Googled (11 page)

BOOK: Googled

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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)

W
hile 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 class 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 assumed 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 cocktail 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 passed 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 assumed the title of CEO in August, and Page was named president, products, and Brin president, technology. According to SEC documents 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 class 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
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 glasses 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 assigned 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 assessed 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,
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 substitute 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.

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