"I almost fell out of my chair!" Doerr said. It was "one of the most extraordinary conversations I ever had in my life. I knew in that first meeting I wanted to invest in this business." Page and Brin were similar to other founders he had funded-young men who had dropped out of school, who spoke quickly and were consumed by their work-but Doerr was struck by what he calls their audacity and singular focus. Doerr had been an investor in Excite, an early search engine, and had seen how the company lost focus as it chased becoming a portal. Moritz, too, was sold on Page and Brin"s "devotion to their dream. They were on a mission. We"ve learned over the years to pay close attention" to this kind of clarity. Besides, he added, "Their product was better."
The plan was for Doerr and Moritz to sign a contract certifying that the two firms valued Google at $100 million and would invest a total of $25 million. There were some hitches, though. Each VC wanted to do the deal alone, but Page and Brin would not budge, insisting they do it together or not at all. And Doerr and Moritz were worried that Page (the CEO and chief financial officer) and Brin (the president and chairman of the board of directors) had between them roughly zero management experience; they wanted the founders to recruit professional managers. After protracted discussions, they finally reached a verbal agreement. "The understanding when we invested was that a CEO would, among others, be hired over time," Moritz said. The founders would ignore this understanding, which later created some friction. They hit one other speed b.u.mp. While the parties were haggling, recalled Shriram, Brin phoned him and said he had met with another venture capital firm, one Shriram had earlier recommended. The VC told Brin that Google was worth $150 million, substantially more than the current estimate. "Should we do it?" Brin asked. Should they dump Doerr and Moritz in favor of the higher valuation?
"You"re already committed," Shriram told Brin.
Nevertheless, Shriram recalled later with a smile, "Sergey mentioned this to Doerr and Moritz and it speeded up the process!" Brin, he said, is no Boy Scout, but rather a sly, dexterous deal maker: "I think of him as Kobe Bryant, a game changer."
ON JUNE 7, 1999, Google issued its first press release announcing that Kleiner Perkins and Sequoia had invested twenty-five million dollars in Google. They also held their first press conference, in a small room in the Gates building at Stanford. Page and Brin, wearing white tennis shirts with the Google logo, sat at a Formica table flanked by Doerr, Shriram, and Moritz. Andy Bechtolsheim, Rajeev Motwani, and Terry Winograd sat in the audience with five reporters. As the journalists looked on, the founders gave a lengthy explanation of the technicalities of PageRank, their methods for indexing the Web and devising algorithms, their notions of "latency" and "scale," and just about anything else they could think of.
At last a reporter asked the obvious question: How does Google plan to make money?
"Our goal," Brin said, "is to maximize the search experience, not to maximize the revenues from search."
At what appeared to be the conclusion of the press conference, Brin rose with a broadly smiling Page beside him and said, "If you want to ask more questions, fine." He invited the reporters to stay and take a Google shirt and share refreshments. Unlike today, where their press appearances are not frequent and are treated, certainly by Page, as occasions to be endured, a home video of the press conference suggests that the two of them would happily have lingered all day.
Google"s next business breakthrough came later that same month. Omid Kordestani negotiated a deal with Netscape and its new corporate owner, AOL, to designate Google as the default search engine for the popular Netscape browser. The deal boosted Google searches to more than three million per day. "That was pretty exciting," said Brin. "That was a big deal for us." It was a major endors.e.m.e.nt of Google. It was also a major test, bringing in huge numbers of searchers. "We got overwhelmed with traffic. It was our first big search engine crisis," remembers Craig Silverstein. "We shut off Google.com that day to everyone but Netscape-till we could buy more computers!" They were burdened by another traffic jam, remembers senior software engineer Matt Cutts. When he joined the company in 1999, among his first tasks was to figure out how to block p.o.r.nography searches, which accounted for one of every four queries. His solution was to a.s.sign a lesser weight in the Google algorithm to the words commonly used in p.o.r.n searches, or for Google"s engineers to misspell the keywords in the Google index so the p.o.r.n was difficult to retrieve. First he had to figure out the pertinent words. He spent hours poring over p.o.r.n doc.u.ments. Then his wife came up with the idea of baking cookies and awarding one "p.o.r.n cookie" to each engineer who discovered a salacious keyword. p.o.r.n search traffic plummeted. that day to everyone but Netscape-till we could buy more computers!" They were burdened by another traffic jam, remembers senior software engineer Matt Cutts. When he joined the company in 1999, among his first tasks was to figure out how to block p.o.r.nography searches, which accounted for one of every four queries. His solution was to a.s.sign a lesser weight in the Google algorithm to the words commonly used in p.o.r.n searches, or for Google"s engineers to misspell the keywords in the Google index so the p.o.r.n was difficult to retrieve. First he had to figure out the pertinent words. He spent hours poring over p.o.r.n doc.u.ments. Then his wife came up with the idea of baking cookies and awarding one "p.o.r.n cookie" to each engineer who discovered a salacious keyword. p.o.r.n search traffic plummeted.
By the summer of 1999, Google was flush with cash and had outgrown the five-thousand-square-foot Palo Alto office, where forty employees now knocked knees when sitting at their desks. They needed to move, so Susan Wojcicki called in a real estate agent, who suggested the founders clear their schedules to visit possible sites. The founders thought this was a waste of their time. They knew what they wanted: to re-create the feel of the Stanford campus. Wojcicki remembers their saying to the agent, "Why don"t you go look at buildings and take some pictures and bring them back to us?"
