Jackson: Most business books tell you how to build a plan and stick to it. Today, we're talking about a book from Google's top minds that starts with a radical premise: Your plan is wrong. And the key to success is embracing the mess. Olivia: It’s such a wonderfully provocative starting point, isn't it? We're diving into How Alphabet Works by Eric Schmidt, Jonathan Rosenberg, and Alan Eagle. And what makes this book so compelling is its origin story. Schmidt and Rosenberg, who were the CEO and Senior VP of Products during Google's most explosive growth phase, originally created this as a confidential, internal management class for their own leaders. Jackson: Oh, so this is like the secret playbook they never wanted to get out? Olivia: Exactly. An employee eventually convinced them to publish it, and what we get is this raw, unfiltered look at how they tried to solve one of the biggest problems in business: how to keep a giant company from becoming slow, stupid, and bureaucratic. Their answer, as you said, is to embrace a certain kind of chaos. Jackson: I have to say, 'embracing chaos' sounds more like a recipe for bankruptcy than a business strategy. How does a company that organized the world's information thrive on messiness? It feels like a total contradiction. Olivia: That's the perfect question, because it gets right to the heart of the problem they were facing. It’s a phenomenon we could call the 'Big Company Syndrome,' and it doesn't start in the boardroom. It starts with a single, frustrated employee.

Jackson: A frustrated employee? I think I know a few of those. What happened? Olivia: The authors tell this incredible story. It's 2014, right after their first book, How Google Works, came out. They’re doing a Q&A at Google's New York office, feeling pretty good about themselves. After the talk, a young, high-performing software engineer comes up to them. He's exactly the kind of 'smart creative' they champion in the book. Jackson: Okay, so he's a fan. He's going to tell them how much he loved the book. Olivia: You'd think so. But instead, he looks them in the eye and says his manager won't let him use his "20 percent time." This was Google's legendary policy allowing engineers to spend a day a week on their own passion projects—it’s where things like Gmail and AdSense were born. His manager told him he was performing well, but he needed to stay focused on the team's core goals. No side projects. Jackson: Ouch. That’s a direct contradiction of their entire philosophy. Olivia: A gut punch. The engineer then delivers the killer line: "Maybe you should have called it How Google Worked." He was telling them that the innovative, free-wheeling culture they were celebrating was already dying, strangled by the very processes and middle management that come with growth. Jackson: Wow. That's brutal. And it's so relatable. You join a company for its dynamic culture, and then you run into a wall of rules and procedures. Olivia: Precisely. And it wasn't an isolated incident. They tell another story about Susan Wojcicki, who was the CEO of YouTube. In late 2014, she was fighting for her next year's budget. The standard Google process allocated operating expenses based on current revenue. But YouTube was a growth engine; it was like a rocket ship. Jackson: Right, you don't give a rocket ship just enough fuel to hover. You give it enough to get to orbit. Olivia: Exactly. Susan knew that if YouTube were a separate startup, she could walk into any venture capital firm on Sand Hill Road and get a massive investment to fuel that growth. But inside Google, she was being held back by a formula designed for a mature, stable business. She was being treated like a department, not a high-growth company. Jackson: So you have engineers whose creativity is being blocked and CEOs of internal companies whose growth is being throttled. That’s the 'Big Company Syndrome' in a nutshell. Olivia: That's it. The processes that make a big company efficient and predictable are the very things that kill the startup spirit. So, Larry Page and the leadership team came to a radical conclusion: if the structure is the problem, you have to change the structure. You can't just tweak the rules; you have to blow up the building. Jackson: And that's where Alphabet comes from? Olivia: That's the genesis of Alphabet. It was an attempt to solve this problem structurally. Instead of one giant Google, they created a holding company, Alphabet, with a collection of independent companies underneath it. Google would be one of them, focused on the core search and ads business. But Waymo (self-driving cars), Verily (life sciences), and others would become their own entities with their own CEOs, their own cultures, and crucially, their own freedom to operate like startups. Jackson: So it's like a corporate federation instead of an empire. Olivia: A perfect analogy. It was a bet that you could maintain the scale and resources of an empire while fostering the agility and hunger of a federation of independent states. But, as you pointed out earlier, just breaking up the company isn't enough. Each of those new companies needed a new playbook for how to operate.

