[Japan’s Voices No.18] Toward Happy Economics: How “Multiple Management” Can Transform Innovation into Sustainable Prosperity

Global Stagnation and the Importance of Innovation

Economic growth has slowed across much of the developed world. To regain sustainable growth, societies must turn to innovation, —especially disruptive innovation that reshapes industries and social structures rather than merely improving existing ones. Many studies suggest that long-term prosperity correlates less with sheer population size than with a nation's ability to continuously generate and commercialize breakthrough ideas on a per-capita basis. Countries such as Israel demonstrate that even nations with modest populations can achieve remarkable economic dynamism by repeatedly transforming technological breakthroughs into globally scalable businesses. Population matters, but it is not destiny. The true driver of prosperity is the ability to continuously create and commercialize disruptive innovation.

This article argues that sustaining such innovation requires a new national strategy, which I call Multiple Management: a framework that uses market valuation signals – —"multiples" – —to identify where future value is likely to emerge, commercialize disruptive innovation, and transform public spending from a fiscal cost into long-term national investment. The broader objective of this strategy is what I call Happy Economics – —using the prosperity generated through Multiple Management to sustain the three foundations of human flourishing: health, growth, and connection.

Why Japan’s Industrial Policy Alone Cannot Compete with the United States and China Through Industrial Policy Alone

Japan faces two structural challenges in generating disruptive innovation.

The first is a weakening ability to identify high‑value-added opportunities. For decades, Japan’s industrial policy has focused on broad sectors such as digital technologies, semiconductors, and green transformation. Yet competition framed purely at the industrial level increasingly becomes a battle of scale; —competing with countries like the United States or China, both of which possess vastly larger populations, capital markets and domestic demand, would be difficult for Japan. Moreover, industrial policy organized purely around sectors struggles to keep pace with rapid technological change. For example, Japan historically invested heavily in the digital sector as a whole ,but yet responded relatively slowly to AI, one of the fastest-growing and highest-value domains within the broader digital sector. The key question is therefore no longer simply which industries to support, but how to dig deeper within those industries to identify the business models and technological architectures most likely to create future value, and then concentrate limited resources on those opportunities.

The second challenge is commercialization. Japan excels at invention but lags in turning ideas into globally scalable businesses. Japan remains one of the world’s most technologically advanced nations: according to the World Intellectual Property Organization’s Global Innovation Index 2023, it ranks fifth in R&D expenditure, third in patent filings, and first in intellectual property income. Yet it ranks only 83rd in ICT service exports, 43rd in unicorn enterprise value, and 111th in labor productivity growth. Moreover, Japan’s R&D has long focused on incremental improvements within existing industries. Going forward, Japan must shift toward strategically identifying global challenges first and building innovation ecosystems designed for commercialization from the outset. 

The Role of the State – Rethinking Fiscal Policy

Innovation requires people, capital, and a culture that encourages risk-taking. In Japan, debates over fiscal policy are often deeply divisive, yet the essential question is straightforward: dDoes this fiscal expenditure ultimately generate future GDP and tax revenues that exceed the initial cost? If capital invested fails to produce commensurate growth or higher tax revenue increases over the medium to long term, naturally expansionary fiscal policy faces limits. However, if it succeeds in creating substantial growth and tax revenues, proactive fiscal spending becomes economically rational.

The key issue is not the size of government expenditure but how effectively it is directed and connected to future growth. What matters here is an operational system in which fiscal resources flow into growing sectors, connect with firms and talent, create entirely new markets, and ultimately return as tax revenues —rather than spending as one-time subsidies. 

 “Multiple Management”: A New Framework for Creating Future Value

Sector‑based industrial policy cannot win in a world defined by scale, and fiscal spending must be linked directly to future value creation. As an answer to these challenges, I propose “Multiple Management” as a new framework for national strategy. 

A “multiple” is the ratio between a company’s market valuation and a key measure of its financial performance, such as revenue or earnings. Multiples reflect market expectations for future value creation from a company or technology. Two companies may generate identical revenues and similar profit margins, yet one may be valued at ten times revenue while another reaches one hundred. This difference reflects expectations regarding future market dominance, technological superiority, network effects, data accumulation, and platform characteristics. In other words, high multiples signal highly scalable, high‑value-added structures.

What matters for national strategy ― regardless of whether government or the private sector takes the lead ― is the ability to identify these high‑multiple structures. This is not about governments picking winners, but a framework for systematically identifying and supporting scalable, high-value domains. This requires continuous monitoring of emerging high-multiple business models around the world, cross-referencing them against social objectives, connecting them to Japanese firms, universities, and talent, supporting their commercialization, and scaling them into global markets. Designing this cycle as an institutional system is the core of Multiple Management — and the national strategic intelligence capability Japan now urgently requires.

