Dialogue 01

The concept of inclusion isintegral to sustainability
management.

Ken Shibusawa
ChairmanCommons Asset Management, Inc.

Co-Creation, All Customers,Inclusion, and Happiness     MARUI GROUP’s vision is for a flourishing and inclusive society in whichhappiness is available to all. It is not enough for only certain people to prosper. Society cannot be said tobe flourishing if all people do not experience prosperity. The following is a discussion between Ken Shibusawa,a long-term investor and chairman of Commons Asset Management, Inc., a company that has fully
embraced the concept of inclusion, and MARUI GROUP President Hiroshi Aoi during which they talk of
the new potential brought about by the perspective of inclusion.

Sustainability in Business Realized through Inclusion

Dialogue 01

The direction of our business strategies
coincided with the resolution ofsocial issues from an inclusion standpoint.

Hiroshi Aoi
President and Representative Director
Representative Executive Officer
MARUI GROUP CO., LTD.

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Aoi: MARUI GROUP’s sustainability management isbased on four core themes and linked to the principlesof the United Nations Sustainable Development Goals.
Among the core themes are customer diversity andinclusion and, on an internal basis, workplace inclusion.
In this manner, inclusion is a major focus for theCompany. We have previously spoken of the concept of“all customers,” but this concept lacked clarity. We wereable to pinpoint the source of this lack of clarity when theSustainable Development Goals put forth the idea ofinclusion as incorporating everyone and leaving no one
behind. This idea had the same goal as MARUI GROUP’sco-creation management, which aims to expand theintersection between the interests of all stakeholders.
We thus realized that “inclusion” more concisely communicated our goals than the idea of “all customers.”
Shibusawa: The concept of inclusion is integral tosustainability management. I came to realize this fact
when I read Rongo and Soroban (“The Analects ofConfucius and Abacus”) by Eiichi Shibusawa, my greatgrandfather. Eiichi Shibusawa is viewed as the father ofcapitalism in Japan and is known to have contributed tothe establishment of around 500 companies and 600
universities, hospitals, and social welfare institutions. In achapter on rational management in Rongo and Soroban,
he describes the idea that, no matter how rich a manager
may become, the happiness this wealth grants will befleeting if a large portion of society falls into poverty as aresult. This idea is the same as the concept of sustainability, which it would seem, existed even 100 years ago.

Aoi: In the past, MARUI GROUP’s business succeeded byfocusing on younger generations. After the turn of thecentury, however, the operating environment underwent
drastic change, and it became clear that continuing tofocus only on products for younger generations would
result in an unsustainable business and invite risks. This
realization notwithstanding, our past successes had
caused us to become trapped by a sense of identity thatassociated MARUI GROUP with younger generations,and we were unable to break away. The chance to escapethis predicament came with the opening of a new store in
front of Yurakucho Station in Tokyo, which took placearound that time. Yurakucho is an area frequented bypeople of all ages, meaning that this new Marui would
have to win the support of both younger and older generations. This was what inspired us to broaden our focus
from younger generations to all ages.
Shibusawa: This ability to evolve together with thechanging operating environment illustrates MARUIGROUP’s affinity with sustainability.
Aoi: This change brought about increases in both customers and earnings. Our next step was to expand therange of sizes we offered. A prime example of these
efforts can be seen in shoes. Previously, shoes had only
been available in sizes near the middle of the bell curve,and shoes were not offered for foot sizes that deviatedtoo far from the average foot size. People with such footsizes therefore could not find the shoes they sought,
forcing them to pay exorbitant amounts for custom-madeshoes or to wear sneakers despite wanting high heels.
This situation deprived specific groups of people ofcertain benefits of society. It is often said that the05

Dialogue 01

number of customers is declining due to a shrinking
population. However, from the perspective of inclusion,
we will see that many potential customers are, in fact,
being left behind. This realization led us to work toinclude such individuals, which in turn drove the growthof our business. In this manner, the direction of our business strategies coincided with the resolution of social
issues from an inclusion standpoint.

Danger of Eradicating Inconsistency and Inefficiency    Shibusawa: There are two schools of thought withregard to efficiency. One is a mechanical approach thatsees value as being born from efficiency and rationality.
Throughout my career in the investment world, I haveused this approach, believing the increased efficiency iscertain to generate corporate value. However, blindly
pursuing efficiency without entertaining new possibilities
bears the risk of excluding exciting new ideas. The otherschool of thought sees life as inherently inconsistent andinefficient, presenting the possibility of new discoveriesarising out of inefficiency. Innovation is at times theprocess of taking something that initially seemed to beinconsistent or inefficient and linking it to a new vision
for the world to create something never seen before.
For this reason, it is dangerous to attempt to eradicate
all inconsistency and inefficiency from the world. Thisidea was in part behind my establishment of Commons
Asset Management.
Aoi: A company is not like a machine, but is rather driven
by people and is therefore like a living organism.
Moreover, companies are not sustained exclusively by
their employees, but are rather supported by entire
ecosystems comprising their various stakeholders. In
other words, a company is a place that is formed byvarious organic relationships.
Shibusawa: People sometimes speak of two different
types of power. One is the power to increase efficiency.
Although this power is necessary, it can only be exhibitedin comparison to things that already exist and therefore
cannot give birth to something completely new. The othertype of power is the power to create new things, sometimes by incorporating inconsistency. There cannot betrue progress without this power. The idea of co-creationis also linked to this type of power. I therefore think this isa concept that requires more attention.
Aoi: You speak of the idea of focusing on “ands” versus“ors.” Inconsistency is one of the fundamental reasons