In August, Google leased part of a two-story building rimmed by trees on Baysh.o.r.e Boulevard in bucolic Mountain View. Initially, they rented the second floor but quickly expanded to the first, then to another building next door. It had obvious attractions: it was barely a ten-mile bike ride north to Stanford University, and in the distance to the west, the Santa Cruz Mountains formed a visible border. But unlike Palo Alto, where employees could walk to lunch, a meal in Mountain View required driving. The offices quickly became littered with pizza boxes and Chinese-food containers. The founders decided they"d need a chef. They"d select one in the same way fraternities and sororities at Stanford did: by having a Chef Audition Week. One chef, Charlie Ayers, "blew everyone away" with his array of "gourmet comfort food-like spaghetti and meatb.a.l.l.s," said Marissa Mayer. (It helped that Ayers was the former chef for the Grateful Dead.) He was hired in November to supervise the preparation of favorites like pizza and hamburgers, and also what he called big-a.s.s barbecues, as well as vegetarian stir-fry, salads with lush tomatoes and fresh vegetables, carved turkey, fiery chili, lamb chops, steak, and generous slabs of sushi, to which he affixed an attractive New Age explanation: "The fat found in fish helps make the cell membranes round the brain more elastic and more able to absorb nutrients easily"
In addition to free food, the founders signed off on an abundance of other amenities that made venture capitalists uneasy. "I think they were a little bit perturbed to see the front-page stories in the San Jose Mercury News that we were hiring a chef and a ma.s.seuse," Brin concedes. "But I think the actual economic and productivity outcome of this they grew pretty quickly to accept. They just didn"t think we should be known for that [profligacy]." He explained how he and Page approach free food and employee benefits: "A lot of it is common sense, a combination of common sense and questioning rituals." Generous benefits help recruit and retain employees, he said. Compelling employees to drive for meals, and find parking "would be a real productivity sink ... and they"d probably not eat healthy food." Besides, he added, waiting in line to pay would waste more time.
For all its intensity, Google could be a playful place to work. The first place in the Valley Al Gore visited after he left the vice presidency in January 2001 was Google. He had championed the Internet while serving in Congress and as vice president. His first meeting with Brin, Page, and Kordestani in February 2001 went smoothly, he said. "I liked them and they asked me to help them out and, initially, to join their board," which he declined because he wasn"t sure whether he"d again seek the presidency. Instead, he said, "They asked me to be-the phrase they used was, "a virtual board member.""
Al and Tipper Gore went on a long European vacation. They returned later in the spring, and newspapers carried pictures of the full beard he had grown. "When I went back to Google, Larry and Sergey and Omid-there weren"t that many of them-all ten of them had false beards on. It was hilarious!"
Google was growing into an informal, open place. At around 4:30 p.m. each Friday, employees now gather in the largest open s.p.a.ce on campus, Charlie"s Cafe in Building 40, for TGIF. Refreshments-nachos, mini-hamburgers, pretzels, beer, soft drinks-are available. Employees sit on chairs arranged in a semicircle, with employees at other Google locations around the world on video conference. Brin and Page stand on a small raised platform to share corporate news and to answer questions from thousands of employees. New employees hired that week sit up front, wearing Noogler beanies with propellers on top. Loud music blasts from speakers. The affectionate bond between the two founders is displayed every time they make a presentation together or at these weekly Friday appearances. On stage, Brin is funnier, and tends to dominate, yet in the dozens of times I"ve watched them together, I"ve never noticed a hint of exasperation from Page, who is an intense person but nevertheless laughs easily at Brin"s jokes.
At the first TGIF I attended, in October 2007, Brin appeared wearing what looked like a green pilot"s jacket and Page wore a black one. They were in jeans and sneakers, and took turns talking-introducing the Nooglers; telling of some deals Google had made the past week; showing a video clip of former Alaska senator Mike Gravel, who was a stealth candidate for president, as he gave a speech on campus in which he described his visit as comparable to "an intellectual o.r.g.a.s.m." Brin cracked, "We"ll use that as a recruiting tool!" They fielded questions from employees. And they had a surprise guest calling in from an airplane. The guest was competing with static, and didn"t sound like himself, but managed to say h.e.l.lo.
"I heard that you won something today," Brin said.
Up on the large screen behind them appeared a picture of Al Gore, who on this day had won the n.o.bel Peace Prize for his work on behalf of the environment, an award that was featured in the morning papers and dominated the news.
"We all feel grateful to you," Brin said.
"Thank you, Sergey. And to you and Larry and Eric and the entire team. One of the fun things in my life is to be part of the extended Google family."
A roar of applause cascaded from the balcony and throughout the cafe, and soon Gore was gone.
"He sounded a little like Stephen Hawking," joked Page.
The hand of an engineer who spends too many hours in front of a computer screen shot up. "Larry and Sergey," he asked. "Which prize?"
The personalities of the founders permeate the company. Doerr described Sergey as the "more exhuberant" of the two. "Sergey is more creative, more experimental than Larry is." One longtime Google executive decribes him as a ham. "I love Sergey," the executive adds. "He"s an exhibitionist. He needs more attention than Larry does." Brin does most of the talking, and joking, at Friday TGIF gatherings. In the early days of Google, when they took the entire staff camping for a weekend, everyone had a canoe partner, except Brin. "He said, "It doesn"t matter. I"ll swim."" Wearing a lime-green Speedo swimsuit, he jumped into the lake, becoming the center of attention. One cannot imagine Larry Page agreeing to appear on the game show To Tell the Truth, To Tell the Truth, as Brin did in March 2001. The question posed was "Who is the real Google guru?" Each of the three contestants wore a Google T-shirt, and after questioning them, the four celebrity panelists unanimously guessed that the real guru was panelist number 3, who turned out to be a professional bowler. Only 22 percent of the audience guessed that Brin was the guru. But when it came time to stand and identify the real guru, Brin histrionically pretended to stand, then sat, then rose to shocked audience applause, reciprocating with a slight but delighted smile. as Brin did in March 2001. The question posed was "Who is the real Google guru?" Each of the three contestants wore a Google T-shirt, and after questioning them, the four celebrity panelists unanimously guessed that the real guru was panelist number 3, who turned out to be a professional bowler. Only 22 percent of the audience guessed that Brin was the guru. But when it came time to stand and identify the real guru, Brin histrionically pretended to stand, then sat, then rose to shocked audience applause, reciprocating with a slight but delighted smile.
Despite the playfulness, few would describe the founders as ideal mediators. They are often too brusque and intimidating for that role. "Larry can be a little raw, but never unkind," said Megan Smith, vice president of new business development. A part of the rawness is due to the fact that they are geeks, more comfortable staring at a computer screen than schmoozing, and too zealously impatient to waste time.
Page is more reclusive, and odder. He was once asked at a dinner, according to a dinner guest, "What"s the most important thing the government should be doing?"
"Colonize Mars!" Page said.
Most of the dinner guests nodded as if he had said something profound.
Page can be almost monklike. He ruthlessly guards his time, and can treat those who ask him to make a speech or meet reporters as if they were thieves trying to steal his time. A longtime Google employee describes Page this way: "Larry is like a wall. He a.n.a.lyzes everything. He asks, "Is this the most efficient way to do this?" You"re always on trial with Larry. He always pushes you."
