The David Rubenstein Show, Peer to Peer Conversations; 5; Eric Schmidt; Season 1

What propelled you to pick Google as the company you wanted to go to? I said, who cares about a search engine? I didn't particularly think Google was going to be that successful. Was it awkward to kind of come in and be the CEO when you're dealing with founders? It was an immediate click. We do have a dress code. You have a dress code? You have to wear something. Okay. It seems as if the driverless car phenomenon is on its way. You've been in one of these cars and you feel safe. We're doing this to save lives. It's more than 32,000 people scheduled to die this year. The Europeans seem to not like Google as much as maybe Americans do. Have you resolved those issues with Europe? Would you fix your time, please? Well, people wouldn't recognize me if my tylus fixed. Okay. Just leave it this way. All right. I don't consider myself a journalist. Nobody else would consider myself a journalist. I began to take on the life of being an interviewer, even though I have a day job running a private equity firm.

How do you define leadership? What is it that makes somebody tick? When you joined Google, Google was a very small company. Did you, in your wildest dreams, ever imagine to become the second most valuable company in the entire world? I don't think any of us did. And I certainly did. Did not. When I met Larry and Sergey, they just seemed incredibly intelligent. We had this huge argument over something technical. And I hadn't had that good of an argument in a long time. And I thought I've got to work with these people. I wanted to join a company that was going to stay in one building. Today, of course, we are many buildings. So you were the CEO of Novel at the time that you were getting ready to go to Google. What propelled you to pick Google as a company you wanted to go to because you had many opportunities? Well, I actually didn't interview anywhere else. John Doer asked me to visit Google. I said, who cares about a search engine? It won't matter very much. Who uses search engines?

But he said, nevertheless, go visit with Larry and Sergey. And what they were doing was so interesting in the quality of the people that they had recruited were so compelling that I just had to be there. So search engines were not that novel at the time because there were plenty of search engine companies, right? So why did you think Google had a search engine that was going to change the world? Well, I didn't particularly think Google was going to be that successful, but I thought the technology was unusually special. Google had invented a different way of doing ranking. And all of the previous search engines had used ranking that was easily manipulated by business forces and so forth. But Larry Page had invented something now known as PageRank, which is a different algorithm, a different way of doing search. And it had spread virally, first at Stanford and then throughout the Bay Area. And it was all word of mouth that I thought, what a great project. So Google is a word that existed before and it kind of meant infinity. And it spelled differently. Did Google intentionally spell it differently than the original word Google? What happened was there was a number called 10 to the 100th. And I'll spare you to the details, but this is a very large number.

10 to the 100th. And it was named by a Russian mathematician, Google, G-O-O-G-O-L. And it was too hard to pronounce. And so Sergei decided it should be called Google. Now today the company is not called Google anymore. It's called Alphabet. So why did they pick Google as the original name? And why did you change it to Alphabet in terms of the parent? Well, Google has always done unusual things. So after 15 years of being Google, we had all of these other companies that were sort of proto-companies. But they weren't real businesses and they didn't have real CEOs. And we talked internally a great length about how do you get great companies founded? And the answer is strong CEOs, strong incentive programs, strong boards of directors. There aren't other models. So how do we recreate that within the context of Google? And that's what Alphabet is. So Alphabet is a holding company of companies of which Google is the best known. So many technology companies that are well known, let's say Microsoft, or Apple,

or Facebook, are run, the CEOs initially are the founders. You had a different situation. You had two people who were, quote, the founders, Larry and Sergei. But they wanted a CEO had more experience, or at least the venture investors did. Was it awkward to kind of come in and be the CEO when you're dealing with founders who don't have the CEO title? Well, in their case, they had been searching for somebody they could work with for 16 months. And what they would do is they would have each of the candidates do something with them for the weekend. So they go skiing with one of them and they play sports with another one to see if they were compatible. And so when I met them, we all have similar backgrounds in the sense that we're computer scientists. But he was an immediate click. And I always knew, based on what had happened with John Scully and Steve Jobs in the 1980s, that it was their company, and my job was to make their company successful. So when you were interviewed by them, was it a normal interview? Well, what happened was I walked into the office, and it was a tiny office in this incredibly crowded building, which Google still has, by the way.

And this tiny little office, they had lots of food, and they had my biography on the wall. And they proceeded to ask each and every question that was possible against the biography. And I had never been so thoroughly questioned, and I had just gone to visit. And they came to a product that I was building at Novel, and they said, this is the stupidest of product ever made, which I, of course, had to respond to. And you didn't think you were going to get the job after they said that? Well, I didn't realize it was a job interview. But as I left the building, which was curiously a building that I had had when I worked at Sun years earlier, to show you how history repeats itself, I knew I would be back. So when you did come back, and it was a small company, I think, under 200 employees when you joined, did you realize that advertising would be the medium through which you would actually make the company grow? No, and in fact, I was quite convinced that the advertising approach that they had taken did not work at all. And when I became CEO, I was very concerned that there was something wrong.

