Google Economics: Innovation + Scalabilty = Success

June 10, 2008

Eric Schmidt’s talk at the tony Economic Club of Washington caught the attention of journalists, Web log authors, and assorted pundits. You can find a plethora of links and news stories on Google News,, and The write up that caught my eye is the one in the Los Angeles Times’s Web log. An essay written by Jim Puzzanghera, whom I don’t know, struck me as the pick of the litter. The write up is quite long, and I urge you to download it here and read it. (My experience with the search functions on traditional media’s Web sites is generally negative. If the link goes dead, that’s par for the course.)

Two points in the article caught my attention. Let me highlight each and then offer several observations. Now, the hot stuff in the article by Mr. Puzzanghera.

First, Mr. Puzzanghera quotes Mr. Schmidt as saying:

It is possible to build a culture around innovation. It is possible to build a culture around leadership. And it is possible to build a culture around optimism. Google is an example, but by no means the only example, of a culture that can be built based on relatively scalable principles. We could run our country this way. We could run the world this way.

My understanding of this statement is that Google is an innovator interested in “scalable principles”. A “scalable principle” as I understand it means that something can get big and then bigger. Knitting together the notions of innovation and scaling, we get a mathematician’s view of how to run the railroad. The only downside to fusing these two ideas is that there’s not much room for folks who don’t want to innovate (most businesses and the US government to cite two examples) or scale (people fearful of getting too big because that’s a lot of work). I can see the audience attendees shifting in their chairs and looking at one another as if to ask, “What’s this fellow talking about?” Mr. Schmidt is providing a clear statement of what makes Google tick. The problem is that most Economic Club members don’t understand Google as anything other than a Web search company and ad company.

The second point is the last sentence of Mr. Puzzanghera’s article. In reference to Mr. Schmidt’s statement “Let’s be revolutionaries”, Mr. Puzzanghera writes in reference to this comment by Mr. Schmidt:

Those sound like the words of someone who might be considering a run for higher office one day, assuming Google isn’t running everything by then.

What struck me about this comment is that Google’s senior manager is using the lingo of a diplomat as shaped by a speech advisor schooled who wants to leave an audience with a call to action. The “Let’s be revolutionaries” line is a new twist to Google’s public persona. Mr. Puzzanghera nails it. Google is positioning itself and maybe its management team to take a more proactive leadership role. If I’m right, Google is going to be doing more talking about its technology, its implications, and its way of doing business.


Google’s spring transparency offensive continues into early summer. Googlers–previously a secretive cabal–are turning up on podcasts (Steve Gillmor landed the big Google API fish Mark Lucovsky), Web logs (Datawocky’s Anand Rajaraman shared some Googley insights from artificial intelligence guru Peter Norvig), and an associate in Israel spotted Sergey Brin chatting about green energy and data here. Even this goose’s Web log received a comment from an alleged Googler about the company’s transparency here.

Several other thoughts triggered by Mr. Puzzanghera’s write up are warranted:

  1. Google is talking more, and I think as this information becomes more widely available, public perception of Google may evolve–and quickly. The one-dimensional view of Google as a search company in the business of selling online ads may give way to a multi-dimensional view of the GOOG
  2. The leadership message is a signal to me that Google wants to move from the shadows into the mainstream of business and political influence. After the missteps in Washington when one of the Googlers visited senators and congressmen in a sparkly T-shirt and sneakers, Google is starting to understand how the non-mathematical world works. That’s a big shift in the last three years.
  3. The greater openness leaves the company open to charges of doing too many things. Microsoft may be the beneficiary of Google’s chattiness. Assume Google continues to explain its view of business, leadership, economics as a blend of innovation and scalability. Google becomes more vulnerable to criticism.

How will Google deal with the consequences of talking more? Let me know your thoughts.

Stephen Arnold, June 10, 2008


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