How Google Works

by Eric Schmidt

When I was younger and first started thinking about my future, I decided to either become a professor or start a company. I felt that either option would give me a lot of autonomy—the freedom to think from first principles and real-world physics rather than having to accept the prevailing “wisdom.”

One night I had a dream (literally) and woke up thinking … what if you could download the whole Web and just keep the links?

It was only later that Sergey and I realized ranking web pages by their links could generate much better search results. Gmail started out as a pipe dream too.

most people haven’t been educated in this kind of moonshot thinking. They tend to assume that things are impossible, rather than starting from real-world physics and figuring out what’s actually possible. It’s why we’ve put so much energy into hiring independent thinkers at Google, and setting big goals. Because if you hire the right people and have big enough dreams, you’ll usually get there. And even if you fail, you’ll probably learn something important.

in technology, because change tends to be revolutionary not evolutionary.

One morning, as he walked down the hall to his closet office,

Clearly, this was not a measure-your-importance-in-square-feet kind of place.

The company’s advertising platform, AdWords, was starting to generate significant amounts of revenue

To take on the biggest gorilla in the jungle, we needed a plan.

As the company grew out of its first home in a Stanford dorm room, to Susan Wojcicki’s garage6 in Menlo Park, to offices in Palo Alto and then Mountain View, the founders ran it on a few simple principles, first and foremost of which was to focus on the user. They believed that if they created great services, they could figure out the money stuff later.

To this day the rule of thumb is that at least half of Google employees (aka Googlers) should be engineers.

through company-wide “TGIF” meetings held every Friday afternoon, where any topic was fair game for discussion.

For years, Google’s primary tool for managing the company’s resources was a spreadsheet with a ranked list of the company’s top 100 projects, which was available for anyone to see and debated in semi-quarterly meetings.

Most projects were prioritized on a scale of 1 to 5, but there was also room on the list for projects categorized as “new / far out” and “skunkworks.”

This emphasis on engineering continued even as the company expanded the management team. The founders didn’t hire Eric for his business acumen as much as for his track record as a technologist (Eric was a Unix expert and helped create Java—the software language, not the beverage or the island) and geek cred as an alum of Bell Labs. They hired Jonathan in spite of his economics and MBA degrees, because he was a proven product advocate and innovator from his days at Apple and Excite@Home. That we were business guys wasn’t exactly a liability,

Today Google is a $50-billion company with over forty-five thousand employees in over forty countries. We have diversified from Internet search and search advertising into video and other forms of digital marketing,

One of the biggest reasons for our success, though, is that the plan we delivered to the board that day in 2003 wasn’t much of a plan at all. There were no financial projections or discussions of revenue streams. There was no market research on what users, advertisers, or partners wanted or how they fit into nicely defined market segments. There was no concept of market research or discussion of which advertisers we would target first. There was no channel strategy or discussion of how we would sell our ad products. There was no concept of an org chart, with sales doing this, product doing that, and engineering doing some other that. There was no product roadmap detailing what we would build and when. There was no budget. There were no targets or milestones that the board and company leaders could use to monitor our progress.

cloud computing10 has put practically infinite computing power and storage and a host of sophisticated tools and applications at everyone’s disposal, on an inexpensive, pay-as-you-go basis. Today, access to these technologies is still unavailable to much of the world’s population, but it won’t be long before that situation changes and the next five billion people come online.

On the day of your departure, your phone will remind you when to leave for the airport, tell you the terminal and gate from which the flight departs, and let you know if you will need an umbrella when you get to your destination, all without you having to ask.

Want to know if that restaurant you picked for tonight’s date has the right ambience or easy parking? Virtually drive there, walk through the front door, and take a tour inside. Table 14 looks perfect!

Today, three factors of production have become cheaper—information, connectivity, and computing power—

Many incumbents—aka pre-Internet companies—built their businesses based on assumptions of scarcity: scarce information, scarce distribution resources and market reach, or scarce choice and shelf space. Now, though, these factors are abundant, lowering or eliminating barriers to entry and making entire industries ripe for change.

Media, marketing, retail, health care, government, education, financial services, transportation, defense, energy … We can’t think of an industry that will escape this era unchanged.

the customer has a voice; provide a bad product or lousy service at your peril.

telling Jonathan that “Google’s search engine is better, but we’ll out-market them.” Excite@Home is gone, so that obviously didn’t work out very well.

Have you ever heard of Google Notebook? How about Knol? iGoogle? Wave? Buzz? PigeonRank?15 These were all Google products that, while they had some merit, never caught on with users.

As Jeff Bezos, founder and CEO of Amazon, says: “In the old world, you devoted 30 percent of your time to building a great service and 70 percent of your time to shouting about it. In the new world, that inverts.”

One can model prototypes digitally, build them with a 3-D printer, market test them online, adjust their design based on the resulting data, and even raise production funds online with a prototype or slick video. Google[x], a team working on some of Google’s most ambitious projects, built the first prototype of Google Glass, a wearable mobile computer as light as a pair of sunglasses, in just ninety minutes.

better products don’t stand on the shoulders of giants, but on the shoulders of lots of iterations. The basis for success then, and for continual product excellence, is speed.

most management processes in place at companies today are designed with something else in mind. They were devised over a century ago, at a time when mistakes were expensive and only the top executives had comprehensive information, and their primary objectives are lowering risk and ensuring that decisions are made only by the few executives with lots of information. In this traditional command-and-control structure, data flows up to the executives from all over the organization, and decisions subsequently flow down. This approach is designed to slow things down, and it accomplishes the task very well. Meaning that at the very moment when businesses must permanently accelerate, their architecture is working against them.

most knowledge workers in traditional environments develop deep technical expertise but little breadth, or broad management expertise but no technical depth.

