Googled: The End of the World as We Know It

Transcription

>> What's interesting about reporters and the press and all is, if you're on the other side of it is, people spend an awful lot of time criticizing writers for how quickly they write, how little due diligence they do, and how if you will random some of their coverage and so forth. And you hear this over and over again. There is at least one exception to that. And probably the person who is the most disciplined and the most detailed reporter of current culture, current facts, and current companies that I have ever met. His name is Ken Auletta. Ken, of course, is the author of about about 11 books, somebody who we have known well over the years, someone who I've known in some of my previous roles as well. In the technology community, has been covering the technology for almost as long as it's existed, along with the media industry, which is another one of his great interests. And Ken is one of those people who goes to the events and then talks to the people back behind the event and try and figure out what's happening. He became interested in the question of the media, which is sort of a fundamental question of our time. And when he told me that he was going to work on this, I figured he would work on a book about what is generally known as "old media." But in fact, what he decided to do is to use Google as, if you will, a story or a metaphor for the changes that are occurring. And I figured, "Well, we'll see a good book out of that." But what is particularly interesting about Ken is the level of detail and the level of discipline and the level of reporting that has gone into his coverage of the set of seminal events, all of which we have lived through. From a Google perspective, this is one of the most accurate chronicals of the journey that we have been a part of. And I'm sure that the other companies that he's covered in his book, and so forth, had the same level of precision reporting and fact-based analysis that Google, I think, stands for. It is a great privilege for me to introduce Ken Auletta to talk about his book, "Googled: The end of the world as we know it." Ken. >> [Clapping] Ken Auletta: Thank you. I appreciate it. Thank you. And thanks, Eric. He forgot to mention my Nobel Peace Prize, but what the hell, you know? I have regards from Microsoft where I was two days ago. I was speaking to an audience like this, and they speak very fondly of all you folks. [laughter] And I should tell you -- there's a story I tell at the beginning, I think, of Chapter Two of an interview that I did with Bill Gates in 1998. And I said, "Mr. Gates," I said, "When you think about the future, what do you worry about? What's your nightmare?" And I expected he would say, "Netscape." He was about to go on trial for violating the antitrust laws, which he was found guilty twice of doing. I thought he would say, "Oracle, Sun, Apple." He didn't say that. He thoughtfully rocked back and forth gently, and he said, "I'll tell you what I worry about, Ken." He said, "I worry about someone in a garage, who is inventing some new technology that I've never thought about. And that's my nightmare that that's going to challenge Microsoft." Well, in 1998, we know who was in a garage -- Worldwide Google Headquarters written out front in hand letters. And they have become -- as I again confirmed on my trip on Monday -- their worst nightmare. And I decided that -- as Eric alluded to -- that I wanted to write about a company that was really riding the top and helping create the digital wave. And that wave was crashing into a lot of traditional businesses that I had spent a fair amount of time reporting on for the New Yorker and a book. I had actually done a book in 1991 called, "Three Blind Mice," which is a book about how the television networks missed the technological threat that was facing them, which was cable -- which had two revenue streams and which could do things that the broadcast networks couldn't do, and which were dependent totally on, as you know, advertising. And they made some of the same mistakes that I found the media in this century made in ignoring -- and being complacent about and not treating with alarm -- the digital revolution that you people represent. So I came here really to try and understand, Who is this company Google? How did it come to be? What's different about its culture? What's unusual about Google? Why is it innovative? Is there a secret sauce? And I also decided that, part of the narrative would be -- I didn't know what the answer was, but I knew that I wanted to write a narrative that told your story, but in the context also of how you begin to change from just a search company to -- what you came to call yourself, which is -- a media company, and how gradually, you started to bump into -- be it book publishing, or newspapers or advertising or telephone companies, or television companies, or Microsoft. And how most of these other industries really ignored you. In fact, I begin the book with the story of a visit that Mel Carmason, who was then running Viacom, which was the second largest media company in the world -- CBS, MTV, Simon & Schuster, etc. And how we came here and he met with Eric and he