How Google Works

by Eric Schmidt

John Wooden’s observation that “it’s what you learn after you know it all that counts.”

We open by discussing how to attract the best smart creatives, which starts with culture, because culture and success go hand in hand, and if you don’t believe your own slogans you won’t get very far. We then cover strategy, because smart creatives are most attracted to ideas that are grounded in a strong strategic foundation. They know that business plans aren’t nearly as important as the pillars upon which they are built. Then, hiring, which is the most important thing a leader does. Hire enough great people, and the resulting intellectual mixture will inevitably combust into creativity and success.

Instead, he printed out the pages containing the results he didn’t like, highlighted the offending ads, posted them on a bulletin board on the wall of the kitchen by the pool table, and wrote THESE ADS SUCK in big letters across the top. Then he went home. He didn’t call or email anyone. He didn’t schedule an emergency meeting. He didn’t mention the issue to either of us.

This core insight—that ads should be placed based on their relevancy, not just how much the advertiser was willing to pay and the number of clicks they received—became the foundation upon which Google’s AdWords engine, and a multibillion-dollar business, was built.

Offices should be designed to maximize energy and interactions, not for isolation and status.

“think outside the box” (which has to be the most inside-the-box phrase ever uttered),

In the Internet Century, a product manager’s job is to work together with the people who design, engineer, and develop things to make great products. Some of this entails the traditional administrative work around owning the product life cycle, defining the product roadmap, representing the voice of the consumer, and communicating all that to the team and management. Mostly, though, smart-creative product managers need to find the technical insights that make products better. These derive from knowing how people use the products (and how those patterns will change as technology progresses), from understanding and analyzing data, and from looking at technology trends and anticipating how they will affect their industry. To do this well, product managers need to work, eat, and live with their engineers (or chemists, biologists, designers, or whichever other types of smart creatives the company employs to design and develop its products).

Internet age product manager

Messiness is not an objective in itself (if it was, we know some teens who would be great hires), but since it is a frequent by-product of self-expression and innovation, it’s usually a good sign.

Google is a computer science company,

Be very generous with the resources they need to do their work. Be stingy with the stuff that doesn’t matter, like fancy furniture and big offices, but invest in the stuff that does.

We invest in our offices because we expect people to work there, not from home. Working from home during normal working hours, which to many represents the height of enlightened culture, is a problem that—as Jonathan frequently says—can spread throughout a company and suck the life out of its workplace.

Hippopotamuses are among the deadliest animals, faster than you think and capable of crushing (or biting in half) any enemy in their path. Hippos are dangerous in companies too, where they take the form of the Highest-Paid Person’s Opinion. When it comes to the quality of decision-making, pay level is intrinsically irrelevant and experience is valuable only if it is used to frame a winning argument. Unfortunately, in most companies experience is the winning argument. We call these places “tenurocracies,” because power derives from tenure, not merit. It reminds us of our favorite quote from Jim Barksdale, erstwhile CEO of Netscape: “If we have data, let’s look at data. If all we have are opinions, let’s go with mine.”40

“it is the quality of the idea that matters, not who suggests it.” Sounds easy, but of course it isn’t. Creating a meritocracy requires equal participation by both the hippo, who could rule the day by fiat, and the brave smart creative, who risks getting trampled as she stands up for quality and merit.

This outcome was possible only because Sergey, as a smart creative, deeply understood the data being presented, the technology of the platform, and the context of the decision. The hippo who doesn’t understand what’s going on is more apt to try to intimidate her way to success.

Sridhar also had a job to do: He had to speak up. For a meritocracy to work, it needs to engender a culture where there is an “obligation to dissent”.41 If someone thinks there is something wrong with an idea, they must raise that concern. If they don’t, and if the subpar idea wins the day, then they are culpable.

That’s why dissent must be an obligation, not an option.

Meritocracies yield better decisions and create an environment where all employees feel valued and empowered. They demolish the culture of fear, the murky, muddy environment in which hippos prefer to wallow. And they remove biases that can hamper greatness.

