CHAPTER
SIX
Google Goes
Public
(2004)
To grow, Google needed investment capital, but its
growth forced a difficult decision. In 2003, Google passed the
five-hundred-shareholder mark, and federal regulations stipulate
that a year after reaching this threshold companies had either to
offer their shares for sale or open their books. Either way, the
innards of the Google rocket would be revealed. Page and Brin
didn’t want to go public, said Schmidt; they were fearful of
revealing to competitors proprietary information and the company’s
true trajectory, but also of having to cope with what they
considered the short-term mania of Wall Street. They abhorred the
idea of doling out fees to investment banking advisers, of going on
road shows to sell their story to investors, of allowing Wall
Street to set the initial stock price—in short, of doing things the
usual way.
The founders knew an
initial public offering of stock was necessary, but they refused to
listen to the experts, or to Schmidt and the three other board
members: John Doerr, Michael Moritz, and Ram Shriram. They
approached the IPO as if it were a science problem, with Page and
Brin crafting their own solution. Instead of allowing bankers to
arbitrarily set the floor price of the stock or allocate shares at
a predetermined price to favored clients, the founders came up with
a more egalitarian method. They would run an auction similar to the
one Google used to sell advertising. Google would set a floor
price, and anyone who made an online bid that matched or exceeded
it could acquire a minimum of five shares. Instead of paying the
usual 7 percent fee to Wall Street underwriters who were necessary
to sell stock, they would cut this fee to about 3 percent. And to
protect what they saw as Google’s “core values” and maintain a
long-term focus, they would implement a dual class stock ownership.
The class A shares sold to the public would receive one vote; the
class B shares, retained by the founders and by Schmidt and senior
managers, would receive ten votes per share, and would comprise
61.4 percent of the voting power.
When the founders
proposed this stock structure, Doerr and Moritz objected, and
strenuously. Like many on Wall Street, the two board members
recoiled at the thought of treating some shareholders as
second-class citizens, and of potentially insulating management
from accountability to shareholders. “It seemed to me vaguely
undemocratic,” said Doerr. Shriram was caught in the middle. “I
didn’t want to take a position until we reached agreement on the
board,” he said. The VCs had another concern, said a participant in
these discussions, about the precedent this might set with their
other start-up clients. But the founders had done due diligence,
consulting with Barry Diller, who serves on the board of the
Washington Post Company, which, like the New York Times Company,
has two classes of stock. Diller noted that other companies,
including Warren Buffett’s Berk shire Hathaway, also have dual
voting stock.
The founders were
unbending, and Coach Campbell was called upon to help coax Doerr
and Moritz to go along. To be even more transparent about their
intent, Page and Brin decided to prepare “A Letter from the
Founders,” to accompany the SEC filing. Written by Page, the letter
began, “Google is not a conventional company. We do not intend to
become one.” To ensure Google’s continued creativity and focus on
users, rather than investors, they would be unconcerned with
“quarterly market expectations,” did not “expect to pay any
dividends,” and would not partake in the usual corporate ritual of
offering “earnings guidance” by predicting quarterly performance.
“A management team distracted by a series of short-term targets is
as pointless as a dieter stepping on a scale every half-hour,” the
letter declared. They would make big investment bets, even if these
only had “a 10% chance of earning a billion dollars over the long
term.” They would continue to “run Google as a triumvirate,” even
though this management structure “is unconventional.”
They minced no words
about the implications of this stock structure: “The main effect of
this structure is likely to leave our team, especially Sergey and
me, with increasingly significant control over the company’s
decisions and fate, as Google’s shares change hands.” They were
also telegraphing that the two founders, who together owned 32
percent of the shares, were more equal partners than Schmidt (who
owned 6.1 percent), or Doerr, Moritz, and Shriram (with 8.7, 9.9,
and 2.2 percent respectively). Years later, Page described his and
Brin’s motivation: “We were concerned in going public that we would
have to change the way we operated, compromise our principles. It
ended up being a good way of stating upfront the kinds of things we
were thinking about and making sure that everybody who was
participating was comfortable. By going public you take on a lot of
shareholders, and the shareholders obviously have some amount of
rights. But we, who are running the company, also have some degree
of rights. We felt like it was better to be explicit ... and allow
us to be able to do the kinds of things we wanted to do.” While
candid, the letter could have used the skill set of someone with a
liberal arts education; say, an editor. Eight times in six pages
they repeat a variation of the same messianic vow: to make “the
world a better place.”
