Influencers with Andy Serwer: Ruth Porat

In this episode of ‘Influencers’, Andy is joined by Alphabet CFO Ruth Porat for an exclusive look at the company’s $7 billion investment in the U.S. workforce. Porat also shares her thoughts on gender equality in the tech and finance industries, and lessons from the financial crisis that are still relevant today.

Video Transcript

ANDY SERWER: Ruth Porat began her career just weeks before the stock market crash of 1987, otherwise known as Black Monday. She advised large tech IPOs at the peak of the Dot Com bubble, worked with the federal government as it fought through the Great Recession, and today she sits atop one of the world’s largest tech companies as we battle a global pandemic. Suffice to say, Ruth Porat’s experience in times of crisis goes unmatched.

Since joining Google as its Chief Financial Officer almost six years ago, Porat has seen the company’s stock rise nearly 200%, a performance which has cemented her status as one of the most powerful women on Wall Street. But as investors cheer, some see trouble on the horizon. In this episode of « Influencers, » I’m joined by the Google CFO as we discuss issues of government regulation, shattering the glass ceiling in Silicon Valley, and the role of big tech in our modern American society.

[THEME MUSIC]

Hello, everyone, and welcome to « Influencers. » I’m Andy Serwer. And welcome to our guest, Ruth Porat, CFO at Google’s parent company Alphabet. Ruth, welcome.

RUTH PORAT: Andy, great to be with you.

ANDY SERWER: So you arrived at Morgan Stanley weeks before the 1987 crash. You advised the Treasury Department during the 2008 financial crisis. What did you learn from those experiences, and how did they compare with what’s happened over the past year, Ruth?

RUTH PORAT: I’ve thought about this past year a lot as we’ve come up to the one-year anniversary. And I remember, at the front end of this crisis, people asking whether I expected it would be worse than the financial crisis. And my reaction back then was, it likely would, because we were dealing with a health crisis as well as an economic crisis. And as we’ve hit this one-year mark, reflecting on so many loved people lost– how in particular the most marginalized communities have suffered economically with health– it’s just been a tragedy.

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But to your question, many of the lessons from that financial crisis have been extremely relevant here as well. And at Google, we moved early to work from home. In March, the first time we started moving some of our sites in the US to work from home. And at the time, I felt like it was a race against the clock in that there was a decent probability we would end up having to move the entire company to work from home.

And one of the concerns was, for all of us leading companies, we’ve gone through risk management where we think about load balancing. If there’s a problem in the Bay Area, you move to New York, or New York you move to Dublin, Dublin you move to Bangalore. But never was it contemplated that the entire world would shut down at one moment in a two-week period of time. And so we immediately moved into crisis management.

And to your question, I drew on the experiences advising the Treasury and the Federal Reserve during the financial crisis. There a couple of core lessons that I keep going back to. The first is that in a crisis, you’re only dealing with the least worst options. There are no good options, and so the most important thing is to act.

Related to that, a crisis doesn’t have a linear path to it. And as the facts change and the data changes, you have to be nimble and ready to move– which really goes to one of the core points, and it’s the importance of the crisis response leadership team. A term I used a lot during the financial crisis, and here again this year, was the importance of having lateral vision, the ability to see around the globe, to pick up different facts as people were seeing them and to weave those together as though you’re weaving a tapestry.

And the importance of that organized team– and we have that. I feel really privileged to have worked with our leadership team. People came with experiences from everything from Ebola and Katrina to the financial crisis and more. But we really had the benefit of an extraordinary crisis response team.

And I would say the last and very important element is you can ever over-communicate enough– generally in life, but in particular during a crisis. We viewed ourselves as having an incredible responsibility, both with our teams, our comms team going literally around the clock on FAQs, everything that we could address. And clearly, in a crisis you don’t have clarity about what comes next. But it’s so important to make sure your team knows you’re thinking of them and doing your best to present the information as you have it, and that it will evolve as you know more.

And we did the same externally. I am very proud of the work we did to build the coronavirus microsite really early to elevate authoritative information to make sure that we were really filling that void as well as we could with authoritative information for people around the globe.

ANDY SERWER: Pulling back a little bit, Ruth, as a banker you helped Google go public in 2004. What’s the biggest difference between the company’s planned business model then and what you’ve helped build in your time at the company now?

