♪ brad: he built a machine that played tic-tac-toe as a teenager growing up in huntington, new york. a few years later, he made his way out west, becoming a faculty member at stanford university in 1977. four years after that, he brought together researchers to develop a technology known as risk, which is now used in 99% of computer chips. today, john hennessy sits on the board of google's parent company 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 and director of the night hennessy scholars program, john hennessy. thank you for joining us. john: thank you. brad: i want to take you back to huntington, new york, where you grew up and ask you who was your first leadership mentor? john: an early mentor to me happened to be a high school math teacher, who at a parent-teacher conference said, "john has a fine mind, but lazy mind." brad: wait a minute, why were you at the parent-teacher 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. brad: at a young age, you become a professor at stanford university.

you write that was the realization of your dreams. gordon bell convinces you and your colleagues to commercialize some of your microprocessor designs. it becomes your first company. how did he convince you to go and take that risk of becoming a part-time entrepreneur? john: there was an experimental project on the west coast, but it didn't translate to the east coast, where the head of the company was. he said this technology is too disruptive. if you don't go with it, it'll 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 with it. brad: you eventually sold the company to silicon graphics. you had a number of ceos in the 1980's. what did you learn from the leadership you witnessed before you had the nice exit? john: the first thing i learned was i didn't know anything about starting a company when i started a company. i knew i wasn't financially capable. i also realized i didn't know how to judge or interview a ceo.

we learned the hard way. sometimes you have a ceo, they are good for a period of the company, but then the company grows and needs it new skills and that ceo may not be the right person anymore. brad: in the late 1990's, you have students who bring you a prototype of a search engine. john: larry and sergey, just as they are today, were creative guys. they liked to think outside the box. they came over to show me a demo of it, and i was astonished. at that time, we had other search engines. i thought, search, it's kind of done. there is altavista, and 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. so, i typed it in.

brad: so wait, 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. the first president then was gerhard casper. i remember showing him the search. he was upset because sometimes when you search him, you get a casper the friendly ghost site, and for a constitutional lawyer, this was not a good thing. this is not what search should do. so i realized they had really made a breakthrough in terms of quality search. brad: i want to fast forward to 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? did they have to convince you? john: i believed deeply in the company and the technology they built. from that perspective, it was an honor to take the job. brad: how do you work with larry, who remains ceo of alphabet, but gives independent ceos like sundar pichai a lot of independence? john: certainly, we spend a lot of time with sundar. the core of google is the majority of the business by a long shot. a lot of our time is spent there. larry is doing what he wants to do, which is inspiring the other parts of the company, pushing the innovation in those parts. while of course he still spends time advising and helping sundar out. we split our time between those things. also other parts of the company we try to hear from periodically

as well. brad: there's a sense that larry is a little invisible? is that an incorrect assumption that he doesn't have the same role? john: larry has very much has an inside role. he sees himself as a capital allocator to those divisions, but also somebody who's keeping track of what progress they are making. are they hitting milestones, or are they missing them? is it time to double down on this bet or is it time to remove this bet? larry still likes to drill deep, go in and spend a lot of time and understand the technology. see what innovations are there. is this technology going to make it? is it going to grow and be important? brad: we mentioned this bubbling topic of employee activism in silicon valley impacting all tech companies. it's been particularly 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 at google? john: i think it's different. you expect students to be engaged in this kind of activity. it's less common among employees. i think google encourages people to speak out and really participate in helping shape a great work environment. brad: so what can you do in this situation, other than listen to them? john: listen. that's the first thing. you have to listen. that's one of the things i learned at stanford, just listening. sometimes where there's smoke, there's a little fire. if you listen early enough, you keep it a small fire rather than let it get out of control. brad: there were news reports about alleged coverups, payoffs of sexual misconduct at alphabet. and sundar wrote a note to the company saying these were hard reports to read and pledging the company will do things differently.

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

but i think we realized that the policy needed strengthening. and that was the goal, to get a stronger, more-aggressive policy. personally, my position has been these things are intolerable and you're creating a workplace hostile to women, or other people. where there's discrimination or harassment, you will have a weaker workplace. brad: google employees are upset in making their voices heard. what do you say to them? john: we have to do better as a company. anybody who does business in china compromises some of their core values. every single company. ♪

brad: there are some business leaders like jeff bezos at amazon, who say it's their patriotic duty to help the u.s. government. at google, you've 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: yeah, it's a tough line to walk, and i think we all agree with that. figuring out how to navigate it, figuring out what role they'll have, and what role employees will have. quite frankly, ensuring that technology is going to be used in ways that are effective and agree with your moral values. brad: at the same time, it doesn't appear technology companies in china are asking these questions. at google, how do you view the patriotic duty to work with the u.s. military, and to ensure you're not hurting alphabet's business i drying a line some of your competitors might not be drawing? the answer is one the company -- john: that's a good question. the answer is one the company will have to struggle with. brad: china, what is your view on the opportunity and risks? john: it's 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 quite different than our own country. the question that comes into my mind and that i struggle with is, 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's not very good? and it does that improve the quality of their laws? and that's the struggle we have to work on. brad: can you do more good by being there, even on a compromise basis? john: right. brad: and do you know the answer to that? you are there seven or eight years ago. john: i don't know the answer to that. i think it's a legitimate question, asking how can you do it and still live within the context of what their regulations are? brad: what does it tell you about the political climate these days, or 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: part of what is inside google, like everywhere in the valley and the country, there is divisiveness. and i think that divisiveness has fed more concern about how these technologies get used. brad: the search engine aside, if google were to introduce cloud tools in china, you would probably, as apple does, 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. things like that. those all added together to create a situation. we're in a different time now, asking how you do this, how you make it safe. but you're right, if you store data in the country, it can be gotten at by the chinese authorities.

