
Eric Schmidt's book is wrong about how Google works - mandeepj
http://venturebeat.com/2014/11/30/why-eric-schmidt-doesnt-know-how-google-works/
======
gilgoomesh
If we take this article at face-value (that Google is as big as it is because
of its monopoly in search) a related question is immediately raised: why is
Google's search engine a monopoly?

If the monopoly is due to superior technology, why are Google able to write a
better search engine and maintain this search engine lead?

If the monopoly is due to other effects (buying favored search-engine status
in Safari, Firefox and pushing Chrome/Android) why don't the browsers have all
the power?

I guess I agree with the article that Google's power is search-engine derived
but there's more to the source of that monopoly than I think the article
discusses.

~~~
mixmax
Google's monopoly is based on their early superior technology. That's it, pure
and simple.

I'm old enough to remember the web before google, and it was terrible. Back
then we switched between hotbot, altavista, yahoo and a few others - and they
all sucked. Some of them ranked searches _alphabetically_ \- try searching
through 100.000 results that are ordered alphabetically.

I remember the first time I ever used google. From the very first day I never
used anything else, and recommended it to all my friends. If you haven't
experienced the web before google I think it's hard to imagine what it was
like.

Pagerank made the difference.

~~~
twelvechairs
Unfortunately since this time results have gotten worse ( anecdotal I know,
but I know many who agree). I think this is down to a mixture of issues - the
SEO industry has made search optimisation much harder, googles probably been a
bit complacent with no competition too. Also introducing big changes like
search personalisation and localisation which (IMO) has taken away more than
it adds.

~~~
jodrellblank
_Unfortunately since this time results have gotten worse ( anecdotal I know,
but I know many who agree)_

Showing results for _I know many who disagree_. To search for what you typed
in and wanted to search for, jump through {this hoop}.

~~~
username223
It's worse than trying to write a paper on the Teh tribe in the Amazon in
Microsoft Word with autocorrect. The relationship between query terms and
results is complex and opaque.

------
fivedogit
> the authors are confusing causation and correlation... they are all
> consequences of Google’s success. For example the authors write: “Their plan
> for creating that great search engine... Hire as many talented software
> engineers as possible, and give them freedom.” Well, this worked because the
> search was already successful enough to fund that freedom.

This is the key point and the clickbait-y headline notwithstanding, it's a
very valid point. People look at Google and say "wow they have super-smart
engineers and let them work on whatever they want with 20% of their time" and
tons and tons of products sprung up all over the place.

But after a while, management seemed to back off of that philosophy quite a
bit. In 2011, Google killed off many of its less successful projects,
including Google Labs, and I read in some nook or cranny of the Internet that
the 20% time has been quietly deemphasized over a number of years.

So the idea that you can just hire smart people and magic will happen, though
often copied and lionized, is not all it's cracked up to be. <Insert quip
about monkeys, typewriters and Shakespeare here.>

~~~
deciplex
For an even more dramatic example, look at Valve. Great company to work for,
no doubt, and open allocation which makes 20% time look like a death march.
They can fund this because of the money fountain that is Steam.

But improvements to the Steam client are underwhelming and come at a snail's
pace, if they come at all (e.g. Steam has been delaying my shutdowns in
Windows now for _two years_ ). They are about a year behind now with SteamOS,
and have pissed off most of their potential partners with SteamBox delays as
well. And, of course, Half Life 3, which should be renamed Half Life Pu-239
based on when we should expect it to be released. (How is episodic gaming
working out?)

"Freedom" certainly makes a place nice to work for. It might even get you some
really good technology. And it probably can, eventually, indirectly, _maybe_
eventually manage to achieve some of a company's goals. But if it is the most
efficient way to do this, I am struggling to come up with any good examples.

~~~
cpks
Conversely, neither Valve nor Google are digging their graves, like much of
the rest of the industry does over time. See the prior post about Dell. Look
at Microsoft.

