Authors@Google: Ken Auletta

Uploaded by AtGoogleTalks on 24.11.2009

>> What's interesting about reporters and the press and all is, if you're on the other
side of it is, people spend an awful lot of time criticizing writers for how quickly they
write, how little due diligence they do, and how if you will random some of their coverage
and so forth. And you hear this over and over again.
There is at least one exception to that. And probably the person who is the most disciplined
and the most detailed reporter of current culture, current facts, and current companies
that I have ever met. His name is Ken Auletta.
Ken, of course, is the author of about about 11 books, somebody who we have known well
over the years, someone who I've known in some of my previous roles as well.
In the technology community, has been covering the technology for almost as long as it's
existed, along with the media industry, which is another one of his great interests.
And Ken is one of those people who goes to the events and then talks to the people back
behind the event and try and figure out what's happening.
He became interested in the question of the media, which is sort of a fundamental question
of our time. And when he told me that he was going to work
on this, I figured he would work on a book about what is generally known as "old media."
But in fact, what he decided to do is to use Google as, if you will, a story or a metaphor
for the changes that are occurring. And I figured, "Well, we'll see a good book
out of that." But what is particularly interesting about
Ken is the level of detail and the level of discipline and the level of reporting that
has gone into his coverage of the set of seminal events, all of which we have lived through.
From a Google perspective, this is one of the most accurate chronicals of the journey
that we have been a part of. And I'm sure that the other companies that
he's covered in his book, and so forth, had the same level of precision reporting and
fact-based analysis that Google, I think, stands for.
It is a great privilege for me to introduce Ken Auletta to talk about his book, "Googled:
The end of the world as we know it." Ken.
>> [Clapping]
Ken Auletta: Thank you. I appreciate it. Thank you. And thanks, Eric.
He forgot to mention my Nobel Peace Prize, but what the hell, you know?
I have regards from Microsoft where I was two days ago.
I was speaking to an audience like this, and they speak very fondly of all you folks. [laughter]
And I should tell you -- there's a story I tell at the beginning, I think, of Chapter
Two of an interview that I did with Bill Gates in 1998.
And I said, "Mr. Gates," I said, "When you think about the future, what do you worry
about? What's your nightmare?" And I expected he would say, "Netscape."
He was about to go on trial for violating the antitrust laws, which he was found guilty
twice of doing. I thought he would say, "Oracle, Sun, Apple."
He didn't say that. He thoughtfully rocked back and forth gently,
and he said, "I'll tell you what I worry about, Ken."
He said, "I worry about someone in a garage, who is inventing some new technology that
I've never thought about. And that's my nightmare that that's going
to challenge Microsoft." Well, in 1998, we know who was in a garage
-- Worldwide Google Headquarters written out front in hand letters.
And they have become -- as I again confirmed on my trip on Monday -- their worst nightmare.
And I decided that -- as Eric alluded to -- that I wanted to write about a company
that was really riding the top and helping create the digital wave.
And that wave was crashing into a lot of traditional businesses that I had spent a fair amount
of time reporting on for the New Yorker and a book.
I had actually done a book in 1991 called, "Three Blind Mice," which is a book about
how the television networks missed the technological threat that was facing them, which was cable
-- which had two revenue streams and which could do things that the broadcast networks
couldn't do, and which were dependent totally on, as you know, advertising.
And they made some of the same mistakes that I found the media in this century made in
ignoring -- and being complacent about and not treating with alarm -- the digital revolution
that you people represent. So I came here really to try and understand,
Who is this company Google? How did it come to be? What's different about
its culture? What's unusual about Google? Why is it innovative?
Is there a secret sauce? And I also decided that, part of the narrative
would be -- I didn't know what the answer was, but I knew that I wanted to write a narrative
that told your story, but in the context also of how you begin to change from just a search
company to -- what you came to call yourself, which is -- a media company, and how gradually,
you started to bump into -- be it book publishing, or newspapers or advertising or telephone
companies, or television companies, or Microsoft. And how most of these other industries really
ignored you. In fact, I begin the book with the story of
a visit that Mel Carmason, who was then running Viacom, which was the second largest media
company in the world -- CBS, MTV, Simon & Schuster, etc.
And how we came here and he met with Eric and he met with Larry and Sergey.
