Don't be evil (E)

0:00In 1990, after more than 50 years of building it, the Annenberg family sold TV Guide magazine. They sold it for more than$3 billion. At the time, the flimsy little magazine that told people what was on television was worth more than ABC, CBS, or NBC, the very networks it was covering. Konnichiwa. It's Nick in Fukuoka, Japan, and this is a special archived episode of Akimbo.

0:44That's crazy. How could it be that a directory of what's on television could be worth more than television? Well, fast forward less than 20 years. I am walking through Union Square in New York City. I'm wearing a Google t-shirt. Google was a pretty new company at the time. I got in the t-shirt because I'd done a gig with them. And from across the farmer's market, hundreds of people across, this woman yells out, Google, do you work at Google? Google is my best friend. And she runs right up to me. Well, no, I didn't work at Google, and therefore I wasn't her best friend. But how could it be that a search engine could create so much value for a single user?

1:36It turns out that the magic trick that Google figured out how to perform was priceless to billions of people. The idea that you could very quickly and fairly reliably find unlimited amounts of information for free was irresistible. And so Google has grown. And as Google has grown, it has changed our culture. In ways large and small, we all live in Google world, whether we want to or not. Most people don't really understand how Google makes all of that money. And even though we interact with it all the time, we're not really aware of how it is impacting so many of the institutions, cultural or business-wise, that it engages with.

2:37So here's a little bit of an overview. The first thing is this, that more than a trillion searches a year happen on Google. What that means is that on average, Google makes about a tenth of a penny from every search that's done. How do they do that? They do that by running permission-based ads next to those search results. In essence, they're delivering anticipated, personal, and relevant messages that match up what the person was searching for. Now, most of the searches, they don't make anything on because you're not clicking on one of those ads. But when you do click on one of those ads, they might make$3,$5, even$80 a click, depending on what it is you're clicking on.

3:28They also make money from ads they place on other sites, but that's a different category of revenue for them because they don't have nearly as much control, nor do they get to keep all of the income that's coming in. It was a brilliant idea. Bill Gross and Overture were one of the people who pioneered it. But the idea that you could show up with an ad that someone paid for that matched what you just searched for is a really big idea. It is a form of direct marketing, not brand marketing, that has grown like crazy. Google got it to catch on with a brilliant strategy. Those ads used to cost a penny, two pennies, a nickel, a click.

4:14So if you sold an item where it was worth 10 or 20 or 30 or$500 for someone to buy something for you, and you could buy the attention of a surfer who just typed in the very thing you sold, and you could buy it for a penny or a nickel, give me all of them. This idea, give me all of them, is the holy grail of advertising. You don't need a sales force. You just have to have the thing someone wants an unlimited number of. And as soon as people started paying a nickel a click, other people, when they googled themselves, saw that their competitors were buying some of the folks they were hoping would click over to their site instead.

5:04What do you mean people are going to our competitor for just a nickel? Bid 10 cents. And so the auction is on. Once we know what it is worth to have someone click on an ad, we are willing to bid up to a penny less than that rather than having our competitor engage in that auction. So here's the first side effect of Google's business model. If it ends up being worth$100 to you to get someone to click over to your travel site and your competitor is bidding$99, you'll bid$99.50. So where's your profit going? Well, you used to keep$100 in profit from every person you sold to. Now you're keeping 50 cents and Google is keeping $99.50.

6:01Like a landlord, they're going to take almost all of the money off the table as long as the market is competitive. If someone else also wants that click, someone else is also going to bid on it. So now you see the path,$136 billion in revenue, most of it straight to the bottom line, from a company doing one thing, offering a magical search engine that connects billions of people to the information they desperately seek. And every time you use it, Google makes money. The more searches, the happier they are. So how do we explain all the other things that Google does? Well, Google's mission, they say, is to organize the world's information.

