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Interview with Google Executive Chairman, Eric Schmidt

Aired August 24, 2011 - 05:30:00   ET



KYUNG LAH, CNN INTERNATIONAL CORRESPONDENT: These are the six letters that revolutionized the way we use the internet. Google. Not only a company name, it's also a commonly used verb.

What started off as an idea in the late 1990s by Larry Page and Sergey Brin to improve the way we search the web has grown into a multi-billion dollar tech empire. Far from being just a search engine, it now encompasses online advertising, a satellite imaging database, and even social networking. It's also the owner of the video sharing website YouTube and the mobile phone and tablet operating system, Android.

But not only is Google renowned for its technological innovation, it's also known for its relaxed approach to office life and is consistently ranked as one of the world's most desirable employers.

The man who held the title of Google's CEO for 10 years is this man, Eric Schmidt. The engineering and computer science graduate steered the company through a successful IPO and a seven-fold growth in share price. Earlier this year, he handed back the reigns to Google founder, Larry Page, to take up the post of executive chairman.

This week on "Talk Asia", we're in Tokyo with Eric Schmidt to get the inside story on one of the greatest business successes of the past decade and a half.


LAH: Well, let's start with your new role at Google. One of the tweets that you - quoting back to you - "Day to day adult supervision is no longer needed". Now, that was in response to the reigns being handed over to co-founder, Larry Page. What has your new role meant?

ERIC SCHMIDT, GOOGLE EXECUTIVE CHAIRMAN: It's pretty much the same. As you can see from the June results, Larry is going to be an excellent CEO. He's very focused, he's very disciplined. He sits in the office all day working very hard trying to get our products that are going to run our business as tightly as possible. This has freed me up to work on some things I wanted to work on for a while including public policy, government issues, global issues, and, frankly, I can travel more than he can.

LAH: Was this in response to questions about whether Google was not being able to innovate fast enough?

SCHMIDT: No, this was done because the three of us talked a little bit about how to restructure to make sure that we were making decisions very quickly. We're our own toughest critics. And what had happened in the last year or so is that we built complicated decision-making processes and we ultimately agreed that we wanted much tighter, much clearer decision-making, which starts at the top.

LAH: Tighter meaning faster?

SCHMIDT: Faster, clearer, and Larry is the perfect person to sort of do those, because he's the world's best product guy.

LAH: Is it tougher to make those swift decisions as a company, you know, becomes 25,000 people?

SCHMIDT: It's always harder to manage with the growth. On the other hand, we have some advantages. We have a lot of cash. We have good capital structure. We have a lot of very powerful platforms. And we have a seasoned and very stable management team. So, the combination of all of that plus, sort of, the general sense that we have a strong mission that we care about, I think, is what propels our executives to work so very hard.

LAH: During a 75-minute Q&A session at the "All Things Digital" conference in Rancho Palos Verdes, you spoke about Facebook and you said, "I screwed up". What did you mean?

SCHMIDT: What I was actually talking about was identity, and it got translated into Facebook. Here's a little bit of - so the question was, "If you look back on your decade, what is the area where you made a mistake or what have you?" And I think it's pretty clear that the internet as a whole has not had a strong notion of identity. And identity means, "Who am I?" So we spent an awful lot of time trying to guess who you are. Plus, it's easy to have imposters. People can spam and so forth and so on.

Facebook has done a good job of building a way of disambiguating names. So, if you used Facebook - if you have John Smith and you try to pick which one, you look at the pictures of their friends and that's how you disambiguate it. But, fundamentally, what Facebook has done is built a way for you to figure out who people are.

That system is missing in the internet as a whole. Google should have worked on this earlier. We now have a program called Google+, which has been in development for more than a year and ha half, which is a partial answer to that. But I think that's the area where I would have put more resources - is developing these identity services and the ranking systems that go along with that. That would have made a big difference for the internet as a whole.

LAH: So, how important is it for you to work with Facebook to get into that identity process? To make that a part of Google search?

SCHMIDT: Well, we would love to. Facebook has typically not wanted to give us that information. We've asked politely a number of times. They've tended to view it as proprietary. So, in any case, we have our product, called Google+ -- is having explosive growth. And we'll see how well it does.

LAH: Do you see Facebook as a major challenger to Google?

SCHMIDT: Well, today, if you're a Facebook user, you use Google more than if you don't use Facebook. So, we love Facebook for that reason. So, Facebook has been a competitor for talent, but we have compatible views with respect to the importance of the internet, the importance of information, the importance of identity. And I think it remains to be seen how they'll react to what we're doing and vice-versa. It's too early to say.