And he thought maybe he'd do some kind of a deal, maybe even acquire you guys or something
like that. This is before you're public.
He had no idea what kind of revenues or growth potentials you had.
And so, he explained his business at one point -- as Eric described to me -- he tried to
sell a Superbowl ad to Google, which was going for $2 million for a 30-second spot at the
time. It's now 3 million, but the way. And of course, Eric and Larry and Sergey were
appalled at the idea of spending that kind of money.
And you had no idea -- no one's clicking -- you don't know, you know, who is watching
the ad, who is buying your product. And it seemed like a very inefficient system.
But they let Mel Carmason speak, and then they described the Google business.
How you actually -- there wasn't waste. You could tell who was clicking, you know,
who was buying, and was much more intelligent. And then Carmason said, "Wait a second. That's
very -- we don't want that kind of efficiency. We want to get people all caught up in the
sizzle of buying TV ads and that's what really matters.
We don't want the advertisers to know what they're getting,"
And, of course, Eric and the Google people were appalled by that.
And Carmason, at the end of the 3-hour visit, leaned over in his cufflinks gleaming, and
he said -- pardon the language, but actually I can't use that.
C-Span is here. So I'll be polite -- he said, "You guys are messing" -- he didn't use the
word 'messing' -- "with the magic." And, of course, at the T.G.I.F. that Friday,
Larry and Sergey and Eric tell the story, "We had an interesting visitor this week."
And "You know what he said to us? 'You're messing with the magic.'"
And of course, that's what you do here. And so, among the things I learned on my visit
is what engineers do. And if you start from the assumption -- as
the three guys who run this company start from -- that the old ways of doing things
are often inefficient, and you could achieve greater efficiency.
And if you think about the business I'm in -- the printing business -- totally inefficient.
The idea that you're killing trees, expensive paper, expensive printing presses, and expensive
distribution vs. doing it online in multimedia, if you want me to say, that's a pretty inefficient
system. So the engineer comes in and says, "Why?"
Why does it have to be that way? Why can't we sell ads and know who we're selling
to and who's actually buying and charging based on clicks rather than you think they
have an impression that you've made on them? And why can't you digitize all the books ever
made? And why can't you have Google news and aggregate
25,000 news sources from around the world? Etc. etc. etc.
And, of course, as you do that, you start bumping into traditional media companies and
they get very upset. And the truth be told, you were very late
to understand, as a company, that you're upsetting these people.
You were pushing the envelope of say, copyright. You were pushing the issue of fair use and
you wanted to be able to do a search -- and a search is wonderful.
I love the idea that the -- now eleven -- books I've written could be searched, and
people can have access to maybe a book that didn't sell so well of mine -- can be brought
back alive because of Google. That's terrific.
On the other hand, I'd like to be consulted as an author before someone puts my book online
and makes it available. And at one point, I tell the story in my book
of my second interview with Sergey, and he comes in the room and he says to me, "Ken,
let me ask you a question." He said, "Why don't you just publish your
book for free online? Just put it out there. Many more people will
read it." I said, "Well, that may be true that many
more people would read it, Sergey. But let me ask you a question."
I said, "Who's going to pay me to write this book?"
I'm now on a leave from the New Yorker to do a book.
So I mean, I need to earn a living, right? "And, who's going to pay for my trips out
here?" I made many trips out here. "And who's going to pay my airfare and the
hotel? And who's going to edit my book?
And who's going to send me on a book tour like I'm on now?
And who's going to index my book?" Sergey, at that point, wants to change the subject,
because the truth is, he was approaching it like an engineer does -- or someone who doesn't
know the book publishing business. But he was also approaching it, I would argue,
as someone who didn't have a full appreciation of copyright.
And an appreciation that you need the cooperation of people who own the content in order to
share it. I want to share my content, but I also want
to make sure that I can earn a living, because that's how I make my living.
And so, one of the reasons you got sued initially, by the Publishers and Authors Guild, was exactly
for this reason -- that Larry had this brilliant idea starting in 2002 to digitize all the
books and, Wouldn't it be great? And it would be great.
And you got the permission of libraries, but you didn't spend enough time -- as Google
executives admitted to me in the course of reporting this book -- seeking permission
from the people who own the copyright -- be they publishers, or be they authors.