RUTH PORAT: So back in ’04, I would say that what was extraordinary was a clearly articulated mission to organize the world’s information, make it universally accessible and useful. And as you probably recall well, the letter from the founders at the IPO– which was very clearly, we are going to invest for the long-run. We won’t provide earnings guidance, because we just want to make sure we’re doing the right things for the long-run, and really embracing the impossible.

And I feel like, 20 years later– when I was actually asked to join, I initially didn’t actually believe it was real. But it was such an extraordinary delight, because I’d seen this company grow from those early days, 1998, to the IPO and then to now. And so we’ve continued to live on– kind of honor that mission. And I would say it’s just continuing to invest for the future, invest for the long-run. The principles are very much the same.

ANDY SERWER: Let’s talk about some things going on at the company this week. You’ve made plans to make major investments this year. What are those, Ruth?

RUTH PORAT: So, very excited to be talking about this. We’ve announced that we’re investing aggressively in the US. In 2021, we’ll be investing over $7 billion in offices and data centers across the US. And we are committed to creating at least 10,000 new full-time jobs for Googlers in the US.

And importantly, what we’re doing is we’re both building on our existing major centers, as well as expanding across the US. In fact, this covers investments across 19 states. So as an example, in California we’ll be investing over $1 billion this year. In New York, we’re really excited that we’re continuing to build out our campus presence. And what that’s going to enable us to do is double our workforce in New York by 2028.

But as I said, we’re also investing across the United States. So as an example, in Mississippi we’re opening our first Google operation center. In North Carolina, we’re opening a new Google Cloud engineering site. And what we’re excited about is we’re not only increasing the number of jobs across the US, but in particular we’re bringing more jobs and investment to diverse communities across the US.

And this is all very consistent with our announcements last year on racial equity and our commitments to racial equity. So for example, we’re growing our presence in Atlanta, in Chicago, in New York I’ve already mentioned– in Washington, DC, where we see tremendous diverse communities. And we’re excited about what we’re able to do with hiring, with investing in the community, with job creation as we’re building.

ANDY SERWER: Yeah, I wanted to ask about the diversity point, Ruth, that you just mentioned, because I know Sundar Pichai has talked about that, your CEO. How would you assess where the company is right now in terms of diversity, and how far still does it have to go?

RUTH PORAT: We’re intensely focused on doing what we can internally, and also supporting efforts externally. And I would say that, like for so many, the world is not where we’d like to see it. There’s quite a bit of work to be done. And we’re continuing to ensure that we’re putting all the elements in place so that we can steadily grow a workforce that reflects the world around us.

And that’s in everything from recruiting and promotion to all of the efforts that we do to support people throughout their careers. So it’s a journey, and one that is of the highest priority for us. We’re continuing to work at it.

ANDY SERWER: Getting back to the $7 billion investment in the United States, you’re the CFO. So it must have made sense to you– or it sounds like it did– that you’d make that investment in the United States versus sending those jobs overseas.

RUTH PORAT: So we are growing around the globe. And I think that– we’re a global company. Our mission is to make sure that we’re giving people around the globe quality information, the ability to have access to information that is accessible and useful. We’re really proud of the fact that, as an example, if you’re a developer in a small town in India, you have the same access to customers as if you’re sitting here in New York City. And so we definitely are continuing to grow globally.

I would underscore that we’re very proud of the ongoing growth that we have here in the US, $7 billion investments. 10,000 jobs just continues to build on the strength that we have here.

ANDY SERWER: Following up on that point about the rigor maybe that you’ve brought to this company– and you’ve been known for that, the financial discipline that you brought. But I’m curious how you’ve had to balance that out, between the projects that the company famously pursues and continues to pursue, and then the financial rigor. Can you talk about that balancing out, Ruth?

RUTH PORAT: Absolutely. I think that it goes very much to a very strongly held view that if you’re not building for the long-run– if you’re not building strong, durable, quality growth– it won’t persist into the long-run. And so really, the question if you’re building a great– it is about, what are the investments that you need to make for long-term and sustainable growth? And so I start with that at the highest level.

I would say we’re living in an extraordinary time now. As we sat down going through the tail end of 2020, we’re clearly seeing this acceleration of the digital transformation. We want to make sure we’re doing everything appropriate to support our users, customers, communities around the globe. And so there’s an opportunity there that is not just about 2021, but clearly a trajectory that persists beyond that.

