Thursday, November 27, 2014
Inquirer Daily News

Google CEO Eric Schmidt transcript

Google chief executive Eric Schmidt's more or less complete remarks to reporters in Philadelphia yesterday

Google CEO Eric Schmidt transcript

Eric Schmidt, a 20-year veteran tech company executive (Sun Microsystems, Novell) who studied at Princeton and Berkeley and now runs Google as chairman and chief executive, addressed University of Pennsylvania graduates yesterday, then met with reporters at the Palestra. We published excerpts in today's Inquirer -- here's Schmidt's fuller remarks on several topics, from my notes: 

 On competition
Microsoft and Yahoo have excellent search engines. They are highly competitive. They are direct competitors. They are working hard to strengthen their search engines in (terms of) the competition from Google.
 On market “dominance” in antitrust law
It’s not that you build a great product. It’s what you do with it. Microsoft blocked new applications for Windows, (which caused) the 1997 (federal antitrust) litigation. Those are not things that Google can do or would do.
 On Google making real-world activities unprofitable
We are critically dependent on the production of high value content…. This huge recording live tour is happening this summer. Americans love to go to a concert. The tickets are not cheap.
It may be the modality of consumption changes; people still want the experience. I’m on the board of Apple. Look at the success of iTunes. People are willing to pay for a high quality product.
  On Penn
Penn has a great narrative. 16, 17 years ago there was a sense at Penn it had lost its way... Financial trouble. A set of people who preceded the current president, some (of them are) still trustees, set out to revise the culture. An urban culture inside what was a tough working environment. They did all the things you had to do. The result is in the last 10 years it’s become the buzz school everyone wants to go to.
It’s a metaphor. The underlying culture was there…We always want to be that place. The place people want to be. You do it by empowering the key leaders at the right level who have a lot of energy.
 On Google’s “70-20-10” management gimmick
The 70-20-10 is a way of thinking about risk. 70 pct core activities. 20 pct adjacent and support activities. 10 pct (creative, future activities.)… Like Google Sky, point your phone at the sky, tells you which are which. It’s a big accomplishment. People have been wondering it for 20,000 years. Now it’s like computers beating chess. It’s done.
The 70 pct subsidizes the creativity. Together they provide this innovation. Most of the new stuff comes out of the 10 percent, the Other. I like the wacky ones.
 On Google wrecking the news business
The hallmark of a successful democracy is investigative reporting. Investigative reporting is not done anywhere else (but by newspapers). We need to do whatever it takes (to keep it going).
Today what happens is the newspapers allow us to search for information… If the newspapers did not want that tooccur it’s easy for them to block that… Newspapers have made the decision it’s OK for us to point to their content because we send traffic to their sites… We’re in this together.
We have not yet developed a good substitute for the totality of the revenue newspapers have… We are having some success with our display ads… newspapers use that.. .But it does not make up for the loss.
  On paying for Internet search content
Google will certainly Not become a paid service. I suspect newspapers… and other high quality providers of content will… evolve into subscription… micropayments… not unlike television…
Google Books… Google Library… taking orphaned and out of copyright works and digitizing them… we embarked.. four years ago.. We spent most of the time in litigation… We have a settlement we like a lot… in front of a judge later this fall… a complex mechanism to try to id the owners of the copyright… We cant charge for things we don’t own; we’re not going to make things expensive when it’s free.
 On Google and Comcast
We have a pretty good relationsip w Comcast. We have a series of advertising partnerships with  them (based on) website search… It’s pretty lucrative deal for them.
Where the collaboration is really important is in the next generation of broadband rollouts. Brian (Roberts, Comcast’s CEO), who’s really clever, and I spend a lot of time on the phone trying to make sure ubiquitous broadband really does happen in the US. Right now cable is 2/3 broadband industry in the US. Comcast is the larger of the players. 60 or 55 pct of the mkt. Theyre the strongest player in the biggest part of broadband in the US. They rolled out Docsis 4 50-megabit modems. That is crucial to thingts we care about. Video and so forth.
We also did a deal with Sprint around Clearwire where Comcast and we joined investors to do v highspeed data in a new block of megahertz. Philadelphia is way ahead of us (the became available here before Google’s California hometown). It was annoying.
That’s the benefit of having Comcast around. The partnership is, we are like what we have with newspapers. We are verydependent on Comcast doinog an excellent job. Brian (Roberts) is very clever.
 On Brian Roberts as a strategist
Brian is very clever. He calls me up to think thru the business strategy. I find him v insightful. He lives in a world, the business side and financial side, that I don’t live in. I talk to Brian every week. That’s how important it is. All the political issues, all the policy issues. If the broadband rollout doesn’t happen, it’s a major issue for Google.