Obviously, you bump into, when you buy YouTube, you bump into Viacom which decides -- and
I think they're trying to hold you up -- but nevertheless, they sue you for a billion
dollars, because they're saying, "You can't take John Stuart off the air."
So I saw that, and I saw basically, I think -- in the course of the two-and-a-half years
I spent -- that you were brilliant engineers, but you often are narrow in your approach
to the world. And copyright is one issue.
I would argue you're sometimes narrow about the privacy issue.
And one reason you're getting static from -- not just the U.S. government, but --
governments, particularly in Europe, is on that privacy issue.
I know Eric is very sensitive to that. But the truth is that there is a belief --
and I encountered this and I report this in the book -- is a belief that, if you look
at -- I spent time on Facebook. You say, "How can people be concerned about
privacy?" People put anything on Facebook, right?
So you kind of become convinced that privacy is not a big issue.
But it might be, because you collect a lot of information about people -- not by name,
unless it's, you know, some of your sites, but mostly, you don't have their name.
But you have a lot of information about them. And people get concerned.
So you now face -- I would argue that -- three issues that you deal with that arouse
the concern of governments around the world. One issue is concentration of power.
And, to go back to Microsoft, when I was interviewing Microsoft for the book I did when I covered
their trial, one of the things that was quite astonishing was how out of touch they were.
And Bill Gates almost pleadingly talked to me about, How could you think that we are
not doing good? How can my government think that Microsoft
is not doing good? He thought, if 95 percent of the people were
using his operating system, it was like he was building one track that worked for every
railroad all over the world. So he was a common source he was providing.
He wasn't thinking that, in fact -- and it's one of the distinctions I make between my
visit to planet Microsoft and my visit to planet Google.
Microsoft were cold businessmen. Gates and Baumer and company wanted to destroy
Netscape. I came away from my visit to your planet thinking
you're not cold businessmen. You're cold engineers. [laughter]
And, but you're not -- you don't mean to harm people -- but inevitably, as Larry Page said
to me at one point. I said, "Is it true that you will sometimes
bump into traditional media?" And he said to me, without any glee -- if
Bill Gates were answering the question, he would have been gleeful in 1998.
Larry said to me, "I wouldn't say sometimes. I would say 'always' bump into."
You're engineers, and you're figuring out ways to do things more efficiently.
The old media world tends to do it, oftentimes, inefficiently.
There are a lot of people doing that. I learned something else.
Let me finish the other point. So, one is "concentration of power."
Americans don't like powerful companies, and you are a powerful company today.
And, not only a powerful company, but -- as happened with Microsoft -- you've got a
lot of industries that want to create competition or lessen your power or use the government
to attack and weaken Google. And they have a lot of influence -- telephone
companies do and advertisers do and television companies -- in Washington.
But not just here. You're talking about Europe and you're talking
about China. There you bump into authoritarian governments
who want searches that don't have anything about tanks in Tiananmen Square.
So you're dealing with that issue. You're also dealing with the copyright issue,
which is something I argued you weren't particularly sensitive to and that governments are concerned
about. And you're dealing with the privacy issue.
And that too, is an issue that different governments deal with different ways.
So I would worry about that, if I were you, more than I think you -- I think you're late
to understand that menace to you -- the government menace to you -- as I think traditional media
was late to understand the digital menace to them.
I learned something else. I learned as I sat in the engineering meetings
here that I was allowed to sit in. And I probably understood half the words that
were spoken. I mean, you could have been speaking Swahili.
I didn't, literally, understand what was -- but I had the luxury of time to ask people,
"Tell me what that word means." or something. But I kept on thinking, as I'm sitting there,
of Terry Simel at Yahoo in 2003 -- and I know he wasn't an engineer.
Or John Sculley at Apple in the mid-, late 80's and the early 90's, and he wasn't an
engineer. And is that why these two companies, for instance,
fell behind in engineering, because the people at the top -- unlike Eric and Larry and Sergey
-- couldn't understand the language that their engineers were speaking?
But, as I listened to the engineers in those meetings, and as I listened to Larry and Sergey
and Eric asking provocative questions of them and saying, "But wait a second.
I heard what you said, but that doesn't make any sense because of x, y, z."
