Part IThe Story
He would take the job on one condition. In 1948, the second president of a Kyoto playing-card company suffered a stroke. Sekiryo Kaneda had no designated successor, and the family turned to his grandson, a law student at Waseda University in Tokyo. The young man had no management experience, no degree, and no particular reason to be trusted. He named his price anyway: he would be the only member of the family working at Nintendo. His older cousin, who was already employed there, was fired.
Consider what this condition was, and who was making it. Hiroshi Yamauchi was twenty-one when he took the presidency on April 25, 1949. (The company's own histories sometimes place the handover a year later, in 1950, as though the institution itself had not quite registered the moment its future arrived.) Much of the rest of his life can be read as an argument with that condition. He would build one of the most valuable companies in Japan and never play its games. He would buy an American baseball team and never attend a game. He would install his son-in-law at the head of his American empire, rule the Japanese one for fifty-three years with a severity the industry press found frightening, and then, at the end, hand the whole thing to a man who was not a Yamauchi at all.
The firm he inherited made hanafuda, the small, stiff flower cards of Japanese gambling parlors. The firm he left behind had sold hundreds of millions of game consoles and turned a mustachioed carpenter, named after a Seattle warehouse landlord, into one of the most recognized fictional characters on earth. Between those two points lies a career of spectacular failures, among them a taxi company, instant rice, a vacuum cleaner called Chiritory, and a red-tinted headset that gave its users headaches. There were also a handful of decisions so correct that they revived an entire American industry. None of it, the record suggests, was left to luck, although the company's name is usually translated as an instruction to do exactly that.
The translation, it should be said, is unverified. Even Yamauchi's descendants do not know what Fusajiro, the founder, meant by it.
By the Numbers
The Yamauchi Presidency
53Years as Nintendo's president, April 1949 to May 2002
21His age when he took control of the family card company
¥60Nintendo's lowest recorded share price, after the 1964 Tokyo Olympics
$280MNintendo of America's windfall from Donkey Kong, 1981–1983
~62MFamicom and NES consoles sold worldwide
$7.8BEstimated net worth in 2008, making him Japan's richest person
0Seattle Mariners games he attended as the team's principal owner
A Name Passed Through Sons-in-Law
In the Yamauchi family, the name traveled sideways before it went down.
Fusajiro Yamauchi was born Fusajiro Fukui on November 22, 1859, the eldest son of a craftsman named Sōsuke Fukui. He became a Yamauchi the way a certain kind of Japanese man became anything in the nineteenth century: by marriage, and then by adoption. The Yamauchis ran a lime business called Haigan and had no male heir, so the craftsman's son married one of their daughters, took their name, and inherited the company, which he renamed Haikyō. On September 23, 1889, in an unoccupied house he had bought in Shimogyō-ku, he opened a second business. He made the cards by hand from mulberry bark and clay and printed them on a woodblock machine of his own design. His premium decks were called Daitōryō ("President") and carried a portrait of Napoleon.
Fusajiro had an instinct for the unglamorous economics of his product. Handmade cards lasted too long; nobody needed a second deck. So he took his rejects, the imperfect cards, and sold them in a cheaper line called Tengu. He courted the gambling clubhouses, which never used the same deck twice for fear of cheating, and signed around seventy of them, each burning through at least fifty decks a night. Other manufacturers fled the hanafuda trade because of its association with the yakuza-run parlors. Fusajiro stayed. When the imperial government levied a card tax that doubled the price of most hanafuda decks and drove more than half of the major producers out of business, Nintendo survived on a sideline: Western-style playing cards made in Japan, which, by most accounts, nobody else was manufacturing. In 1907 he struck a deal with the national tobacco monopoly to sell his cards in cigarette shops across the country. At the time, drugs and tobacco were about the only goods with that kind of national reach. Mary Firestone's Nintendo: The Company and Its Founders sketches this founding generation for younger readers, and even in that simplified telling the pattern is visible: the company's first great asset was not a product but a channel.
Fusajiro had two daughters and no son. In 1905 he arranged a marriage between his daughter Tei and Sekiryo Kaneda, an employee who had joined the business earlier that decade. Kaneda took the Yamauchi surname and, in 1929, the company. He incorporated it, built a new headquarters beside the old workshop near the Toba-kaidō station, and discovered that history repeats itself in families that produce daughters. He too had no male heir. So he planned to adopt his own son-in-law, Shikanojo Inaba, an artist in the company's employ, who would become Shikanojo Yamauchi and eventually the third president.
Inaba did not stay. When his son Hiroshi was five, he abandoned his wife and child. Kimi, the mother, could not cope and gave custody to her parents, which is how the future president of Nintendo came to be raised by the sitting president of Nintendo. The succession skipped the absent father entirely. Hiroshi went to a preparatory school in Kyoto at twelve. During the war he worked in a military factory, and his plans to study law or engineering were suspended. Kyoto, which the American military had at one point placed at the top of its list of atomic targets, was struck off that list by Secretary of War Henry L. Stimson, who admired the city. So the old headquarters stood. After the war Hiroshi studied law at Waseda and married Michiko Inaba, a match arranged by his grandparents because there was no father to arrange it. Michiko came from a wealthy family, and during the war years her money helped keep the card company afloat.
A family business built on the adoption of sons-in-law is a kind of wager that the institution matters more than the blood. It is telling that the man who emerged from this lineage wanted the blood cleared out of the building.
What He Learned in Cincinnati
The resentment was immediate and predictable. Employees accustomed to cautious, conservative leadership did not take seriously a twenty-one-year-old who had jumped the line and fired his own cousin. When the factory workers called a strike, Yamauchi responded by dismissing long-serving employees who had questioned his authority. The video game historian Steven L. Kent would later describe the period as "notoriously imperialistic." Yamauchi renamed the company, centralized its scattered Kyoto manufacturing in 1952, and in 1953 made Nintendo the first company in Japan to succeed at mass-producing plastic playing cards. He made himself the sole judge of new products and approved only the ones that appealed to his own instincts. This was not a management philosophy so much as a temperament, and it would stay that way for fifty years.
Then, in 1956, he went to Ohio.
The United States Playing Card Company in Cincinnati was the largest manufacturer in the world in Yamauchi's line of business. He expected an empire. What he found, according to the standard account, was a company confined to a small office. It is one of those anecdotes that historians flag for want of a citation, and it survives because it explains too much to discard. If the biggest card company on earth looked like that, the card business had a ceiling, and the ceiling was low.