met with Larry and Sergey. And he thought maybe he'd do some kind of a deal, maybe even acquire you guys or something like that. This is before you're public. He had no idea what kind of revenues or growth potentials you had. And so, he explained his business at one point -- as Eric described to me -- he tried to sell a Superbowl ad to Google, which was going for $2 million for a 30-second spot at the time. It's now 3 million, but the way. And of course, Eric and Larry and Sergey were appalled at the idea of spending that kind of money. And you had no idea -- no one's clicking -- you don't know, you know, who is watching the ad, who is buying your product. And it seemed like a very inefficient system. But they let Mel Carmason speak, and then they described the Google business. How you actually -- there wasn't waste. You could tell who was clicking, you know, who was buying, and was much more intelligent. And then Carmason said, "Wait a second. That's very -- we don't want that kind of efficiency. We want to get people all caught up in the sizzle of buying TV ads and that's what really matters. We don't want the advertisers to know what they're getting," And, of course, Eric and the Google people were appalled by that. And Carmason, at the end of the 3-hour visit, leaned over in his cufflinks gleaming, and he said -- pardon the language, but actually I can't use that. C-Span is here. So I'll be polite -- he said, "You guys are messing" -- he didn't use the word 'messing' -- "with the magic." And, of course, at the T.G.I.F. that Friday, Larry and Sergey and Eric tell the story, "We had an interesting visitor this week." And "You know what he said to us? 'You're messing with the magic.'" And of course, that's what you do here. And so, among the things I learned on my visit is what engineers do. And if you start from the assumption -- as the three guys who run this company start from -- that the old ways of doing things are often inefficient, and you could achieve greater efficiency. And if you think about the business I'm in -- the printing business -- totally inefficient. The idea that you're killing trees, expensive paper, expensive printing presses, and expensive distribution vs. doing it online in multimedia, if you want me to say, that's a pretty inefficient system. So the engineer comes in and says, "Why?" Why does it have to be that way? Why can't we sell ads and know who we're selling to and who's actually buying and charging based on clicks rather than you think they have an impression that you've made on them? And why can't you digitize all the books ever made? And why can't you have Google news and aggregate 25,000 news sources from around the world? Etc. etc. etc. And, of course, as you do that, you start bumping into traditional media companies and they get very upset. And the truth be told, you were very late to understand, as a company, that you're upsetting these people. You were pushing the envelope of say, copyright. You were pushing the issue of fair use and you wanted to be able to do a search -- and a search is wonderful. I love the idea that the -- now eleven -- books I've written could be searched, and people can have access to maybe a book that didn't sell so well of mine -- can be brought back alive because of Google. That's terrific. On the other hand, I'd like to be consulted as an author before someone puts my book online and makes it available. And at one point, I tell the story in my book of my second interview with Sergey, and he comes in the room and he says to me, "Ken, let me ask you a question." He said, "Why don't you just publish your book for free online? Just put it out there. Many more people will read it." I said, "Well, that may be true that many more people would read it, Sergey. But let me ask you a question." I said, "Who's going to pay me to write this book?" I'm now on a leave from the New Yorker to do a book. So I mean, I need to earn a living, right? "And, who's going to pay for my trips out here?" I made many trips out here. "And who's going to pay my airfare and the hotel? And who's going to edit my book? And who's going to send me on a book tour like I'm on now? And who's going to index my book?" Sergey, at that point, wants to change the subject, because the truth is, he was approaching it like an engineer does -- or someone who doesn't know the book publishing business. But he was also approaching it, I would argue, as someone who didn't have a full appreciation of copyright. And an appreciation that you need the cooperation of people who own the content in order to share it. I want to share my content, but I also want to make sure that I can earn a living, because that's how I make my living. And so, one of the reasons you got sued initially, by the Publishers and Authors Guild, was exactly for this reason -- that Larry had this brilliant idea starting in 2002 to digitize all the books and, Wouldn't it be great? And it would be great. And you got the permission of libraries, but you didn't spend enough time -- as Google executives admitted to me in the course of reporting this book -- seeking permission from the people who own the copyright -- be they publishers, or be they authors. Obviously, you bump into, when