When Google announced
it was going public in the spring of 2004, it had to disclose its
finances in an SEC filing. As Google’s director of global
communications and public affairs, David Krane said reporters
suddenly realized, “Holy shit, this is a business story we missed
here!” Krane and his then boss, Cindy McCaffrey, were bombarded
with queries, but because SEC rules require a “quiet period” from
companies between the time they file and the time their stock goes
on sale, they could not answer. Reporters would call and say, “I
need to talk to Sergey. I need to talk to Larry. I need to talk to
Eric.” The pressure “to get the Google story” was intense. Once,
Krane spotted a photographer hiding behind a bush at the
Googleplex, hoping to snap a picture of the founders.
On the eve of the
auction, there was rampant speculation about the price the stock
would fetch. On the day of the offering, August 19, Page did a
highly unusual thing: he wore a suit, not his usual black T-shirt
and jeans. He and Schmidt had flown overnight to New York to open
trading on the NASDAQ floor. They were accompanied by investment
bankers and a team of about ten Google executives, including
Marissa Mayer. They went back to Morgan Stanley and watched, rapt,
as their stock was traded, rising one minute, falling the next.
They had suggested in their IPO a floor price of eighty-five
dollars, but were hoping to better that. They were now engaged in a
spectator sport, one with enormous personal financial consequences.
“Will it break one hundred dollars? Will it break one hundred
dollars? I kept asking,” said Mayer. She and Page and Schmidt and
the others were mesmerized by the Morgan Stanley trader who spoke
so fast to those on the trading floor that the Googlers found him
unintelligible. They watched him finally coax the stock to settle
in at one hundred dollars. At last, he rose from his chair and, as
if he had put a baby to sleep, calmly told them, “It likes to trade
at one hundred dollars.”
Page, Schmidt, Mayer,
and David Krane hopped into a waiting SUV that took them to
Google’s New York offices, which were then on West Fortieth Street.
As soon as the car doors closed, recalled Mayer, Page pulled out
his cell phone and announced, “I’m going to call my mom!” The
others pulled theirs out and chorused, “I’m going to call my mom!”
When they got to Google’s offices, Page and Schmidt and Mayer went
back to work, meeting for ninety minutes with a team of
engineers.
Where was Brin? He
had stayed out of the public eye in Mountain View, working. Page
and Schmidt had urged him to come to New York, but he refused,
saying, “It would send the wrong message.” By treating this as a
normal workday, he declared that the IPO was not about getting rich
but about building Google.
The stock reached
$108.31 the next day, and by January 31, 2005, had jumped above
$200. It soared, in large measure, because investors had for the
first time peeked at Google’s ledger sheet. They saw that Google’s
revenues had shot up from $86 million in 2001 to $1.5 billion in
2003, and seemed destined to double by the end of 2004. Net profits
reached $105.6 million in 2003, and were expected to almost triple
the following year. They saw that the young AdSense program now
contributed half of all revenues, and that Google raced well ahead
of its two primary search competitors, with nearly twice the users
of Yahoo and more than three times Microsoft’s. Google had little
debt, and though Yahoo had terminated their search contract, it had
generated only about 3 percent of Google’s revenues. They also saw
that the Overture patent lawsuit hanging over Google was withdrawn
by its corporate parent, Yahoo, which exchanged its warrants for
2.7 million Google shares. And they saw that Google’s skilled work
force was deeply invested in their company’s success, with Google
regularly setting aside about 12 percent of its revenues to award
nearly 40 million stock options to its employees.
