Masayoshi Son Bet Billions on the iPhone – 3 Years Before It Existed

Ellison’s home was in fact more like a village, a compound of intricate wooden houses modeled after the Japanese emperor’s palace. The 23-hectare estate took nearly a decade to design and build, including a lake and waterfall operated by an on-off switch. All buildings were constructed without nails and had mud plastered walls designed to withstand a 7.3 Richter earthquake. In total, Ellison’s tribute to Japanese culture and history was worth about $70 million.

The discussion around the table that day was about crazy internet valuations in the stock market. But Masa and Jobs were more interested in what would happen after the dotcom bubble. “I said he was focused on the internet – and he agreed that the internet was the future,” says Masa. Both men realized that a paradigm shift had come. The movements in the Nasdaq were one thing; The advent of the networked world, in which Apple played a leading role as an innovator and SoftBank as an investor and operator, was another.

Apple was, by then, one of the most valuable companies in the world, with a suite of smash-hit products from Mac laptops to the iPod. Like Masa, Jobs was paranoid about rivals stealing his ideas. No Apple project was more secretive than the iPhone, the touchscreen smartphone that would sell billions and revolutionize personal communications.

By Masa’s account, on a visit to California sometime in the summer of 2005, he showed Jobs his own sketch of a mobile-enabled iPod that had a large display and used the Apple operating system. The new device, he predicted, could transform data and images. Jobs pooh-pooh-poohed the idea, but couldn’t resist dropping hints about the iPhone.

Jobs: “Masa, don’t give me your crappy drawing.” I have my own.”

Masa: “Well, I don’t need to give you my dirty piece of paper, but once you have your product, give it to me for Japan.”

Jobs refused to reveal more details, but Masa saw the flicker of a smile on the face of the head of Apple. After pressing further, Masa held a follow-up meeting at Jobs’ Tudor-style country home in Palo Alto. At that meeting, Masa claims, Jobs agreed in principle to give SoftBank exclusive rights to distribute the iPhone in Japan. “Well, Masa, you’re crazy,” Jobs said. “We didn’t talk to anyone, but you came to see me first. I’ll give it to you.”

Nothing was written. There was no discussion of price or volume. Just a gentleman’s agreement, based on the assumption that Masa would have the financial means to build or acquire a mobile phone business. “It was super confidential. I never saw the product before it came to Japan (in 2008),” says Masa. “Steve never even told me the name.”

The story has a mythical quality. It is assumed that Jobs gave his word three years before Apple launched the iPhone in Japan. Yet this promise might also have given Masa the confidence to buy Vodafone Japan, the British-owned “also-run” that used soccer icon David Beckham in its marketing campaign. It was a high value-added deal, the largest to date in Asia, but Masa bet it had a game-changing product in the pipeline. Whatever the precise timeline, Masa pulled off the distribution deal of the century, which allowed him to build a profitable consumer business in Japan, massively strengthening the SoftBank brand.

On March 17, 2006, Masa concluded its $17 billion deal to buy Vodafone Japan. Two weeks later, Jobs flew to Tokyo, where Masa challenged Apple boss to keep his end of the deal. “You didn’t give me anything in writing, but I made a $17 billion bet based on your word,” he said. “You better feel some responsibility.” Jobs laughed and said, “Masa, you’re crazy. Let’s do what we discussed.”