Silicon Insider: Google Haters

Aug. 25, 2005 — -- In Silicon Valley, nothing makes enemies like success. Now it's Google's turn.

Years ago, I was riding in a car with one of Silicon Valley's best-known venture capitalists, when we happened to drive by the headquarters of a chip company run by an outspoken and cocky CEO.

"You know him don't you?" he asked.

"Yeah," I replied, "Just did a TV show with him."

"Well," said the Valley veteran, "Next time you talk with him, tell him to shut up. All of his talk about how great his company is doing, and how much smarter he is than anybody else, is going to get him into trouble. He's making a lot of enemies -- and the moment he stumbles, they are going to be all over him."

As it happens, the company did soon get into trouble -- though I suspect that was sheer coincidence. However, the CEO did in fact quiet down, staying below the radar for almost five years before re-emerging on the scene, just as opinionated but a lot less cocky. During those quiet years, my request for interviews with him were almost always met with, "You know, I really just want to focus on my business right now. Let's talk after things turn back around."

Did someone with authority, say a board member or a major customer, have a little conversation with the CEO? Did they tell him that he might be able to get away with this stuff when times were good, but the instant they turned bad company shareholders might not look kindly on a guy who motivated competitors and scared customers, suppliers and strategic partners? And did they add, as they were leaving, that the day might come when he and the company might part ways -- and that he might have a little trouble sitting down with same venture capitalists and private investors he had once characterized as idiots?

Most Start-Ups End in Failure

Silicon Valley embodies a strange contradiction. It is a place defined by success, but built upon failure. Being the world's greatest high tech entrepreneurial incubator, it naturally deals with a company mortality rate between 80 and 90 percent. Almost every one of those new start-ups you read about dies within four years. The lucky ones limp along long enough to get bought. Only a handful -- say, 5 percent -- ever go public, reward their founders with great riches and become true corporations. (Obviously, that number increases during a bubble, like the dot-com boom, but that merely shifts the bloodletting until after the IPO.)

So, the Valley knows failure. It breathes failure. And, in its greatest stroke of genius, the Valley has even learned to reward failure: if you have run a solid, well-managed company that happens to die for reasons outside your control, venture capitalists will come to you with money for your next venture.Living in an environment suffused with failure creates some interesting secondary phenomena. One is enormous egos -- after your last company failed and lost millions, and you've been unemployed for six months, it takes supreme self-confidence to walk into a room full of investors and casually ask for $15 million. The great secret of Silicon Valley is that everybody is out of their depth. Even David Packard played above his game.

Another is an obsession with time -- knowing that you can do everything right and still miss the market window (or the economic uptick) is enough to drive most Valleyites, from entrepreneurs to Fortune 500 executives, to the brink of hysteria. I got an e-mail last night from a legendary Valley entrepreneur, with whom I regularly have lunch, asking to bump our next appointment until November. "I'm in another start-up," he wrote, "and it's crunch time right now. I don't know when I'm going to see daylight." This gentleman, it should be noted, has a net worth approaching 10 figures -- enough, one might think, to afford a few days off. Not here. And not in a start-up.

Handling the Spoils of Success

Given our familiarity with failure, it should come as no surprise that we have an equally strange relationship with success. It goes without saying that over the course of the last 30 years, the Valley has created some of the wealthiest men and women on the planet. And a certain amount of nouveau riche excess has to be allowed for. The mansion in Woodside, the other homes around the world, helicopter skiing, the Gulfstream, the daughter's dressage horses, the Ferrari, etc., etc.

But there is a distinct dividing line here between pride and hubris. It is one thing to have a lot of money; it's another to believe that you wholly deserve it. There are so many uncontrollable variables in the equation of high-tech success that only a fool believes he or she made it big solely on their own brains and competence. The smart winners know just how lucky they are -- how much their riches depended upon good timing, clever subordinates and making fewer mistakes than the competition.

Needless to say, the most despised figures in the Valley are those newly minted success stories who proudly announce to the world that they got there through their own pluck and genius. Back during the dot-com boom, the magazine I edited ran a joking comment about the luck of one new billionaire-on-paper CEO. Instead of keeping his mouth shut and silently nodding in agreement, he proceeded to fire off a letter to the editor wailing that no one appreciated how hard he had worked for that billion -- why, he'd spent a whole 18 months to make it. I'm sure the $4.50-an-hour guy in his company's mailroom enjoyed that comment.

