Mr Schmidt goes to Dublin

It is a rare piece of fortune to have witnessed one of the most important people in the global technology industry in action at least three times, and each time at the top of his game. I’ve interviewed Eric Schmidt twice and seen him in action once before the leaders of the global telecoms industry fielding tough questions on the smartphone revolution in which he has played a guiding role.

The first occasion two years ago was in Killarney after he personally landed his Gulfstream jet at the nearby airport and was about to address 2,000 Google sales employees. He seemed to be in a brittle mood but showed professionalism, calm and an earnest nature as he patiently dealt with questions he might have answered a thousand times before.

The second occasion was months later from the audience at the Mobile World Congress in Barcelona, where he explained to embattled and anxious telecoms executives how his big bet on Android and the unfolding information technology revolution would empower their industry to be more than just networks of ‘dumb pipes’.

On the third occasion, a summer afternoon in Dublin recently after he addressed a conference on extremism attended by former gang members and paramilitaries now into peace and reconciliation, he was relaxed and cheerful. As he swept into the room at Google’s Dublin headquarters, he decided not to sit at the centre of the table, but at the corner and cracked open a tin of Sprite.

Schmidt, a software engineer by profession who played integral roles in some of Silicon Valley’s best known companies such as Xerox, Bell Labs and Sun Microsystems, as well as a former board role at Apple, has risen to be a key advisor on science, technology and the environment to the Obama administration and up until this year was CEO at Google.

Before joining Google Schmidt had been CEO of Novell and impressed the young founders of Google, Larry Page and Sergey Brin, who insisted he join as CEO in 2002. He played a guiding role in the company’s stellar growth in just 13 years to become a US$30bn a year internet giant employing 28,000 people worldwide. He has a net worth of US$7bn and according to Forbes is the 136th richest person on the planet.

A computer scientist at heart, he jointly authored Lex (a vital system for compiling and analysing software), lectured at Stanford Business School and worked at the influential Xerox R&D lab in Palo Alto. But he has also shown incredible business acumen as a leader in what is a very complex industry. He is also a strategist who masterminded the acquisition in 2005 of YouTube for US$1.6bn, and the acquisition of the Android operating system which now occupies 50pc of the global smartphone market.

As part of what seems to have been a pre-agreed plan he stepped aside from the CEO role this year to let co-founder Larry Page take the reins to guide Google on its next phase of growth: social media.

As well as being a technologist and a business leader, Schmidt is considered one of the top 200 art collectors in America and he and his wife Wendy run the Eric Schmidt Family Foundation, which is focused on addressing sustainability and the use of natural resources.

Sipping slowly from his soft drink Schmidt gets started by complimenting Ireland as a location for Google’s operations and its success at winning investments from top performing tech companies including Zynga and Facebook.

Google came here eight years ago with the intention of creating 200 jobs – now it employs 2,200 people in Ireland and last year announced 200 jobs in Dublin focused on mobile apps.

“Our decision is nothing to do with the Irish economy, but everything to do with the Irish workforce. Ireland is a great place to run our business. We have access to creative, young people who see Dublin as a desirable place to work. People are coming to Ireland from other parts of Europe.

"We are growing significantly in Dublin. We are very committed here and we’re going to continue. There is nothing happening in the local market that would prevent us from doing that.”

Ireland’s broadband infrastructure

But the praise quickly evaporates into a warning for Irish businesses and the Irish Government. Despite our prowess at winning technology investment, outside of the big cities our broadband infrastructure is not up to scratch. The writing has been on the wall for a long time.

“You are behind on fibre to the home and you guys are late with respect to 4G rollout. France, Germany and the UK are already ahead of Ireland with respect to citizens and businesses connected to the internet. You just need to do it,” warns Schmidt.

“There are many things that the Government can do, but the thing is it is hard to work with telecoms providers to get more broadband. But these are the roads of the future. There are very few things that are better use of your money that serves the citizens of your country.

“Yes, I am very surprised, you were doing very well with broadband until the financial crisis hit. The economic benefit is it gets Irish businesses global. The flow through is phenomenal, it creates jobs.

“The key is competition,” he continues, pointing to how countries like Japan, South Korea and Singapore are steaming ahead.

“They are viewing broadband as a vital industrial policy and they are creating hyper-connected societies that are growing pretty well. This does matter.”

Schmidt refers to a McKinsey study that said that for every job lost in the economy another two can be created through investment in broadband.

Weeks before I met Schmidt, Google’s head of Irish operations John Herlihy, who also is vice-president in charge of global ad sales for the internet giant, reminded me that Google is a company that is in the habit of taking big bets on technology from online advertising to video, the cloud, social and smartphones. “We intend to embed social in everything we do.”

