Just about everyone who is anyone has asked “Is Google evil?” some time during 2009. I did, in an early November post. Google’s growing dominance is reason enough to wonder. That dominance helped put me out of a job nearly eight months ago and many other journalists since. Google’s free business model, supported by advertising, has hugely disrupted news and other information services. More disruption is coming to more business categories in the early 2010s.
Is this disruption evil? The answer may depend upon worldview. In a compelling blog entry posted late yesterday, Jonathan Rosenberg, Google’s senior vice president of Product Management, described the company’s “meaning of open.” But the meaning is broader than open standards or open source. What he lays out, whether intended or not, is a different business worldview — and it’s one that can’t help but be disruptive.
Open and Closed Principles
“At Google we believe that open systems win,” Rosenberg asserts. “They lead to more innovation, value, and freedom of choice for consumers, and a vibrant, profitable and competitive ecosystem for businesses.” For Google, open — as in “open information” and “open technology” — is a business philosophy. “We run the company and make our product decisions based on these principles, so I encourage you to carefully read, review, and debate them. Then own them and try to incorporate them into your work.”
Exactly what kind of public company talks about principles? Not many, but most successful companies operate by some guiding principles, even if not overtly stated. Microsoft cofounder Bill Gates tipped off his business principles in 1976 “An Open Letter to Software Hobbyists.” Gates wrote:
Most of you steal your software… One thing you do do is prevent good software from being written. Who can afford to do professional work for nothing? What hobbyist can put 3-man years into programming, finding all bugs, documenting his product and distribute for free?
Many people are asking the same question today. It’s fundamental to the recent clash between media mogul Rupert Murdoch about Google search. Gates’ question “Who can afford to do professional work for nothing?” was strangely prescient of today’s expanding Google free — supported by advertising — business model. The question also defines one of the principles behind Microsoft’s worldview — that people (or the businesses they work for) who create something have a fundamental right to profit from it.
Modern American capitalism is built on concepts of dominance and profit. Businesses seek to control key concepts, copyrights or patents that put critical information in their control or allow them to selectively lock-in customers to proprietary technologies or standards. Copyright laws have helped organizations like the Recording Industry Association of America and the record labels it represents to gain copyright control over most music and lyrics. Getty Images obtains the rights to photographs that it licenses on a per-use basis.
Microsoft is a technological monopoly. Gates understood the importance of establishing and controlling file formats and software standards that locked-in customers and partners. The resulting Windows ecosystem has been hugely successful for the company. But as I explained 11 days, during the last decade Microsoft abandoned the standards principles that made it a software giant.
A Contrary Worldview
Google’s open principles and resulting business model are in many ways the antithesis of concepts behind establishing modern monopolies or other corporate centers of power. Yesterday’s Google blog post compares so-called open and closed systems: Traditionally trained MBAs are “taught to generate a sustainable competitive advantage by creating a closed system, making it popular, then milking it through the product life cycle,” Rosenberg asserts. He adds:
There are different tactical approaches — razor companies make the razor cheap and the blades expensive, while the old IBM made the mainframes expensive and the software — expensive too. Either way, a well-managed closed system can deliver plenty of profits. They can also deliver well-designed products in the short run — the iPod and iPhone being the obvious examples — but eventually innovation in a closed system tends towards being incremental at best (is a four blade razor really that much better than a three blade one?) because the whole point is to preserve the status quo. Complacency is the hallmark of any closed system. If you don’t have to work that hard to keep your customers, you won’t.
That’s an apt description but also a misdirection, whether or not intended. The stagnation he describes isn’t necessarily from a system being closed. It’s a byproduct of success. Dominant products tend to stagnate as they reach a certain threshold of adoption. If there is an ecosystem established around them, it seeks to preserve the status quo infrastructure.
Take the television as example. There were many manufacturers creating TVs using network broadcast standards for which they didn’t control. The system was more open than closed, yet still stagnated in the United States during the 1970s. In the late 1990s and throughout the first decade of the new century, new technologies revived the sagging TV set industry.
Rosenberg claims that “open systems are just the opposite” of closed ones. He writes:
They are competitive and far more dynamic. In an open system, a competitive advantage doesn’t derive from locking in customers, but rather from understanding the fast-moving system better than anyone else and using that knowledge to generate better, more innovative products. The successful company in an open system is both a fast innovator and a thought leader; the brand value of thought leadership attracts customers and then fast innovation keeps them. This isn’t easy — far from it — but fast companies have nothing to fear, and when they are successful they can generate great shareholder value.
Open systems have the potential to spawn industries. They harness the intellect of the general population and spur businesses to compete, innovate, and win based on the merits of their products and not just the brilliance of their business tactics. The race to map the human genome is one example.
These two paragraphs are staggering for their implications — and directly relate to other portions of Rosenberg’s post I will only briefly explore here; open information and open source, for example. Harnessing “the intellect of the general population” raises the question: “By whom?” It’s not like there is a collective, Borg-like “open” hive mind. Google harnesses the intellect of others for profit. As a public company, Google has obligation to its shareholders to make money. The “competitive advantage” belongs to individuals and companies savvy enough to exploit the smarts of people working for similar profit-making goals or none at all.
The human genome is an amazingly revealing example of Google’s worldview. What’s open about companies rushing to patent biological processes related the the Human Genome Project? Rosenberg writes about how open is Google technology, but he ignores that it is closed, too. The company controls key technologies, such as the secret recipe behind its search algorithm, that provide competitive advantage. Open is open until there is a business need to be closed.
Means to an End
In 2004, at JupiterResearch’s defunct Microsoft Monitor blog, I took a contrary view about Google. I asserted that Google is not a search company. “Search is a means to an end, and information is that end. Google monetizes the information through search and contextual advertising.” That Google is all about information should be obvious enough now, although perhaps not to many people outside of Google five years ago.
Google is in the information trading business, which is another aspect of its open philosophy and really the foundation of the free business model. “On the Web, the new form of commerce is the exchange of personal information for something of value,” Rosenberg writes. “This is a transaction that millions of us participate in every day, and it has potentially great benefits.”
Rosenberg writes about individuals giving up information as part of a mutually beneficial ecommerce transaction. But Google takes much more information through its search bots. Information is currency to Google. The more information that Google catalogs, the more money it can make from search keywords and advertising.
This so-called open approach fundamentally opposes longstanding principles of intellectual property ownership. Copyrights are a barrier to Google gaining information that it can monetize. Google takes what it gets for free — but which someone else may have paid to produce — gives it away for free but with eventual profit motive.
My decade 2010 prediction: Unchecked, Google’s open approach and free business model will eventually disrupt most businesses that produce information. The news business is being disrupted now. Google will disrupt software products or Internet services, too. The RIAA, Hollywood studios and stock image companies should watch their backs for a Google knife. Google’s power isn’t so much the open philosophy as the free business model it empowers. Bill Gates asked the right question 33 years ago: “Who can afford to do professional work for nothing?” It’s the question everyone should ask as Google’s free business model expands.
Is this evil? If your worldview is in line with Gates’ — that he or she who creates something should own it and profit from it — the answer is likely “Yes.” Perhaps it is not, if your worldview is that all things — all information — belong to everyone.
I encourage anyone trying to really understand Google to read Rosenberg’s post, but to think of the content as presentation of a business worldview rather than definition of open. Google knows its business model is disruptive. Dare I use “anarchy” to describe its goals. Rosenberg writes: “We are technology optimists who trust that the chaos of open benefits everyone. We will fight to promote it every chance we get.”