you buy YouTube, you bump into Viacom which decides -- and I think they're trying to hold you up -- but nevertheless, they sue you for a billion dollars, because they're saying, "You can't take John Stuart off the air." So I saw that, and I saw basically, I think -- in the course of the two-and-a-half years I spent -- that you were brilliant engineers, but you often are narrow in your approach to the world. And copyright is one issue. I would argue you're sometimes narrow about the privacy issue. And one reason you're getting static from -- not just the U.S. government, but -- governments, particularly in Europe, is on that privacy issue. I know Eric is very sensitive to that. But the truth is that there is a belief -- and I encountered this and I report this in the book -- is a belief that, if you look at -- I spent time on Facebook. You say, "How can people be concerned about privacy?" People put anything on Facebook, right? So you kind of become convinced that privacy is not a big issue. But it might be, because you collect a lot of information about people -- not by name, unless it's, you know, some of your sites, but mostly, you don't have their name. But you have a lot of information about them. And people get concerned. So you now face -- I would argue that -- three issues that you deal with that arouse the concern of governments around the world. One issue is concentration of power. And, to go back to Microsoft, when I was interviewing Microsoft for the book I did when I covered their trial, one of the things that was quite astonishing was how out of touch they were. And Bill Gates almost pleadingly talked to me about, How could you think that we are not doing good? How can my government think that Microsoft is not doing good? He thought, if 95 percent of the people were using his operating system, it was like he was building one track that worked for every railroad all over the world. So he was a common source he was providing. He wasn't thinking that, in fact -- and it's one of the distinctions I make between my visit to planet Microsoft and my visit to planet Google. Microsoft were cold businessmen. Gates and Baumer and company wanted to destroy Netscape. I came away from my visit to your planet thinking you're not cold businessmen. You're cold engineers. [laughter] And, but you're not -- you don't mean to harm people -- but inevitably, as Larry Page said to me at one point. I said, "Is it true that you will sometimes bump into traditional media?" And he said to me, without any glee -- if Bill Gates were answering the question, he would have been gleeful in 1998. Larry said to me, "I wouldn't say sometimes. I would say 'always' bump into." You're engineers, and you're figuring out ways to do things more efficiently. The old media world tends to do it, oftentimes, inefficiently. There are a lot of people doing that. I learned something else. Let me finish the other point. So, one is "concentration of power." Americans don't like powerful companies, and you are a powerful company today. And, not only a powerful company, but -- as happened with Microsoft -- you've got a lot of industries that want to create competition or lessen your power or use the government to attack and weaken Google. And they have a lot of influence -- telephone companies do and advertisers do and television companies -- in Washington. But not just here. You're talking about Europe and you're talking about China. There you bump into authoritarian governments who want searches that don't have anything about tanks in Tiananmen Square. So you're dealing with that issue. You're also dealing with the copyright issue, which is something I argued you weren't particularly sensitive to and that governments are concerned about. And you're dealing with the privacy issue. And that too, is an issue that different governments deal with different ways. So I would worry about that, if I were you, more than I think you -- I think you're late to understand that menace to you -- the government menace to you -- as I think traditional media was late to understand the digital menace to them. I learned something else. I learned as I sat in the engineering meetings here that I was allowed to sit in. And I probably understood half the words that were spoken. I mean, you could have been speaking Swahili. I didn't, literally, understand what was -- but I had the luxury of time to ask people, "Tell me what that word means." or something. But I kept on thinking, as I'm sitting there, of Terry Simel at Yahoo in 2003 -- and I know he wasn't an engineer. Or John Sculley at Apple in the mid-, late 80's and the early 90's, and he wasn't an engineer. And is that why these two companies, for instance, fell behind in engineering, because the people at the top -- unlike Eric and Larry and Sergey -- couldn't understand the language that their engineers were speaking? But, as I listened to the engineers in those meetings, and as I listened to Larry and Sergey and Eric asking provocative questions of them and saying, "But wait a second. I heard what you said, but that doesn't make any sense because of x, y, z." I kept on thinking that, in fact, the engineers were the content creators at the company. You don't think of