Google, China, and Profits

The insulated Silicon Valley online culture that believes information has got to be free has been struggling with the reality that many authorities in other parts of the world believe the contrary (and are willing to use force to assert those beliefs). After learning that cooperation can put innocent people in jail, Yahoo left China, for example, while Google has struggled to remain there. 

Recent news of Google's discovery that Chinese hackers have broken into several dissidents' Gmail accounts (and U.S. business accounts) has provoked Google to do an about face. (The universally held assumption being that the Chinese government itself was responsible for the attacks.) Not lost in translation: The company will no longer allow its searches to be censored in China and if the government there insists on doing so, Google will pack up its (admittedly small) operations and leave.

But is the business argument that Google should stay in China valid? 

Joe Schoendorf, for example, a partner at Accel Partners, was quoted in The New York Times as saying, "I don’t think anybody is going to run away from China. Google has Microsoft on the ropes, and China is arguably the world’s most important market outside of the U.S. You don’t walk away from that on principle.”

Investment advisors and financial analysts are paid to keep their eyes on a single target (money), which is as it should be. However, in this case their argument that Google cannot depart the Chinese market because of the money the company would forgo is partly based on a false premise, namely that anyone with enough money (and a large enough population) can innovate and create. In other words, if you don't participate in the Chinese market, you will eventually be eclipsed by engineers and companies working there (or by other American companies willing to work there). Of course, this is ostensibly false. (To wit, where are those magnificent Chinese electric cars that can travel hundreds of miles on a single charge? Where are those staggeringly fast microprocessors that can predict the weather? Where are those advances in tomography, air travel, cancer research, etc.? Innovations come from innovators, not large or small companies.)

The point is, without knowledge and information, innovation and thus the ability to compete is stymied. And Google represents access to information (the knowledge part is debatable). If Google continues to be censored by the Chinese government and then follows through on its threat to leave the country, the Chinese people will be the losers, not Google.

So the argument for staying can only rest on humanitarian grounds, i.e.. leave, and you're punishing the people, not the oppressive government. It's a tricky diplomatic dance whose choreography is based on the idea that participating in the censored Chinese market provides at least some information and a degree of openness to people in China. And some is better than none, right?

Not necessarily. The problem is not China's cyberspies. The problem is the presentation of "some" information under the pretext that it's knowledge. Put another way, if you're not providing a complete picture of what's available, then you're providing a deceptive picture. So if Google is now unable to "negotiate" a way to deliver uncensored search results in China, it should shutter

It may also be time for other companies to reassess their ties to the Chinese market. The computer incursions at Google were aimed not only at human rights activists; they were mainly aimed at stealing information from dozens of companies. Not exactly the kind of business partner one would hope for, and certainly not the type that will help you turn a profit.

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About jquain

Technology reporter, writer, and television correspondent, JQ has been covering the computer, communications, and consumer electronics industries for more than 25 years.A contributor to The New York Times, Popular Mechanics, PC Magazine, U.S. News & World Report and many other publications, JQ appears on CBS News television program Up to the Minute and on Fox Business.
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