexistent. He started Rakuten as an online shopping mall, essentially a platform where small merchants could set up their own stores. The key innovation was that he charged a fixed monthly fee, not a percentage of sales. That was unusual, but it gave merchants predictable costs and encouraged them to list more products. Luna: And that model worked. By the early 2000s, Rakuten was the dominant e-commerce player in Japan. But Mikitani didn't stop there. He started expanding into other services—travel booking, credit cards, banking—all linked through a loyalty points system. That's the Rakuten ecosystem. Lucas: The loyalty program is the glue. Rakuten Points are earned across almost every service they offer. Book a hotel through Rakuten Travel, earn points. Use the Rakuten credit card, earn points. Shop on the marketplace, earn points. The points are redeemable anywhere in the ecosystem. It's a brilliant retention mechanism. And today, Rakuten has over one hundred million members in Japan alone—that's nearly the entire adult population. Luna: It's a flywheel effect. More services attract more members, more members attract more merchants, more merchants generate more data, and data improves the services. But the really bold move came in 2018 when they launched Rakuten Mobile as a mobile network operator. That's a capital-intensive, low-margin business dominated by three giants in Japan. Why would he enter that? Lucas: Mikitani saw mobile as the ultimate distribution channel for his ecosystem. If he could control the network, he could bundle Rakuten services—e-commerce, banking, travel, insurance—into a single subscription. He also wanted to disrupt the Japanese telecom oligopoly, which he felt was overcharging consumers. He launched with a radically low price—about three thousand yen per month for unlimited data, roughly half of what competitors charged. And he built the network using a software-based architecture that was cheaper to deploy. Luna: But it's been a money pit, hasn't it? Rakuten Mobile has been burning cash—operating losses of hundreds of billions of yen. The stock took a hit. Some analysts questioned whether he was risking the whole company on this bet. Lucas: It's definitely been a drag on earnings. In 2025, Rakuten's consolidated operating profit was positive, but only because the fintech and e-commerce segments were strong enough to offset the telecom losses. Mikitani has said that he expects the mobile business to break even by 2027 or 2028. But the interesting thing is that he's not backing down. He sees it as a ten-year play. And historically, he's been patient with big bets. The e-commerce business took years to become profitable. Luna: That patience is a hallmark of his leadership. But so is his willingness to be confrontational. He's publicly criticized Japan's Ministry of Economy, Trade and Industry for protecting incumbents. He's called out the big banks for being slow to innovate. He's even had public spats with SoftBank's Masayoshi Son over telecom regulations. He's not a typical consensus-seeking Japanese CEO. Lucas: No, he's not. And that's partly because he spent time in the US—Harvard MBA, worked at a US investment bank—and he brought back a more aggressive, shareholder-focused mindset. He's also a big believer in what he calls 'Rakuten Shugi,' or Rakuten-ism, which is a set of five principles: customer satisfaction, improvement, speed, challenge, and professionalism. It's not that different from other corporate mission statements, but he actually enforces it. Every new hire goes through a two-week training program on Rakuten Shugi. Senior executives are evaluated on how well they embody the principles. Luna: It sounds almost cultish, but it seems to work. The company has grown revenue from about three hundred million dollars in 2000 to over twelve billion dollars today. That's a compound annual growth rate of around twenty percent over two decades. Not many companies can sustain that. Lucas: That's a great stat, Luna. And a lot of that growth came from acquisitions. Rakuten has bought dozens of companies—from the US e-book company Kobo to the French e-commerce site PriceMinister to the Israeli messaging app Viber. Mikitani's strategy is to acquire, integrate, and then scale using the Rakuten ecosystem. Not all of those acquisitions have worked perfectly, but the overall track record is strong. Luna: Let's talk about Viber specifically. Rakuten bought it in 2014 for nine hundred million dollars. At the time, messaging apps were all the rage—Facebook bought WhatsApp for nineteen billion. But Viber never really became a global leader. It's still around, but it's not a major profit driver. Was that a mistake? Lucas: It's debatable. On one hand, nine hundred million dollars for an app that generates maybe a hundred million in annual revenue isn't a great return on capital. But Mikitani saw Viber as a way to get a direct relationship with consumers in markets where Rakuten didn't have a strong brand—Eastern Europe, Southeast Asia, the Middle East. And Viber has been used to promote other Rakuten services. It also gave them a foothold in fintech—Viber Pay launched in some markets. So it's not a home run, but it's not a total bust either. Luna: I think the bigger lesson from Mikitani's leadership is his willingness to take calculated risks and then double down. The Englishnization policy could have destroyed the company's culture. The mobile bet could bankrupt the company if it fails. But he's consistent: he'd