>>schmidt: what an enthusiastic introduction. >>russo: was that enthusiastic for you?yes, we ran out of coffee and both he and are greeting the daywithout a lot of caffeine. thank you so much for being here. >>schmidt: i want to make clear that, i think,maybe due to your leadership, this is the most effective technology councilin all of america. we actually studied this question. [applause] so, i want to thank you.you're clapping for yourself.
>>russo: that's a pittsburg thing.we all clap for ourselves. >>schmidt: you do? >>russo: yes. we do. >>schmidt: another local custom i'm goingto learn by being here. >>russo: it's a local custom. [laughs] >>schmidt: but you all should be very proudof this, because you've managed to take a pretty good environment and makeit much, much better because of the stuff that you all do.and i also want to take a minute to comment about they have such a strong mayor.the mayors are, mayor luke.
the mayors in our society are where the politicalskills and leadership are really honed.the kind of dynamism that you see politically here goes alongwith the dynamism that you see in a technology council.that's part of the secret that i think we should talk about.so thank you as well. >>russo: thank you. >>russo: okay. i have a few questions.and i thought we'd have a chance to talk about this.now, i believe that you will be surprised by the peoplethat you meet here and the people that work
here. >>schmidt: i've actually been here a fairamount. i really like the place.so i may not be as surprised as you think. >>russo: okay. well, i'm thrilled. i'm thrilled.so, what does it take for someone like you to move here to pittsburgh? [laughter] >>schmidt: well, the company is expandingdramatically [laughs]. unfortunately, my basic job is to make surei keep everybody else in check.and most of them are still in california,
but we video conferencein pittsburgh a lot. >>russo: okay. >>schmidt: we are… what happened was…it's a bit of history. much of computer science was essentially inventedhere, in the ‘60s and early ‘70s, by peoplewho taught the people who taught me. so when i was a very young programmer, peoplewho went to carnegie mellon and lived in pittsburgh, that was sort ofgod-like. i didn't realize it at the time, but now iunderstand that it's part of a long history of pittsburgh;of inventing new industries,
dating back to mr. mellon, westinghouse, theair brake… all of the things that everybody know… youall know much better than i. so when it came to getting ourselves established,there was no question we should establish ourselves in pittsburgh as well, just becauseof that continuity. >>russo: okay. well, thank you.i'll get back to that question, in terms of when you're moving here.for people here who know me, they know that i will continueto ask everyone that question. so, seriously though, in the past couple ofmonths, i learned a lot about google that i reallydidn't know.
and, honestly, i was fascinated with the arrayof products that you've deployed in the past couple ofyears. you're obviously in search, but your productsrange from digitalization of books, satellite maps,and photo management. and now you're even talking about launchingyour own operating system. >>schmidt: we've announced we're launchingour own operating system. we'd better do it. >>russo: you have also had the luxury, asa result of the growth and penetration of your company, to professthe democratization
of information.so, what i was hoping, was that you could spend a few minutesto provide our audience here with some brief context as to wheregoogle came from, and how you've gotten where you are;and where you might be, let's say, in the next two years.five years would be a long stretch in your world.and, you know, lastly, who would have thought that googlewould have become an accepted verb? and, what verb currently describes where you'reat? >>schmidt: running… i don't know… is thata verb, or not?
but it's a state.google was founded to organize all the world's informationby our two then-young founders. they brought a generation of people with themwho saw information and technology in a very different way thanwhat had existed up until then. the key development at google was a new algorithmfor ranking that would allow you to organize things ina new way. it was called page rank.it's long since been dissected, copied, and so forth, and the technologyhas moved on. but without that key innovation, which thetwo founders invented
when they were in graduate school, the restwould be history. they found some people who were willing totake some risks on them. they built the company.they built the hardware themselves. and they built the search engine.they didn't really know how to make money at it and, in fact,they visited all of the other people and said, "we would like to sellour search engine to you." and everyone said, "no," because it was toodisorganized. it was too different.it was too strange. so they were forced to build some form ofrevenue.
