The Role of Regulation in the Transition from Quantity to Quality

December 11, 2023
by Noriyuki Morimoto

On the one hand, with the infinite wisdom of mankind, new demands are born from the creation of new fields through technological innovation. On the other hand, many fields are reaching the phase of scientific and technological maturity, where it becomes important to rediscover or redefine demand rather than create demand. In other words, the shift of perspective from quantity to quality leads to the rediscovery of myriad differences in the vastly diverse qualities of demand. In many fields, the issue going forward will be how to build upon such small differences to develop businesses.

Regulation can also play an entirely different role, as its advancement can become the source of new demand. One example is finance: In the financial sector, where there is no further prospect of quantitative expansion, financial institutions will not be able to generate profits worth the cost of their efforts if they keep competing for quantitative expansion in the same way as before. Such institutions will fail to meet the true demands of their customers, and may even turn to behaviors that run against their customers’ interests.

Meanwhile, based on the premise that the quantitative expansion of finance has come to an end, financial regulation has undergone a fundamental shift, and now encourages the qualitative advancement of financial service from a wholly customer-centric perspective. Taking the customer’s point of view is nothing less than responding to the diverse demands of customers. The future of finance may not involve quantitative growth, but there can be growth through qualitative sophistication.

Similar regulatory reforms will be decisively implemented in education, healthcare, and many other areas. Regulation on electric power is no exception. In electricity, as in finance, quantitative expansion is not expected. Hence, the regulatory framework aimed at protecting a stable electricity supply system collapsed and the electricity industry was exposed to free competition. And it was under these difficult circumstances that stricter nuclear regulations were implemented and fossil fuel power generation was restricted.

Given that increased costs due to the tightening of electricity regulations cannot be fully transferred to utility bills, fossil fuel and nuclear power generation is facing an existential crisis. But whether it continues or is abolished, its significance as a power source in its own right has diminished, and its role in accelerating the qualitative transformation of the entire power source mix is simply more important.


[Category /Growth Strategy]

Noriyuki Morimoto
Noriyuki Morimoto

Chief Executive Officer, HC Asset Management Co.,Ltd. Noriyuki Morimoto founded HC Asset Management in November 2002. As a pioneer investment consultant in Japan, he established the investment consulting business of Watson Wyatt K.K. (now Willis Towers Watson) in 1990.