Are They Outdated 'Dinosaur' Enterprises or Actively Transitioning to Green Energy and High-Tech Fields?

# Are They Ancient "Dinosaur" Companies, or Actively Transitioning to Green Energy and High-Tech Fields?

## Introduction: Overview of Buffett's Investment in the Five Major Trading Houses
Warren Buffett invested in Japan's five major trading houses (Sogo Shosha) through Berkshire Hathaway in 2020, including Mitsubishi Corp., Mitsui & Co., Itochu Corp., Sumitomo Corp., and Marubeni Corp. Originating from the Meiji era, these companies are core pillars of the Japanese economy, renowned for global trade, resource development, and diversified operations. Buffett praised them as "conglomerates similar to Berkshire," emphasizing their long-term value and dividend potential. But the question remains: Are these century-old institutions stagnant "dinosaur" companies, or are they embracing green energy and high-tech transformation?

## Traditional Image: Ancient "Dinosaur" Companies?
These trading houses indeed exhibit characteristics of "dinosaur" companies:
- **Long History**: Established in the late 19th or early 20th century, they have weathered multiple economic cycles, including post-WWII reconstruction and Japan's economic bubble.
- **Dominance of Traditional Businesses**: Core revenue stems from resource trading (e.g., oil, natural gas, metals), food, chemicals, and infrastructure. These sectors rely on global supply chains and are vulnerable to geopolitical and market volatility.
- **Large Scale but Efficiency Challenges**: As corporate giants, they are sometimes criticized for bureaucracy and insufficient innovation, resembling "dinosaurs" in their sluggishness. During Japan's "Lost Decade," they faced debt crises and restructuring pressures.
- **Sustainability Concerns**: Past reliance on fossil fuels and heavy industries led to environmental controversies. For example, Mitsubishi Corp.'s involvement in coal mining drew criticism from environmental groups.

Nevertheless, these companies are not static. Buffett emphasized during his investment that they offer stable cash flow and dividends (average dividend yield of about 4-5%), unlike the high volatility of tech stocks.

## Active Transformation: Shifting Toward Green Energy and High-Tech Fields
In recent years, these trading houses have accelerated their transformation, embracing sustainability, high-tech, and green energy to address climate change and digitalization trends. This is not a passive response but a strategic realignment, demonstrating the adaptability of "traditional enterprises." Key transformation initiatives include:

### 1. **Green Energy and Sustainability**
   - **Renewable Energy Investments**: All five major trading houses are increasing investments in wind, solar, and hydrogen energy.
     - Mitsubishi Corp.: Participates in European offshore wind projects and invests in hydrogen fuel cell technology, targeting carbon neutrality by 2030.
     - Mitsui & Co.: Collaborates with Shell on LNG projects while shifting to renewables, such as solar farms in Australia.
     - Itochu Corp.: Invests in EV battery recycling and biofuels, emphasizing the "circular economy."
     - Sumitomo Corp.: Engages in lithium battery materials and geothermal energy, supporting the EV supply chain.
     - Marubeni: Promotes green hydrogen projects and develops solar parks across Asia.
   - **Carbon Reduction Commitments**: All companies have signed Paris Agreement-aligned targets and report progress via ESG (Environmental, Social, Governance) disclosures. For instance, Mitsubishi Corp. aims for net-zero emissions by 2050.
   - **Sustainable Agriculture and Food**: Itochu, for example, uses precision farming technology to reduce carbon footprints.

### 2. **High-Tech Industry Expansion**
   - **Digitalization and Innovation**: These firms are moving beyond trade to invest in AI, IoT, and biotech.
     - Mitsui & Co.: Partners with Silicon Valley startups and invests in AI-driven supply chain optimization.
     - Itochu Corp.: Owns FamilyMart convenience stores and enhances retail efficiency through big data analytics; also invests in medtech, such as telemedicine platforms.
     - Sumitomo Corp.: Engages in semiconductors and 5G infrastructure, collaborating on smart city projects.
     - Marubeni: Invests in drone and robotics technology for logistics and agriculture.
     - Mitsubishi Corp.: Enters space technology through subsidiaries, including satellite communications.
   - **Venture Capital Funds**: Many have established VC funds to support high-tech startups. For example, Mitsui's Moon Creative Lab incubator focuses on AI and blockchain.

### 3. **Drivers and Challenges of Transformation**
   - **Drivers**: Japan's "Green Growth Strategy" and global decarbonization trends propel the shift. Buffett's investment has also boosted confidence, driving up stock prices.
   - **Challenges**: Transformation requires massive capital, and slow exits from traditional businesses (e.g., coal) may invite accusations of "greenwashing." Additionally, high-tech investments carry uncertain returns, necessitating a balance between short-term profits and long-term vision.

## Buffett's Perspective and Investment Insights
Buffett invested in these trading houses not because they are "dinosaurs," but due to their transformation potential. He emphasized that, like Berkshire, they achieve sustainable growth through diversified operations. Amid green energy and high-tech waves, they are evolving from trade intermediaries into strategic investors, showcasing the resilience of traditional enterprises. For investors, this serves as a reminder: Ancient companies can become engines of sustainable development—not extinct dinosaurs—if they actively transform.

In conclusion, these five major trading houses are undergoing a phoenix-like transformation from "dinosaurs," with green energy and high-tech emerging as new growth drivers. Their future performance hinges on execution and global trends, but Buffett's endorsement has already validated their value.