Smart creatives are different: They prefer a flat organization, less because they want to be closer to the top and more because they want to get things done and need direct access to decision-makers.

One last organizational principle: Determine which people are having the biggest impact and organize around them. Decide who runs the company not based on function or experience, but by performance and passion. Performance should be relatively easy to measure, but passion can be trickier to gauge. It is native in the best leaders—the sort of people who are elected captain of the team without even volunteering—and it draws others to them like iron filings to a magnet. Bill Campbell, the former Intuit CEO and ongoing coach and mentor to us both, often quotes Debbie Biondolillo, Apple’s former head of human resources, who said, “Your title makes you a manager. Your people make you a leader.”

Internal teams work in much the same way: You want to invest in the people who are going to do what they think is right, whether or not you give them permission. You’ll find that those people will usually be your best smart creatives.

When a CEO looks around her staff meeting, a good rule of thumb is that at least 50 percent of the people at the table should be experts in the company’s products and services and responsible for product development.

You also want to select as your leaders people who don’t place their own interests above the company’s. We see this a lot in companies with business units or divisions, where the success of the unit, as we noted before, can take precedence over that of the company as a whole.

You should never be able to reverse engineer a company’s organizational chart from the design of its product. Can you figure out who reigns supreme at Apple when you open the box for your new iPhone? Yes. It’s you, the customer; not the head of software, manufacturing, retail, hardware, apps, or the Guy Who Signs the Checks. That is exactly as it should be.

Once you identify the people who have the biggest impact, give them more to do. When you pile more responsibility on your best people, trust that they will keep taking it on or tell you when enough is enough. As the old saying goes: If you want something done, give it to a busy person.

Life is something like that island, only more complicated. For not only are knaves in real life devoid of integrity, they are also sloppy, selfish, and have a sneaky way of working their way into virtually any company. Arrogance, for example, is a knavish tendency that is a natural by-product of success, since exceptionalism is fundamental to winning. Nice humble engineers have a way of becoming insufferable when they think they are the sole inventors of the world’s next big thing. This is quite dangerous, as ego creates blind spots.

There are other things that classify people as knaves. Jealous of your colleague’s success? You’re a knave. (Remember that famous knave Iago, warning the smart creative Othello to “beware, my lord, of jealousy. It is the green-eye’d monster, which doth mock the meat it feeds on.”46) Taking credit for someone else’s work? Knave. Selling a customer something she doesn’t need or won’t benefit from? Knave. Blowing up a Lean Cuisine in the company microwave and not cleaning it up? Knave. Tagging the wall of a nave? Knave.

The character of a company is the sum of the characters of its people, so if you strive for a company of sterling character, that is the standard you must set for your employees. There is no room for knaves. And generally, in our experience, once a knave, always a knav...

You must always be firm with the people who violate the basic interests of the company. Don’t bite them, but do act swiftly and decisively. Nip crazy in the bud.

Knaves are not to be confused with divas. Knavish behavior is a product of low integrity; diva-ish behavior is one of high exceptionalism. Knaves prioritize the individual over the team; divas think they are better than the team, but want success equally for both. Knaves need to be dealt with as quickly as possible. But as long as their contributions match their outlandish egos, divas should be tolerated and even protected. Great people are often unusual and difficult, and some of those quirks can be quite off-putting. Since culture is about social norms and divas refuse to be normal, cultural factors can conspire to sweep out the divas along with the knaves. As long as people can figure out any way to work with the divas, and the divas’ achievements outweigh the collateral damage caused by their diva ways, you should fight for them. They will pay off your investment by doing interesting things. (And if you have been reading this paragraph thinking “she” every time we mention diva, remember that Steve Jobs was one of the greatest business divas the world has ever known!)

For many people, work is an important part of life, not something to be separated.

Manage this by giving people responsibility and freedom.

