"Stagnation in middle-class wages is an economic problem" says Eric Schmidt

by Henry Blodget, Business Insider
Jan. 23, 2014


Google Chairman Eric Schmidt gave a "fireside chat" in Davos, Switzerland, at the World Economic Forum.

In the context of talking about global inequality, which Schmidt thinks is partly the result of technology and is going to get worse before it gets better, Schmidt revealed a critical truth about the economy that few other successful investors and executives appear to understand (or at least admit):

The stagnation in middle-class wages is not just a middle-class problem. It's an economic problem. And it's one of the main reasons that global economic growth is so lousy.

Why do stagnant middle-class wages hurt the economy?

Because the middle-class folks whose wages are stagnant are the global economy's biggest spenders.

And when they don't have money to spend, their lack of spending hurts not just them but all the companies that depend on them for revenue.

Including, Schmidt pointed out, Google.

Put differently, one company's expenses (wages) are another company's revenues. So, collectively, when companies are cutting wages, they're also cutting their own future revenue growth.

Right now, companies are so focused on cutting wages — by paying their employees as little as possible and replacing them with technology whenever possible — that wages as a percent of the economy are now near an all-time low (see chart below). And this weakness in wages is the big reason demand in the economy is so weak.

Wages as a percent of GDP.

Very few corporate executives and investors seem to understand this.

Instead, they act like it's a law of economics that they have to pay their employees as little as possible, so they can "maximize profit."  And, in the process, they hobble the economy.

Steve Jobs, Google CEO plotted ‘gentlemen’s agreement’ to keep wages down

RT
Published time: January 25, 2014

Two of the most powerful people in the technology world secretly and perhaps illegally coordinated business strategies in which they agreed not to poach each other’s employees, thereby keeping salaries low, according to emails unveiled in federal court.

Apple founder Steve Jobs and Google CEO Eric Schmidt apparently kept a secret pact to institute a “no-hire” policy in which each executive promised not to recruit each other’s workers. Yet the tech superstars are just two of the business leaders to be implicated in the wink-wink agreement, which reportedly included Google, Apple, Intel, Adobe, Intuit, and Pixar.
According to Pando Daily journalist Mark Ames, the scheme began in early 2005, when the need for Silicon Valley engineers was at an all-time high. The deal’s consequences became so pervasive that the US Department of Justice launched an antitrust investigation in 2010, which laid the groundwork for a class action lawsuit filed on behalf of more than 100,000 Silicon Valley employees who allege they were deprived of over $9 billion since 2000.

The US 9th Circuit Court of Appeals refused to throw out the class action suit over the objections of executives at Apple, Google, Intel, and Adobe. The emails in question were unsealed Tuesday by Judge Lucy Koh, the same judge who presided over the Samsung-Apple patent lawsuit.

Jobs, who died in 2011, seems to be the principal architect behind the illegal conspiracy. Yet Schmidt, according to an email from Google senior advisor Bill Campbell dated February 27, 2005, “got directly involved and firmly stopped all efforts to recruit anyone from Apple.”

Schmidt is also said to have told his Senior Vice President for Business Operation Shona Brown to only mention the pact “verbally, since I don’t want to create a paper trail over which we can be sued later.”

Google founder Sergey Brin was also strong-armed when he approached members of Apple’s Safari team about working for Google. Jobs, in an emailed quoted by Pando Daily, cited the “gentlemen’s agreement” when threatening Brin, stating: “If you hire a single one of these people that means war.”

Testifying in court, former Palm CEO Edward Colligan said Jobs enforced the no-poaching policy by threatening to hire away Palm employees, or worse.

“Mr. Jobs also suggested that if Palm did not agree to such an arrangement, Palm could face lawsuits alleging infringement of Apple’s many patents,” Colligan said.

Colligan swore he told Jobs the scheme was “likely illegal” and that Palm Inc. – a computer hardware firm eventually obtained by HP – would not be “intimidated” by a patent battle.

“If you choose the litigation route, we can respond with our own claims based on patent assets, but I don’t think litigation is the answer,” Colligan testified to telling Jobs, as quoted by Reuters.

