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- Good evening and welcome to tonight's program hosted by The Commonwealth Club of Silicon Valley. My name is Chuck Geschke, and it's my pleasure to be introducing Eric Schmidt and Jonathan Rosenberg, co-authors of their new book "How Google Works." Eric is Google's executive chairman, and former chief executive officer. He joined the company in 2001, and during his tenure has helped Google grow from a Silicon Valley start-up to a global technology leader. Previously, Eric was the chairman and CEO of Novell, and chief technology officer at Sun Microsystems. He served on the research staff at Palo Alto Research Center here in Northern California, as well as Bell Laboratories and Zilog. Eric received his Bachelor's Degree in Electrical Engineering from Princeton, and his Master's Degree and PhD in Computer Science from the University of California at Berkeley. Eric is a member of the President's Council of Advisors on Science and Technology, and the Prime Minister's Advisory Council in the U.K. He serves on several boards including the New America Foundation, Khan Academy, and "The Economist." Jonathan serves as an advisor to Google CEO, Larry Page. He joined the company in 2002, and managed the design and development of Google's consumer, advertiser, and partner products, including Search, Ads, Gmail, Android, Apps, and Chrome. Previously, Jonathan was the vice-president of software for palmOne, and senior vice-president of online services and products at @Home. He received his Bachelor's Degree in Economics from the Claremont McKenna College, and his MBA from the University of Chicago. The moderator for this evening's discussion is Sal Kahn, the founder of the Khan Academy. The Khan Academy is a non-profit learning platform that provides free world class education for anyone, anywhere. The Academy has over 15 million users in nearly 200 countries around the world. Ladies and Gentlemen, please join me in welcoming Eric Schmidt, Jonathan Rosenberg, and Sal Khan. (applause) - This is every exciting. I'll just start off, you know, a lot of business books kind of show up on my desk every now and then, and I tend to be somewhat sceptical of most of them, but as an aspiring Jonathan/Eric Schmidt, I said "Maybe I should see what's ... " - It's entirely, because of the title. - It is. - It has the word "Google" in it. - That's right, that makes it very marketable, but I have to say just to preface. - How Google Academy works. - This was useful, this was useful. I learned a lot, so I'll just start with that. Kind of going into the meat of this book I'll open up with a question for both of you. I'll start with Eric. At what point, when you joined Google, did you realize that it was a different kind of company? - Pretty much the first day. I showed up and I wasn't quite sure what to expect. My initial office was, there was a group of five people, and they gave me a corner of one table. I thought "This is interesting." They soon moved me to a very large office which was eight feet by 12 feet, and I was quite happy there for the first few weeks. Then, one morning I come in, and there's a gentleman who has moved into my office. We were sitting tandem next to each other like this. He's wearing his headphones and he's working. I figure he must be an engineer, so I say "Hello," and he says "Hello, I'm Amit," and I say "Hi," and there's this sort of awkwardness of like "What are you doing here?" And I said, "Yes, Hi," and he said, "I know who you are, Eric," and I go, "Yes," and he goes, "Well, you know, I moved in." I said, "Okay," and he goes, "Well actually my office is over there, "but it was always crowded. "There were six people in an office, "and your office was always empty." At this point the light bulb goes off, and I think "There's no thing I can say now "that's okay," like "Get the heck out of my office," bad answer. "Oh, I love you, I love this engineer, this is great," can't do that either. So I figured I'll just sit down, and I said to myself "Oh, my God." We became best friends, and we shared an office for three years. - I was a little slower than Eric. I would say it took me about 90 days. I had a lot of experience doing product management and product planning. I figured I was brought in as the adult supervision to explain to the company and the engineers how to do product management, and the way you do product management is the MBA comes in and writes a plan. There's lots of details in the plan. It explains kind of the concept phase, and the investigation stage, and the development phase, and at every spot if everybody delivers you dole out a little bit more resources, and you document this thing and then you dictate that everybody produce what's in it. I was really good at that, so I produced a really, really pretty version of the mother of the greatest product plans that you'd ever seen and I dump it on Larry's desk, which was my first mistake, instead of e-mailing it to him. But I dumped it on his desk, and he asks me to sit down with him. He goes to the first page and the second page, and he says "These are very pretty, pretty pictures "that you've made, that's very impressive." And he goes to the third and fourth page, and he just looks at me and he says, "Noooo," I'm like, "What's wrong?" He says "When have you ever produced "a plan like this where the engineers "stuck features in that weren't in your plan?" I was like "Never." He says "When did the engineers ever finish "a product faster that was in that ... "What's that thing you call it, a Gantt Chart?" I said "Yeah, Larry, that's a very important thing, "well never," and he said, "Well then your plans are stupid." "Please stop doing them." And so I was like "What am I doing here?" And he said "Go sit with the engineers," and that's what I started to do. - That raises an interesting question because when both of you came Google was still in its start-up phase, and it was already clearly on an exponential growth trajectory, but as you mentioned, Jonathan, you were brought in as kind of potentially the adults, the management experts. How do you navigate that like in your own head? - It helps if you have teenage girls. - Explain. - I managed fine and I didn't have any teenage girls, but please explain. - You had a teenage girl and a boy. - 10 years later, you're older than I am. - In any case, so if you think about your teenagers they sort of tolerate you and every once in a while you say something which they will reject, and then sometime later it comes back out of their mouth as though they have invented it. Your children are young, but trust me, this is going to happen. - I look forward to that. - You really don't, by the way. - This is a tension. You noticed it's a different kind of company. A lot of what you had practiced in your successful career up to this point, these people just kind of an immune response to it. As leaders in this nascent organization, how do you decide how much to push back and say "No, no, no, Larry, look, this is the way "it really should be done if we want to scale," versus "No, you're right, "this is a new type of organization." - I think what I figured out was I couldn't tell them how to think. They already knew how to think, but we could manage the environment in which they thought, and that's why in the book we really talk a lot about the culture, the approach we took to decision-making, running meetings. The