and so they decided to go into advertising.it was sort of happenstance that advertising occurred.along the way, the culture of the company was very muchthat of a graduate school, which means not much differencebetween home and work; an awful lot of pets; a lot of strange personal behaviors.[laughter] those of you who have been to graduate schoolknow what i'm talking about. and the company's culture has evolved fromthat day. and so what happened was the google todayis really the grown-up version of what i just said.obviously, a big advertising company; obviously,
many, many servicealong with search and organizing information. and a cultural phenomena that represents creativeideas of a new generation. i'd like to think of google in all of thoseforms. today, we also would… our critics wouldalso say we're probably also a disruptive force in many industries.and i don't think that anybody anticipated that that would occur,when the company was early founded. >>russo: can you describe to us the role thatyour pittsburgh operation will play in some of your product strategies?and can you help us understand the key issues that factoredinto the decision to establish a permanent
residence here?and any surprises along the way? >>schmidt: in carnegie mellon's case, carnegiemellon, again, this is a characteristic, i think, of pittsburgh, that you all accept…youmay take it for granted, but it's rather unique.you have a very good working relationship between the universityand the local businesses at the technology level.to the point where jerry cohen, as part of his…he's been there for what…ten plus years now? when he started off, he said, "let's go onestep further. let's put the little incubator companies onthe campus.
let's build a building right next to the campus;right next to the train line" and so forth.and raised some money and figured out a way to do this,which was reasonably difficult to have pulled off at the time.other universities have now copied this model. and so jerry and the team that worked forhim, basically, organized themselves to take people directly…because, remember, these are young people; they already live there; they like it.and they literally can just, instead of turning left on the sidewalk,they turn right, and they can continue what they're working on.i think that that innovation model, which
has now, as i said,become the model that everybody else is using, is probablywhy it has been so successful. my understanding is that pitt has a similarmodel now. so, i think, from you all's perspective, oncethat occurred, it was easy for us to begin.we were able to hire talented leadership out of the university.and, again, these are people who literally wouldturn into the same parking spot, different direction building.and it's a very good working relationship, to the pointwhere much of our staff, for example, have
affiliations with the university,so they go back and forth. and that affiliation is… and then, of course,finally, a lot of it depends on our leader, as youmentioned, andrew has been very successful for us.i didn't really answer your real questions. what do they do?the answer is programming. and we're a programming company, and roughlyhalf of google's people are in technology programmingoperations of data centers. which is a very large number, by the way,compared to most companies. and we see ourselves as the innovators ofcomputer science at scale.
so we see ourselves as taking the ideas thatpeople talk about in research, and applying them to infinitely large amountsof data. we can come up with insights that no one elsecan because that. >>russo: okay. great. thank you.so, you've been consistently ranked as one of the top companies,if not the top company, to work for. and not just because of the rapid growth.and not just because of the enormously successful business.but it's the culture. and you described it a moment ago when youtalked about, you know, it's really graduate school, sortof the organic design of the culture.
but you're a $22 billion start-up company,essentially. how do you preserve that culture in the midstof rapid growth and decentralized teams? >>schmidt: it's sort of a mess by design.i should also say that the culture adapts to scale.so google's culture today is not identical to the culture that we had as a small company.it's a natural next step from that. but it comes from a set of principles.it's simple for you all; you all work in corporations, most of you.for those of you who are not the ceo, you can probablyvery accurately describe the culture of your
company.and my guess is that if you're not the ceo, the descriptionthat the ceo would give is quite different from the culture that you would give.my experience with corporate cultures is that there isa distinct corporate culture in every company. sort of, how does it work?how do i get things done? how do i feel?and that, sort of, dominates everything. but if you look at industrial structures thatfail, to use a bad example, the detroit automobile companies, have a very,very distinct culture, which everyone understood and everyone understoodhad to change;
and they couldn't change it.so we work hard on where that culture is. the first comment is…there is a culturewhether you like it or not. and if you're the ceo, you should ask somebodywhat the culture really is as opposed to what you say it is.and then, the second thing is, in innovation industries,which is what the pittsburgh technology council is all about,innovators don't like being told what to do. i know this is a shock, right?[laughter] everyone who works for me, they just loveme telling them, "well, you do this. and you do that. and youdo this."