I kept on thinking that, in fact, the engineers were the content creators at the company.
You don't think of engineers as content creators, but in fact, I came to think of many engineers
at places like Google as the Martin Scorsese's of this world.
The applications that you're creating become content.
And if I spend two hours doing Google search or on Google maps or one of your other products
-- if I spend two hours on that, I'm not spending two hours on CBS or with a book.
And if I spend time -- Facebook is content -- anything that occupies your attention,
I would argue, is content -- including how content changes for the Internet.
It's not the same; storytelling is not the same, etc.
So I learned that in my visit here. I also learned, as I went from here back to
the world of traditional media -- to book publishers and television executives and movie
executives and music company and newspaper and magazine and Microsoft and advertising
agency and telephone companies -- and I interviewed those folks.
I came to realize how retrograde they had been.
There are two types of people in the world, I think -- particularly people who are dealing
with challenges. There are people who lean back, and there
are people who lean forward. The people who lean back are the people who
are protective, defensive, worrying about, How do I preserve what I have?
The people who lean forward are proactive, and they're people who say, "This is a challenge,
and I'm going to seize the day. I'm going to be an optimist. I'm not going
to be a pessimist. I'm going to forge forward. I'm not going
to whine. I'm not going to complain, 'Oh, woe is me,
Google is killing me. The Internet is harming me.'"
And in fact, we hear more of that whining. And it really makes me sad, because I actually
think that many people who are whining -- particularly say, people with the New York
Times are doing God's work. The blogosphere is never going to replace
the kind of reporting and expenses that the New York Times invests in a place like Afghanistan
today. Or that some newspapers -- most newspapers
are not very good newspapers I would argue, but there are some that are wonderful newspapers.
And sometimes spend two, three, four months to investing an investigative report or covering
state and city capitols. And in the digital world, you have a way of
proving who is reading or watching what. And what editors in the digital world --
one of the dangers -- and Larry Page and I talked about this, and he's thought a lot
about this issue. He said to me once, he says, "I worry that
people are going to -- editors are going to see or publishers are going to see that people
are interested in Britney Spears, but they're not interested in government news.
And those papers will start covering what is most popular with people."
And that worries him. It should worry him. It worries him in terms of search. You need
good search information. So he said to me -- as did Eric -- that, "We
really want to see if there's some way to help the New York Times."
And in fact, at one point, they acknowledged, when I asked them this question, that they
discussed internally the idea of buying the New York Times -- at Google.
They never talked to the New York Times about it and they never did anything about it, because
in the end, they decided that you have to be -- as a search engine -- you have to be
a neutral Switzerland. You can't take sides.
And you can't be perceived as favoring one content over another.
And in fact, one of the things that actually enthralled me in the reporting of this book
-- and I look at my friend David Crane, who I spent many hours with -- and most people
I interviewed here, I would ask, "Where did these two founders of this company get the
clarity that they had? How did they come, at 25 years old, to say,
'I'm going to have a simple home page. I'm not going to allow Visa to spend $3 million
to have an ad on my home page. And I'm not going to build what Yahoo and
AOL were doing, which was a portal. I'm not going to try and trap people.
They're going to do a search, and I'm going to send them to this search destination that
they want. And advertisers? I'm not going to milk them.
I'm going to charge them an e-Vickrey Auction and only a penny more than the second and
then the third highest bidder.'" right? And how did they know that building trust
of the user was essential? And if you think about -- if you have that
as your guidance, you automatically know you can't buy the New York Times.
Because, if you buy the New York Times, you may be helping save a great institution, but
you're undermining the trust you need to function. Just as I would argue that you should be worrying
-- much more than I know you did, certainly when I finished reporting this book this spring
-- about governance. And if you think about it -- as brilliant
as many of the engineers at Google are, as brilliant as the founders are and Eric is
-- there is a, like Bill Gates at Microsoft, they are not necessarily the best people to
determine things that are not easily measurable. That is to say, something like people's fears.
If people fear Microsoft, as they did, or they fear Google -- as many do, and certainly
other companies do -- that's a fear that can build and infect and go to Washington, go
to the European Union, go to other countries that you're dealing with.
And that's not something that -- as Sergey said to me when I asked him about this --
he said, "Look, we're not strong in the emotional intelligence department."