While Brin is more approachable than Page, he, too, can be awkward around strangers. His wife Anne Wojcicki"s company, 23andMe, was feted at a fashionable c.o.c.ktail party in September 2008 that was cohosted by Diane von Furstenberg and her husband, Barry Diller, Wendi and Rupert Murdoch, and Georgina Chapman and her husband, Harvey Weinstein. The event was held at Diller"s Frank Gehry-designed IAC headquarters in Manhattan. Brin appeared wearing a dark crewneck sweater and gray Crocs. He and Google are investors in her company and he is openly proud of her work. But she had to quietly beseech him to stay. He did, but hid behind his oversized Canon camera, moving about the vast room or retreating to a corner, always snapping pictures.
THE YEAR 2000 BEGAN with two bangs. The first was that Google entered the new year averaging seven million searches a day, a ma.s.sive jump from half a million at the beginning of 1999. The second was the sudden crash of technology stocks. Between March and October, the NASDAQ Composite Index, which lists most tech and Internet companies, fell 78 percent. Yahoo"s stock at one point plunged from $119 a share to $4. As a private company, Google was both spared and offered opportunities. "As in any successful venture, there"s a lot of luck," said Hal Varian. "One of the great things from Google"s point of view was the dot-com collapse in 2000. A lot of talent became available." Google cherry-picked some good engineers.
But the company was burning through its cash. While Google"s revenues would total $19.1 million in 2000, its losses would be $14.7 million, more than double those of the previous year. And they"d had "zero discussion" about any kind of Google advertising until late 1999, recalled Salar Kamangar, who crafted Google"s first business plan and became vice president of product management. The founders feared ads would slow searches. They still believed Google could outsource monetization to ad firms like DoubleClick, or sell their search services to corporations. Page and Brin were relying on their faith that a way would be found to make money. This faith produced more friction with their two major investors, but Page and Brin were undeterred.
In The Search, The Search, John Battelle describes an encounter around this time between Page and Brin and Bill Gross, the founder of the Go To search engine. Gross had come up with an idea: he was convinced advertisers or Web sites would pay more for certain keywords if they could pay on a cost-per-click (CPC) basis, meaning they paid only if the user showed enough interest in a given ad to click on their link and perhaps make a purchase. The price for the keyword and the placement of the ad would be set in an online auction process. By mid-1999, GoTo had a network of eight thousand advertisers, with some paying by the click and others paying a fee to appear at the top of the search results. Gross approached Page and Brin to propose that the two companies merge, reports Battelle, but "Brin and Page turned a cold shoulder to Gross"s overture. The reason given: Google would never be a.s.sociated with ... a company that mixed paid advertising with organic results." (Gross later changed his company"s name, GoTo, to Overture, and in 2002 would sue Google for allegedly stealing its cost-per-click model.) John Battelle describes an encounter around this time between Page and Brin and Bill Gross, the founder of the Go To search engine. Gross had come up with an idea: he was convinced advertisers or Web sites would pay more for certain keywords if they could pay on a cost-per-click (CPC) basis, meaning they paid only if the user showed enough interest in a given ad to click on their link and perhaps make a purchase. The price for the keyword and the placement of the ad would be set in an online auction process. By mid-1999, GoTo had a network of eight thousand advertisers, with some paying by the click and others paying a fee to appear at the top of the search results. Gross approached Page and Brin to propose that the two companies merge, reports Battelle, but "Brin and Page turned a cold shoulder to Gross"s overture. The reason given: Google would never be a.s.sociated with ... a company that mixed paid advertising with organic results." (Gross later changed his company"s name, GoTo, to Overture, and in 2002 would sue Google for allegedly stealing its cost-per-click model.) Meanwhile, Google decided to offer its search to other Web sites and to share any revenues. It was a way to extend its reach, and to be paid for the use of its search engine. The most significant deal, signed in June 2000, established Google as Yahoo"s official search engine. Google paid dearly for the privilege, granting Yahoo a warrant to acquire 3.7 million shares of Google when it was issued. And few users knew they were conducting a Google search, because Yahoo wouldn"t allow Google"s branded search box on its page. For Google, the deal was another milestone. Its search traffic doubled to fourteen million on the first day of the partnership.
While most experts by the end of 2000 thought Google had the best search engine, this claim was conjectural. What was indisputable was that Google was now the most-visited search engine on the Web, with one hundred million daily search queries and a worldwide market share of about 40 percent. Yahoo had given Google a boost, but "it was really about the quality of the search," said Search Engine Land Search Engine Land editor Danny Sullivan. "People were coming to Google because they heard about it." The rapid growth would provide Google a vital and at the time overlooked a.s.set. More searches generated more data for Google about users, which led to better searches, which would eventually lead to more ad dollars. editor Danny Sullivan. "People were coming to Google because they heard about it." The rapid growth would provide Google a vital and at the time overlooked a.s.set. More searches generated more data for Google about users, which led to better searches, which would eventually lead to more ad dollars.
The question of how to monetize search by turning traffic and data into cash remained unanswered. Unlike AOL, Google didn"t have subscription revenues. And unlike portals such as Yahoo, it didn"t have content sites on which to place banner or display advertising. In October 2000, Google introduced its first advertising program, called AdWords. It was a small beta test, available to 350 advertisers who paid for a selection of search keywords that allowed the advertiser"s small text ads to appear on the side of the search results. It was a self-service program. Companies gave Google their keywords and went online to retrieve data on the number of times users typed their keywords into the search box. The effort was clunky, and grew very slowly.
Although AdWords was a new media advertising effort, it borrowed an old media CPM (cost-per-thousand) model. Much in the way that a television network might know that millions of viewers were exposed to a thirty-second spot, but not whether they actually watched it or made a purchase because of it, advertisers paid based soley on the number of times their ad appeared. There was a link to the advertiser allowing users to learn more about a product, though Google did not get paid if the user clicked through. The program was also limited in that Google could not easily syndicate AdWords to partners because GoTo had already tied up other search engines, making Google less attractive to advertisers. In addition, prominent advertisers were not inclined to place their dollars on search keywords. Giving credence to something that seemed so puny was alien to the brand advertising they were accustomed to. Because Page and Brin insisted that all advertising be relevant to the keywords, Google only allowed ads to appear in 15 percent of all searches, which meant that Google was forgoing advertising dollars if the ads were not judged "relevant." Page and Brin liked to boast that Google could move on a dime, but their company was moving ever so gingerly to embrace advertising.