And I actually asked them to audit the cash accounts to make people were selling these ads. And what we learned was that these targeted ads worked incredibly well, even though they were these little text ads. And that discovery, and then the subsequent algorithmic improvements, which allowed for auctions and so forth, which were done by impossible young and creative engineers who I sort of viewed as sort of experimenting with things, created what is today Google. The culture at Google was very unusual at the time. Others have emulated it, but it's a culture of kind of do what you want a bit, where what you want, sleep in the office if you want. We do have a dress code. You have a dress code? You have to wear something. Okay. We had problems where engineers would move in and put cots on the floor. And we would explain that you can do anything you want to at Google, but you can't live here. You have to have a bed somewhere else. We famously encouraged people to bring pets. And we would have, we had lots of rules about the pets. We didn't have any rules about the people.

But, you know, if your pet was over here, you had to keep your pet over here. So what about the food? Very unusual. You had free food for everybody. What was the purpose behind that? Well, the comment was that the free food really changed everything. But the real reason we did food. And of course, many of these things were marketed as great fun. But there was a serious business behind them. We, in case of the food, this was Sergei's idea. Families eat dinner together. And he wanted the company to be a family. And so if you had people have proper good food, breakfast, lunch, and dinner, they would literally work as teams. And they would work in whatever way made the most sense. Larry and Sergei invented something called 20% time. And the idea is that for each of the employees, especially the engineers, if they are interested in something they can spend 20% of their time on whatever they're interested in, oh my god, how could you run a company that way? Well, that allowed the engineers who were sitting there at dinner to have conversations

about what do you think? What do you think? What do you think? Give you another example. Larry Page was looking at our ads just as they came out. And he studied them and he put a big sign on the wall. And he wrote, these ads suck. And this one and this one and this one. And I was looking at this. I said, this is another stupid Google thing, right? Nothing's going to happen. We have an ads team. We have a manager. We have a plan. So this was Friday afternoon. I come in Monday morning. And a completely different set of teams had seen the sign and had invented over the weekend what today is the underlying ad system of Google and delivered it on Monday morning. That could not have occurred without such a culture. 20% time, have you gone to the businesses that came out of the 20% time? Well, the most interesting examples are maps, many of the ad system components. Most people believe that the 20% time is the source of real creativity

and now what is a very large company. So one time I think you told me previous occasion that you were out of the office and then you came back to your office and somebody had occupied your office. It's important to remember that at the time Google's culture was seen as very unusual. And I knew this. And I was always careful not to commit a faux pas, if you will, in the culture. And so one morning I walk in and my assistant has this look on her face like something bad has happened. And I walk into my office, which is eight feet by 12 feet, and here is my new roommate, Amit. And he's moved himself in, he's working, and so forth. And I didn't know that I had a new roommate. And after all I am the CEO. Someone should tell me these things, right? So I said, hello, who are you? It says, hello, I'm Amit. And I go, okay, and he goes, nice to meet you. And I said, well, kind of, why are you here? And he goes, well, your office was not occupied, you're never here?

And I was in a six person office, it was too loud. And I thought, what to say to this? Because this is a career limiting moment. If I say, get out of my office, they're going to fire me or something. So I thought, okay, did you ask permission? And he goes, yes, I asked my boss and he said it was a great idea. And I said, okay, so we sat next to each other. And he would program and I would do my work literally next to each other for a year. And we became best friends. Do you think the United States government is better at cyber terrorism than other governments are against us? The one that I worry about the most about right now is actually Russia. They're not shy about it, they don't mind people knowing about it. I just want to talk about your own background. So your father was an engineering professor? International economics professor. You grew up in Virginia?

Yeah, we're over in Virginia. What made you think he wanted to be an engineer? As a boy, I think I was a normal sort of science interested boy. This was at the time of the space program and everyone wanted to be an astronaut. In my high school, they had a terminal. These were the old teletype ASR33 teletypes with paper tape. And my father had the good thoughts to get one for our house, which is highly unusual at the time. And so I'd spend every evening working and reprogramming and so forth. Today, of course, if I were a 15-year-old at home, I'd have five personal computers and a super network and sound blurring out of the speakers. So you went to high school in Virginia. You must have done pretty well to get into Princeton. Yes, although it was easier back then. But you knew you wanted to be an engineer at Princeton. I actually applied to Princeton as an architect. And when I got to Princeton, I discovered that I wasn't a very good architect. But I was a much better programmer. And Princeton, again, was kind in that I was advanced enough that I was able to skip the introductory courses and go straight into the advanced courses and then the graduate courses at Princeton.

