In July 2012, two titans of industry sat down for a fireside chat. Eric Schmidt, then Executive Chairman of Google, and Peter Thiel, who posed tough questions about Google’s ideas, or lack thereof.

While nobody denied that Google was one of the most innovative companies of all-time in its heyday, it’s certainly slowed down. Search, Maps, Gmail, Android, Chrome and others are wonderful products. But they were all built a decade ago. What has happened since then? Nothing revolutionary from the world’s most innovative company, apparently.

The crux of Theil’s argument is: why let $50B in cash profits sit idle or be distributed to shareholders? If Google had any ideas for the future, they could spend that $50B on them. But they don’t.

This topic is particularly interesting to me because lately Google/Alphabet has been slow to the punch on “frontier” technology. ChatGPT delivers a usable product despite DeepMind existing before OpenAI. Cruise is operating autonomous vehicles in SF before Waymo. Now, speed to market is obviously not the ground truth indicator of current or future success. But it does make me wonder if the “big company” slowness and risk aversion is as explanatory as lack of institutional vision is.

Check out the video here, and let’s jump into the (lightly edited for clarity) transcript below:

MODERATOR: The New York Times did a major piece suggesting that Apple doesn't account for the same kind of employment in the United States that General Motors did in the 1950s. You make a similar case with Twitter, Facebook, great as they are, 140 characters is neat, but they don't employ a lot of people.
THIEL: Google is a great company. It has 30,000 people. They have pretty safe jobs. On the other hand, Google also has $30, $40, $50 billion in cash. It has no idea how to invest that money in technology effectively. And so it prefers getting 0% interest from Mr. Bernanke. Effectively, the cash gets burned away over time through inflation because there are no ideas that Google has on how to spend the money.
SCHMIDT: Let me see if I can help Peter answer your question. The core problem we have going forward, since I think we're supposed to talk about the future, is that you have two forces that are going to govern much of what's going to happen in the future. The first is globalization, which we're not going to repeal. And the second one is automation, which we're not going to repeal. And if you look, these problems are ultimately cast in political systems in the West, and I think eventually globally, as jobs problems. And the solution to jobs problems, in my view, is education. Education at many levels and many different ways which we can discuss. I don't see another solution to this. It's absolutely true, as Peter says, that these gems, if you will, and you were nice enough to call those companies, describe them so well, they're not employing enough people.
THIEL: You have $50 billion at Google. Why don't you spend it on doing more in tech, or are you out of ideas? And I think Google does more than most companies. You're trying to do things with self-driving cars and supposedly with asteroid mining, although maybe that's just part of the propaganda ministry. And you're doing more than Microsoft or Apple or a lot of these other companies. Amazon's the only one, in my mind, of the big tech companies that's actually reinvesting all its money, that has enough of a vision of the future that they're actually able to reinvest all their profits.
MODERATOR: They make less profit than Google does.
THIEL: But if we're living in an accelerating technological world, and you have 0% interest rates in the background, you should be able to invest all of your money in things that will return it many times over. And the fact that you're out of ideas, maybe it's a political problem, the government's outlawed things, but it still is a problem.
MODERATOR: I'm going to go to the audience very soon, but I want you to have the opportunity to address your costly investments, Eric.
SCHMIDT: I think I'll just let his statement stand.
MODERATOR: You don't want to address the cash horde that you do not have, that your company does not have the creativity to invest.
SCMIDT: What you discover in running these companies is that there are limits that are not cash. There are limits of recruiting, limits of real estate, limits of regulatory limits, as Peter points out. There are many, many such limits. And anything that we can do to reduce those limits is a good idea.
THIEL: But then the intellectually honest thing to do would be to say that Google is no longer a technology company, and that it's basically a search engine. The search technology was developed a decade ago. It's a bet that there will be no one else who will come up with a better search technology. So you invest in Google because you're betting against technological innovation in search. And it's like a bank that generates enormous cash flows every year, but you can't issue a dividend because the day you take that $30 billion and send it back to people, you're admitting that you're no longer a technology company. That's why Microsoft can't return its money. That's why all these companies are building up hordes of cash because they don't know what to do with it, but they don't want to admit they're no longer a tech company.
SCMIDT: So the brief rebuttal is, you know, Chrome is now the number one browser in the world. The platform for enterprise innovation on top of Google is, I think, phenomenal. The rate at which people are using Google to redo the way their businesses work, there are many, many examples of business innovation that Peter's not choosing.

There are a number of interesting callouts to make:

It seems true that innovation has slowed down at Google in the past decade. The best advancement I can think of is AI related, but it hasn't seemed like they have productized quickly or meaningfully as they have in the past.
It's true that there are limiting factors besides capital. Google has opened multi-billion dollar flagship offices in California and New York, satellite offices in basically every tier 2 and tier 3 city worldwide, and also hires remote. They need to find every talented person they can to maintain all their products. That’s hard.
There becomes a level where are you simply can't build much in-house. Each company must become an investment firm that allocates capital across divisions. “Special projects” teams focused on building a “startup within a large company” typically don’t attract the talent they need to revolutionize a market.
The Internet and iPhone eras brought about so much innovation that we have set an unreasonably high expectation. My dad commented to me that when he was my age, a paperless society was a clear and attainable vision for the future. And yet it took a whole generation for Google Docs to proliferate. If a company like Google can bring about serious innovation once a decade, rather than once a year, that is still an enormous success in the grand scheme of things.

The broader debate about the technology industry, its successes and failures, and the future it holds in our economy is wide ranging, and will probably go on for quite some time. I will leave these notes here, and would love readers’ perspectives! Tweet me at @whrobbins.

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Robbins Notes

Google Has $50B, Doesn't Innovate