They were moving too gingerly for Doerr and Moritz, who admit they were frustrated by Google"s mounting losses. In the eyes of investors, the issues of monetization and management were twined. Good managers would impose the discipline every profit maker requires. "The understanding when we invested was that a CEO, among others, would be hired over time," said Moritz. The venture capitalists finally persuaded Page and Brin to hire a headhunter to find a CEO, but the young founders were resistant, fearful that "a suit" would subvert the Google culture. They met with about fifteen candidates, all accomplished executives who were invited to attend TGIF, to share meals with the founders in the cafeteria, to sit in on staff meetings. Brin went heli-skiing with one prospective CEO who boasted that he was an expert at the sport. (He wasn"t.) "They thought everyone they had talked to was a clown," Paul Buchheit said. "The candidates didn"t understand technology." Omid Kordestani said Page and Brin "knew in their gut that they wanted a fellow intellectual."
The VCs feared the founders would find an excuse to reject every candidate, which was true. Marissa Mayer said she believes the CEO search was so protracted in part because "they were not convinced it needed to happen." Mayer knew Page and Brin"s thinking. She was a central member of the engineering team. And she and Page were dating, as they would for about three years. Like most company founders, they believed they could better manage their baby, better ensure the implementation of their vision, better preserve the culture. Asked if the founders resisted, Moritz now responds like a State Department official: "They resisted hiring ordinary people, and that"s a wonderful tribute to them. One of the many lessons I learned from the Google investment is the importance of hiring spectacular people. Sometimes it frustrated us, but they were spot-on."
Moritz, however, did not feel that way at the end of 2000. "All of us on the board, in particular John and Mike, felt we needed someone who had been there, done that. You can call it adult supervision," said Ram Shriram. Caught between the VCs and the founders, his "job was to keep the two sides talking," he said, describing his role as that of "a coach." Some at Google even feared a VC coup. "The VCs figured, "Once we get a CEO in there we"d get control,"" said one early Googler.
Doerr and Moritz arranged for Page and Brin to meet with the founders of other Valley companies, such as Intel, Intuit, and Apple, to talk about management issues. "We like Steve Jobs!" Page and Brin chorused, to the annoyance of the VCs and, eventually, to the consternation of other Google executives. One new hire that year, Tim Armstrong, the president of advertising and commerce, said, "It was chaos when I got to Google." Executives were needed to manage the brilliant engineers and help set priorities, he said. Under pressure internally and externally, the founders interviewed two computer scientists who met their standards, said Marissa Mayer. One was from New York, the other from the Valley. Both were offered the job, she said. But the New Yorker did not want to relocate his family, and the other thought he was on the CEO fast track at Intel. Both declined the offer.
By the end of 2000, Google had indexed one billion Web pages. But no CEO had been hired, nor had any professional managers, and there was still no clear path to making money. Google had built it, the traffic came, but the revenue had not followed. The venture capitalists worried that Page and Brin were humoring them-and maybe leading Google astray.
CHAPTER FOUR.
Prepping the Google Rocket (2001-2002).
While Google"s venture capitalists fretted that Page and Brin were spinning their wheels and that the company cried out for professional management, the Internet was growing and changing at warp speed. January 2001 brought two innovations that profoundly disrupted the existing order. Steve Jobs launched Apple"s iTunes application, and within seven years, iPod owners had purchased and downloaded five billion songs. Already reeling from piracy, the big four music companies felt compelled to allow individual songs to be sold at a price Apple chose (ninety-nine cents), inevitably undermining the sale of entire CDs, the centerpiece of their business model. That same January, Jimmy Wales and Larry Sanger launched Wikipedia. Within seven years this nonprofit effort would contain ten million entries in 253 languages, changing the way people gathered information. Wikipedia and iTunes were reminders, as if any were needed, that we had entered the dawn of a new digital democracy that granted more power to individuals.
Page and Brin were convinced that Google would become an even more profound disrupter of the existing order. Their philosophy, Page told a cla.s.s at Stanford, can be distilled into two words: Don"t settle. He defended the exhaustive process of hiring at Google, and finding managers who respected and nurtured Google"s engineer-is-king culture. But there were too many kings. It wasn"t until January 2001 that Google finally hired its first vice president of engineering operations, Wayne Rosing, who had held a series of senior management positions at Apple, Sun Microsystems, and the Digital Equipment Corporation. The process was laborious, but eventually Rosing was hired. That was "the real turning point," said employee number 1, Craig Silverstein. "He brought a professionalism to management we had not had before." When he stepped into the chaos at Google, a shocked Rosing found that one senior engineer "had 130 direct reports." Instead of doing what most companies did by relying on financial management software made by companies such as Intuit, Page and Brin had insisted that Google engineers invent a new system.
DOERR WAS EAGER to find a CEO for Google, and thought his friend Eric Schmidt might be a perfect fit. Because Schmidt held a Ph.D. in computer science-making him the rare professional manager who could speak the language of engineers-and did not have an oversized ego, Doerr a.s.sumed he could work with the founders. At the time, Schmidt was the chairman and CEO of Novell, a computer networking and software company then in the midst of a merger with Cambridge Technology. He wasn"t thrilled with the job; the commute from his home in the Valley to Novell"s headquarters in Provo, Utah, was arduous, and Novell was underperforming. One night, Doerr and Schmidt were chatting at a c.o.c.ktail party. Doerr asked Schmidt what his plans were, and Schmidt said he hadn"t thought deeply about it.
"I think you should look at Google," Doerr said.
"I can"t imagine that Google would be worth much," said Schmidt.
"I think you should have a talk with Larry and Sergey," said Doerr.
As it happened, he already had. During the process of vetting Wayne Rosing, Brin had called Schmidt, a former colleague of Rosing"s at Sun, for an opinion. The call lasted forty-five minutes and ended with Brin inviting Schmidt to visit Google.