Focus helps, but good people make a bigger difference. The overhead, be that
20% time or whatever else, is peanuts in comparison.

~~~
nicklaf
Interesting. One might go further and postulate an inverse relationship
between the focus of a company and it's ability to attract 'good people'.

It's tempting to argue that the kind of long-term vision usually shared by the
best researchers is at odds with having pressure from management to compete.
To be sure, companies with focus also fund pure R&D, but non-monopolies won't
usually be able structure an an entire corporate culture around the research
mentality.

------
bronbron
Hmm. Preface: I do not work at Google.

> I would love to see one single company that isn’t dominating a market with
> no cash cow in-flow that can succeed without strict discipline, sharp focus,
> hard work, and hands-on management

I've worked for plenty. I'm not going to name them because it's tactless, but
they were both huge monolithic corporations and small-ish companies that were
pretty profitable. I'm sure others have too. Those companies that you think to
yourself, "how the fuck are we making money when we're so fucked up?". I
wouldn't say it's a rare scenario. The idea of companies as "hyper-efficient
market machines" is pretty laughable.

In fact, I've met plenty of people who worked at IBM (the company he alludes
to being one of these strict discipline companies) who said IBM was/is a
complete mess.

> why have the majority of initiatives at Google either failed or been
> financially inefficient and unprofitable

The majority of initiatives full stop are failures, or unprofitable. This is
kind of pointless without comparing Google to other companies.

> When interacting with sales people at Google, I am shocked to see how
> untrained and inefficient they are

This is admittedly one of Google's faults: they're awful at customer support
and the like in general. Well known, but it seems to be working out fine for
them.

> If there are known companies with great sales cultures such as Oracle,

Google is doing considerably better than Oracle in most senses of the word.
One possible conclusion is the author's, that Google succeeds in spite of this
because of their search monopoly. The alternative is that maybe a strong sales
culture doesn't mean as much as the author thinks for the bottom line.

> everything else in the Google world, you get $5 billion or 10 percent of
> Google’s revenue. Peanuts!

Peanuts? Facebook's revenue last year was $8 billion.

> Google is in a situation of monopoly with its search business

Why do they continue to be a monopoly? There are certainly competitors. One
explanation is because they continually offer the best results, because they
hire the best software engineers, because they have free food, and offer "20%
time", and etc...

------
abalone
_> why have the majority of initiatives at Google either failed or been
financially inefficient and unprofitable? If they were standalone startups,
they would have most likely already been dead._

It takes a lot of experimentation to produce hits. Even the best companies are
going to have a lot of failed projects.

One reason Google "appears" to have so many failures is that they're more open
then other companies. No doubt Apple has tons of internal failures. Projects
that don't see the light of day, get canceled if they're not looking good. Tim
Cook even talks about it in interviews. I do think that Apple's producing more
hits overall, but the point here is that they are not failure-free; they just
don't ship crap. Google likes to publicly experiment.

In the startup world this experimental function is fulfilled by the startup
pool as a whole. Most will fail. Most winners have "focus, discipline, hands
on management", but I'm sure that's true for most product teams at Google
too.. where "management" = the local team's product & engineering management,
which is more equivalent to a startup's executive team than the CEO of Google.

If bigger companies want to stay innovative I think there's still a lot of
value to supporting experimentation and freedom within the company. It's going
to look like a lot of failure. But then so does the startup universe.

------
candybar
This article is aggressively awful. His entire premise:

"According to the company’s 2013 financial filings, 83 percent of Google’s
revenue came from ads, about 7 percent from Motorola (which is now gone), and
10 percent from everything else. In other words, when you add up all the
revenue from Google Apps (Gmail, Docs, Drive, Maps, etc.) together with the
Android and other mobile businesses, and then add Chromebooks, Chromecast,
Chromeboxes, and everything hardware and everything Chrome, Google Developers
Network, Google+, Google cars, Google robots and drones, Google Glass and
other wearables, Google Cloud, and everything else in the Google world, you
get $5 billion or 10 percent of Google’s revenue."

is completely wrong because Google's ad revenue cannot be separated from its
products outside of Search. Google+, Gmail, Docs, Drive, Maps, Android and
Chrome are all designed to add to their ad revenue. Saying that Google's ad
revenue is the vast majority of their non-Motorola revenue, therefore Google's
non-Search products must not be adding much to the bottom line is to conflate
Google's advertising businesss with their Search product, when Search is one
of their many products that lead to their advertising revenue.

Once you destroy this premise, this whole notion that Search is the only thing
Google does well (or makes a lot of money from) becomes obviously absurd.
Gmail, Google Maps, Android, Youtube and Chrome are all market leaders in
absolutely gigantic markets.

Edit: The synergy between many of Google's products and advertising should be
obvious. They all capture information about the user, which improves their
ability to display "relevant" ads or at least ads that advertisers will pay
more money for. They also prevent other dominant players in that space from
getting a foothold in advertising. Chrome and Android ensure that Google's
various services are not a disadvantage on the web and in mobile computing
respectively and may gradually be used to advantage their services over
competitors'.

Edit2: jjoonathan, your point regarding Amazon and competitive threats they
face is correct, but it has very little to do with the article, which is
taking Google's successful position for granted and asking how they got there.
And the idea that Gmail, Maps, Android and Chrome haven't helped and won't
help in the future is fairly absurd.

Edit3: Multiple downvotes seem a little fishy, as does this article getting
voted to the top of Hacker News.

Edit4: Another thing the article is ignoring is that Google's continued
dominance in search and web advertising is a massive accomplishment that was
not at all guaranteed from its initial success. And its massive investment in
engineering that the author sees as excess I'm sure has a lot to do with how
it was able to sustain that dominance.

