Jack Welch

What Google in China shows: It's never about shareholders

March 25, 2010: 11:22 AM ET

Investors (and Jack Welch) complain that Sergey Brin was acting from personal belief when he made the move. Of course he did. So does every CEO.

By Paul Smalera, contributor

Google watchers and investors are scrambling to make sense of the company's historic pullout from the Chinese market on Monday. The company's stake in technology, services and staff there likely ran into the hundreds of millions, if not billions of dollars. But within the space of just a few weeks, Google helicoptered itself out of the country; forsaking decades of future growth prospects in a rapidly maturing and massive economy, and a half-decade spent building up its operational and business presence.

Investors, usually not much for principled stands that don't involve the capital gains tax, aren't exactly thrilled with Google's abdication from China, nor its losses on sunk costs. "I would have loved to have been in that boardroom to hear that discussion: how they decided to walk away from the largest single growth market in the world," one money manager told Investor's Business Daily.

But investors looking for the business case here simply aren't going to get it. Google left China based on the principles of co-founder Sergey Brin, plain and simple. Brin was uncomfortable continuing to do business with a regime that reminded him a little too much of his native Soviet Union, which he left at age six. And he has often said a corollary to Google's famous "don't be evil" motto is to also "be good." For better or worse, it was Brin's personal experience, and the translation of those experiences into business principles, that informed Google's decision to walk away.
That's not to say Brin didn't have a strong argument, grounded in sound business practices, if not financials, for pushing the decision through. Just as automotive and luxury goods executives helplessly watch while Chinese firms produce copies of their cars and purses, Google has seen its investments in search, online video and social media copied by Chinese firms that enjoy government favor.

And while Baidu and Google are both regularly criticized for delivering seamy results, it's typically Google that is made an example of in state-run media. "Without Google access to pornographic and subversive content, China's cyber space will continue to grow in a cleaner and more peaceful environment," is how the state-run newspaper China Daily marked Google's exit. More

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