He did not abandon cards right away. He changed who they were for. In Japan, Western playing cards sat in the same moral category as hanafuda and mahjong: devices for gambling, and gambling was technically illegal. In 1959, Yamauchi licensed Walt Disney's characters and printed them on the backs of Nintendo decks, packaged with a booklet explaining the different games a family might play. Mickey Mouse laundered the product. The cards sold 600,000 packs within a year. By 1961 Nintendo had a Tokyo branch and was selling more than 1.5 million packs, supported by television advertising and a new distribution system that put its products in toy stores. In 1962 he took the company public on the second section of the Osaka exchange and the Kyoto exchange. In 1963 he shortened the name. It was no longer Nintendo Playing Card Co. It was simply Nintendo.
What followed was a period of cheerful, directionless flailing that a less merciful historian would call a catastrophe. There was Daiya, a taxi company, sold off when its labor unions proved unmanageable. There was a food venture, a joint effort with two other firms whose product line featured instant rice. There was the Chiritory vacuum cleaner. There is also, in nearly every English-language account of these years, a chain of love hotels. The story traces to David Sheff's Game Over, first published in 1993, which alleged that Yamauchi opened one and was its most frequent patron. A Japanese blogger and the Nintendo historian Isao Yamazaki later went through the company's securities reports from 1962 onward, which itemize its many other side businesses, and through contemporary newspapers. They found no trace of any hotel. Sheff's book was built largely on interviews, and his source is unclear. The legend persists anyway, for the obvious reason that it is more fun than instant rice.
The real disaster was quieter. The Disney cards had tied Nintendo to the children's market just as adult Japan was drifting toward pachinko, bowling, and nights out. When Disney sales slowed, there was nothing behind them. In 1964 Nintendo earned ¥150 million. After the Tokyo Olympics, as the rest of the country boomed, households simply stopped buying playing cards, and Nintendo's stock fell from ¥900 to ¥60.
The Engineer Who Was Playing
In 1965, Nintendo hired a young man named Gunpei Yokoi to keep the card factory's assembly-line machines running. Yokoi had an electrical engineering background and the temperament of a tinkerer. He was the kind of employee who, left alone on a break, would build something for his own amusement.
In 1966, visiting one of the hanafuda factories, Yamauchi saw him playing with such a thing: an extendable claw, a lattice of crossed arms that shot outward at the squeeze of a handle. Yamauchi did not ask what it was for. He told Yokoi to turn it into a real product in time for the Christmas rush. Released as the Ultra Hand, it sold more than 1.2 million units in Japan. The critical fact is not the toy but the plumbing. Nintendo already had shelf space in toy stores, a legacy of the Disney cards, and Yamauchi decided to run toys through the card company's existing distribution network. Yokoi was pulled off maintenance and moved to product development, first in a department called Games and Setup and, after Yamauchi increased investment in research and development in 1969, in a new division directed by a long-time employee named Hiroshi Imanishi.
Yokoi's toys had a quality the rest of the Japanese toy market, dominated by Bandai and Tomy, lacked: a thread of electronics that let Nintendo charge more for novelty. There was the Ultra Machine, a baseball-pitching device. There was the Love Tester, a gadget that claimed to measure the strength of a romantic relationship, which is to say a toy that sold the pleasure of pretending to be judged. In 1970 a designer named Masayuki Uemura produced the Beam Gun, an optoelectronic pistol made in partnership with Sharp and described by the company as Japan's first electronic toy. It sold more than a million units. In 1971 Nintendo partnered with Magnavox to supply a light-gun controller for the Odyssey, the first commercial home video game console. Nintendo was in the video game business before most Americans knew there was one.
Yamauchi pushed further, and the world pushed back. In 1973 Nintendo installed the Laser Clay Shooting System in abandoned bowling alleys, a clever reuse of a dead leisure boom that briefly surpassed bowling in popularity. That same year the oil crisis drove up the cost of plastics and turned consumers toward necessities. Nintendo lost several billion yen, and the subsidiary behind the light-gun ranges, Nintendo Leisure System Co., was closed. The lesson was harsh and specific: novelty is a luxury good, and luxury goods are the first thing a frightened household stops buying.
He kept going anyway. In 1974 he acquired the Japanese distribution rights to the Odyssey. Between 1975 and 1978 he worked with Mitsubishi Electric on the Color TV-Game series, dedicated consoles that played variations of Pong. The Color TV-Game 6 went on sale on June 1, 1977, and the Color TV-Game 15 a week later. Each sold about a million units. In 1977 a young industrial designer named Shigeru Miyamoto joined Yokoi's team, and his first assignment was the plastic casing for the Color TV-Game consoles. He brought with him the forests and caves of the countryside around Sonobe, a taste for Westerns and detective fiction, and the folk Shinto of his childhood. He also brought, as the company's own accounts pointedly note, no background in engineering.
In 1978 Yamauchi split research and development in two, with Yokoi running R&D1 and Uemura running R&D2, and later hired engineers away from Sharp. Two teams, doing similar work, reporting to one man who judged them both. One researcher would later call the arrangement unique. The logic was simple enough: internal rivals will outwork each other, and the president, as sole arbiter, gets to choose among their best efforts.
The Son-in-Law in Seattle
By the late 1970s, Nintendo was struggling financially again, and Yamauchi's answer was America. He would send family.
Minoru Arakawa, the husband of Yamauchi's daughter Yoko, was appointed president of a new North American subsidiary. Yoko became its first employee. Both came from extremely affluent families, and their motives, the company's own history notes, ran more toward prestige than money. They left Vancouver and set up in Manhattan because Manhattan was where serious American business happened. The target was the coin-operated arcade market, then worth $8 billion a year. They hired young gamers to work in a poorly maintained warehouse in New Jersey, receiving and servicing hardware shipped from Japan. It was a very long way from Kyoto, and it would get worse before it got better.
Arakawa contracted a two-man Seattle distributor called Far East Video, run by the arcade salesmen Ron Judy and Al Stone, who told him they could always clear Nintendo's inventory if Nintendo made better games. Their contract was settled by a Seattle lawyer named Howard Lincoln. It is worth remembering the name: the lawyer who drew up a distribution agreement would later run Nintendo of America and represent Yamauchi's interests in a baseball franchise.
Encouraged by promising test sites in Seattle, Arakawa bet most of the subsidiary's modest finances on 3,000 cabinets of Radar Scope, a shooter that had done respectably against Galaxian in Japan. By the time the cabinets finished their four-month boat ride across the Pacific, American taste had moved on. The game failed. Far East Video was already in trouble, and Ron Judy borrowed his aunt's life savings, $50,000, to stay afloat. Arakawa came to regret founding the subsidiary at all. Yoko, the company history records with unusual candor, was "trapped between her arguing husband and father."
