True colors

It is profound what being a public company can do to the core values of a young company. It was less than two years ago that Google Inc. co-founders Larry Page and Sergey Brin thumbed their noses at the U.S. investment banking community with an auction-based IPO and their pledge not to cave in to the short-term demands of Wall Street.

Their mantra was "do no evil," and the company's mission statement still says Google's goal is to "organize the world's information and make it universally accessible and useful." Even with one of the largest market valuations of any U.S. company, Google (GOOG: news, chart, profile) tries to set itself apart from its rivals -- Yahoo (YHOO: news, chart, profile) , Microsoft's (MSFT: news, chart, profile) MSN and Time Warner's (TWX: news, chart, profile) AOL -- by underscoring its high-minded philosophical goal to "resist the temptation to make small sacrifices to increase shareholder value."

It passionately claims that, "Google has steadfastly refused to make any change that does not offer a benefit to the users who come to the site."

Yet Google's announcement Tuesday that it will comply with China's repressive laws by doctoring its search results in that country makes a mockery of those values.

Google is making a sacrifice, and a big one at that, risking its democratic image for more access in a country that will contribute very little business in the near future. Right move for shareholders? Possibly. Ironic move? Yes. Noble move? Hardly. Maybe China's riches are worth it. I don't think so. But when you've tasted billions -- like Brin and Page -- I guess you can hire a boatload of attorneys to justify any choices you make.

A successful serial entrepreneur friend once said that when starting a business, one has to know whether they're doing it because they want to change the world in a good way, or because they want to make money. It's one or the other, not both. He is right. We often have lofty goals. We often remind ourselves of them, as Google does of its own. But more often than not we fail to achieve them. The world changes us far more than we can change it.

Watch my interview with Kurt Opsahl, an attorney at EFF

Read Net Sense on MarketWatch

Comments

[Eliana]

I think you're spot on. Google was so eager to flaunt its alleged morality that it forgot that it would eventually have to live up to it. No one questioned Microsoft or Yahoo when they created business in China. Why the Google interest? Because this move (and a few others) makes them look like hypocrites in lieu of their "do no evil" policy. Do you think any reporters ever chased Bill Gates around Davos demanding answers to his evident breech in morality? Did Jerry Yang, David Filo, or Terry Semel have to backpedal and eat crow like Sergey Brin had to yesterday (while cutting into his precious skiing time)? No. If they had kept their braggart ways to themselves from the beginning, they would have saved themselves a lot of bullshit later.

Of course, the "do no evil" motto is what separated them from the others. It was a gimmick, and the founders rode it all the way to post-IPO billions. Unfortunately, they've painted themselves into a corner. I'm reminded of what Jeff Bezos said when he was asked about Google's "do no evil" policy: "...You shouldn't have to brag about it."

[John]

Excellent article, but you're too kind to Google. It's not a question of partial information or no information at all. The choice is between information censored by an unelected, life tenured dictatorship (but don't get me started on Judge Alito) versus no information at all. When governments ban books and movies people smuggle them in and pass them to their friends. It's a shame Google, committed to freeing information, should be caught up in hiding it.

[Thomas Pace]

Ms. Francisco,

I disagree with the popular press that this represents a 'caving in ' to the Chinese Government, and that this is in direct conflict with Google's stand with the DOJ. An entry point is just that, and necessary if anything of merit (or something solely for corporate advance) can ever develop.

The subpoena from DOJ opens a can of worms of who may have already searched for whatever, whereas the limitations on Google as dictated by the Chinese Government limit what the Chinese can search for - a distinction that is important by manner of perspective : which is better, a witch hunt or limited access ?

China has been mired in the dark ages by the dictatorial oppression, certainly. Still further, barriers to communication have done even more, as only the written words in Mandarin are the same throughout all the Chinese provinces. The spoken language is different between the many villages, towns, and regional areas, but as the proliferation of computer use grows along it's inevitable path, using the now-standard of written Mandarin, information will emerge through the use of the internet.

I am hopeful that Pandora cannot be kept in a box, certainly not forever. Is Google's foray into China a good thing for Democracy, free speech, and individual _expression right now ? Most probably not much if at all.

