By picking on Google, Washington (Post) shows why the U.S. is losing in 21st Century business

Apologies for a rant that's a bit off-topic - but I'm going to use this sounding board to applaud Google for firing back this morning at Washington Post columnist Steven Pearlstein.

Don't get me wrong. I have nothing but respect for Pearlstein and my former colleagues at The Washington Post. But I also recognize that many established folks in that newsroom - those who've been inside the Beltway for possibly a bit too long - have lost sight of what's really holding back this country from being a 21st Century world power (in terms of advanced technology, that is.) Washington's 15th Street certainly doesn't have the same vibe as Silicon Valley's Sand Hill Road.

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Here's what really throws me: Every quarter, right around earnings season, we - pundits, analysts and the like - judge and ridicule companies that aren't growing fast enough to meet Wall Street's hunger for more more more. We mock companies that are losing races because of their own missteps or lack of foresight. (Microsoft, most recently.) We chastise and leave out to dry those companies who didn't innovate fast enough to keep up with the changing competitive landscape (RIM, most recently). And we love to hate those that seem to have a Midas Touch and create high-demand, quality products - Apple, every quarter.

And yet, we cry and moan constantly that other countries are kicking our butts in the area of broadband, mobile and other technologies. It's no wonder. We want companies to grow - but not too much, too fast. We want companies to expand - but only into some areas and not into others. We want companies to use their profits to build overnight growth - but lose patience when they invest in the slow churn of R&D and cry foul when they buy other companies that are already innovating.

What the hell? Can Washington and Wall Street make up their freakin' minds already? Out here in Silicon Valley, we're trying to push this country forward and 3,000 miles east of us, they're trying to push us back. Granted. maybe I'm just some out-of-touch youngster (by Washington's definition) or old geezer (by Silicon Valley's definition) but I've been given this forum to sound off. So here goes:

Pearlstein writes:

Google portrays each new line of business as a logical extension of its core mission to expand digital horizons in ways that allow people to use the Internet to improve their lives. It's a noble goal, and Google does it very well - so well, in fact, that it boasts a market value of $190.2 billion, a profit margin of 30 percent, and cash and marketable securities on its balance sheet worth $33 billion

He says that like it's a bad thing. I thought the whole point of being in business is to make money and to keep making more money for the shareholders who funded the business and for the innovation channels that keeps the company growing. He continues:

The question now is how much bigger and more dominant we want this innovative and ambitious company to become.

Notice the word "want" in that sentence? Why should anyone "want" to hold back a company? Is there an element of fear here? Is there a concern about the unknown, about what Google - or any large company for that matter - might become, as opposed to what it already is? Pearlstein continues:

There is nothing improper or illegal about Google's monopoly

Then why pick on Google? It hasn't done anything improper or illegal when it comes to growth. Sure, people may question its dominance and they certainly cry foul over perceived breaches of privacy that Google might or might not be invading. (And for the record, that whole Street View WiFi thing occurred because people didn't secure their networks, not because Google drove by and picked the locks on them.) Pearlstein continues:

Where I have a problem, however, is in allowing Google to buy its way into new markets and new technologies...

Again, why? Companies buy other companies all the time. And in the fast-paced culture that is Silicon Valley, sometimes it makes more sense to buy a company that's developing a core technology than to throw those same investment dollars into R&D for the sake of creating something that's already being created, just for the sake of competing with that same startup down the road. Google's doing plenty of innovation behind the scenes - and sometimes that involves taking a company's technology and investing money into it to make it better and bring it to market faster. Again, why is that a bad thing? Pearlstein continues:

Moreover, by swooping in and buying these promising firms, Google forecloses on the possibility that they might be purchased by companies such as Microsoft or Facebook, which could use them to mount a serious challenge to Google's dominant position.

Google, in its own blog post, responds better than I could:

...those companies not only have substantial cash or equity that they use to make acquisitions, they also regularly compete against us and other companies to acquire leading startups. In 2007, Google bought DoubleClick, but then Microsoft spent twice as much for its display ad company aQuantive and Yahoo bought ad exchange Right Media. All mature companies regularly acquire companies to make big bets on new spaces.

From Pearlstein's column:

The ease with which Google has been able to extend its dominance reflects, in large part, the inability to adapt century-old antitrust laws to the quite-different economics of a high-tech economy that is susceptible to winner-take-all competition.

A-ha! Now we're getting somewhere: "the inability to adapt." Sounds like Washington is the one with the problem, not Silicon Valley.

Again, I have nothing for respect for Mr. Pearlstein. He knows his stuff and is a well-respected voice inside the Beltway and inside that newsroom. But, he's off the mark here. Instead of closing this post with some witty final thought from me, I'll give Google the final rebuttal:

Antitrust law is designed to protect consumers, not competitors, and our acquisitions have created great things for consumers. Our 2004 acquisition of Keyhole led to Google Earth, which for the first time provided free satellite imagery for consumers. Our 2005 acquisition of a small company called Android -- and our investment in the technology that Andy Rubin was developing -- later led to the creation of the Android mobile operating system, which has injected more competition and openness into the smartphone space. For startups, getting acquired is often the path to success (especially given the difficult IPO market), so stopping large companies from making acquisitions would only deprive startups of another potential bidder and investors of a potential return on their invested capital. You can’t be both pro-economic growth and anti-acquisitions.

Bravo!

Also see: Google gets touchy on antitrust