Schmidt visited Google in December 2000. He knew Building 21 well, for he had worked there when it was Sun"s headquarters. In the office Page and Brin shared, he found two desks, a sofa, and the same lava lamps Sun had had on display. In contrast to the carefully groomed Schmidt, Page and Brin seemed to use their fingers rather than a comb to tidy their dark hair; Page"s shorter hair is pulled down and clings to his forehead, while Brin"s wavy locks are pushed back and one sideburn is longer and slants more sharply than the other. To his surprise, Schmidt saw his bio projected on the wall above the couch. There was little foreplay. "They started going at it," Schmidt recalled. "They said I was mistaken in my business strategy with regard to proxy caches, a method Novell was using at the time to try to speed up Internet connections. Their thesis was that there was so much bandwidth coming down that such proxy caches were a bad business and would be unnecessary. I, of course, disagreed, and disagreed violently. This was a forty-five-minute meeting that went on for an hour and a half. I could not get them to accept the brilliance of my argument. They started from the data they saw at Google, and peppered me with questions. I hadn"t had that good an argument in all my years at Novell." Page and Brin were also pleased. They appreciated Schmidt"s technical prowess, and he pa.s.sed the airplane test when he revealed that he, too, was a regular attendee at Burning Man. How much of a suit could he be?
Schmidt was born April 27, 1955, in Falls Church, Virginia, and like Page and Brin was raised in an academic family. Wilson Schmidt, his father, was a professor of international economics at Johns Hopkins and worked for a time in Richard Nixon"s Treasury Department; Eleanor, his mother, received a master"s degree in psychology but stayed home to look after Eric and two brothers. Eric attended public schools, where he got hooked on time-share computers, which in those prehistoric days still relied on punch cards. Another solo-sports enthusiast, he earned eight high school letters as a distance runner. After graduating, he was accepted at Princeton as an architecture major, but switched to electrical engineering because, he said, "I lacked creativity." He became adept at programming. "All of us never slept at night because computers were faster at night," he said. He worked summers at Bell Labs, where he was skilled enough to write a software program called Lex, a code that facilitated the writing of text. He received an electrical engineering B.S. from Princeton in 1979 and an M.S. and a Ph.D. in 1982 from the University of California, Berkeley. Graduate school summers were spent working at Xerox PARC, the famed lab that hosted the creation of computer work stations, that forged the technology that became the mouse, laser printers, and the Ethernet. After completing Berkeley, he joined the research staff in the Computer Science Lab at PARC, where he worked alongside such software pioneers as Bill Joy (who became one of four founders of Sun Microsystems) and Charles Simonyi (who would oversee the development of Microsoft Word and Excel).
His first corporate job was at Sun, which he joined in 1983. Over the next fourteen years, Schmidt would demonstrate a repertoire of talents: as a manager who hired and supervised ten thousand engineers, as a scientist who nurtured the innovative programming language Java, and as Sun"s chief technical officer. He left in 1997 to become CEO of Novell. By his own admission, he failed to do proper due diligence before he took the job. "When you grow up in a company that is well run, it"s hard to imagine a company not well run," he said. Novell was not well run. When he arrived, Novell had a $14,600,000 shortfall to declare in its quarterly report, and executives there proposed they tap their reserves to cloak it. Schmidt chose to report the shortfall, and Novell"s stock took a dive. Chapter 11 was a real possibility. "Getting near bankruptcy is a pretty good experience for being a tough CEO," said Schmidt. Looking back on his tenure at Novell, Schmidt candidly said, "I did an undistinguished job."
Still, his skills and temperament were attractive to Page and Brin. More conversations ensued, and in February of 2001 they offered him the CEO job. Schmidt could not accept until the Novell merger was completed; it was in March that he was named chairman of Google. He a.s.sumed the t.i.tle of CEO in August, and Page was named president, products, and Brin president, technology. According to SEC doc.u.ments Google filed when it went public, Schmidt was paid a salary of $250,000 and an annual performance bonus. He was granted 14,331,708 shares of cla.s.s B common stock at a price of 30 cents per share, and 426,892 Series C preferred stock at a purchase price of $2.34. LarryandSergey had a partner.
THE APPOINTMENT WAS GREETED with some skepticism. Schmidt"s critics said he was barely escaping from Novell. They sneered at the Mercedes he drove, the suits and ties he wore. They wondered whether he had the right skill set. "No one from his previous jobs," said one industry insider who knows him well, "would say that Eric was an inspirational leader, a great speaker or salesman, a take-charge leader like Paul Otellini of Intel, Carol Bartz of Autodesk, or John Chambers of Cisco." Skepticism about Schmidt was reinforced by the management structure announced by Google. Although Schmidt was named CEO, there was an unusual division of power. He, Brin, and Page would work as a team, and if there was a difference between the two founders over routine decisions, Schmidt would act as the tiebreaker. "We agreed that on any major decision, the three of us must agree," he said.
When Schmidt arrived full time at Google there was some hissing that he was a stooge. "Eric doesn"t have a huge ego," venture capitalist and former Fortune Fortune columnist Stewart Alsop told GQ. "He"s willing to suffer the myriad small indignities of being a pet CEO." Reminded of this disparagement, Schmidt declined to take the bait and after a pause said, "I think it"s inappropriate for me to comment on myself.... Self-reporting is always suspect." His low-key demeanor; monotone voice; and round, frameless professorial gla.s.ses were interpreted by some as signs of timidity. But over time, detractors came to appreciate his competence and maturity. His modesty also won converts. Instead of wearing his customary suits, Schmidt soon donned the Google uniform: khakis and a white or black golf shirt with the Google logo. He was building trust. Schmidt was a.s.signed a small office containing two desks, but before he arrived an engineer looking for a place to park spotted the empty office and moved in. According to Rajeev Motwani, who continued to advise his Stanford proteges, when Schmidt arrived he a.s.sessed the situation and quietly took the second desk. "They became office mates. Can you imagine a company where an engineer can move into the CEO"s office? That tells you a lot about Eric, and about the company. He understood the company"s DNA, which is that what you do defines your importance." columnist Stewart Alsop told GQ. "He"s willing to suffer the myriad small indignities of being a pet CEO." Reminded of this disparagement, Schmidt declined to take the bait and after a pause said, "I think it"s inappropriate for me to comment on myself.... Self-reporting is always suspect." His low-key demeanor; monotone voice; and round, frameless professorial gla.s.ses were interpreted by some as signs of timidity. But over time, detractors came to appreciate his competence and maturity. His modesty also won converts. Instead of wearing his customary suits, Schmidt soon donned the Google uniform: khakis and a white or black golf shirt with the Google logo. He was building trust. Schmidt was a.s.signed a small office containing two desks, but before he arrived an engineer looking for a place to park spotted the empty office and moved in. According to Rajeev Motwani, who continued to advise his Stanford proteges, when Schmidt arrived he a.s.sessed the situation and quietly took the second desk. "They became office mates. Can you imagine a company where an engineer can move into the CEO"s office? That tells you a lot about Eric, and about the company. He understood the company"s DNA, which is that what you do defines your importance."