What it is and represents, at least to the idealist in me, is a start. A beginning of something that I hope will prove to be undeniable, even from the strong arm of the Chinese Dictatorship, is definitely better than no genesis at all. It can be made a similar argument to civil rights in the USA, gender, age, and religious bias in the workplace, et al : better the opportunity to make significant change in the rules from within than attempt to fix the situation from the outside.

Great articles an opinions - keep 'em coming.

Regards and Aloha,

Tom Pace

[Andrew S]

I wrote up my opinions on this at the URL below. Most of the media is missing the big story, which is that by hiding the truthful results, Google is only showing the goverment lies and propaganda on political search queries. I'm glad that you (unlike most of the rest of the media) were able to make the important point that censored, incomplete search results can be far worse than no search results at all.

http://lart.stanford.edu/~shandrew/google-cn-propaganda.html

[Claude Bogley]

As a share holder and US Citizen I completely agree with Google's approach to opening a market in China. What a brilliant idea to adhere to the legal requirements in the country in which you do business in order to benefit the viability of the enterprise. As long as they do not violate laws from the country where they are legally chartered it would appear to be the sanest approach to making inroads to what will be the worlds largest economy in the near future. Are all the other US Companies in China refusing to obey the laws of the legitimate government of that country. I certainly do not think so. Why isn't the patriotic integrity of these companies being questioned?

I don't believe this is inconsistent with their "mantra" do no evil. Unless you believe that the citizens of the country haven't concluded that the government already censors what they see and hear. I am sure they are not in front of the monitor asking why their Fox News search only shows web sites featuring the small furry figure. Ya think?

I love companies that know how to make a buck. Clearly Google has solved the puzzle. Atleast they didn't outsource it so more US Citizens can be laid off as a result of a more brilliant idea.

[Gary H]

"Is Google doing the right thing..."?

No. And I don't understand the mis-step. They are doing exactly the right thing, on multiple levels, with respect to the US government's demands for information to which _no one_ - not a government, not a police department, NO ONE, is entitled, aggregated or otherwise. (Why has no one made that point?) So I'm really puzzled why Google would apparently turn hypocrite with respect to China.

Some guesses that haven't been expressed in other posts:

Maybe they intend to sort of obey, but not work very hard at it - to give a reasonable appearance that they are obeying, trying to stay in a place where honest experts will disagree about whether Google is purposely being ineffective, or merely isn't being as effective as the Chinese government would ideally prefer. This is probably the Chinese government's expectation anyway; they are politicians, after all.

This need not be "dishonest" on Google's part; it's a matter of degree. It becomes a balancing act between opposing forces. It seems to me that time is on Google's side: as Google's functionality becomes familiar, it eventually becomes infeasible for the Chinese government to threaten expulsion. In fact ultimately Google could gain the upper hand, and threaten to pull out if the limitations aren't lifted.

Another possibility is that Google believes censored results will ultimately retard China's progress, and put them at a disadvantage compared to the rest of the world... and that both the Chinese populace and the rest of the world will make that case more credibly than Google can.

Or maybe they just feel forced by competition: since their competitors (Yahoo et al) have capitulated to the US DOJ, it's reasonable to assume they'd kowtow (no pun intended) to the Chinese government as well, to grab market share. Google has to be there and have their usual high market share before any of the above positive scenarios can play out.

Maybe they just trust the Chinese people to be more inventive than their government can handle at getting around the limitations.

A tactical note: to facilitate their eventually gaining the upper hand, I think it would be a good idea for Google to always tell the user when some search terms or results have been filtered out by "local restrictions".

Regards,
Gary

[Tony Cecala]

I enjoyed your thoughtful piece on Google and China. And, I respectfully disagree.

The ethics of international relations is about doing the "lesser of two evils" (situational triage). In international affairs, one partners with an evil despot to defeat a "more evil" despot. By relenting to the Chinese government, Google gives Chinese citizens the best search results possible—within government regulations. No one on the planet will be able to do this better.

Is this a noble move? I think nobility is overrated. In Hollywood, the heroes confront evil and always win. In the real world, a more practical approach is sometimes necessary. Integrous acts sometimes appear to be evil. Last century, buddying up to Stalin was a situational necessity. When taken in context (ending WWII) we certainly did the right thing.