They retreated to Seattle, the American harbor closest to Japan at nine days by boat, with a local lumber industry that could supply wood for cabinets. In the suburb of Tukwila they rented a 60,000-square-foot warehouse with three offices, one for Arakawa and one for Judy and Stone. The landlord, whom none of them had met, was a man named Mario Segale.
Arakawa kept begging Kyoto for talent, anyone who could build something for America and redeem the dead stock of Radar Scope cabinets. Yamauchi's senior engineers were all busy, and the American subsidiary was a rounding error in the parent's business. So he gave them what he could spare: Yokoi's young assistant, the designer with no engineering background. When Miyamoto's game arrived in Tukwila as conversion kits for the unsold cabinets, the American staff were uniformly revolted. The exception was Howard Phillips, a young warehouse hand. The game was Donkey Kong. From 1981 to 1983 it produced a $280 million windfall for the subsidiary. At its peak Nintendo of America was selling 4,000 new arcade units a month, which made the twenty-four-year-old Phillips, by his own later description, "the largest volume shipping manager for the entire Port of Seattle." In July 1982 Arakawa used the profits to buy twenty-seven acres in Redmond.
The hero, a little man in overalls who jumped barrels, was renamed after the landlord.
What should one make of this? Yamauchi's most consequential staffing decision in America was an act of triage, of giving away the person he thought least valuable. He did not choose Miyamoto for his genius. He chose him because he was available. The foundational myth of the modern video game industry rests on a busy man's shrug, a failed game's leftover hardware, and a joke about a reclusive property owner. The company's name may or may not mean "leave luck to heaven." Heaven, in this instance, did not require the instruction.
Cheaper Than the Cassette Vision
The Game & Watch arrived in 1980. It was Yokoi's handheld built from the technology in pocket calculators: a single game on a segmented LCD screen, with a clock and an alarm. It sold 43.4 million units worldwide and became one of the most successful products Nintendo had ever made. Yamauchi was pleased and unsatisfied. He believed it lacked the depth to be a long-term business. It was a toy, and he had already learned what happens to toys.
In 1982, Uemura's R&D2 team began work on a home console under the code name Project GAMECOM. The best-selling console in Japan at the time was the Epoch Cassette Vision, and Yamauchi's instruction to his engineers had a certain Kyoto-merchant brutality to it. The new machine should be more powerful than the Cassette Vision and cheaper than it. Not one or the other. Both. The team's working target was a system cheaper than its competitors whose performance no rival could surpass for at least a year.
Uemura's engineers pulled apart the Atari 2600 and the Magnavox Odyssey and set them aside as primitive. A Coleco demonstration of the ColecoVision impressed them with its smooth animation. Two engineers, Katsuya Nakakawa and Masahiro Ootake, carried an actual Donkey Kong arcade machine to the semiconductor maker Ricoh so its engineers could see what the chips needed to do. There they met Hiromitsu Yagi, a former Mitsubishi man who had designed the integrated circuits for the Color TV-Game consoles. Uemura had considered a modern 16-bit processor and instead settled on an inexpensive 8-bit chip based on the MOS Technology 6502, paired with a custom graphics chip from Ricoh. A keyboard, a modem, and a floppy drive were all proposed and rejected to hold down cost, although money was spent on a fifteen-pin expansion port for later add-ons. The directional pad came from the Game & Watch. Every choice pointed at a price.
To get that price, Yamauchi made Ricoh a promise: Nintendo would order a million units within two years. It was an enormous commitment for a company whose largest previous consoles had sold about a million units each, and it gave Ricoh the volume to cut its price. The Family Computer, which everyone called the Famicom, went on sale in Japan on July 15, 1983, for ¥14,800, about $150 at the time. It was deliberately designed to look like a toy, in red and white, with two hardwired controllers tucked visibly into its sides. It launched with Donkey Kong, Donkey Kong Junior, and Popeye. Five hundred thousand units sold in the first two months.
Then consoles began to freeze. The fault was traced to a defective chip, and Nintendo voluntarily recalled every Famicom on store shelves just before the holiday season, suspended production, and reissued the machine with a new motherboard. It cost millions. It also meant that the first story consumers heard about a Nintendo product going wrong was a story about Nintendo taking it back. By the end of 1984 more than 2.5 million Famicoms had sold in Japan. The Ricoh promise had been kept easily.
A subtler inheritance came out of the third-party arrangements. Namco, a major arcade developer, wanted to publish games for the Famicom but had no means of producing cartridges. Nintendo charged it 30 percent of each game sold: 10 percent as a licensing fee for the console and 20 percent for manufacturing the cartridge. That 30 percent became a de facto standard in console and digital-storefront publishing for decades. When software developers argue today about the cut taken by app stores, they are arguing, at some remove, with the terms Nintendo set for Namco in 1984.
Not a Videogame in Any Way
In 1983 the American video game market died. Industry revenues fell from more than $3 billion to about $100 million between 1983 and 1985. Atari, Coleco, Mattel, and Magnavox were all gravely wounded by a flood of consoles and low-quality games. Retailers cleared their shelves and swore off the category.
Nintendo had been negotiating with Atari to sell the Famicom abroad as the "Nintendo Enhanced Video System." The contract was to be signed at the Consumer Electronics Show in June 1983. At the last minute, Atari's executives saw Coleco demonstrating Donkey Kong on its Adam home computer. Atari held the exclusive computer license for that game and took the demonstration as a betrayal. The misunderstanding was cleared up within a month, but by then Atari's finances were collapsing and its chief executive had left. The deal was never signed.
— Steve Bristow, Atari engineerRegrettably, it was my decision not to license the Nintendo system.
Yamauchi's diagnosis of what had happened to Atari was blunt, and he would state it publicly in 1986: too much freedom for outside developers, too much garbage on the shelves. His prescription, though, began with a kind of market intelligence his American rivals had missed. The home market was dead, but people were drifting back into arcades. So Nintendo built the VS. System, arcade hardware using the same chips as the Famicom, cheap to buy and easy to convert from one game to another. It was an embodiment of what Yokoi called "lateral thinking with withered technology." Between 10,000 and 20,000 units sold in 1984. By 1985 it was the highest-grossing arcade machine in the United States, and by the time the home console launched, nearly 100,000 VS. Systems were sitting in American arcades. Individual games, including VS. Tennis, VS. Baseball, and Duck Hunt, topped the arcade charts. Nintendo was using the arcades as a test market. Americans were playing Famicom games before they knew the Famicom existed.
