5. Susan Wojcicki: “Hey, Let’s Go Buy YouTube!”

12:03Susan Wojcicki:We decided to build an ad system, which in retrospect is like just crazy looking back on it. And we built this really basic text ads and we ran those ads. And I just want to tell you that nobody clicked on them. It was a complete failure. The really big change of the huge breakthrough that we made was when we started looking at the click through, how the ads performed. and having it be a CPC-based solution, which is a cost per click. So we basically said like, how much money are we making? And then how many people are clicking on it? So like I would compare that to inventory in a store. If you have a store, you don't just put your expensive items in the front, right?

12:43Susan Wojcicki:You have the expensive items that a lot of people are buying. And that was basically the click-through. And so we started looking at both cost per click as well as the click-through. Just that breakthrough, which was really simple, made a huge difference. It was better for our users. And we actually generated more revenue when we started factoring in whether people clicked on those ads or not. And I remember there was like a period of time at Google where like, nobody got this concept. I remember like, we all went around and we all tried to say something about CPC click through and everybody failed.

13:16Susan Wojcicki:I mean, today we just like, it rolls off of our tongue in terms of how we think about our ad and our ad development, but we didn't really have any expertise in this area.

13:22Steven Levitt:Well, things that are new are hard. I think people dramatically underestimate how hard it is to do anything new. And once you figure it out or your teams figure it out, then the next generation is just explaining it and it makes sense. But to actually figure stuff out is hard.

13:36Susan Wojcicki:It was.

13:37Steven Levitt:And the other thing that I think is underappreciated about how brilliant the Google system is, it's like the typical company has a huge sales force that goes out and negotiates prices with their clients. But can you imagine if that's what Google tried to do? And the thing that's so remarkable about your system is, number one, that it's totally self-serve, right? It's almost completely self-serve, maybe for the big customers who do some kind of sales force. And the other one is that you do this very economic-y thing, which is you have your companies that want to place ads. They tell you essentially how much they're willing to pay for different spots.

14:13Steven Levitt:And they even do it in this very clever and complicated thing called the victory second price auction, which to an economist makes our heart beat a little faster because it's supposed to make people reveal their true preferences. So when someone's searching for a new car, that's worth a whole lot of money compared to when someone's searching for, I don't know, what the weather is going to be today, probably. And the system just takes care of that without having to be handheld by a sales force.

14:39Susan Wojcicki:Yeah. We used to have a Salesforce that sold all the ads that are on the top of the Google search page. And it used to be that we automated everything that was on the right-hand side of the page. That's the way it used to be. And we realized quickly that we were generating more revenue with this automated system. And so there was actually like a big transition where we had to go to our sales team and say, hey, you're going to have to use this second price auction solution that we have. And so you can imagine that did not go down well initially with all of our sales teams. But that was actually a huge improvement for us because suddenly we were dynamically adjusting our page and prices based on supply and demand.

15:23Susan Wojcicki:So factoring in the CPC that people are willing to pay, the click-through, and then using the Vickery Second Price Auction, and then doing that across all of the inventory, all of the ad slots on the page, made a huge difference in terms of just having the most efficient way of figuring out who wants to be shown on this page and what users were interested on that page.

15:44Steven Levitt:Yeah, really, it is an economist's dream. I really can't think of another company that has so embraced the basic principles of economics, and you certainly can't argue with all that's gone down.

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18:00Steven Levitt:So skipping forward by 2005 or 2006, you are now in charge of Google's video service. And And usually in firms, there's such an unwillingness to accept that anyone else could do it better than your firm. And you had the backbone to say, look, YouTube is doing something special. Let's go bring them inside, not fight them.

18:20Susan Wojcicki:Yeah, it was a really hard time for us because we had actually created Google Video before YouTube came out. So we actually came out first. So we had this moment where we saw it and we were like, wow, this is a huge opportunity for us. We're doing so great. And then YouTube came out. And this all happened within a year. We saw it slipping away to YouTube. And our teams, of course, were very motivated to compete with YouTube. So going and saying, hey, let's go buy YouTube was a really big decision. I mean, it was hard because you had to say, hey, we weren't as good as we thought we were. But it was clear to me that that was the right decision for us.

18:57Steven Levitt:Do you think that it helped that you had been so successful at Google up to that time to be able to say, look, we just can't handle this. I just think in all the corporate environments I've ever been around, you're just not allowed to say, we're not good enough. Let's spend$1.65 billion to buy this little upstart because we can't beat them ourselves.

