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Hazlett in Barron's: "Don't Be Evil" Principle Permits Profits

"As Google broadened the terms of its motivating motto, 'Don't Be Evil,' to include commercialism, dazzling innovations arose and millions of users flocked to it," says Professor Thomas Hazlett in an editorial commentary appearing in Barron's.

Hazlett illustrates that Google's founders initially viewed the for-profit sector as a threat to their product, fearing that an advertising-funded search engine would produce bias toward advertisers and away from consumer needs. However, the decision to combine Google-generated picks with some commercials allowed market forces to deliver success at a nearly unimaginable level.

"Capitalism provided a superior mode of economic organization. By sharing ownership, pooling resources and hiring expert managers, it pushed specialization to new frontiers," says Hazlett. "Limitless variations became available, including collaborative business models -- as Google now knows."

Economies of Scale, Barron's, November 17, 2008. By Thomas W. Hazlett. 

Excerpt:
"Google's advertisers today pay for your search terms, your e-mail messages and millions of lifestyle clues lurking in terabytes of personal-data storage.

"In their 1998 paper, the Googlers cited Prof. Ben Bagdikian's theory of Media Monopoly. Page and Brin swallowed the idea that U.S. media markets were controlled by a cabal of corporations, manipulating content to protect advertisers, and stifling competitive entry to protect their shareholders. According to Bagdikian, just four megacompanies share the U.S. Media Monopoly: Disney, News Corp., Time Warner and Viacom. (News Corp. is the corporate parent of Dow Jones, publisher of Barron's.) Resistance was futile.

"If Brin and Page had been deterred by the bleak forecast offered by Bagdikian, Google today would not be worth some 90% of the capitalization of the four media oligarchs combined.

Creative Power

"'Gales of creative destruction,' in Joseph Schumpeter's memorable phrase, drive the capitalist economy. The awesome result is the Free Market Innovation Machine, as William J. Baumol's 2002 treatise was titled. It delivers prosperity such as the world had never known. 'Average growth rates for about one-and-a-half millennia before the Industrial Revolution are estimated to have been approximately zero,' writes Baumol. 'In the past 150 years, per capita incomes in a typical free-market economy have risen by amounts ranging from several hundred to several thousand percent.'

"This fountain of wealth inspires the globe. The University of Michigan's C.K. Prahalad trumpets the liberation of 'the bottom billion,' triggered by a 'market based ecosystem' working to 'eradicate poverty through profits.' A key cultural element turns out to be the sanctity of contracts, and the remarkable wealth gains that have spread to places like India and China are only beginning."