right? i'm obviously being facetious.these people actually went to graduate school to learn something,and now you're going to tell to go sweep the floors?it just doesn't make sense. they want a culture where they can pursuewhat they really care about. i'll give you an example.when larry and i were trying to figure out what to do,at one point we went to visit warren buffet. right? he's very smart.and we asked him what was his culture. and his answer was, his theory about companiesis, you buy a company where the executive is goingto work there
whether you pay them or not, because theylove the business so much. and that's how he manages, you know, 37 companieslargely without any staff. because he had, like, eight staff on his floorwhen we visited him. and i thought, that's an industrial modelthat had never occurred to me. have the people just do what they want.rather than me telling them what to do. so, if you can get through this notion ofcommand and control, and instead try to figure out what peoplewant to do; what are they passionate about?the culture will evolve to something very, very interesting.and that's how google happened.
>>russo: so you think that applies to otherindustries as well? >>schmidt: why would it not apply to otherindustries? certainly the private sector, you're goingto be better off with more empowered, with more empowered decision-making.and what happens is, you get into this culture where it's likeyou don't like the people who work for you. you say, "those people." and this. and that.and you get this sort of tonality. well, if you don't like that, go get a differentjob. you don't like the people that work for you,maybe you should quit. there's a reason why these people work here.you should have the right people.
and you should empower them.and often empower means actually listening as opposedto telling them what to do. >>russo: well, good. thanks.so, what about your ability to look externally, as you're this $22 billion company?obviously, with the kind of parameters that you talked about,which is essentially seamless, no walls, a lot of self-direction…do you look externally for innovation? for different ways to fuel your future growth? >>schmidt: we look externally for innovation.we're now at a scale where it's efficient for usto buy small companies with innovation.
it's fundamentally faster if we can find afive person start-up here in pittsburgh and buy them. >>russo: i heard you just did that. >>schmidt: i know. funny thing.we did it, like, yesterday. >>russo: that's a funny thing. >>schmidt: because most of these little companiesget started and people don't really have a plan for hugesuccess, but they're having a really good time.they tend to be extremely efficient with respect to peopleand their culture, and so forth.
it's usually not efficient to buy a largecompany. with a large company, you catch all of theirproblems. you catch their culture, their issue, theirhistory, and so forth. there is a couple of notable exceptions.we bought a large company called double click, which turned out to be very strategic forus. but that's pretty rare. >>russo: do you want to say anything aboutthis local company in pittsburgh? >>schmidt: we bought a company called recaptcha,which does a very clever way of doing… they inventeda new way to figure out
whether you're a human being or not.the problem with the internet is no one knows if you're a dog.[laughter] we actually need to know if you're a humanor not, for lots of things. there's a lot of attacks on google that canoccur by people getting 5,000 computers simulating human behavior.so, again, it's another one of these very clever innovationscoming out of pittsburgh. >>russo: we're very proud of that.so, if there are entrepreneurs in the audience todaywho would like to share their ideas, what avenue, what form,does google offer?
what would be your advice?because we have a lot of interesting things that people are working onand solving really hard problems here. how would we navigate?how would we demonstrate? >>schmidt: the question is… who is the audience?in general, transparency is a better answer for things.so i would encourage people to write down everything you're doingand put it on a website. you never know who is going to show up.there are people who actually care about the thing you care about.i know it's sort of obtuse, but there's another person.you just don't know them yet.
what's great about the internet is you canfind these people. like people can find each other.from our perspective, we have product managers who actually look in areas of technology.and we tend to find these things. the communities of specialized interests arepretty small. so we tend to find people through the university,or through referrals, and so forth. but in general people are writing down whatthey are doing, and that seems to get their attention.the venture industry calls us every day because they're looking for an exit.what happened with venture was that before sarbanes-oxley,it was relatively easy to go public.
and sarbanes-oxley was put in placeafter the doc.com bubble and bust in 2002 and 2003.now it's relatively hard for these small companies to go public.for most venture people, they have to get somebody to buy in.and google is on the list, along with a couple of other companies. >>russo: so in what seems like the blink ofan eye, and probably for you, since 2001, you've been there, google hasbecome an example of a real successful international business.but along the way you've caught the attention of a few world leadersagitating some fears of some of these national.
