SoftBank CEO Masayoshi Son explains why a $100 billion fund isn’t enough

To understand Masayoshi Son, the CEO of SoftBank, you have to think of normal ambitions and multiply them by a million or so. That’s why he considers the $100 billion investment fund that he is raising with a Saudi Arabian group only the “beginning” of his future strategy.

Son made this remark alongside Simon Segars, CEO of ARM, in an interview with a small group of press on Tuesday, just before he gave a speech at the ARM TechCon event. Segars said he is happy to have Son as his new boss, as SoftBank just bought ARM for $31 billion. Son said he measures his investment return in decades and thinks about how he can execute on a long-term vision.

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And that vision is audacious. He said he wants to make the Singularity happen. That is the day, coined by futurists such as Ray Kurzweil and Vernor Vinge, when machine intelligence will exceed all human intelligence combined. Son said he thinks that will happen in the next 30 years. Son believes that we’ll first see the Internet of Things produce more than a trillion connected devices in the next 20 years. And those devices will lead to the Singularity.

Some notable figures like Bill Gates, Elon Musk, and Stephen Hawking are worried about the creation of artificial intelligence that could turn on humankind. Asked if he thinks the Singularity is a good thing, Son said that it will happen anyway and that it is just like the invention of fire. It can be used as a tool for good or bad.

We also talked about the tough choices he has made, like selling off his stakes in Alibaba and mobile game companies Supercell and GungHo Entertainment in order to buy ARM, which can design the computing technology that we’ll need for the Singularity.

Here’s an edited transcript of our conversation.

Simon Segars: We’re having our annual developer’s conference this week. We’ve been doing this more than 10 years. I’ve lost count, actually. It’s a great reflection of ARM’s ecosystem. We have people who build chips using ARM’s technology. We have people who build products using ARM technology. It’s a great event bringing everyone together.

There’s always something a bit different at TechCon. This year ARM’s ownership is different. It’s changed in a pretty significant way over the summer, as you all know. But it’s a change that’s going to allow us to move forward with more pace and more scale than we could have done on our own. We’re all excited about this. We know that our developers coming here this week want to understand what, if anything, has changed. How is this going to impact the ARM partnership?

Our mission this week is to explain how the changes people are going to see ahead of us really are for the better. We’ll have the ability to accelerate investment in our road map and bring more technology to market sooner, what we’ve been working on for so many years. Our business model is not changing. We’re just going to do more and do it faster. That’s going to set up a very exciting future for ARM and the ARM partnership.

Masayoshi Son: In my presentation this morning, I explained a little bit more about why I’m excited about ARM. I can explain further if you have any more questions. But I’ll try to give my own expression.

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As Simon said, the basic business model isn’t changing. We’re only adding and accelerating. This is something that I want ARM partners to understand. I know there was some concern over the possibility of radical changes to the business model or damage to the ecosystem. We are not going backward, though. It’s the other way. I would rather free up Simon and the team to go more aggressive in developing technologies, deepening their relationship with partners, and investing in other leads. I don’t want them to have to worry about what the next several quarters’ earnings should be and watch the share price every day.

Instead of those financial investment worries, let me worry about financial results. Just believe in the future and direction of the capability that ARM has. Go deep and build a better future, both for the company and for its contribution to the industry. That’s what I want ARM to do, invest more the future.

Question: When you say the same business model, how do you think about pricing?

Son: ARM’s per-chip price has been gradually growing in the past, if that means anything. Not because ARM is trying to raise the price, but because ARM is increasing functionality, adding multiple cores per chip, developing more sophisticated IP, and so on. That’s a natural trend that I won’t touch.

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Question: Do you expect further price rises? Anything in the short term?

Segars: What we’ve done is command more on a per-chip basis by offering more value. Multi-cores is a great example, and the move to 64-bit processing. Adding video and graphics. As we bring more value to chips, our revenue per chip has increased. It’s always been our intention to command a higher price by adding more value and that’s what we’re expecting to do. We have a roadmap ahead of us of investments in mobile–

Question: Does the acquisition change the dynamics of your thinking about pricing in any way?