6:57But in fact, their business mission is to have people do a Google search. Doing a Google search is where they make almost all of their profit. perhaps 80 % of all of the paid search advertising in the world goes through this one company in an auction where the salespeople don't have to do very much at all except soothe the people who aren't winning the auctions. Once you're hooked on it, on paying for this traffic, you will keep paying for it because it's still worth it to you. So Google sees something like blogs. Blogs, and I'm partial here, are a fun, free, easy way to get information from a trusted source.

7:46The best way to read a blog is with something called an RSS reader. An RSS reader bypasses the search engine. It just lives on your device, your phone or your laptop, and it brings you, unimpeded, uninterrupted, all of the blogs you want to read. So Google launches Google Reader. It's free, like everything Google's doing, and it works. It's fast. It's well-designed. Go ahead. Move the blogs you like onto Google Reader. There, on one page, you can read all the blogs you want to. Guess what this does? This depresses search. the people, the most interested, highest status people, the kind of people who are reading blogs are going to search less because you don't have to go to Google and type in blog or Seth or any other topic to find the blog.

8:43The blog is coming to you. That doesn't help search. So a few years into it, Google shuts down Google Reader, sending all of those blog readers either to a more difficult to find, RSS reader, or back to the search engine. Think about what happens if you search for lyrics. Oh, I can't get that out of my head. Excuse me while I kiss this guy. What's that lyric? If you type that into Google and it takes you to a site filled with detailed discussions about lyrics, you're gone. You're not searching for the next thing you're looking for. On the other hand, if Google manages to scrape that site or hire an intermediary and just puts the answer right there on the page with no clicking on your part, you're going to do another Google search.

9:42And so, bit by bit, topic by topic, Google is cramming more and more onto their page and not sending you to a page that's far away. When I worked at Yahoo in the late 90s, Yahoo's mission was come to Yahoo and stay at Yahoo. Amazon's mission was come to Amazon and buy something. When Google came along, the giant disruption in the early 2000s was come to Google and leave Google. That was their goal. There were only three buttons, two buttons on the homepage. At the time, Yahoo had 188 buttons on their homepage. And of the 188 buttons, almost all of them pointed to other things you could do on Yahoo.

10:31Because Yahoo hadn't figured out how to run the right kind of ads, they were busy running banner ads. They needed to generate billions and billions of page views to make them pay. Google, on the other hand, just wanted you to find what you were looking for and leave. But if they're to continue to grow, they need you to do more and more searches. And so bringing the content back onto their pages encourages you to do that. A little bit of an aside about this whole idea of continuing to grow. Part of the lore of the last 25 years is that the best way to hit it rich is to work for a fast-growing public tech company.

11:19Why is that? Most of the people who are in senior positions at these companies, and I'll argue that there are more than 10 ,000 people in a senior position at Google, have stock options. a stock option says that one day in the future, you're gonna get some shares that you can buy for X number of dollars. Let's say$50 a share. And on the very same day that you can buy them from us for 50 as a prize for working here, you can sell them at whatever the stock market says they're worth. Which means that as soon as the stock goes over$50, every time the stock goes up a dollar, your stock options are worth another dollar each in value.

12:08So if you're sitting there holding 100 ,000 stock options, which is not that unusual, and the price goes up a dollar, that means one day soon, you just made$100 ,000. If it goes up$10, you just made a million dollars. So try to imagine what it's like at a meeting at Google when they have to make a decision about something that's going to make their stock price go up by$5 or maybe even down by a dollar. You look around the room and every single person in that room knows what to multiply the increase in stock price by to figure out what it did to their net worth. So even if the multi-billionaires who run the place decide to take a longer term view, Deep down, there are tens of thousands of people in each of these companies who are driven to figure out how to make the stock price go up.