And that's true. So where does that lead me?
What do I take away from this book? I call this book, "Googled," because I think
Google has basically changed the world. As Hal Varian said to me -- at one point he
said, your chief economist, he said to me that, "The Internet made information available.
What Google did was make it accessible -- the great navigation assistant for the universe."
And that changed the world -- changed my life as a writer and reporter.
I mean, I have a library at my fingertips, and every day I thank the fact that I can
have a Google at my fingertips. And the thought that I can have books, as
well as scholarly journals, available to me too, it's just -- it's very efficient for
my time. I'm like getting up and going to the New York
public library. And I could work at night or early morning.
And it's just fabulous, but the reason for the subtitle of my book, "The end of the world
as we know it." is that, the world -- the traditional world with all those media institutions
I spoke about -- is forever changed. And that's a profound change.
And some of that is wonderful. And some of that is not so wonderful.
And when I hear bloggers say what's important, for instance, about journalism is just preserving
the journalist. And you could have one individual do good
journalism that's enough. And in fact, bloggers can do wonderful things
and one individual can do wonderful things. I think of people like I.F. Stone, for instance,
doing great reporting. But journalism -- really good journalism
-- is a team effort, just as Google is a team effort.
And you need editors, and you need -- in New Yorker's case -- copy editors and fact checkers.
But when you do an investigative report or I go out and do a piece for the New Yorker,
I have lots of people that are constantly involved in my life.
And when I hand that piece in to them, they'll say, "Hey, Ken you buried the lead, it's really
in Paragraph 20, not where you put it." Or, "I think the story is a little off.
I think you really need more of the following." I would go back and do a little more reporting.
That's the nature of the way journalism really works.
A team is essential for great journalism. That's the truth of the New York Times.
You can't replicate that unless you have the resources of some kind of institutional support
to do that. And if we lose that, we lose a lot in our
society, in our democracy, and the kind of checks and balances and trying to keep governments
and powerful institutions honest. But I came away thinking -- to finish my remarks
and welcome any questions you may have -- I came away thinking, "You're a really great
company." And I mean that; I'm not saying that just
to placate an audience, and just to prove it, you also are tremendously challenged.
And it seems to me, you face both external threats and internal threats.
The external threats are the obvious competition -- Bing, other search engines, though Bing
has not done as well as certainly they expected to.
And when I was reporting this book in May of '08, I went to a Microsoft conference and
literally Microsoft executives were whispering to me, "We have a game changer here.
We're going to announce something called 'cashback', and it's going to change the world."
Has anyone heard of cashback since then? Nada. So you have to worry about Facebook and Twitter
and the form of vertical search that they might do.
I mean, it would be a much more valuable search for me to be able to consult -- if I want
to buy a camera -- 20 friends in Facebook with Twitter, than getting 10,000 answers
from a Google search. I mean, I did a search -- I describe in the
book -- I said, "Who is the real William Shakespeare?" I punch it into my Google search box.
And how many answers do you think I got? Anyone have a guess?
How about if I said 5 million? That's preposterous. That's totally inefficient.
It violates every rule you say you believe in at Google.
And you couldn't give one answer to that, because it's a controversy whether William
Shakespeare actually did exist or was someone else.
But 5 million guys? Uh-uh. So vertical search is a threat.
Government is an external threat to you. Governments, I should say.
And you got to worry internally about your size.
Can you move with the same speed as you always have, the loss of good people, and you got
to worry about hubris. And I saw this in Microsoft too.
And I know all the differences -- I think I know at least some of the differences between
you and Microsoft. People are locked into their operating system.
You're one click away from escaping Google. I understand that.
But when you're that successful, as you've been, and your life is really pretty -- I
mean, you're given lots of things from your laptops to your food to your buses etc. --
it is very easy to lose sight of the real world.
And if you're an engineer and maybe living in this tight community, you have the advantage
of being on the Internet, which Microsoft avoided and didn't have, you know, that kind
of exposure that you have to other opinions. You're at risk. And it's worth probably thinking
about. In any case, in my visits to your planet
-- and I'm not coming back in any regular way, though I'll miss the food.
I learned a lot, and I thank you for that. I mean, I had nothing but hospitable people
and wonderful interviews here. Thank you. Welcome your questions.