Similarly with the transformation with the cloud. Enterprise customers are moving to the cloud. It is an extraordinary opportunity. We’re seeing wonderful traction with all that our team is doing. And so we want to make sure we’re investing at the right intensity to support that long-term growth. So step number one is just the analytics around, how do you ensure you’re supporting long-term growth?

Step number two– and probably core to your question– is, are you being vigorous and rigorous enough on stack ranking within each area? Everybody has a bottom 10% or bottom some percent. And you need to unlock those resources to have enough focus and financial intensity on the things that are important.

And then I would say the third critical element of capital planning is what I call operational excellence. It’s making sure that you’ve got a strong foundation. It’s everything around privacy, trust and safety, our compute capacity so that it enables us to deliver on the value proposition at the quality that we’re talking about. It goes back to the durable long-term growth.

So you’re absolutely right, it’s always a trade-off. I think that middle portion about stack ranking so that you get both the management focus and financial focus is a key element of it. And then keeping your eye on the long-run, because many of these investments are long-term investments. The objective is clearly to understand, what are the metrics along the way, what are the milestones along the way so that you can assess progress and really position as a result.

ANDY SERWER: Let me ask you some news-y questions, Ruth. Treasury Secretary Janet Yellen this week proposed a global minimum corporate tax. And Google, along with other big companies, has come under criticism for tax avoidance. Is Yellen’s proposal for a minimum standard applied worldwide a good idea?

RUTH PORAT: So first, in terms of tax, Google has been paying over the last decade on average the same tax rate as OECD countries. We’re actually– we are an active taxpayer in the US. It’s our home. And so when we’re looking at the proposed reforms and tax, what I would really point you to is a very important one.

There’s a debate that’s been going on for quite some time about what should be the international framework for tax. And there has been a proposal to really modernize international tax. The OECD is looking at a multinational solution, multilateral solution to tax. And it’s been somewhat stalled out.

One of the other very important things that Janet Yellen said last week is that she felt that it was appropriate to abandon the safe harbor focus from the prior administration. And this should open the possibility of actually finally getting done an international solution. And we’re very supportive of that. It may mean that we’re paying higher taxes, but it’s the right answer because it’s a durable long-term solution.

It also addresses what is otherwise sort of the proliferation of one-off digital service taxes, which in themselves I don’t believe are durable or fair. And so we are looking to engage constructively on tax and believe that having a durable supportable tax system is the right thing. And as I said, the OECD tax solution makes a lot of sense.

ANDY SERWER: Is this connected, do you think, Ruth, to the administration generally wanting to raise the tax rates for big companies? I mean, it’s of a piece, isn’t it?

RUTH PORAT: Well, I think there’s an element of that. And I would say as it relates to the international tax point, there’s also a question of what is fair– raises tax revenues, kind of consistent with how business is being conducted in the digital world, and is therefore durable.

ANDY SERWER: Right. Microsoft recently came out in support of a bill that would allow news companies to bargain collectively against big tech for stories that appear on their platforms. And in a blog post, Google called that move naked corporate opportunism. What made Microsoft’s action rise to the level of requiring such a public rebuke?

RUTH PORAT: So look, we’ve been engaging, as you’re very well aware, with publishers, and I think are working very constructively with publishers around the globe. I’ll let our general counsel Kent Walker’s comments stand on their own.

ANDY SERWER: OK. And I want to ask a little bit about YouTube and criticism there that the algorithm has recommended inappropriate or harmful content. Have you seen that advertisers pull back on their spending because of this?

RUTH PORAT: So there are sort of two parts to your question that I think are very important. First, I’d like to really spend time on the first part, which is across Google, ensuring that we’re elevating authoritative content, protecting users, protecting advertisers, protecting creators and communities from those bad actors who would like to put forth inappropriate, misleading content is core to what we do.

I’ve already talked about the importance of operational excellence in the way we think about capital allocation. And one of the key elements of that is supporting all of the efforts around trust, safety, content moderation. And we kind of approach that with a high level of intensity. It’s a combination of people. It’s machine learning. It’s also working with NGOs.

Many of the issues that are put forth by kind of extremes oftentimes are presented in a way where we really need to partner with NGOs to understand the dog whistle. And once they can help us decipher the dog whistle, we can work with our engineers, with machine learning, with people to make sure that we’re doing all we can to protect the ecosystem.