A jury trial has been set for May 27 in San Jose, California.

Why I left Google (former Google tech on Google's Approach to Privacy)

James Whittaker 13 Mar 2012

Ok, I relent. Everyone wants to know why I left and answering individually isn’t scaling so here it is, laid out in its long form. Read a little (I get to the punch line in the 3^rd paragraph) or read it all. But a warning in advance: there is no drama here, no tell-all, no former colleagues bashed and nothing more than you couldn’t already surmise from what’s happening in the press these days surrounding Google and its attitudes toward user privacy and software developers. This is simply a more personal telling.

It wasn’t an easy decision to leave Google. During my time there I became fairly passionate about the company. I keynoted four Google Developer Day events, two Google Test Automation Conferences and was a prolific contributor to the Google testing blog. Recruiters often asked me to help sell high priority candidates on the company. No one had to ask me twice to promote Google and no one was more surprised than me when I could no longer do so. In fact, my last three months working for Google was a whirlwind of desperation, trying in vain to get my passion back.

The Google I was passionate about was a technology company that empowered its employees to innovate. The Google I left was an advertising company with a single corporate-mandated focus.

Technically I suppose Google has always been an advertising company, but for the better part of the last three years, it didn’t feel like one. Google was an ad company only in the sense that a good TV show is an ad company: having great content attracts advertisers.

Under Eric Schmidt ads were always in the background. Google was run like an innovation factory, empowering employees to be entrepreneurial through founder’s awards, peer bonuses and 20% time. Our advertising revenue gave us the headroom to think, innovate and create. Forums like App Engine, Google Labs and open source served as staging grounds for our inventions. The fact that all this was paid for by a cash machine stuffed full of advertising loot was lost on most of us. Maybe the engineers who actually worked on ads felt it, but the rest of us were convinced that Google was a technology company first and foremost; a company that hired smart people and placed a big bet on their ability to innovate.

From this innovation machine came strategically important products like Gmail and Chrome, products that were the result of entrepreneurship at the lowest levels of the company. Of course, such runaway innovative spirit creates some duds, and Google has had their share of those, but Google has always known how to fail fast and learn from it.

In such an environment you don’t have to be part of some executive’s inner circle to succeed. You don’t have to get lucky and land on a sexy project to have a great career. Anyone with ideas or the skills to contribute could get involved. I had any number of opportunities to leave Google during this period, but it was hard to imagine a better place to work.

But that was then, as the saying goes, and this is now.

It turns out that there was one place where the Google innovation machine faltered and that one place mattered a lot: competing with Facebook. Informal efforts produced a couple of antisocial dogs in Wave and Buzz. Orkut never caught on outside Brazil. Like the proverbial hare confident enough in its lead to risk a brief nap, Google awoke from its social dreaming to find its front runner status in ads threatened.

Google could still put ads in front of more people than Facebook, but Facebook knows so much more about those people. Advertisers and publishers cherish this kind of personal information, so much so that they are willing to put the Facebook brand before their own. Exhibit A: www.facebook.com/nike, a company with the power and clout of Nike putting their own brand after Facebook’s? No company has ever done that for Google and Google took it personally.

Larry Page himself assumed command to right this wrong. Social became state-owned, a corporate mandate called Google+. It was an ominous name invoking the feeling that Google alone wasn’t enough. Search had to be social. Android had to be social. You Tube, once joyous in their independence, had to be … well, you get the point. Even worse was that innovation had to be social. Ideas that failed to put Google+ at the center of the universe were a distraction.

Suddenly, 20% meant half-assed. Google Labs was shut down. App Engine fees were raised. APIs that had been free for years were deprecated or provided for a fee. As the trappings of entrepreneurship were dismantled, derisive talk of the “old Google” and its feeble attempts at competing with Facebook surfaced to justify a “new Google” that promised “more wood behind fewer arrows.”

The days of old Google hiring smart people and empowering them to invent the future was gone. The new Google knew beyond doubt what the future should look like. Employees had gotten it wrong and corporate intervention would set it right again.