 On Roberts as a tough negotiator
I haven’t dealt with that side of him.
 On the recent increase in Washington lobbying by Comcast and Google
Their general counsel is the incoming trustee head at Penn (David L. Cohen, actually Executive Vice President at Comcast). We had dinner at (Penn) President (Amy Gutmann’s house last night. They had a beautiful clear tent on the back of her house. It was extraordinarly well done… I’ll let him talk for them.
 On Google’s own lobbying and public relations efforts
We went from being a startup to being an institution very quickly. We have organizations that spend a lot of time complaining about us an criticizing us. That’s healthy. We had to get (used to) that fact. We were no longer an itty bitty startup. I learned that information is important to a lot of people.
We style ourselves as focused on end users…
We bought Youtube and we were immediately sued by Viacom. (Cited also the litigation over Google’s book search project.) These suits are not fundamentally about whats right to the end user. It’s about the industrial structure that has grown up pre internet. As I understand antitrust and the way government works, as long as we benefit end users and are consistent with our principles we will be just fine.
People will complain. When the Internet arrives in your town people will complain… I don’t think the government will stop the Internet. There’s too much of a broad sense of the value
We acknowledge we get criticized for everything we do. Info is important. We see ourselves as focused on what end users really want. If there’s an opportunity to do something extraordinary for the end user.
  On last week’s Google outage
We’re not perfect.
  On a reader’s request that Google compete more aggressively vs Microsoft for business-email
We have an enterprise email product that gentleman should take a look at it.
  On open sourcing and Google online programs
The computers we use run Linux. The programs we run are based on open source tools. Chrome browser is open source. A new Google operating system, Android ,is open source. Code.google.com has a lot of the paraphernalia to do open source programming. Web based. Tht’s been a huge success.
We have a game different from our competitors. We don’t need to sell software since our advertising is so successful.
Chrome (is doing well). There are new versions coming up very,.very quickly. Chrome is strategic for us. It allows us to build a platform for cloud computing that’s even more powerful.
The browser is a key part of the platform. Bring in stuff nobody else can. If you fiddle with all the Google products, Chrome as the design of a product is in many subtle ways as good as the initial Google search engine. Once you start using Chrome it’s hard to go back.
  On buying other companies, and why Google’s waiting for prices to go down more
Price does matter. We learned that with acquisitions.  Lever up debt, it kills us. We’re tightly managed on these sorts of things. Tho we present ourselves as this happy go lucky company.
We have  $18billion in cash. $2.2 billion in the March quarter. We have a very strong cash position which is getting stronger. I do not want that to burn a hole in our pockiet; it does not follow that we should blow $5 billion on an overpriced asset. We haven’t seen anything that is compelling or cheap enough to get exicted about. We are buying small companies. Three or five people. They’re immaterial (to Google’s current financial results).
I think (analysts) are really asking, will you become what Oracle is? Do a lot of acquisitions. Assimilating companies.
 On Philadelphia, past and future
Philadelphia was a wonderful success story (in the past)… good leadership, luck, debt financing… In order to get a tech renaissance you have to have a couple things. You have to have the kind of universities you have here, Penn and Drexel, maybe some others. You have to have a couple of engineering programs. The Penn engineering program is very good, we’re hiring (from Penn). I don’t know Drexel…
You need a diverse culture… that seeds itself into a global context. You also have it for example in Chicago
It does not follow that you end up with a suburb of Philadelphia that becomes a tech hub. It’s an urban phenomenon. This generation wants to live in these interesting diverse places. Look at the graduates today. Race, nationality, forebearance.
 On the yearly private, secretive Bilderberg conferences he’s attended in the past:
I’m not with Bilderberg this year. I’m missing that to be here.
 On why he’s doing college commencements this year (Penn’s and Carnegie Mellon’s; in previous years he also did Berkeley and Virginia Tech)
I had been more inward looking. I’m trying to be more publicly visible. There are many reasons to be publicly visible. The most important is to say thanks. This is the University where we get the largest number of non-engineering interns from in the U.S. (from Wharton) Which is a surprise to me.
At Carnegie Mellon (with its strong computer science engineering culture) we have an office on their campus.  These are parts of (our) constitueny. I’ve been a trustee at Carnegie Mellon.
So when Amy (Guttman) sent me this note inviting me...
 On what he tells college grads