~~~
jjoonathan
Google has some very impressive moats, but the real question is how much
protection they actually provide. Business-idea-space is super high
dimensional. You can't just walk the perimeter and say "yep, the moat protects
us from all viable routes of assault." Specifically, if all the valuable
searches start going through Amazon how quickly can Gmail, Google Maps,
Android, and Chrome make up the missing revenue?

Of the products you listed, Youtube is the only one that I think is really
orthogonal in the sense that it could bring in significant revenue if google's
core product were disrupted. Perhaps maps and docs as well, to a much lesser
extent. Gmail and chrome exist in competitive enough market spaces that I
don't see them being able to stand on their own at all.

It's the familiar old adage about backup systems: interdependencies lead to
concerted failures. A nuclear reactor with 500 backup systems that all depend
on having a stable electrical supply isn't safe at all.

~~~
arfliw
Android could. If they spun that off into it's own company it would be worth
tens of billions, minimum. It's headed toward a mobile OS monopoly. It would
be difficult to overstate how valuable that is.

AdSense could as well. They roll that into 'advertising' but it has nothing to
do with search or any of G's products - and it's a huge chunk of their
advertising revenue. Even if search lost all of its marketshare overnight they
would still bring in many billions every year via AdSense.

(AdSense is their ad network where they display ads on 3rd party sites, acting
as a middleman between publishers and advertisers).

~~~
pron
> Android could. If they spun that off into it's own company it would be worth
> tens of billions, minimum.

That's tricky. Android's success depends heavily on phone vendors, and the
vendors -- at least the large ones -- have only bet on Android because
Google's control over it is relatively subtle. If Google tries to extract too
much money off of Android, you'll see phone manufacturers forking it in a
heartbeat.

~~~
jpdus
This is just wrong. Android forks were never successful (see eg Amazon's fire
phone) an will never be - the lock-in factor is incredible.

In the opposite direction, more and more customers want "pure" software and
good hardware is increasingly available from many different manufacturers.
Nokia arguably has made the best hardware and hardly sold any phones with WP
because customers wanted Android. Google knows this and moves more and more
parts from AOSP in its proprietary play framework because manufacturers are
way more dependent on Android than Google is dependent on any single
manufacturer (including Samsung).

~~~
gbog
This depends. If Google is able to run ahead of the others fast enough and
have very compelling updates to force competitors to follow them, then yes,
their grab on Android is still strong.

