business

What Might Happen If Google Is Broken Up

August 16, 2024 by Llewellyn King Leave a Comment

Alphabet Inc.’s Google has few peers in the world of success. Founded on Sept. 4, 1998, it has a market capitalization of $1.98 trillion today.

It is global, envied, admired and relied upon as the premier search engine. It is also hated. According to Google (yes, I googled it), it has 92 percent of the search business. Its name has entered English as a noun (google) and a verb (to google).

It has also swallowed so much of world’s advertising that it has been one of the chief instruments in the humbling and partial destruction of advertising-supported media, from local newspapers to the great names of publishing and television. All of these are suffering and many have failed, especially local radio and newspapers.

Google was the brainchild of two Stanford graduate students, Larry Page and Sergey Brin. In its short history, it has changed the world.

When it arrived, it began to sweep away existing search engines simply because it was better, more flexible, amazingly easy to use, and it could produce an answer from a few words of inquiry.

Seven major search engines were fighting for market share back then: Yahoo, Alta Vista, Excite, Lycos, WebCrawler, Ask Jeeves and Netscape. A dozen others were in the market.

Since its initial success, Google — like Amazon, its giant tech compatriot — has grown beyond all imagination.

Google has continued its expansion by relentlessly buying other tech companies. According to its search engine, Google has bought 256 smaller high-tech companies.

The question is: Is this a good thing? Is Google’s strategy to find talent and great, new businesses, or to squelch potential rivals?

My guess is some of each. It has acquired a lot of talent through acquisition, but a lot of promising companies and their nascent products and services may never reach their potential under Google. They will be lost in the corporate weeds.

During its acquisition binge, Google has changed the nature of tech startups. When Google itself launched, it was a time when startup companies made people rich when they went public once they proved their mettle in the market. Now, there is a new financing dynamic for tech startups: Venture capitalists ask if Google will buy the startup. The public doesn’t get a chance for a killing. Innovators have become farm teams for the biggies.

Europe has been seething about Google for a long time, and there are moves to break up Google there. Here, things were quiescent until the Department of Justice and a bipartisan group of attorneys general brought a suit against the company for monopolizing the advertising market. If the U.S. efforts to bring Microsoft to heel are any guide, the case will drag on for years and finally die.

History doesn’t offer much guidance about what would happen if Google were broken up. The best example and biggest since the Standard Oil breakup in 1911 is AT&T in 1992. In both cases, the constituent parts grew faster than the parent. The AT&T breakup fostered the Baby Bells — some, like Verizon, have grown enormously. Standard Oil was the same: The parts were bigger than the sum had been.

When companies have merged with the government’s approval, the results have seldom been the corporate nirvana prophesied by those urging the merger, usually bankers and lawyers.

Case in point: the 1997 merger of McDonnell Douglas and Boeing. Overnight, the nation went from having two large airframe manufacturers to having just one, Boeing. The price of that is now in the headlines as Boeing, without domestic competition, has fallen into the slothful ways of a monopoly.

Antitrust action against Google has a few lessons to be learned from the past. Computer-related technology is just too dynamic; it moves too fast for the past to illustrate the future. That would have been true at any time in the past 20 years (the years of Google’s ascent), but it is more so now with the arrival of artificial intelligence.

If the Justice Department succeeds and Google breaks up after many years of litigation and possible legislation, it may be unrecognizable as the Google of today.

It is reasonable to speculate that Google, at the time of a breakup, may be many times its current size. Artificial intelligence is expected to bring a new surge of growth to the big tech companies, which may change search engines altogether.

Am I assuming that the mighty ship Google is too big to sink? It hasn’t been a leader to date in AI and is reportedly playing catch up.

Life at the Top With Rupert Murdoch

April 27, 2018 by Llewellyn King 1 Comment

Rupert Murdoch stands astride the Atlantic. He is the most successful newspaper publisher in the United Kingdom and the proprietor of Fox, the most successful cable news channel in the United States.

While he has many other spectacular holdings in the U.K., the United States, Australia and Asia, those are the two pillars on which the empire stands now that he has sold 21st Century Fox Entertainment to Disney.

I believe the two pillars are linked by what amounts to the Murdoch formula: find a chauvinistic, nationalistic vein and mine it.

Murdoch blew on the embers of resentment and stoked the fires of tribalism through The Sun, his big British moneymaker, and Fox News, his American gold mine.

He understood this social stratum, whether it was in working-class Britain or spread across what we now call the red states in America. This audience felt ignored, put upon and unloved. Its traditional champions on the left — the unions, the Labor Party and the Democratic Party — had condescended to it, but not celebrated it.

Murdoch articulated its frustrations and gave them voice not where you would expect it on the left, but on the right.