>> [Clapping]
Ken Auletta: And just raise your hand, I'll call on you if you got any thoughts.
If not, we'll -- [pause] yes. Oh, I'm sorry. [pause] I wish I knew.
I wish I knew how you save the New York Times. I mean, I think newspapers are going to try
and create a payroll, and I address this issue in my book.
I think they have to try to figure out how to get another stream of revenue, just as
you do. I mean, I think the notion of being totally
dependent on one source of revenue -- advertising -- I'll tell you a story, for instance.
Eric Schmidt -- in my 11th interview with Eric last December, I said to him, "I just
left John Hennessy, the president of Stanford, and he said he thinks the original mistake
that was made with the Internet was not having either micropayment or subscription -- not
just being reliant on advertising. Do you agree with Hennessy, who is on your
board?" He said, "I do not. I think free is the best model."
And my last interview with Eric, which was April of this year -- so four months later
-- I said, "Eric, do you still agree with what
you said to me in December?" And he said, "I don't. I've changed my mind."
And if you think about -- Chris Anderson wrote a book called, "Free."
It came out, the editor wire came out in July. He added a chapter at the end of that book,
which is called, "Coda." And essentially, what he says in that last
chapter seems to contradict much of what he said in the rest of the book.
He said, "Free is not the answer." And I think what happened -- the recession,
which began in late 2007, really was a wake-up call for Silicon Valley and people whose businesses
were digital or -- to realize, you were making the same mistake the broadcast networks made.
You were going back to the future and relied on a source of revenue that was shrinking
-- advertising. And you had to figure out some way of getting
another source. The New York Times has to try and figure out
another source of revenue. They've come to Google -- in fact my last
visit when I left Eric's office, I came downstairs to the cafeteria in 43, and who was in the
cafeteria in 43? Arthur Sulzberger, Jr., the chairman and publisher
of the New York Times. And he was going up to see Eric and the founders
to try and -- Is there some way we can pump more advertising dollars, some other -- obviously,
they'd love Google to pay them a fee for the content.
So far, there hasn't been a good answer. Some, but the danger is, if they create a
payroll, as they're going to, what if every newspaper -- and every newspaper won't --
have a similar payroll? So people will then get information from the
wire services. Maybe they'll get it from the Christian Science
Monitor, which is six days a week online, or the Seattle Intelligentsia, which is only
an online publication. So you skirt the payroll, and you reinforce
the notion that news is a commodity, which is exactly what the papers are trying to combat.
That's one problem. The other problem is, How do you educate
-- how do you change the culture of the web, which is a culture that basically says, "Information
should be free"? Then you got the hacker question.
People who will hack around your payroll. So I read what Murdock said in Australia to
SKY TV that, you know, "We're going to stop Google from searching."
I think of that in two ways. One is that Murdock doesn't even -- you know,
his e-mails are printed out so he can read them.
He's not -- seriously, by the way. Two, he's negotiating.
He's trying to put you guys on the defensive and get you to pay something -- as others
have gotten you to pay them. You're paying 125 million to the book publishing
industry. And in fact, Google is coming to realize,
as you have with YouTube, that you need professional content.
The engineers at YouTube made a mistake. They thought user-generated content would
be the way. It's great, all this traffic.
The truth is, the advertiser doesn't want their friendly ad next to some dog pooing,
you know? So you have to have more professional content,
and you have to pay for it -- as you're starting to, and you're starting to generate more income
at YouTube because of it. But I don't know -- I wish I had a good answer
for that question. I wish New York Times had a good answer for
that question. But, I would rather be the New York Times
than the St. Louis Post Dispatch, or the Detroit News or, you know, San Diego Union -- a lot
of other newspapers. Times has some advantages, but they have a
particular problem -- like a lot of papers do -- they have a huge debtload, and the debts
are coming due, and they got to pay them, and can they?
Q [inaudible]
Ken Auletta: Well, some of them are benign, and some of them are less benign.
But one of them is that -- if I come here and ask any one of you -- if I put my pad
out, and I say, "How much does an engineer make?" Or, "How many people from India?
How many Indian citizens or were born in India or of Indian descent work at Google?"
Or you ask any factual question -- I may as well be talking to a CIA agent.
