Google Part III: The AI Company

**Ben Gilbert** (0:00)
I went and looked at a studio, well, a little office that was going to turn into a studio nearby, but it was not good at all. It had dropped ceilings, so I could hear the guy in the office next to me. You would be able to hear him talking on episodes.

**David Rosenthal** (0:13)
Third co-host.

**Ben Gilbert** (0:14)
Third co-host.

**David Rosenthal** (0:14)
Is it Howard?

**Ben Gilbert** (0:16)
No, it was like a lawyer. It seemed to be like talking through some horrible problem that I didn't want to listen to, but I could hear every word.

**David Rosenthal** (0:22)
Does he want millions of people listening to his conversations? That's right. All right.

**Ben Gilbert** (0:28)
All right. Let's do a podcast.

**David Rosenthal** (0:30)
Let's do a podcast. Is it you? Is it you?

**Ben Gilbert** (0:49)
Welcome to the fall 2025 season of Acquired, the podcast about great companies and the stories and playbooks behind them. I'm Ben Gilbert.

**David Rosenthal** (0:57)
I'm David Rosenthal.

**Ben Gilbert** (0:58)
And we are your hosts. Here's a dilemma. Imagine you have a profitable business. You make giant margins on every single unit you sell. And the market you compete in is also giant. One of the largest in the world, you might say. But then on top of that, lucky for you, you also are a monopoly in that giant market with 90% share and a lot of lock-in.

**David Rosenthal** (1:23)
And when you say monopoly, monopoly as defined by the US government.

**Ben Gilbert** (1:27)
That is correct. But then imagine this. In your research lab, your brilliant scientists come up with an invention. This particular invention, when combined with a whole bunch of your old inventions by all your other brilliant scientists, turns out to create the product that is much better for most purposes than your current product. So you launch the new product based on this new invention, right?

**David Rosenthal** (1:51)
Right.

**Ben Gilbert** (1:51)
I mean, especially because out of pure benevolence, your scientists had published research papers about how awesome the new invention is, and lots of the inventions before also. So now there's new startup competitors quickly commercializing that invention. So of course, David, you change your whole product to be based on a new thing, right?

**David Rosenthal** (2:11)
Uh, this sounds like a movie.

**Ben Gilbert** (2:13)
Yes, but here is the problem. You haven't figured out how to make this new incredible product anywhere near as profitable as your old giant cash printing business. So maybe you shouldn't launch that new product. David, this sounds like quite the dilemma to me. Of course, listeners, this is Google today. And in perhaps the most classic textbook case of the innovators dilemma ever, the entire AI revolution that we are in right now is predicated by the invention of the Transformer out of the Google Brain team in 2017 So think OpenAI and ChatGPT, Anthropic, NVIDIA, hitting all time highs, all the craziness right now depends on that one research paper published by Google in 2017 And consider this, not only did Google have the densest concentration of AI talent in the world 10 years ago that led to this breakthrough, but today they have just about the best collection of assets that you could possibly ask for. They've got a top-tier AI model with Gemini. They don't rely on some public cloud to host their model. They have their own in Google Cloud that now does $50 billion in revenue. That is real scale. They're a chip company with their tensor processing units or TPUs, which is the only real-scale deployment of AI chips in the world besides NVIDIA GPUs. Maybe AMD, maybe, but these are definitely the top two.

**David Rosenthal** (3:41)
Somebody put it to me in research that if you don't have a foundational frontier model or you don't have an AI chip, you might just be a commodity in the AI market, and Google is the only company that has both.

**Ben Gilbert** (3:58)
Google still has a crazy bench of talent, and despite ChatGPT becoming kind of the Kleenex of the era, Google does still own the text box, the single one that is the front door to the internet for the vast majority of people anytime anyone has intent to do anything online. But the question remains, what should Google do strategically? Should they risk it all and lean into their birthright to win in artificial intelligence? Or will protecting their gobs of profits from search hamstring them as the AI wave passes them by? But perhaps first, we must answer the question, how did Google get here, David Rosenthal? So, listeners, today, we tell the story of Google, the AI company.