Ruth Porat

0:28Your next product launch is coming fast.

0:33In recent years, one of the most powerful people in the financial and technology worlds has been Ruth Peratt. She served as Chief Financial Officer for Morgan Stanley and then as Chief Financial Officer for Google and Alphabet. She now serves as President and Chief Investment Officer for Alphabet. I sat down with her recently in Davos to talk about what she's gonna do in her new position and how she's gonna invest more than$100 billion that Alphabet now has.

1:01So we're very pleased to have Ruth Barrett here. Ruth, as you may know, has recently been promoted. She, for almost the last decade, has been the CFO of Google and Alphabet. And now she still has that title, but she's now also the President and Chief Investment Officer for Alphabet. Is that right? I am, and it's great to be here with you. So you have three jobs, CFO, President. Do you get three salaries for that? I think I'm doing okay. Okay.

1:32So, everybody wants to talk to you here because you've got a lot of money. You've got over$100 billion of cash to invest. So, people want to see you. Why do you come to Davos? Because people are just going to be bombarding you, give me money for this or that. Is it really worth the effort to schlep all the way here? Or are you happy to come here and you actually meet people you actually want to see? Well, I've actually been coming here since I ran tech banking at Morgan Stanley back in the 90s and was hunting for fees. And so I think it's sort of become one-stop shopping. You make the trip, and then you get to see people from Asia and Africa and Middle East, Europe.

2:07So it's just that one-stop shop. Well, let's talk about your background now that you mentioned it. Where did you grow up? I grew up, I was born in England, mostly grew up in California. California. Your father was a professor at Stanford or something like that? My father actually was a Holocaust refugee. So my father escaped from Vienna right after Kristallnacht and made it to Palestine. He had no high school education. He ended up enrolling in the British Army, fought in the Battle of El Eman, and in the Army taught himself physics because he figured if he survived, he needed something that somebody valued.

2:42After the war, actually that worked. That plan worked. He ended up getting to England where I was born and then eventually got to the United States. He was sponsored by Senator Kennedy, so he spent his whole career at Harvard and then at Stanford. So I mostly grew up in California. California, okay. So you're in Stanford for a nice area, Silicon Valley. Why would you want to go to business school at Wharton? Why did you go across the country to go to business school? And why did you want to go to business school to begin with? Why not be a physicist like your father? Well, I loved Wharton, so I'm not going to give you that.

3:14You know, I thought I was going to end up being, first of all, I got married. My husband was a lawyer on Wall Street, so I was commuting. But I thought that I would go into investment. I thought I'd go into consulting. And then I took this amazing mergers accounting class, kind of geeky, and decided I was going to go into mergers and acquisitions. So ended up on the East Coast. Okay. So you ultimately became the CFO of Morgan Stanley. Right. And many people thought you might go in the government someday, and you actually could have been the CEO of Morgan Stanley. Why would you leave the important world of finance for something less significant like technology?

3:47Why would you do that? You know, kind of right time, right place. Like when I was the CFO of Morgan Stanley, I started in that position January 1st, 2010, when James Gorman took over as CEO. And I think he's an all-star CEO. Absolutely amazing. Great partner. And when we started, it was 2010, so after the financial crisis, but Morgan Stanley was still very challenged. You know, Moody's was going to downgrade the bank at one point. It was kind of shaky. And I think that he and we together, the team, led this extraordinary kind of recovery. and it got to the point in 2015 where I was ready for the next chapter, and then I got this call.

4:25So I did Google. It seemed okay, so I made that move. Before we get to Google, you were at Morgan Stanley when the great meltdown, the great financial crisis of 07-08 occurred, and it is said that people thought that Morgan Stanley and Goldman Sachs and everybody else was going to go under. Were you living through that, and did you actually think Morgan Stanley was going to make it at that time? There were days I did not. It was bad. So I was running financial institutions, banking at the time, and probably the most meaningful part of my career was when Hank Paulson called and said, I need advice, I need some bankers here.