LAH: So, you believe that you can live peacefully on the web?

SCHMIDT: Well, these are not winner-take-all markets and the press would love to say, "Oh, there's going to be one of this and one of this and one of that". That's not how information markets work. There will always be competitors, there will always be challengers. And the lesson to be learned in high tech, is that you need to move to these new phenomena very quickly and you need to get the details right. Otherwise, you're left behind.

LAH: And you believe that Google+ is doing that?

SCHMIDT: Well, it's too early to say about Google+. Let's wait and see. Google operates based on options, right? We try these things. This one looks like we got the combination right. It's hard to get it right the first time.

LAH: The options that you were talking about - Google has tried so many different things. Is failure something that Google is unafraid of?

SCHMIDT: Well, I should hope we're not afraid of failure, because if you only have winners, then you're obviously not trying hard enough. So, Google has had a history of trying many, many things. Almost everything has been very successful. And we relatively quickly clean up the things which don't work out, because we need to take those resources and put them on something else. It's part of our innovation culture.

LAH: Is that something that's important for other CEOs watching this interview to pay attention to?

SCHMIDT: It's easy in Google's case, because we don't have the kind of capital outlay that traditional businesses do. We can try something - get five people or 10 people and try something. And if it doesn't work, we haven't spent a billion dollars and have a huge capital loss. So, to some degree, we get to play by different rules.

What I will tell you is that every industry can adopt a more aggressive innovation culture by listening to young people and by asking the question again and again and again. Why is it that we can't do this? What's in our model that prevents us? We have a future competitor coming up here - why are we not cost competitive with that? And if executives took that position, which I think they should, they'd run their businesses much, much more aggressively and much tighter for the benefit of their shareholders.

LAH: Coming up, Google responds to the recent ruckus over claims of mobile phone tracking.




LAH: The heart of your mobile strategy is Android. You have the dominant market share in the United States. Here in Asia, though, you've had extraordinary growth - from six percent to 34 percent. Not quite there, yet. Is it just a matter of time, do you believe?

SCHMIDT: We think our model is a better model than our competitors, because our model creates more choices. Remember, in our case, we provide the software for free and then the hardware partners compete on price, functionality, features, keyboard, no keyboard, or what have you. There are more than 400 such devices available today. Growing very dramatically - we're shipping more than 550,000 of these phones every day and that number has been growing so quickly I've lost count of its growth rate.

LAH: So, does that mean the PC is dead?

SCHMIDT: Well, the PC will be used for things where you need to do a lot of typing. Because it's hard to type on that glass screen. But, for everything else, you're going to be using a mobile device - a tablet or a mobile phone or some kind of mobile, small thing that you'll carry around. They're inherently better. They're more personal. With your permission, they know who you are, they can make suggestions to you - that kind of thing.

So, the PC, which, remember, grew out of the IBM desktop model sitting in a corporation, makes perfect sense for somebody who sits at a desk all day. A lot of people don't.

LAH: Citizenry and mobile - what kind of impact do you see? Do you see citizenry pushing mobile forward, or do you see it the other way around?

SCHMIDT: Well, the revolution that is mobile has just begun and all of these countries, especially in Asia, mobile penetration is very, very high and, in fact, growing even faster. And the new generation of phones are so much more capable. So, we're going from a situation where the average citizen didn't have that much power to a point where they can know everything and they can organize very quickly. And that may bring down a government, as in the case of the Arab Spring, but it may also just challenge vested interests and so forth in a democracy.

LAH: What does, then, Google's role in the mobile technology field? Where do you see it going?

SCHMIDT: Well, we see ourselves as making information more valuable for everybody and getting that information literally to every human on the planet. In order to make that happen, you have to adopt what is known as cloud computing, which everybody's doing now. Where all the data and all the applications are carried somewhere in the network and your device, it just comes to visit your network, you use it, and then it goes back. So, everything's backed up, you can't - if you drop your device, you can just get another one - that kind of thing. It's a very, very pro-user model and it works well.

LAH: Getting back to something you just said a short time ago, you said - with your permission - There have been some concerns about cell phone location tracking. Google and Apple have been at the center, kind of the focus, of the cell phone location concerns. Do you believe that this is a legitimate consumer concern? Or is this an overreaction to a technology that we just don't quite understand?

SCHMIDT: I think it's a very legitimate concern and we have good answers for these things. People don't want to be tracked and recorded and all of that without their permission. The little information that is used by Android is actually not kept anywhere after we use it, and it's not identified to you. I can't speak for the other vendors.