Herlihy wasn’t kidding. Just weeks after we talked Google rolled out Google+, its rival to Facebook and Twitter. Within 16 days Google+ had 20 million users, a feat that took at least a year for Facebook and Twitter.

I ask Schmidt about his big bet on Android, the operating system that is powering half of the world’s smartphones, sits on at least 300 high-end mobile devices and is achieving 500,000 activations a day. With the recent news that Google has bought Motorola Mobility for US$12.5bn, all eyes are now on what this will mean for Android’s competition in the marketplace with Apple’s iPhone.

“We believe the space for Android is larger than the space that is for Apple and its iPhone and it would be a reasonable assumption that Android and iOS will battle it out. Competition is good, it keeps everyone honest.

“These are global scale platforms and we’ve really only just started. We’re two years into this journey and a year ago I kept saying Android would happen and it did, and with tablets we will see something similar.

“We benefit from the competition between various Android devices. It drives prices down and the reach up. Tablets in the Android space have really only just happened in the last six months, there are big enough markets and there won’t be just one winner.

“The space is large enough and people are moving to this digital model. Competition is beneficial,” adds Schmidt, who had lunch with local entrepreneurs who were developing for iOS as well as Android, something he said he was he was fine with.

I put it to Schmidt that beyond online advertising, which is clearly Google’s main cash cow, the opportunity for digital payments via mobile devices could even be  larger.

“The thing about Android was there were not a lot of capital costs. But with NFC you need to put a special chip in the phones and, of course, point-of-sale terminals have to get upgraded. The sooner we can convince retailers that the loss rates are lower, then it’s just a matter of how long.

“How fast will it occur? In a year, I think, you’ll begin to notice it. When you start seeing people using it in different places then you know it’s going to take off.

“But then again, we as an industry have been talking about cloud computing for 20 years and only now the infrastructure stuff is possible. So it’s speculative. If the payment thing works, that side of the retail business is a trillion dollars. How much of that will Google get? Well, we’re not going to take three-quarters. I like payments because it’s related to advertising. They are not that far afield and there are lots of benefits.”

Media of the future

We move on to the future of the media industry, particularly broadcasting and newspapers, which is at a very sticky point. I ask Schmidt about the dilemma facing newspapers and media owners.

“Independent of how you price it, costs of reading this way versus buying a paper – do you think when people move to tablet computers from newspapers they will pay the same way? That will be a decision newspapers themselves will have to make – should they charge the same price?

“Ultimately, traditional newspapers will decline because a vast number of people will begin reading them on tablet devices. That’s not bad unless you love newsprint. I like to read physical newspapers myself. But all the kids I know read their news on smartphones and tablet devices.”

We switch to Schmidt’s pet subject of sustainability. He says Google has invested US$350m so far in green energy-related businesses and it is looking around the world for renewable energy sources.

For example, Google has invested in two wind farms in North Dakota with a 20-year purchase agreement which will yield the internet giant 169.5MW of energy for the next 20 years – enough to power 55,000 homes – more than what it needs but which will ensure a guaranteed energy price for the next 20 years. It has also invested in a similar wind farm in Oklahoma, a wind transmission system spanning 563km off the US mid-Atlantic coastline, and a solar energy farm in the Mojave Desert.

“We’re doing this because it’s the right thing to do; we want to offset our use of carbon-based fuel and will have invested half a billion in businesses that we expect to make money on because they are solar and wind-based,” Schmidt explains.

He hits on the difference in attitudes between nations that are closer to the implications of global warming and many in the US who don’t see the urgency. “Europeans as a group understand the engines of global warming because they are physically closer to the resulting changes.

“We are seeing the rate of extinction of wildlife accelerate, the sea levels are rising and in 50 years the world will be a different place. We share a responsibility to do what we can. And the US isn’t doing its part.”

He says he lamented the fact that US President Barack Obama’s carbon trading scheme bill didn’t pass.

Schmidt, who is a member of the US President’s Council of Advisers on Science and Technology (PCAST), has in the past proposed that the easiest way to solve all of the problems of the US at once was through a stimulus programme that rewards renewable energy and over time replaces fossil fuels with renewable energy.

Google is looking at sources of renewable energy worldwide, he says.

When I venture that there’s an abundance of ocean and wind off the coast of Ireland, Schmidt laughs and politely replies that most of these decisions into the future will be defined by available tax benefits, what things investors are interested in and ultimately, what is the right thing to do.

Finally, in a display of the impeccable manners that define the man, Schmidt waits by the door until everyone has left the room, a quizzical smile on his face suggesting he enjoyed the verbal sparring. But there is also something in his stance suggesting he couldn’t wait to start talking to the people he really understands – the engineers.

This article first appeared in Irish Director magazine, Autumn 2011