manner in which we really focused on transparently sharing information, so we created a structure where we were going to scale by helping them understand. They all understood the mission. They all believed the slogans, and rather then telling them what to do we were going to kind of give them the vision, and then let them manage as we scaled. - I think it's also helpful with people who are this sort of brilliant and forward thinking to understand what they're really trying to do, and try to say yes as long as it's legal. I still remember we were sitting in our little office, and then Larry and Sergey had gone rollerblading, as they often did, and they came back and they said, "We want to move our offices over there," referring to the then SGI campus. It's an immense campus. I said, "It's not going to happen," and duly we ended up acquiring it, and making it our headquarters. Sometimes it's easy to misunderstand the power of compound growth. So we would do things, like we would do, let's have a five-year conversation, and we would plot our growth rate, and I would say "Oh, my God, "look at the number of people." And they would say, "Not enough." So, again, my instincts were always manage to what we have, and theirs was always manage to what is possible. The latter is a better way to lead. - One thing that I found here which I found pretty powerful, especially from your part, Eric, is that you come as the CEO, but even in your answer just now there was a humility in how you approached it because you did have these kind of two strong, iconic founders. Were there times where it was just incredibly frustrating? - Sure, but I think it's important to remember when you're the hired help, Jonathan. - I've heard this lecture, but go ahead. - It's important to remember who the owners are. I think in Silicon Valley one of the great strengths is having founder-led companies. There's something very special about successful founders in terms of their reach and their vision. I don't need to tell our audience here who they are. The names come off everyone's lips. Start with Steve Jobs and move forward. These are exceptional people. We need to find them. We need to mint them, we need to support them. We need to let them come into the country, and you need to figure out a way to work with them because they're going to change the world, and I understood that. What I also learned was that while there were things that they knew far better than I, there were things that I could help them with. I could help them achieve their vision. In a partnership if you're helping somebody else achieve their vision, then it's going to be a great partnership. - You already touched on this idea that you both identified that these people are ... This is a special type of organization, not just Larry and Sergey, the whole organization, the engineers, everyone. It's the central theme in the book this idea of the "Smart Creative." What is a smart creative, and how is that different than the way that people might have imagined your Silicon Valley tech worker of the past? - Actually, Jonathan coined the term, but I would argue that we started writing the book because I said to Jonathan, "There's some kind of a problem here. "People are coming out of these universities. "They're very, very ready to work "in organizations that are interesting, "and powerful, and they listen to them, "and they give them what they need, "and they change the world. "The problem is that almost everyone "who comes out of undergraduate "and graduate school finds the organizations "that they join sclerotic, unchanging, poorly led. "It's a huge sort of a whack to these young people. "We've got to disconnect between the training, "and the inspiration of our young people "in the institutions and organizations "that they are joining." - Eric decided he liked this term "smart creative," which I actually didn't like, and then he asked me to try to figure out how to define it, so the way we really defined it is it starts with a person who is really highly technical, but then beyond being highly technical they have some level of business savvy. They actually have an interest in the business. The third thing is they're curious, but they're curious in the passionately curious kind of way, and they're very facile with the tools of today's age in manipulating data and creating prototypes. Unlike most technical people instead of pitching you with something they quickly produce and show you a prototype. - Given that these are people, they're not just your stereotypical engineer. They have a business interest. They have a design interest. They have passions about what they're doing, the consumer. You already touched on decision-making a little bit, and you talk a lot about it in this book, and it's fascinating. How do you do that? How do you give this person the autonomy, make them feel like they have a voice, while at the same time being able to make decisions, and guide the organization? - I think there are different levels of answers to that. One is people have to actually believe that the time and value they put in these ideas will be listened to, but you also don't want sort of random things occurring at random places. You have to have some kind of a review process, so we instituted a set of meetings that ultimately became Tuesday Google Product Strategy meetings which were brutal, and we would go through these things in enormous detail and try to figure out do they need more resources, do they need support help, or were they a good idea or bad idea? Eventually, we started having serious concerns about regulatory issues, privacy issues, and so forth, and we added that as well. In the early years there was simply a list called "The Top 100," which, of course, had 300 things on it that Marissa maintained, and we would say, "This is roughly what we're working on." - I think we were also very structured in the way we made decisions, and the way we ran meetings. We would always start meetings with data. Jim Barksdale used to say, "If we have data, let's use data. "If all we have are opinions, we'll go with mine." - By the way, can you imagine if the way our country worked, and the way your companies worked, and so forth, every meeting began with "Here are the facts." It would be a very different set of conversations in almost every aspect of life. - So we start with the facts and then we argue. Eric was always very good at making sure that everybody got to argue, not just what we call the "HiPPO's." The highest paid person's opinion. Eric would always make sure-- - Are you the author of that acronym? - Well, yeah. - Highest paid person's opinion. - HiPPO, we just had cartoons about them all over the web. People like that one. It was that one or Fat Cat, and we decided to go with HiPPO's. But you want the most senior person running the meeting, but that person's job is also to elicit opinions out of everyone in the room. If people aren't going to provide opinions then they don't need to be in the room. So you get everybody focusing on the data, sharing their opinions, and then eventually you ring the bell. That's the job of the person who is running the meeting. - In theory it sounds great, but how do you do it in practice? I mean I could imagine being a junior Googler, and being in a meeting with you guys, even today, and it would be intimidating. How do you get that out of that employee? - I think there's a bunch of ways, and