So you must have done pretty well because you then got a scholarship to go to Berkeley and get your PhD. And was it hard to move across the country? No. But to give you an example of how naive people were back then, I decided I wanted to move to California because I'd heard that it was sort of nice and sunny beaches. But of course, I went to the wrong part. And this is, of course, before Google Maps. I worked at Bell Labs, where UNIX, which is the basis for much of computing today, was invented. I was a junior programmer there. And I worked at Xerox Palo Alto Research Center, where the workstation and the screens and many of the editors and many of the networking things that we used today were invented as a young programmer. So I was unusually fortunate to be as a young person and assistant to the people doing that kind of research. So from there, I went to some microsystems where I was in executive for many years. And then from there, you were recruited to Novel. And I was at Sun for 14 years, Novel for four, and now Google for 16 plus. So as the company became bigger and bigger, it dominated the search business.

It has 90% plus of the search, more or less, I guess. So why did Google say, well, you want to do other things? We don't want to just be in the search business. You'd begin to decide to go into other things. So let's talk about a few of them. I should say that Google's motto was not only search the web. It was all the world's information. And information is broadly consumed. So the company set out with all of the hiring you were able to do and the talent to begin to solve some new problems. We became very interested in maps. And we developed our own maps, hugely successful product line. We bought a company called YouTube today incredibly successful in terms of video and other form of information. We built an enterprise business that has done incredibly well. I can go on. In some cases, we bought little companies that we grew, like Google Earth. In other cases, these were technologies that we grew ourselves. But the whole idea was to integrate around information. At some point four or five years ago, we became interested in solving other problems. Not just information problems, but problems where digital technology could make a material difference.

The most obvious one being self-driving cars. We've been working on that as a research project. You've been in one of these cars. And you feel safe when you're driving. Well, the funniest story is, so I get on the car on the highway in California. And it's driving. And I've decided it's following too close. And so I complained to the engineering. He says, no, no, no. We're exactly right. And of course, they got it right. And it gets off the freeway and parks itself and all of this. In other case, I'm driving or non-driving in the self-driving car. And it turns left. And here we have a mother and a child crossing the street illegally. And I'm going, oh no, this is the movie that you've seen. The car running over the mother and child skids to a stop. So the technology works. And it works because there's a very, very powerful laser imager on the top of the car, which sees more accurately than we do. So imagine a car that has vision all around it rather than just in front of it. There's more than 32,000 people scheduled to die this year in America.

We just don't know who they are. Right? That's how bad this is. So imagine if we could reduce that by half or a third or a quarter. Most of the accidents are driver-induced or one kind of another. We may ultimately be able to make a driving accident a very, very rare event. Now, you've been involved in artificial intelligence, better known to some as AI. Is artificial intelligence dangerous for humans or is it going to be helpful to humans? I see it as extraordinarily useful. And let me give you examples. Today, artificial intelligence is being used to do things which are hard for humans to do because of data. There's a disease called diabetic retinopathy. And it's diagnosed by ophthalmologist. We can detect that 99% of the time, the best ophthalmologist do it at 90% of the time. Why are we so good at it? Because we see more eyes. We can train the computer against eyes. There's a lot of reasons to think that this kind of intelligence, as we say, will allow things which are either repetitive or require deep pattern analysis

will be much, much better. So do you think the United States government is better at cyber terrorism? That's the right word than other governments are against us? The US government has never acknowledged that it plays an active role in cyberspace that is active offensive role, although the people who might be our targets have certainly been claiming we've been doing it. The consensus of people who don't know any of the details, which includes me, is that America is very good at this, but other countries are as well. The one that I worry about the most about right now is actually Russia. If you look at their actions in the last few months, they've done a number of very publicized invasions, attacks, and alterations, which can only be understood as cyber activity and they're not shy about it. They don't mind people knowing about it. So this must be part of their strategy to keep in our face, if you look. The Europeans seem to not like Google as much as maybe Americans do.

Have you resolved those issues with Europe? The core issue, I think, is that the European governance model is not yet set up to build these global companies. So a few years ago, you gave up being positioned as CEO. You were CEO for how long? For a decade. And now you're the executive chairman of Alphabet. In that role, you've become a technology advisor to the President of the United States, to the Secretary of Defense, and a very well-known commentator and advisor on technology to many people. Do you enjoy this role? I do. It's important in life, as you get older, to not do the same thing your entire life. There are better people now doing the work that I used to do. And this is something that I can uniquely do because of the background that I have. It's always hard to know when to get off the stage and join in the next stage. But from my perspective, this is the right time.

