♪ >> he built a machine that played tic-tac-toe as a teenager. a few years later, he made his way out west, becoming a faculty member at stanford. four years after that, he brought together researchers to develop a technology used in 99% of computer chips. today, john hennessy sits on the board of alphabet after serving as president of stanford for 16 years. some of silicon valley's best and brightest were educated under his watch, including larry

page and sergey brin. joining me today on "bloomberg studio 1.0,", google chairman, former stanford president, john hennessy. thank you for joining us. >> thank you. >> i want to take you back to huntington, new york, where you grew up and ask you who was your first leadership mentor? john: a high school math teacher, who at a parent-teacher conference said, 'john has a fine mind, but lazy mind.' >> why were you at the conference? john: they wanted to deliver that message in front of me. it sent a message that it wasn't good enough to be smart and have a good mind, but you had to work hard. >> you become president of stanford university. you write that was the realization of your dreams.

gordon bell convinces you and your colleagues to commercialize your microprocessor designs. how did he convince you to take that risk? john: there was an experimental project on the west coast, but it did not translate to the east coast. he said this technology is too disruptive. if you don't go with it, it will get put on the back shelf. it disrupts too many business models and product lines. he said you have to start a company. eventually we agreed. >> you eventually sold the company to silicon graphics. you had a number of ceos. what did you learn from the leadership you witnessed before you had the nice exit? john: that i didn't know anything about starting a company when i started a company. i knew i was not financially

capable. i also realized i didn't know how to judge a ceo. sometimes you have a ceo, they are good, but then the company grows and that ceo may not be the right person anymore. >> in the late 1990's, you have students who bring you a prototype of a search engine. john: larry and sergey were creative guys. they showed me a demo. i was astonished. we had other search engines. i thought, search, it is kind of done. there are all these other ones out there. the problem was you do a search for john hennessy, you get a string of hits not necessarily in any order. i typed it in.

>> your first google search is a vanity search? john: i wanted to see whether it would find, for example, a paper of mine, and find that high up on the list. i remember showing someone the search. he was upset because sometimes you get a particular site, and for a constitutional lawyer, this was not a good thing. so i realized they made a breakthrough in terms of search. >> february this year, you are named non-executive chairman of alphabet after the company had been run for 20 years by this group of three leaders. were you reluctant? john: i believe deeply in google and the technology they built.

it was an honor to take the job. >> how do you work with larry, who remains ceo of alphabet, but gives independent ceos like sundar pichai a lot of independence? john: we spend a lot of time with sundar. a lot of our time is spent there. larry is doing what he wants to do, inspiring the other parts of the company, pushing the innovation in those parts. he spends time advising and helping sundar out. we split our time between those things. >> there is a sense that larry is a little invisible? is it an incorrect assumption that he doesn't have the same role?

john: larry has an inside role. he sees himself as a capital allocator to those divisions, but somebody keeping track of what progress they are making. are they hitting milestones, missing them? is it time to double down on this bet? larry still likes to drill deep, go in and spend a lot of time and understand the technology. is this technology going to make it, grow, be important? >> we mentioned employee activism in silicon valley impacting all tech companies. it has been prominent at alphabet, things like contracts with the defense department, and more recently allegations of sexual harassment. you had experiences at stanford, but did this activism catch you off guard a google? -- at google?

john: you expect students to be engaged in this kind of activity. it is less common among employees. i think google encourages people to participate and help shape a great work environment. >> what can you do? john: listen. that is the first thing. you have to listen. that is one of the things i learned at stanford, just listen. sometimes where there is smoke, there is a little fire. if you listen early you keep it , a small fire rather than let it get out of control. >> there were news reports about alleged coverups, payoffs of sexual misconduct at alphabet. sundar pichai wrote a note to the company saying these were hard reports to read and pledging the company will do things differently.

is alphabet a different company than it was three years ago? john: i can't comment on the individual details of the reports, but there is a different policy in place. it has been reviewed by the board. the board gets periodic reports on actions taken under that policy. we concluded that is something that requires attention at the highest level of management. as sundar said, there have been a number of cases prosecuted, including high-level management. >> how did you feel reading that? some of those were decisions involving a person you were involved with at that time. john: at the time, things were different. not everybody was aware of things. i can't comment on the exact details of what happened at that time.