Google peers represent a quite different type of employee. They are not confined to specific tasks. They are not limited in their access to the company’s information and computing power. They are not averse to taking risks, nor are they punished or held back in any way when those risky initiatives fail. They are not hemmed in by role definitions or organizational structures; in fact, they are encouraged to exercise their own ideas.

They are a new kind of animal, a type we call a “smart creative,”

The primary objective of any business today must be to increase the speed of the product development process and the quality of its output.

A smart creative has deep technical knowledge in how to use the tools of her trade,18 and plenty of hands-on experience.

She is an expert in doing. She doesn’t just design concepts, she builds prototypes. She is analytically smart. She is comfortable with data and can use it to make decisions. She also understands its fallacies and is wary of endless analysis. Let data decide, she believes, but don’t let it take over.

She is user smart. No matter the industry, she understands her product from the user or consumer’s perspective better than almost anyone. We call her a “power user,” not just casual but almost obsessive in her interest.

“If I give you a penny, then you’re a penny richer and I’m a penny poorer, but if I give you an idea, then you will have a new idea but I’ll have it too.”

they all must possess business savvy, technical knowledge, creative energy, and a hands-on approach to getting things done.

We’ve been working on this ever since, and along the way, like all good students, we kept notes. Whenever we heard something interesting in a staff meeting or product review, we scribbled it down.

Innovation is up next, since the only way to achieve sustained success is through continuous product excellence, and an environment of innovative primordial ooze is the only way to get there.

Is that you? Are you ready? As Peter Drucker pointed out, the Egyptian who conceived and built the pyramids thousands of years ago was really just a very successful manager.21 The Internet Century brims with pyramids yet unbuilt. Let’s get started. And this time, with no slave labor.

One Friday afternoon in May 2002, Larry Page was playing around on the Google site, typing in search terms and seeing what sort of results and ads he’d get back. He wasn’t happy with what he saw. He would enter a query for one thing, and while Google came back with plenty of relevant organic results, some of the ads were completely unrelated to the search.22 A search for something like “Kawasaki H1B” would yield lots of ads for lawyers offering to help immigrants get H-1B US visas, but none related to the vintage motorcycle to which the search query referred. Or a search for “french cave paintings” delivered ads that said “buy french cave paintings at …,” with the name of an online retailer that obviously did not stock French cave paintings (or even facsimiles of them). Larry was horrified that the AdWords engine, which figured out which ads worked best with which queries, was occasionally subjecting our users to such useless messages. At that point, Eric still thought Google was a fairly normal start-up. But what happened over the next seventy-two hours completely shifted that perception. In a normal company, the CEO, seeing a bad product, would call the person in charge of the product. There would be a meeting or two or three to discuss the problem, review potential solutions, and decide on a course of action. A plan would come together to implement the solution. Then, after a fair amount of quality assurance testing, the solution would launch. In a normal company, this ...

The reason a bunch of employees who had no direct responsibility for ads, or culpability when they were lousy, spent their weekends transforming someone else’s problem into a profitable solution speaks to the power of culture. Jeff and gang had a clear understanding of their company’s priorities, and knew they had the freedom to try to solve any big problem that stood in the way of success. If they had failed, no one would have chastised them in any way, and when they succeeded, no one—even on the ads team—was jealous of their progress.

Many people, when considering a job, are primarily concerned with their role and responsibilities, the company’s track record, the industry, and compensation. Further down on that list, probably somewhere between “length of commute” and “quality of coffee in the kitchen,” comes culture. Smart creatives, though, place culture at the top of the list. To be effective, they need to care about the place they work. This is why, when starting a new company or initiative, culture is the most important thing to consider.

Culture stems from founders, but it is best reflected in the trusted team the founders form to launch their venture. So ask that team: What do we care about? What do we believe? Who do we want to be? How do we want our company to act and make decisions? Then write down their responses.

Most companies neglect this. They become successful, and then decide they need to document their culture. The job falls to someone in the human resources or PR department who probably wasn’t a member of the founding team but who is expected to draft a mission statement that captures the essence of the place. The result is usually a set of corporate sayings that are full of “delighted” customers, “maximized” shareholder value, and “innovative” employees. The difference, though, between successful companies and unsuccessful ones is whether employees believe the words.

“Our mission is to build unrivaled partnerships with and value for our clients, through the knowledge, creativity, and dedication of our people, leading to superior results for our shareholders.”24 Boy, that sure checks all the boxes, doesn’t it? Clients—check; employees—check; shareholders—check. Lehman Brothers was the owner of that mission statement—at least until its bankruptcy in 2008. Surely Lehman stood for something, but you couldn’t tell from those words.

A good litmus test is to ask what would happen if you changed the statements that describe culture.

one of Google’s stated values has always been to “Focus on the User.”