The home machine, meanwhile, went through a series of disguises. It was pitched first as an "Educational Learning System," then as a home computer called the Nintendo Advanced Video System, with a keyboard, a cassette recorder, a BASIC cartridge, a musical keyboard, and wireless infrared peripherals. It was shown at the Winter Consumer Electronics Show in Las Vegas, January 5–8, 1985. Attendees admired the technology and disliked the keyboard. The press was merciless. Electronic Games reported in March 1985 that "the videogame market in America has virtually disappeared" and suggested Nintendo was making a miscalculation. Roger Buoy of Mindscape reportedly asked, "Hasn't anyone told them that the videogame industry is dead?" The historian Chris Kohler would later summarize the retail mood in three words, repeated: videogames were "dead, dead, dead."
Nintendo came back to the June show with a stripped-down, cheaper machine and a vocabulary designed to deceive. Gail Tilden, Nintendo of America's marketing manager, chose the terms. Cartridges became "Game Paks." The console became the "Control Deck." The whole platform became the "Nintendo Entertainment System." Lance Barr, a Nintendo of America product designer, had modeled the AVS on a Bang & Olufsen Beomaster 1900 receiver. When the cost-reduced prototype arrived from Japan, the American team nicknamed it "the lunchbox," and Barr and Don James added the two-tone gray, the black stripe, and the red lettering. The cartridge went into a front-loading chamber and disappeared from view, like a tape in a VCR. The machine was designed to look like anything but what it was.
— Gail Tilden, marketing manager, Nintendo of AmericaWe spent a lot of energy not calling it a videogame in any way.
The most important piece of the disguise was a small gray robot. R.O.B., the Robotic Operating Buddy, responded to flashes on the screen with mechanical movements. It was, by general agreement, not much fun. It did, however, reclassify the NES as a toy, and toys were a category American retailers still stocked. In a survey of 200 early NES owners commissioned by Nintendo in January 1986, the most common reason for buying the system was that children wanted the robot.
Arakawa chose New York City as the test market. Conventional practice was to test cheaply in a mid-sized city, and he picked the largest market in the country instead, with a $50 million budget. "If it's going to work in New York," Tilden remembered of his reasoning, "it will spread." The team worked out of a warehouse in Hackensack that was, in one participant's recollection, full of "rats and snakes and toxic waste." Don James called it "the longest and hardest I ever worked consecutive days in my life." Arakawa himself carried televisions up flights of stairs.
To get retailers to take the product at all, Arakawa made an offer that, according to the NES's historians, he did not clear with Kyoto. Nintendo would set up the displays and handle the marketing. Stores would get ninety days' credit on the merchandise and could return whatever didn't sell. They would pay nothing up front. The risk sat entirely with Nintendo.
— A New York retailer, agreeing to carry the NES in 1985It's your funeral.
About 500 stores in New York and New Jersey signed on. The flagship was a small area at FAO Schwarz, where a dozen playable consoles surrounded a giant television and real Major League Baseball players played Baseball and signed autographs, a familiar American ritual anchoring an unfamiliar Japanese machine. The test launch began on October 18, 1985. The mood on the street was not friendly. The mid-1980s were a time of trade friction and cheap Japanese knockoffs of American goods. A security guard told the crew he hoped they'd "fall flat." A woman walked up to Tilden and asked whether Nintendo was a Japanese company, then told her, "I hope you fail!" The very first NES sold, a Deluxe Set with all fifteen additional launch games, went to a quiet gentleman the team later realized worked for a Japanese competitor.
Nintendo said it sold nearly 90,000 units in nine weeks. In 1986 it went national, city by city, and sold 1.1 million consoles in the United States; the company estimated it could have sold 1.4 million if it had not run out of stock. Nintendo took $310 million of the $430 million in total American video game sales that year, an industry that had been worth $100 million the year before. By 1990 an NES sat in 38 percent of American households, compared with 23 percent for personal computers of any kind. That year, according to one account, Nintendo passed Toyota as the most successful corporation in Japan.
Americans started calling every console "a Nintendo." The company, alarmed that its trademark might become generic, printed posters for retailers correcting them: "There is no such thing as a Nintendo." Nintendo, the posters explained, was "an adjective, not a noun." It is hard to think of a more perfect expression of Yamauchi's worldview. The name was not to be used carelessly, not even by the people who loved it.
The Gatekeeper
Behind the gray lunchbox sat a chip called the 10NES. Every licensed cartridge carried one, and the console would not play a game that lacked it. Only Nintendo and the developers it licensed had access. Unapproved software, whether pirated copies or opportunistic junk, simply would not run. When an Atari subsidiary called Tengen reverse-engineered the chip, Nintendo sued for patent infringement and won.
The chip was the enforcement mechanism for a set of terms that read like the regulations of a closed guild. Licensees could publish only a handful of Nintendo titles a year; accounts differ on whether the ceiling was three or five, and the difference matters less than the principle. A game released on Nintendo's system could not appear on a rival's for two years. Nintendo decided how many cartridges a licensee received, required a minimum order, and controlled how much space each publisher got in Nintendo Power, the company's own magazine, which reached a circulation of 1.5 million. Games carried an Official Seal of Quality, which Nintendo advertised as a guarantee of "excellence in workmanship, reliability, [and] entertainment value." Content rules in the United States barred nudity, profanity, blood, drugs, political messages, and religious symbols, with an exception for faiths nobody practiced anymore, such as the Greek pantheon. Yamauchi personally believed that licensing pornographic games would tarnish the company's image permanently. He was strict about approvals and yet, oddly, liberal about access to the tools: the system was made easy to develop for, because he believed that artists, not technicians, make excellent games.
Some of this was wisdom. Sid Meier, the designer of Civilization, would later name the Seal of Quality one of the three most important innovations in the history of the medium. Some of it was simply power, and power has a way of attracting regulators. Konami got around the title limits by founding shell publishers such as Ultra Games. Smaller companies could not afford to. In 1991 Nintendo settled Federal Trade Commission charges that it had threatened to cut off retailers who discounted the NES, at a cost of roughly $25 million to $30 million. In 1997 European authorities forced it to rewrite its licensing contracts, ending the title caps, the mandatory pre-approval, and the requirement that third-party cartridges be manufactured by Nintendo. In 2002 the European Commission fined it €149 million for price-fixing across the single market during the 1990s, later reduced on appeal to €119 million.