we realized the policy needed strengthening. that was the goal, a stronger, more-aggressive policy. personally, my position has been these things are intolerable and you are creating a workplace hostile to women, or other people, discrimination or harassment. you will have a weaker workplace. >> what do you say to google employees? john: we have to do better as a company. anybody who does business in china compromises some of their core values every single time. ♪

♪ >> there are some business leaders like jeff bezos who say it is their patriotic duty to help the u.s. government. you have gotten pressure from employees not to do anything that might conflict with the company's values. how do you view walking that fine line? john: it is a tough line to walk, figuring out how to navigate it, figuring out what role they will have. quite frankly, ensuring that technology is going to be used in ways that are effective and agree with your moral values. >> it doesn't appear technology companies in china are asking these questions. how do you view the patriotic duty to work with the u.s. military, and to ensure you are not hurting alphabet's business? john: that is a good question. the answer is one the company will have to struggle with. >> china, what is your view on the opportunity and risks? john: it is something we worry about. anybody who does business in

china compromises some of their core values, every single company, because the laws in china are different than our own country. are we better off giving chinese citizens a decent search engine, a capable search engine, even if it is restricted and censored in some cases, than a search engine that is not very good? and that is the struggle. >> can you do more good by being there, even on a compromise basis? the answer to that? john: i don't know the answer to that. i think it is a legitimate question, asking how can you do it and still live within the context of the regulations? >> what does it tell you about the political climate for the

empowerment that employees are feeling that even as the search engine was in a prototype form, the news got out and people were debating it? john: google, like everywhere in the valley and the country, there is divisiveness. that divisiveness has fed more concern about how these technologies get used. >> if google were to introduce cloud tools, you would have to store data in the country. does that worry you? john: if you wind back to the time google decided to exit china, it was not just censorship but also surveillance, hacking attempts. those added together to create a situation. we are in a different time now. you are right. if you store data in the country, it can be gotten at by the chinese authorities.

>> does that make you feel uncomfortable? john: at a minimum, you better make sure your users understand that. >> we do seem to be in the midst of a trade war with china. what would be the potential implications for silicon valley, alphabet in particular, if the hostilities continue or get worse? john: trade wars are not economically productive. we should remind people of that and find a way to move forward. >> governments around the world, in particular in europe, are viewing the tech companies much more skeptically. what is the correct view with governments that have the lowest possible impression of the company? john: every company owes users a clear set of policies around privacy and security. we should have those.

we need governments to help policy. we have a hole. i am leery about government passing laws and legislation. our copyright law is still stuck in the last two centuries. we have to be careful, but regulations about the rules, privacy and security, would probably help create a level playing field for all the tech companies and they would know what their obligations are. >> do you worry about aggressiveness in terms of acquisitions have been curtailed? if google were to announce a youtube-style acquisition tomorrow, i would have a hard time seeing that approved in this political climate. john: acquisitions have been potentially curbed by anti-trust concerns. if any of these companies would do an acquisition that would strengthen their hold on a core market, they will get questioned

in that case. that is appropriate. >> one eu commission rule is google is charging for makers to use the store and apps. how does that affect google's business in europe? john: we don't know yet. clearly it is a change. we thought we were doing the world a favor, creating a free operating system. >> how does that impact the ecosystem? john: a big concern for google was that it would be forked. instead of one, we would get lots of versions of android, which would defeat the value of the ecosystem. >> more of a risk in china? john: it could happen in other places. ♪ >> do you think there has been a failure of leadership in silicon valley? john: there has been a failure to anticipate some of the consequences.