Jackson: Okay, so you've created all these new 'mini-companies' under the Alphabet umbrella. What's the new playbook? How do they actually operate differently to avoid the same old problems? Olivia: The playbook shifts the foundation of strategy itself. The old model, which they detail in a story about competing with Microsoft, was about market analysis. They called it the 'Finland Plan'—a codename for Microsoft. It was a traditional business strategy: analyze the competitor, identify market segments, and build a battle plan. Jackson: That sounds like what they teach you in business school. It seems logical. Olivia: It is logical, but in the fast-moving world of technology, it's also perpetually out of date. The new Alphabet playbook argues for something different. It says: don't bet on market research, bet on technical insights. Jackson: 'Technical insight' feels like one of those corporate buzzwords. What does that actually mean? Is it just an engineer having a hunch? Olivia: It's more than a hunch; it's a deep understanding of technology that reveals a new, fundamentally better way of doing something. The book gives a brilliant example with Google's SafeSearch. In the early days, a huge portion of search queries were for, let's say, 'adult' content. The existing porn filters were terrible. Jackson: I can imagine. Olivia: So a team of engineers developed a filter by combining two technical insights. First, they got very good at identifying what was in an image—specifically, how much skin was visible. Second, they analyzed user behavior—how people interacted with those images—to judge the context. This combination was far more effective than any simple keyword filter. Jackson: Okay, that's a clever solution to a specific problem. But where's the big strategic win? Olivia: Here's the magic of technical insights. The technology they built to understand and categorize images for SafeSearch became the foundation for something much bigger: Google Image Search. They solved a narrow, practical problem, and in doing so, they developed a capability that unlocked a massive, entirely new product that now serves billions of people. No market research report would have ever said, "You should build a better porn filter so you can invent image search." Jackson: That's fascinating. The innovation was a byproduct of solving a different problem really, really well. So the Alphabet structure is like a parent company giving its kids enough allowance and freedom to start their own lemonade stands, but they all live under the same roof? Olivia: It’s a great start to the analogy. But Alphabet does more. It doesn't just give them an allowance; it gives them access to the world's best technology—the best data centers, the best AI researchers, the best mapping data—and tells them to go invent a whole new kind of beverage, not just a better lemonade. And each of those kids is the 'CEO' of their own stand. Jackson: And this is where the idea of not listening to the 'HiPPO' comes in, right? The Highest Paid Person's Opinion. If you're empowering these mini-CEOs, you can't have the big boss swooping in and overruling them based on a gut feeling. Olivia: Exactly. The model only works if you trust the people on the ground. The book emphasizes that decisions must be driven by data and the merit of the idea, not the rank of the person proposing it. They tell a story about Sergey Brin debating an idea for AdWords with Sridhar Ramaswamy, an ads leader. Sridhar, the expert, disagreed with Sergey, the co-founder. They debated, looked at the data, and Sergey's idea was discarded. That can only happen in a culture where data trumps hierarchy. Jackson: That takes a lot of humility from the person at the top. But it also seems like this model would lead to a lot of huge, risky bets. A company can't just be funding self-driving cars and space elevators. How do you balance these wild ambitions with the need to, you know, actually make money? Olivia: You've just hit on the central tension of their entire innovation philosophy. It’s not just about 'moonshots.' It’s about balancing them with something far more grounded and, in many ways, more important.