From a Subsidy State to a “Future-Value Investment State”

Viewed from this perspective, the very nature of government spending begins to change. Conventional subsidies appear as a straightforward negative on the government balance sheet. The company which that received the subsidy may eventually grow, generate employment and tax revenues, and indirectly return value to society – but such returns are indirect, uncertain, and difficult to measure. By contrast, Multiple Management differs by integrating market signals — especially how markets price future value — directly into national capital allocation decisions.

Consider a simplified scenario in which the government first identifies a business model that the market values at approximately thirty times revenue. If such a company does not exist, public policy could help create and commercialize it by connecting the necessary firms, technologies, talent, and capital. The government then invests 10 billion yen in exchange for a 10 percent equity stake while simultaneously committing to 10 billion yen in public procurement for the company's products or services, creating an initial market. This represents a total public commitment of 20 billion yen. With 10 billion yen in revenue valued at a 30× revenue multiple, the company would have an enterprise value of 300 billion yen, making the government's 10 percent equity stake worth 30 billion yen. In other words, a 20 billion yen20-billion-yen public commitment could create 30 billion yen in public assets while simultaneously creating a new strategic industry and expanding the future tax base. In principle, the same approach could be applied aton a much larger scale. If even a modest share of large-scale government bond issuance were systematically directed toward identifying, creating, and scaling high-multiple companies, public spending could become not merely a fiscal cost, but a mechanism for creating national assets, expanding the future tax base, and reinforcing fiscal sustainability and confidence in sovereign credit.

Of course, the above is a simplified model. Multiples fluctuate with market conditions, and companies may fail. This scenario should be read as one intended to challenge the assumption that government spending is inherently a cost. When investment, offtake agreements, market formation, and concentrated support for high‑multiple sectors are combined, public spending can become an investment capable of strengthening the national balance sheet. Sustaining high value creation despite demographic decline and limited resources defines the essence of Multiple Management.

Designing Society for an Era of Technological Transformation

Identifying high‑multiple domains requires looking beyond what markets value today. Multiples express expectations of future value, thus and so the key task is to understand which technological transformations may reshape society over the coming decades and to identify the emerging high‑value-added domains within them. 

Three trends stand out over the next ten to twenty years. The first is radical longevity technology that could extend human life, potentially making population growth itself a constraint rather than an advantage. The second is near‑limitless energy supply, particularly through nuclear fusion. If realized, it would fundamentally radically transform the geopolitical structures by reducing the strategic importance of resource-rich countries and redefining the economics of the energy transition. The third is the restructuring of society through AI and robotics. If AI evolves from a tool that augments production into an autonomous participant in consumption, the assumptions underlying population policy, labor markets, education, and social security may need to be fundamentallyprofoundly reconsidered.

All three trends share a scale of change that existing social institutions are ill-equipped to manage, and nations and companies that recognize these shifts early and concentrate investment in the relevant technologies, infrastructure, and business models will be positioned to define the next generation of high‑multiple domains.

The Vision of “Happy Economics”

Everything discussed so far raises a more fundamental question. If disruptive innovation and Multiple Management are means, what should be their ultimate purpose? What kind of society should sustained value creation serve? This brings us to perhaps the most fundamental critical question in economic policy: whatWhat is happiness? Through my experiences of dialogue and research involving diverse generations and nationalities, I have come to believe that the answer rests on three interconnected foundations: health, growth, and connection. Health –  ― both physical and mental –  ― supports well-being. Growth provides hope for progress while preserving the dignity, freedom, and autonomy needed to avoid exploitation. Connection, through relationships with family, friends, communities, and society, offers meaning and security. Together, these three foundations reinforce one another, creating a virtuous cycle that enables people and societies to flourish, —an idea captured in the concept of Happy Economics.

Regardless of how dramatically technology or institutions may evolve, the foundations of human happiness remain remarkably constant: health, growth, and human connection. What nations require, therefore, is not simply fiscal spending, but systems that continuously generate disruptive innovation, commercialize it, and transform it into sustainable prosperity. If Japan can demonstrate a social model that channels this prosperity back into those three foundations, it may offer important lessons for countries facing similar demographic and fiscal pressures.

Multiple Management is the national strategy designed to realize this vision. It reads the future-value signals that markets emit as a form of national strategic intelligence and connects them to social objectives. This is a third path,  – distinct from conventional sector-based industrial policy and from laissez-faire market liberalization alike. 

Sustaining the fiscal foundations underpinnings of the nation through high value creation even under demographic and resource constraints, continuously generating the resources necessary to support human flourishing, and using those resources to build a society that is healthy and deeply connected – this, ultimately, is the essence of “Happy Economics.”

Mr. Soichiro Chiba is the Founder of Thousandleaf. He is also the Founder and Chair of Y7 & Y20 Japan, the official under-40 engagement groups of the G7 and G20. He has advised the Japanese Prime Minister’s Office, METI, and MOFA on topics including GX industrial strategy, innovation policy, and sustainable development.

The views expressed in this article are the author's and do not reflect those of JIIA CGO.