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♪ >> i know it has been less than a year since you took over as chairman of alphabet, but do you think about your legacy? john: we would like the company to continue to deliver high value to users. my mindset about any leadership role is that it is a service role. you serve the employees, shareholders, the community, and you serve them with a long-term perspective, things the company is focused on and how they will shape it over time. >> you recently started a scholars program. you talk in the book about feeling like there was a crisis in leadership. where do you see the crisis in leadership now?

john: when i started the program i thought washington was in bad shape, but it got worse. i don't think we have done so well on the corporate side. we have had recent events in the valley and going back to the financial crisis where we did not have the greatest leadership in some places. there have been repeated cases of it, even in our universities where you question the quality of leadership and determination of the people at the top to do the right thing. >> i remember this iconic photo from 2011, silicon valley executives having dinner with barack obama. you were there with john chambers, mark zuckerberg next to the president, steve jobs, unfortunately looking very frail, and i'm talking about the current president. would that kind of meeting be possible today? john: it was an exchange of views.

interestingly, we had pre-met and asked steve jobs to take the lead on it. we decided one thing to focus on was immigration reform. here we are still having the discussion about immigration reform. i remember leaving that dinner after hearing the president speak about the challenges, thinking, things are broken in washington, because the dream act, for example, had become a political football. there was a version both sides would accept, but neither side would make the compromise needed. >> the irony is they are more fractured now. part of what has changed is the likelihood of the president sitting down with tech leaders, but the impression of silicon valley has changed so dramatically over the last two. it does not appear for the better. john: the rise of social media

has meant everybody is free to publish. instead of getting a greater exchange of ideas, we have created echo chambers where people can go to sites that tell them things they already agree with and believe in and don't challenge them, and perhaps don't convey the facts accurately as one would like them to. it is a reflection of the divisiveness in society. >> how much accountability do business leaders have creating social networks without care and caution about the unintended consequences? john: it is a tough balancing act. while the companies are not required to support first amendment rights, there is a general societal belief they

should and people should be free to speak and put their opinions up. balancing that against ensuring people have a variety of facts and opinions. that is why curated news sources will continue to be important. >> has there been a failure of leadership in silicon valley? john: there has been a failure to anticipate some of the consequences of what has happened. i'm not sure any of us would have gotten it right, but perhaps some warning signs were missed early on that could have tempered the situation somewhat. >> there are canonical leadership qualities in silicon valley that have been prized for so long. steve jobs with his freshness and creativity. mark zuckerberg is almost epitomized by the phrase "move fast and break things." john: move fast and break things was fine when you were a small

company and you had a small impact when you broke something, or when you're impact was confined to one sector. when you are impacting the american public at the scale these companies do, breaking things has many unintended consequences. i think we hit another mantra. >> a lot of the tech companies we write about are good at tax minimization, avoidance, so what is the responsibility of stanford university that has instructed these visible leaders, larry and sergey, evan spiegel at snapchat, crafting leaders that take things like ethical leadership and the service-mindedness into account? john: when we did our undergraduate curriculum, we introduced an ethical reasoning requirement for all undergraduates.

you have people going into leadership positions in technology, medicine, politics, the corporate world. all of them should have ethical training. what we want to emphasize is -- think through a framework for making decisions which may have an ethical component. if you haven't developed a thought framework for doing that, you get to the crisis point and you have to make a decision quickly. you don't have the framework for making it. it is so easy to make the wrong decision. that brings you partway down the slope. now you have to make another wrong decision to fix that one. it is an avalanche. >> for the potential entrepreneur, the student going to school next year and thinks

john: i ask them why they want to be an entrepreneur? if they tell me, money, i tell them that is wrong. then i asked them to tell me about their novel model or novel technology, or the two of them together. many times students say, i want to be an entrepreneur. tell me about your technology. i don't have it yet, but i want to be an entrepreneur. come back when you have that technology that is disruptive and will create new capabilities. >> is entrepreneurship still in vogue? john: it is still in vogue. there is the rush to the new thing, blockchain, cryptocurrency, ico's. one has to stand back and say -- what are you going to offer that is an opportunity? entrepreneurship movement is getting stronger. we are doing a better job of preparing social entrepreneurs to be successful, to scale their efforts, and to have a larger impact. >> john hennessy, chairman of google, author of "leading

matters," and president of stanford, thank you for joining us on "bloomberg studio 1.0." john: thank you. ♪

♪ >> ladies and gentlemen, the winner of the stirling prize for architecture 2018 is the bloomberg building. [applause] caroline: bloomberg's european headquarters was awarded the stirling prize for the u.k.'s best new building by the world roil institute of architects. -- royal institute of architects. we look at bloomberg's office in london as a model for workplaces of the future. welcome to this program about bloomberg's new european headquarters.