help us understand those challenges that you'vefaced with some of these "closed societies."and even some of the challenges you've faced in open societies,which include the european union, where at least one leader feltthat google was serving to advance an americanized culture in their countryand went as far as to, perhaps, fund the creation of a competitor.so talk about the challenges; give us a little bit of the background. >>schmidt: yes, that was a fun set of meetings.not everybody is in favor of all the world's information organizedand available to everybody.
an example would be that, if you were a dictatorfor a day and you had a small country, what you woulddo is you would immediately circle the country.take your tanks and put them around the border. shut down the television stations.keep everybody in the dark. so if you take this obviously crazy example,the internet is the best antidote to dictatorship, lackof transparency, all of that that's ever been invented.and it's very, very difficult to put a moat around your countrywith respect to the internet, because information gets in.even the most centralized regimes, the most…
the worst kind of non-elective regimes, havesome level of legitimate support. the internet is a real threat to them becausethe truth comes out. i'm sure that we will be shocked with countriesthat are repressive when we find out all the horrific thingsthat have been going on that we don't today know aboutbecause they're not being reported. one of the things that i'm proudest aboutis this technology is really empowering individuals to see, record,and talk about what's happened to them.the horrific treatment of people around the world.and i won't go into details, but you know
what i'm talking about.and now with a digital camera, with a mobile phone,every mobile phone is really a video camera and a digital cameraand a super computer all at once… we actually can find out what's happeningand, in my view, make the world a better place.so in google's case, governments have a legitimate interestin dealing with information and we are a threat to thosethat don't want a lot of transparency of the individuals.what happens with repressor regimes is they usually…they're smart enough not to say, "we hate
open things."they'll say, for example, "we hate pornography." and then they'll define pornography to bewhat we think of political speech. and then that creates the cycle.we fight that every day. >>russo: okay.so now, rewind to september 23, 2008. our nation's economy seemed to be hingingon the edge of a bottomless pit, and the world seemed ready to follow us in.how did google react then? and how is the current economy affecting google'sstrategy? >>schmidt: it's worth remembering what happeneda year ago, because people have such short memories,you forget what happened so quickly.
this week, literally, a year ago on the wednesdaymorning, the financial trading system around, essentially,the way money market funds work… actually failed for a small number of hours.literally, the dollar that you put in was not the dollar that you took out.it had to do with the fact that the banks that were guaranteeingday-to-day deposits had managed to invest in securitiesthat were securitized by aig and lehman. i sat there, and i remember at the time thinking,"where were the regulators?" of course, i'm with the regulators, becausei was in the meeting. and, like, didn't you guys know this?i mean, the computers all talked to the computers.
so the computers all knew what the other computerswere doing. and, yet, our government and the other governmentsdid not know this. and so, the first question i would ask is,"what was the failure in lack of information that got us to that point?"and until you can answer that question, you can't figure outhow to prevent it from occurring in the future; or decide you can't prevent it in the future.the simple answer is the transparency one, that had the generalized risk…had all of this sort of aggregate information been publicly available,people would have discovered all of this was going on.so, given that that was the problem, we had
this huge influx of cash,which was about seven trillion of guarantees of one kind or other,and the u.s. had about half of our gdp. similar numbers are even higher numbers ineurope. it monetized everything.it's a quick recovery from a death spiral that was induced by this credit collapse.from google's perspective, we knew, because we could see the activity,we actually saw a shift in activity in about june of last year,as the currency markets shifts. i became worried about it over the summer,but i didn't understand it. but, obviously, by september we understoodit.