Envy raced through
the corridors of traditional media companies. By the standards of
media conglomerates (or investment bankers), Google’s compensation
was extremely modest. Schmidt was the highest salaried employee at
$250,000 and received a bonus of $301,556 in 2003, and Page and
Brin each earned a salary of $150,000 and a bonus of $206,556. But
the value of traditional media executives’ stock holdings were
usually leaden. By contrast, a total of 19 million share options
had been granted to Google employees, more than half of these at an
option price of 49 cents per share, and none at a price above
$15.95. When the stock price leaped with the IPO, it produced more
than nine hundred Google millionaires. Eventually, four
employees—Page, Brin, Schmidt, and Omid Kordestani—and the three
outside directors would become billionaires. Andy Bechtolsheim, who
signed the first check, owned 1.5 percent of Google’s stock, and
David Cheriton of Stanford, who tirelessly promoted Google, owned
1.4 percent. Stanford University, which received stock and
royalties from Google for their investment in Brin and Page, owned
nearly 1.7 million shares. If the first thirty Google employees
held their stock, said a knowledgeable insider, by 2008 they would
each be worth about $500 million; the next seventy employees would
each be worth about $100 million. Even Bonnie Brown, the first
masseuse hired by Google in 1999, who smartly opted for stock
options and a lower hourly rate, retired a millionaire and
established her own foundation.
There was more to
unsettle traditional media companies. On page 80 of the Google IPO
was this strategic declaration: “We began as a technology company
and have evolved into a software, technology, Internet, advertising
and media company, all rolled into one.” And on page 11: “In
addition to Internet companies, we face competition from companies
that offer traditional media advertising opportunities.” Google
went on to say that, increasingly, they would be vying with these
media companies to induce advertisers to shift their ads online. In
an appendix that accompanied the filing, Google produced a chart
showing that while magazine and newspaper advertising declined
between 2000 and 2007, and television ads only rose 8.8 percent,
Internet advertising jumped 101.9 percent, becoming “the fastest
growing medium for advertisers.”
While Wall Street
focused on the money Google was making, Benjamin A. Schachter, then
the senior Internet and video game analyst for UBS, focused on the
dollars they were investing in computers and servers and data
centers, two hundred million dollars in 2003 (and soon to climb to
nearly three billion dollars annually). “This said they were doing
much more than selling advertising. You don’t need that computing
power for text searches. You need it for mobile phones and
applications, for cloud computing.” A “cloud” of servers could
store a consumer’s information and hold a suite of software
products, including spreadsheets, word processing, and
calendars.
Google has dozens of
data centers all over the world (the exact number is a state secret
at Google), and within these data centers are housed what may be
the world’s most massive computer system, millions of PCs that have
no keyboards or screens and are arranged in stacks and have been
repurposed as servers to process searches. The servers in these
data centers provide an array of software services that users can
access from any device. By geographically spreading these data
centers all over the world, Google became more efficient. “In a
second, light can go around the world seven times,” said software
engineer Matt Cutts, who joined Google in 2000. “That’s a couple of
milliseconds between a data center on the East Coast and a data
center on the West Coast or in Europe.” When we log onto Google, it
instantly identifies our approximate geographical location from the
Internet Protocol address on the browser that connects us to the
Internet. Thus the query is dispatched to the closest data center,
which produces a speedier result.
But the data centers
are meant for more than search. Eric Schmidt, Schachter noted, has
been proselytizing for cloud computing for two decades, since he
was a Sun executive touting “network computing.” That same year,
2004, John Markoff of the New York
Times spotted it too. While others saw Microsoft training
its guns on search, he saw Google taking aim at Microsoft’s
software. The scale of the Google computer system, as well as the
backgrounds of its management, he wrote, “suggests that while
Microsoft may want to be the next Google, the Web search company
has its own still-secret plans to become the next
Microsoft.”
A STRIKING TAKEAWAY
from the Google IPO and letter is that Google’s two
thirty-one-year-old founders were driving the company with a
clarity of purpose that would be stunning if they were twice their
age. Their core mantra, which was echoed again and again in their
IPO letter, was that “we believe that our user focus is the
foundation of our success to date. We also believe that this focus
is critical for the creation of long-term value. We do not intend
to compromise our user focus for short-term economic gain.” The IPO
declared, as they had from day one, that Google will “not accept
money for search result ranking or inclusion”; that no attempt is
made to keep users in a walled Google garden but instead to steer
them quickly to their destination; that if the ad does not attract
user clicks, it will be dropped “to a less prominent position on
the page, even if the advertiser offers to pay a high amount.” And
those ads deemed more relevant because they attract more clicks,
move to the top “with no need for advertisers to increase their
bids.” Since Google only gets paid when ads are clicked, this
ranking system “aligns our interests equally with those of our
advertisers and our users. The more relevant and useful the ad, the
better for our users, for our advertisers, and for
us.”