I don't believe that holding Google to the moral standards of a saint is realistic in the world today. Unfortunately, their "do no evil" motto taunts us to do so.

[Kevin]

Dear Bambi,

First of all, I just wanted to say that I don't usually read financial news (though I do read the Economist) as I'm a terrible investor and don't work in a normal business world (I design museum exhibits). But your column (or whatever it is in today's world!) is always thoughtful, personal, and engaging, while teaching me more about a world developing and affecting all of our lives. So thank you!

Also, I believe you're right: my professor used to say you can do well, or do good. You usually can't do both. Living and working in New York, I realize how much can be made in the world, even in design, but it's worth it to me to do some good in what I do even if I don't do super well (but I don't live an uncomfortable life; I just can't live the extravagant life that some live). I've lost a few jobs, but always feel like there is a point where you have to make a stand, and stick to it (that's a long story!) Not inflexibly (we all learn and grow), but with principles that resonate as true to what we believe we know and understand that moment.

I think you're right in calling them out since they do make a big point of being principled, and yet this action flies in the face of all they say and I believe they are conscious of what this means. Despotism will have its way only when we give it to them out of fear or desire. It's easy for them to take on the U.S. government since the "hurt" isn't so much in fighting it, but as they were staring the big Chinese government in the face and seeing risk in losing their desired market share. Good for you to say it... it isn't all about convenient stands, right?

Thanks again,
Kevin

[Joe Buhler]

I totally agree with your opinion on this subject. Google starts to compromise its lofty, idealistic statements already by kowtowing to the government of China, which let's remember is a totalitarian regime. If they are caving in at this point, when their China revenue is minimal, just imagine what might happen down the road when that business will inevitably grow larger.

One thing we should all remember, China will be the next rival to the U.S. as a superpower, and the time of being the world's only superpower will be rather short lived, especially with China holding the financial bag in the form of U.S. treasuries.

If the past history of U.S. dealings with China is any guide, we should be in for quite a rough time...... Stay tuned!

[David]

Gimme a break. Either you're very ignorant and naive or you think your readers are. Forget China, maybe you should suggest Google to move out of the US for what's going on in Guantanamo Bay and Iraq too.

[JC]

Hi Bambi,

Excellent article on google "Google shows its true colors", very well said, no one could have nailed it down better. These two fellows claimed to want to follow Warren Buffet's footsteps, but they are cashing in their stocks faster than anyone can say hallelujah, printing the stock certificates and cashing them in every chance they have while ordinary folks put their hard earned dollar on Google hoping it is going to some place useful and meaningful. Buffet does not sell his personal stakes in his holdings so he can travel around in a 767 jet. So the next time they say they are emulating Warren Buffet, someone should tell them to shut up!! So money does change people, big time, and I guess that is the reality. But on the bright side, lately I can sense the tide is turning and public opinion is changing after the news of their stock sales was widely known to the public. I don't own Google shares because I will not buy them at these prices for the reasons you eluded to in your article. The irrational exuberance of the dotcom era is still very fresh in my mind.

Secondly, I am Chinese, I grew up in Asia, your clever friend is absolutely right. It will be a very scary development indeed when China becomes a superpower and history is re-written through the eyes of the Chinese government!!

I read many of your articles on MarketWatch and listen to your interviews with the analysts/fund managers from time to time:)

Keep up the good work!!

JC

[Bill]

Regarding your MarketWatch video piece:

Google simply is getting their foot in the Chinese internet market. The underground internet of the newly computer saavy Chinese will continue to find ways around the government censorship. As Joe Kernan, CNBC, said today..."the genie is out of the bottle". Ditto, that....!

China's economy grew at 9% last year. Just imagine their power when communism finally falls just as it did in Eastern Europe years ago under President Reagan.

Imagine the Chinese Government trying at first to sensor the "truth dripping" from you kitchen faucet with their "hand". Now imagine that same sensor trying use his hand to sensor the "truth gushing" from the fire hydrant in front of your house courtesy of Google.

