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.