we actually published a set of rules for running effective meetings, and it starts with somebody has got to be in charge of the meeting. There has to be some kind of an outcome. Somebody has got to take notes. Jonathan pioneered this, and it was this huge thing because every room had to have two projectors. One to project what somebody was projecting, and the other one was projecting the notes, so you could see what somebody was writing. Every once in a while I would be reading the notes and saying "I didn't say that," and the person would have to, but it worked. - The reason that I did that was, I was a master in product management in crafting the minutes after the meeting because then you could give everybody the action items that you wanted, and articulate them the way you wanted. So once I moved into management I wanted to make sure that none of the people who worked for me could get away with that. - When you're running these meetings, the fact of the matter is for managers their job is to sit in meetings. It's unfortunate, you think that managers should not be doing that, but in fact, they spend most of their time in meetings. So making them more efficient, even if you make them 10 or 20% more efficient makes a huge difference in the productivity of their firm, so we spent a lot of time looking at this. I think there's a bunch of principles beyond that. You need to make sure that everyone feels included which means that the people who never say something need to say something. You need to actually pause, and let the women speak, which is difficult for the men, it's a fact. The third thing is you have to tell people we're going to not make a consensus decision here. We're going to try to figure out what the best idea is. If you're sincere about that, and it's not the HiPPO's opinion, but really the best one you'll get conflict, but everyone is kind of shooting for the prize which is how do we solve this problem. - You mentioned this kind of term "consensus" in everyday language means everyone has to agree, but you guys kind of go to the Latin roots, and you say, "No, it's go get everyone's opinion out." - Every once in a while we would have situations where people were not going to come to agreement. We use the China example which was very controversial inside the company as an example, where we had the debate, we followed our process. We ultimately had a vote. The vote was clearly in the majority to do what we did, and then everyone, including the people who disagreed set out to implement it as fast as possible. As a simple rule businesses are run by making decisions. You make them fast, you fail quick. All those kinds of things, you can be very, very responsive to what you're dealing with. - I love Sal Kahn is the only person who actually reads the Latin footnotes because we wrote the footnotes for a reason. Consensus doesn't mean-- - I think he has a class on Latin in the Khan Academy. - It doesn't mean agreeing. It means to come together with feeling. - Yeah-no, I'm a curious person. - Do you realize that we're sitting next to the most famous educator in the world today? - I know, I keep hearing his voice, and all I hear is my kids in the other room looking at geometry. - Put headphones on them. Sorry, please continue. - No, I like that, that was very flattering, thank you. - What, the putting headphones on? - Either way. One thing that fascinated me, and I'm asking these questions really from the vantage point of someone who is at least 10 or 15 years behind you guys trying to kind of get some of your wisdom. One of the fascinating things about Google, and you mentioned this in the book, is the kind of triumvirate of leadership between Eric, Larry, and Sergey. Traditional business practice or leadership would say "That's going to be tough. "It's going to be hard to make decisions." How did that work? - Well I think it obviously worked pretty well. I think you should judge leadership teams by their accomplishments, not by their rhetoric. So a leadership team that keeps its mouth shut, and just executes well deserves our praise, and our attention. I'd also observe that the most successful companies literally in tech, and I suspect worldwide, were more than one person. The media ultimately lionizes a single individual which is great, and they certainly deserve it, but the fact of the matter is that there's always a few people who collectively have the same incentives. One of the great things about the partnership that I built with Larry and Sergey was we would argue very; and continue to argue, very, very strongly with each other, but there was never a nanosecond where we had any question as to the incentives of the other because we were locked together in an ownership structure, in a management structure, in a board structure, we all knew we were fighting to win. We may have disagreed on a tactic, but it's a wonderful thing. In your case at the Khan Academy you have a very, very effective chief operating officer and president who you've worked with for years. Imagine if he had not been there, and you had to do all the things that he did. The two of you deserve the credit. You get a lot of the media credit. He deserves a whole bunch more. That's my point. If you study each successful company, here we are in Silicon Valley look at Intel, look at Oracle, look at Sun, look at Cisco. Go through the list. In every case they had two or three key people who made that happen. Apple, people have forgotten the role of Steve Wozniak, and the others. - Jonathan, from your point of view, and obviously Google is wildly successful, but did that ever make it confusing for the team? Was it ever "Who do I go to?" - It actually worked surprisingly well, and the reason that it worked is that they met once a day, all the time, and so in this crazy maelstrom of very, very fast hypergrowth when you needed someone you just went, and hunted down one of them. We did, often, kind of pick and choose. There were things you'd know you'd go to Sergey for. If you wanted resources to build something, you wanted a trampoline somewhere, or something, you'd ask Sergey, but the beauty was you could find any one of them. You could tell them what you needed, and then somewhere by the end of the day they'd get back to you if they were concerned, and if you didn't hear back you just did it. - I tried to run that process as efficient as I could. Our actual agreement was the following. We knew roughly what the other cared about, and we agreed not to surprise the other on something important. In other words, if it was something relatively straightforward just do your thing, but if it's something that I care a lot about, and you know it, don't annoy me. Don't go around me, and that partnership model is a good one, and I think it scales to three or four people. It takes three or four people as I said to really run at full blast. Today, of course, we organize the rules. As always, Sergey does whatever he wants, and Sergey is busy doing Google X. I can describe to you both the current, and future impact of Google X by just describing the contact lens. A team that was hired by Sergey figured out a way to embed a computer chip in the lens of a contact lens with a small battery. That lens detects the conditions that diabetics need to know when to take shots, and so forth, and so on. This is life changing for the hundreds of millions of people who are or will be affected by diabetes, and, of