This same ambivalence towards success extends to companies as well. We love skyrocketing companies the same way we love superstar entrepreneurs; they remind us that the Valley dream is still real, that each of us still has a shot at the brass ring. But let that hot company become too successful, especially if it exhibits the institutional equivalent of hubris, and feelings start to turn. And when the perception is created that the company is beginning to hoard those brass rings of new company creation -- when VCs begin investing (or not investing) based upon where they expect that company to move next -- then all bets are off. Then, as with that chip company CEO, a lot of players suddenly have a stake in making that company fail.

Is Google the Next Microsoft?

When I first started working in the Valley, that company was IBM. When I started as a newspaperman, all of the young (and doomed) personal computer companies were squealing about Apple. Then, following the IBM PC, it was Big Blue again. Then Intel, first killing off the chip business, then threatening to go into systems. And then, of course, it was Microsoft, its threat the most frightening both because it was so enduring, so wide, and, not least, because it was outside the Valley. Then, in their own spheres, came eBay and Amazon.

Now, that fear has shifted to, of all places, Google, that maverick darling of the tech world of just a year ago. Just this week, that growing resentment finally broke through into the public eye, thanks largely to an article Tuesday in The New York Times. In it, reporter Gary Rivlin describes a rising anger against Google for everything from stealing the Valley's best engineers, to treating strategic partners arrogantly, to scaring VCs away from investing in markets Google might enter (and, in a Catch-22, not investing in markets where Google has shown no interest). The cries have only become louder in recent months as Google has unveiled one new service after another -- instant messaging, photo management, news aggregation. It's a roll-out of new businesses that, according to rumors I'm hearing, could continue almost weekly until the end of the year. All the better to send the tech world reeling.

So great is Google's influence that each time it enters one of these new businesses, it instantly transforms it, changing the rules and putting at risk companies that have been there for as long as a decade. As with Microsoft's onslaught in the early 1990s, whole sectors of the tech world are now hunkered down, fearfully waiting for Google to attack.

Even Microsoft is scared these days. As well it should be -- only now is it becoming apparent that Google's long-term goal may not be to remain the world's largest search engine, or even to overrun Yahoo!, but instead to take down the biggest dragon of them all, Microsoft. Bill Gates has even said that Google reminds him of the early Microsoft -- a comparison he's made with no other company.

Google's Message -- Brilliance or Bravado?

If this is Google's strategy, it should probably come as no surprise. After all, CEO Eric Schmidt has taken on Microsoft twice before, with Sun and Novell, and was defeated both times. He knows better than anyone what Microsoft's strengths and weaknesses are, and he may have decided early on that in Google he had the stuff to make the third time the charm.

To date, Google has executed brilliantly. It has managed to carve off whole regions of the Web, yet still remain beloved, approachable, and even cute. Schmidt knows the pent-up hatred of Microsoft, and has played off it superbly. For all the billions that Google is worth (and the billions more it will have in its war chest after the upcoming stock offering), the goodwill it enjoys is worth even more. Google's control over its message has been almost unmatched in Valley history.

But the shift in mood this week toward Google, far from a minor PR glitch, actually poses a real threat to the company's plans. Schmidt has proven himself a genius at playing the underdog. Now for the first time, he finds himself in the unaccustomed position of being the Big Dog. And he knows better than anybody that when you can't fight a giant competitor head-on in the product market, the best way to defeat it is to undermine it in the marketplace of images. Now Google is about to be on the receiving end of just that kind of attack, and it will find those vast reserves of goodwill can be spent amazingly quickly in defense.

Whether or not Schmidt can rein in both Google's runaway hubris and his own imperial ambitions -- and, perhaps most difficult of all, restrain the two founders, who are obviously reveling in their new fame -- may well decide whether Google grows into a beloved giant like the old HP or merely another perceived "evil empire" like Microsoft, surrounded by enemies and erstwhile friends, all plotting its demise.

This work is the opinion of the columnist and in no way reflects the opinion of ABC News.

Michael S. Malone, once called "the Boswell of Silicon Valley" most recently was editor at large of Forbes ASAP magazine. He has covered Silicon Valley and high-tech for more than 20 years, beginning with the San Jose Mercury-News as the nation's first daily high-tech reporter. His articles and editorials have appeared in such publications as The Wall Street Journal, The Economist and Fortune, and for two years he was a columnist for The New York Times. He has hosted two national PBS shows: "Malone," a half-hour interview program that ran for nine years, and in 2001, a 16-part interview series called "Betting It All: The Entrepreneurs." Malone is best known as the author of a dozen books. His latest book, a collection of his best newspaper and magazine writings, is called "The Valley of Heart's Delight."