And so core to what we’re looking at is to elevate authoritative information, to reward creators who are focused on quality, and to really pull off, remove controversial content. And where things are borderline– because there are bad actors who try and get you right to the line but not over– to really reduce the reach that they have.

And so I think that what you will see– what you’ve seen, for example, in our results last quarter that we talked about is YouTube is performing very well. It continues to be an extraordinary platform for creators, for advertisers, given the reach that it has. And we’re really proud of the work that the team has done.

There are a lot of different issues out there where people are trying to– there are too many bad actors. But I’ll give you one that’s right in front of us now. It’s a lot of work that our team is doing around COVID, and in a particular around vaccines, and ensuring that we’re elevating authoritative information and working with those authoritative voices to amplify them.

ANDY SERWER: Speaking of YouTube and the business doing well, you had a strong year last year. Q4 also robust, driven as you said by YouTube and search, in part. But does Google face headwinds in 2021 as the economy reopens and people spend less time at home online?

RUTH PORAT: Well, I think what we’re looking at– one of the most profound changes has been this acceleration of the digital transformation. And you can see it in everything from the way commerce is conducted to the way people consume content, the way we’re doing our conversation today, the way people are working generally. And I think many of us are finding a joy, a productivity lift that comes from that. And we think that basically, what was playing out over the next 10 years has really been telescoped in.

You can actually see it in some of the data, around for example from the Commerce Department last year. We looked at the pickup in online commerce, which is pretty stunning relative to 30%-ish relative to what we saw for offline commerce. And we’ve seen it in a lot of the metrics internally as well.

And so we do expect that as people have seen the utility of this world, yes, you’re absolutely right. There will be puts and takes. But fundamentally, trends that have been playing out, we think, have just been accelerated in.

ANDY SERWER: Another risk I have to ask you about, Ruth, is antitrust. The Biden administration has brought on some high-profile antitrust advocates in recent weeks. What is your assessment of potentially where that could lead, and how concerned are you in terms of this as a business risk?

RUTH PORAT: This is not new for Google. There have been kind of inquiries around the globe over time. Our approach has been to constructively engage with regulators.

Our view is that people come to Google not because they have to, but because they want to. I’ll never forget, back in 1998 when I first heard about Google– and I think at the time, it was the eighth search engine. And probably like many, my reaction is, why do you need yet another search engine? And the reality is, it was a higher quality, better experience, more relevant results. And therefore Google broke through the pack.

And core to this has really been just this ongoing commitment to innovation. So as an example, one of the things that we talked about on our most recent couple of earnings calls are some of the new breakthroughs that make the search experience better. It’s something called BERT, which is a natural language translation that provides better sense of context when you’re asking a question, and therefore a more specific and relevant response using AI.

There’s another one that’s, I think, everyone’s favorite. You can hum a song, and even if you hum as poorly as I do Google will help you identify what was that song. So we continue, through technology innovation, to make it fun, quirky, relevant.

And I think that’s at the core of what we’re focused on. We want to engage constructively with debate. We want to continue innovating for the user. But our view, very strongly, is people come to Google because they want to, not because they have to.

ANDY SERWER: You mentioned cloud earlier, Ruth. And obviously, that’s been another growth engine for the company recently. How have you view differentiated cloud from top competitors like Amazon and Microsoft, and how do you keep those trends going?

RUTH PORAT: Well, it’s a great question. Thomas Kurian, CEO of our cloud business, has put the business on a strong trajectory. I’ve been doing a bunch of customer meetings with him, and feel like I keep hearing back the same key elements that are magnets for customers.

The first is data and analytics. It is clearly the foundation for any company that’s on a digital transformation. And our solutions really help customers better understand what their customers want. They create opportunities to improve their products, things like real-time predictive analytics.

The second is multicloud. What we hear time and time again is companies want to work with multiple cloud providers. Whether that’s as a risk management matter or otherwise, they want the best analytics, the best tools. And we make it easy to do that.

And the third very important area that Thomas has been focused on is industry solutions. And those industry solutions benefit from all that we bring with AI and machine learning. So for example, in financial services– my old home– it’s been exciting to see our solutions around some of the core risk topics that every bank deals with. How do you do anti-money laundering? How do you do your KYC, Know Your Customer, compliance requirements?