Disclosures: Long Google

[Dave]

Thank you for your excellent article. I, like many of my friends, have forwarded the article or link to all that I know. You hit the mark with your comments and I hope that enough people take notice that Google changes their mind. In Nazi Germany just before WW2, many Jews had a similar decision. The false argument was that if they didn’t boycott the Nazi companies then the Nazis wouldn’t punish them. In the end they lost everything. Google may not have lost everything but they certainly lost the moral high ground, especially with their failure the assist the government in their fight against child access to porn. Additionally, they seem to have lost the concept of personal property rights. They seem to feel that they and they alone can judge who can store and release intellectual property rights. In many ways they remind me of Microsoft before Microsoft was humbled by competition and negative opinions. Hopefully Google’s time is coming.
Thank you again for your excellent article and keep up the good work.

[Bill V]

I so enjoy your informative e-newsletter. This most recent Net Sense was right on. It is sad that Google caved to the Chinese and tripped over their high-minded principles. They had the power to move things (albeit inches) in the right direction and they took the easy road.

Thanks for your keen observations.

[John D]

Hi Bambi,

Your column on Google made some interesting points. However, I feel you left out some important points and pulled the trigger to quick to call Google's move in China "hardly noble." The following are some points worth considering.

First, I don't believe "that Billions typically have a way of getting the best of us" is fair to use to describe co-founders Page and Brin's motivations. They are worth Billions and will probably never worry about money again. So I'm not sure where the motivation is? Also, the fact that each of them drives a Prius, and not some extremely expensive and flashy car, to work might be one indicator of how much they care about changing the world. If I was a shareholder (for the record I have never been and feel that Google's current valuation is overvalued by about 15%), I would want them to position themselves in the largest future economy. I don't see their move as a form of hypocracy (more on that below). We don't know what their motives are and before we do, we should try and examine all the possible reasons. As a company which competes on the most global medium, the internet, it would be foolish not to enter into China. Also, do you really think the Chinese gov't will change their ways if Google doesn't support their political system? Or some other company won't come into China to take Google's spot?

What if Google has another goal in mind that they do not want to disclose (for fear of the Chinese gov't not allowing them in). What if they have a plan of becoming the market leader in the internet seach arena within China then, after gaining this market share, push the Chinese gov't towards free-speech ideals. Once a leader in their business, Google would have a real influence on China and perhaps help them become a move democratic republic.

Second, IMO what Bush is doing with respect to eavesdropping in the US is illegal. We had something in place before Bush started eavesdropping on domestic citizens called Echelon (this allowed eavesdropping once a court order was authorized by the FISA court). I don't see a problem with that old system because it had checks and balances in place to make sure it wasn't being abused. Don't get me wrong, if the US gov't wishes to eavesdrop my phone calls, go ahead. Just make sure there exists a seperate body, such as the FISA court, to make sure the system is neither being abused nor someone doesn't act above the law (such as what Bush is currently doing). We need to fight terriorism, but not at cost of changing our own ideals. If we do that, we have lost our ideals, as well as our identity, and should stop fighting this war because there is already a winner. To get back to Google's story, I appauld them for standing up to the gov't b/c what the gov't is doing is wrong. For them to step into China and allow some censureship of their searches is not an act of hypocracy (depending on how you look at it). My view is that while a free and democratic system maybe the fairest and best system for individuals, it is difficult to impose on a country led by as narrow minded and strict as China's gov't officials are. They (the people of China), not us, are the ones who will ultimately have to make the change away from communism.

I hope this post's tone came across as polite and respectful of everyone's viewpoints.

Keep it up,

John D

[Dee Dee]

Hi, Ms. Francisco,

I strongly disagree with you that Google's decision is "evil". Google Chinese searches will contain a disclaimer stating that the results are filtered according to local laws and regulations. When Chinese people increasing do business with Westerners, and become more adept and dependent themselves on Internet technology, it will become more and more apparent that they aren't getting its full benefit. They will much more likely be moved to work for change if they have a taste of what they're missing.

Is it also wrong for democracy-loving citizens to travel to China and obey the laws? If so, Chinese people will never know what they're missing compared to a "free" society.