engineers as content creators, but in fact, I came to think of many engineers at places like Google as the Martin Scorsese's of this world. The applications that you're creating become content. And if I spend two hours doing Google search or on Google maps or one of your other products -- if I spend two hours on that, I'm not spending two hours on CBS or with a book. And if I spend time -- Facebook is content -- anything that occupies your attention, I would argue, is content -- including how content changes for the Internet. It's not the same; storytelling is not the same, etc. So I learned that in my visit here. I also learned, as I went from here back to the world of traditional media -- to book publishers and television executives and movie executives and music company and newspaper and magazine and Microsoft and advertising agency and telephone companies -- and I interviewed those folks. I came to realize how retrograde they had been. There are two types of people in the world, I think -- particularly people who are dealing with challenges. There are people who lean back, and there are people who lean forward. The people who lean back are the people who are protective, defensive, worrying about, How do I preserve what I have? The people who lean forward are proactive, and they're people who say, "This is a challenge, and I'm going to seize the day. I'm going to be an optimist. I'm not going to be a pessimist. I'm going to forge forward. I'm not going to whine. I'm not going to complain, 'Oh, woe is me, Google is killing me. The Internet is harming me.'" And in fact, we hear more of that whining. And it really makes me sad, because I actually think that many people who are whining -- particularly say, people with the New York Times are doing God's work. The blogosphere is never going to replace the kind of reporting and expenses that the New York Times invests in a place like Afghanistan today. Or that some newspapers -- most newspapers are not very good newspapers I would argue, but there are some that are wonderful newspapers. And sometimes spend two, three, four months to investing an investigative report or covering state and city capitols. And in the digital world, you have a way of proving who is reading or watching what. And what editors in the digital world -- one of the dangers -- and Larry Page and I talked about this, and he's thought a lot about this issue. He said to me once, he says, "I worry that people are going to -- editors are going to see or publishers are going to see that people are interested in Britney Spears, but they're not interested in government news. And those papers will start covering what is most popular with people." And that worries him. It should worry him. It worries him in terms of search. You need good search information. So he said to me -- as did Eric -- that, "We really want to see if there's some way to help the New York Times." And in fact, at one point, they acknowledged, when I asked them this question, that they discussed internally the idea of buying the New York Times -- at Google. They never talked to the New York Times about it and they never did anything about it, because in the end, they decided that you have to be -- as a search engine -- you have to be a neutral Switzerland. You can't take sides. And you can't be perceived as favoring one content over another. And in fact, one of the things that actually enthralled me in the reporting of this book -- and I look at my friend David Crane, who I spent many hours with -- and most people I interviewed here, I would ask, "Where did these two founders of this company get the clarity that they had? How did they come, at 25 years old, to say, 'I'm going to have a simple home page. I'm not going to allow Visa to spend $3 million to have an ad on my home page. And I'm not going to build what Yahoo and AOL were doing, which was a portal. I'm not going to try and trap people. They're going to do a search, and I'm going to send them to this search destination that they want. And advertisers? I'm not going to milk them. I'm going to charge them an e-Vickrey Auction and only a penny more than the second and then the third highest bidder.'" right? And how did they know that building trust of the user was essential? And if you think about -- if you have that as your guidance, you automatically know you can't buy the New York Times. Because, if you buy the New York Times, you may be helping save a great institution, but you're undermining the trust you need to function. Just as I would argue that you should be worrying -- much more than I know you did, certainly when I finished reporting this book this spring -- about governance. And if you think about it -- as brilliant as many of the engineers at Google are, as brilliant as the founders are and Eric is -- there is a, like Bill Gates at Microsoft, they are not necessarily the best people to determine things that are not easily measurable. That is to say, something like people's fears. If people fear Microsoft, as they did, or they fear Google -- as many do, and certainly other companies do -- that's a fear that can build and infect and go to Washington, go to the European Union, go to other countries that you're dealing