While Schmidt did not believe he had come to Google to fix a company that was broken, he knew its management systems were dysfunctional. He also knew he needed to go slowly in changing them. He saw that Page and Brin wanted to stay focused on technology and products, and had an aversion to intrusive bureaucrats. Schmidt set out to convince the founders and the engineers that good managers would liberate the engineers, reduce bureaucracy, provide an audited financial system that would better allocate resources and provide more transparency, transparency, a word the founders often invoked. "He found a way to bring the discipline of running a company but not lose the magic," said Omid Kordestani. a word the founders often invoked. "He found a way to bring the discipline of running a company but not lose the magic," said Omid Kordestani.
Deftly, Schmidt shed old practices. The weekly free-for-all meeting of about a dozen executives, recalled Craig Silverstein, "had outgrown its usefulness. Yet it was hard to disinvite people." So Schmidt simply said the meeting was too unwieldy and canceled it. Because he did not subst.i.tute another meeting, "no one felt excluded," Silverstein said. Only later did Schmidt establish his own weekly management meeting.
There was an adjustment period, particularly for Schmidt, to get used to his two unusual partners. "Larry is shy, thoughtful, detailed, a linear thinker," he said. "Sergey is loud, crazy, brilliant, insightful. Their personalities are so different. When I first came here I didn"t think Larry could talk, because Sergey did all the talking." An unofficial part of Schmidt"s mission was to police the wildest ideas of the founders.
On one occasion, Brin proposed to Schmidt, "We should run a hedge fund."
"Sergey, among your many ideas, this is the worst," Schmidt said.
"No, we can do it better because we have so much information."
Schmidt explained the legal complications, and said he talked him out of it.
And Page, for all his mania about efficiency, could be obsessive. A footnote buried at the back of Battelle"s book on search provides an ill.u.s.tration. He writes of seeking an interview with Page and receiving this weird counterproposal: In exchange for sitting down with me, Page wanted the right to review every mention of Google, Page, or Brin in my book, then respond in footnotes. Such a deal would have been nearly impossible to realize, and would have required untold hours of work on Page"s part. Page and I negotiated for weeks over his proposal.... In the end, Page relented.
Like the founders", Schmidt"s background was fairly narrow. He was an engineer, with management experience. He had little experience working with advertisers or media companies, which would soon become apparent. But what he did have was maturity and an even temperament. It was said, sometimes by Schmidt himself, that he was brought in to supply "adult supervision." He was the friendly, wise man with a touch of gray in his neatly parted sandy hair. Eventually, Schmidt became Google"s facilitator, or "catcher," as he likes to describe his role. "I catch whatever the problem is." (When I later asked the decidedly non-sports-loving Brin if this description was accurate, he said, "I don"t know what a catcher does.") The more serious answer, Schmidt added, is that he facilitates decisions that need to be made, establishing management systems, meeting with financial a.n.a.lysts and reporters, serving as Google"s chief link to industry and government. To the founders these were odious tasks, but increasingly important ones. He focused Google on outside technological dangers. "He made us better understand compet.i.tion in the technology s.p.a.ce," said Marissa Mayer. Google once thought its compet.i.tion came from search engines like Alta Vista or Overture. "Eric said, "If we"re successful, Microsoft is going to jump in [to search]." Larry and Sergey and I were surprised."
What could a late entrant like Microsoft do to impede Google? Schmidt, having spent much of his career in opposition to Microsoft, and having supported the government"s ant.i.trust prosecution of the software giant, explained how Microsoft could use its dominant Internet Explorer browser or Windows operating system, on which search engines depended, to cripple Google. Discussions like this, said Mayer, helped persuade Google to build its own applications and, eventually, its own browser, to ensure its independence.
Schmidt also helped focus Google internally. When he discovered that nearly half of Google"s searches were coming from outside America, yet there was no concerted effort to sell ads against these searches, he seized the opportunity. He prodded Omid Kordestani to travel overseas, jokingly saying, "I"ll call you Monday morning at the United terminal and tell you what plane to get on." Kordestani gained so much weight from eating fast food while on the road that when he returned from his successful trips abroad he would touch his belly and laugh, "Body by United!" Among Schmidt"s signal accomplishments, said Paul Buchheit, was that he kept Page and Brin "focused" and "kept things on track." Often at meetings, he said, Page and Brin would suddenly change the topic at whim. "Eric would say, "No, we need to come to an understanding right now.""
Soon after Schmidt"s arrival, the troika was romanced by Yahoo"s new CEO, Terry S. Semel, who had come to a Web business after twenty-four years as co-chairman and co-CEO of Warner Bros. Semel came to Yahoo at a time when Internet stocks had plunged; Yahoo"s stock had fallen from a market value peak of $127 billion to $12.6 billion. His arrival aroused the righteous anger of many in the Valley, who were suspicious of "outsiders." He was dismissed as a representative of old media, as a troglodyte, a Hollywood suit. But the old media warhorse knew how to calm an anxious company, handing out backslaps, compliments. He was a self-proclaimed content guy, and wanted Yahoo to create more of its own, not just license the content of others. And he wanted to sell more ads. He brought in a former ABC network executive, Lloyd Braun, to oversee new content, and an experienced sales team led by Wenda Harris Millard. "Terry brought two things," said Bobby Kotick, now the CEO of the game company Activision Blizzard, who served on the Yahoo board. Semel was "genetically predisposed to making money," and if he was presented with one hundred ideas, he could spot the one or two that would make money. "He brought that. And he just brought the maturity and wisdom that comes from experience. He asked the simple question: "How do we make money?""
Semel had huge gaps in his knowledge of the digital world and of Yahoo. He was shocked to learn that Yahoo had lost ninety-eight million dollars the year he arrived. Ron Conway recalled a dinner with Semel on his first day at Yahoo. He said, "Semel did not know Yahoo owned part of Google" in the form of the warrants it banked when it signed its search engine contract with Google. An avid deal maker, Semel became intrigued by Google, particularly after Jerry Yang and David Filo, Yahoo"s founders, urged him, he recalled, to "go meet these guys."