course, the financials for the royalties that we'll get will far outweigh any of the costs. So you don't think this is good business? Google X is great business, but even more important it changes peoples lives. We now have organized it so Larry is the CEO largely focused internally running everything, and I do everything externally which means that I'm dealing with all of the political and government and partner issues, but we still basically meet, we're still basically in alignment. We know each other so well we can anticipate each other's concerns. - You're bringing up Google X, and this is actually one of the really fascinating things about Google. It's actually changed my perception of Google in the last few years. How did that happen? Especially as an organization grows and you write a lot about this, there tends to be an organizational inertia. There tends to be a desire to just work on things that are adjacent to where you already are. When someone talks about self-driving cars or? - This is the benefit of having brilliant founders. So, in the first place these are founder decisions, and nobody else should get the credit. It's really Larry and Sergey. What happened at "The Times," maybe five years ago is that I had wanted to put a lot more money into science. As you all heard I worked with and for "Chuck" Geschke at Xerox PARC, one of the great heroes of my life. I understood the importance of investing in the seedcorn for 10, 20, 30 years from now, and I wanted us to do it directly. Larry and Sergey said, "That's okay, universities do that. "Why don't we pick things which "not only have that aspect, "but have a significant, potential upside business "with a lot of risk, let's take the risk." Again, founder decision. We hired this fellow, Sebastian Thrun, who is the inventor of the modern version of the autonomous car. Larry had known and worked with him at Stanford, and he set up Google X, initially, to work on the car maneuver, and once that model worked we were inundated by people who needed the support, the hiring, and the mechanisms. They couldn't do these new ideas by themselves, and so Sergey set out to start working on them. So one day he walks in, and every once in a while they'll come in and tell me, they'll fool me. So one day I went into their office, and they share an office. They said "We're going to go "into the hardware business," and I said "Oh, my God. "The last thing we need to be "is in the hardware business." Sort of my typical reaction to everyone of their ideas. By the way, I'm always wrong. So they go on about the importance of refrigerators. I think everybody understands how important refrigerators are, refrigeration, and studied this at some length, and the importance of automating the refrigerator, in the way it behaved, and the monitoring of refrigerators. About 20 minutes into this it became clear that they were joking. So we're clear we're not going into the refrigerator business at the moment, but you never know. The next acquisition may lead to that, we'll see. So then they announce "We're going to go into the balloon business." I said, "Give me a break," but in this case it was the right decision because they had figured out how to use existing handsets, so the breakthrough of the balloons is not the balloons, which in of themselves are quite impressive, but the fact that they could use existing handsets to empower connectivity to people who do not otherwise have digital bandwidth in the world. Again, this is life changing, and it works. - I think this also sort of showcases Larry's principle of "Think 10x," which really is not the kind of things that most companies do. Most companies think very incrementally, and Larry really tries to encourage people pick a vision that's 10 times better. An order of magnitude better than the alternative. If you fail, it's okay, but you'll probably learn something in the process. Astro Teller likes to say that if you give them a project to build a car that gets 70 miles per gallon, that's one project. If you give them a different project, and say "build a car that gets 500 miles per gallon," that's a completely different project. If you fail you'll probably learn something. So just go back to the Project Loon that Eric mentioned. If this project provides connectivity to people in the Third World, in the next five years we're going to have 2.5 billion more cell phones in the Third World. Imagine what that's going to do for those people. People in many of these areas don't have access to newspapers. They don't have access to libraries. They don't have access to what their government is doing. They don't have access to Khan Academy. - Let's use a more tangible example. We have this horrific tragedy in Liberia. Imagine if all of those people had a reasonable cellular network I'm sure we could have saved many lives by earlier prevention, earlier monitoring, earlier treatment, earlier awareness. So this is more than just entertainment, this is life. - From an outsider's point of view this level of breakthrough innovation it's the envy of the rest of corporate America, global, everyone. I can understand how having these strong founders who are very kind of, thinking 10x could drive that, but how does it become more ingrained to the organization? How do you all feel this will continue to happen, say, 50 years in the future, potentially, for the organization? - If you think about it, we're likely to have the general idea, and we're likely to have the cash because we have lots of cash. Will we have the people? It's very much leader dependent, and it became fairly clear that the limit on the growth of the company was not the brand, and it wasn't the vision, because I think we had plenty of that, but it was literally recruiting the leaders. It's interesting that Jonathan and Marissa set up this Associate Product Management Program where they would take people who were very young, 22, 23 years old right out of college with a technical degree, and turn them into product managers. Well over a five or 10-year period those people have become not just the executives that run large parts of Google, but they've also become the CEO's of many of the start-ups that you hear about being funded today, so I would say that the model works. It's clear, we discuss it in the book at some length, and it does scale. Subject to continued focus I think this scales for a long time. - I think it scales if you give people flexibility to move, and you really espouse a model of innovation by prototyping because it's much easier today to create prototypes. It's much easier to experiment, and if management kind of stays out of the way, and you get a bit of a Darwinian process of the experts lower in the organization voting with their feet, voting by participating with 20% time, voting by gravitating towards the projects that they think are going to be successful it's much easier to let some of these nascent things emerge without top management looking at all of them, and dictating which are going to work, and which aren't. - With that same lens a lot of what we have just been talking about Google X, and the contact lens for blood sugar, and self-driving cars, and Project Loon, someone 10 years ago, no one would have predicted Google would have Android, and now we're just, "Yeah, that's what Google does." - I can assure you we didn't predict it. - I wouldn't have predicted it 10 years ago. 10 years ago, let's