4:59And so I went and led a team that worked on Fannie Freddie and then AIG, and those were very, very challenging days. And coming out of it, we did Fannie Freddie and then we did AIG, put them into conservatorship. and I got to Morgan Stanley, John Mack was CEO at the time, and he said, okay, you're in charge of liquidity. Figure out liquidity. And of course, days before what very much was running out of liquidity, there was no way to get liquidity. In fact, one day we were trying to figure out what to do and I was on the trading floor and I'm like, can we maybe sell the chairs? They were Herman Miller chairs.

5:37I thought that might be a solution. That was supposed to be funny, but it was actually really scary at the time. And so, no, it was hard. But we did this whole series of different teams, and it worked. You know, MUFG came in. They were an incredible partner. The government came in. We became a Fed-regulated bank. But there were some very scary times and a lot of important lessons. Okay, so you got that deal done. Then presumably some headhunter called you up and said, you should be the CFO of Google. And how did you tell John Mack or James Gorman you were going to leave to be the CFO of a tech company?

6:11Was that easy to do? So 2015, Morgan Stanley was in a really good spot. I happened to be with Bill Campbell, an iconic leader in Silicon Valley. He's been written about as the trillion dollar coach. He coached Steve Jobs, Larry, Sergey, Sundar, Eric. So it's a privilege to sit with him. And at the time I said, you know, I'm ready for the next chapter, but the one thing I'm not going to do is be CFO again. We spent two hours in his living room. And at the end he said, okay, I heard you clearly, not CFO. And I said, exactly. And he said, okay, so I've got the best idea for you, CFO of Google. And, of course, I immediately said, well, I hadn't thought of that one.

6:51That one is interesting. But did you tell him this would mean you wouldn't be able to work with private equity people as closely as you had been? You know, sometimes hardship in life is worthwhile. So what's it like moving from the East Coast, where everything is finance and money, to the West Coast, where everything is technology? Did you fit in right away, and did you really know how to use all the computer things that they give you to use? So it was pretty fun. There were plenty of times where I would sit around in meetings, and literally I would be Googling terms. And at one meeting, Larry Page actually caught me Googling terms, and he kind of pointed that out to other people in the room, which was a little embarrassing, but I figured there were some things that I could do that they couldn't do.

7:37And so it was a learning curve. And my dad always, he taught me at a young age a term that I've used constantly with my teams. He said, in his lab at Stanford, if a physicist could not define a quark in under 30 seconds, they didn't know what they were talking about. And so I use the quark test all the time. If somebody's rambling on and on and they can't get to the point they probably don't know what they're talking about, they fail the quark test. My finance team knows this quark test. And at Google, I'm working with amazing computer scientists, so they never fail the quark test. They can explain things really clearly, which shoots you up the learning curve.

8:13But did you understand what they were talking about from the beginning, or did you have a special tutor that's taught you technology? I had actually run tech banking and took Google Publix. I had a little sneak preview. So today, for people who are not experts on Google and Google search, Larry Page really developed the Page system, I guess it was called, and it was unique. But when he came to get the initial money in Silicon Valley, people said, well, there's plenty of search engines out here. There are like 12 or 13 search engine companies. And so people didn't think it was anything so unique.

8:42What turned out to be so unique about the page system that it made Google such a powerful company? I actually remember those days because I was one of the people who said, why do we need it? It was actually the eighth search engine. Why do you need the eighth search engine? And I was at Morgan Stanley at the time in 1998 running banking. and our research analyst, Mary Meeker, an iconic analyst, pulled her team together and said, you know what, let's do a test. Let's look at all the search engines. Let's do queries and see speed and relevance of response. And I think she may have started with that search engine question as well, but it quickly rose to the top.