In general, real-time location tracking and face recognition will ultimately be pretty heavily regulated, in my opinion. Simply because of the possible threat to individual liberty.

LAH: How do you address that consumer concern, and then still look at the exciting possibilities of where your cell phone, your location, what you do, what you think - how do you bring those two together?

SCHMIDT: We believe in choice. And we believe that users can make these decisions. So, we ask you, "Would you like us to use this information?" And, if you say no, our products will still perform pretty well. So, ultimately, it's not for us to judge what choice you make. It is, however, up for us to give you that choice.

LAH: Do you believe consumers are hurt if they say, "No"?

SCHMIDT: I can tell you that they're not, today. From a standpoint of features, there will be features that you will not be able to use, but overall, the value, even if you say no, of these devices is so high, you should have one.

LAH: The consumer group, Consumer Watchdog, has sort of had a little fun with you. They've turned you into the poster boy for privacy infringement. There's one particular satirical video that caught my eye - the one with, I don't know if you've seen it, the evil ice cream man?


UNIDENTIFIED MALE: Free ice cream. Hi there, boys and girls. They should know there's no such thing as a free ice cream. Give me a dozen full-body scans. Come on kids, get your ice cream. I already know your favorite flavors.


SCHMIDT: That was interesting, because it had nothing to do with any of the things Google was doing.

LAH: What do you think about your image and who you are being used that way?

SCHMIDT: As a general comment, we would like constructive and informed criticism.

LAH: You are, though, going to be appearing before the Senate Judiciary Subcommittee's Anti-Trust subcommittee. What do you anticipate as the government now starts to look at Google and do you believe that the concerns of an add monopoly - are they legitimate?

SCHMIDT: Well, there's clearly not an add monopoly. That's - there's plenty of other choices. The way that this has played out is the European Union in December began a process of looking at Google's behavior in European markets. They sent out a set of questionnaires. They have not come back to us with any concerns they may have. And my guess is, that'll be a few months from now.

A similar process - and we've, of course, talked to them and pledged to cooperate - a similar process began in the United States Federal Trade Commission in June. And, again, I've met with them and made a similar commitment to them. We've been reviewed by the federal trade commission multiple times, four or five times now, for other unrelated matters. So, they know us pretty well.

So, from my perspective, we don't know what to think about what they're doing, because they haven't made any comments yet. But, I'm sure at some point, they'll say, "We like this, we don't like that". And then we'll discussion with them. But until then, it's too hard to know what they're concerned about.

LAH: Is this just part of the many things that come with being a large company?

SCHMIDT: Well, if you're in the information business and, especially if you're disruptive with respect to information incumbencies, it makes sense that people would be upset with you. Many of the complaints that I've seen have been initiated by our competitors. So, they need to be viewed with the appropriate grain of salt in that situation.

On the other hand, these governments have a proper role to take a look at this. And any time a company like Google, you know, has the amount of information we have, it's appropriate to review it. It doesn't bother us at all.

LAH: So, you feel comfortable going forward this fall?

SCHMIDT: Oh, absolutely. And we would expect there'll be more of it. Again, information is simply too important.


LAH: What is the future for Google and will you one day drive my car?

SCHMIDT: We hope that your car will be driven by a computer and you'll be watching it drive it perfectly.



UNIDENTIFIED FEMALE: A few minutes after midnight on January, 28, the internet went dark across Egypt. Cell phone service was cut off, TV satellite signals were jammed, and internet access was blocked for nearly the entire population. The government did not want the people to communicate with each other. And it did not want the press to communicate with the public. It certainly did not want the world to watch.


LAH: Let's talk about the Middle East uprising.


LAH: Something you chatted about a short time ago. You had mentioned in a previous interview that you do fear certain governments will try to regulate the internet as they have regulated television. So, how do you prevent those governments - certain governments - from trying to regulate the internet?

SCHMIDT: The first message we send to governments is it's a mistake to shut down the internet. If you're shutting down the internet, then you are in a world of hurt. Because you're now afraid of what your citizens are going to do by talking to each other. You're also going to shut down all of the business, all of the electronic communication that goes in the normal operation of your country. So, when you see countries like Syria shut down the internet, you know that they're really scared. And this is not a good thing.

Ultimately, I think that the technology that we and others have been able to build here is serving as an organizing tool for people who don't have other options. It will serve as a check and balance for countries that are so fixed - that is they're so inflexible - that they've not created job opportunities. They've not created opportunities for expression and mobility. The people now have more power than they did before.

Put another way, as a dictator, you're going to have to provide more opportunities for your citizens or the citizens really will mobilize in the streets.

