How Google's CEO Eric Schmidt keeps the company on the righteous path

Google (GOOG) CEO Eric Schmidt spoke at MIT this afternoon. He had some interesting things to say about the company's place in the world -- and how Google can continue to follow its golden rule, "Don't be evil."

Schmidt came to MIT to honor the memory of one of my MIT professors, Dr. Michael Hammer, who, as I wrote earlier, tragically passed away about 14 months ago. Hammer was most famous for co-authoring Reengineering the Corporation, along with my former boss, James A. Champy. But Hammer received tenure as a computer science professor at MIT before he became a management guru.

Schmidt was interviewed by Tom Ashbrook, who hosts the National Public Radio program "On Point." Ashbrook's first question: Is Google re-engineering the world?

Schmidt fielded questions about whether Google was in trouble for monopolizing advertising; whether it threatened the survival of the iPhone; what it would do to stay true to its famous 'do no evil' dictum; how it could operate so many computers without damaging the environment; and the future of investigative journalism.

I was surprised about the number of questions from the MIT audience about Google's ethical place in the universe. Schmidt argued that since Google operates big server farms next to dams, that is was getting a huge amount of its electricity from renewable sources. That sounds good to me. In fact, Schmidt suggested that with the right kinds of technology, the U.S. could be energy independent in about 20 years.

But it was in the area of Google's disruption of the advertising business that he had to defend it from charges of evil. As he said, there is little danger that Google, which has $22 billion in sales, will be monopolizing advertising since it does not plan to be a $1 trillion revenue company (that's his estimate of the size of the advertising market).

Sympathy for Newspapers -- But No Money

Schmidt appears to have a lot of sympathy for newspapers and magazines. He argued that they offered value in the production of content but less so in its distribution. Schmidt pointed out that thanks to the Internet, people will stop subscribing to newspapers since they can get their content online for free. Moreover, thanks to online advertising, which offers a more measurable return on investment, newspapers are losing what had been their biggest source of revenue.

Someone asked him what would happen to investigative reporting, which had in the past been supported by advertising. To that, Schmidt did not have an answer -- although he said Google did not have plans to simply write checks to the newspapers to help finance it. He vaguely suggested that Google was working with newspapers on a way that they could both make money.

And when asked whether he was afraid of Microsoft (MSFT) CEO Steve Ballmer or Microsoft's' efforts in search, Schmidt declined to comment. All he would say is that he was more afraid of Google not using its strengths to keep providing more value to consumers.

To connect Hammer -- who weaved biblical stories into his speeches -- to Google, Dan Bricklin, who co-invented -- VisiCalc -- the first electronic spreadsheet asked Schmidt whether Google had a spritual side. Schmidt said that Google tries to make decisions based on its values -- so it takes consumer privacy and security issues very seriously.

I think Hammer would have approved of that sentiment.

Peter Cohan is a management consultant, Babson professor and author of nine books, includingCapital Rising (due in June 2010). Follow him on Twitter. He has no financial interest in the securities mentioned.

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