The HITSHOP “flying-contract” fraud and retreat from mobile retail (2000)

A product of the bubble filled the hole the bubble’s collapse tore open

The core of this affair is that the very mechanism driving the explosive expansion was also the mechanism that bred the fraud. A stock revenue of about $3 (¥300) a month per handset made it possible to calculate that the more contracts you stacked, the more future profit was locked in — an arithmetic that economically justified the franchise-driven surge in stores. But the same arithmetic became the quota imposed on member stores, and pushed those that could not meet it into phantom contracts. The accelerator of growth and the fuse of collapse lived together inside a single business model. President Shigeta’s plea that he was a “victim” did not hold, because it was Hikari Tsushin itself that had designed the mechanism.

And there is a second irony: what saved Hikari Tsushin from failure was not a management judgment but the gain on selling its SoftBank shares. A company swollen by the internet bubble was brought down by the internet bubble, and a different asset acquired during that same bubble filled the loss. Hikari Tsushin’s survival shows that a company’s life or death turns not only on rational judgment but also on the price movements of assets it happens to hold. Discarding the glamorous pillar of mobile retail lost in this crisis and returning to the plain work of corporate sales became the start of the road that later led to a second trillion-yen company.