13:07And so we come face to face with the motto. The motto that first appeared on Google's homepage more than 15 years ago. Don't be evil. Lots of people have claimed they made up this motto. It was probably Paul Bukhite and Amit Patel. And their idea was, don't be evil means do it on behalf of the user. Give users long-term paths to satisfaction. Some people say it was in contrast to Microsoft, which at the time was a monopoly and wasn't giving people a choice. So don't be evil can mean lots of different things. But for a long time it meant, don't be greedy, give people a choice. Back to those music lyrics.

14:02The website Genius.com, which has had a fairly checkered past, is a site where lots of people can chime in and comment on the lyrics to many songs, particularly rap songs. And they did something really clever, which is they seeded a code in all of the lyrics they had on their page. It was a little bit like Morse code in the way that they used certain characters. Well, you guessed it. Google got busted. Google was stealing, probably through a contractor, all of the hard work that Genius had put in in creating the typed-up lyrics, which you could argue were stolen from the people who wrote the lyrics, but that's a whole other discussion.

14:49What we know is that Google's people incented to keep folks on the site do things like shut down Google Reader. They do things like include the lyrics on their site instead of sending you to a site where you can see them yourself. So back to TV Guide, where we began. Try to imagine it's 1988 and you are a TV programmer and you figure out how to make a show that TV Guide is really going to like. And if TV Guide really likes it and puts it on the cover of their magazine, you're going to get more viewers. And if you get more viewers, you're going to sell more ads. And if you sell more ads, you're going to make more money.

15:36That is where the power of someone like TV Guide comes from. Now, Google will bend over backwards to tell you they don't have somebody who's making editorial choices inside of Google. It's true. But there are more than 3 ,000 people working full-time to program Google's search engine. And there is no human who knows exactly how Google's search engine works anymore. It's too complicated. 3 ,000 people working night and day for decades creates quite a complicated algorithm. But what is also true is that algorithm is making choices. It may not make choices that you can influence by taking it out for dinner, but choices it makes.

16:27And those choices impact what websites get built, how they get built, what those websites talk about. Around the time of Google's ascendancy, a craft called SEO began to hit its stride. SEO stands for Search Engine Optimization. And at the beginning, the idea of SEO was benign. Let's organize our website so that when Google visits it, it knows what it's about. Because if we can be clear for Google about what kind of person we want to come here, then that kind of person will find us when they search in Google. But over time, people got a little bit more hurried and lazy. Over time, sites got a lot more greedy.

17:16And so a combination occurred. First, we know that the vast majority, more than 90 % of the people who do a Google search, never get to page two of the Google results. Google is that good. We trust Google so much. If it's on the first page, maybe if it's just in the first two or three matches, that's enough. We satisface. We click through. We're done looking. So even though there might be 84 ,000 matches for a search on Alt-MBA, you're only going to look at the first two or three to find what you were looking for, which means that if you're at the top of the search results, you're going to get an unfair share of attention, which means you've got to do everything you can to be at the top of the search results.

18:05And that leads to the black hat part. Because once SEO began to work, companies started budgeting for it. And if 15 companies want to be number one, 14 of them are going to lose. So people start looking for shortcuts. So people start changing the site itself. So people start resorting to paying other people to link to them, acting in ways that make absolutely no cultural or rational sense. They simply exist to make a mythical algorithm happy. And when it's not happy, theories abound as to what to do to make it happier. And as soon as someone starts doing something that works, everyone tries to copy it.

18:49So what we're left with is a cycle that was started by Google, where it looked at a system, a benign, thoughtful system that said, here's a webpage. And it started to try to make guesses as to what that webpage was about. And so then SEO shows up and sharpens it a little bit. And then Google responds to that. And then SEO responds to that. And then Google responds to it. And what we end up with is page after page of the internet that isn't organized for users anymore. It's organized for this idea that maybe we can get free traffic from the website that people think of as their best friend. That maybe we can get the equivalent of the cover of our edition of TV Guide.