I would suggest that we focus our moral outrage and values on our own government so that we will have an example of freedom that we can proudly set forth. As we allow our own government to become increasingly oppressive, there will soon be little difference in information and privacy in China versus in the United States, and the issue will be moot.

[gary pearson]

Google's position with the Chinese and US governments are clearly two seperate issues.
Google can forget having a positive impact toward freedom in the future with the Chinese, if they do not make some short term concessions. Oh, and when they resisted the recent US government requests, the stock tanked. They showed their true colors there.

[Emilio Gonzalez, Jr.]

Twenty-Six Jan O'Six

Hi Bambi:

I sincerely disagree with your opinions as expressed in "True Colors". Google's true colors, as are mine and most Americans' are green and black [By the way, when people said "Black is beautiful, they must have been thinking of you =:) -- if you're not African American I apologize; I'm from Spain and North Africa by way of Cuba, so I'm also "African American". Actually, all us humans are "African" since the species started there =;)]

Sorry, I digress.

My opinions/responses:

A glass half full or half empty is better than an empty one or none at all; otherwise there is no water to drink, even if it's "Chinese tea"

If the Chinese ruled the world, history would be writen..etc. I got news for you honey, history is ALWAYS written by the winners; jusr read "The Bible"!

Complying with a power hungry dictatorship is caving in--I guess we all [learn to]censor ourselves for our survival, always at a very costly price. It's not referred to as "biting one's tongue" for nothing =:)

Finally, I disagree on valuation.

Google is worth whatever they can get away with, because they are a font of information (knowledge) and knowledge is power, not to mention $. Wall Street is not anything an emotional herd of traders, and rationality goes out the window in the face of exhuberance and the best search engine ever. I just hope it's not me going out of a 13nth story window if/when my "investment" in GOOG tanks (I "got into it" just recently--Yikes!)

Google is fast becoming humankind's greatest library, and as a faithful former user of my dear ol' NY Public Library I'm glad it's available at the click of a mouse, and not the price of a ticket back "home".

Much as I loved the Big Apple by the Hudson while growing up, I prefer Bagdhad by the Bay(Area), where I now live, even more=;)

I love your columns, keep them up and posted. I always check CBSMarketBlahBlah for your thoughts, if only to look at your picture!

Respect(as in "looking at you")fully
A faithful reader and [not so] secret admirer,

eg
(Phew!)

[Steve Hanson]

I agree with their decision to limit search results based on international policy. I believe that once they can get a foothold in the search engine market in China, that they will slowly be able to phase in various tidbits of information, which will help to educate the Chinese society. Oh, and as a side benefit, they will make a couple billion in advertising revenue.

gonights.blogspot.com

[Mark Gilbert]

What does it profit a man to gain the world and lose his soul?

[Brad Barnes]

I disagree completely.

I think that it is clear that this is not the Google way of operating. This is a comproimise based on very shrewed planning.

The market for Google in China FAR expands the search engine. This is merely a segway.

To say that this move will bring very little business in the near future is just plain wrong. I am sure time will show them the money. And they will have their principals too.

[Sean]

Bambi:

I'm not going to deny that it probably had something to do with the
potential billion people surfing the web in China and the advertising
money that can generate. However, their move most definitely had a lot
to do with Google's vision of conveying all information to the entire
world. It had to go to China right now so that it can be there in 10
years when things loosen up. Otherwise, if they hadn't gone right now,
Baidu and Yahoo would have locked them out by the time 2015 rolls
around, and then there'd be 2 companies who don't share Google's ideals
dominating the market. I don't believe that making money and spreading
your vision are mutually exculsive. I do believe that compromise is a
natural part of life, though. In China it's either bend or get nothing,
and to spread the vision, Google had to bend.

[Brian]

Bambi,

Thanks for the article. It is definitely a great topic for discussion.

I think you missed the mark. It is the Chinese government doing the censoring here. That wasn't Google's idea, and Google really has no choice but to either comply with Chinese law or be excluded from the Chinese market. I think everyone is better off if Google at least attempts to be in the market.

