My Conversation with Eric Schmidt

Self-recommending, here is the audio and video.  Here is the video, here is one excerpt from the dialogue:

COWEN: So you receive an offer to run Google. Why were you so skeptical about Google at first?

SCHMIDT: Well, I assumed that search wasn’t very important, and I assumed the ads didn’t work. I was so concerned about the ads that, after I accepted the offer — because it just seemed like it was interesting, and a lot of luck comes from doing things that are interesting, and sort of creating your own luck — I hauled the then–sales executive, whose name was Tim Armstrong, who you all know well, and I said, “Tim, prove to me that these ads work.”

So they showed me a set of ads, and they looked pretty foolish to me. So I said, “Well, let’s go find the finance person,” of which there was one, and the accounting system was done on QuickBooks. I said, “Prove to me that people are paying for these ads,” and they did.

We then did an ads conversion in the first year, which was called Project Drano, where we basically took three different ads databases, which were simple compared to today’s databases, and merged them into one. And I was terrified, absolutely terrified that the ruse that we had — because we had fixed pricing on our ads — that people would discover that our ads were not worth anything.

So I organized what I called the cash restriction period, where the only thing you could do if you wanted to spend money, is you could only spend money on Friday at 10 AM, and you had to come to me to justify it, which very much shuts down spending.

So we get to this conversion, we turn the thing over, and of course, we didn’t bother to build into the tools. We had no metrics. We didn’t know what was going on. I’m going, “Oh my God, the company is bankrupt. My first year, I’ve done a terrible job. What will the board think?” I did my best to notify everybody we were going to go kaput.

The auction produced a price that was three times higher than the previous prices. Very interesting. So much for the cash restriction period, and the rest is history.

And from Eric:

We did all sorts of things. My favorite example is that we would interview people to death. We interviewed this one gentleman sixteen times, and we couldn’t decide. So I picked a random number, which was half, and I said, “We should have a max of eight, and if we can’t decide after eight . . .” We’ve since done a statistical analysis, and the answer today is four to five interviews.

And here is my bit on Eric:

COWEN: Now early on, you were an intern at Bell Labs, and also PARC, which belonged to Xerox, and I think of those two institutions as stemming from earlier glory years of American science.

Is it fair to think of your career as in some sense, you’re the person who spans those two eras, the Bell Labs-PARC era of doing things, and then the tech era of manipulating information, and that your ability to bring expertise from those two areas together is what has made you a unique figure? Is that a fair assessment of how you fit into the picture?

And there is this bit:

COWEN: How did it influence you having a father who was a famous economist? He wrote on balance of payments crises. What did you draw from him? Did that have a role in using so much economics in Google?

SCHMIDT: Well, what’s interesting is, I asked my father, “If you’re such a good economist, why are we not rich?”

I very much enjoyed doing this event, which was for Village Global, a new venture capital firm.  Here is a Village Global post on lessons from the event.

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Schmidt's transition from Bell Labs, etc. to Google followed America's transition from building stuff to "manipulating information" (Cowen's description). And why isn't his father rich? Duh! Schmidt should have no guilt with his chosen path (he is rich!), even if in a small way he contributed to the transition where we are today. Manipulating information will be our undoing. Can we achieve Cowen's hope for faster economic growth by relying on manipulating information? And as fewer and fewer own the bulk of the assets, can we rely on rising asset prices for prosperity? Google gave up on building a reliable car, and much of its autonomous car efforts now are devoted to converting the autonomous car into an advertising platform (the occupants of the car won't need to see through the windshield). The absurdity of tech.

rayward you are so old-fashioned, "Manipulating information will be our undoing". LOL! I guess you're concerned with Madison Avenue creating artificial demand or something, like the economist Galbraith was back in the 50s or 60s in a book I once read. Conspicuous consumption will be your undoing young man! Grandpa would agree.

No, I'm not concerned about digital advertising manipulating people, I'm concerned that we have staked our future on "tech" that isn't. Cryptocurrencies are but an example on the nonsense that is "tech". Google's efforts at autonomous cars at first included creating one, but Google soon realized Google can't build a reliable car and gave up, and now devote their efforts into the software (algorithms) and exploiting the autonomous car for selling advertising. Google is an advertising company and the autonomous car to Google is a potential advertising platform. Read the quotes Cowen has produced in his blog post. At first Schmidt himself couldn't believe that Google could be a successful company by selling advertising. Of course, Schmidt turned out to be wrong, much to his good fortune and to the good fortune of those who own stock in Google. In this age we have come to define technology by the amount of wealth one accumulates. The hucksters manipulating information to make money fit the times.

“We used to be a country that farmed stuff. Real stuff. Cotton. Now we have this so called industry, which is just people putting things together in a building.

Hucksters manipulating widgets and useless junk. You can’t eat clothes. You can’t eat these confounded gadgets! No one needs more than 2 pairs of pants. We could be farming Alaska with corn !

I’m agin it!!”

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That last point is so inane and It infuriates me every time I hear it and its variants repeated. Not everyone prioritizes wealth above all else.