19:36Maybe we can be swamped with a whole bunch of people who want to show up. Okay, another aside. At the same time that all this is going on, email continues to evolve as a way to contact people who want to hear from you. The original permission marketing medium anticipated and personal and relevant messages to people who want to get them. But for the last 30 years, the bad guys have been going after email attention as well. Because email is an open API. You don't need stamps. If you format your email properly. You can put as much email as you want into the system. And so some people do. Some people send a million or 10 million emails a day.

20:26Spam continues to be rampant. If I have to entrust any amount of money under your custody, I am Mr. Michael Bangura, the son of late Mr. Tiamu Bangura, who is the minister of finance in Sierra Leone. Who was killed during the Civil War?

20:49In the face of all that spam, people who run email services needed a way to filter it out. Google, of course, launched an email service that ended up becoming the biggest one, Gmail. And because Google's programmers are so good, Gmail's spam filters are excellent. And they got rid of a huge chunk of the spam that was bedeviling most of us. But businesses, businesses that understood permission marketing, were not spamming people. They were emailing people who wanted to hear from them. So were bloggers. So were charities. So were political campaigns. So were people who were sending out newsletters.

21:31And now Google has another decision to make. Another decision on the boundaries of don't be evil. The question is, if I've signed up to get email from you and you're sending me email every day, is that email I want to read? I think it is. Google, well, they have a business reason to think it's not. Because if they can put all that email into a different folder, call it, I don't know, the promotions folder, then they get to do a couple things. First of all, they can sell ads inside the promotion folder. Next to all the stuff I wanted to get, they can put stuff I didn't want to get. Number two, once it's in the promotions folder, lots of people don't read it anymore because we're busy working our way through our quote real unquote email in our inbox.

22:26Maybe we'll get around to the promo folder one day. And if you're using your phone to do it, with one swipe, you can send all your promotions all at once to the archive and never see them. Why does Google want you to do that? Google wants you to do that because if you haven't heard from Pottery Barn in a while, you need to go Google Pottery Barn. And when you Google Pottery Barn, go try it. I'll wait. What you'll see are ads for Pottery Barn and Pottery Barn's competitors right at the top of the page. Pottery Barn has to repay and repay and repay to get you back to the site you signed up for in the first place.

23:07So my blog, if you get it, might very well be in the promo folder, even though I'm not sending you promotions, even though you asked for it. Because Google has people with stock options, who don't think they're being evil, who have decided on your behalf that you don't want to see this email. And I don't think I could do Google's job as well as Google is currently doing Google's job. But I do think they have worked their way into a corner. And the corner is they've gone way beyond TV Guide. The thing is, I never got TV Guide at my house going up because we got the newspaper and the listings were in the newspaper and the listings were enough.

23:51Also, there were only three channels, so clicking around was pretty easy. But that's not what's happening now. What's happening now is that all of the information we're counting on sooner or later is touching Google and also Facebook, that the news is going through those two sites, and I haven't even gotten into the whole Google News discussion, that it is shaping our culture because it is the filter of our culture. And because it is the filter of our culture, the culture itself is changing to make itself friendly to be found on Google. And because it is, Google itself is changing. So it is chasing its tail, an Ouroboros, going around and around and around in this cycle where they're getting paid less than a penny per search, but they need more searches.

24:42They need more searches to make more money. They need more money to make the stock price go up. And at the very same time, all of the websites that need your attention are fighting harder than ever to do it. Some of them are cheating. Some of them are trying to play it straight. But we have choke points now. Choke points we never used to have before. Sure, the local bookstore got to decide which books were on the shelves, and it could only hold 40 ,000 titles. 40 ,000 is different than three search results. And so the shift that's happening here, and I could talk about Google's repercussions and all of the other services that Google has tried and failed, all of the other services that Google is building now.

25:28I'll add one more to the equation. Android has lost Google billions of dollars. Why does Google create a free operating system? It's simple, because it's the only way to be sure that the Google search box remains primary, even as we switch to mobile. Google Maps hasn't made them much of anything in terms of profit, But Google Maps keeps you connected to Google, one click away from searching for the next thing. When we see people who aren't in the center, the Foursquares and the Yelps, trying to get their share of search, we see just how difficult it is to get away from a monoculture. The biggest miss of Google's entire history is Facebook.