Olivia: Everyone loves to talk about Google's 'moonshots'—the self-driving cars, the life-extension projects. They're audacious and inspiring. But as you said, a company can't survive on moonshots alone. You'd burn through all your cash waiting for a rocket to maybe, one day, land. Jackson: Right. It feels like a great way to get headlines, but a terrible way to run a sustainable business. Olivia: The authors would agree. And the most powerful idea in this part of the book didn't come from the top down. It came from an internal rebellion of sorts. A brilliant Google Fellow named Luiz Barroso wrote an internal manifesto that went viral within the company. Jackson: A manifesto? What was he arguing for? Olivia: He argued that the company was over-glamorizing the "10X" moonshot dogma at the expense of what he called "roofshots." A roofshot isn't about a 10-times improvement; it's about a 1.3-times or 2-times improvement. It's the relentless, methodical, persistent pursuit of making the core product better, every single day. He famously wrote, "We choose to go to the roof not because it is glamorous, but because it is right there!" Jackson: I love that. A roofshot. It’s so much more accessible. It's not about inventing a teleporter; it's about making the current product 30% faster or 20% cheaper. That feels like something any team, in any company, can actually do. Olivia: That's why it was so powerful. It gave a name and a sense of honor to the crucial, everyday work that actually pays the bills and keeps users happy. The book argues you need both. Moonshots attract the best talent and push the boundaries of what's possible. But roofshots create the stability, revenue, and momentum that fund the moonshots. It’s a 70/20/10 rule: 70% of resources on the core business (roofshots), 20% on emerging products, and 10% on brand new, crazy ideas (moonshots). Jackson: That 70/20/10 framework makes so much sense. It's a balanced portfolio for innovation. And this must tie back to the kind of people you hire, right? You need people who can do both. Olivia: Absolutely. They talk about hiring "learning animals"—people who are not just smart, but have a ferocious curiosity and the character to thrive in a constantly changing environment. And it's not just about technical skill. They have this great metric called the "LAX test." Jackson: The LAX test? What's that? Olivia: The idea is, if you were stuck in the LAX airport with this candidate for a six-hour flight delay, would you enjoy the conversation? Are they interesting? Do they have passions outside of work? Because in a collaborative environment, you're going to be spending a lot of time with these people. You want colleagues who are not just brilliant, but also engaging human beings. Jackson: That's a fantastic filter. It gets at character, not just credentials. But what about the brilliant but difficult people? The classic 'divas'? Olivia: The book makes a crucial distinction here. You have to fight to protect your 'divas,' but you must exile your 'knaves.' A diva is someone who is exceptionally talented but might have a big ego or be difficult to work with. As long as their contribution is immense, you tolerate their quirks. A knave, on the other hand, is someone who lacks integrity. They might be talented, but they put themselves before the team, they hoard information, they act unethically. Knaves are toxic and must be removed, no matter how good they are. Jackson: That's a really sharp and useful distinction. So, you're building this culture with a mix of moonshots and roofshots, powered by interesting, learning-obsessed people you actually want to be stuck in an airport with. Olivia: And you're giving them the freedom to pursue their own ideas, like with 20% time. It’s about creating what the book calls a 'primordial ooze'—an environment so rich with talent, data, and freedom that new ideas can't help but collide, evolve, and emerge organically.

Jackson: When you put it all together, it feels like the book is making a much bigger argument than just 'here's how to manage a tech company.' Olivia: I think that's the real takeaway. How Alphabet Works is a response to a fundamental shift in the business world. In the 20th century, companies had power because they controlled distribution and information. In the 21st century, the internet gave that power to the consumer. The only sustainable advantage left is the speed and quality of your innovation. Jackson: And you can't innovate if your best people are stuck in budget meetings or being told they can't work on their passion projects. Olivia: Exactly. The Alphabet structure, the 70/20/10 rule, the focus on technical insights, the hiring of 'learning animals'—it's all in service of one goal: creating an organization that can out-innovate the competition because it's built around empowering its most creative people, not controlling them. It's a bet that the only way for a giant to survive is to learn how to act like a collection of fast, hungry startups. The structure is designed to force the behavior. Jackson: It's a powerful case, and it's hard to argue with their success. But it does leave me with one big question. The book has been praised for its insights but also received some criticism for feeling a bit like a victory lap, a corporate manifesto. Can this model truly be replicated elsewhere? Or is Google just a perfect storm—the right people, with the right technology, at the exact right moment in history? Olivia: That is the billion-dollar question, isn't it? And it’s a great one for anyone listening to reflect on. We'd love to hear your thoughts. Does your own workplace suffer from 'Big Company Syndrome'? What's a 'roofshot'—a small, meaningful improvement—that your team could tackle tomorrow? Let us know. The conversation is just as important as the ideas themselves. Jackson: A perfect place to leave it. This has been a fascinating look inside the machine. Olivia: This is Aibrary, signing off.