we slowed our hiring, although we didn't stop.we put some significant expense controls in place.and it all seems largely behind us now. it looks to us that the worst is behind us.we can't predict the future, but we've seen reasonably good advertiser behavior;and not just in the u.s., but also around the world.i had originally assumed that you would have the u.s. recovery first,and europe would be six to 12 months late, which is the historic pattern.but one of the new discoveries is that the economies are so interlinked,that they fall together and they climb back up together,which is a sort of a new fact for economists,
globally.i think the…we don't know what the slope is, of course,and we can't make future projections, but it is clear that the worst is behind us. >>russo: so, with some of those lessons inmind, and some of the observations that you've made, what message might you havefor today's world leaders who are gathering here,in helping them encourage innovation in their own respective economies,as well as in the u.s? >>schmidt: i'm one of these people who believesthat there are smart people everywhere, including in countries other than our own.by the way, i'd like us to bring them to our
country, educate them,and keep them here. but that's my own american view.and, by the way, also give them visas so they can stay; little things like that.[applause] this is a…it's one of the most brilliantstrategies of our government. take really smart people; pay for their educationin the u.s.; kick them out; go to a different country;create jobs; and hire people away from away from america.now that's a really pro-growth strategy, right? i do have an opinion about this. >>russo: you don't need to stop.
>>schmidt: i think we're in agreement on thisone. every western country is facing the followingrough problem… the rise of the third world, in particular,india and china, and eventually the pan asian countries whohave a demographic benefit; they have a very large number of young people.and, by the way, this will also be true of the arab world,at some point in our lifetime. just look at the demography.you have a very large number of young people who can basicallyenter the work force at low wages because of the wage levels in general.and they basically can compete both in terms
of traditional farming and,now, high volume manufacturing. so it forces countries like the united states,and like europe, to build economic value through some othermechanism. i can't come up with a better mechanism thanwhat you all do. in fact, i don't know of an alternative, becausethe way you create wealth in society is you build something.i'll give you an example…america is the inventor of something called,basically, nano technology. and it's a form of advanced manufacturingwhere you make things atom by atom. i know this sounds crazy, but it's as significanta potential manufacturing
set of industries, as the stuff 100 yearsago that was invented here in pittsburgh. and america has the scientists, the patents,the ideas, the culture, and so forth and so on.the president, as part of his innovation agenda, has identified this as one of the areas.now, could that be a trillion dollar industry? you betcha.it could also not be. there's a bunch of these high tech, manufacturingcentric, innovation industries that will become thesource of real wealth creation. i'll give you a negative example.britain, and i'm an economic advisor to one of the parties there,had the following problem.
they decided to focus on being the centerpiece for financials. and so, for a long time, all of the interestingfinancial innovation occurred in the city, in london.well, the problem is, when it collapsed, what's the future?because making money doesn't really make things. it gave the illusion of, really, prosperityin the culture. so i think here, we have an opportunity withthe leadership of people in this room, to build a genuinelysustainable differentiated economy, not just for pittsburgh,but for america. and there are example after example… theclassic one…
the other classic one, is in green jobs.it was funny that you talked about the article… the economist article, which i happened toread yesterday, so i cut it out. the president said on september 8, "pittsburghhas transformed itself from the city of steel to a center for hightech innovation, including green technology, education andtraining, and research and development." that's you.and, by the way, that's the president's agenda for america. >>russo: right. that's a great quote.okay. enough of questions from me. what i'd like to do is open it up to the audiencefor just a few caveats.
there are tech council staff that are standingwith microphones; you can see, we have emily on one end andraj over there and matt at the other end there.they're waving. all i ask is that if you have a question,use the microphone, let us do it in sequence, and let's try tokeep it short so that we can make time for everyone to gettheir questions answered. so, we're going to start.who's got the first question? you have one, emily?okay. >>off camera speaker: hi. i was wondering…whatis your message to young people around the
world? >>schmidt: work harder. think about the benefits of being a youngperson today. everything that you care about is on yourmobile phone, right? think about it.so, let's work on that for a while. it seems to me that, when i think about whata young person would do… what i would be doing if i were sitting atyour table… i would try to figure out how to make thatvision of how my world works so incredibly connected.there's a lot of…in our society, there's
a sort of thiscontinuous negativism about things, but i think that this generationof young people, as a data point, is smarter, works harder,more together, will have a better outcome and a better future than we ever did.and i say that because we hire them, so i talk to them.and, so, my advice is to everybody else, turn off the televisionand talk to a young person. and, even better, work for them.because you're probably going to end up anyway. >>russo: that's a great answer.that's true. okay.