The market eventually tested the walls from outside. In 1990 Sega hired a former Mattel marketer named Tom Kalinske to run its American operation. Kalinske ignored Nintendo's core audience of younger children and went after teenagers with jump-cut television ads and a slogan built out of his rival's name: "Genesis does what Nintendon't." Around 1990 Nintendo held roughly 80 percent of the global market. Within a few years its American share had fallen to about 45 percent, and developers moving to Sega forced it to drop some of the NES-era restrictions. The Super Famicom, another Uemura design, sold out its first 300,000 units in hours when it launched in 1990, and the SNES ultimately outsold the Genesis 49.1 million to about 40 million. Nintendo still won that war, but not everywhere, not easily, and not on the old terms.
The costliest episode was a partnership. Around 1987 Nintendo had brought in Sony, and a Sony engineer named Ken Kutaragi, to build the Super Famicom's sound chip. The collaboration expanded into a CD-ROM drive for the console, publicly named the Super NES CD-ROM in 1991. Before it shipped, Nintendo re-read the licensing terms and concluded that Sony would collect a disproportionate share of revenue from disc-based games. Renegotiation went nowhere. Sony announced the partnership at the Consumer Electronics Show. The next day, Nintendo announced it would work with Philips instead. The Philips venture produced four games starring Nintendo characters, Link: The Faces of Evil, Zelda: The Wand of Gamelon, Hotel Mario, and Zelda's Adventure, all of them critically savaged. Sony, humiliated and now holding a nearly finished design, kept going on its own. The result was the PlayStation, and it attracted exactly the developers who had chafed under Nintendo's rules.
It is difficult to find a cleaner illustration of how a single virtue curdles. The instinct that kept rubbish off Nintendo's shelves in 1985, the refusal to let anyone else own a piece of the platform, created in 1991 the most dangerous competitor the company would ever face.
A Debt to Seattle
In 1991 the Seattle Mariners were put up for sale. If no local buyer came forward, the team would move to Florida. A consortium of Seattle-area business owners organized as The Baseball Club of Seattle and went looking for serious money. Bill Gates declined. Slade Gorton, a U.S. senator from Washington who had dealt with Nintendo during Senate hearings on intellectual-property theft, reached Yamauchi through Howard Lincoln, the lawyer who had once drawn up Far East Video's contract and was now running Nintendo of America.
Yamauchi agreed to put up $75 million of a $125 million bid. The Mariners were interested. Major League Baseball was not, and objected specifically to 60 percent of an American team being controlled by someone from Japan. It took sustained pressure, including from the owner of the Texas Rangers, George W. Bush, before the league relented. Even then Yamauchi was barred from holding more than 50 percent of the voting interest. The man who had taken over his family's company on the condition that no one share it with him now accepted, in America, a condition that he could never fully control what he paid for.
He explained the purchase in language nearly unheard of from a Japanese industrialist at the height of the trade wars. It was, he said, "not being undertaken as business, but rather as a form of community service." Japan had the United States to thank for its "miraculous growth." Nintendo had been allowed to do business in America. "I owe a great debt to the United States," he said, "and I want to do everything in my power to pay it back." One could read this as public relations, and it was surely partly that; the NES crew had been told on the streets of New York that people hoped they would fail. But it fits a pattern of gestures in the early 1990s. That same period saw a $3 million donation to the Massachusetts Institute of Technology, which the Associated Press said was meant to "help it create games that think," a response to American fears that video games were ravaging young minds.
Having bought the team, he did almost nothing with it. He assigned his rights to Nintendo of America. He never attended a game. The one game he did plan to attend, a Mariners series scheduled for Japan in 2003 that he meant to see in Kyoto, was moved to the United States because of the impending war in Iraq. Nintendo sold most of its stake in 2016, three years after his death, and kept 10 percent.
The ownership was hands-off in a way his ownership of Nintendo never was. There is a clarity to it. He knew which games were his.
The Man Who Didn't Play
For a man running the most important video game company in the world, Hiroshi Yamauchi rarely played video games. One of the few exceptions was Igo: Kyuu Roban Taikyoku, a computer version of Go developed by Henk Rogers. Rogers was the Dutch-born publisher who had brought Tetris to the Game Boy, a feat of negotiation with the Soviet trade agency Elektronorgtechnica that helped make the handheld Nintendo's greatest hit of its era. The Game Boy launched in 1989. Its initial Japanese inventory of 300,000 units sold out within two weeks, and the line, together with its color successor, eventually sold 118.69 million units. Rogers also described Yamauchi, bluntly, as an autocrat who fired people for disagreeing with him.
What Yamauchi actually loved was Go, the ancient board game of territory and encirclement, at which he achieved a high rank, along with the hanafuda games of his family's trade. The detail explains more than it first appears. Go rewards the player who sees the whole board and cares less about any individual stone than about the shape of what it controls. A man with that temperament would not need to enjoy Super Mario Bros. to understand what it was worth. He needed only to see where its pieces sat.
By 1995, at sixty-eight, he was, in the words of Next Generation magazine, "the most feared and respected man in the videogame industry," and still very much in charge. He was also about to have his worst decade.
The Virtual Boy launched in Japan on July 21, 1995. It was Yokoi's design, a tabletop headset that rendered games in stereoscopic 3D using two oscillating mirrors, in black and four shades of red. Users got headaches. Every game offered to pause itself automatically every fifteen to thirty minutes, and the packaging warned of eye strain and, in rare cases, seizures. Only twenty-two titles were ever made. Yamauchi reportedly told a press conference he still had faith in it. The machine was discontinued within months and remains the company's largest commercial failure. Amid the wreckage, Yokoi left. His last product for Nintendo was the Game Boy Pocket, and he resigned about a week after it went on sale. He then helped design the WonderSwan, a rival handheld.
The two men had made each other. It was Yamauchi who spotted a maintenance engineer playing with a homemade claw and turned him into the architect of the Ultra Hand, the Game & Watch, and the Game Boy. In 1997, driving on the Hokuriku Expressway in Ishikawa Prefecture, Yokoi rear-ended the car ahead of him. He stepped out to inspect the damage and was struck by a passing vehicle. He died two hours later, at fifty-six.