How did Page and Brin
achieve such clarity?
Page’s answer: “Being
less experienced, you have benefits and you have costs. We were
willing to do things differently because we didn’t know better. I
think our propensity to do that is higher than most people’s. I’m
not sure it’s clarity. It looks like clarity in retrospect because
you see the things that work.” Page’s modesty is becoming, but
falls short of a full explanation.
Brin gave a parallel
answer: “A lot of it is common sense, a combination of common sense
and questioning rituals. Experience is a benefit, but it can also
be a handicap.” He also attributes their success to their math
backgrounds and a thirst “to be precise.” The idea to give
employees 20 percent of their time to pursue their own passions he
credits to graduate school, where “you’re always going off” on your
own projects. Stanford was a huge influence: its bikes and buses,
its open cafeteria tables and time to work on your own projects.
“They wanted to replicate the Stanford culture in the business
world,” said Ram Shriram.
The precision
argument is picked up by senior vice president of Operations Urs
Hölzle, who said the logic flows from a focus on the user. Start
there, and it is relatively easy to decipher whether users want a
Google home page cluttered with ads, or want relevant ads, or want
to rapidly move to different sites. “They predicted things that did
not make sense to me, but turned out to be true. Larry said, ‘The
ad results have to be better than the search results.’ I thought he
was wrong. Yet today studies show that people value the ads as an
essential part of their search results.”
One of their mentors
at Stanford, Terry Winograd, thinks their “clear, coherent point of
view” is “an engineering point of view: Don’t assume things are
done the right way because they were always done that way. Question
everything.” And after you question, revert to “an engineering
optimization attitude: ‘Make it more efficient.’” What stands out
to another Stanford mentor, Rajeev Motwani, the Stanford professor
Brin remained closest to and who died in a tragic accident in 2009,
are their one-word questions: “The number of times they made me
change my opinion by asking, ‘Why?’ They asked like a
child.”
It would be a mistake
to ascribe Google’s success to the generic category of engineers.
Larry Page brilliantly conceived search, and Sergey Brin’s math
skills were vital to its success. But Google also succeeded because
it forged teams of engineers who were not territorial, who formed a
network, communicating and sharing ideas, constantly trying them
out in beta tests among users, relying on “the wisdom of crowds” to
improve them. Building communities of engineers and hackers and
users was the ethos they shared. They believed it was virtuous to
share, for it embraced the construct framed by Eric Steven Raymond
in a paper originally presented at a conference of Linux developers
in 1997, “The Cathedral and the Bazaar.” Instead of a solitary
engineering wizard crafting software as if it were a cathedral and
releasing it when perfected, Raymond argued that the Linux model
was more like “a great babbling bazaar” that would ignite the
creativity of communities of engineers and users. This ethos was
one that infected Page and Brin and Google engineers, led them to
the clarity of a free search engine designed to serve
users.
Eric Schmidt had
another theory: Page and Brin actually have more experience than
their age suggests. He recounted a recent discussion he had had
with Page. He and the founders were upset with a product user
interface presentation they attended. Page said the problem was
that the engineers were young and had no experience. “The reason
you and I agree on this is that I started on this when I was very
young, and I’ve been thinking about it for a long time,” Page said.
At first, Schmidt was stunned, wondering how Page grouped himself
with someone who was two decades older. Then it dawned on him that
Page nearly matched him for experience. Like Brin, he said, “He
looks like a kid to you, but he’s been in the industry as long as I
have in a way.”
The experience of the
founders stems, as well, from four things they shared. First, each
was raised in an academic home, where clear thinking was prized.
They were trained to be precise. Each also “are quintessential
Montessori kids,” said Marissa Mayer. “They didn’t have a lot of
structure. They got to do what they want to do. They were taught to
question authority and think for themselves. They fundamentally
believe that people on many levels know what’s best for themselves.
Like the Montessori kid who paints when he wants to paint.”
Montessori, Page said, taught Brin and him “to question
everything.” A third vital shared life experience was Stanford. The
fourth was that Page and Brin shared each other. “There’s kind of a
strength in the duo,” said Coach Campbell. “So when they come out
the door at the other end, they are even more convinced than they
were going in.”