LAH: Then how do you get - how do you get that message across to the governments where they won't shut down the internet?

SCHMIDT: Well, the good news is that governments watch CNN like everybody else. And everyone is very, very well aware that the internet was one of the contributing factors to the activities in Tunisia and in the Egypt world. So, you can be sure that all those governments have had private conversations about how they feel about it. And I would hope all of them are trying to make more opportunities available for their young people to invest more in technology tools. And learning to listen with an informed and empowered electorate.

LAH: The penetration of mobile technology in Asia is very, very high.


LAH: And one place where you have to be looking is China. But you have a complicated relationship with China.


LAH: Where does the relationship stand and where do you see it going in the future?

SCHMIDT: Well, as is widely known, in January of last year, we became dissatisfied with a set of things, including a security attack and the censorship policies of the Chinese government. We relocated our businesses to Hong Kong and the censorship is now done by the Great Firewall, which exists between Hong Kong, which is a largely open internet, and the more closed internet that is that of mainland China.

That structure has worked in the sense that it's stable. The government has given us necessary operating licenses and we continue to invest and build products and so forth in China. I want to emphasize that the government of China could arbitrarily, any day, decide they don't like that structure and just shut us down.

LAH: But you do see a future for Google in China. I mean, there's so much growth there.

SCHMIDT: Well, there's absolute growth there and, indeed, we have a significant investment in Shanghai and Beijing. The quality of our engineering there is excellent. We have a very good advertising business and, particularly, a very good display business. And we serve as a good challenger to the majority player there, which is Baidu.

LAH: Is it complicated, though, trying to do all of this at once?

SCHMIDT: It's always complicated.

LAH: Let's talk a little bit about Google's future. A study caught my eye. It was a study that said that the way we Google today - the way we use the web - is actually reorganizing human memory.

SCHMIDT: I saw that.

LAH: So, what is the future for Google, and will you one day drive my car?

SCHMIDT: Well, first place, we hope that your car will be driven by a computer and you'll be watching it drive it perfectly. Because computers ultimately should drive cars better than humans do. They can react more quickly, they can make decisions more quickly than - humans take a tenth of a second to make a decision. Computer can make the decision in a microsecond. So, that's an easy one.

In Google's case, I think, our view is that ultimately computers will do what they do well. They remember everything. They can be very personal. They can travel with you. You can tell them what you want. They can anticipate things. They can suggest things which are anomalous. But, they're not going to provide the human things. You know, the sort of sense of emotion and connectedness and so forth that, as humans, we crave so much. They're very good at memorization, they're very good at remembering what you did and making some suggestions. And Google will make sure that is done extremely well.

LAH: So, reorganizing memory - does that study surprise you? Or is that just, you know, part of our adaptation to technology?

SCHMIDT: I would be skeptical about reorganizing anything involving human biology in a year. If you look at the rate at which evolution -- changes over literally thousands of years are considered fairly fast. We do know that people who use Google - people are using Google more and more in place of rote memorization. Because of the ubiquity of Google, we know that, rather than sitting there and memorizing all of these things, which are, frankly, cluttering up their brain, it's more convenient for them to use Google to do that. So, in that sense, they're learning to search rather than to rote memorize.

But that doesn't take away from the most important thing for a human is to learn conceptual thought, planning thought, strategic thought. These are not things that Google is going to do for you or me or anyone any time soon.

LAH: Let me get to my last question. Three people, either in or out of the business, who you personally admire.

SCHMIDT: Secretary of the Treasury, Bob Rubin. If you look at Bob Rubin, he was able to deal with all of the political stuff around him, but was able to articulate a really clear sent of principals of things that he actually pulled off. And it ultimately took America into a surplus for the first time in many, many years. That's a case where you have all of the stuff swirling around you and you have good judgment.

Another one is Vint Cerf, who works at Google, and is largely the father of the internet. He and Bob Kahn invented it. But what Vint did is he spent the entire rest of his life pushing and pushing and pushing in his friendly way for adoption, because he didn't have any power. So, there's an example of somebody who is a - he's a missionary. All right? He understands what it's like.

And then, I'm obviously a supporter and an admirer of President Obama. First, because of his race and what he's faced in his life. But second, because he approaches problems with the kind of discipline and diligence that you would want a U.S. President to do. You may disagree with his decisions, and it's fine to do so - I disagree with some too - but the fact of the matter is, what I know about him is he sweated the details. He sat there with briefing book after briefing book and he has a strong opinion and he really does understand why he's doing what he's doing.

LAH: Great. Thank you very much for packing us into your schedule. Thank you.