The Nintendo 64 had arrived in 1996, praised by critics and home to Super Mario 64 and The Legend of Zelda: Ocarina of Time, which Guinness would call the most critically acclaimed video game ever made. It still lost the decade to the PlayStation, the machine built from the partnership Nintendo had walked away from. Third-party developers cited the lower cost of CDs compared with Nintendo's cartridges and fled. The console sold about 33 million units. That same year, 1996, Yamauchi mused publicly about retiring and admitted he could not think of anyone good enough to replace him. In 1997 he set a deadline: he would retire by 2000, whether or not a successor had been found, when the 64DD disk drive shipped. The 64DD came out in 1999, only in Japan, mostly through a website called Randnet, with seven games. He did not retire.
His children, the record notes flatly, disliked that he spent more time on Nintendo than on them. He had been described as stern, single-minded, devoted to the business. His wife Michiko had suffered several miscarriages and was often ill; she gave birth to Yoko in 1950, and to Fujiko and a son, Katsuhito, in the late 1950s. It was the family life of a man for whom the company was the family, or at least the part of the family he knew how to run.
Leaving Luck to Heaven
In 1993, HAL Laboratory, a small developer that had made games for Nintendo systems since 1984, was nearing bankruptcy. At Yamauchi's direction, Nintendo stepped in and turned it into a second-party studio. The rescue came with a condition, and by now the reader will recognize the grammar. HAL would be saved only if one particular employee became its head: a programmer named Satoru Iwata, who had been with the studio since 1980, shortly after its founding, and had designed the Famicom games Balloon Fight and Adventures of Lolo. Under Iwata, HAL produced or helped produce EarthBound, Super Smash Bros., and the Game Boy Color sequels Pokémon Gold and Silver. In 2000 Iwata left HAL to run Nintendo's corporate planning division in Kyoto.
The GameCube arrived in 2001. Yamauchi believed its focus, its low price, and hardware designed so developers could "easily create games" would set it apart. It had no DVD player, while the PlayStation 2 did. Its tiny proprietary discs held only 1.6 gigabytes. Its handle and its cartoon-colored Wind Waker made it look, to teenagers eager to leave childish things behind, like a lunchbox of a different kind. It sold 21.7 million units, the weakest home console Nintendo had made to that point. In 2003 its early struggles would push the company to its first half-year loss since going public in 1962.
On May 24, 2002, Yamauchi resigned as president and became chairman. He had surprised Iwata by offering him the job, and Iwata accepted. For the first time since a craftsman's son married into a lime-dealing family in the nineteenth century, the president of Nintendo was not a Yamauchi, not by birth, not by marriage, not by adoption. That same year Arakawa stepped down at Nintendo of America. The sons-in-law were gone.
Yamauchi left behind something less visible than a successor: money. Unlike most Japanese companies, Nintendo kept an enormous cash reserve instead of spending surplus funds on investments, buybacks, or dividends, a policy he had set. Analysts at the time described the "war chest" he had begun building before his departure. That war chest carried Nintendo through the GameCube and, a decade later, through the Wii U, the least successful console in its history. Iwata used the room to build the Nintendo DS and the Wii, two of the best-selling machines ever made. Nintendo's rise in the Wii years made Yamauchi, who still owned about 10 percent of the company, Japan's richest person in 2008, with an estimated fortune of $7.8 billion. By 2013, as smartphones pulled players away from dedicated consoles, that figure had fallen to $2.1 billion, still the thirteenth largest in Japan.
On June 29, 2005, citing his age and his confidence in the company, he left the board. He refused his retirement pension, reportedly between $9 million and $14 million. He gave money to build a cancer treatment center in Kyoto. And he founded Shigureden, a museum devoted to the Ogura Hyakunin Isshu, the classical anthology of one hundred poems by one hundred poets that Japanese families have long played as uta-garuta, a card game of matching the second half of a verse to its first. Fusajiro's shop had begun selling uta-garuta decks in 1890, the year after it opened.
Something else should be recorded here, because it complicates the portrait of a man who cut family out of his life with a single condition. Years after abandoning him, Shikanojo Inaba came back to see his son. Hiroshi refused to speak to him. When Hiroshi was nearing thirty, his father died of a stroke, the same illness that had put the grandson in the president's chair. At the funeral, Hiroshi met his father's wife and their four daughters. He had never known they existed. He grieved for months, regretting the silence he had chosen, and began visiting his father's grave.
Michiko died on July 29, 2012, at eighty-two. Hiroshi Yamauchi died of complications from pneumonia on September 19, 2013, in Sakyō-ku, Kyoto, at eighty-five. Nintendo issued a statement that its staff were mourning their former president. His son Katsuhito and grandson Banjō, the pair whose names, it later emerged, had inspired the title of the Rare game Banjo-Kazooie, inherited the family's shares and sold more than a billion dollars' worth back to the company. Iwata had died two years later, on July 11, 2015, of bile duct cancer, at fifty-five.
The last Famicom was made on September 25, 2003. Its serial number was HN11033309. Nintendo kept it. In October 2024 the company opened the Nintendo Museum on the site of its old Uji Ogura plant, where it had once printed hanafuda.
In Kyoto, the museum he founded after he let go of everything else holds a hundred poems. For generations they have been played the same way: read aloud, half a verse at a time, while someone reaches across the floor for the right card.
Part IIThe Playbook
The lessons of Yamauchi's career are not the tidy ones found in management literature. He was autocratic when collaboration is fashionable. He hoarded cash when capital efficiency is the creed. He judged products he did not use and succeeded in a medium he did not enjoy. What follows are the operating principles that can be reconstructed from his decisions. They are grounded in the record above and include his failures alongside his wins, because with Yamauchi the two are rarely separable.
The principles
- 1.Clear the succession before you clear the strategy.
- 2.Visit the incumbent's headquarters and measure the ceiling.
- 3.Borrow legitimacy to cross a taboo.
- 4.When the product dies, keep the channel.
- 5.Recruit from the factory floor, not the org chart.
- 6.Demand both: more powerful and cheaper.
- 7.Enter a dead market through its living door.
- 8.Make scarcity your quality control.
- 9.Know when the gate becomes a wall.
- 10.Run two teams against each other and keep the gavel.
- 11.Hoard cash like a card maker.
- 12.Choose your successor outside your blood.
Principle 1
Clear the succession before you clear the strategy
Yamauchi's first strategic act was not about products at all. Before accepting the presidency at twenty-one, he negotiated the terms of his own authority: no other family member would work at Nintendo. His cousin was fired. When employees struck, he dismissed the long-serving workers who challenged him. Only then did he rename the company, consolidate its manufacturing, and push it into plastic cards.