with. And that's not something that -- as Sergey said to me when I asked him about this -- he said, "Look, we're not strong in the emotional intelligence department." And that's true. So where does that lead me? What do I take away from this book? I call this book, "Googled," because I think Google has basically changed the world. As Hal Varian said to me -- at one point he said, your chief economist, he said to me that, "The Internet made information available. What Google did was make it accessible -- the great navigation assistant for the universe." And that changed the world -- changed my life as a writer and reporter. I mean, I have a library at my fingertips, and every day I thank the fact that I can have a Google at my fingertips. And the thought that I can have books, as well as scholarly journals, available to me too, it's just -- it's very efficient for my time. I'm like getting up and going to the New York public library. And I could work at night or early morning. And it's just fabulous, but the reason for the subtitle of my book, "The end of the world as we know it." is that, the world -- the traditional world with all those media institutions I spoke about -- is forever changed. And that's a profound change. And some of that is wonderful. And some of that is not so wonderful. And when I hear bloggers say what's important, for instance, about journalism is just preserving the journalist. And you could have one individual do good journalism that's enough. And in fact, bloggers can do wonderful things and one individual can do wonderful things. I think of people like I.F. Stone, for instance, doing great reporting. But journalism -- really good journalism -- is a team effort, just as Google is a team effort. And you need editors, and you need -- in New Yorker's case -- copy editors and fact checkers. But when you do an investigative report or I go out and do a piece for the New Yorker, I have lots of people that are constantly involved in my life. And when I hand that piece in to them, they'll say, "Hey, Ken you buried the lead, it's really in Paragraph 20, not where you put it." Or, "I think the story is a little off. I think you really need more of the following." I would go back and do a little more reporting. That's the nature of the way journalism really works. A team is essential for great journalism. That's the truth of the New York Times. You can't replicate that unless you have the resources of some kind of institutional support to do that. And if we lose that, we lose a lot in our society, in our democracy, and the kind of checks and balances and trying to keep governments and powerful institutions honest. But I came away thinking -- to finish my remarks and welcome any questions you may have -- I came away thinking, "You're a really great company." And I mean that; I'm not saying that just to placate an audience, and just to prove it, you also are tremendously challenged. And it seems to me, you face both external threats and internal threats. The external threats are the obvious competition -- Bing, other search engines, though Bing has not done as well as certainly they expected to. And when I was reporting this book in May of '08, I went to a Microsoft conference and literally Microsoft executives were whispering to me, "We have a game changer here. We're going to announce something called 'cashback', and it's going to change the world." Has anyone heard of cashback since then? Nada. So you have to worry about Facebook and Twitter and the form of vertical search that they might do. I mean, it would be a much more valuable search for me to be able to consult -- if I want to buy a camera -- 20 friends in Facebook with Twitter, than getting 10,000 answers from a Google search. I mean, I did a search -- I describe in the book -- I said, "Who is the real William Shakespeare?" I punch it into my Google search box. And how many answers do you think I got? Anyone have a guess? How about if I said 5 million? That's preposterous. That's totally inefficient. It violates every rule you say you believe in at Google. And you couldn't give one answer to that, because it's a controversy whether William Shakespeare actually did exist or was someone else. But 5 million guys? Uh-uh. So vertical search is a threat. Government is an external threat to you. Governments, I should say. And you got to worry internally about your size. Can you move with the same speed as you always have, the loss of good people, and you got to worry about hubris. And I saw this in Microsoft too. And I know all the differences -- I think I know at least some of the differences between you and Microsoft. People are locked into their operating system. You're one click away from escaping Google. I understand that. But when you're that successful, as you've been, and your life is really pretty -- I mean, you're given lots of things from your laptops to your food to your buses etc. -- it is very easy to lose sight of the real world. And if you're an engineer and maybe living in this tight community, you have the advantage of being on the Internet, which Microsoft avoided and didn't have, you know, that kind of exposure that you have to other opinions. You're at risk. And it's worth