“We agree eighty to
ninety percent of the time,” Brin said of his relationship with
Page. Page thinks they agree about two-thirds of the time, but said
their disagreements are usually over small things. “If we both feel
the same way,” Page said, “we’re probably right. If we don’t agree,
it’s probably a toss-up. If we both agree and nobody else agrees
with us, we assume we’re right!” He smiled as he said this, an
awkward, tight smile, yet one that conveyed both merriment and
resolve. “It sounds like a tough thing to say, but that’s sort of
what you need to do to make progress.”
Susan Wojcicki, who
rented them her garage, believes they gave each other
strength—strength “to be different. They think alike. They had a
shared vision. So when things got tough, they were able to support
each other in being different.” They don’t always agree, said Jen
Fitzpatrick, who is Google’s engineering director and was among the
first thirty Google employees, but “having a mental sparring
partner is a good way to drive your own thinking.”
“Having the two of
them being completely in sync” is a huge advantage, said
Kordestani. He remembers his experiences as an executive at
Netscape, where the three senior executives—founder Jim Clark, CEO
James Barksdale, and the browser’s inventor, Marc Andreessen—“were
not in sync.” Pulling in different directions, Netscape lost its
focus.
Page and Brin bucked
each other up in another way: they burned with an idealism that
sometimes bordered on messianic. They launched Google with a
fervent belief that advertising tricked people to spend money, that
the Internet would foster a democratic ethos that would liberate
people. They gave employees their 20 percent time, Page told
Schmidt, in order “to force a conversation” with managers, removing
some managerial power.
There is a real sense
of loyalty to Page and Brin at Google. Their vision has made
Googlers obscenely rich. Employees love the freedom that the 20
percent time and generous benefits grant. Like Steve Jobs or Bill
Gates, their knowledge can be intimidating, though terror is not
commonly part of their motivational arsenal. Their approach can be
subtle. Sheryl Sandberg recalled a project she supervised in her
role as vice president, global online sales and operations. The
story she related could be interpreted as an illustration of a
company careless about how much is spent, or as a reason employees
like Sandberg saluted the founders. At the time, her project
awarded free search ads to nonprofit groups. “Some companies would
be worried about the bottom line. Larry and Sergey just wanted to
know why the program was not bigger, faster,” she said. She
increased the size of the effort—too fast, it turned out. “We were
giving much more ad inventory to a handful of nonprofits than we
should have.” She trekked to the founders’ office in Building 43 to
explain. Page was there alone, and she explained her “really big
mistake,” said she “should have noticed,” and
apologized.
Page interrupted her,
she recalled. “He said, ‘I’m so glad these are the kinds of
mistakes you’re making because it means you’re moving quickly and
doing too much. I’m going to be very upset when the mistakes you’re
making are by going too slowly and missing opportunities.”’ She
volunteered a ten-point plan to avoid similar mistakes, asking if
he wanted to review it.
“No, I totally trust
you,” he told her.
Of course, clarity is
not a trait unique to Google’s founders. Steve Jobs has
demonstrated prescience with several transformative innovations:
the first Macintosh, Pixar, the iPod and iTunes, and now the
iPhone. Bill Gates was clear about the value of software, a clarity
IBM lacked when it ceded the operating system to Microsoft. By
insisting that craigslist.org be a free site for most classified
ads, Craig Newmark knew, he said, that by sacrificing revenues
“people saw values we believed in and picked up on it.” He knew he
was building trust.
Page and Brin’s
clarity was abetted by the CEO they chose as their partner, Eric
Schmidt. Aside from the bumps they had the first few years, it is
the overwhelming opinion of those who work with them that the three
men have a smooth working relationship. Sheryl Sandberg observed
that the reason the troika “works is that whoever you go to for an
answer, that answer sticks.” When you have two parents, a child can
usually play one off against the other, she said. But at Google
even if one of the three disagrees, he will back the decision. Brin
said of Schmidt, “Eric is the leader for the company. Larry and
Eric and I all share in the top-level leadership, but mostly Eric
takes on the hardest challenges. Larry and I can spend more time on
products and technology.”