A new and exceptional book by Irwin Stelzer, “The Murdoch Method,” lays out how Murdoch did this and how he holds his empire together. Stelzer should know. He has been a friend and consultant to Murdoch and his many enterprises for 35 years.

Stelzer, who I have known for 45 years, is worthy of a book in his own right. When he met Murdoch, he had already achieved success enough for many a man. He founded National Economic Research Associates and sold it well. Then, after a stint with Rothschild in New York, he enjoyed running an energy program at Harvard. Then came Murdoch.

Stelzer worked so closely with Murdoch that a rival newspaper in London described him as “Murdoch’s man on earth.” And he was.

He was sometimes the go-between for British prime ministers and leading American figures, from Richard Nixon to Richard Cheney. Stelzer made Murdoch’s case to the mighty, and he crunched numbers. Money and the power of media made this world go around.

As the title suggests, Stelzer explains in his book how Murdoch manages so diverse a company as News Corp. and how he created and grew it from the newspapers he inherited from his formidable father, Sir Keith Murdoch, in out-of-the-way Adelaide, Australia.

What emerges is a portrait of man who thinks of himself as an outsider, a loner: a practitioner of a kind of minimalist management out to war against the establishment and its elites.

Murdoch, both as a publisher and a businessman, has been incredibly courageous. He flipped The Sun from timid left to truculent right. He also stripped the brassieres off the models on Page 3. Chauvinism, sex and celebrity gossip was what Murdoch offered, and the public could not get enough. He also broke the British print unions in a near-military move to a secret printing site in Wapping, East London, in January 1986.

In America, Murdoch pretty well failed with newspapers he purchased in San Antonio, Boston and Chicago. He has not exactly succeeded with The New York Post, but he keeps it going as a personal indulgence. He is doing well with The Wall Street Journal. Fox News is the jewel in his American crown.

Stelzer’s Murdoch and his method is one of a small executive staff: excellent executives who are very well paid and prepared to answer a call from their boss day and night. He let really gifted people, like Roger Ailes of Fox, run their enterprises until there was a scandal and then, bang, the locks were changed, and settlements were paid. Murdoch is generous and ruthless.

Murdoch and Stelzer were in a way made for each other, although they did argue and sometimes Stelzer lost, only to find out just how wrong he was — as when he opposed the creation of the Fox Business Network.

Stelzer acknowledges he does not like everything Murdoch does; and he should not. Murdoch has treated the world as a playground where you make money by making damaging mischief — so you hire people like Sean Hannity and tolerate the inanity. Or you court the Clintons, but back Trump.

Stelzer has been on a wild ride and he takes you along in clear, readable prose.

What Makes a President: Fallacies about Business, Markets

February 28, 2012 by White House Chronicle Leave a Comment

Come walk in the garden where the fallacies grow. Today, we’ll examine two varieties that are enjoying strong growth: the businessus presidentus and themarketus perfectus.

The first fallacy (businessus presidentus) is that a business person, presumably Mitt Romney, is better equipped to run the government than a professional politician. This is an idea as old as anything in the garden. The supposition is that business people are organized, understand the economy and are less prone make decisions based on politics. It also suggests that as a species they are innovative, strategic thinkers and have an acquired understanding people.

Well let's see: The purpose of business is business; in short, to make money. Romantics of the right like to credit it with virtues it doesn't have and doesn't want.

Business is about the numbers, and making the numbers. It’s not intrinsically wise, nor is it necessarily more inventive than government.

It’s true that business innovates; but only when it’s forced to by competition and disruptive technologies. Coca-Cola was supposed to be the smartest company on the planet until it introduced New Coke and had to beat an ignominious retreat. Many old and new businesses simply can't change fast enough. We’ve seen the demise of Kodak, Polaroid and Borders and the emasculation of Western Union. The American car companies had to be rescued — especially General Motors which was a model of management structure, celebrated by Peter Drucker, until its management choked the life out of it.

If Romney has the skills to be a good president, he didn't learn them in the wheeler-dealer world of investment banking – Remember Lehman? – but rather in the statehouse in Boston. By and large, business success prepares a man or a woman for retirement and maybe volunteer work, not political office.

The Washington trade associations periodically decide what they need is “kick-ass” business person. In time, they find someone who knows the ways of Congress to be a lot more effective than someone who can read a balance sheet.

Then there’s the workforce difference. Management controls the workforce in private industry, but the workforce often controls the management in government. Only the military is exempt from this rule. Presidents down to junior political operatives chafe under this reality.

The second fallacy (marketus perfectus) is about markets being next to godliness. Markets are an efficient way to distribute goods and services at affordable prices. But they are as cruel as they are efficient. They exterminate and reward.