19:16Susan Wojcicki:It was hard, but I've attended Google's management meetings pretty much since the beginning of Google. And so it was easy for me to take myself out of the equation and just look at what was good for the larger company, irrespective of what was good for me. And I wound up doing the model that showed that it was worth paying 1.65 billion. And also just to let you know, we only had like a day that we were able to like go through the whole process. And so I probably did the model in an hour at the most. And, you know, afterwards I wound up getting asked a lot of questions about it. And why did you assume all these things?

19:53Susan Wojcicki:And I always have to remind people, like I only had an hour. I really couldn't do it with that much detail, but I wound up not working on it initially, even after I had done all this work to encourage us to buy it because we had a little reorg and I wound up taking over and managing all of the ads. So it took eight years until I could work on YouTube again.

20:10Steven Levitt:Well, I just want to go on record as saying that I remember vividly a lunch conversation I had in the days after Google acquired YouTube. And I was sitting in the faculty club, quad club at the University of Chicago with a bunch of other economists, including some Nobel Prize winners. And honestly, we almost never agreed on anything, but all of us collectively agreed 100 % around the room that that was the stupidest business move that had ever been made in the history of mankind. And history has proven 15 years later that actually it was probably the opposite. It might've been the single best acquisition of all time.

20:43Steven Levitt:But that's probably why we're sitting in the faculty club and why you're running YouTube now, which you took over the CEO in 2014. And let me just start by saying that YouTube is amazing. People watch a billion hours of content on the site a day. And that's a level of success that I think even the model you were building back in an hour when you did the acquisition probably never imagined that kind of success. But of course, with that success comes all sorts of responsibilities and challenges you probably never imagined either, like hate speech and terrorism, misinformation. foreign governments trying to influence elections.

21:22Steven Levitt:I mean, basically now YouTube and Facebook and Twitter are essentially blamed for every problem that exists in the world. And the critics are screaming, you know, why don't you just fix these things? So I'm guessing it's not that simple. These are hard problems. And the reality is that as hard as you try, it's just not realistic to think that you're just going to fix these problems. Is that a fair assessment?

21:45Susan Wojcicki:Well, I think we have been focused on this area. We call it responsibility or trust and safety. And we have been really focused on it. I'd say we started around 2016. That's maybe really where the light bulb started to go off, that we needed to make a lot of changes and have implemented a lot of changes across our entire system that I think have made a huge difference. And we'll continue to improve them. We'll continue to staff them. But I think if you look at the systems that we had then versus what they are now, Now it shows that we have been able to respond really quickly and our systems are built in a way to make sure that we can deliver trusted results for our users.

22:23Susan Wojcicki:And during COVID, I was so grateful for those years and years of work because we were able to so quickly have accurate information for our users. And that was all due to the work that we had done over the last couple of years. So, you know, of course, there'll always be some new loophole that, you know, somebody will figure out and we'll close that loophole.

22:43Steven Levitt:Yeah. I mean, that's the nature of adversarial interactions is you fix one thing and the bad guys go and try and break a new thing. But somehow, even more fundamentally, I think as I watched a debate over the tech space, you're being asked to make decisions that even in the best of cases, governments have difficult times making. I just find it odd that there's, you know, these are companies that were founded in basements and in garages 25 years ago. And now the executives are being asked to make fundamental decisions about life and society, which I think is just kind of, you know, you can't possibly be equipped to do.

23:21Steven Levitt:So in general, companies hate the idea of being regulated. But would you actually welcome more regulation? Because that would kind of put the onus for these, I would say, essentially impossible decisions on government instead of you as the executive?

23:36Susan Wojcicki:Gosh, I have a lot of different thoughts in this area. I mean, first of all, it would be much easier, right, if there was some regulation and we just said, hey, we're just, you know, complying with the current rules. That would simplify everything for us. On the other hand, as a private company, we can actually make, in many ways, much more detailed, fine-grained, and really thoughtful decisions in this area. And you look at something like COVID, right? So there were new conspiracies that were coming up, you know, almost every week. Like, you know, 5G causes the symptoms of COVID. It's not a virus, right?

24:10Susan Wojcicki:And so would the government be able to respond quickly enough to be able to come up with the right set of requirements? I'm not really sure. And I also think there's something good about having multiple companies come up with different perspectives on this and that we're trying to, as much as possible, to balance all the different needs of the constituents around these really important and tough topics.