And a decade is a perfectly good amount of time to be so hard. So you've been an advisor on technology matters to President Obama. Is he a person that really understands technology? He does now. As president, when he started, I don't think he knew very much about technology. But he's educated himself a lot. He appointed a very strong group of science advisors of which I'm one. And he spends a lot of time listening to the science and listening to the impact of technology. And he's also become very successful and popular in the new forms of social media. Remember that today, the five most valuable companies on the American Stock Exchange are technology companies. So it's not just an interesting curiosity that technology is America's heartland and heartland America's strength, if you will. It's a core source of economic growth, share value growth, financial growth, and so forth in our country. Well, these five companies I assume are Apple, Google, Facebook, Microsoft, Amazon. That's correct. Okay. It seems as if every day when you pick up the paper, they all want to be in the business that somebody else is in. That's called competition, right?

But everybody wants to have driverless cars. Everybody wants to have cloud businesses and so forth. Do you expect them all to try to be in everybody else's business? What I love about that question is, this is how it's supposed to work. People are supposed to identify business opportunities and they're supposed to go in there and produce a better product. Now, I believe our products in our key spaces are better than our competitors, but our competitors keep trying. And I can assure you in areas where we're not quite as strong in market share, we have a new idea, we have a new approach. We want to solve a problem in a new way. In the tech industry, you can't do the exact same product as somebody else is already there. Because why would people switch? The switching cost is too high. So what you have to do is you have to come up with a new idea, a new approach. For us, we've decided that that new idea is the use of machine intelligence that is AI to be an assistant. So everything we're doing will make you smarter because it anticipates and helps you and makes suggestions. Larry says that this is going from search to suggest.

We want to go from use telling us what you're searching for to making suggestions for what you're interested in. You've been the visible spokesman and lead person for Google around the world and there's so many issues. Let's talk about Europe for a moment. The Europeans seem to not like Google as much as maybe Americans do, maybe because it's an American company. Have you resolved those issues with Europe? We have not been able to resolve issues that are broadly held within Europe. We have more than 10,000 employees in Europe. We love Europeans. We hire their people incredibly smart, incredibly capable. Many of the products you use in America were developed partially or completely in Europe. And the core issue, I think, is that the European governance model, the way the universities are set up to venture capital, is not yet set up right. That is not yet set up to build these global companies. They have every piece of tool that they need. They have the people, they have the discipline, they have the educational systems, but somehow they've not congealed it together. We have furthermore funded a number of innovation banks. We're also doing our own venture capital to help this. We need Europe to be more competitive against the American companies.

So, one of the effects of building a very successful company with Sergey and Larry is that you've made a fair amount of money by any normal human standard. But it's hard to spend that amount of money in your lifetime, so what have you decided to do with it? I'm most interested in climate change and science, and science, of course, has got what got us to this point. And so, my philanthropy has been focused on the underlying issues around environmental causes, philanthropy, and oceanography. Well, oceanography is quite interesting because there are almost no private philanthropy in it, and yet there's this mass extinction going on in the ocean today. We're losing most of the current life forms again. 70% of the world's humans are dependent on fish for daily food. It's the majority carbon sink for all of the carbon that we're putting in the air goes into the ocean. So, even small changes in how the ocean works could have debilitating impact on human society. What would you like to do with the next 10 years, and what would you ultimately like to have as your legacy?

Well, hopefully I don't need to answer the legacy question anytime soon, but from my perspective, what I'm doing now is the most interesting. I don't want to work in any government. I've been seeing government up close enough to know that I'm not a government person. But I'd like to make sure that the governments around the world promote technology, promote innovation, and make the world a better place. I'm very concerned that this is all happening so quickly that governments, which are designed to move slowly and do indeed move slowly, will either miss out on opportunities or worse, pass laws that prevent things from happening. And every once well will have a near miss. So, I like working on that. I personally believe that the machine learning and AI technology is going to be transformative in far deeper ways, in good ways. You're obviously a leader in the science and technology world and the corporate world. Do you think leaders are born or they made or educated? Leadership is a little bit of both. You have to have some innate skills, but it can certainly be learned. I also believe that as leaders, you need to do something very well. That sort of stereotype of a general manager is not really how the world works today.

Now the managers are, they're uniquely good at something and then they learn other things. I don't think it matters where you start, but I think you needed to be incredibly good at that one thing and then you broaden your skills. This one, hard work and loving what you do will get you very far.