I don't get an answer. So the notion of transparency has its limits
at Google about that. And some of that, I know, comes from Larry
Page, who all his life -- he read a book very early in his life about Tesla, who arguably
invented electricity, but because he was very generous and shared his secrets, wound up
dying a very bitter and poor man. And Thomas Edison got all the credit.
And so, Larry Page talks about this. He's talked not just to me, but he's talked
about that elsewhere. The importance of keeping things secret.
And there are secrets that are worth keeping. You keep your black box for your algorithm
is the determined search is a secret for good reason.
You don't want people to game the system. If they did, you would lose the kind of trust
that's essential to your success. The other contradictions are, there is a genuine
idealism here, and when the slogan, "Don't be evil," was created by Paul Buchheit, that
resonated on this campus, because you can embrace that as being true -- as befitting,
you know, who you were -- your self-identity. But then, in the real world, you make compromises,
like you did in China, right? And that, you know, that's a contradiction
-- inevitable. And here you are with all your idealism.
You've hired some nice-priced lobbyists in Washington -- contradiction.
Those are just some of the contradictions. But the truth is, that's the adult world,
you know? And the adult world is full of compromise
and contradiction. And it doesn't mean it's evil, but it doesn't
mean it's good either. And you think about it, "Don't be evil," is
really a slogan. I mean, it may satisfy you and all that, but
I was at a T.G.I.F. meeting here, and someone said -- Larry and Sergey were up on the stage
-- and they said, "How could you close the Phoenix office?" This was in the fall of '08.
"It's evil." You know? Well, to the people in the Phoenix office,
it may have seemed evil, you know? I don't think it is.
I mean, I think they're making a business decision, but again, evil is often in the
eye of the beholder. So it's kind of self-righteous in a way.
Yes, sir.
Q [inaudible]
Ken Auletta: I think it's much more the changing business than it's Google.
Google is really a surrogate for the Internet, and music is a classic example.
I mean, if you think about how the music companies -- I would argue -- committed suicide.
They weren't murdered. And the suicide is to have a business model
that says, "We are only going to sell CDs. You have to buy all of the records in this
album, even if you don't like them." And along in 2001 comes iTunes, and they say,
"Hey, just for 99 cents you could buy any song you want.
You could actually listen to a portion of it before you decide to click and buy it."
Where was the music company? Why didn't they make a deal with the online
stuff that the people -- what do you call it?
What was the company that they sued? Napster, yeah.
Why didn't they make a deal with Napster? Why didn't they buy Napster, you know? And
do that? Why did they resist? Why did newspapers, for
instance? If you go back, newspapers can tell you honestly
that 15 years ago to a dozen years ago, they had online editions.
But if you go back to that point in time -- and I was writing about this at that point
in time -- the online edition reported to the newspaper editor not to -- they didn't
have a separate online editor who was conversant with the Internet and realized that the Internet
was just not a print model. It was a multimedia, and it was a different
medium than the newspaper. Not only that, but you couldn't break a story
in your online edition until it appeared in the next morning's newspaper.
It's insane. And by the way, Craigslist.
I mean, the New York Times -- people approached the New York Times and other newspapers with
the idea of a digital classified. Newspapers used to get one-third of their
advertising revenue from classified advertising. Before Craigslist was born, it was proposed
to the New York Times and others to create a digital consortium to sell classified ads
online. "Oh, no. We don't have to do that." Hello?
You know, so I don't -- again, this is the 'cold engineer' point I was making as opposed
to 'cold businessmen'. You didn't set out to disrupt and kill businesses.
You are disrupting though -- people. Inevitably, the digital world disrupts them;
the Internet disrupts them. And you either lean forward and figure out,
What the hell do you do about it? And it would have been better if you thought
about lean forward ten years ago than now. Yes, sir.
Q [inaudible]
Ken Auletta: So let me understand. So you're saying that, if you pay $35 a month
for your broadband connection, that you consider that paying for news?
Q [inaudible]
Ken Auletta: Right. Well they can, but a basic problem they face is that, you know, Google
is providing many more readers for the New York Times or Washington Post through your
Google search or Google news. You only give a headline, basically, of what's
in the paper, and you have to click on the New York Times link to take you to the New
York Times. And the New York Times then is allowed to
sell advertising off of that. The basic problem is that the advertiser will
only pay about ten percent of what the advertiser will pay for the same ad in the newspaper.