24:40Steven Levitt:There's so much public hatred of Facebook and Twitter and personal enmity really towards Mark Zuckerberg, Sheryl Sandberg, Jack Dorsey. Why do you think you basically are completely off the hook on that? How come you don't get lumped in with other folks?

24:54Susan Wojcicki:Well, I mean, YouTube in many ways serves a few really important functions. You know, during COVID, we served over 400 billion impressions related to information that came from public health officials, local public health officials around the globe. And so a lot of people during COVID, again, just to use that as an example, were looking up, like, how to fix something in their house, like, how to give yourself a haircut, how to exercise at home, how to do yoga. So as an information source, I think we're a really important part of the equation. And we were also able to connect a lot of people. I saw a lot of people who otherwise wouldn't have been able to meet with whether it was their local school or their religious organization come together.

25:36Susan Wojcicki:And I also just think people come to us looking for a laugh. And like we've always had as a top search request, funny video, that's always been a top thing that we've seen our users come. And so I think it's a combination of those.

25:48Steven Levitt:I'm sure I'm aggravating many listeners and they're angry that I'm not challenging you and saying you're wrong about everything.

25:55Susan Wojcicki:Welcome to. Go ahead.

25:56Steven Levitt:No, the problem is I actually agree with what you're saying, so I don't want to argue. But actually, there's one area where I do think you could do better. And just to simplify things, assume that everyone could agree on what was hate speech and what wasn't hate speech. And my impression is that the goal of YouTube is to minimize the amount of hate speech content on the platform today. Like you set things up because you want to make sure that today you take as much down as possible. and you spend enormous resources identifying and immediately removing all sorts of offensive content. Okay, but that seems to me to be an enormously short-sighted approach in the sense that it ignores the fact that in the jargon of game theory, the battle between you and the hate speech people is a repeated game.

26:42Steven Levitt:And shouldn't YouTube strategy reflect the fact that you care not about how much hate speech is on the platform today, but you care about how much hate speech is on the platform a month from now, a year from now, or five years from now. And it seems to me that if you took a different longer-term approach, so not the goal of taking down everything today, but actually tricking the people who are doing hate speech and leaving their stuff up, but making it so that very few people see it and tracking them and maybe working with authorities to actually, you know, get them arrested and stuff. There's a whole menu of strategies that it seems to me that you and the other tech companies have punted on to achieve a short-term goal.

27:19Steven Levitt:So how do you respond to that?

27:21Susan Wojcicki:Well, I guess I would say that I don't think we have necessarily gone after a short-term goal. What we have focused on is, first of all, defining hate speech in a way that we think is appropriate, is enforceable, and is fair. And we've made a significant number of increases in terms of the removals that we have there. So last quarter, we removed 11 million videos, and you can look and see what percentage have come from hate.

27:47Steven Levitt:But that's kind of my point, which is a really short-term way to deal with hate speech is to take down people's videos and then let them start a new account and put them up again.

27:56Susan Wojcicki:So first of all, we've taken an approach of not enabling there to be a business created on hate content. And I do think that that has long-term implications. So as soon as you have revenue and a revenue model, then you can start to grow it and you can hire people. And by removing the videos, we've removed the economic incentive to do it. But we also have an issue where a lot of times there's content that is not necessarily violative, but really brushes up against our guidelines, there's always going to be content that's up against that line wherever you have drawn it. And so what we've done with that is we have reduced the viewership to that by not having it be recommended to our users.

28:35Susan Wojcicki:If you look in the US, we've actually had an over 75 % reduction of the content that we classify as borderline content. And that I think has also had an impact. When people create content on YouTube, they have two goals. One is that lots of people see it. And the second is that they generate revenue. So we don't want to be too overarching in our approach. And so there'll be some content that will allow on the platform, but they can't monetize it. And we won't recommend it. So basically, there's a whole grayscale in terms of how we approach these different types of content. It's not just black or white on or off the platform.

29:10Susan Wojcicki:There are a lot of different dials that we use. And at the end, like if you produce content and you can't generate any revenue and no one's going to watch it, you've taken away a lot of the incentives for people to create that content.

29:27Steven Levitt:Okay, I'd love to shift away from business and stuff into a more personal realm. Sure. Let me say, what kind of advice would you give to a 15-year-old who's hoping to build a tech career?