Also, I really take issue with your comment that "when starting a business, one has to know whether they're doing it because they want to change the world in a good way, or because they want to make money. It's one or the other, not both." Oh really? So no business that generates a profit can be of value to mankind? Sounds to me like you are saying the real enemy is capitalism. If that is the case, then you ought to be very comfortable with China and their policies.

Regards.

[m.hause]

Wow! Thanks for these observations, Michael.

Would you mind posting on my blog at bambi.blogs.com? I’d like to get a discussion going.

As for your No. 3 point – I realize others are in China and have complied. But the difference is that Yahoo, MSN, etc. don’t try to be outliers. They don’t take every opportunity to say, we’re doing what we do for the users and not for shareholders. I just wanted to bring that point out.

--------------------------------------------------------------------------------

From: MICHAEL HAUSE [mailto:michaelhause@msn.com]
Sent: Wednesday, January 25, 2006 6:07 PM
To: Francisco, Bambi
Subject:

hi Bambi

great article!

You did leave a couple of things out though...

1) china is a communist country posing as a democracy . They want our money THAT IS IT!

2) They are not America! they do not have the freedoms we are blessed with. The Chinese Gov't has allowed western culture in. As Greenspan would say "at a measured pace". The fact that the internet exists there today is to be compared with the berlin wall falling!

3) The other big guns MSN YAHOO ETC...also complied to chinas censorship rules. This to me is the most important fact. yahoo gave out addresses and china arrested several dissidents. GOOGLE DID NOT give out addresses (like the US wants)!

As a shoe manufacturer for 20 years You used to have to dodge out bicycles crossing the streets in china . today your dodging out bmw's and mercedes benz's. I wish we would enforce a child labor law in china if they want to do business with america. Then maybe we could put more of our people to work, but God forbid we pay an extra 10%. I see footwear being made. Like UGGS Australia.. $200.00 boots. MADE IN CHINA!!!!!! The cost for deckers(owner of uggs) is about $20 US. THAT’S WHAT NOT RIGHT!90% of all goods sold at every dept store/ low/ mid and hi end (except true designer merchandice) are made in china.

WE HAVE CLOSED ALMOST EVERY AMERICAN SHOE FACTORY HERE AND SPAIN AS WELL. why??? because china allows 8 yr old kid work 16 hoyr days to earn anbout 20cents a day with a 20minute break.

WE SHOULD NOT BAG ON GOOGLE BUT APPLAUD THEM FOR FOLLOWING THEIR COUNTRIES RULES AND GETTING IN THE DOOR.

WE SHOULD BAG ON EVERY DEPARTMENT AND BOX RETAILER FOR SUPPORTING CHINA AND DECEIVING THE AMERICAM PEOPLE WITH A SALE THAT REALLY ISNT A SALE . THEIR INITIAL MARK-UP IS SO HIGH THAT @ 50% OFF THEY'RE STILL MAKING UNBELIEVABLE MARGINS..... 39-54% ON AVERAGE. THAT WHY FEDERATED WAS ABLE TO BUY may co. that why nordstrom ..

Is doing so well. more profit per item , less items sold. huge change from what JWN used to stand for . NOW THEY SELL YOU CRAP, BUT WITH A SMILE AND SERVICE..... JOKES' ON US.
Thank you and have a great day .. and please support google...They really deserve it. Our country has different standards then china , iraq, africa iran etc.......IT IS 1 NATION UNDER GOD.... HOPEFULLY THE REST WILL CATCH UP. BUT KEEP IN MIND THEYRE CULTURES ARE THOUSANDS OF YEARS OLD OURS IS A COUPLE HUNDRED YEARS OLD.

[Brad]

Bambi, as a former Google employee, I strongly disagree with this article. I can tell you that Google's core values are so central to the management that this move pains them greatly. However, at the end of the day, they had to either censor search results now or not reach the chinese audience at all. This was the ultimatum. Google believes very very strongly in free speech, but they also believe that you can exact change over time. That is what they will try to do. As the Chinese people begin to use Google, their interest in free speech will influence the government. Over time, sentiment will shift toward a less filtered version of Google.

Lately it seems that people are spinning their actions in a way that is unjust and not based on the actual intentions of the company. I can tell you from first hand experience that you will not find a company anywhere that is more dedicated to its core values than Google. Google is not evil.