On January 12, 2010, Google announced that the company would re-evaluate its approach to doing business in China after the discovery of cyber attacks that appeared to target human rights activists. While Google did not directly accuse the Chinese government of complicity in the attack, the company clearly stated that it is no longer willing to censor search results. At a time when nearly every major company in the United States is trying to expand opportunities in China, Google has decided to buck the trend with a very controversial move that could result in a major setback for the business. What could Google’s executives have been thinking when they made a decision that was sure to cause a political uproar?
Richard L. Brandt’s latest book, Inside Larry & Sergey’s Brain, presents a portrait of Larry Page and Sergey Brin that helps the reader understand what may have motivated the company to initially enter China by accepting some level of censorship. Although the book was published prior to Google’s recent announcement, we can draw some important insights regarding the way Google’s founders think about the issue of doing business in China. Perhaps more importantly, the book also allows the reader to glimpse into the psyche of the founders and draw some conclusions regarding entrepreneurship in general. For anyone investing in early stage companies, the insights are invaluable.
Mr. Brandt’s book is not as well known as Googled: The End of the World as We Know It which we reviewed in November. However, one can argue that Mr. Brandt succeeds in providing a more vivid background of both founders and he also makes a better effort to draw links between their core values and a number of decisions that were made which may appear “crazy” at first but actually led to Google’s stunning success. It is easy to see in retrospect how conventional thinking could have destroyed Google’s ambitions at several points during the early years. The fact that Mr. Brin and Mr. Page stuck to their core values made all the difference.
Can Idealism Coexist with Good Business Sense?
Google’s idealism is hardly a well kept secret. In fact, the idealism of the founders has often been mocked as disingenuous by outside observers. However, Mr. Brandt clearly shows how Mr. Brin and Mr. Page kept Google on course with an idealistic view of the world that ultimately provided the differentiation required to succeed.
Perhaps the most important example was Google’s insistence to not permit advertisers to purchase ranking in search results and to keep all advertisements clearly distinct from search results. Google could have easily maximized short term profitability in the early years by taking a less idealistic approach (as all their competitors did). It must have been incredibly tempting to do so. The founders did not come from wealthy families and were facing pressure to produce profits. However, ultimately the decision to consider the needs of the search user first trumped short term profitability but led to the trust required for the company to gain traction in numerous other initiatives.
Pros and Cons of Entering China
Google’s founders struggled with the question of censorship for several years before deciding to accept restrictions in exchange for being permitted to enter China. Mr. Brandt’s chapter on China asserts that the founders never lost sight of their determination to contribute to positive change within Chinese society. The question was whether engagement, even with restrictions, could improve the free exchange of information within the country. Google was the first search engine to insist on at least notifying users if the results of a query were censored. This fact alone helped to expose the actions of government to restrict the information citizens are permitted to see.
It is difficult to maintain cynicism regarding Google’s intentions for China after the company announced a willingness to exit the country if the government continues to require censorship. While some subsequent statements made by Google’s CEO Eric Schmidt appeared to soften Google’s stance to some extent, the company seems committed to follow through on the statements made on January 12. At this point in time, the decision seems likely to cost Google some profits but so did the earlier decision to refuse to allow advertisers to influence search ranking. Google may be making a long term profit maximizing move if the new policy builds trust in China and the government eventually is forced to back down.
Genius, Hard Work, and Entrepreneurship
Sergey Brin and Larry Page have IQs that are obviously off the charts. They were also willing to work extremely hard and found a way to start Google with very little capital. They started out of a garage and used second hand and improvised furniture. They were able to secure venture capital funding and attracted other talented people to join the company.
But while IQ, hard work, and guts are required elements associated with any successful startup, these attributes alone are not sufficient to ensure success. Silicon Valley’s history is full of startups that failed despite all of the wonderful qualities that Mr. Brin and Mr. Page brought to Google. What made Google such a stunning success is what may have been initially viewed by outsiders as insanity on the part of the founders. However, the unconventional thinking that failed to maximize profitability in the short run directly led to Google’s stunning rise.
Controversy Will Continue
Google will continue to be controversial in the future. We recently asked whether Google’s recent re-pricing of employee stock options meant that the company’s “Don’t Be Evil” pledge does not apply to stockholders. Apple CEO Steve Jobs recently declared that Google’s “Don’t Be Evil” mantra is “bullshit”. Google is often accused of expanding well beyond search particularly with its emphasis on offering applications for cloud computing. Will the company use dominance over search to gain unfair advantage in new ventures?
Mr. Brandt provides an important service to those who are interested in moving past simplistic sound bites and gaining a better understanding of what makes Sergey Brin and Larry Page tick. One gets the distinct sense that these men will be rocking the boat in the technology world for decades to come.
Disclosure: The author of this book review does not have a position in Google. Richard L. Brandt provided The Rational Walk with a copy of his book.