Son: I am not changing the dynamics of anything. It’s just the natural course.

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Question: I watched the investment from afar in Supercell and Gung Ho. At the time I thought you would stay in those businesses for quite a long time, but you eventually did sell. I’m curious what was the thinking behind going into games and getting out of it. Do you see any parallel in ARM, since it’s not entirely clear why SoftBank is going into ARM, the same way it was not exactly clear why you went into games and then exited games?

Son: In the last 10 years, I was very impressed and already in love with ARM, quietly. But we did not have enough money. There were not needed synergies to our business that we were already in. We’d just started in PC broadband and migrated into mobile broadband by acquiring Vodafone Japan. Then we had to decide – should we go and acquire ARM at that time, instead of going into Sprint for the same amount of money? Back then it was a more direct synergy for owning mobile business in Japan and expansion to the U.S. But then I came back to the idea of going into ARM.

Now, with the rise of new paradigm shifts into IOT, which I talked about this morning, I said, “The time has come. We can’t wait anymore.” As you know, we have a lot of debt. I’m the king of debt. [laughs] We can’t leverage too much anymore. We had to give up something to go forward with our long-term core strategy. Core to our strategy was ARM. We had to sell something to make the money to invest.

I didn’t want to sell Supercell or Gung Ho. But I had to sell something. It’s not because I don’t believe in their future. It’s because ARM is so critical to our core strategy that we had give up something to maintain balance.

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Question: You mentioned synergies. What is the role of ARM in the future SoftBank ecosystem, and how will that interact with other investments, like in Alibaba? Also, you mentioned future investments. Are you looking at further acquisitions in the semiconductor industry, or other companies in the supply chain?

Son: There are two approaches to investment. One approach is that you have one business, your main business, maybe your only business. Then you want to extend around your neighborhood to increase your synergies, find return on synergies. That’s one way of expanding through investment.

My approach is a little different. My approach is to look at where the industry is migrating, where technology is migrating. The best opportunity for return on investment is in the information revolution. Sometimes it’s far from where we are, but if you look back 10 years from now, you’ll understand.

It’s like in the game of Go. You have the black and white stones. Amateurs put their stones around where you’re playing, as close as possible. But that type of play won’t necessarily win a championship. To win a championship, sometimes you have to play very far apart from your main stones. 50 stones later, that will turn out to be the key to success.

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I play a long-term game, a 20-year or 50-year game. Through many people’s eyes, it’s far away from the synergy we have in our own businesses right now. But the information revolution is coming. In many locations it’s exploding. My way of doing things—our return on investment has been 44 percent over the last 18 years. If I go just close by to where we are to bring synergies with what we do, the return on our investment won’t be 44 percent. It’ll be five or 10 percent, or sometimes even negative. That’s not the way I think I’d like to play.

Question: It seemed today, from Sprint’s earnings, that things are going better there, but there’s some concern that it’s a zero-sum game, to an extent, the investment between ARM and Sprint. Can you comment on whether you think Sprint is now solid, where it’s going where it needs to go? And can you comment on where to invest in future technology? Obviously building network operators is very expensive, but you’re also talking about increasing investments in ARM.

Son: Between the Sprint investment and the ARM investment, I don’t understand why you would think it’s zero-sum. It’s not. Softbank is not adding new investment into Sprint.

My original intent for investing into Sprint—the main strategy was to buy Sprint and T-Mobile at the same time, so we’d have a critical mass to fight against AT&T and Verizon. The U.S. government didn’t accept that. They rejected it. So my fundamental strategy was broken. For a while I even wanted to sell the company and accept that I’d made a mistake. I had expected that the U.S. government would accept it. Anyway, I thought I was stuck in the Sprint situation for a while. I was very unhappy. But nobody wanted to buy, so I said, “We have to fix it by ourselves.”

