Japan's Ancient Ohmi Merchants
How to Turn Corporate Social Responsibility into a Highly Successful Business Model
“Always put the customer first. When visiting other provinces, do everything you can to ensure that the people there feel good about using the products you bring.” (“Ohmi” Merchant)
Introduction
During the Edo Period (1603 – 1867) highly successful merchants called “Ohmi”, trading all over the Japanese peninsula, followed a code of conduct called “Sanpo Yoshi”. The term roughly translates to “good for three parties”. Doing business should benefit everyone: The buyer, seller and society at large. Basically, “Sanpo Yoshi” is the equivalence of today’s Corporate Social Responsibility (CSR).
Nowadays, no corporation can do without a shiny brochure hailing their CSR. Turning the concept into a buzzword, an industry, mostly throwing dust into the public eye.
For the “Ohmi” merchants, however, CSR was not only a lip service, but an integral part of their business model. “Sanpo-Yoshi” does not exist in written form. But guidelines have been preserved since the 18th century. A valuable record of how CSR could be incorporated into an organization, adding value not only to their owners but a great variety of stakeholders.
The “Ohmi” and the Role of Daimyo Oda Nobunaga
The merchant’s name derived from the province Omi, now Shiga Prefecture, located in the middle of the archipelago, close to Kyoto. Origins date back to the 13th/ 14th century. But success kicked in much later and would be unimaginable without one of Japan’s great unifiers Oda Nobunaga, the free market visionary Daimyo (territorial lord) who controlled the province.
In the 16th century the Daimyo declared “Rakuichi-Rakuza” (free market and open guild) for the town around his castle Azuchi. He cracked monopolies and stripped away privileges enjoyed by guilds and trade associations. He also abolished the “Sekisho”, toll collecting checkpoints.
Basically, he turned the province into the world’s first economic special zone. What followed was an unprecedented boom, which inspired other neighboring Daimyos to set up “Rakuichi-Rakuza” in their territory.
After Nobugaga’s downfall, Azuchi Castle was demolished in 1582. The “Ohmi” resettled to the neighboring town Omihachiman (近江八幡), which was perfectly located for inter-regional trade.
When the Tokugawa took hold of the whole country in 1602, they granted the “Ohmi” a priority passage for any “Sekisho” checkpoints in the country.
The “Ohmi” and “Sogo Shosha”
The “Ohmi” immediately took advantage of the privilege. Japan’s producers badly needed larger markets in order to scale economies and to innovate. The “Ohmi” delivered them exactly that.
They started out by establishing branch offices in the main cities of Osaka, Kyoto and Edo (later Tokyo) and ended up with a vast network. Conducting trade from Hokkaido in the north all the way to Japan’s southern Kyushu Island. Distributing manufactured goods from the Kamigata Area (Kyoto and Osaka) and procuring specialty products and raw materials from the rest of the peninsula.
“When you travel (…) to peddle products (…) always care about people in that region so that customers can enjoy shopping. Do not think only about yourself and do not care only about making money. (…) be careful not to be greed (…)” (“Ohmi” Merchant)
“Ohmi” were not simple intermediaries. They were also organizers, financers and, most importantly, information gatherers. On the supply side they knew the regional style of goods, the high-quality and low- cost producers. On the demand side the regions favored style and flavor of products, and the prices people were willing to pay.
“Ohmi” connected producers and consumers, created new markets, facilitated investments by capitalizing on comparative advantage and generated massive economies of scale that improved the welfare of the whole country.
Thus, Ohmi’s business was the equivalent to today’s big trading companies (“Sogo Shosha”). In fact, the roots of most “Soga Shosha” can be traced back to “Ohmi” Merchants.
Factors Contributing to Success of the “Ohmi”
The “Ohmi” province was home to “Toraijin” (Korean and Chinese immigrants) that possessed of superior numeracy and knowledge compared to native Japanese. “Ohmi” not only invented the double-entry system in bookkeeping, but also strictly streamlined the distribution business. Resulting in a highly efficient approach to business that later would become the Japanese-style management concept.
Although, “Ohmi” were Buddhist, they shared similar beliefs to protestants (Calvinists). On average “Ohmi” walked more than 10 kilometers per day, carrying up to 15 kilograms suspended on both ends of a shoulder pole, only returning home to sleep. For “Omi”, prosperity was evidence of a correct practice. “What pleased buddha was for merchants to thrive and let their family business flourish”.
Most crucial, “Ohmi” believed in values that penetrated every aspect of life and business, like devoting oneself to sustainability, frugality and discipline. Most of them found their way into “Sanpo Yoshi”.
“Once people become wealthy, they become arrogant. Once they become arrogant, they become impolite. Once they become impolite, they become hated. Once they are hated, their misfortunes follow one after the next. Once they suffer misfortunes, they incur losses. Once they lose, they fall into poverty. Once they fall into poverty, they commit crimes. Once they commit crimes, their lives are ruined.” (“Ohmi” Merchant)
In the Social status system of the Edo period Samurai ranked top. Followed by farmers and craftsmen. Merchants like the “Ohmi” came in at the very bottom. It necessitated “Sanpo Yoshi” to the “Ohmi”, as only profit earned with diligence, abstinence and faithful contribution to the community was socially accepted.
In addition, “Ohmi” were outsiders at their outpost branches. They had no territorial or blood relationships with the local community. Thus, building long-term, trusting relationships with locals, a future oriented business model with the aim of creating mutual satisfaction and benefit was paramount to business success.
Debt financing and/ or speculation was a taboo. Part of the profits were reinvested into activities that benefited the community, such as building bridges and schools, donations to shrines and temples. During the Great Tempo Famine, “Ohmi” sold rice at a preferential price.
The resilience of the business model was frequently tested. Think: Man-made and natural disasters, famine, economic collapse and armed conflicts. The “Chichibu” incident serves as a good example. In 1884 farmers suffered a severe deflationary slump and revolted. Slaughtering government officials and local loan sharks. Only the shop of the Yao family (“Ohmi” merchants of the region) was spared by the furious mob.
Conclusion
CSR has become the darling of many corporate communication officers. Most of their messages are nothing more than hollow words. The “Ohmi” merchants showed what a powerful tool CSR could be for forming a prosperous and durable organization.
The business environment is becoming ever more challenging. Think: environmental issues, inflation, wars and social conflicts. The “Ohmi” were able to overcome similar adverse conditions, not only by their superior business know- how, but their values, which found its expression in “Sanpo Yoshi”.
Business leaders in the West would be well advised to study the wisdom and insights of the “Ohmi” merchants carefully!
“Keep in mind: You should have confidence in the products you bring to customers, satisfy them and desire that the deal can be useful for people. Do business for people without considering gain or loss, which would meet with a good result and be up to how much you think of customers. Think of the benefits of customers first with esteem without desiring your own gain. Also, it is very important to devote yourself to the gods.” (Sogan Nakamura/ the linen king) Source:
Begin sanpo-yoshi today!-三方よしを世界に広める会 (sanpoyoshi.net)
Lessons from the world’s oldest companies - Investors' Chronicle (investorschronicle.co.uk)
Origin of Japan’s Business Philosophy: Righteous Merchants of Ohmi | MANABINK
The Edo Period Houses of The Omi Merchants (gaijinpot.com)
Omi shonin - Japanese Wiki Corpus (japanese-wiki-corpus.org)
Great article, I never heard of Ohmi merchants before.
The link to the pdf (sanpoyoshi 20160621) is not working tho.
Thank you. Really, really interesting.