9:19And that has been the ethos all along. We still, to this day, have more than 100 product innovations every quarter. The whole idea is continue challenging ourselves about how to make the product better, more relevant, faster. And what's extraordinary sitting where we are today is how searches evolved. So back then, it was 10 blue links. Whoever's old enough in this room to remember 10 blue links, that's what it was. And then it went to image search, voice search, and now multimodal search. If I want your tie, I can take a picture of your tie, and then I can just, I can lens it, and I can find a place to buy your tie.

9:58So this whole evolution of search just keeps extending the runway for a search. So it's very different, obviously, today than it was. So let's suppose I do a Google search on something maybe I shouldn't be doing a Google search on or something. Not that you ever do. I wouldn't do that, but I just, theoretically, can somebody from Google, an officer like you, look up what I've searched? No. You cannot. Absolutely, unquivocally. You're protected, right? You're protected. Even if the government comes along? We do not look at what you search. You can go into incognito mode, but we do not look at what you search.

10:28Okay. So the company for a long time was called Google, and Google used to be spelled differently. Why did they spell Google that way as opposed to the way it was originally spelled, which was E-L? Did they not know that it was spelled differently? Well, there are a couple of stories around this. So one of the stories that I think is true and fun is that one of the early venture checks actually wrote it that way. So they went with it. Okay. So why did Google is a brand name that's working very well. Companies making a lot of money and so forth. But why did you need to go to Alphabet? And who came up with that name?

11:03So Larry and Sergey had a vision about kind of the next iteration. and there were a lot of different things that they were investing in, the whole spirit of which is you want to make sure you're investing for long term, investing for the future. And in the earliest days, what they did is they created something called X. It was the moonshot factory within Google, Google X. And it gave birth to things like Gmail. It was really relevant for all of the type of innovation that came out of Google. And by 2015, their view was, we want to be able to avoid distraction on Google, let Google do what it's going to do, and create another set of businesses that the founders could focus on and really nurture growth outside of it.

11:47And so the word, as you would know better than anyone, is alphabets. And so you put the two together, and that was the goal. So it used to be when Google started, you had what was called 20 % time. Right. So for 20 % of your time, you could do whatever you wanted. Theoretically, it might be helpful to the company, but it wasn't supposed to be necessarily. So do you still have 20 % time or did it go away? Well, it was actually a little more structured than that. The goal was if you had some great engineering idea and you wanted to launch a new product, you could do it in one of two ways. You could leave or you could be told, you know what, in 20 % of your time, why don't you go experiment with this and see if you can grow it?

12:24So rather than having great ideas constantly leaving, the view was let's nurture the talent. Let's give people these growth opportunities. Let's give it a go. And so that's what the 20 % time was. Did any 20 % time product ever get to the market? Well, Gmail is not an inconsequential. Billions of users. Google Brain came out of that. It's our core part of our AI business. And then we've continued to evolve it. So it moved over to become X. Waymo came out of it. So there's quite a bit and quite a bit of features and applications. Speaking of Waymo, are we going to have driverless cars in our lifetime?

12:59Well, I welcome everybody to come to San Francisco because you can actually hail a Waymo in San Francisco, hop in it and get where you want to go. It's pretty remarkable. Have you done that? Absolutely. Really? It's safe? It's so safe that the most fascinating part is within about 15 seconds, people are bored because it's so safe. They're like, they realize, you know what? You don't need a helmet or anything? It's safe, right? You need a helmet with many drivers on the road. Introducing the all new Adobe Acrobat Studio, now with AI powered PDF spaces. Do more with PDFs than you ever thought possible.

13:30Need AI to turn 100 pages of market research into five insights with a click? Do that with Acrobat. Need templates for a sales proposal that'll close that deal? Do that with Acrobat. Need an AI specialist to tailor the tone of your market report to sound real smart in real time? Do that with the all-new Adobe Acrobat Studio. Learn more at adobe.com slash do that with Acrobat. So for a young woman that's watching this or a young man, what are the recommendations you'd have to get ahead in the finance world, technology world? Is it be smarter than other people, be nicer than other people, be harder working?