think of the things I had in my pocket. An address book, an answering machine. At home I had an alarm clock. I needed the yellow pages. I had a pager, you had a pager. I had a Rand McNally Map. I needed to look up the weather. Today, all of this is in a Smartphone. Imagine 20 years ago you thought about "Star Trek," and a Tricorder that measured geological, physiological and mediological stuff, and Kirk had a communicator in his other hand. Now he has both of these things in a Smartphone. - One of the great set of start-ups that are happening in the Valley are ones which are medical device monitoring that are connected to phones. Transdermal patches, other ways in which they can monitor what's going on in human's bodies, and in theory the patch goes off, the phone calls the doctor, and the doctor says something to the phone, and the phone calls you and said, "Get your butt over to the hospital. "You're going to die in 10 minutes." And then it calls the doctor and says, "I scared him enough that he's coming." - This is kind of an open-ended question. I know it's impossible to predict the future, but I'd love to get both of your takes on what will surprise us about Google in the next 10 years? - I think you'll see, it may be Google, or it may be firms that build things based on platforms that Google is creating, but I think if you look at the whole Android Wear world the opportunities there are enormous. The whole point about health care, and longitudinally being able to track information about individuals has enormous opportunity. There are apps. Somebody was working on an app, a psychology app that would instead of having the teenager show up at their psychologist, and give some monosyllabic answer, "How you doing?" "Oh," the phone with, of course, the person's permission, if this is an at-risk teenager, would tell the psychologist whether or not they were at-risk. Are they getting more depressed? Well, let's see, your phone can tell you. How many calls did it get in? How many calls did it make out? Are you responding to your text messages? Are you leaving the house at a different time of the day? So I think all of these things including all the big data that we're going to get that won't be associated with individuals, but will inform the health care world is going to lead to huge, huge changes. - Let me answer that by talking about the industry as a whole. I have consistently in my career underestimated the scale of the disruption, and the scale of the positive impact from the use of software to redo systems, human systems of one kind or another. We're at a point now with combinatorial innovation, the ability to mix and match things together is going to produce a very large number of new things that are very useful that other people will fight about. The best current example is Uber which uses Google Maps, and disclosure Google as an investor, but Google is a good example of a fight for the user, and provide something new, and then deal with all the regulatory pushback. You're well aware at Khan Academy of the issues of trying to change education, but changing it from within. You are, yourself, a veteran of that, but what is more important than getting the education for kids right? You're willing to use the tools. You started off using YouTube. Now at Khan you've got these amazing new tools that have been built by engineers that work for you that can do things that use predictive analytics to figure out what math problems you don't understand, and so forth. It's a quantum change in learning that we've never seen before. So now replicate that in each and every business, and if you're an incumbent you worry about it. If you're a user you benefit from it. - Since we have an economist in the audience I would also add that if you think about information costs and transaction costs going to zero which is kind of the Uber example, that's going to spawn massive commerce because every single person in the world can now reach every other person in the world, and as soon as that can happen the number of things that somebody over here has that he would be willing to sell for a very low price, the number of things that somebody over here would be willing to buy, whether or not, it's a good or a service, or it's a ride in an Uber is going to expand exponentially because everyone knows what everyone else has, and it becomes very seamless to buy and sell. - I could ask questions for the next five hours as a curious person, but I will not monopolize your time. We have some questions from the audience. I'll start with this first one. How is Google's motto "Don't be evil" been an ethical choice that directed its impact on the world? - Eric may have a different answer, but I think of "Don't be evil" as kind of this cultural load star that guides us internally, and I think a lot of people have misinterpreted what we mean by "Don't be evil." I can remember many meetings within the company where we'd be talking about a concept, and somebody would just stop, and pound their fist against the table and say, "We can't do that, that would be evil." And suddenly everybody stops and they say, "Yeah, we should keep those search results "separate from that commerce opportunity." So I think it really does continue to guide the way people think internally. It's kind of like the Kanban line being pulled. When a car is being built somebody sees something broken, and just says "It doesn't matter how junior I am, "I'm going to stop this thing." - This is an interesting one. I would like both of you to answer this. Who are your personal heroes both in tech and outside of the tech industry? - Well for me it's easy, Steve Jobs. I had the privilege of knowing him, working with him, and serving on the Apple board, and when I look at what he achieved in terms of impact on society we could all aspire to be a small percentage of Steve. - You talk about him in the book as one of your heroes. In the not too distant past there was some ... Obviously, Google and Apple are now kind of both in the phone space. Was that hard for you? - Yes, but in the first place we were both respectful to each other, but exceptional people; remember what I said earlier, exceptional people are worth hanging out with because there's a good chance they'll change the world. - Steve Jobs is certainly a hero of mine as well, but I'm going to go with a more personal hero. Milo Medin who hired me at @Home, which was the two-way cable modem company that I worked on before I came to Google. He drew a vision of what broadband access could look like in the world one day, and I wasn't really sure that I believed that it was correct, and before I left his office he said, "Jonathan, with enough thrust anything can fly," is what he learned at NASA. - We forget that the first trials of all of that were done in Sunnyvale right near here, and I remember going to Milo's house, and having him show me this. I said "Is this thing really gonna work?" Today there are 70 million American households that have access for that, pretty good. - Personal heroes are in doodles on my walls, so if I were only to pick one, Martin Luther King. - This is another interesting one. Are we in another tech level? If so, what's-- - No, we're not, valuations are low. Occupancy is low, salaries are low. It's so easy to hire talent. I mean look at the quality of the people you've been able to get and you pay them nothing. - That's called leadership. So I'll ask