Most inheritors reverse the order. They try to win legitimacy by pleasing the incumbents, then attempt change from inside a web of obligations they have already accepted. Yamauchi saw that a young leader without experience has exactly one moment of leverage, the moment before he says yes, and he spent it entirely on the question of who else could claim the name. Everything that followed, including the ability to be the "sole judge" of new products for five decades, depended on that first condition.
The cost was real. Kent's "notoriously imperialistic" and Rogers's "autocratic" are not compliments, and a culture built around one man's instincts is only as good as those instincts. But a founder-successor without clear authority is not a leader. He is a regent.
Tactic: Before accepting any inherited leadership role, negotiate the structural conditions of your authority, including who reports to whom and who else can claim legitimacy, because that leverage disappears the moment you sign.
Principle 2
Visit the incumbent's headquarters and measure the ceiling
The 1956 trip to the United States Playing Card Company is the hinge of Yamauchi's early career. He went expecting to learn how the world leader operated and came away with a better lesson: the world leader in his category was small. The Cincinnati office told him that winning the card business outright would still leave Nintendo in a modest room.
This is a form of market sizing that no spreadsheet replicates. Revenue projections tell you how big your share might become. The physical plant of the category leader tells you how big the category actually is. Yamauchi's subsequent flailing, through taxis, rice, and vacuum cleaners, was clumsy, but it came from an accurate diagnosis. The failure was in the cure, not in the reading of the ceiling.
Tactic: Physically visit the strongest company in your category, because its offices, headcount, and ambitions tell you the true ceiling of your market more honestly than any forecast.
Principle 3
Borrow legitimacy to cross a taboo
Twice, Yamauchi faced a market that was not so much uninterested as morally suspicious. In 1959, Western playing cards in Japan meant gambling. He licensed Disney characters and added a booklet of family games, and 600,000 packs sold in a year. In 1985, video games in America meant a crash, junk, and shame. Nintendo of America's answer (a toy robot, a VCR-like chassis, and a vocabulary of "Game Paks" and "Control Decks") followed the same logic. As Gail Tilden said, they spent a lot of energy not calling it a videogame in any way.
The move is to find an adjacent, trusted category and let it vouch for you. Mickey Mouse vouched for cards. R.O.B. and the toy aisle vouched for the NES. Neither was the real product; both were passports.
Tactic: When your category carries stigma, attach your product to a trusted adjacent brand, format, or retail aisle, and rename the product's parts so that customers encounter it without the old associations.
Principle 4
When the product dies, keep the channel
The Ultra Hand was not the breakthrough. The distribution network it traveled through was. Disney cards had given Nintendo shelf space in Japanese toy stores, and when cards collapsed in 1964, that network was the surviving asset. Yamauchi ran Yokoi's toys straight through it. Fusajiro had understood the same thing in 1907, when the tobacco monopoly's national reach turned a Kyoto workshop into Japan's largest card company.
Contrast the failures. The taxi company, instant rice, and the vacuum cleaner had no relationship to Nintendo's existing channels, and all of them failed. Diversification worked only when it reused the pipes.
♣
Yamauchi's Bets, Scored
Wins clustered where Nintendo reused an existing channel or talent pool; losses clustered where it didn't.
| Year | Bet | Channel reused? | Outcome |
|---|---|---|---|
| 1959 | Disney playing cards | Card distribution, toy stores | Win |
| 1960s | Daiya Taxi | None | Loss |
| 1960s | Instant rice venture | None | Loss |
| 1966 | Ultra Hand | Toy-store network from cards | Win |
| 1973 | Laser Clay ranges | Light-gun tech, new venues | Hit, then oil-crisis loss |
| 1983 | Famicom | Arcade chips, Ricoh, Donkey Kong | Win |
| 1984 | VS. System | American arcades | Win |
| 1991 | Philips over Sony | None; new partner | Loss |
| 1995 | Virtual Boy | Yokoi, but a new form factor | Loss |
| 1993 | HAL rescue, on condition Iwata leads | Existing developer partner | Win |
Tactic: Before diversifying, list the distribution relationships you already own, and give priority to new products that can travel through those same channels on day one.
Principle 5
Recruit from the factory floor, not the org chart
Nintendo's two most important creative figures of the twentieth century were not hired as creative figures. Yokoi was brought in to maintain assembly-line machines; Yamauchi noticed him playing with a homemade toy. Miyamoto was a casing designer with no engineering background, assigned to the American subsidiary's crisis because nobody more senior could be spared. Uemura, who designed the Beam Gun, the Famicom, and the Super Famicom, came up through the same unglamorous corridors.
Yamauchi's belief that artists, not technicians, create excellent games was a hiring philosophy disguised as a design philosophy. He was looking for taste and play, not credentials. And he acted fast: from the claw on the factory floor to a Christmas product in months.
The Donkey Kong story adds a humbling footnote. Yamauchi assigned Miyamoto as an act of triage. Sometimes the talent is visible only in hindsight. The practical lesson is to put untested people on real problems more often than seems prudent.
Tactic: Walk your operations floor looking for people building things they weren't asked to build, and give at least one of them a real commercial deadline this quarter.
Principle 6
Demand both: more powerful and cheaper
Yamauchi's brief for the Famicom was deliberately contradictory: beat the Cassette Vision on performance and on price. Engineers normally treat this as a trade-off to be negotiated. Yamauchi treated it as a constraint to be engineered around, and the team responded with a cheap 8-bit processor, a custom graphics chip, rejected peripherals, and a directional pad borrowed from the Game & Watch.
The second half of the move was commercial. He promised Ricoh a million units in two years, a volume commitment that brought down unit cost. He bought his low price with conviction. When the chips failed, he recalled every unit before the holidays rather than let the product's reputation rot.
Tactic: Set specifications that force engineers to beat the market leader on two dimensions at once, then back the design with a volume commitment large enough to make the price achievable.
Principle 7
Enter a dead market through its living door
In 1984 every American retailer knew home video games were finished. Yamauchi looked more closely and saw that people were returning to arcades. The VS. System, Famicom hardware in an arcade cabinet, gave Nintendo a revenue stream, a brand, and, above all, a live test lab. Games debuted in arcades, and the best of them became the NES launch lineup. By the time the console reached New York, nearly 100,000 VS. Systems had built Nintendo's reputation in American arcades.
A "dead" market is rarely uniformly dead. There is usually a segment where demand survived, and that segment can serve as both beachhead and focus group.
▲
The Road Back Into America
How Nintendo re-entered a market the press had declared dead.
1983
Atari deal collapses at CES; U.S. industry begins falling from $3B toward $100M.