>>off camera speaker: hi. thanks so much forcoming. i know stanford has sandhill road and kleinerperkins, with, ironically, henry hillman that helped foundit here. how does pittsburgh get that type of investmentenvironment? i know investors like to keep their investmentsclose. how do they direct those risk takers to actuallyinvest in some of our startups here and create thatclimate of risk taking here? >>schmidt: there has been some in the technologysector here that has been somewhat successful.i think the… it's always difficult to compare
yourselfagainst the number one player, and how do you do better?it's very difficult to displace sandhill road and silicon valley,simply because of its scale. and people have written about silicon valley'sdeath for many, many years, but it always reinventsitself. it's reinvented itself into the green technology,green areas. there's clearly a center of mass.i guess my own view is you need a certain level of activityto get enough people and enough money. you are seeing some of it here.you're also seeing some of it in austin, texas,
and in a few other places.but it's ultimately, from my perspective, a function of making…loving the universities and spending more time with them.because the money will… the money will come when the money is made. >>russo: thank you.okay, matt. yes? >>off camera speaker: eric and audrey, thankyou so much for this discussion this morning. it's really informative.eric, the question is for you. i'm the ceo of a small startup…softwarestartup here in town. last week, we were on site in brazil withthe google earth outreach team,
working with local folks on collecting dataabout their forests, and whatnot. i was very surprised to learn how deeply imbeddedsocial and environmental change is in the cultureat google. i was wondering if you could talk a littlebit more about some of that work. >>schmidt: one of the questions that i wouldask you is, what do you think… what causes your employees to come to work?and, if your answer is, because we pay them… then that's not the right way to organizeyour company. people come to work, ideally, because they…human values, the things that they really care about.because life is short.
and so google has somehow managed to attracta set of people who are socially conscious.we made a set of commitments to them, including spending 1% of our profits, 1% ofour equity, on social goods. we've tried to set an example in climate changeand social policy. it's interesting that you mentioned googleearth. i did not realize, when we bought keyhole,which became google earth, how fundamentally different it was to havea new dimension of looking at things.i just missed it. and what's happening now is that philanthropicgroups
of many, many different kinds are using thegoogle earth platform to, sort of, show what's happening to the worldaround us. not just the actual earth, which obviouslylots of people worry about, but also societal changes… population issues,disease issues, and so forth and so on. so i think culturally this goes back to whatwe were talking about earlier about values.there is a culture in your company whether you like it or not.you should figure out what it is, and then steer it to the thingsthat you think are most, ultimately, i think, that will cause you to attract the smartestpeople.
i've never met anybody who has joined a jobsaying, "oh, i'm going to hate this and i don't liketo work, and this is a disaster and i don't know whyi'm here." they don't start off that way.so your job is to keep that optimism. keep the optimism, if you will, of the youth,the sense that they can do anything. it's very, very important. >>russo: okay, thank you.we have a question on this side. >>off camera speaker: with kind of the inventof the new web 3.0, what specific technologies do you see drivingthe web forward
in the next two to five years? >>schmidt: pardon a little bit of abbreviationsfor the rest of the audience. there's a new standard in web browsing calledhtml5. html is the standard that browsers use toproject things. probably the most important thing is gettingthis new standard adopted. most of the browsers are adopting it.with that, it will be possible, for example, to have very sophisticated gaming on the web.very sophisticated ways of keeping information well,you know, you're on an airplane and you're disconnectedand you get reconnected.
those sorts of things.that's probably the most important single thing that can occur on the web.without something like html5, the web will remain an adjunctand then the traditional personal computer structureswill probably stay there for much longer a time.people working on the web really want the web to becomeso pervasive that it's always around you, it's always working,and everything you can do is on it. that obviously favors google, but it alsofavors a lot of other companies. it also lowers the barrier to entries fornew companies.