the second part of that question. - Oh, there's more. - Even though we're absolutely not in a tech bubble, hypothetically if we were. - Should we be in a tech bubble? - Or what advice, what suggestions do you have for start-ups and I would say even indiviudals to survive the burst? - [Jonathan] Sell early. - The general rule of bubbles is at the top, and I have failed to do that so far. This audience is probably smarter. - I think the way to really tell whether or not you're in a bubble comparing today versus the last tech bubble, the beginning of the last decade, is look at the Mary Meeker slides. If you want to learn a lot about tech just search Mary Meeker. She's at Kleiner Perkins, and look at her last presentation, and compare the level of e-commerce that we have today to the valuations that we have today versus the valuations that we had back then, and the level of e-commerce that we had then. We're now at this point where these information costs and transaction costs are going to zero, and people are buying everything online, and soon they're going to be buying all of these things online, and consummating the transactions on their phone. When this stuff moves to phones the valuations are going to feel even more justified. - There's always an argument, it's different this time. So if you want to make that argument I think it would go something like this. First, the NASDAQ is not as high as it was in March of 2000, so we forget what the bubble was really like. Trust me, the bubble was great. Let's bring back that bubble, I love that bubble, but the fact of the matter is that valuations have been going up because people can credibly now see that the impact of scale from the Internet means that if you have a successful product that product can get global distribution very quickly. Jonathan makes the point, and makes it in the book quite cogently, I think, that it used to be you had to worry about distribution issues and branding issues, and so forth. Now if you produce a much better product it will scale so very quickly that you get this sort of phenomena where the winner gets incredibly high valuation, and so far the markets are rewarding them. - Just look at your product, and the number of eyeballs that you get coming to your, albeit non-profit site, but think about all of the apps that you have. I doubt there was a lot of marketing that caused you to download Instagram, or WhatsApp, or any of the Google products that hopefully you have on your phones as well. Angry Birds, right, these things take off and they skip all that stuff that Geoffrey Moore and the "Crossing the Chasm" people used to write about, innovators, early majority, late majority. It's just like suddenly there's this thing and it's just boomed. - They just go to Superstore. - Yeah. - Right. - This is something we talked a little bit about, but this is an interesting frame of it, and I'll put it at the angle of if you were talking to another manager. You guys kind of walked into a culture that was already innovative, and you helped foster that further. The question here is how to create and build Google's culture what was the challenge while building it, and how the challenges would be different in a different country? I think that last part is especially interesting. I would say even in a different company. Could you create a Google in another company or country? - The culture of a company is set at the top. We have a section in the book about famous slogans. What's the one that you like the most? Was it Enron? - There's Enron which ... Well there's Lehman which is to build something like. It's almost impossible to remember, but it's something like, "To build unrivaled partnerships "through the dedication, perseverance, "and hard work of our employees "to generate shareholder value for our investors." - You can be quite sure that they hired a branding company to write that sentence, and they put it on their website, or the equivalent. I mean that's not real, so companies have real cultures, and employees will tell you what they are. If you do parachute yourself into an existing company, ask the employees, not necessarily the founder, or the CEO, what's the culture really like, and you'll get an honest answer, and then try to make it better. Another observation, and people always say, "You could do this at Google because "it was special and new and fast." I just don't agree with that. The fact of the matter is the average company in America hires turns over five or 10% of its employees every year, so there you have an opportunity. You actually have an opportunity to change the culture person by person by changing your hiring practices along the lines that our book talks about, and telling people we expect something different. Every company has at least some kind of strategy. Put in a hard-bitten, hard fought, five-year strategy that employees believe in and march to it, and you'll do great. - This next question and this is kind of a hot topic, these days, especially. What efforts do you all personally undertake to improve gender diversity in the company? - We say actually that diversity is your best defense against myopia. We are investing quite a bit in Girls Who Code, and various initiatives to get more minorities coding. In fact, we were just in Toronto where we visited. We had demos from a bunch of kids who were showing us 3D printing and games. I do a lot of mentoring of women at Google, and I also participate in a lot of the bold, diversity programs that we have in recruiting on an annual basis. - We have a very serious problem in our industry about a lack of supply of just literally the incoming number of women versus men. It's quite perplexing because if you look in other fields like biology, a majority of the PhD's, and the Master's Degrees are now female, so there's something about what we are doing that's a problem and we need to be honest about it, and figure out a way to fix it. - We did recently release our internal numbers with respect to the numbers of women in minorities, and we were very pleased to see that a number of other Silicon Valley companies followed suit which is a very good start. - In your estimate do you think it's a pure, inbound kind of supply issue, or do you think there are things in kind of culture that are making it hard? - There's plenty of evidence of hidden bias, and even these nice, pleasant liberal tech companies have all sorts of biases. We try to do a bias check, but the fact of the matter is I'm sure. In our case we have three female board of directors. A number of our most senior female leaders have now left to run their own companies, and so forth, so we think we're making a good contribution, but it could be so much better. - Absolutely, so this is an interesting question. Would you apply for a job at Google today? If yes, what project would you be most interested in? - Sure, I'd apply for a job at Google today. I don't know that I'd get one. - I'm worried about the same. We put in those hiring practices. We never actually subjected ourselves to them. - No, but you're my friend, and maybe you'd help me. I don't know that I'd get through one of the committees. I think the fascinating thing today is that there's different sets of choices. I think for a young person today learning our ad systems is a hugely, valuable, long-term skill because it's critical internally, but it also gives you the opportunity at some point to go to a