1984
VS. System launches in arcades on Famicom hardware; 10,000–20,000 units sold.
Jan 1985
Advanced Video System, pitched as a home computer, meets a lukewarm response in Las Vegas.
Jun 1985
Redesigned as the Nintendo Entertainment System, with R.O.B. and "Game Paks."
Oct 1985
New York test launch; about 500 retailers carry it on 90-day credit and full returns.
1986
National rollout; 1.1M consoles, $310M of a $430M industry.
1990
NES in 38% of U.S. households.
Tactic: When analysts declare your market dead, find the segment where customers are still spending, and use it to generate revenue and test products before you re-enter the mainstream.
Principle 8
Make scarcity your quality control
Yamauchi blamed Atari's collapse on too much freedom for outside developers. His response was the most elaborate gatekeeping apparatus the consumer electronics industry had seen: a lockout chip, annual title limits, two-year exclusivity, mandatory approval, content rules, and a Seal of Quality that turned restriction into a consumer promise. The 30 percent fee first charged to Namco became the economic template for platform publishing for decades.
The insight is that on a platform, the supply of bad products is an externality every participant pays for. By controlling supply, Nintendo protected the value of every good game on its system, and its own hardware. Scarcity was not a side effect of the model. It was the product.
Tactic: If you run a platform, put a gate on supply before the market floods, and brand that gate as a promise to customers rather than as a restriction on partners.
Principle 9
Know when the gate becomes a wall
The same instinct that saved the industry in 1985 nearly cost Nintendo it in the 1990s. Sega exploited the licensing rules to win developers. The FTC, and later European regulators, went after Nintendo's pricing and contracts. And the refusal to let Sony earn outsized revenue on CD-based games, handled with a public humiliation at CES, created the PlayStation, which then welcomed every developer Nintendo's terms had frustrated. The N64's cartridges, costlier than CDs, drove still more third parties away.
⚖
The Two Faces of Control
The same rules produced opposite results in different market conditions.
| Mechanism | 1985: market flooded, trust gone | 1991–1997: rivals present |
|---|---|---|
| Lockout chip and approvals | Restored trust | Regulatory scrutiny |
| Title limits and exclusivity | Stopped shovelware | Pushed developers to Sega |
| Refusing partner revenue share | Kept margins | Created the PlayStation |
| Proprietary media | Anti-piracy | Higher costs than CD rivals |
Control is a response to conditions, not a permanent identity. When partners have nowhere else to go, rules protect everyone. When they do have somewhere to go, the same rules are an invitation to leave.
Tactic: Review your partner terms every time a credible competitor appears, and ask not whether your rules are fair but whether your best partners now have a better alternative.
Principle 10
Run two teams against each other and keep the gavel
In 1978 Yamauchi split research and development into R&D1 under Yokoi and R&D2 under Uemura, and later added a third and a fourth unit. The teams overlapped in scope and competed for his approval. One researcher described the arrangement as unique, and it produced the Game & Watch, the Game Boy, the Famicom, and the Super Famicom from different rooms of the same company.
Internal competition is corrosive without a single, final judge. Yamauchi was that judge, approving products on instinct and with no appeal. The structure works only if the person at the top is willing to choose and to live with the results. That includes the Virtual Boy, which his faith in Yokoi's team allowed to ship.
Tactic: For critical product bets, charter two independent teams with overlapping mandates and name one decision-maker, in advance, who will pick the winner.
Principle 11
Hoard cash like a card maker
The card business taught Yamauchi that demand can vanish in a single season. He saw the stock fall from ¥900 to ¥60 after the Olympics and watched the oil crisis erase several billion yen of toy profits. The lesson became policy: Nintendo would keep a large cash reserve instead of spending surpluses on investments, buybacks, or dividends. Observers called the reserve he built before his retirement a war chest.
It paid off after he left. The GameCube produced Nintendo's first half-year loss since 1962; the Wii U became its worst-selling console. Both times, the reserve gave management room to take long bets instead of retreating. As of 2025 it was estimated at about ¥1.5 trillion, roughly 120 percent of annual sales. Capital-efficiency purists hate this. Hit-driven businesses should not listen to them.
Tactic: If your revenue depends on hits, set a cash reserve target measured in years of operating costs rather than months, and treat it as a strategic asset, not idle capital.
Principle 12
Choose your successor outside your blood
The man who took power by clearing family out of the building ended by clearing family out of the succession. He saved HAL Laboratory in 1993 on the condition that Satoru Iwata lead it, watched Iwata produce hits, brought him to corporate planning in 2000, and in 2002 surprised him with the presidency. It was the first time since 1889 that the top job went outside the Yamauchi line. He left the board in 2005 citing confidence in the company, and refused his pension.
Yamauchi had publicly admitted in 1996 that he could not think of a good replacement, and missed his own 2000 retirement deadline. But when he finally chose, he chose on the record rather than on the name. He tested the candidate in a real crisis, on a condition he set himself, and waited years before handing him the keys.
Tactic: Identify potential successors by giving them turnaround mandates years in advance, and choose based on what they did with that authority rather than on relationship or lineage.
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Part IIIQuotes and Maxims
In their words
— Hiroshi Yamauchi, 1986Atari collapsed because they gave too much freedom to third-party developers and the market was swamped with rubbish games.
— Hiroshi Yamauchi, on buying the Seattle Mariners, 1992Not being undertaken as business, but rather as a form of community service.
— Hiroshi Yamauchi, 1992I owe a great debt to the United States, and I want to do everything in my power to pay it back.
— Next Generation magazine, November 1995The most feared and respected man in the videogame industry.
Maxims
- Negotiate authority before you accept it. The leverage of an inheritor exists only in the moment before he says yes.
- Measure the ceiling in person. The category leader's office tells you how big the category really is.
- Borrow trust to cross a taboo. Mickey Mouse sold cards to families, and a toy robot sold the NES to retailers who had given up on video games.
- The channel outlives the product. Toys survived because they traveled through the same stores the cards had.
- Look for the person playing on break. Nintendo's greatest designers were hired to fix machines and build casings.
- Refuse the trade-off. Ask for more powerful and cheaper at the same time, and buy the price with a volume commitment.
- A dead market has a living door. Find where customers are still spending, and use it to test before you return to the mainstream.
- Scarcity is a quality promise. On a platform, keeping bad products out protects everyone who is let in.
- Every gate eventually becomes a wall. Rules that save a flooded market will drive partners away once they have alternatives.
- Hoard for the bad years. In a business built on hits, cash is what buys the next bet.
