The Key to Google’s Explosive Growth, According to LinkedIn’s Former CEO
Eric Schmidt was realizing that he’d made a very big mistake. After fourteen successful years at Sun Microsystems, he decided: “It was time for a change. It was time to be a CEO somewhere.” He was offered the job leading a networking software company called Novell. On paper, it sounded perfect. “But in the typical way I operate, I did not do enough due diligence.
“The reality hit on the first day, because I was presented with different numbers for revenue for the quarter than I’d been told when I was interviewing. And by that Wednesday — third day on the job — we were in a real crisis.” Things went rapidly downhill. “Later that summer, we had a month which we called ‘the worst month,’ where everything was failing. And there was a moment in that month where I remember saying to my colleague, ‘I just want to get out of here with my integrity intact.’ When you face those kinds of challenges, you learn what really matters.”
In the midst of this crisis, Eric set out to learn something else entirely. He became a small-plane pilot. And while that may sound inconsequential, it turned out to have a profound influence. A friend said to Eric: “You need a distraction. And if you’re flying planes, you won’t be able to think of anything else.”
“It was the best advice ever,” Eric recalls. “Because in aviation, they teach you to make rapid decisions, over and over again: Decide. Decide. Decide. It’s better to make a decision and just accept the consequences.”
“I just want to get out of here with my integrity intact.”
“That discipline helped me in the hard times at Novell, when I was in a real hard-core turnaround,” Eric recalls. But this habit of rapid decision-making also served Eric well at Google, historically so.
Thinking Fast. Acting Fast.
Rapid decision-making has been key to Google’s explosive growth, for at least two reasons. The first is that it allowed them to outpace competition in the fast-changing ecosystem of online search. The second — and less understood — is that fast decisions fuel innovation. Nothing kills creativity like running into bureaucratic red tape. “Most large corporations have too many lawyers, too many decision makers, unclear owners — and things congeal.”
To avoid such clotting, Schmidt baked rapid decision-making into the company’s early rituals. “We adopted a model of staff meeting on Monday, a business meeting on Wednesday, and a product meeting on Friday,” Eric says. “The agenda was that everybody knew which meeting the decisions were made at. Today at Google, decisions are made quickly in almost every case, even at its current scale. And that’s a legacy of that early decision.”
“So, choice A is, ‘We’re going to build it ourselves, do it right.’ And choice B is, ‘Buy that company and do it now.’ You always should choose ‘do it now.’”
The $1.65 billion acquisition of YouTube is a perfect example. “We made the decision to purchase YouTube in about ten days. Incredibly historic decision but we were ready. People were focused. We wanted to get it done,” Eric recalls.
And Susan Wojcicki also recalls the speed. Susan is YouTube’s current CEO, but at the time of the acquisition, she was a longtime Googler, then working on a new program called Google Video, a direct competitor to YouTube.
“YouTube launched a few months after us, and they very quickly grew and were very soon bigger than us,” Susan recalls. “And we realized that we were losing. It was first a moment of incredible highs — while we found this great area that we could develop and build product around — and then soon afterward, realizing Wow. We were failing.
“For me one of the big factors was, I was tracking the number of videos uploaded — how many new people were uploading to YouTube or to Google Video. And they were already significantly larger than us. And even though we made changes, it was just too late. So that for me was the defining moment. I knew it’d be very hard for us to catch up.
“YouTube at the same time realized that they needed to have a lot more investment; they were going to have huge capital needs. And so they were going to need either significantly more investment — which at the time I don’t think the market would have really understood” — or they would need to be acquired.
“So they quickly realized they needed to sell and started shopping it around. It was clear to me this was just a huge opportunity in terms of future video, and I was a big advocate along with Salar Kamangar, who ended up being my predecessor as YouTube’s CEO. We got together and we had a good conversation with [Google co-founders] Sergey [Brin] and Larry [Page]. I produced a model. I did a model in like fifteen minutes to show that this actually had huge potential in the future — not just in views, but in revenue, too. We didn’t have a lot of time.”
Eric had dismissed an earlier suggestion to buy YouTube for $600 million. He was told it would probably cost more than that if he waited, but he insisted that it still wasn’t worth it. Then came word that YouTube might be talking to Yahoo about a sale.
Now he was ready to talk.
A Search Engine and Video Platform Walk Into a Diner...
Eric found himself sitting across a table with YouTube’s founders — at a Denny’s restaurant. Because where else would you want to do a billion-dollar deal?
“Actually, we met at Denny’s because we were quite sure that we wouldn’t see anyone else there — we did not want this to leak,” Eric says.
Within days they settled on a price. The YouTube team was invited to a Google board meeting, the board voted, and just like that, YouTube was part of Google. And it’s a good thing Eric moved as quickly as he did. “I found out later that they met with Yahoo the day after us — at the same Denny’s!”
“We purchased it for $1.65 billion,” Susan recalls. “And so the first direction that we got was, ‘Don’t screw it up.’”
“I found out later that they met with Yahoo the day after us — at the same Denny’s!”
Those words would ring true a few years later, when Susan was given another high-stakes, lightning-fast decision to make: After more than ten years at Google, did she, or did she not, want to take the helm at YouTube?
“What happened was Larry just asked me,” Susan said. “I remember he said, ‘What do you think of YouTube?’ He didn’t say ‘Oh, I’m offering you the job.’ I hadn’t prepared anything. I didn’t know that’s what we were going to talk about that day. But I just gave him my off-the-cuff thoughts about YouTube and said I was really interested. A couple weeks later I became CEO of YouTube.”
You can hear it in Eric’s and Susan’s stories — and you can see it in business history. Many of Google’s most strategic decisions come down to moving fast. This may be the aspect of Google’s strategy that’s least understood. It’s why Google buys smaller companies instead of competing for dominance. “We have plenty of engineers,” explains Eric, “but let’s imagine that we have engineers that can build an equivalent product in one year, versus an acquisition that’s expensive. And let’s say that we can monetize this fairly quickly. So, choice A is, ‘We’re going to build it ourselves, do it right.’ And choice B is, ‘Buy that company and do it now.’ You always should choose ‘do it now.’”
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From the book MASTERS OF SCALE: Surprising Truths from the World’s Most Successful Entrepreneurs by Reid Hoffman, with June Cohen and Deron Triff. Copyright © 2021 by Wait What Inc. Published by Currency, an imprint of Random House, a division of Penguin Random House LLC. All rights reserved.