rather go big and fail than stay small and safe. Lucas: And that's a useful contrast to the stereotype of Japanese management as risk-averse and consensus-driven. Mikitani is an outlier, but he's also proof that contrarian leadership can work in a traditional culture. The question is whether his successor—whoever that is—can maintain that momentum. He's still CEO at sixty-one, and he's shown no signs of stepping down. But succession planning is a real concern for investors. Luna: Yeah, that's a big unknown. Rakuten is very much Mikitani's company. He owns about twenty percent of the stock and has outsized influence on the board. If he were to leave suddenly, the company could struggle to find its footing. But for now, he's still at the helm, still making bold bets. Lucas: And that brings us to a quick sidebar. If you've gotten some value from these conversations—maybe a new idea for your own work, or a fresh way of thinking about a challenge—honestly, if today was worth a coffee to you, that's the link. Just go to buy me a coffee dot com slash fexingo. No pressure, no perks, just knowing that the show helps you think differently. And we keep it ad-free because of that support. Luna: It's a small way to say this matters. And we appreciate it. Lucas: Alright, back to Mikitani. One of his most interesting recent moves was the launch of the Rakuten Securities cash-back program, which gives users points for trading stocks and ETFs. That's part of a broader push to make Rakuten the primary financial platform for Japanese consumers. They already have a bank, a credit card, an insurance arm, and a securities brokerage. The goal is to make Rakuten the default choice for all household financial transactions. Luna: That's a big ambition, especially in a market where traditional banks like Mitsubishi UFJ and Mizuho have deep roots. But Rakuten has an advantage: the data. Because they know what you buy, where you travel, what you read—they can offer personalized financial products. That's something the old banks can't do easily. Lucas: Right. And the regulatory environment in Japan is gradually opening up to fintech. The government has been pushing for more competition in banking and payments. Rakuten is well-positioned to benefit. But they also face competition from PayPay, which is backed by SoftBank and Yahoo Japan, and from Line Pay, now merged with Yahoo's payment system. The battle for digital payments in Japan is intense. Luna: Let's zoom out. If you had to distill Mikitani's leadership into one key lesson for CEOs, what would it be? Lucas: I'd say it's the willingness to make a decision that will be deeply unpopular in the short term because you believe it's right for the long term. The Englishnization policy is the clearest example. He knew it would cause a talent exodus, he knew it would hurt morale, but he did it anyway because he was certain that the company couldn't globalize without a common language. And ten years later, Rakuten's workforce is far more diverse, they've made acquisitions abroad, and their international revenue has grown significantly. Luna: But that also requires a high tolerance for criticism. Mikitani has been called arrogant, reckless, a bully. He doesn't seem to care. He's focused on the outcome, not the perception. Lucas: Exactly. And that's a trait we see in many transformative CEOs—Jobs, Bezos, Musk. They're not necessarily nice people, but they have a clear vision and they're willing to push through resistance. The difference is that Mikitani operates within a Japanese corporate context, where harmony and consensus are valued. He breaks those norms openly. And his results have been good enough that shareholders give him leeway. Luna: So what's the biggest risk ahead? I'd say the mobile business. If it doesn't turn profitable in the next few years, the whole company could be at risk. The debt load is significant—about one point five trillion yen, or roughly ten billion dollars. That's a lot for a company with twelve billion in revenue. Lucas: It is. But Mikitani has a few levers. He could sell a stake in Rakuten Mobile to a strategic investor—there have been rumors of interest from US telecom companies. He could also spin off the fintech business, which has a higher valuation multiple. And the e-commerce business remains a cash cow. So I don't think bankruptcy is imminent, but the margin for error is small. Luna: One more thing I find interesting: Mikitani is also a published author. He wrote a book called 'The Power to Compete' with the late economist Ryoichi Mikitani, his father. In it, he argues that Japan needs more entrepreneurs and less conformity. He's essentially trying to change the country's business culture, not just his own company. Lucas: That's a big mission. And it ties back to his belief that companies should be run for the long term, not just quarterly results. Rakuten doesn't pay a dividend—they reinvest everything. That's unusual for a mature company, but it's consistent with his philosophy. He wants to build something that lasts generations. Luna: I think that's a good note to end on. Hiroshi Mikitani is a CEO who thinks in decades, not quarters. He makes bold, sometimes painful decisions, and he sticks with them. Whether you agree with his methods or not, you have to respect the conviction. Lucas: Absolutely. And as we watch the mobile bet play out, it'll be a real-world case study in whether a contrarian CEO can sustain long-term growth while taking on massive risk. Thanks for listening.