Now the company is turning around. It’s already positive. For the first time in the last 13 years or something, the number of subscribers, the net adds—for so many years Sprint didn’t have net adds. They were losing customers every quarter. And then the EBITDA is almost double since we acquired. The company is really turning around. I’m very happy with its progress. I’m very proud of Marcelo and the team. They’ve done a fantastic job. I think it’ll be one of the biggest turnarounds in U.S. history.

I hear rumors that AT&T is buying another big media company. [laughs] I wonder if the U.S. government will accept that after rejecting my deal. There’s no justice in this country. Even before that, Verizon, the number one company, was approved to acquire the number five company. Number three and four are still smaller than number one. We got rejected. I was very upset. But anyway, Sprint is doing well.

ARM is a totally different story. As many people say, it’s not immediately related to Sprint, nor is it immediately related to mobile. But this is the paradigm shift that’s happening. If you look back on my business for the last 35 years, every time there was a big paradigm shift – PC into internet, internet into mobile internet – I sold everything that I could sell to get the cash to reinvest into the next paradigm. That’s how Softbank has survived and grown.

Every time I do that paradigm jump, our share price tanks. Everybody says SoftBank is going bankrupt, that there’s no synergy with the business we were doing in the past. That’s always been the case. Through four different paradigm shifts, every time I’ve jumped. But the companies that we were competing with in the past, in our old businesses, have faded away. They no longer exist, or they’re no longer growing. We survive and thrive in the next paradigm shift. This is what I believe ARM is going to provide.

Question: You’ve obviously embarked on a new, very large investment fund. How does that relate to this overall strategy? Could you bring another chipmaker into that investment portfolio?

Son: As I say, I think a big paradigm shift is coming. The biggest theme, in my view, is the singularity – that a computer superintelligence would surpass the human brain. That’s the biggest long-term thesis. I’ve had the image of it since I was 19 years old, when I first saw a semiconductor chip. Now I think it’s coming into reality, in the next 30 years. That’s the fundamental vision I have. For that vision, I’m exercising a strategy in this paradigm shift, assembling a group of companies.

$100 million is the beginning, in my view. The information revolution that’s coming, the singularity that’s coming in front of us, is such a big thing, such a great opportunity, that money is not enough, even $100 million. My passion, my presence, is bigger than many people think. I’m a little bit crazy, but I’m enjoying my life.

Question: Do you see that business going to, say, a dozen very big companies, or smaller venture investments?

Son: It’s a mix. As you’ve seen in the last 10 years, we’ve done the acquisition of Vodafone Japan, the acquisition of Sprint, and the acquisition of ARM. Once every four or five years, I do some sizable acquisition. And then, every year, we make a few hundred million dollars worth of acquisition. With this war chest, $100 million, I’ll have one or two deals of big size, and then several $2-5 million acquisitions, and a bunch of $1 million or so investments.

Question: Do you have any companies in mind already?

Son: I already have a dozen or so possible investments in mind. I always do, but I don’t talk about them. In the last 10 years I’ve always had my wish list of about a dozen companies. Sometimes I change my mind. It’s like falling in love. [laughs] I shouldn’t be chasing too many women. But after taking a closer look, it may not seem as attractive as I originally thought. Things continue to change. If I start talking to a company and they tell me to go away, I have to go away. If we meet a few times and things seem better than I thought, I jump in.

Question: In this area now, there’s a lot of focus on artificial intelligence, autonomous vehicles, and biotechnology, the growth of technologies around the singularity. Are you interested in any of these particular fields?

Son: As I mentioned in the presentation this morning, the singularity is coming. There are several key areas that will have huge dynamic change and opportunities. Artificial intelligence, IOT, these are very exciting opportunities. That will enable many traditional businesses – health care, transportation, finance. All kinds of other traditional industries will be reinvented with the superintelligence that’s coming into our hands.

This is a huge opportunity. Shopping and media were early opportunities. Now every industry will be reinvented. Even old, stable industries will be reinvented. Steve Jobs reinvented telephony. That reinvention will be coming with the empowered technology of microprocessors. ARM is at the center of that revolution. The ARM core is going everywhere. It will enable all kinds of reinventions. That’s what I’m excited about.