I had never been to Istanbul Turkey (until recently). Here I am in the cab. I get my computer. My 3-gig GSM card… I’m going by the Ottoman This and Ottoman That (and getting info about each site by computer). And I thought, What is wrong with you? It was so addictive I kept doing it. (Puts his hands on his head) Everyone has a moment. In my case it was the Ottoman Empire. It’s beautiful. So turn your computer off when you’re driving by.
Our goal is to have you be as attached (to your computer) as possible. (But) know where the off button is. It’s possible to spend your life inside the computer. Life is the people around you.
These tools are enormously powerful. Use them. Then turn it off, and talk to them.
 On social networking
The tech change of the Internet has taken place so quickly that all the systems of society have not had a chance to react… So we have this community of teenagers expressing every inner thought… There are many, many reasons we did Not want to know that and yet they’re being expressed… Maybe society is going to decide that’s not such a good idea to write down every inner thought from the age of 14.
 On federal antitrust regulation
Once industries become regulated they seldom innovate very quickly… The railroad industry was a wild and woolly place…payoffs…scandals. Eventually they formed… the Internet Commerce Commission. Our analogy would be the Internet Commerce Commission… The result was nothing was done the next 50 years.  The regulation stifled it.
I would hope companies like (ours) will be able to take our consumer mandate, then hold off people who want to get in the way of that.
 On energy costs
I am here and Google is successful because of Moore’s Law…(in which computer power is) doubling every18 months…(This is) likely to continue for at least 10, 15 years… 10 years in Moore’s Law is a factor of 100. 100 times cheaper, 100 times  more powerful in 10 years. And a factor of 10 every 5 yrs.
In a world where you have that enormous price deflator of Moore’s Law that’s where you get this appearance of ubiquity… .
In energy they have Not had the same phenomenon. People in my part of the world think you can apply things that are similar to that to renewable energy. Once you cross over those production curve costs you will get something similar (to Moore’s law).
The negative people who’ve dominanted the conversation for 30 yrs say, ‘We’re running out of oil! Woe is me!’ Not the people who are innovators… Wind (power will be) similar to the cost of coal…It never runs out but it’s also intermittent. There’s a storage problem w wind. So get a bunch of wind farms.
  On poverty
…There’ll always be poverty in America… When I was a boy… (it was) much much worse in the South….Today poor people (in U.S. cities, and in Africa, for example) have access to mobile phones… It’s working because the stuff has gotten so cheap.
The way the wireless networks are being pushed out even poor people will be able to (start) businesses, talk with their friends…. Google…is helping… the (online) infrastructure of Africa build out… The fact Google is free is a big help… I talked to a professor in Kenya (who) teaches computer science without textbooks, using Google.
  On Internet communities
…A lot of our markets are very deep, and very narrow… Because you live in a local human context you forget how broadly diverse human interests are. The structure of weblogs, the blogging community, the facebook stuff all are good testimony to the breadth of human interests. People are interested in the breadth… also in things they are passionately interested in… It’s a nice testimony about the diversity of the human spirit.
  On Twittering
I decided not to. I’ve tried it anonymously. I’m not in the same position as other people.
Twitter is an example of realtime microblogging. It’s very useful for a bunch of scenarios. We’re all sitting in a theater, we can decide during the play if it’s any good or not. There’s a hurricane, we can twitter about the reality, overcome the limitations of the traditional news distribution models. Twitter provides an amazing realtime information process. It’s about what am I doing right now?
  On profiting from Twitter
I don’t know enough about it to speculate.
  On whether “deep” isolated Internet communities threaten society
These are overwhelmingly good things.. People who care an awful lot about (for example) the Penn archives, they are happy (with Internet access). How and who am I to judge that is not the best use of their spare time?
  On studying the humanities
The reason you should go to college this is the time you’ll be broadly exposed to things. When I was at Princeton (President) Shirley Tilghman would give this speech the benefit of a broad liberal arts education is a lifetime of learning… All your life, you still have the benefit of that. Even if you don’t work (in a liberal-arts field).
About this blog

PhillyDeals posts raw drafts and updates of Joseph N. DiStefano's columns and stories about Philly-area finance, investment, commercial real estate, tech, hiring and public spending, which he's been writing since 1989, mostly for the Philadelphia Inquirer.

DiStefano studied economics, history and a little engineering at Penn, taught writing at St. Joe's, and has written the book Comcasted, more than a thousand columns, and thousands of articles, and raised six children with his wife, who is a saint.

Reach Joseph N. at JoeD@phillynews.com or 215 854 5194.

Joseph N. DiStefano
Also on Philly.com:
Stay Connected