Marissa Mayer, who became one of Silicon Valley’s most famous working mothers not long after she took over as Yahoo’s CEO in 2012, says that burnout isn’t caused by working too hard, but by resentment at having to give up what really matters to you.49 Give your smart creatives control, and they will usually make their own best decisions about how to balance their lives.50

We encourage people to take real vacations, although not to promote “work-life balance.” If someone is so critical to the company’s success that he believes he can’t unplug for a week or two without things crashing down, then there is a larger problem that must be addressed. No one should or can be indispensable. Occasionally you will encounter employees who create this situation intentionally, perhaps to feed their ego or in the mistaken belief that “indispensability” equals job security. Make such people take a nice vacation and make sure their next-in-line fills in for them while they are gone. They will return refreshed and motivated, and the people who filled their shoes will be more confident. (This is a huge hidden benefit of people taking maternity and paternity leaves too.)

there’s nothing a good ’80s cover band and a fine brew can’t fix. Everyone’s fun when they’re dancing to Billy Idol and swigging an Anchor Steam.

“When you are in a turnaround,” the man told him, “find the smart people first. And to find the smart people, find one of them.”

While establishing a culture in a start-up is relatively easy, changing the culture of an ongoing enterprise is extraordinarily difficult, but even more critical to success: A stagnant, overly “corporate” culture is anathema to the average smart creative.

Then articulate the new culture you envision—to borrow Nike’s advertising phrase from the 2010 World Cup, “write the future”—and take specific, high-profile steps to start moving that way. Promote transparency and sharing of ideas across divisions. Open up everyone’s calendar so that employees can see what other employees are doing. Hold more company-wide meetings and encourage honest questions without reprisal. And when you get those tough questions, answer them honestly and authentically.

“It’s been said that every institution is nothing but the extended shadow of one person.

Gerstner goes on to talk about rebuilding IBM based on Watson’s core beliefs: excellence in everything they do, superior customer service, and respect for the individual.

Rather, they rally their troops by shouting “Ah’cha’rye,” which translates from Hebrew as “Follow me.” Anyone who aspires to lead smart creatives needs to adopt this attitude.

Every company needs a “Don’t be evil,” a cultural lodestar that shines over all management layers, product plans, and office politics. This is the ultimate value of having a well-established and well-understood company culture.

Successful teams spot the flaws in their plan and adjust.

In fact, it’s fine to have a plan, but understand that it will change as you progress and discover new things about the products and market.

This rapid iteration is critical to success, but equally important is the foundation upon which the plan is built. The tectonic, technology-driven shifts that characterize the Internet Century have rendered some of the commonly accepted strategic fundamentals we learned in school and on the job incorrect.59 So although your plan might change, it needs to be based on a foundational set of principles that are grounded in how things work today and that guide your plan as it shape-shifts its way to success. The plan is fluid, the foundation stable.

The company didn’t need to document its plan (or even have one), they argued, but in order to hire new people and keep everyone moving in the same direction, it did need to document the foundation for that plan.

today they stand as a foundational blueprint for how to create an Internet Century success story: Bet on technical insights that help solve a big problem in a novel way, optimize for scale, not for revenue, and let great products grow the market for everyone.

AdWords, the Google ads engine that generates most of the company’s revenue, was based on the insight that ads could be ranked and placed on a page based on their value as information to users, rather than just by who was willing to pay more.63

Chrome, Google’s open-source browser, was founded on the insight that as websites grew more complex and powerful, browsers needed to be reengineered for speed.

YouTube Content ID creates a unique data representation for every audio and video clip and matches that fingerprint against a global rights database, thereby giving content rights owners the ability to find (and sometimes monetize) their content on YouTube. Translate gets help from a vast multilingual user base to continuously improve translation quality.

Product leaders create product plans, but those product plans often (usually!) lack the most important component: What is the technical insight upon which those new features, products, or platforms will be built? A technical insight is a new way of applying technology or design that either drives down the cost or increases the functions and usability of the product by a significant factor.