Officially, Google declared that “sharing is broken on the web” and nothing but the full force of our collective minds around Google+ could fix it. You have to admire a company willing to sacrifice sacred cows and rally its talent behind a threat to its business. Had Google been right, the effort would have been heroic and clearly many of us wanted to be part of that outcome. I bought into it. I worked on Google+ as a development director and shipped a bunch of code. But the world never changed; sharing never changed. It’s arguable that we made Facebook better, but all I had to show for it was higher review scores.

As it turned out, sharing was not broken. Sharing was working fine and dandy, Google just wasn’t part of it. People were sharing all around us and seemed quite happy. A user exodus from Facebook never materialized. I couldn’t even get my own teenage daughter to look at Google+ twice, “social isn’t a product,” she told me after I gave her a demo, “social is people and the people are on Facebook.” Google was the rich kid who, after having discovered he wasn’t invited to the party, built his own party in retaliation. The fact that no one came to Google’s party became the elephant in the room.

Google+ and me, we were simply never meant to be. Truth is I’ve never been much on advertising. I don’t click on ads. When Gmail displays ads based on things I type into my email message it creeps me out. I don’t want my search results to contain the rants of Google+ posters (or Facebook’s or Twitter’s for that matter). When I search for “London pub walks” I want better than the sponsored suggestion to “Buy a London pub walk at Wal-Mart.”

The old Google made a fortune on ads because they had good content. It was like TV used to be: make the best show and you get the most ad revenue from commercials. The new Google seems more focused on the commercials themselves.

Perhaps Google is right. Perhaps the future lies in learning as much about people’s personal lives as possible. Perhaps Google is a better judge of when I should call my mom and that my life would be better if I shopped that Nordstrom sale. Perhaps if they nag me enough about all that open time on my calendar I’ll work out more often. Perhaps if they offer an ad for a divorce lawyer because I am writing an email about my 14 year old son breaking up with his girlfriend I’ll appreciate that ad enough to end my own marriage. Or perhaps I’ll figure all this stuff out on my own.

The old Google was a great place to work. The new one?

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Google Confirms It Aims to Own Your Online ID

Amid a furor over Google+'s ban on pseudonymity and anonymity, Google Chairman Eric Schmidt just admitted the company intends to be an 'identity service"

By Mathew Ingram
Ever since Google (GOOG) launched its new Google+ social network, we and others have pointed out that the search giant clearly has more in mind than just providing a nice place for people to share photos of their pets. For one thing, Google needs to tap into the “social signals” that people provide through networks such as Facebook so it can improve its search results. There’s a larger motive, too: As Chairman and former Chief Executive Officer Eric Schmidt admitted during an interview in Edinburgh over the weekend, Google is taking a hard line on the real-name issue because it sees Google+ as an “identity service” or platform on which it can build other products.

Schmidt’s comments came during an interview with Andy Carvin, the National Public Radio digital editor who has become a one-man newswire during the Arab Spring revolutions.

Carvin asked the Google chairman about the company’s reasoning for pushing its real-name policies on Google+—a policy that many have criticized (including us) because it excludes potentially valuable viewpoints that might be expressed by political dissidents and others who prefer to remain anonymous. In effect, Schmidt said Google isn’t interested in changing its policies to accommodate those kinds of users: If people want to remain anonymous, he said, then they shouldn’t use Google+.

Google+ is primarily an “identity service”It was the former Google CEO’s remarks about the rationale for this policy that were most interesting: He didn’t just say—as Vic Gundotra, the Google executive in charge of the new social network has—that having real names maintains a certain tone of behavior that is preferable to anonymous forums (an argument that online-community pioneer Derek Powazek has also made). According to Carvin, Schmidt said the reason Google needs users with real names is that the company sees Google+ as the core of an identity platform it is building that can be used for other things:

He (Eric) replied by saying that G+ was built primarily as an identity service, so fundamentally it depends on people using their real names if they’re going to build future products that leverage that information.

As Union Square Ventures partner Fred Wilson noted in a blog post in response to Schmidt’s comments, this is an admission by the company that it wants to be an identity gatekeeper.