If I were 20 years old, I would be almost going crazy over the huge opportunities everywhere. Every day I wake up with some idea about a new opportunity. I’d be pitching venture capitalists almost every week.

Question: Are there any areas you could invest more in the future without backing from a stable partner like SoftBank?

Segars: One way to answer that—it’s not so much there are areas we can go into now that we couldn’t previously. It’s more about degrees of investment. ARM has a very successful track record over the last 18 years. In that time our revenues grew. Our profits grew. Our shareholders bought into this company on this projection of growth at the top and bottom line. That’s all great. We have great relationships with our shareholders and they’ve been very supportive of growth.

As I look at the future ahead, I think about some of the transitions in technology that Masa mentioned. I can think of opportunities where we’d want to make radically different investments. As a public company, that’s something you have to work hard at. If you want to radically change your cost base, or make investments to grow into a new area – to try and anticipate many moves ahead on where the industry is going – that’s quite difficult for a public company. Shareholders typically like linear, predictable, no surprises.

We have an opportunity now to think longer-term and to place bigger bets in ways the public markets might not exactly reward in the short term. We can do that without the overhead of lots of communication, constantly explaining what we’re doing, and being under that magnifying glass. Everything Masa just explained, his view of the future, I completely agree with. I think there are now opportunities to make bigger bets, perhaps in areas that are slightly orthogonal to where ARM traditionally has been. It gives us a greater degree of freedom.

Question: Do you have examples of those areas?

Segars: If you think about the way both software and hardware are coming together to provide this intelligence, there are things that we would ordinarily work through at some pace to deliver. We’d engage with our ecosystem and move that along. Now we can maybe choose to do more of that ourselves, or invest more in the ecosystem at a higher level to make it happen faster.

Question: Have you thought about Twitter? Would it fit your plans at all?

Son: Any specific company name, I can’t comment on.

Question: What about them just as a company? Do you like their business?

Son: No comment.

Question: What’s the main talent needed to be an entrepreneur or a leader in this paradigm shift you see coming?

Son: You have to have a deep understanding of technology. You have to have—not an understanding of the past, but the imagination of technology going five years, 10 years, 20 years into the future. Then, come up with a specific strategy, either that breaks through in technology or breaks through with a new business model. Very often both are required. You have to have the sort of leadership to bring people, a team, together to support you. Then things fall together.

Question: You talked about the singularity like it’s a good thing, something we should automatically go for. Elon Musk has talked about AI as something very dangerous, that there should be limits on what we should try to do. How do you think you can make this investment toward the singularity and make sure it’s a good thing?

Son: If you think about the history of mankind, fire made man’s life dramatically change. It’s dangerous if you misuse it, but if you use it in the right way it makes life dramatically better. It’s a double-edged sword. The singularity, if misused, could be super dangerous, but if we use it in the right way, it can help people lead longer and healthier lives. It can help people be more productive, more happy. We might never see accidents on the highway again.

There are lots of great results we can achieve with this technology. If someone could use it, it could be dangerous. But I’m always thinking on the brighter side. I believe in good faith and good will.

Question: What are you doing to reach that singularity through ARM?

Segars: The technology we have today, that we’ve developed over the years, has made life a lot easier. It’s increased quality of life and life expectancy. More intelligent technology is going to help that.

For our part, we do always think about how computing enables this intelligence. Artificial intelligence is about computing. It’s about algorithms. In a lot of use cases it’s not going to be a big computer sitting in a basement somewhere. It’s going to be distributed. It’s going to be in your device. It’s going to be coming through the cloud. Making all of that work requires a lot of technological advances. We’ll be sorting that out over the next couple of days – keynotes today, keynotes tomorrow, the product launches we’re doing this week. They’re all successive steps toward delivering this distributed computing platform through which intelligent algorithms will be able to make our lives better.