probably thinking about. In any case, in my visits to your planet -- and I'm not coming back in any regular way, though I'll miss the food. I learned a lot, and I thank you for that. I mean, I had nothing but hospitable people and wonderful interviews here. Thank you. Welcome your questions. >> [Clapping] Ken Auletta: And just raise your hand, I'll call on you if you got any thoughts. If not, we'll -- [pause] yes. Oh, I'm sorry. [pause] I wish I knew. I wish I knew how you save the New York Times. I mean, I think newspapers are going to try and create a payroll, and I address this issue in my book. I think they have to try to figure out how to get another stream of revenue, just as you do. I mean, I think the notion of being totally dependent on one source of revenue -- advertising -- I'll tell you a story, for instance. Eric Schmidt -- in my 11th interview with Eric last December, I said to him, "I just left John Hennessy, the president of Stanford, and he said he thinks the original mistake that was made with the Internet was not having either micropayment or subscription -- not just being reliant on advertising. Do you agree with Hennessy, who is on your board?" He said, "I do not. I think free is the best model." And my last interview with Eric, which was April of this year -- so four months later -- I said, "Eric, do you still agree with what you said to me in December?" And he said, "I don't. I've changed my mind." And if you think about -- Chris Anderson wrote a book called, "Free." It came out, the editor wire came out in July. He added a chapter at the end of that book, which is called, "Coda." And essentially, what he says in that last chapter seems to contradict much of what he said in the rest of the book. He said, "Free is not the answer." And I think what happened -- the recession, which began in late 2007, really was a wake-up call for Silicon Valley and people whose businesses were digital or -- to realize, you were making the same mistake the broadcast networks made. You were going back to the future and relied on a source of revenue that was shrinking -- advertising. And you had to figure out some way of getting another source. The New York Times has to try and figure out another source of revenue. They've come to Google -- in fact my last visit when I left Eric's office, I came downstairs to the cafeteria in 43, and who was in the cafeteria in 43? Arthur Sulzberger, Jr., the chairman and publisher of the New York Times. And he was going up to see Eric and the founders to try and -- Is there some way we can pump more advertising dollars, some other -- obviously, they'd love Google to pay them a fee for the content. So far, there hasn't been a good answer. Some, but the danger is, if they create a payroll, as they're going to, what if every newspaper -- and every newspaper won't -- have a similar payroll? So people will then get information from the wire services. Maybe they'll get it from the Christian Science Monitor, which is six days a week online, or the Seattle Intelligentsia, which is only an online publication. So you skirt the payroll, and you reinforce the notion that news is a commodity, which is exactly what the papers are trying to combat. That's one problem. The other problem is, How do you educate -- how do you change the culture of the web, which is a culture that basically says, "Information should be free"? Then you got the hacker question. People who will hack around your payroll. So I read what Murdock said in Australia to SKY TV that, you know, "We're going to stop Google from searching." I think of that in two ways. One is that Murdock doesn't even -- you know, his e-mails are printed out so he can read them. He's not -- seriously, by the way. Two, he's negotiating. He's trying to put you guys on the defensive and get you to pay something -- as others have gotten you to pay them. You're paying 125 million to the book publishing industry. And in fact, Google is coming to realize, as you have with YouTube, that you need professional content. The engineers at YouTube made a mistake. They thought user-generated content would be the way. It's great, all this traffic. The truth is, the advertiser doesn't want their friendly ad next to some dog pooing, you know? So you have to have more professional content, and you have to pay for it -- as you're starting to, and you're starting to generate more income at YouTube because of it. But I don't know -- I wish I had a good answer for that question. I wish New York Times had a good answer for that question. But, I would rather be the New York Times than the St. Louis Post Dispatch, or the Detroit News or, you know, San Diego Union -- a lot of other newspapers. Times has some advantages, but they have a particular problem -- like a lot of papers do -- they have a huge debtload, and the debts are coming due, and they got to pay them, and can they? Q [inaudible] Ken Auletta: Well, some of them are benign, and some of them are less benign. But one of them is that -- if I come here and ask any one of you -- if I put my pad out, and I say, "How much does an engineer make?" Or, "How many people from India? How many Indian citizens or were born in India or of Indian descent work at Google?" Or you