Wednesday, October 22, 2014

How Google Works

Eric Schmidt was Google's CEO from 2001 to 2011, which was a period of stunning growth for the technology behemoth. In How Google Works, he discusses the aspects of the company that he believes contributed to its success.

Schmidt covers a range of topics, including what a firm's strategy should include and leave out, how to hire properly, how to communicate, what is essential in a firm's culture, and how to foster innovation. Everything makes a great deal of sense. You want to ship/iterate quickly, fail quickly, always keep the user in mind, give employees at the front lines the ability to make decisions, use as much data as you can to make intelligent decisions and so forth.

Of course, with this type of book it is always difficult to separate out what actually positively contributed to Google's success, versus what cool stuff the company is able to do *because* of its success. Google's Adsense product is tremendously successful through a combination of skill and luck. The rest of the stuff, though, includes a bunch of failures and a bunch of stuff that is popular but not necessarily generating good returns on capital. If Adsense wasn't around to fund all this stuff, would Google still be a successful company? It's hard to say.

Unsurprisingly, there wasn't a whole lot of talk (if any) from Schmidt about returns on capital or margins or anything like that. The company seems to simply aim to thrill the user by solving huge problems, and let the returns come later if they do at all. This philosophy was in place from day one as it guided the company's founders as they produced the flagship search engine, and boy did the returns ever follow! So I guess you can't fault them for sticking to this philosophy.

I highly recommend the book to anyone looking to grow a technology company, and to anyone who may consider investing in Google.

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