So the revenue you generate online, even if you had many more readers reading the New
York Times -- because, if you add the online edition, the income -- if they close the print
edition and save all the money, not enough revenue would come from the online to make
up for the lost subscribers and lost advertising from the print edition.
And that's a conundrum that newspapers face. Now, it may be that some day that it won't
be ten percent. It'll be 50 percent and the economics will
work. But right now, the math doesn't work for newspapers.
So they've got to figure out -- well, if they can get money from the ISPs, great.
But, you know, if they can get money from you guys, great.
If they can figure out some way to charge micro-payments or subscription for online,
great. And if they can't, not so great. And it may
be they can't. Yes, sir.
Q [inaudible]
Ken Auletta: I did detect hubris on this campus. And particularly, if you think about government,
which I don't think this company was particularly sensitive about.
In part, because you are full of the idealism and the kind of sense that, "We don't do evil.
We're God's creatures. We're advancing and we're doing wonderful
things." And you do do wonderful things.
But, you also are a giant powerful company, which is bumping up against issues that really
matter to people like copyright and privacy and power -- concentration of power.
And people really -- advertisers are worried you have too much power.
Book publishers are worried that you're going to be selling books against Amazon -- which
you are going to be doing, as you know -- and that you'll have control over price point,
just as they were about Wal-Mart and Amazon having that kind of power.
So people want competition, and there is a certain hubris I think that infects -- it's
in the leadership of this place -- in the belief that you're very close to the Obama
administration. And you are.
You have people like Eric, who's an advisor, people like David Drummond, who's an early
supporter, people who've left Google to go work in the administration.
And I've literally heard -- I've been reporting a piece on the Obama -- I'm at the New Yorker
now and reporting a piece, and I've literally heard people saying, "God, you've got to go
down. Anything we want we can get from the Obama
administration and the FCC in terms of open net and all those other things."
I think what you miss -- what the hubris misses in this case is that Democrats tend to be
pro-regulation -- the more so after what happened on Wall Street and a sense that it was the
lack of regulation that led us to some of the Wall Street and banking excesses.
Well, there's the same concern that you need more government intervention to prevent things,
A. B, we've already heard the head of the Justice
Department's Antitrust Division -- Christine Varney -- say that she is going to look very
closely at companies like Google, and about their market power and market concentration
issues. And I think you delude yourself if you think
that you're not in for some tough years ahead because of your friend in the White House,
who made a wonderful presentation here in 2007.
And I think, you know, you would be blind if you don't realize that -- not to mention
all the other government bears that threaten you all over the world, including totalitarian
governments. Yes.
Q [inaudible]
Ken Auletta: There's a great book I would urge you to read by Clayton Christensen, and
it's called "The Innovator's Dilemma." He's a Harvard Business School professor.
And he makes the point, and he talks about many companies in this book -- like Sears
and Roebuck -- that essentially had a great business and they tried to protect that business,
and they saw new technologies coming around and the Wal-Marts and buying by catalogs etc.
Or IBM, which says that, "We're in the hardware business, and let's give our software.
Let Microsoft do it." And Microsoft -- '98 -- my story with Gates.
I mean, they're protecting their package software business.
And suddenly the Internet's coming along and, Do we invest in that?
And do we take money from our existing business to do that?
That's the innovator's dilemma. Do you sacrifice your existing business to
make a bet on what you think might be the future, but might not be.
It's a wonderful book with many, many vivid examples of that innovator's dilemma.
And you're going to face that here, you know? I mean, one of the reasons that I was told
that you did make a bid to buy Twitter last spring was because you're worried about the
possibility of vertical search that we spoke about before.
And, you know -- that I don't think is a diverture from your existing business and in fact, it
arguably enhances your existing business, but you're going to have those issues.
For instance, the issue of, Do you do more content at YouTube?
Do you have to own content and invest in content in order to have the content that advertisers
are going to want to buy? And what does that -- does that, at some point,
undermine the trust that you need for your success in search?
Maybe. That could be an innovator's dilemma. Yes.
Thank you.
>> [Clapping]