26:22Look, organizing the world's information apparently didn't include organizing all of the world's friendships and relationships. And so Facebook, following as closely as they can in Google's footsteps, is trying to do the same thing. Lease out attention in an auction to organizations that want attention. Click here and you can find out about X, Y, or Z. But just as Google has shifted the way that websites act, Facebook has shifted the way that humans act, the way that politicians talk, the way that people who are seeking a following are behaving. Because winning at search means winning at attention.

27:06And winning at attention gives you a chance to tell your story. And telling your story helps you get closer to the people you seek to change. so all of our economy all of our culture is tied together between two companies that are just a few miles apart near Mountain View, California so the name of this episode also I think needs to be the name of the North Star we've got to figure out how to legislate how to regulate because they can't do it themselves don't be evil what does it mean to come up with the rules for the world we're going to live in tomorrow.

28:13We love to hear from you. If you've got a question about this episode or anything previous, please visit akimbo.link, that's A-K-I-M-B-O dot L-I-N-K, and press the appropriate button. Before I get to the questions, a heads up. The Bootstrappers workshop is starting this week. You can find it at boot.work, and you can check out all the upcoming Akimbo workshops at akimbo.com, that's A-K-I-M-B-O dot C-O-M. In response to last week's episode about interesting problems, we got two good notes from educators. Hi, Seth. Thank you for making a ruckus. I found your podcast five months ago, and I have been binge listening to it since episode one.

28:59As a teacher, I wanted to add to your solve meaningful problems episode. Many schools and teachers are using two approaches to help students engage in solving meaningful problems. One is called project-based learning, where everything is learned through completing a gigantic project. And the second is service learning, where students learn content in order to provide service to a community. Parents who want to encourage their children to solve meaningful problems can learn from these principles. I hope this helps and keep on making a ruckus. Hey, Seth. This is Dave Michaelman from Durham, North Carolina.

29:36I really enjoyed your podcast on the interesting problems. And it just so happens I'm the head of school at Duke School, which is a project-based school. While I totally agree that we ought to give students and children interesting challenges to pursue, I think maybe you missed two points in your podcast. The first is these problems need to be intrinsically interesting to children. So while you may find how to design a garbage can to be an interesting problem, many three-year-olds, six-year-olds, and eight-year-olds would not. The other is the complete reworking of the infrastructures of schools if these interesting challenges are to be presented there.

30:24As you implied in your podcast, if you give a student a grade for doing this work, they'll be looking for the grade, not looking for how to solve interesting problems. I really enjoy your podcasts and the interesting problems you bring up for me to think about. Thanks for your great work. What this points out to me is something that is quite relevant to the next question. So let's go to that question first. So my question is, in supple and in postmodern world, you talked about being able to identify game-changing technologies or cultural shifts. and some of you talked about yourself and Bill Gates being just a little bit late to the game concerning the internet.

31:12So the question is, how do we identify those things that will be true game changers and not just another iteration of what's already happening? And my example today is 5G. 5G has moved from, you know, conception to reality in a certain way. Certainly has a lot of potential. But is it a true game changer? Will it change the way we do things every day? Or is it just another iteration? And how will that affect current technology and things that are being used now? Well, thanks again for all you do. When we think about betting on the future, two things are worth considering. The first one is it's a bet.

31:57There are lots of bets that could be made. You could bet on the third race at Santa Ana tomorrow. You can bet on Bitcoin. You can bet on 5G. You can bet on the infrastructure changes that are happening in places like India. You cannot make all of the bets. So the first place we begin is to realize that there are betting strategies. Annie Duke writes about this in Thinking in Bets. There are betting strategies that make sense. You could hold a portfolio of bets. You can make small bets that will pay off early, thus financing your ability to make bigger bets down the road. It is foolish to mortgage everything you own to make one big bet on one future idea.

