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Google’s chief economist on its big bets, success and partnership

If you search for “most successful companies,” “most innovative companies,” or “most influential companies,” you’ll most certainly see “Google” (the company) high and often on the results page. Since launching in 1998, Google has grown from the startup search engine to an international growth machine that’s helping drive the rest of the world into the future.

Thomson Reuters is proud be a trusted partner for Google, and as the company approaches a new milestone – becoming a $1 trillion dollar business – Thomson Reuters Global Business Director Asif Alam sat down with Google’s Chief Economist Hal Varian to get his insights on the secrets to: Google’s success, Google’s biggest bets, big data and partnership, and where the global economy is headed.

Highlights from their interview are excerpted below: 

On growing Google

Asif Alam: Google is about to become a $1 trillion company … what’s been the recipe for your success?

Hal Varian: Well people think that we’ve found it easy to hire people because we’ve been so successful, but it’s really the reverse that’s true … we’ve been successful because we’ve been able to hire great people. And part of this success actually came from the dot-com bubble in 2000, where there were a lot of very talented people with lots of experience, lots of skills … and they were willing to work for options. So we did very well with hiring those people and they’re the ones who really brought this company to its take off point.

Google employees work outside on Google's campus in Mountain View, California.

Alam: In the past you’ve spoken about the importance of Google’s recipes vs. ingredients. Can you explain?

Varian: Lots of people have emphasized the importance of data – and data is important. But what really matters is what you do with it. I sometimes express that by saying it’s not the ingredients that are critical, it’s the recipe…the algorithms, the analysis, the business decisions that come from looking at that data and analyzing and understanding it.

If some evil aliens from outer space came down and took all of our data, we’d be running again in a few weeks. But if they came down and took all of our engineers, we’d be in really deep trouble. 

Alam: How has Google been able to maintain its unique culture in the midst of so much growth?

Varian: Well, we like to think it’s unique. But I’ll tell you, you go into a Silicon Valley company these days and it looks a lot like Google because a lot of other companies are trying to capture that same quality that has contributed to Google’s growth. So it’s kind of the secret sauce, or maybe not-so-secret sauce, out there in Silicon Valley.

You just have to focus on it. That’s it. You have to do it deliberately. It doesn’t spring up by itself. It could easily melt away, so it requires constant attention.

We did a lot of things back in the early days we’ve managed to maintain, despite this huge growth — and that can only be done if you really focus on the culture, you invest in it, you further it and you make sure you’ve got a nice environment for people to work in. And that’s something we’ve really focused on.

On partnerships in the era of big data

Alam: Big data has changed how we do business. What do you see going forward with big data and partnerships, and how they correlate?

Varian: When we encountered this big data problem back in the early 2000s, we had to build all of our own systems that could manage these massive amounts of data, but now those systems have become open source. They’ve become available through data centers from Google, from Amazon, from Microsoft … everywhere. So these things that took us so much time, energy and costs to build have now become completely commoditized.

So I like to refer to this as the democratization of data, because the data is available to everybody now. And the tools you need to analyze it are available to everybody. The tricky part is the expertise.

Alam: What is the role of partnership between firms like Google and others?

Varian: I think partnership is really critical. And we’re providing a lot of these services, a lot of these innovations, a lot of the data manipulation and analysis tools through our cloud platform. So these are not things that are uniquely the property of this company or that company; these are things that are available to everybody, another aspect of the democratization of data.

Google's Chief Economist Hal Varian and Thomson Reuters Asif Alam chatting about Google's success.

On Google’s big bets

Alam: We are talking about Google, but Alphabet is the parent company now. Where do Google and Alphabet fit in, and what was behind this decision?

Varian: When we looked at our business as a whole, we saw that it was a core business with search and ads, and then there were these other pieces. Some of it was Internet of Things, some of it was the driverless cars, some of it was X and so on. And we decided we should have an organizational structure that fit that heterogeneity better. And we have two big bets – I mean, several bets –  but two that stand out are driverless cars and cloud computing.

And it seemed appropriate, I think the right decision, to split those off as separate entities, but they could still draw on some of the core technology strengths from Google.

Alam: Driverless cars are an innovation where Google is right there. What are your thoughts on driverless cars and all the data that will flow from them

Varian: Well, people forget that the driverless vehicles really started as a program from DARPA (Defense Advanced Research Projects Agency, an agency of the U.S. Department of Defense), and they invested 10 years and several different universities to develop this capability. The real breakthrough came when Larry [Page] and Sergey [Brin] went to visit the Stanford program and said, ‘Gee, I wonder how this would work if we hooked it up to Street View in Google Maps?’ And that made a big difference.

So now the driverless cars are not only collecting all this information about road conditions and anomalies and things that might be problematic for themselves, but they are collecting it for all the other driverless cars. So you’ve got this whole web of data which can now be used to help people get around in the world.

Alam: What do you see for the future of driverless cars?

Varian: The automobile industry is a $2 trillion industry worldwide. It’s huge. And it’s focused primarily on the manufacture and sales of vehicles. But I think the industry is going to evolve into a service industry where the important thing is a delivery of transportation services and the integration of those services with other kinds of transportation – be it rail, be it air, be it bus, truck, cars, the whole thing. And that’s the kind of natural outcome for the driverless car industry, in my view.

Alam: How do you see cloud evolving?

Varian: Well, as we built up the company, we ran into lots of problems in data management, ran into problems on data analytics. We had a lot of challenges, and we solved those for our business. But now that we’ve created all those tools and all those mechanisms, it’s quite apparent that other companies need those same services, so that’s why we have cloud.

Cloud is out there because it allows this kind of democratization of data, which means that anybody can access those tools and services and capabilities now. And that’s a great business for us, we expect.

On the global economic outlook

Alam: What do you think about the macroeconomic conditions that are taking place overall? How does it drive a corporation like Google or Thomson Reuters or others?

Varian: Well, I just actually came back from a meeting in Washington with a number of economists looking ahead of what things look like for the next year or two. And I must say, everybody was surprisingly optimistic because growth rates seem to have picked up in the U.S. There are some wage increases going on. Europe is seeing signs of life. So I would say the near-term future looks pretty good.

Of course there are a lot of risk factors out there, too, so we need to be concerned about those. The factor that I think is underestimated but is very apparent when you look forward a few years is demography. The Baby Boomers are now retiring. We’ve come to the baby bust. The labor force is growing at half the rate of the population growth, and next decade it will grow at the lowest rate ever. So there’s a real issue, which in some sense is good; it means that we’re going to see a tight labor market for the next 20 years or so.

And that’s going to be a change. People will change their attitudes about how they think about the economy when you’ve got this strong demand for workers.

I think we all have to think about, prepare for and make sure we’re in a position to really deal when that demographic drops.

Learn more

Explore more insights about the role partnership plays inside (and outside) a large firm in our annual report, The Partnership Equation.