start-up that needs to understand how to monetize online, and again, since it's so much easier to create prototypes and get funding today I think if you understand how to join a start-up that's already built a good product, and then help it monetize that's a really good career strategy. I think on the other side of the established products there's great opportunities to pick something that fundamentally is going to change the world. The contact lens would be a good example. The self-driving car is another great example. Pick something at one of those ends of the spectrum. - As a computer scientist my work was in operating systems programming languages, so if I had to take my historic training I would join the Android team. It's inconceivable to me that Android would have a billion and-a-half platforms, or whatever the number is today, and sure I would want to work on that, but if I were a young person today with a different educational background I'm sure I'd be attracted to some of the Google X projects because they integrate software and hardware in ways that no one has ever imagined. - As a corollary to that question what advice would you give to a young 12-year-old or 15-year-old if he or she is aspiring to be a Googler, and kind of grow a career in Silicon Valley? - The first place I think is, if you look at teenagers today, at least the high performing ones are under enormous pressure from their parents and society to overachieve. I benefited from the fact that I just naturally enjoyed computers, and I just sort of did my thing. So I would be careful not to over manage this outcome. Again, you want it to be natural and native, and not have a burned out 18-year-old who's busy on psychiatric drugs, or whatever, stressing out, is more stressed out than you are. You just don't want that. It's not a good human outcome especially for young and developmentally still developing brains, so I think that would be the first thing. I think the second thing is that early exposure to programming is probably as important. There's a lot of evidence that early reading, and you understand this as an educator very well, early reading skills correlate very well to subsequent performance. So early reading comprehension, and then later programming skills. I'm not talking about Hardcore C and C++. I'm talking about manipulating games, understanding graphics, learning how these things work. It structures your mind. It gets you to be organized. It gets you to think clearly, and even if you ultimately do not end up as a programmer somewhere that will probably help you as a lawyer, as a doctor, as whatever you ultimately become. - I have a very different answer. The graduate plastics answer would be statistics, and the reason I say statistics or computer science is that if you think about what Bill Gates said he went into software because he foresaw that the cost of computing was becoming cheap. So now think about this concept of big data. There's data everywhere. The Internet makes that data accessible for free. What becomes the complimentary scarce resource to free data? The ability to analyze the data, so statisticians I think are going to be the most highly paid people in the next 20 years. - By the way, Jonathan, just to update you these are now called data scientists. - Thank you Eric. - So had you said the word data scientist and statistician you would have had a perfect answer. - I'll do that next week. - One outcome, and I do think you should think about this for Khan Academy is that there's a lot of evidence that the analytical skills, simple programming skills, and simple data science and statistic skills you're going to need them as a young adult because everything is going to be measured, everything is going to be in front of you. How do you reason about it? How do you think about it? How do you analyze it? - Absolutely, so this is an interesting question one that I'm fascinated about as well. When do you realistically think self-driving cars will be introduced to the general public? What process goes into the testing? - I have been told that the correct answer is about 10 years, but I think it could be less. - The testing consisted of Jonathan getting behind the wheel. - When you get in one of these cars, first, I love that I've driven a self-driving car. I have not, I have been driven by a self-driving car. So you get in and if you've ever taught your teenage kid to drive you sit on the right side, and you're hitting that imaginary brake pedal. It takes like 20 minutes and after 20 mintues this calm sort of comes over you, and you realize that this thing isn't going to get distracted, and it isn't going to stop and have a drink. The laser that it's using to look at the car ahead of you works better than your eye, and it cannot crash into the bumper of the car ahead of you, and you get really accustomed to accepting that it just works better, it's safer, and ultimately these self-driving cars are going to save lots and lots of lives. - I think we don't really know how long it will take. We're working with the regulatory authorities. They obviously have a lot to say as to whether these kinds of cars are going to co-exist in the form that we have mentioned. We'll certainly be doing testing on autonomous courses and specialized places, but the real question is when are they let into the wild, if you will. - I know Sebastian, he's also kind of in the education space he talks about once every 400,000 miles, so it's already quite good. - We've not had an accident. - It's better than you. - Yes. - Better than you generically. - That's right. - I'm a defensive driver. - You are a defensive driver? - Yeah, I drive like a grandmother. - It's not you, it's the other car. - My mother actually told me that last time she was here. This is an interesting question. Apple, a lot of fanfare about kind of the financial portion of the new iPhone. What is Google doing in the area of mobile purchasing apps, and phones in the future? - Well we have Mobile Wallet. I think Apple has introduced something reasonably similar. I think as Apple makes progress it will be good for us. We'll certainly see more retailers with working NFC systems, so I think as we build all of those into more phones, and as we get phones down in price which I think we've started to see with a lot of the Android phones we'll get more wallets and as we get more wallets you're going to get much, much more acceptance at the retailer level. - I think it's helpful to say that this is a platform that Apple, Google, and others, and let me include Amazon, and a few others. That platform, all of us will be using in some form, and as a group we're all going to benefit from all of these innovations. It was true in the earlier sets of platforms, but think about commerce and buying things, and making it easy. Jonathan always talks about trying to get to friction-free markets. You have a nice way of describing this as an economist, but the fact of the matter is you're going to buy more stuff if it's easier. - This is an interesting one. How do you inculcate a sense of entrepreneurship among people who are not natural entrepreneurs? And I'll add the correlate, can you? - One thing we've learnt that you can't teach is passion, and that's why we're so careful about interviewing for passion. I think you can get somebody addicted to a positive experience where they build something that is ultimately successful, so I think you