Others have made similar observations since the launch of Google+. Programmer and online veteran Dave Winer, for example, said—when the real-name policy first started to become a hot-button issue—that Google’s purpose was clearly to “provide identity in a commerce-ready way. And to give them information about what you do on the Internet, without obfuscation of pseudonyms.” In his blog post, Fred Wilson said:

It begs the question of whom Google built this service for? You or them. And the answer to why you need to use your real name in the service is because they need you to.

Real names are more valuable to advertisersAs I tried to outline in a recent GigaOM Pro research report entitled “How social search is changing the search industry” (subscription required), there’s an obvious search-related rationale for launching a social network such as Google+ because indexing and mining that kind of activity can help the company provide better “social search” results. But the real-name issue has more to do with Google’s other business: namely, advertising. Users who are anonymous or pseudonymous are arguably a lot less valuable to advertisers than those who choose to attach their real identitie—including their age, gender, location, and further demographic details—to their accounts.

What kind of services is Schmidt referring to when he says that Google is looking at Google+ as an identity platform that could support other services? Dave Winer thinks the company wants to effectively become a bank—something he suspects Apple (AAPL) and Amazon (AMZN) are interested in as well. Apple and Google both seem interested in NFC technology (near-field communication), which turns mobile devices into electronic wallets; having a social network tied to an individual user’s identity would come in handy. Ross Dawson says Google wants to build a “reputation engine,” using Google+ as a platform.

Whatever its specific interests, Google clearly sees Facebook as a competitive threat, not just because it has developed a gigantic social network with hundreds of millions of devoted users, but because it has also become a kind of identity gatekeeper—with tens of millions of those devoted users happily logging into other websites and services with their Facebook credentials, thus sending Facebook valuable data about what they are doing and where they are doing it. The ubiquitous “like” button provides even further data, something Google is also trying to mimic with its +1 buttons.

Google needs a horse in the identity raceThe bottom line is that Google needs to have a horse in this identity race. It has been unable to create one so far. The growth of Google+ provides a reason for people to create Google profiles, and that data—along with their activity on the network and through +1 buttons—goes into the vast Google cyberplex where it can be crunched and indexed and codified in a hundred ways. The more people who decide to do it, the better it gets, both for Google and for its advertising strategy. As the saying goes: If you’re not paying for it, then you’re the product being sold.

That’s the obvious background to the real-name issue, something Eric Schmidt has effectively confirmed with his remarks in Edinburgh. It remains to be seen if users like the position that puts them in.

Collateral Damage in the War on Anonymity

Friday, August 12, 2011 by Creators.com
by David Sirota

From warrantless wiretapping to ever-present surveillance cameras, our world is right now in the midst of a long war on anonymity.

In the media and political arenas, we've seen paparazzi culture famously fetishize the outing of anonymous iconoclasts, from Watergate's Deep Throat (Mark Felt) to a top CIA agent working on weapons of mass destruction (Valerie Plame). Likewise, in our communities, we now know that we are almost always being monitored in highly trafficked parks, malls, airports and stadiums -- and as Slate recently reported, we may soon have apps on all of our smartphones that let us identify random faces in a crowd.

Teeming with incognito bloggers and commenters, the Internet seemed to be the last bulwark against this trend -- a rare public space that let us broadcast opinions from the shadows. But even cyberspace will likely be exposed to the white-hot spotlight of identity, as a new campaign for disclosure now starts in earnest.

Launched in response to cyber-bullying, this campaign made headlines last month when Facebook executive Randi Zuckerberg declared that "anonymity on the Internet has to go away." Her statement echoed that of former Google CEO Eric Schmidt, who previously called for "true transparency and no anonymity" on the Web.

As advertising corporations always seeking new information about their users, Facebook and Google have an obvious financial stake in these positions. Regardless of these firms' particular motives, though, they set standards for the entire Internet. So when their luminaries declare war on anonymity, it's presumably a fait accompli.

Thus, the key question: Will the end of Internet anonymity be good or bad for society?

The big potential benefit of users having to attach real identities to their Internet personas is more constructive dialogue.

The downside, though, is that true whistle-blowers will lose one of their most essential tools.