Semel joined Page, Brin, and Schmidt for dinner in the Google cafeteria. Semel began the discussion: "Help me with something. We"re your biggest customer in the world, right? We both know what we pay you for the whole world is less than ten million dollars, right?"
"Yes," they concurred.
"So what"s your business?" Semel asked. "You don"t really have a business."
"We love what we do," Page and Brin responded.
"Maybe we should buy your company?" said Semel, who thought it was enough of a business to throw out a billion-dollar purchase price tag.
"No, no. We don"t really want to sell our company."
Semel walked away convinced "one hundred percent they did not want to sell." He also walked away with a.s.surances from Schmidt that Google was working on "their own technology" to monetize search. Later that year, when Overture approached Yahoo with their patented monetization technology and offered Yahoo a revenue guarantee, Semel signed a contract for Overture to sell its ads. Google was upset, but Semel said that in the first full year, Overture generated two hundred million dollars of advertising revenues. By 2003, Overture separately approached Yahoo and Microsoft with an offer to be acquired. Microsoft declined to bid. (They later reversed course and started up their own search engine.) In the end, Semel acquired two search engines, Overture and Inktomi, and Yahoo dropped its search license agreement with Google. (It was beginning to become clear what a colossal blunder it had been for Yahoo to farm out search in order to focus on building its portal traffic, relegating Yahoo to a weak second place in search. By buying Overture, Yahoo also inherited its April 2002 patent infringement lawsuit against Google.) Google was growing fast, and the founders worried they"d divide into cliques and lose their cohesive culture. Stacy Sullivan, who had been hired in 1999 as the first employee in human resources, and Joan Braddi, Omid Kordestani"s trusted deputy, were asked to a.s.semble a disparate group of early Googlers to devise a coherent mission statement of core principles the company could embrace. Twelve employees gathered in the cafe, each from a different department. The discussion went in circles for several hours, with Sullivan dutifully writing cliches on a whiteboard. Some wanted the group to enunciate a set of rules: Don"t mistreat people; Don"t be late; Don"t lose user focus; Play hard but keep the puck down. The engineers in the room weren"t interested in codified dos and don"ts because they reeked of corporate America and offended their sense of efficiency. They also took too long to read. After hours of exasperating discussion, Paul Buchheit blurted, "All of these things can be covered by just saying "Don"t be evil."" "Don"t be evil.""
Within a day, engineer Amit Patel, Google employee number 7, wrote the slogan in impeccable handwriting on whiteboards all over Google"s offices. The slogan became viral. When opposing an idea at internal meetings, Googlers would proclaim, "That could be evil." The slogan became Google"s rallying cry, a way to distinguish itself from other corporations and Microsoft in particular, a way to harness the goodwill Google enjoyed as a free service bringing the world"s information to everyone"s fingertips. To former Intel chairman and CEO Andy Grove, the slogan was too vague to define a boundary, and smacked of self-righteousness. "Do you think Hitler thought he was evil?" Grove said he thought at the time. "It"s too vague, too self-serving, self-defining. "I"m not evil, therefore I"m not evil.""
Eric Schmidt was happy with the slogan, though, and happy with what he was accomplishing at Google. Years later, he sat on one of three canvas-backed directors chairs jammed into the closet-sized conference room dubbed "the directors room" that is next to his office in Building 42. The view from a narrow vertical window overlooked a Google parking lot; the white brick wall to his left held a whiteboard containing mathematical formulas; to his right were several framed newspaper clippings, including one headlined "The Grown-Up at Google." He admitted to feeling that he had grown as an executive since his days at Novell. "Most people who worked with me ten years ago," Schmidt said, "would have said, "He"s smart, a nice guy, but he can"t lead." What is the distinction between then and now? Toughness."
Back in 2001, his "toughness" was circ.u.mscribed. He did not issue orders to the founders, he had to persuade, to prioritize his concerns, and pick his battles. There were palpable tensions-the founders would sometimes loudly explode in meetings that the company was becoming bureaucratic, and Schmidt knew he was the target. These were three strangers working together, and the founders were uncomfortably ceding some management control over their invention, their baby. Schmidt knew the founders did not blame each other. There was rarely a hint of tension between Page and Brin-"In all the years I"ve worked with them," said John Doerr, who is a Google director, "I"ve never seen them get angy with each other." But it was not unusual, said another early investor, to witness emotional outbursts by the founders aimed at others, and to see these outbursts fielded and defused by the calm, self-effacing Schmidt. The go-slow, relaxed way that Schmidt approached the founders or changed the management meetings or eventually chased a squatter from his office was at times exasperating to others. While describing Schmidt as "the unsung hero" of Google, Shriram admits, "He had a slow start." The founders at first, he said, "challenged everything," and openly wondered: "Could they trust his judgment?" Meanwhile, the VCs were pushing for a revenue plan. And Moritz was skeptical that Schmidt was the right man to bully it through Google.
Schmidt needed help to lower the emotional temperature, and to upgrade Google"s management. That help came in the form of Bill Campbell, then sixty-one, a barrel-chested man known throughout Silicon Valley as "the coach." At one time Columbia University"s head football coach, Campbell had also been a senior executive at Apple and a CEO of several Valley companies, including the Go Corporation and Intuit, the now-thriving online software company that provides financial services to individuals and small businesses and where he worked side by side with the founder. John Doerr knew that Campbell felt an obligation to give back to a Silicon Valley that had made him rich enough to own his own Gulfstream IV His discretion is legendary, and part of his allure. Aside from a profile in the magazine of his alma mater, the only other time he has ever been profiled was in a superb 2008 Fortune Fortune magazine piece by Jennifer Reingold t.i.tled, "The Secret Coach." His many friends offered tributes but Campbell would not sit for an interview. A Google search retrieves very few Campbell press mentions. magazine piece by Jennifer Reingold t.i.tled, "The Secret Coach." His many friends offered tributes but Campbell would not sit for an interview. A Google search retrieves very few Campbell press mentions.
