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Hazlett in Financial Times: Google's Withdrawal from China

Google's withdrawal from China is a tactic to keep their search engine open and their database closed, says Professor Thomas Hazlett, writing in The Financial Times.

Hazlett points out that Google's tremendous success as the dominant global Internet application is based in good measure on the company's bond of trust with its users.

"This vault is more important than the bank's." says Hazlett. "Dollars stolen can be insured and replaced. Confidentiality breeched cannot be restored."

When Google began its physical presence in China in 2006, it did so with a clear compromise that acknowledged the Chinese government's control of speech and Internet content, Hazlett says. Now, however, up against cyberattacks and compromise of users' private information, Google has elected to remove its facilities in China, a decision with which Hazlett is in agreement.

"Their corporate soul merits protection. It is a metaphysical construct that has cash value," he believes. "Supporting it is not selling out—it's just selling."

Google's China Syndrome, The Financial Times, February 2, 2010. By Thomas Hazlett.

Excerpt:

"Traditionally, the local bank engaged in a 'trust relationship.' It promised to invest your savings wisely, taking only the most prudent risks. To convince you of its sincerity, it spent a lot on a fancy building, telling customers: we’re no 'fly by night' operation. It sponsored the Little League team and the Girl Scouts, spreading community roots deep and wide. Employee comportment: polite but boring, under the shadow of engraved plaques noting how many long years the bank had been in town, behaving itself.

"Ah, for the days before the moral hazard of 'too big to fail,' you gasp? Perhaps. But the conservative ethos of the button-down banker is alive and well. It rides on roller blades at the Googleplex.

"What seems like a revolutionary departure from your father’s capitalism is, in fact, just another spin cycle in the machine of creative destruction. Google’s business model takes the rich, voluminous private information in search or email and creates the most profitable audiences on the planet. Advertisers flock. But what they bid to buy depends critically on banker’s trust."

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