Lessons From the World's Formerly Oldest Business

This year is a throwaway anniversary for Hoshi Ryokan. The Japanese innkeeper fluffed its first pillow in 718, meaning 2011 marks its 1,293rd year in continuous operation. Not a very round number and so no big deal, except for the fact that Hoshi Ryokan is the world's oldest continuously operating business, according to Family Business magazine. When you're in such exclusive company, every day above ground is a good one.

I'm not here to talk about Hoshi Ryokan, however. That's because, for me, the more interesting story belongs to Kongo Gumi, another Japanese firm that formerly held the position as world's oldest business. Kongo Gumi built its first temple in 578, so it would have celebrated 1,433 years in operation this year.

Unfortunately, Kongo Gumi failed in 2006. What brought down a company after 1,428 years? Three things, that I can see:

Not sticking to its knitting. Kongo Gumi prospered for 14 centuries building temples. It collapsed a couple of decades after getting into real estate investing in the 1980s. From half a world and half a decade away, that looks like the single most important factor in the company's demise. Japanese real estate looked like a can't-miss deal back then, so it's perhaps understandable. But the company's founders undoubtedly passed up many similar risk-free opportunities over the centuries. Too bad they didn't let this one go.
Borrowing money at the wrong time and for the wrong reason. Nobody can predict the future, and it's not the fault of Masakazu Kongo, the last CEO, or the 39 Kongo family forebears who ran the company before him, that Kongo Gumi went into debt just before the Japanese bubble economy of the 1980s collapsed and ushered in a decade of doldrums. It is, however, their fault that they borrowed at all, and that they borrowed to go into a business they weren't as good at as temple building.
Not changing with the times. That is a crazy thing to say about a company that lasted that long, I know. But Kongo Gumi's incredible run was largely due to one thing: It built temples in a one-religion, extremely stable, conservative society where temple donations were as well established as rice balls. So it didn't have to change, at least not often and not much. When Japan's society changed drastically following what was arguably the most severe upheaval in its history in the wake of World War II, temple donations fell and Kongo Gumi's bread-and-butter flowed away like so much soy sauce. The company had shown flexibility in the past, even building coffins for a while during one notable episode, but it failed to do so again this time -- or perhaps it could have been said to be too flexible, because instead of doing something related to its core competency of constructing wooden buildings, it started speculating on land.

So, while 2011 is a meaningless anniversary for Hoshi Ryokan, it's a big one for Kongo Gumi. This is five years since Kongo Gumi ended its reign as an independent concern and was absorbed into a larger conglomerate. The next anniversary of similar import in the oldest-business category comes in 2018, when Hoshi Ryokan will notch a smooth 1,300 years of satisfying customers and making payroll. Unless, of course, something goes wrong first.

Mark Henricks is an Austin, Texas, freelance journalist whose reporting on business, technology and other topics has appeared in The New York Times, The Wall Street Journal, Entrepreneur, and other leading publications. Learn more about him at The Article Authority. Follow him on Twitter @bizmyths.

Image courtesy of Flickr user Ivan Walsh, CC2.0

Mark Henricks

Mark Henricks' reporting on business and other topics has appeared in The Wall Street Journal, The New York Times, The Washington Post, Inc., Entrepreneur, and many other leading publications. He lives in Austin, Texas, where myth looms as large as it does anywhere.

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