Doerr served on Campbell"s Intuit board, and had called on him to mentor young leaders of Valley companies. Regularly, Campbell would join fifteen or so of Doerr"s dot-com CEO clients over dinner. The sessions are dubbed Camp Campbell, "and I"m not allowed to attend," said Doerr, who described Campbell "as one of my two best friends." In late summer of 2001, Doerr reached out to his friend to help Schmidt and the founders. "I felt it was an opportunity worth Bill"s time," he said. "Eric had not been CEO on a scale Google would become. Larry and Sergey and Eric needed to be coached."
In the Valley, Coach Campbell is a magnet for friends old and new. Still the chairman of Intuit, he is also the colead outside director at Apple, and one of Steve Jobs"s few confidants. On weekends and evenings, when big college or professional football and basketball games are televised, Campbell can often be found with a group of buddies in downtown Palo Alto"s Old Pro sports bar, a Stanford student hangout he owns. He"ll have a table in the middle of the pub piled high with hamburgers, French fries, pizzas, and his preferred drink, Bud Lite. Just under six feet tall, Campbell is easily spotted, and not just by the Kennedyesque thatch of gray hair that sprawls across his forehead: he"s the guy in constant motion, moving about the room dispensing high fives, fist pumps, hugs, and baseball caps. He sports an oversized Columbia 1962 ring and weighs just three or four pounds more than he did as a college linebacker. At the Old Pro, he"s garrulous. Outside, he"s allergic to interviews with reporters, and even with friends he sequesters conversations he has with other intimates. His discretion is well known, and part of his allure.
In a rare 2007 interview with two McKinsey & Co"s partners for the McKinsey Quarterly, McKinsey Quarterly, Campbell said something that is music to engineers at places like Google: "empowered engineers are the single most important thing that you can have in a company." He was talking about a tech company, and he went on to say that to foster innovation "you"ve got to be careful that you don"t make engineers beholden to product-marketing people. For me, growth is the goal, and growth comes through having innovation. Innovation comes through having great engineers, not great product-marketing guys." He also said that smart tech executives should spend entire days "doing nothing but reviewing projects. A whole day, with the whole management team, so that we can clean up those projects, clean out the ones that aren"t going to be good, and take the bodies that are recovered and put them on the projects that look like they have the best prospects." Campbell said something that is music to engineers at places like Google: "empowered engineers are the single most important thing that you can have in a company." He was talking about a tech company, and he went on to say that to foster innovation "you"ve got to be careful that you don"t make engineers beholden to product-marketing people. For me, growth is the goal, and growth comes through having innovation. Innovation comes through having great engineers, not great product-marketing guys." He also said that smart tech executives should spend entire days "doing nothing but reviewing projects. A whole day, with the whole management team, so that we can clean up those projects, clean out the ones that aren"t going to be good, and take the bodies that are recovered and put them on the projects that look like they have the best prospects."
Explaining Campbell"s role as a bridge builder at Google, Moritz said, "Bill"s contribution has been to take the emotion out of decisions. He"s more objective. He"s seen as a neutral source and a fair man." The objectivity was needed, he explained, because: "You had two founders who were in their twenties and Eric was twenty years older, and you had to make that relationship work between people who did not know each other. It was natural that the founders would be suspicious. There were b.u.mps at the beginning that Bill helped smooth over." The biggest b.u.mps, another Google insider said, were not between Schmidt and the founders, but with two venture capitalists on the board, Doerr and Moritz: "Eric had a busy-body board. The impression the board had was that Larry and Sergey were not focused. When they got Eric in, now they wanted to micromanage him." They wanted Schmidt to push harder to monetize search. Doerr and Moritz "were both impatient," said Shriram, who had served as a bridge between the founders and the board and gratefully handed this role to Campbell.
"I would sit with Larry and Sergey and try to figure out the things they more or less wanted from Eric," recalled Campbell. Then he"d sit with Schmidt. He performed this particular function for three years, until 2005. Looking back over the life of Google, these sessions where Campbell performed as both a psychologist and a coach loom especially large. The company could have imploded. On Campbell"s shoulders rested a complex problem. He had to earn the trust of the founders, Schmidt, the board, and Google executives. He had to help put management systems in place, recruit executives, suggest financial controls and the structure of board and management meetings.
One would expect an ex-football coach to be an in-your-face, bl.u.s.tery, and threatening personality. And Campbell sounds like he would be, for he has a deep, hoa.r.s.e voice that seems the product of yelling all day. But he is self-effacing, quick with a quip, more listener than talker. Schmidt likens Campbell"s ability to listen to that of a shrink, adding, "When he walks into a room, everyone smiles. I"ve never seen that." But he also said that "shrinks are seen as pa.s.sive," which is why he believes the "coach" appellation is more accurate. "A coach says, "Let"s go!""
Campbell laughs when told that some refer to him as Google"s shrink and offers this modest explanation of his role: "Sometimes when you are in a big and complex organization, your behavior is noted. And if your behavior is sometimes out of line, sometimes it"s me that will say, "Move it a little bit in this direction or that direction. Not much." Shrink would not be the right description. It"s more coaching people into the right direction."
It did not take long for Campbell to win over Schmidt and the founders. "Bill took me under his wing," said Schmidt, who refers to him as "my consiglieri." Campbell is so valuable at Google, Page said, because "he has the unique ability to be a warm person, one that everyone can relate to, but also has the experience of actually running a company" Brin smiles when asked about Campbell and speaks of his "especially high EQ," emotional intelligence. A princ.i.p.al criticism of Brin and Page is that they, like many of their engineers, lack EQ. Did he, he, I asked, think they lacked EQ? "We are ranked far below Bill Campbell," Brin conceded. I asked, think they lacked EQ? "We are ranked far below Bill Campbell," Brin conceded.
Two Campbell ideas embraced by the troika were an executive management meeting with their direct reports and Campbell that consumes several hours every Monday, and project review meetings with engineers that occupy much of Tuesday, Wednesday, and Friday afternoons. Campbell regularly holds one-on-one sessions with other senior executives to offer evaluations, mediate management disputes, hold hands. In other companies, Brin said, politics become excessive when you get to be large. "One of the reasons we"ve been able to avoid politics is Bill Campbell. When issues arise, he"s willing to intercede." One day I"d scheduled an interview first with Brin and then Campbell. But Brin had arrived late and we backed into Campbell"s allotted time. We were in the small conference room a few doors from Brin"s office in Building 43 and Campbell ambled in for his scheduled interview. Brin smiled and instantly rose from his chair and the two men hugged.