14:06What is it that takes to be successful? Well, there's no substitute for hard work because the hard work actually gets you smarter and up the learning curve faster. So most certainly that's one of them. I think the other, I've already said, chart your career. Work for somebody who's going to take a risk on you and give you runway. But very importantly, we each need to do that for someone. So at one point, when I was asked to run technology equity capital markets on the equity trading floor, a senior partner called me into his office, and he said, I will be your air cover. All the guys at Morgan Stanley use these military terms there.

14:40A lot of military guys. But it was a good one. I will be your air cover. I think you will soar, but if you stumble, I'm here to be your air cover. I think everyone needs air cover, and I think we all need to be air cover. And the other is keep learning and keep growing. And when you're plateauing, my line was what's my highest and best use? And don't do it on a specific timeline, but keep evolving. And if you go to the right people, they'll keep opening doors and take those doors and then finally use your voice. You have a challenge that many people would like to have, but they don't have, which is you've got over$100 billion of cash.

15:14And so are you going to invest that in private equity firms or are you going to do new technology? What are you going to do with$100 billion, more than$100 billion of cash? And, you know, have you thought about that? Do you have people coming up to you all the time with great ideas for that cash? We do, as you would imagine. So, look, we're continuing to invest in the business. There's a lot of extraordinary upside in the business. And then we do make investments and acquisitions, so do all of our peers. There's a lot that's exciting going on in the world. And so we're looking across the board.

15:46It starts within the business. Then it goes to investments and acquisitions. Then obviously return of capital through a not inconsequential share repurchase program. Let's talk about artificial intelligence. Artificial intelligence has gotten a lot of publicity in the last year or so. And OpenAI has got an enormous amount of it. And they have an affiliation with another technology company. I can't remember the name of it. I've heard that. Another one. But do you have your own kind of open AI company, or do you do it all internally? And what do you do to compete with open AI and this other technology company?

16:20So we've been infusing product at Google with AI for more than a decade. In fact, billions of people today are benefiting from AI across our products. It's benefiting what you see in search, in maps, in commerce, in YouTube. I just mentioned multimodal search the ability to search with your camera when you search for your kids in photos that's AI so AI has continued to be a way to enhance what the product experience is and we've done that historically through two groups within Google one Google Brain I already mentioned and the other is DeepMind an extraordinary acquisition back many years ago led by an extraordinary entrepreneur Demis Isadas and we've put the two together last year which has been really exciting.

17:09And so we are building on that foundation that has been an experience for the last decade. What's the excitement of working in technology in Silicon Valley? Is it even more exciting than working in finance or not quite as exciting, but okay. It's hard to believe it's more exciting. Really? I mean, we are living in the most extraordinary time with AI. Bill Gates just said that. I completely agree. Engineers who've been at Google since inception are saying that this is the most exciting time in computer science in our lifetime, which always strikes me as profound because Google's done okay. And what's extraordinary about it really goes to building on this decade of innovative work in AI.

17:53And so where are we now? What we're doing is we're addressing some of the most profound social challenges with AI in ways that are transformative. So to give you a couple of examples, I think that one of the extraordinary places for all of us, and we've heard a lot about it here over lunch, is healthcare. And part of the reason is it's the ability with AI to aggregate so much data that you can actually have a level of diagnosis that is better than what specialists can do. So one example, breast cancer. Back in 2015, Google had a breakthrough in detection, early detection of metastatic breast cancer.

18:34One in seven women will be diagnosed with breast cancer. I was one of those. I've had breast cancer twice. So when I heard about this, I did the only rational thing. I called my oncologist at Memorial Sloan Kettering, and I said, is this really as important as I hope. And he said unequivocally because only with AI can we democratize healthcare. It's the only way that oncologists everywhere, radiologists everywhere, all of the medical profession has the ability to leverage the insight that AI will give you through scans, reviewing a million scans. We're doing the same in other forms of cancer. We're doing it with something called diabetic retinopathy.