That's true. The meek shall inherit the earth (in the afterlife I believe is the connotation).

My Greek uncle used to say that to me: "why aren't you rich if you're so smart?". He got rich with "7-11" type stores with huge markups, before the Carrefour and other "big EU chains" came into Greece, and buying real estate in Athens, which like DC expanded after WWII due to big government. Sadly, he lost half his wealth in the form of cash (withdrawn from Greek banks he thought would fail in 2013; why he didn't use Swiss banks I'll never know) to domestic help who stole from him when he rapidly lost his mind to dementia. I rescued the other half (long story, and the help was looking to off me I'm convinced, since the wealth was in the form of cash lying around the house, it was a game of cat and mouse).

So if I'm so dumb, how come I'm rich? Because I earned my money the old fashioned way: I inherited it.

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I think the question is more than fair when asked of an economist.

Why?

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Did you ask about wage fixing?

https://pando.com/2014/03/22/revealed-apple-and-googles-wage-fixing-cartel-involved-dozens-more-companies-over-one-million-employees/

Auctions are for ads, not employees!

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Schmidt's "cash restriction" is clear evidence of managerial incompetence. Which leaves me wondering if his company's success is despite of him rather than (partly) because. But we come here today to praise Caesar, not bury him, I suppose.

Good point. Either something lost in translation when he explained how shutting down cash spending saves a company, or, as you say, incompetence. Schmidt might be like Honda salesmen back in the day: they could be rude and arrogant but in the end they meet their quota since the cars sell themselves due to their popularity (one reason I bought a cheaper Nissan, and it lasted nearly 30 years, good car).

He probably wasn't brilliant and a cause of Google's success, but he obviously was competent. Actually this is a fairly unappreciated attribute - most people are not competent except when closely supervised, which obviously as a CEO you cannot be.

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I can't believe he mentioned such a petty thing, much less talk about it as if it were some revelation. What a peasant!

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DC, reaching out to do the embrace and extend trick - 'which was for Village Global, a new venture capital firm.'

Or is it that Conversations can be paid for, which means they are simply part of a much older DC game?

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"I’m strongly in favor of free speech for humans. It makes sense, right? But I think we have to deal, as a society, with this question of how much of an amplifier do you want to give to people who are truly insane?"

Eric Schmidt is strongly free speech - so much so that he shut down Alex Jones because he must be truly insane. Please Mr. Schmidt, shut down the free speech of more truly insane people! The world is counting on you.

However, as a counterpoint - 'The North Carolina man who commandeered a pizza restaurant at gunpoint in Northwest Washington to investigate a false Internet rumor of a pedophile ring there was sentenced to four years in in prison Thursday.

Edgar Maddison Welch, 28, who apologized to his victims and residents in the nation’s capital last week in a court filing, asked for an 18-month sentence for charging into Comet Ping Pong last December carrying a fully loaded AR-15 military-style rifle and revolver seeking to investigate a viral Internet rumor known as “Pizzagate.”

Prosecutors had sought a 4½ -year prison term.

False stories propagated a conspiracy theory that linked Hillary Clinton to an alleged child-sex-trafficking ring run from the family restaurant, where Clinton’s presidential campaign chairman, John Podesta, occasionally dined.

During the sentencing hearing, assistant U.S. attorneys Demian S. Ahn held up the rifle used by Welch and told the judge it had been part of an “armed invasion” and part of a campaign of “vicious harassment and unfounded rumors.”' https://www.washingtonpost.com/local/public-safety/pizzagate-gunman-sentenced-to-four-years-in-prison-as-prosecutors-urged-judge-to-deter-vigilante-justice/2017/06/22/a10db598-550b-11e7-ba90-f5875b7d1876_story.html?utm_term=.b1b396944c4b

There are reasonable questions to be asked at this point, as the flood of information is leading to unforeseen results. The 1st Amendment relates to the government, but all businesses have always been free to allow or deny any speech they want in the U.S.

And you are welcome to watch what that man, who clearly sees himself in the role of protecting the weak, said as he was driving to DC, before entering a restaurant with weapons by the way - https://www.washingtonpost.com/video/national/watch-pizzagate-gunman-recorded-this-video-on-his-drive-to-dc/2017/06/22/795d76a8-5783-11e7-840b-512026319da7_video.html?utm_term=.96446216679d

"The 1st Amendment relates to the government, but all businesses have always been free to allow or deny any speech they want in the U.S.

Yes, but not all businesses are monopolies that deal in speech. Eric Schmidt is really the head of two huge monopolies, Google and in turn Yahoo, so we are subject to his views of what "free" speech is allowed. He is "strongly in favor of free speech" - his version of it.

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"a lot of luck comes from doing things that are interesting"
Many people use the word "luck" when it seems fairly obvious that in other circumstances they would argue that there is no such thing. I wonder what point is being made. It almost seems to be a way of imputing a mystical, arbitrary dept upon the supposedly lucky person that is then owed to the unlucky. Sam Harris and Steven Pinker also come to mind as frequent users of that word.

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