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why engagement is important. Two people will no doubt
have differing views, making ideas appear in terms of“ors.” Focusing only on these differences or inconsistencies will make one unable to see the similarities in theirviews. However, if we change our perspective, we willcertainly find similarities or shared aspects—the “ands”
of their views. At MARUI GROUP, we see corporate value
as building upon these “ands.”
Shibusawa: MARUI GROUP describes corporate value
as arising from the intersection of five rings of stakeholders. I see these rings as having elasticity. Engagement iswhat moves these rings. If this movement can bedirected toward the center of the intersection, the intersection between the interests of these stakeholders will
no doubt grow larger. Accordingly, while it may be possible to entrust the efficiency-increasing power to theorganization, the creating power, the power that goesbeyond judging current situations to foresee the future,must be the power of management.

Necessity of Inclusion for Future Generations    Aoi: Around New Year’s 2017, I watched an interview
with people who had just reached adulthood in which
they were asked about their resolutions for that year, andthe responses were quite shocking. Around 70% of thequestioned individuals expressed concern for the futureand in relation to money. Not knowing exactly how toaddress these concerns, they would resort to conservation and saving. Perhaps better than these options would

be the approach of making gradual, cumulative investments to save and increase one’s money with time. This
interview reinforced the idea that it was our mission to
inform young adults of this approach.
Shibusawa: Saving money for the future is a prudent
decision. However, the annual interest rate offered onbank deposits is only 0.002% in Japan. This means that
if one were to save ¥10,000, roughly U.S.$100, over
20 years, the 0.002% interest rate would result in it only
growing to ¥10,020. In this manner, saving alone cannot
produce sufficient results. Conversely, the annual growthrate of 3% in the global population suggests that thebase growth of the global economy will be about 3%
each year. A service that will take advantage of this fact
is Tsumitate NISA, which is slated for launch in January
2018. This service provides tax exempt dividends andtransfer gains over a 20-year period. While the maximum
amount that can be invested in a year is ¥400,000,
which may seem a bit low, this equates to ¥33,333 amonth, a level that is sufficient for investments conducted as part of normal life. After 20 years, it is likelythat the amount returned will be substantially larger thanthe collective principal of ¥8,000,000 invested over thisperiod. If one were to start investing in their 20s, theywould have accumulated a substantial amount of assets
by the time they were in their 40s. I hope that younger
people will catch on to this fact as soon as possible.
While it is important to be satisfied with what one has,
it is equally important to understand what necessities
one lacks. MARUI GROUP is poised to build upon thisconcept by introducing the new perspective of retailingin financial services.
Aoi: MARUI GROUP has long been engaged in retail.
Looking back, I realize that it was the joy brought about
by earning the gratitude of customers that has been oursource of motivation. We have thus responded to thevarious changes society has undergone by considering
what services would bring the greatest joy to our customers at any given time. Examining what services we canbest provide, we have sometimes been led to start fromzero. Our business has changed as a result. We are now
rapidly transitioning to a real estate model; our stores aretransforming into showroom-type spaces or sources of
new experiences and venues for consulting; and ourmethods of distributing products are increasingly using
an e-commerce approach. Nevertheless, our connection
with customers is still retail in nature. However, the definition of “retail” is changing for MARUI GROUP. This new
definition of “retail” goes beyond selling products toinclude the provision of retail finance and other financial
and non-financial services.
Shibusawa: That is truly an example of the creating power
behind co-creation. I am confident in MARUI GROUP’s
ability to create new innovations by incorporating thepower of different fields. The word “invest” comes fromthe Latin word “investire,” which means “to clothe in, cover,or surround.” In this manner, investment is not simply
about sinking funds into something, but is rather aboutsurrounding oneself with various types of growth andperspectives. Based on this idea, I hope to open the eyesof people who have only ever seen investment in thetraditional sense and help them see how anyone caneasily invest to accumulate the assets that will help themin their future.

Ken Shibusawa
Chairman, Commons Asset Management, Inc.
Executive Director, Shibusawa Eiichi Memorial Foundation
Director, Keizai Doyukai

After working at a foundation operating in the field of international relations,
Ken Shibusawa acquired a Master of Business Administration in the UnitedStates and then joined the financial industry. Working at foreign financial
institutions in Japan, he was involved in the dealing of Japanese government
bonds and currency options and the sale of derivatives. He also held a position
as the Japanese representative of a major U.S. hedge fund. Mr. Shibusawa struckout on his own in 2001, later establishing the current Commons AssetManagement in 2007 and becoming its chairman in 2008.

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