But my feeling from having looked at Android 5 (which is apparently
superficial) is that Google still try to run fast, but there is not more any
very compelling innovation to propose. So quite soon a normal two years old
version of Android will be just good enough for manufacturers and users.

Then Android will still be the main player, but it will exist as multiple
forks and Google will have to adapt and propose apps compatible with the most
successful forks (just like they propose apps on Apple store).

~~~
bad_user
Google's lock in is more about Google Play than about what is coming in
Android. Basically as a manufacturer, if you don't play nice, then you don't
get Google Play (or YouTube, or Gmail, or GMaps), which then means that your
smartphone is just an expensive brick with no apps on it. iOS is special
because it is popular and was here first. But do you see Google giving a shit
about Amazon's stuff or about the Windows phone?

You know, i'm an Android user because of its openness, because of its ability
to be forked, but Google practices a kind of lock-in that is very hard to
escape. Basically everything they do is technically excellent, plus they end
up dominating the underlying platforms.

------
AndrewKemendo
Being dominant is not the same as being a monopolist. I wish people would quit
bringing that term up anytime a company is at the top of a market because it
has legal and social implications. I have even heard people say that they have
a natural monopoly which is just silly if you understand how natural
monopolies work.

In fact Google isn't a monopolist on any terms, but they do currently dominate
search. My guess is they could be knocked off their perch fairly swiftly if
someone came along with an amazing recommendation service (not like what we
see now) that was more advisory than search as it would necessarily absorb
search.

------
millstone
I would disagree with characterizing GOOG's P/E (27.5) as "low" or "not on par
with its financial performance." That's well above the average. The
comparisons are suspect: Facebook is an outlier, MSFT in the 90s was surely
overvalued along with most tech stocks, and Amazon is deliberately pursuing
growth at the expense of profitability.

Why not compare instead to other mature tech companies today: Microsoft, IBM,
HP, Cisco? Or Apple, who has had a P/E under 20 for the last five years, yet
whose stock has outperformed GOOG by 3x over the same period?

------
jpatokal
_Another special characteristic of Google is its sales force. When interacting
with sales people at Google, I am shocked to see how untrained and inefficient
they are._

Did the author just make a wild generalization about a very large number of
people, backed up with no evidence whatsoever? Why yes they did. Come on, the
least they could do is offer up an anecdote to justify that bizarre claim.

------
wahsd
Interesting article. It also adds more validation to my theory that Google is
"successful" in spite of itself in many ways.

I really think Google's search supremacy is vulnerable, although there is no
one really positioned to disrupt Google's domination in search quite yet.

------
leoc
"First off, the authors are confusing causation and correlation. Schmidt
points out a series of characteristics of Google as a company and presents
them as the reasons for Google’s success, but in my opinion, they are all
consequences of Google’s success.

For example the authors write: “Their plan for creating that great search
engine, and all the other great services was equally simple: Hire as many
talented software engineers as possible, and give them freedom.” Well, this
worked because the search was already successful enough to fund that freedom.

[...]

The key is market dominance. If you have a de facto position of a monopoly in
your market, money pours in, and you can afford to give your employees even
more than 20 percent of their time free."

This is itself backwards, yes? ISTR that
[http://blogoscoped.com/archive/2007-09-03-n78.html](http://blogoscoped.com/archive/2007-09-03-n78.html)
AdWords — and thus the profitability of Google's search business, if
(arguably) not the search monopoly itself — was the product of early Google's
20% time and employee freedom, rather than the other way round. (Oh, and they
got GMail into the bargain.) Similarly for:

"I would love to see one single company that isn’t dominating a market with no
cash cow in-flow that can succeed without strict discipline, sharp focus, hard
work, and hands-on management."

I thought that Google's 20% time was modelled after practises at 3M and
Hewlett-Packard? I have no doubt that in their day these were companies that
enjoyed comfortably high margins on many of their products, but from my
limited knowledge I don't have the impression that they were monopolists
sitting on their laurels from one of two huge hits. (As Xerox apparently was.)
I also don't know how reasonable it would be to claim that private-project
time didn't contribute anything to the bottom line of these companies either:
3M itself tends to claim that the Post-It note was a product of its 15% time
[http://solutions.3m.com/innovation/en_US/stories/time-to-
thi...](http://solutions.3m.com/innovation/en_US/stories/time-to-think) .

Accordingly I'm unsure why this article has been voted to the top of HN.

None of which is to say that _How Google Works_ is a model of candour and
insight, or to suggest that Google has no problems with how it handles
innovation, of course.

------
rajlalwani
Google is one of the most innovative companies. It has successfully maintained
agility (start up culture) even after becoming multi billion dollar giant.
What Eric might be hinting and what author of the article sees may not be
contrary! ... It's perceptual difference deliberately created.

------
zobzu
" “Their plan for creating that great search engine, and all the other great
services was equally simple: Hire as many talented software engineers as
possible, and give them freedom."

Man I so dislike these. Its pure bullshit. (its a quote from the book, mind
you).

------
mathattack
He had me at "Correlation doesn't equal causality" but it rapidly went
downhill. I get that the concept of "Cut loose smart creatives" is not
universally successful, but the article seems to go rapidly downhill from
there.

------
jackmaney
I know that the old saying of "don't judge a book by its cover" has been
around a long time for a very good reason, but I honestly can't get past the
title of this article. I find myself incapable of taking it seriously.

------
dang
We changed the title in a somewhat feeble attempt to make it less baity. If
anyone suggests a better title, we'll edit it again.

------
ajhsieh
Its certainly not in Schmidt's interest to proclaim in a book that Google has
a search monopoly even if he did realize it.

------
BrandonM
_> I would love to see one single company that isn’t dominating a market with
no cash cow in-flow that can succeed without strict discipline, sharp focus,
hard work, and hands-on management._

I would not work for this person. It's ironic that he thinks Schmidt is the
one that has it wrong.

