Ken Auletta - Googled - The End of the World as We Know It

Bill Gates, like Page and Brin, has always believed a corporation should be concerned with looking over the treetops. Before Page and Brin were out of college, he refused to deliver dividends to Microsoft’s shareholders, believing this money should be reinvested. But unlike the Google founders, Gates thought a company like his had one obligation: to increase its wealth. He also once said that he would not begin to make large personal charitable gifts until he had stepped down as CEO and could concentrate on making intelligent choices. He changed his mind in part because his marriage to Melinda French Gates broadened his thinking and gave him a partner, because his parents’ generous charitable endeavors had an impact, and because age had mellowed him. Starting in 2000, long before Google established its own effort, the Gates Foundation has been extraordinarily generous and smart about leveraging its resources to affect real change. More recently, Gates has enlarged his view of a corporation’s role. In a speech to the 2007 graduating class at Harvard, and again in a January 2008 address to business and government leaders attending the World Economic Forum in Davos, Gates called for a “creative capitalism” that relies on market forces to address the needs of poor countries. In an interview with Robert Guth of the Wall Street Journal, Gates spoke of the shortcomings of capitalism. He said he was troubled that innovations in education or health care tend to skip over poor people, and he proposed that successful companies spin off businesses that have “a twin mission” of making money and “improving lives.”

Over the years, it has not been unusual to hear Silicon Valley companies sound like social service agencies. In 1995, the newly founded Yahoo declared, “We believe the Internet can positively transform lives, societies and economies.” Craig Newmark, the founder of craigslist, extols “nerd values,” by which he means that he is intent on keeping his listings free for most of his users and refuses to enrich himself by selling his company or taking a large salary. Social idealism has been a core value in the culture of the Internet, from the insistence of Tim Berners-Lee, who believed that the Web should be open and that he would not patent it or enrich himself; to the open-source movement; to Wikipedia, which follows a democratic faith in “the wisdom of crowds” and has adopted a nonprofit model.

Before one dismisses these approaches as the gauzy thinking of left-wing populists, consider how often traditional companies now promote their own “corporate social responsibility”-in part to ecumenically emulate Andrew Carnegie, in part to bathe in the favorable publicity, in part to profit from some of these endeavors, and in part as a reaction against almost daily ethical business lapses. Companies like the Gap and Hallmark donate a portion of their profits to fight AIDS; Starbucks gave comprehensive health care to its employees, including part-timers. General Electric devised what it called an ecomagination strategy to address climate change and reap profits from it. WPP started issuing a Corporate Responsibility Report in 2002, and has promised to reduce its carbon footprint by 20 percent. One of America’s most powerful marketers, Jim Stengel, in late 2008 left his job as global marketing chief for Procter amp; Gamble to fund a private consulting venture to advise companies how to build trust in brands. His task, he said, is to create “emotional equity,” by which he means that consumers will believe the company cares not just about their dollars but about them. This is what P amp;G did with Pampers, consulting parents and designing diapers that felt more like cloth and kept babies warmer. And the Harvard Business School, in 2009, introduced a voluntary oath, which 20 percent of the graduating class signed, pledging to “serve the greater good” and avoid advancing “narrow ambitions.”

True, do-goodism is often a marketing ploy. True, the idealism one encounters at Google can be tempered by its business realism, as when Google placated the government of China, or denied that it wanted to snare a chunk of the income of media buyers like Irwin Gotlieb. It is also true that waves can inflict real damage. Google creates jobs, and it also destroys them. This poses life-and-death questions for traditional companies.

I asked Tom Glocer, CEO of Thomson Reuters, “Does Google help or hurt Reuters?” For a moment it seemed that Glocer was not going to answer. “My pause,” he said finally, “is the pause of a time frame. To date, they’ve been neutral to positive.” In the short run, Google has served as a spur, compelling traditional companies to “raise the level of our game,” just as Wall Street brokers had to improve their services and information to compete against online services like E-Trade or information sources like Yahoo Finance or CNBC. In the long run, he continued, “What everyone’s waiting to see is whether ‘Do no evil’ is true to the credo, their real inner core, or is it just a convenient sort of ’Don’t worry, Don’t worry‘-until they’ve built up such an amazing personal database about all of our habits and they then go to the New York Times and say, ’By the way, if you want the search engine to include your content, you’re going to have to start paying us.‘… They’ve created with software a narrow strait through which most people need to pass to do an activity that is at the root of much of what we do on the Web… The fear is that an increasing number of businesses depend on Google to get their eyeballs. At a certain point, Google can flip their business from being a utility” to a gatekeeper that charges for access.

This power imposes constant pressure on other companies. “You can’t wait for the wave to get there. You’ve got to start paddling,” said Peter Thiel, who was cofounder and CEO of PayPal, and is now president of Clarium Capital Management, a global hedge fund and Silicon Valley venture capital firm. “If you were running a railroad company in the 1940s and people started to fly airplanes, what would you do?” I asked Thiel what he would do if placed in charge of a traditional media company. He said there were two choices. Either you push consolidation and cost cutting much further than media companies have done. Or you “do something radically transformative.” On paper, the radical solution is more appealing. One question is how to adopt a radical solution, such as for newspaper companies publishing only a free Web edition, without destroying what you’re trying to save. One impediment is that in the digital age the transformation often depends on engineers, and media and engineering, as we’ve seen, are from different planets. “This is not a problem specific to media,” Thiel said. “When we started PayPal in 1998-99, we asked, ‘Why can’t the banks do this?’ They did try to copy us, but you needed engineers and the large financial institutions were not able to build it. The caliber of our engineers was significantly higher. Nothing against these companies, but if you’re a talented engineer, why would you go to work at CitiGroup? Why would you go to work at a place where your contribution is not seen as central to the success of the organization? If you’re a politician, you want to be in D.C. If you’re a finance person, you want to be in New York. If you’re an aspiring actor, you want to be in Los Angeles. If you’re an engineer, you want to be in Silicon Valley”

Most traditional media companies, including those that have a reasonably good relationship with Google, are worried that they will be Googled. But there is a larger context for their insecurity They are anxious about technological innovations that can quickly disrupt their businesses; about maneuvering in a world where corporate partners are also competitors; about how rapidly their businesses can change; about not being embarrassed by the omnipresent bloggosphere. Not long after he relinquished his CEO job at Disney, Michael Eisner flew JetBlue from Burbank to New York. “When I landed, I opened my BlackBerry and there was my picture on JetBlue. On JetBlue! In a blog saying, ‘Has something happened to Michael Eisner that he can’t afford a private airline or a big-time airline?’” He laughed about the incident, but used it to illustrate how cell phone cameras and bloggers transform private actions into public acts. The stage has widened.