if you think about it, we're talking aboutcreating new companies. today, you can invent something brand newhere, and you can have millions of users anywherein the world very, very quickly. and that's because of the standardizationof the web. >>russo: good. thank you. >>off camera speaker: thank you very muchfor being here this morning. i'd like to reiterate the point you made aboutour young people. i teach at american university, and i seethese kids. i see their enthusiasm.i see their optimism.
i see their drive.and i'm really, really hopeful that we're going to have a really bright future.for me, personally, i'm a wind energy entrepreneur, and i want to cool your servers.so i want you to tell me how we can make that connectionfrom my wind turbines to cooling your servers. >>schmidt: andrew is sitting right here.we actually… we've looked pretty carefully at wind turbines.and we use so much power that the complexity of usgetting the wind turbines right next to the data centers…the funny story is that we like to buy land rightunderneath the transmission tower.
and it has the property that it's also thecheapest land. so we bought these, you know, miles…square miles and square miles of things… right underneath power lines, because we thenbuild a substation to run our data centers.we have invested heavily in various forms of solar and wind technology.we're also investing now in various of geothermal, which we think is interesting.and we do that partly because we think it's good business,and also because we think it's better for the world. >>russo: good. okay.let's go on.
>>off camera speaker: technology is obviouslyessential for america in the 21st century. but intellectual property rights seem to beunder fire globally, particularly in parts of the developing world,like china, india, brazil. as a technology company, what sorts of policiesshould the united states be advocating in order to protect intellectualproperty rights for the developed world, as well as the developing world? >>schmidt: the problem that you're citinghas been true for many, many years. when i was doing pc software, it was estimatedthat something like 95% of the use of our product in china had beenstolen,
and that we would make an extra billion dollarsof revenue if they would just pay.and we could never quite figure out a way to convince anybody to pay.it seems like, in those countries, this is a cultural value as well as a legal issue.in other words, it's hard enough to police it just with technology,but fundamentally the people just don't understand that they're stealing.this is not the way the culture was built. i think the single best way to solve thatproblem would be to have those countries develop their own industries that depended upon this,and have the change come from within, rather than relyingon american trade negotiators going in and
yelling at them.because i think, fundamentally, that is not working very well.obviously, i support us doing that. but i think, ultimately, societal change comesfrom within. it comes from people saying, "hey, maybe weneed to actually have our own industry where we actually haveperformers who are paid for" and so forth and so on.we can't succeed without an effective copyright, because weat google don't create the stuff. and so somebody has to create it, and forthem to create it they have to get paid for it.you didn't ask this question, but it's worth
notingthat there's a much bigger problem looming. and it has to do with the quality of digitalcopies. the fact of the matter is that digital copiesare so good now, it's so trivial to make copies of everything,that a lot of the sort of scarcity, things like making it difficultto do film distribution, because they have big reels and so forth,it's really going away. and so the industry is going to have to dealwith this. it may be… the fact that you can get perfectcopies really has made it difficult to build a lot of thesemedia businesses.
and i feel very sorry for them in that sense. >>russo: okay.i'm trying to go around here. >>off camera speaker: hi, i just want to saythank you for joining with us today. my question was… what drove you to leaveapple on their board, and rejoin with google on their move withthe g1 phone? >>schmidt: as a bit of background, i was onthe apple board for three years. when we started, apple and google did nothave so much product overlap. but there was so much… we began to do thingswhich have at least the appearance of competition.and i had to, sort of… the way you solve
this problem…i now know lots about board governance laws… so if you're on two boards, you're not allowedto favor one over the other. if you do so, it's a crime.and it's like, serious. it's called the two hats problem.what you have to do is, you have to treat both boards equally.if you can remove yourself from one, which is called recusal,you can do that. well, the problem with the apple board was,i was recusing myself from a good chunk of it.at which point, we talked about it as a board, and we said,"well, okay, this is just not working."