can teach technical people who haven't had a wonderfully positive experience. Certainly somebody who hasn't marketed an app, or earned money from an app you show them once they build something that they can actually monetize it suddenly they get excited about entrepreneurship. I think entrepreneurship is easier to teach someone than passion. - Eric. - I agree. - So this one, and I didn't plant this, but I'm going in order now. How do you see the future of using technology to improve education? - Sal, perhaps you could answer that question. - It's not my handwriting, not my handwriting. - Go ahead and answer the question. - I don't want to take your stage time. - Look, you asked the question, you answer the question. - Someone else asked this question. - Okay, I'll make up your answer. Look, it goes something like this. We were all educated, all of us in this room in pretty much the same way, but there's a lot of science that says that people learn in different ways. With the combination of gamification, new kind of testing, new ways in which we're experimenting and learning we can prove that you learn quicker with some of these new tools that are online. By the way, that doesn't mean the teacher goes away. It means the teacher is more effective because the teacher is supervising the entire process. How did I do? - Excellent, I would say you're probably on the board of the Khan Academy. - This is why they put me on the board. That was my pitch. - We'll see more of the model of what people call the "flipped classroom." - I wonder who pioneered that term? - You? - No, Sal. - I didn't pioneer, but it got associated. - The concept that any student in a college can see let's pick the best version of a physics professor who does Einstein's Theory of Relativity, and we record these things. The students watch them, and then they come into their classroom, and they have their own physics professor who then talks to them about what they saw. That model, I think, is going to become more and more popular. The other thing that's wonderful about that model is, again, if we have these phones everywhere in the world people who don't otherwise have access to any education at all can watch them for free. - You want people who don't have access to high quality learning, and the stuff that Sal and company are doing is revolutionary, so we should just clearly do that, but even for us, even the elites, the genetically fortunate who end up in America at the top universities, and so forth and so on. Whatever position you have on that they can benefit too. There was a study of a particular physics class where they ran an experiment, and it went something like this. We're going to show you a 10 minute lecture, and then we're going to describe how to answer the questions, then you're going to answer the questions, and they were going to dissect the approaches you took. That worked better than the traditional physics lectures. They proved using their metrics that was twice, a factor of two better. So that's an example of the kind of learning. It's unclear, by the way, whether that result applies to other fields, but it appears to apply to physics. - This is a question that we've touched on a little bit, a slightly different spin. As Google grows and expands how do you insure the culture stays healthy? What changes have you made to handle growth, and keep the culture true to its roots? I'll add another correlate. What are you most concerned about as Google continues to grow? - We've actually written a book about it, and we're sharing it externally. - We gave a copy to every employee. - A digital copy actually, and we actually spent this morning in a big meeting with all of the employees where we were asking those who have read the book what their thoughts were. What are some of the things that we're not doing today that we talk about in the book? We've given this talk recently. We just gave it in Toronto, Washington, and New York and Mountain View and L.A. next week. I think lots of engagement after kind of documenting the "Tribal Wisdom" is the focus. We had been doing some of that. In fact, the book evolved out of a talk that I gave in 2009 when we were scaling very, very quickly and we tried to write down all of the rules that we've had within the company. - [Eric] By the way, what was the title of this talk? - Not a particularly prescient choice. "Notes for the best seller I'll never publish," and as of yesterday. - As of yesterday. - We're a best seller, woo-hoo! - Congratulations. - Finally, we've done something valuable. - Yes, exactly, you're finally successful in your life. I'm sure there's a lot of people feeling insecure right now, but anyway. I'm one of them. My book did not get as many, but anyway that's a separate thing. - You have millions of views everyday. - That's right, but there's-- - Sal, will you stop complaining. The most famous educator in the world, and you're unhappy? - I'm rich in other ways. With that, I think, there's one more question. We have time for one more. Eric Schmidt: Thank you for making Google a strong leader on clean energy. What will Google do to help pass climate legislation through congress? That's a very easy thing to do. You guys should have no trouble passing things through congress. - Yeah, I don't know if anybody's noticed, but congress has largely stopped passing laws, of any kind, so if you assume that more laws are good then their productivity is poor. If you assume fewer laws are good then their productivity is high. Look, we elected these guys. I think we get the government that we've elected. On the climate change thing what I would tell you is climate change is very real. We need to begin to address it in lots of ways. My standard joke on this is, I sort of like Florida, and I don't want to lose half of it. The modelling indicates that in, at least young people's lives, there's a reasonable chance of severe flooding because of the way the sea level rise works, so this is a very, very serious matter. If you don't care about Florida, which I do, you might care about the water sources in the Himalaya that provide water for a billion people, or you might care about genetic biodiversity which provides genetic health, and other sort of biological resistance to disease and things that affect humans, and on and on and on. Or the wars that appear to be coming up because of lack of things. By the way has anybody noticed the temperature today? So there's lots about, and the West is in a long-term cycle which may or may not be related to climate change. You go on and on and on, and I think that climate change is very real. I think we can debate how to address it, but it's important to start with the facts, and those are the facts. - Thank you very much. This was a lot of fun. We could go on for hours, but I recommend everyone, I mean I found a lot of value in this "How Google Works." Thank you very much. - Thank you. - Thank you. (applause) - I hope you all enjoyed this evening's program. I know that I certainly did, and by your reaction I think you did as well. We'd like to once again thank Eric Schmidt, the chairman of Google. Jonathan Rosenberg, the Google advisor, and Sal Kahn, the founder of Khan Academy. I know that our audience here in Santa Clara, and those of you joining us on the radio have enjoyed it as well. Now the meeting of The Commonwealth Club which is celebrating over 100 years of enlightened discussion is adjourned.