~~~
gumby
I disagree with you (even despite the fact that the author describes himself
as a buzzwordy "Enterprise SaaS Executive" \-- he writes better than someone
with a description like that should be able to).

It's no secret, within Google or without, that Google is not particularly well
run. This article cites the sales team (without backing up the talk) but talk
to any of the tech folks and most will tell you the same thing. And as the
article says, the Street seems to think so too.

What Google _does_ get right are two things. First, they _do_ get the core
stuff right: search, search infrastructure, and adsense. That's sine qua non
and they aren't bozos! Second, at the other end, the stuff that's flakyest is
the stuff that _should_ be flaky: Google X (and as the article says, it's a
tiny amount of money).

In between, however, the company isn't great. Not a mess, but mediocre on
execution. The article says that the company's killing of products is a sign
they are trying to get their house in order. I don't see it, but it could
certainly be true.

The good news for Google is that they have a huge cash flow so can actually
afford to take their time to fix things. The bad news is that they have a huge
cash flow which removes any sense of urgency. Big cash flow covers a multitude
of sins.

Big cash flow kills a lot of companies. In such a circumstance hard to do
anything new, especially since while it's new it doesn't move the needle on
revenue. That's why great, paranoid companies like Intel and Microsoft that
had dominant cash flow suddenly struggled when the tide went out. In the case
of IBM they had an existential (near death) experience and it forced them to
get their act together.

The point of books like these is to be talismanic. The company is successful
so others look for the surface gimmicks that made it successful. It almost
doesn't matter what is inside them, since the readers generally aren't looking
for insight but rather validation (they are the business equivalent of self
help books).

~~~
BrandonM
I wasn't responding to the entire article. I agree that he got a few things
right.

The specific part I quoted, though, stands out to me as a rather old-fashioned
management philosophy, one that is unlikely to attract and retain top talent
in a competitive hiring market.

------
mickreggel
"As a fan of his, I’ve followed most articles, interviews, and slides about
his latest book"

The author of this piece of shit is a fan of Eric Schmidt??? WTF? Someone
needs a life.

This article is the biggest load of bullshit I've ever read.