so that's why i got off. >>russo: good question.okay. next, raj. yes. >>schmidt: >>off camera speaker: as is known,google makes most of its revenue from advertising. >>schmidt: only 98%. [laughs] >>off camera speaker: as was noted by audrey,google has invested a lot in new products and services for consumers and enterprises.my question is, in the long term, let's say ten years from now,what do you see as the nature of the customer relationshipbetween enterprises and google? that is, how will companies depend on googlefor their needs
besides advertising? >>schmidt: advertising is such a good business.we wanted to have other businesses, as well. and we invest in them.but the advertising has done so well for us. that's why we've stayed at 98%.at one point, it got to, like 97%. so we are trying to diversify away from that.and, again, if you're in the advertising business, you should love it.and we love it very much. if you extrapolate forward, and you startthinking about what the economic structure of the internetis ten years from now, it's reasonable to expect that a lot of corporationswill pay the money
that they pay today to it companies, to internetcompanies. a lot of the traditional it services are becominginternetized. sorry for the word.and you have these all sorts of hosted services, if you will.so google could, eventually, expect to have a good chunkof revenue from enterprises paying us for us doing thingswithin their company, using our computers. we have a set of initiatives there.they're doing very well. they're starting from the bottom up.and they are much, much cheaper than the competition. so it's classic disruptive strategy.i think eventually we'll get there.
the other one has to do with the other sourceof potential revenue, which will be subscriptions.and subscriptions here means buying things digitally,once or many times. your monthly subscription.somehow you put your credit care in, and the technology to dowhat are called micropayments, has now existed for a while.some of it was invented here in pittsburgh, by the way.and it looks to me like we're going to have advertising,which i think will still be a very large component; some enterprise business; and then, probably,some of this…
either micropayments or subscription services,as we learn how to sell things. some examples of companies that do this stuffthat we don't do today… amazon, for example… has a very nice digitaldownload service where you can buy things digitally.that's an example of a revenue source that's not advertising;this is internet sensitive. and i think you'll see more of that from allof the leading firms. >>russo: okay. we have time for one more question. >>inaudible off mike comment. >>schmidt: well, let's do two.
>>russo: okay. we'll do two. go on. >>off camera speaker: okay. thank you foryour time today. you talked about culture at google.that's it very open culture. my question is, how open google's cultureis for those who want to have access and who have a productwhich can be useful to other people and google might be interestedin helping people gain access to google people to showcase theirproduct. >>schmidt: as i mentioned earlier, we havepeople who are looking for things in the areas that we care about.and so, again, if you know somebody at google,
or you publicizewhat you are doing, we typically will find you.or you could talk to us today. and then there was a final question? >>russo: yes. there's one more question inthe back. >>off camera speaker: i've been in it for25 years, and my question for you today is as a ceo of my own it staffing firm.my son asked me a question the other day and i did not know how to answer.he said, "dad?" he's 15 years old, and i figure he'll be inhigh school for three more years and then four years ofcollege.
what advice should i give to my 15-year-oldson because he wants to get in it?what path should he be on in order to be successful? i know it's seven years out, but even thoughi'm in the industry, i was not sure how to answer his question.could you help me out with that? >>schmidt: is he a programmer today? >>off camera speaker: [laughs] he's only 15.he wanted to get into developing software for games. >>schmidt: at 15, he should be programming,and programming games is a very good thing.one of the things that people don't appreciate
is how powerfulcomputer gaming is now. parents are always obsessed with, "oh, i'velost my son into the gaming world." but, when they emerge, they emerge with thisamazing ability both to move their fingers a lot; but alsoto do strategic navigation and strategic game theories… very, veryimpressive. to give you a technology it answer, the mostinteresting stuff that's going on is in the gaming world, andin the web programming world. so the simple answer would be to say, "builda game and build it on the web, and build a multiplayer game on the web betweenyou
and your 15-year-old buddy, who's down thestreet and i'm so mad at you i've taken the car keysanyway." or, in case he doesn't drive yet, in the futurewhen i take the car keys you can still play with your friend down thestreet over the internet. and building that networking skills and interactiveskills is a very, very good skill base for the worldthat your son will be graduating into in his 20s and 30s.almost everything is going to look like a multiplayer game, in that sense.and that's why it's such an interesting era that they're all in.if i were 15, that's exactly what i would
be doing. >>russo: it's not too late. >>schmidt: thank you so much. >>russo: thank you.oh, thank you so much. >>schmidt: thank you, audrey.
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