19:13Blindness caused through diabetes, which can be prevented if diagnosed early enough. And so I think that when you look at the impact of AI, this is what motivates our engineers. We're seeing in healthcare, we're seeing in education, we're seeing with food scarcity. You can improve crop yields by looking at pest issues in farming. We're looking at so many different ways that AI can make a difference on the most profound issues. One last one, because you asked, am I excited about it? Yes, it's better than even finance. Climate change. You know, SOS, crisis alerts. Extraordinary. We've seen the impact of fires and flooding, 250 million people a year affected by flooding.

19:57But with AI, we can predict and are with seven days' notice where the water flows will be to get people out of harm's way. So this is not science fiction. This is here today. On climate change, to be realistic about it, is there things that you think that AI can really make us more readily make us able to solve climate change? Is that your point? You think we can? There's both adaptation and mitigation. So around climate change, we have a whole other set of efforts going on. So, for example, one of the major sources of emissions is what you see right out the window here, start-stop from cars. We have something called Project Greenlight, which streamlines that so you don't have the start stops.

20:40We have something else that looks at planes, major source of carbon footprint, are contrails, what many of us think are the beautiful white plumes off the back. You can adjust flight patterns and reduce carbon footprint. So the short answer is yes. And it's happening today. It's not a hope for science fiction thing. You've been public about your breast cancer. You've talked about it, written about it, and so forth. Why did you go public about it? many women say they don't want it to be known that they might have breast cancer. Maybe that's right or wrong, but why were you so willing to be public about it?

21:11It is a really personal thing, and when I was first diagnosed, I didn't want to talk about it. I was at a bank, one of few women. You know, I was bald, and it's like, it's not what you want to talk about, but I got to the point where I realized in this day and age, if you get the right care, actually these diseases are manageable, and the scariest part is not knowing. And so to me, it was important to actually make it clear this is manageable, you can get through it, and to actually be a resource for people. So for many women, you're a role model. You have a successful career in finance and technology.

21:47You were on your first husband, right? Yeah, yeah. Hanging on, hanging on. Right? So, and you have three kids, and so you've done it all. You've had it all. You have a successful career, successful marriage, three healthy, happy kids. Can you tell us something that doesn't make us so feel jealous about you? Because you're, I mean, you know, everybody can't be as good as you, so make us feel that everything isn't perfect for you, leaving aside the breast cancer, so that everybody else doesn't feel like they're not gonna be able to live up to your standards. Oh, man. Other than cancer. Look, I think that one of the most important lessons I learned early in my career, you know, as a woman in banking, there weren't many of us.

22:33It wasn't the easiest environment. There were a lot of men I've now gently decided to call blockheads. But, you know, they were worse than blockheads. And they made it difficult. And you learn to be resilient. The one thing is I was going to outlast them, and that would be the joy that came from it. And fortunately, there were obviously a lot of extraordinary men at Morgan Stanley. There weren't enough senior women in the day, and there are more now. And so I learned to chart my career. I went to people who would take a risk on me, and I said, what's my highest and best use? And they opened doors that I didn't know existed.

23:13And to me, that's the most important is those hard days, bad lessons, I just chalk them up to being lessons. So I don't actually record them. So what do you do when you're not working on technology, being a wife, being a mother? Are you a tennis player or you're a golfer? What do you do for relaxation to the extent you have time for relaxation? Well, I kind of merge things because there's nothing more joyful to me than going on hikes with my kids or bike rides with my kids. And so it's, you know, it's a lot of that. Are your parents alive now? They are not. And did they live to see your success?

23:50before they passed away? They did. My mom, actually, when I was a young kid, said, she was a psychologist, and she said what's really important for women is have your own identity and a career outside of the home. She told me that when I was eight. My little sister was six. For some reason, she thought, that's the time you need to send that message. So I'm grateful to her for that message. Your father, did he ever say, this is better than being a physicist, what you're doing? My dad was pretty remarkable. You know, the tail end of that story about his journey from no high school education to a PhD and a career at Stanford is he said education is your passport for freedom.