Success in the Valley
requires more than good engineers and passion, said Bill Campbell,
pointing to the brilliant engineers and divided management that
could not save Netscape, or how the passion of founder Jonathan
Abrams, who founded Friendster, the pioneer social network site,
was no substitute for missing management, and is a reason
Friendster was eclipsed by Facebook. “I can’t imagine that anyone
could have done what Eric has done. He matches what this company
needs. You’ve got founders that have their unique passions, and
they have an unusual amount of strategic insight. Applying that to
a business model and making sure that the trains are running on
time—and at the same time never losing the technology vision—is a
feat. Eric’s technology skills mean that no one can bullshit him.
You can bullshit me. I’m not an engineer.”
Being an engineer,
alone, is not enough. Oracle has thrived for a long time as a
company founded and headed by Larry Ellison, who is not an
engineer. Ditto Apple under Steve Jobs. This point is made by Dan
Rosensweig, the former COO of Yahoo who is today the CEO of
Activision Blizzard’s Guitar Hero franchise. What makes a
successful CEO, he said, “is a balanced appreciation” of the many
factors, including engineering, an entrepreneurial and business
culture, plus good management. In defense of his friend Terry
Semel, he added, “When Terry ran a movie studio he wasn’t a
director or an actor. Yet he and Bob Daly ran one of the great
studios.”
The youth of the
founders sometimes leads to sneering that an adult like Schmidt was
essential to managing Google. “It borders on insulting to say that
Eric provides ‘adult supervision.’ It is insulting to both,” Elliot
Schrage said. Yet there are times when Schmidt does supervise,
playing a role he likens to “a catcher” who retrieves “loose
balls.” For example, at the conclusion of a Google Zeitgeist
conference, the founders and Schmidt hosted a lunch for fewer than
a dozen journalists in a conference room on campus. In an earlier
interview, I had asked Schmidt how he felt about the federal
Patriot Act, which grants the president superseding power to tap
phones or e-mails to investigate potential terrorism. “I’m not a
big fan,” Schmidt said. “I’m offering you my personal opinion as a
citizen.” At the press lunch, the three men sat at the head of a
long table, and as a preface to a question I mentioned that two
years earlier Google had challenged a Justice Department subpoena
that the company share information about search queries involving
pornography, and Google took them to court and won. Given that, I
asked, what was Google’s posture toward the Patriot
Act?
“I’m not an expert on
the Patriot Act,” Brin began, “but it’s certainly a long-standing
issue prior to the Patriot Act....”
“Can I?” Schmidt
interrupted. Not waiting for permission, he proceeded to say: “The
best way to answer this question is to say it’s the law of the land
and we have to follow it.”
“Or in some cases we
fought it in court,” Brin began again, referring to the court
victory on whether Google must turn over search requests involving
pornography. Again, Schmidt interrupted, steering Brin away from
any possible don‘t-be-evil proclamations. Schmidt said, “We fought
it legally, and we followed the law, and we won in
court.”
There are times when
Schmidt appears obsequious to the founders, as when he introduced
Page at the annual meeting of Google shareholders as “the best
business partner in the world.” But then, “every once in awhile,” a
Google executive said, “he does this unintentional condescending
thing, and he does it in public settings.”
What Schmidt clearly
brought to Google was experience the founders lacked. Experience
often brings seasoned judgment. “Eric is the person who said, ‘We
did this at Sun,”’ said Sandberg. “Eric instilled some business
discipline. Before Eric started, our engineering team was going to
build a finance system.” She recalled that he told them “This is
not a good use of our resources. We’ll buy the software program.”
Michael Moritz, who as a director was unhappy with Schmidt’s
toughness during his first year at the helm, now said, “I’ve become
a huge cheerleader and fully paid-up member of his fan club. He’s
done the most important thing for a chief executive, and that’s to
recruit and lead a wonderful management team.”
Andrew Lack, then the
chairman and CEO of Sony Music, who is a friend of Schmidt‘s,
remembers an incident at the 2005 World Economic Forum in Davos.
Arthur Sulzberger, Jr., the chairman of the New York Times Company
and publisher of its flagship newspaper, spoke at a dinner attended
by Schmidt and about fifty media executives and journalists.
Schmidt remembers the evening vividly, thinking, “I was the guest.”
