TOPICS > Economy

Google CEO Joins Apple Computer’s Board of Directors

August 31, 2006 at 6:35 PM EDT

JIM LEHRER: Now, new connections between two computer giants, Google and Apple. NewsHour economics correspondent Paul Solman has our story.

PAUL SOLMAN, NewsHour Economics Correspondent: This week’s announcement that Google’s CEO, Eric Schmidt, would be joining Apple Computer’s board of directors had industry analysts wondering if two Microsoft rivals weren’t, in fact, teaming up against the giant.

For more on this and its broader implications, we’re joined by Michael Schrage, MIT research associate. He’s worked as an adviser to Microsoft, Google, and other technology companies.

Michael, welcome.

MICHAEL SCHRAGE, Co-Director, MIT’s e-Markets Initiative: Thank you.

PAUL SOLMAN: How big a deal is this?

MICHAEL SCHRAGE: Well, the announcement that Mr. Schmidt is going on Apple’s board, frankly, is I think more of an individual than an institutional story. I think it’s intriguing and provocative, but in and of itself I don’t think that’s the big deal.

PAUL SOLMAN: It’s symbolic, though.

MICHAEL SCHRAGE: Absolutely. It is an important symbol of some key trends going on in the business and the industry at large, not just in the U.S. and not just in their markets, but worldwide.

PAUL SOLMAN: And they are?

MICHAEL SCHRAGE: And they are the triumph of digital services over software; the importance of devices as the media to transform, about to turn these digital services into value; and the importance of simple, easy, accessible customer interfaces.

PAUL SOLMAN: Digital services over software, meaning what?

MICHAEL SCHRAGE: Over software. What it means is that the traditional notion of computing is that you have software and it runs in your computer. These days, with the Internet, you don’t need the software in your computer. It can be on the network. And software running on the network is like a service to your computer, a service to your desktop, a service to your laptop, a service to your phone.

PAUL SOLMAN: OK, so that’s one. What are the others?

MICHAEL SCHRAGE: Number two is the increasing importance of devices as empowerment, as the media for all of these services. You have a phone; you talk on the phone. But you don’t just talk on the phone anymore. You send messages on the phone. You don’t just send messages on the phone. You take pictures with the phone. You don’t…

PAUL SOLMAN: Videos. I take videos of my grandkids.

MICHAEL SCHRAGE: You got in my way.

PAUL SOLMAN: Sorry, sorry.

MICHAEL SCHRAGE: There’s pictures, videos, the whole — anything having to do with bits and bytes in any form, banking transactions. These devices are the media that give more power to digital services and vice versa.

PAUL SOLMAN: And what’s number three?

MICHAEL SCHRAGE: The third trend is key, because it symbolizes what Apple and Google do best: great consumer interfaces, interfaces to these devices. In other words, Google and Apple understand ease of use, convenience, and accessibility.

The alliance

PAUL SOLMAN: And so, if Google and Apple are linking up...

MICHAEL SCHRAGE: Yes. Well, they are linking up.

PAUL SOLMAN: They are linking up.

MICHAEL SCHRAGE: People are linking up. The question is: Does putting the guy on the board mean there's going to be a more formal alliance? Not so sure.

PAUL SOLMAN: Well, but if they are linking up, though, symbolically, then what do they do with each other? I mean, what's the link? What's the change?

MICHAEL SCHRAGE: What's the change? I think what the change is going to be is you're going to see collaborative research around the notion of search. Right now, you type something in, in a very simple -- under Google, you type a few words in, and you get a plethora of lists. You get arrays after arrays of lists.

Suppose Apple allowed you to play a snippet of music and you could hear all the songs like that. So searches not based on words but on tunes, on melodies, on lyrics. How about searches based on image scans, because you can take digital photography?

So there is a variety of ways that you can completely redefine the meaning of search and the role of devices that were once used for voice or for e-mail.

Threat to Microsoft

PAUL SOLMAN: Is this a big threat to Microsoft? I mean, are Google, with its search engine, and Apple, with its iPod, which seems to dominate the market, are they the next Microsoft, the next monopolists?

MICHAEL SCHRAGE: You know, that's a fascinating question. Is it a threat to Microsoft as a company? Well, there are certainly threats, and they've already been enormous threats to elements of Microsoft's business.

And let's be clear here: The people at Microsoft are very smart. They're very ambitious. They like competition, and they like to beat competition. They did this with Netscape. They've done this with a variety of other companies. Microsoft unquestionably sees this as a threat.

PAUL SOLMAN: But I press the point: Is Microsoft's monopoly over? And are Google and Apple perhaps the next Microsofts, the next monopolists?

MICHAEL SCHRAGE: Boy, I would have to say the answer to that is most likely no. If you look back 10 years ago when the swirl of debate about was Microsoft a monopoly or not, there's a fundamental difference between then and now, and it's not just the passage of time.

Ten years ago, people looked at China and India as great markets for all of these digital innovations in software. Now it's pretty clear that India and China aren't just great markets, they're great competitors, they're great producers of software, and digital services, and products.

In fact, I think, maybe 10 years hence, we're going to be talking about perhaps the dominance of India and China and Asia, the monopoly from Asia as opposed to the monopoly of Google, Apple, or Microsoft.

PAUL SOLMAN: Michael Schrage, thanks very much.