brad: does that make you feel uncomfortable? john: i think you should worry about it. at a minimum, you better make sure your users understand that. brad: speaking of the divisiveness, we do seem to be in the midst of a trade war with china. what would be the potential implications for silicon valley, or for alphabet in particular, if the hostilities continue or even get worse? john: i think trade wars are not productive, and they're not economically productive either. we should try to remind people of that and find a way to move forward. brad: governments around the world, in particular in europe, are viewing the tech companies much more skeptically. what's the correct view with governments that have the lowest possible impression of the company and its business motives? john: look, i think every company owes users a clear set of policies around privacy and

security. we should have those and make those clear. and we need governments to help policy. we have a hole. i have to admit that i am somewhat leery about governments passing laws and legislation because i look at our copyright law, which 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. brad: do you worry about innovation or even like aggressiveness in terms of acquisitions have been curtailed? for example, if google were to announce a youtube-style acquisition tomorrow, i would have a hard time seeing that approved in this political climate. john: i think it's always been that acquisitions have been potentially curbed by anti-trust concerns. to the extent that any of these companies would do an acquisition that would strengthen their hold on a core

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

the consequences. ♪

brad: i know it's been less than a year since you took over as chairman of alphabet, but do you think at all about what you want your legacy at google to be? john: we'd like the company to continue to deliver high value to users. in the end, my mindset about any leadership role is that it's a service role. you serve the google 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. brad: you recently started a scholars program. you talk in the book about agreeing with phil and feeling like there was a bit of 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, and then it got worse. i don't think we've done so well on the corporate side. we have had a number of recent events in the valley and going back to the financial crisis where we didn't have the greatest leadership in some places. there have been repeated cases of it, even in our universities we have had things where you question the quality of leadership and determination of the people at the top to do the right thing for the company. brad: i remember this iconic photo, i think it was from 2011, a bunch of silicon valley executives having dinner with barack obama. you were there with john chambers, john doerr, mark zuckerberg next to the president, steve jobs was there, 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. and we decided, as a group, 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, boy, things are broken deeply 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 agree to the compromise that was needed to make that happen. brad: the irony is as broken as it was then, they're 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 years.

unfortunately, it doesn't 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 even don't convey the facts as accurately as one would really like them to. so, i think it's a reflection of the divisiveness in society. it just makes it that anybody can publish now. brad: how much accountability do the business leaders here have for creating social networks without care and caution about the unintended consequences? john: it's a tough balancing act because while the companies are

not required to support first amendment rights, there's a general societal belief they should support first amendment rights and people should be free to speak and put their opinions up. balancing that against ensuring that people here facts and a variety of facts and opinions. that's why news sources are still so important and curated news sources will continue to be important. brad: has there been a failure of leadership in silicon valley? john: i think there's been a failure to anticipate some of the consequences of what has happened. technology races along fast. i'm not sure any of us would have gotten it right, but perhaps some warning signs that things were devolving were missed early on that could have at least tempered the situation somewhat. brad: there are canonical leadership qualities in silicon valley that have been prized for so long. certainly steve jobs with his brashness, along with his freshness and creativity. mark zuckerberg is almost epitomized by the phrase "move

fast and break things." did we prize the wrong things for too long? john: i think we did. i think "move fast and break things" was fine when you were a small company and you had a small impact when you broke something, or even when you're impact was confined to one sector. when you're impacting the other technology companies, when you're impacting the american public at the scale these companies do, breaking things has many unintended consequences. i think we hit another mantra. brad: a lot of the tech companies we write about are very good at tax minimization, tax avoidance, so what is the responsibility of stanford university that has instructed these very visible leaders, larry and sergey, evan spiegel at snapchat, in crafting leaders that take things like ethical leadership and the service mindset into account? john: when we did our undergraduate curriculum, we introduced an ethical reasoning

requirement for all undergraduates. the motivation was exactly that one. you have people going into leadership positions in technology, medicine, politics, the corporate world. all of them should have some ethical training. and i think in particular, brad, 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's too easy to make the wrong decision then. that brings you partway down the slope. now you have to make another wrong decision to fix that one. and another one, and the next thing you know, it's an avalanche. brad: for the potential entrepreneur, the student going to school next year and thinks about starting a company, what is your advice for the next generation of leaders? john: the first thing i ask them is why they want to be an entrepreneur? if they tell me make lots of money quickly, i tell them that's wrong answer.

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. i want to be an entrepreneur. tell me about your technology. i don't have it yet, but i want to be an entrepreneur. i say, well, come back when you have that technology that's disruptive and is going to create new capabilities. brad: is entrepreneurship still in vogue? john: it's still in vogue. there's the rush to the new thing, whether it is blockchain, cryptocurrency, ico's. one has to stand back and say, what are you going to offer that is really an opportunity? i think the social entrepreneurship movement is actually getting stronger. we're doing a better job of preparing social entrepreneurs to be successful, to scale their efforts, and to have a larger impact. brad: well john hennessy, chairman of google, author of "leading matters," and former

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

♪ david: you were happy with your successor? justice kennedy: over a very short time, you will see the system is working in the justices are working very well with their colleagues. david: do the justices lobby each other? justice kennedy: that's a felony. you can't do that. [laughter] david: one of your famous decisions is citizens united. justice kennedy: there is money in politics. david: -- justice kennedy: the rest of the world is looking at us to see what democracy means. >> would you fix your tie, please? david: well, people wouldn't recognize me if my tie was fixed, but ok. just leave it this way. alright.