ask any factual question -- I may as well be talking to a CIA agent. I don't get an answer. So the notion of transparency has its limits at Google about that. And some of that, I know, comes from Larry Page, who all his life -- he read a book very early in his life about Tesla, who arguably invented electricity, but because he was very generous and shared his secrets, wound up dying a very bitter and poor man. And Thomas Edison got all the credit. And so, Larry Page talks about this. He's talked not just to me, but he's talked about that elsewhere. The importance of keeping things secret. And there are secrets that are worth keeping. You keep your black box for your algorithm is the determined search is a secret for good reason. You don't want people to game the system. If they did, you would lose the kind of trust that's essential to your success. The other contradictions are, there is a genuine idealism here, and when the slogan, "Don't be evil," was created by Paul Buchheit, that resonated on this campus, because you can embrace that as being true -- as befitting, you know, who you were -- your self-identity. But then, in the real world, you make compromises, like you did in China, right? And that, you know, that's a contradiction -- inevitable. And here you are with all your idealism. You've hired some nice-priced lobbyists in Washington -- contradiction. Those are just some of the contradictions. But the truth is, that's the adult world, you know? And the adult world is full of compromise and contradiction. And it doesn't mean it's evil, but it doesn't mean it's good either. And you think about it, "Don't be evil," is really a slogan. I mean, it may satisfy you and all that, but I was at a T.G.I.F. meeting here, and someone said -- Larry and Sergey were up on the stage -- and they said, "How could you close the Phoenix office?" This was in the fall of '08. "It's evil." You know? Well, to the people in the Phoenix office, it may have seemed evil, you know? I don't think it is. I mean, I think they're making a business decision, but again, evil is often in the eye of the beholder. So it's kind of self-righteous in a way. Yes, sir. Q [inaudible] Ken Auletta: I think it's much more the changing business than it's Google. Google is really a surrogate for the Internet, and music is a classic example. I mean, if you think about how the music companies -- I would argue -- committed suicide. They weren't murdered. And the suicide is to have a business model that says, "We are only going to sell CDs. You have to buy all of the records in this album, even if you don't like them." And along in 2001 comes iTunes, and they say, "Hey, just for 99 cents you could buy any song you want. You could actually listen to a portion of it before you decide to click and buy it." Where was the music company? Why didn't they make a deal with the online stuff that the people -- what do you call it? What was the company that they sued? Napster, yeah. Why didn't they make a deal with Napster? Why didn't they buy Napster, you know? And do that? Why did they resist? Why did newspapers, for instance? If you go back, newspapers can tell you honestly that 15 years ago to a dozen years ago, they had online editions. But if you go back to that point in time -- and I was writing about this at that point in time -- the online edition reported to the newspaper editor not to -- they didn't have a separate online editor who was conversant with the Internet and realized that the Internet was just not a print model. It was a multimedia, and it was a different medium than the newspaper. Not only that, but you couldn't break a story in your online edition until it appeared in the next morning's newspaper. It's insane. And by the way, Craigslist. I mean, the New York Times -- people approached the New York Times and other newspapers with the idea of a digital classified. Newspapers used to get one-third of their advertising revenue from classified advertising. Before Craigslist was born, it was proposed to the New York Times and others to create a digital consortium to sell classified ads online. "Oh, no. We don't have to do that." Hello? You know, so I don't -- again, this is the 'cold engineer' point I was making as opposed to 'cold businessmen'. You didn't set out to disrupt and kill businesses. You are disrupting though -- people. Inevitably, the digital world disrupts them; the Internet disrupts them. And you either lean forward and figure out, What the hell do you do about it? And it would have been better if you thought about lean forward ten years ago than now. Yes, sir. Q [inaudible] Ken Auletta: So let me understand. So you're saying that, if you pay $35 a month for your broadband connection, that you consider that paying for news? Q [inaudible] Ken Auletta: Right. Well they can, but a basic problem they face is that, you know, Google is providing many more readers for the New York Times or Washington Post through your Google search or Google news. You only give a headline, basically, of what's in the paper, and you have to click on the New York Times link to take you to the New York Times. And the New York Times then is allowed to sell advertising off of that. The basic problem is that the