What he did not know, said Lack, was that he “would become a
target.” Sulzberger, who despite his august position can be
surprisingly supercilious, rose and accused Google of “stealing his
business,” his advertisers, his content. Sulzberger has another
side, as a staunch defender of journalistic values—a reason many in
the Times newsroom believe he nobly stands between them and the
financial barbarians—and he then made an eloquent plea for the
importance and future of newspapers, before coming back to Schmidt
and underscoring his animus toward Google.
The room was tense
when Schmidt rose to respond. He defused it with humor, said Lack,
referring to himself “as the skunk at my garden party. I can feel
in this room, shall we say, a certain indifference towards my
contribution to all of our work together, and I feel sorry about
that, because I think there are great contributions to be made
working together.” Schmidt acknowledged that Google and the
Internet can negatively affect newspapers and other media
businesses, but ended by urging them to talk and search for ways to
work together. Sulzberger said he had “no recollection of the
specific incident,” adding, “You can certainly check with Eric on
this.” Eric Schmidt confirmed Lack’s account.
“I admired Eric for
the way he handled himself,” Lack said. “There was no armor to him,
no bluff, no bravado.”
By 2004, relations
between Schmidt and the founders were harmonious. The founders are
happy with Schmidt, said one longtime Google executive who did not
want to be quoted, because “Eric does everything they don’t want to
do.” Bill Campbell sees it from another angle. He lavished praise
on Page and Brin for their entrepreneurial brilliance and
inquisitiveness. But he added, “Here’s the part you don’t see:
Let’s assume they had ten ideas they thought were great. Let’s
assume they applied six of them. That gauge of what you can apply
and what you can’t is where Eric comes in big time. These guys
decide this is what they want to do, and Eric will say, ‘This is
worth fighting for. This is a really important thing. Let’s go do
that. Let’s pull that, it will take us a little off track.’ What
Eric has, and the founders are the first to say, is judgment,
judgment, judgment. He knows when to take their initiatives and
drive them to a conclusion, or to talk them out of
it.”
SOMETIMES ENGINEERS
CAN BE CLEAR about the wrong thing. By relying so heavily on
algorithms and science, the Google founders—and Schmidt—have
sometimes been clueless about right side of the brain issues, as
they were with their original approach to Gmail, or book search, or
their clumsy dealings with traditional media companies. Google
collects an enormous amount of data about the people who use it. It
asks users to trust them with private information, much as a credit
card company asks users to trust it won’t share card numbers. The
difference is that Google’s business model is based on selling
advertising. And the data Google collects—the amount of time users
spend with an ad or reading something, what they click on, what
they search for, what they seem to like or dislike—is invaluable to
the advertiser. Although Google does not hand over the data to an
advertiser, it does use the data to help advertisers target
customers. As Winograd points out, Google is really saying, “‘We’re
smart guys. We have integrity. Trust us.’ They see things not from
an institutional, political point of view but from this personal
and engineering point of view: ‘We would never do that sort of
thing.’ They believe that in their hearts.” Winograd believes them
too. But the engineer’s passion, he said, drives them to also
believe that they are “smart enough to make sure that it won’t
happen by accident.” With the air of an empathetic but rigorous
professor grading a smart but innocent student, Winograd arches a
huge white eyebrow and concludes that this entails “a certain
amount of technical arrogance—‘The system cannot fail, cannot
fail.” But the system can fail, he added, because it is managed by
fallible human beings, not machines.
Google, at least
abstractly, is aware of this danger. Their IPO filing acknowledged
that “privacy concerns” could sabotage the trust the company
requires from users. In disclosing to investors the various ways in
which Google could fail, they write: “Concerns about our
collection, use or sharing of personal information or other
privacy-related matters, even if unfounded, could damage our
reputation and operating results. Recently, several groups have
raised privacy concerns in connection with our Gmail free email
service.... The concerns relate principally to the fact that Gmail
uses computers to match advertisements to the content of a user’s
e-mail message.”
If users lost trust
in Google, believed their private data was being exploited and
shared with advertisers (or governments), the company regularly
judged one of the world’s most trusted brands would commit suicide.
Do Google’s engineers, in their gut, believe they could lose the
user trust they have earned? Unclear. What is clear is that there
is often a fine line between certitude and hubris.