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Tuesday, November 14, 2006

Google Too Bold?

Slashdot Slashdot It! Digg! Google now has a market cap of more than $140 billion, a bit more than the combined market caps of Yahoo!, eBay, and Dell. Google's success with paid search has its competitors searching for new strategies. So what's really behind Google's great performance? What was so clear is that from very early on, Google communicated to the outside world two really important things. First of all, Google's founders wanted everybody to know from day one this is the value system we adhere to and believe in, and these are the ideas we are fighting for. So very early on, for example, long before it was a public company, Google posted on its website "10 things we know to be true." ... This is a company that from day one had a clear value system.

The second thing they did very early on was to post on the website the top 10 reasons to work at Google. From very early on, when Google was maybe a couple dozen people in Silicon Valley, they understood that long-term, the success of the company depended fundamentally on whether it could attract the best programmers in the world, the best project managers in the world, the best marketers in the world. And it was going to be going up against Yahoo! and Microsoft and IBM and all the other big names, so its fierce commitment to the battle for talent -- again, long before people felt like working at Google -- was [a] "you are getting a lottery ticket to instant millions" kind of deal.

IPO

So again, when the IPO came out, in the very first line in the letter from the founders was, "Google is not a conventional company. We do not intend to become one." This was met with great consternation on Wall Street, but to me, that was absolutely the maverick spirit of the times we live in. ... Obviously, Google can't always live up to the values it espouses, the stuff in China being a good example. But nonetheless, very few companies dared to be that explicit about "these are the ideas we are fighting for, and here is our strategy for attracting the best people in the world."

Well, the hardest thing in the world -- and it was true for IBM in the '50s and '60s, it was true for Microsoft in the '80s and '90s, and we will see how Google handles it in the early years of the 21st century -- is maintaining the original formula that made you successful in the first place. And so I would say two things.

First of all, let's not be naive about the challenges. To me, what is amazing is [that] with every new generation of technology and every new generation of the business cycle, the half-life of runaway success seems to be getting shorter.

So, IBM -- the world was IBM's oyster for what? -- 35, 40, 45 years. It just ruled the waves. IBM is still a wonderful blue-chip company, but no one lives in fear of IBM. No one believes that IBM is in an unassailable position of power. Microsoft had, what, a 20-year run where it sort of dominated the world and the very word "Microsoft" inspired fear in the hearts of competitors and visions of sugarplums in the minds of investors? I don't think Microsoft today inspires either that fear or the visions of sugarplums.

We will see how long Google's run can continue. Capitalism has a way of being a very powerful, self-correcting mechanism, and so somehow or other, time and again, your very success, and particularly runaway success, contains the seed of its own -- if not failure, and Lord knows it is hard to imagine Google somehow being a failure -- but it creates the seeds of a return to the baseline performance, let's say.

I am in no position to offer Google advice, but I think the great challenge going forward for Google is to figure out how on earth, when we now have these massive amounts of financial assets at our disposal and so much cash on hand and so on, how do we possibly continue a path of not growth -- because I think they will be able to ride the online advertising wave for some time now -- but a sense of innovation and really operating on the cutting edge.

How do you keep that sense of "we are the major game in town"? How do you keep that going for years and years? On the one hand, Google has developed a tremendous culture of experimentation that is fantastic. On the other hand, for all of these amazing experiments they have got going, obviously nothing has yet begun to move the needle in the way that the initial advertising algorithms do.

So I think they have got a great ride ahead of them. But looking back in history, it is amazing how a combination of technology, new competition, and the sense that among really talented people, there is always the new game to want to be part of -- how one way or another, companies that seem all-powerful, unassailable at some moment in time, one way or another get brought back to earth.

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