advertiser will only pay about ten percent of what the advertiser will pay for the same ad in the newspaper. So the revenue you generate online, even if you had many more readers reading the New York Times -- because, if you add the online edition, the income -- if they close the print edition and save all the money, not enough revenue would come from the online to make up for the lost subscribers and lost advertising from the print edition. And that's a conundrum that newspapers face. Now, it may be that some day that it won't be ten percent. It'll be 50 percent and the economics will work. But right now, the math doesn't work for newspapers. So they've got to figure out -- well, if they can get money from the ISPs, great. But, you know, if they can get money from you guys, great. If they can figure out some way to charge micro-payments or subscription for online, great. And if they can't, not so great. And it may be they can't. Yes, sir. Q [inaudible] Ken Auletta: I did detect hubris on this campus. And particularly, if you think about government, which I don't think this company was particularly sensitive about. In part, because you are full of the idealism and the kind of sense that, "We don't do evil. We're God's creatures. We're advancing and we're doing wonderful things." And you do do wonderful things. But, you also are a giant powerful company, which is bumping up against issues that really matter to people like copyright and privacy and power -- concentration of power. And people really -- advertisers are worried you have too much power. Book publishers are worried that you're going to be selling books against Amazon -- which you are going to be doing, as you know -- and that you'll have control over price point, just as they were about Wal-Mart and Amazon having that kind of power. So people want competition, and there is a certain hubris I think that infects -- it's in the leadership of this place -- in the belief that you're very close to the Obama administration. And you are. You have people like Eric, who's an advisor, people like David Drummond, who's an early supporter, people who've left Google to go work in the administration. And I've literally heard -- I've been reporting a piece on the Obama -- I'm at the New Yorker now and reporting a piece, and I've literally heard people saying, "God, you've got to go down. Anything we want we can get from the Obama administration and the FCC in terms of open net and all those other things." I think what you miss -- what the hubris misses in this case is that Democrats tend to be pro-regulation -- the more so after what happened on Wall Street and a sense that it was the lack of regulation that led us to some of the Wall Street and banking excesses. Well, there's the same concern that you need more government intervention to prevent things, A. B, we've already heard the head of the Justice Department's Antitrust Division -- Christine Varney -- say that she is going to look very closely at companies like Google, and about their market power and market concentration issues. And I think you delude yourself if you think that you're not in for some tough years ahead because of your friend in the White House, who made a wonderful presentation here in 2007. And I think, you know, you would be blind if you don't realize that -- not to mention all the other government bears that threaten you all over the world, including totalitarian governments. Yes. Q [inaudible] Ken Auletta: There's a great book I would urge you to read by Clayton Christensen, and it's called "The Innovator's Dilemma." He's a Harvard Business School professor. And he makes the point, and he talks about many companies in this book -- like Sears and Roebuck -- that essentially had a great business and they tried to protect that business, and they saw new technologies coming around and the Wal-Marts and buying by catalogs etc. Or IBM, which says that, "We're in the hardware business, and let's give our software. Let Microsoft do it." And Microsoft -- '98 -- my story with Gates. I mean, they're protecting their package software business. And suddenly the Internet's coming along and, Do we invest in that? And do we take money from our existing business to do that? That's the innovator's dilemma. Do you sacrifice your existing business to make a bet on what you think might be the future, but might not be. It's a wonderful book with many, many vivid examples of that innovator's dilemma. And you're going to face that here, you know? I mean, one of the reasons that I was told that you did make a bid to buy Twitter last spring was because you're worried about the possibility of vertical search that we spoke about before. And, you know -- that I don't think is a diverture from your existing business and in fact, it arguably enhances your existing business, but you're going to have those issues. For instance, the issue of, Do you do more content at YouTube? Do you have to own content and invest in content in order to have the content that advertisers are going to want to buy? And what does that -- does that, at some point, undermine the trust that you need for your success in search? Maybe. That could be an innovator's dilemma. Yes. Thank you. >> [Clapping]