It’s a heresy in conservative circles to point out that national interest and market interest do not always coincide. But among treasured companies that have been saved by government intervention in the market are Harley-Davidson (price barriers), Lockheed (loans), Chrysler (twice with loans, and later part of the great Detroit bailout).

It can be argued that some of our current economic woes are the market doing what it does best: seeking the lowest-cost, competent production. It was that which lead to the export of our manufacturing. Companies flooded China because they got the three things they sought and which they sought to satisfy the marketplace: low wages, talent and reliability. They didn’t flood to other cheap-labor places like sub-Saharan Africa, but to China which knew how to please.

People who have really changed the political landscape in Washington have been professional politicians, or those who have embraced politics as a second career, like Ronald Reagan. Richard Nixon changed it not by his misdeeds, but by creating the Office of Management and Budget from its predecessor the Bureau of the Budget. In so doing, he increased the power of the presidency and downgraded the Cabinet. And the consummate Washington insider, Lyndon Johnson, enhanced the president's war-making prerogatives — even though it would’ve been better for him and the nation if he hadn't.

If Romney makes it to the Oval Office, he'll have Massachusetts on his mind not Bain & Co. You won't get the garden to bloom with the wrong seed. –For the Hearst-New York Times syndicate.

What Makes a President: Fallacies about Business, Markets

February 16, 2012 by White House Chronicle Leave a Comment

Come walk in the garden where the fallacies grow. Today, we’ll examine two varieties that are enjoying strong growth: the businessus presidentus and the marketus perfectus.

Well let's see: The purpose of business is business; in short, to make money. Romantics of the right like to credit it with virtues it doesn't have and doesn't want.

Business is about the numbers, and making the numbers. It’s not intrinsically wise, nor is it necessarily more inventive than government.

If Romney makes it to the Oval Office, he'll have Massachusetts on his mind not Bain & Co. You won't get the garden to bloom with the wrong seed. –For the Hearst-New York Times syndicate.

Government Isn’t as Bad as We Think

October 29, 2009 by Llewellyn King Leave a Comment

Here’s a dirty little secret: The Post Office isn’t so bad.

Although it’s the rhetorical emblem of all that’s wrong with government, the postal service is surprisingly dependable and efficient. Letters get delivered by the millions and very few are lost.

Where the Post Office fails, as most government enterprises fail, is that its dynamic is antithetical to creativity, invention and risk-taking. Government enterprises seldom innovate, except those in the defense arena and collateral endeavors like space exploration. The Bonneville Power Administration, a federal agency, does its job well enough, as does the FAA in controlling aircraft. It just wasn’t in the Post Office to create FedEx.

In Washington, and across the nation, politicians repeat often and loudly that the worst outcome of any new endeavor would be for the government to run it. To hear Rep. Louis Gohmert, R-Texas, tell it, the government is a vast anti-American conspiracy. Recently, he took to the House floor to protest against a government role in health care and claimed that anything government-run means socialism to him. And socialism, according to Gohmert, is the slippery slope to totalitarianism.

In Washington, there’s a more ambivalent attitude toward the bureaucracy. It’s not an abstraction to Washingtonians; government workers are neighbors, commuting companions, friends and family.

But that doesn’t mean that Washingtonians are taken in by it, or that they believe the government should grow more.

If you know enough government workers, you know that they’re not created equal; neither are their departments and agencies.

The Department of Defense is an archipelago of islands of success in a sea of contradiction and confusion. But the agencies, like Housing and Urban Development and Labor, are resigned to a level of ineffectiveness, often doubtful of the virtue of their own missions.

The challenge is to know what is best left to government or to the private sector.

Attempts to privatize support sectors of the U.S. military (base maintenance, security, fuel, etc.) have led to scandals at every level for companies like Blackwater (now known as Xe Services) and KBR, denounced in Congress and the media. Privatizing war is a questionable undertaking.

As often as not, government is lumbered with failing or failed businesses for political or social reasons. Amtrak is front-and-center among these and General Motors may join the group of government orphans — too important to fail and too rickety to succeed.

Finally, there is no political will to tackle the thorny issue of productivity in the bureaucracy. Politicians complain of government in the abstract and praise “hard-working men and women” in specific agencies.

Sadly, it boils down to hiring and firing. It’s hard to get hired in the government because of rules and rigidities and even harder to get fired.

The reverse applies in the private sector. Business operates on incentives, but also on fear. Fear is missing in government employment and it shows.

Government is not as inept as conservative politicians like to say, any more than CitiBank and AIG were models of corporate governance.

Some things organically belong in the government’s sphere and others far from it. Today’s question is: Where does health care fit? –For the Hearst-New York Times Syndicate