And we’re also helping with products, enhancing products like around lending and processing. We’re seeing the same in retail. So he has brought in extraordinary leaders going deep in verticals. When you layer that with the other elements, we’re seeing the kind of momentum I was able to talk about last quarter.

ANDY SERWER: Speaking of financial services, I’m curious, what headwinds do women face in the finance industry? And what headwinds do they face in the tech industry? And how are they different and how are they similar?

RUTH PORAT: Well, I’m sure it doesn’t surprise you that I’ve thought a lot about that. And I think the most important point is society isn’t where it needs to be. This is a broad societal issue. Distinguishing between tech versus financial services begs the bigger question of the ongoing headwinds.

I would say where I’m most focused is, how do you break through those and accelerate the opportunities for women at all levels? It clearly starts with tone from the top. But then I think the most important element for each one of us as leaders is to put in place rigorous systems and process to get us where we want to go. It’s about recruiting. It’s about equity. It’s all of the unconscious bias work that’s being done.

And so I think that neither are where they should be. Both are better than when I started. Probably one of the stories I think most often about is when I was given the opportunity to run technology equity capital markets at Morgan Stanley. So that’s kind of a hybrid with the trading floor and banking. And trading floors are probably the most inhospitable part of a bank.

And one of the senior partners there called me into his office and he said, I think you’re going to soar. But I just want you to know, I’m your senior air cover. I’m here to backstop you if you ever stumble.

And that line, senior air cover, I think is really important. I use it a lot. I think each one of us needs to have senior air cover, and we need to be senior air cover. I think that’s true in tech. It’s true in finance. And I bet you it’s true in every other industry, public and private sector.

The other important element is, because I was kind of rising through the ranks at Morgan Stanley quite some time ago, there were no women in senior positions. So all of my senior air cover were men. I think very importantly, you don’t need someone to look like you to be your sponsor to help you get to that next level. And so this is very much as we’re looking at it at Google. We’re making sure that we’ve got that kind of coverage and support, and we’re trying to put in place every element so that we can, in 10 years when we’re having this conversation again, have a different answer.

ANDY SERWER: A quick two-part last question. First of all, what can we do to enhance digital skills in this country? And number two, what can people do to try to get a job at Google, since you’re going to be doing so much hiring going forward, Ruth?

RUTH PORAT: Well, I’m so glad you asked about digital skills, because it’s an area that we’re very proud of. We have a program that’s called Grow with Google. It’s a digital skills training program. We started it years ago. It was designed to help individuals, small businesses, NGOs develop the digital skills they needed, really, to thrive in this increasingly digital world.

What’s exciting is when we first started, we created an IT certificate, an IT training program for people. We said, that’s one of the fastest growing job categories. We can do digital training, give you the skills needed so that with no background, you could become an IT support person. We then concluded we should give you a certificate. We created one, actually like a diploma, that would be recognized that you had completed this program.

And we then concluded that, actually, wouldn’t it be better if it was portable to a lot of companies? We now have over 130 companies who are in our Grow with Google digital skills program. So if you decide to go online, go to Grow with Google, in three to six months, with no background, you can develop the skills to get this IT certificate.

And what’s really exciting is just last week, we announced that we’re expanding the program. We now have three new certificate programs– one in user experience, one in project management, and one in data analytics. So for anybody listening who knows anybody or who wants to switch careers, three to six months. It’s online. Go to Grow with Google. There’s 130 companies that honor those certificates. So that’s one option, and I’m really excited about it.

I think what’s particularly extraordinary is the impact that we’ve been able to have on underrepresented communities. 67% of people who have gone through this are from underrepresented groups. And so we’re really proud of the impact that we’re able to have through the various programs. That is kind one of the most important elements.

And then overall, yes, we are continuing to hire. We’re hiring across the country, and we’re really excited about it.

ANDY SERWER: If you get some of those digital skills, you get a shot at getting a job at Google, right?

RUTH PORAT: Exactly. And many other companies.

ANDY SERWER: Ruth Porat, CFO of Alphabet, thank you so much for your time.

RUTH PORAT: Andy, it’s great to be with you. Great to see you.

ANDY SERWER: You’ve been watching « Influencers. » I’m Andy Serwer. We’ll see you next time.