32:47Because once you're out of the game, you're out of the game. The second piece, which connects directly to the first one, is that sunk costs, while they are real, must be ignored. What you invested in yesterday is irrelevant when you make a new decision about what to do today. Yes, you may now own an asset, that's different. But the fact that you committed to the asset is irrelevant. So this is the problem that Bill Gates had when the internet showed up. The internet, if you looked at it rationally as a technologist in the late 1980s, early 1990s, of course it was a smart thing to make a series of bets on.

33:36It was cheap to make those bets, and the potential upside was significant. But Microsoft had a huge amount of sunk cost in a world that wasn't based on the internet. Steve Ballmer never understood this lesson. That is why he profanely and loudly denigrated any new technology that undermined a sunk cost that Microsoft had already made. In my case, Yo-Yo Dine was built on email. We had made a huge investment in email, not just money, but emotionally. So to me, when the World Wide Web showed up, I intentionally didn't get the joke because I was defending my sunk cost. So back to the idea of education.

34:27The challenge that so many schools have is they have made an emotional commitment to a bureaucratic structure, to a top-down compliance-based system. And so when a new educational idea shows up, the first thing they ask is not, what small bet can we make here? What can we learn from this opportunity that is clearly in our wheelhouse? But instead, it's, how do we defend what we've already done? So when someone says this isn't going to work because we have this sort of system, these sort of teachers, these sort of processes, my answer is, well, but other people who aren't defending that sunk cost, what will they choose to do with this opportunity?

35:13And so we see online learning accelerating, rarely because existing institutions are pioneering it, mostly because people with nothing to lose, nothing sunk, are going ahead and exploring it. When I hear from educators who are on the cutting edge, when I visit schools in New York and other places where people are leaning out of the boat, exploring new ways to educate children, I see how caring and brave these administrators and teachers are. And I can't help but feel optimistic about what we're going to be able to create. My cousin Brooke runs the lab school in New York, a public school that is on the cutting edge of treating kids differently and seeing how extraordinary the results are.

36:03And all I can say to any educator who's on the front lines is thank you. I'd be remiss if I didn't take this opportunity to share Ellie Markson's story of Joey Nadell and the two sticks. So here's the situation. Six eight-year-olds arrive at summer camp homesick. It's the first day. There's two more kids left to come in the cabin, but they're on a bus that's arriving an hour later. So you've got these six kids who don't know each other. You've got an hour to kill, and all you've got is two sticks. Joey Nadell took the two sticks and figured out how to help the kids invent a game with its own set of rules, a complicated game that these kids ended up playing, not for an hour, but for a month.

36:55Because even two sticks can present an interesting problem if you can create an environment that makes the problem seem interesting. The challenge that we have in giving students' problems is that what makes something intrinsically interesting is not whether or not it is part of their life so far. It's whether we are building systems and emotions and feedback cycles that reward people for playing with interesting problems. You're exactly right. Students who are going to get a grade for solving interesting problems will do whatever they can to get a better grade because that's what we taught them to do.

37:42But we also know that if you give kids room to play, they will often choose to play. Thanks to everyone for listening and for the ruckus you're making. We'll see you next time. It's back. The Bootstrappers Workshop is back. Proven. Effective. Tested. People like you in search of a chance to own something, to build a business bigger than themselves. As valuable, if not more than the content, is the people who are attracted to this. It's a real gift. Make this happen, and I feel ready to move forward. I have this little baby muscle now that I need to keep building about how to think huge and execute small and keep building like one brick at a time.

38:31What was really beneficial was people saying, well, that's okay and encouraging me to stretch my mind and go with it and just see what happens. You have to go find the answer. And that's been really exciting. Check out the details. Just visit boot.work. We'd love to have you join the Bootstrappers Workshop.