Eric Schmidt says founders should build five-year plans that test whether their model can scale globally. He favors free apps with upsells, platforms like Android, and machine learning trained on crowdsourced data—the combination he sees as a path to $100 billion companies.
Questions this video answers
Five years.
$10.
$1.
One million dollars.
Chapters
So one of the reasons why our industry is so tough is that just when you sort of figured it out, the rules change again. So I'll give you a simple example. If you went to business school and I didn't, but I teach at business school, you would have been taught, build a great product, organize a salesforce. You know, you and I talked about this in my previous roles. Sell it to the customer, charge a fair price, make the customer happy. Seems like that's what business is about, right? That strategy is insufficiently scalable in a global market that's all interconnected. So in other words, it sounds like a fine strategy and it'll produce a reasonable business, but it's not going to produce a huge business. It's just too hard to hire all those salespeople working with every customer and so forth. You have to have a more clever strategy. So I can give you examples, but all of the really big companies have invented a new way to access information or a new way to do something that didn't require that full cycle and all the time that is required. So many, many people talk to me about their new ideas and I'm sure there are many of them represented here in the room. The problem is they're good, but they're not good enough. And so the specific question I would say is do a plan over the next five years. And I always like to do five year plans and try to figure out what your growth rate will be like and then try to figure out what a more scalable strategy would be. So, typical example is somebody will build some interesting app that they want to charge $10 for. And so I will ask, well, why couldn't you give the app away for free and then upsell the users? Everybody and everybody here understands that strategy. Give you another example, I'm quite convinced I know what the platforms will look like in five years. I can't tell you what the great companies will be like. But I'll describe it in that five years ago I said publicly that the future will be apps that are on smartphones, that use Google Maps, GPS and do something useful. Now what I should have said was Uber, right? But I wasn't smart enough to say, well, people actually want a personal transportation system that was up for Travis and his co founder to invent in Paris when they were visiting. So what do I think five years from now we'll be talking about, I think we'll be talking about systems that use Android and iOS, fast networks, powerful machine learning, but they're going to do something else they're going to use the crowd to learn something. I'll give you a trivial example. I know nothing about dermatology and I have a million dollars. So what I'm going to do is I'm going to run around to dermatologists, I'm going to pay them $1 to categorize skin samples with whatever the dermatological problem is, put that in my machine learning system, run it through the system, have it do a categorization, and then I'm going to go and sell the same service to dermatologists because my system will be more accurate than the individual dermatological diagnoses. So that model, which is you crowdsource information in, you learn it and then you sell it, is in my view, a highly likely candidate for the next hundred billion dollar corporations. I'm not suggesting it would be Alphabet or Uber or Facebook, but if I were starting a company, I'd start with that premise today. How can I use this concept of scalability and get my users to teach me? So if your users teach me and then I can sell to them or others a service which is better than their knowledge, it's a win for everybody.