29:39Susan Wojcicki:I would say, first of all, I think tech's a wonderful career and it's a huge area of opportunity. And I've always found it to be easier to be successful if you're a company that's growing. And what I've always looked for are the areas that are high growth, but are not necessarily universally recognized as high growth yet. I've also looked for companies that have some kind of mission and that are doing something meaningful. And so Google could have failed, but at least it would have failed with a big mission, which was to organize the world's information to make it universally accessible and useful.

30:16Steven Levitt:Yeah, I love that advice. How about, let's say now you're a 30-year-old, you're not in tech, but you're unhappy with the path that you've been on and you're looking to get into tech. Any advice? Would you say, forget it's too late? Or do you think there are entrees for people like that to actually have a shot?

30:33Susan Wojcicki:They're definitely entrees. I took my first computer science class when I was a senior in college. And I almost didn't take it because I almost thought it was too late for me. But of course, I think it's really never too late. And not everyone is going to be an engineer. So if they did finance for another company, they can do finance at a tech company. Having demonstrated interest in technology is always a benefit. But I think there's lots of opportunities if you're, you know, in your 30s, find how you can leverage your current skill set and make a transition.

31:04Steven Levitt:So we both have a bunch of kids. I've got six and you have five. And we also both have a big age spread in our kids. And so in principle, we both could have had a lot of learning along the way. And I'm often asked by people, hey, what did you learn in the first round of kids that you raised that has been beneficial in the second round? And honestly, I'm kind of stymied by that. And the only explanation I have is I was so sleep deprived that I just I can barely remember what it was like to have the young kids the first time around. I literally find myself tongue tied when people ask me about advice about raising kids.

31:34Steven Levitt:Are there things you've learned that could be helpful to other people about raising kids?

31:37Susan Wojcicki:Oh, you know, if I look back at sort of my young self and me as a young mother, I probably worried a lot about like following what were the established rules. like your kids shouldn't sleep in your bed and your kids shouldn't do this and your kids should be toilet trained by this age. And you're, you know, there are all these things about what your kid is supposed to do by these certain times. And, you know, and of course there's some milestones where if they don't reach it, you worry because there's maybe some developmental delay that you need to help them reach. But I'd say by the time I got to my fifth, I just didn't really worry about that anymore.

32:12Susan Wojcicki:And I wish with my older ones, I hadn't been so worried about all these different milestones and just enjoyed the moment. I'd say the second thing I've learned as my kids have gotten older is I think it's really good for kids to have chores in the house. And with my younger kids, I've done it earlier. It's very hard to tell a 12 or a 14-year-old like, hey, like now all of a sudden we expect you to do stuff in the house. So I'm sure we all could do more and get our kids to be more productive and help in the house. But I wish I had done that earlier. I learned that as my kids got older. Four-year-olds don't get angry about it because they're excited because they're contributing to the house.

32:47Susan Wojcicki:It's easier if like they've always just been expected to do a lot of things in the house.

32:51Steven Levitt:Finally, last question. Do you have advice for people about living a good life, a life worth living, a life they could look back on and be proud of?

33:04Susan Wojcicki:One of the things that I have thought a lot about is just making sure that I live a life without regrets. So I'll just say there've been some decisions that we've had to make at YouTube that have been really, really hard, hard for me in the sense that maybe they've introduced a lot of risk, but yet I think they're the right thing for us to do. And so I want to do what I think is the right thing over the long term. And I would also say, I think it's important to have a multidimensional life, like not focus too much on just one area, you know, and as a working mom, to be fair, you're always making trade-offs that are not optimal.

33:40Susan Wojcicki:There's always like something that you missed for your kids. So I'm not trying to say that that's not going to happen, but I just want to make sure when I look back on my life that I feel that I did the right thing for my friends, my family, and in my job and for society.

34:06Susan Wojcicki:People I Mostly Admire is part of the Freakonomics Radio Network and is produced by Freakonomics Radio and Stitcher. Matt Hickey is the producer, and our sound designer is David Herman. We had help on this episode from James Foster. All of the music you heard on the show was composed by Luis Guerra. We can be reached at radio at freakonomics.com. Thanks for listening.

34:45Susan Wojcicki:The Freakonomics Radio Network. The hidden side of everything.

34:53Steven Levitt:Stitcher.

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