Though today's journalists often grant establishment sources anonymity to attack weaker critics, anonymity's real social value is rooted in helping the powerless challenge the powerful. Think WikiLeaks, which exemplifies how online anonymity provides insiders the cover they need to publish critical information without fear of retribution. Eliminating such cover will almost certainly reduce the kind of leaks that let the public occasionally see inconvenient truths.

Encouraging civility while preserving avenues of dissent is a tough balancing act, and the core debate over whether one should have a right to anonymity in public spaces is long overdue. However, it comes with a danger -- namely, that legitimate arguments for disclosure will be expanded to justify illegitimate spying on private interactions.

If you think that's far-fetched, recall that this is precisely what happened in Congress last month, when a House committee moved forward a proposal forcing Internet service providers to keep logs of all online activity by their users.

Clearly, if it ultimately becomes law, this legislation would undermine not just anonymity in public spaces, but privacy in general. Should it succeed, we may achieve transparency, but at far too high a cost.

Google's Eric Schmidt says Facebook "threatens the bargain of the Web"

By Rich Trenholm on 28 January 2011

Google boss Eric Schmidt has revealed his feelings about Facebook in a chat with the BBC. Having stepped down from his role as the big dog at the big G, Schmidt now has lots of time on his hands to don a tasteful powder-blue jumper and ponder the threat of social networking to the openness of the Web.

The Beeb confronted Schmidt with Google's apparent failure to catch the social network wave, citing the failure of Google Buzz. Schmidt concedes that Google has been "late adding social capabilities to our core products" but says that Buzz and other current plans are not an attempt to copy Facebook.

Discussing the walled gardens of social networking, Schmidt reckons that closed systems threaten "the bargain of the Web", a neat little phrase that sums up our relationship with the Internet.

Schmidt stepped down from his role as Google CEO in a surprise shake-up last week, leaving co-founders Larry Page to take charge and Sergei Brin to deal with new business. Schmidt is now executive chairman, focusing on external relationships like deals, partnerships and nipping out on sandwich runs.

Schmidt said Google is growing by 20 per cent around the world, but added, "We don't have to do everything." Which is news to those worried that the Big G is taking over the world one email address at a time.

Google's Schmidt: Society not ready for technology

by Ina Fried | August 4, 2010

TRUCKEE, Calif.--For those concerned with privacy, Google CEO Eric Schmidt gave them a few more things to start worrying about.

At a conference here Wednesday, Schmidt noted that using artificial intelligence, computers can take 14 pictures of anyone on the Internet and stand a good chance of identifying that person. Similarly, the data collected by location-based services can be used not only to show where someone is at, but to also predict with a lot of accuracy where they might be headed next.

"Pretty interesting," Schmidt said. "Good idea, Bad idea?...The technology of course is neutral but society is not fundamentally ready."

His comments came at the start of Techonomy, a new conference devoted to looking at how technology is changing and can change society.

Schmidt said that society really isn't prepared for all of the changes being thrust upon it. "I think it's time for people to get ready for it."

Schmidt said these records are a challenge for everyone, himself included, as he noted he was a child of the 1960s.

"Raise your hand if you were a well-behaved teenager," Schmidt said, drawing few if any hands from the high-powered crowd.

Techonomy, which runs through Friday, is the brainchild of ex-Fortune staffers Brent Schlender, David Kirkpatrick, and Peter Petre. Other speakers include Microsoft Chairman Bill Gates and Sun co-founder Bill Joy.

Schlender said that the conference organizers remain fundamentally optimistic, a point echoed by Petre.

"We invent our way out of problems, even the problems we create," Petre said. "This is the truth we need to show to our children and their children."

Schmidt said he sees a balance eventually coming with society and governments coming to terms on how to regulate the collection of information. The end result, he said, will be that computers will be able to do what they are good at--store and recall information, while humans focus on intuition and problem solving.

"That separation of power is a reasonable one," he said.

On balance, Schmidt said that technology is good, but he said that the only way to manage the challenges is "much greater transparency and no anonymity."

Schmidt said that in an era of asymmetric threats, "true anonymity is too dangerous."