Ruth Porat (Alphabet CFO) – The Secret to Being a Great CFO | Google Zeitgeist (May 2016)

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Abstract

Navigating Change and Innovation: Ruth Porat’s Journey from Wall Street to Silicon Valley



In an illuminating exploration of cultural and corporate dynamics, Ruth Porat, the CFO of Alphabet and Google, reveals the contrasting worlds of Wall Street and Silicon Valley. From experiencing a stark culture shock and embracing Google’s mission-oriented culture, to steering Alphabet towards long-term success and championing transparency, Porat’s journey underscores the critical importance of maintaining a clear vision amidst the pressures of the financial world. Her insights on resisting short-termism, learning from the financial crisis, and balancing the roles of finance in fast-growing tech companies offer a compelling narrative on navigating change and fostering innovation.

Culture Shock: Transitioning from Wall Street to Silicon Valley

Ruth Porat’s move from Wall Street to Silicon Valley was marked by a significant culture shock. Accustomed to the fast-paced and established norms of Wall Street, Porat found Google to be surprisingly early-stage, brimming with endless possibilities for innovation across various fields. Despite the common perception of the tech industry disrupting traditional industries, Porat’s experience highlights the stark contrast between the conventional financial sector and the dynamic tech industry. Notably, Google’s early stage of development is evident in its constant product evolution, driven by the combination of mobile technology, geodata, and micro moments, leading to an explosion in the utility of its products. Additionally, the rise of voice search, with 20% of searches in the U.S. already using voice, and its expected dominance among the next 4 billion internet users, further emphasizes Google’s potential for continued growth and innovation. Moreover, YouTube’s reach among 18- to 49-year-olds on mobile exceeds that of any cable or network station, yet offline ad spending still outpaces online. The diverse portfolio of Google, encompassing VR, cloud computing, life sciences, and self-driving cars, offers endless possibilities for innovation.

Tech companies benefit from the public’s favorability towards their popular products like Google Search and Photos. Google’s internal mission to improve lives drives employees to do more for the less fortunate, such as Google’s Growth Engine Initiative and computer science training. The tech sector should ensure that their skills and technology have a positive social impact.

Mission-Oriented Culture: Google’s Life-Improving Focus

At the heart of Google’s culture lies its mission-oriented approach, the most striking cultural difference observed by Porat. Unlike Wall Street’s profit-driven focus, Google’s ethos centers on improving billions of lives. This culture accepts, and even celebrates, failure as a means to conserve resources and pivot to more promising projects, illustrating a profound shift in corporate mindset. Google’s moonshot factory, X, exemplifies this approach, embracing failure as a means to save resources and move on to the next project. The company’s diverse portfolio, including VR, cloud computing, life sciences, and self-driving cars, offers endless possibilities for innovation, driven by its mission to improve lives.

Lightness of Silicon Valley: A Unique Work Environment

Porat describes the “lightness” of working in Silicon Valley, where a mission-driven environment attracts talent and fosters a unique work culture. This lightness is a stark contrast to the often intense and pressure-driven atmosphere of Wall Street. This work environment, particularly at Google, is described as light and mission-oriented, which attracted a former Wall Street employee to join the company. Google’s commitment to job training, especially in computer science skills, is highlighted, with the goal of training 2 million people in Europe by the end of the year to prepare them for the digital economy.

True North and Long-Term Vision: Guiding Alphabet’s Success

Porat emphasizes the importance of having a “true north” and a long-term vision for Alphabet. She argues that clear goals and focus are crucial for guiding the company towards sustained revenue growth and innovation, especially in moonshot projects. In communicating with investors and analysts, Porat stresses the importance of prioritizing long-term revenue growth and investing in “moonshots” to foster sustainable growth. She criticizes the short-term focus often associated with quarterly earnings calls and investor expectations, believing that companies should prioritize long-term value creation and resist short-term pressures. Instead of providing incremental updates, she prefers to communicate the company’s overall direction and strategic priorities.

Transparency and Structure: Facilitating Investor Understanding

To improve transparency and clarify its direction, Alphabet restructured, distinguishing Google from its other ventures. This strategic move was designed to provide clear insights into the company’s established businesses and its potential growth engines. This structure allows for transparency, focus, and effective management of various endeavors within Alphabet.

Resisting Short-Termism: A Focus on Long-Term Value

Porat criticizes the short-term focus often associated with quarterly earnings calls, advocating for a prioritization of long-term goals over short-term pressures. This perspective is essential for fostering long-term value creation.

Lessons from the Financial Crisis: Risk Management and Prioritization

Drawing from her experience during the financial crisis, Porat highlights the importance of robust risk management and clear financial metrics. She stresses the need for companies to have transparent dashboards and analytics, essential for making informed decisions. Porat shares her experiences during the financial crisis, where she worked closely with the US government to address the housing crisis and the AIG situation. She highlights the importance of having the right dashboards and financial metrics to avoid driving blindly in business. Porat emphasizes the importance of having both the will and the means when making tough decisions, as demonstrated by the Greek crisis.

Ruth Porat shares concerns about the stagnant living standards of non-elite workers and the lack of tangible policy solutions. Google strives to provide broad access to information, dispelling misinformation and facilitating informed decision-making. They also use technology to remove barriers to voting, increasing voter participation.

Financial System Safety and Student Lending Concerns

Despite advancements in creating a safer financial system in the US, challenges remain, such as the trillion-dollar federal student lending program. This program faces issues akin to the housing crisis, with high default rates among certain student demographics. Porat draws a parallel between the housing crisis and the current federal student lending program in the US. She highlights the influx of $120 billion annually into student loans, with a significant portion going to for-profit colleges. The high dropout rates among students attending these colleges result in a situation where they are left with debt and no degree, leading to rising default rates, similar to the housing crisis.

Porat draws parallels between the current tech sector correction and the tech bubble of the 1990s. She notes that today’s tech sector has a much broader impact, reaching a larger online audience.

Addressing Root Causes and Unemployment

Porat emphasizes addressing problems at their root, avoiding superficial solutions that may lead to future crises. She also highlights the need for effective job training to prepare individuals for the digital economy, especially among vulnerable demographics like youth and older workers. Porat advocates for addressing issues honestly, directly, and at the root cause. She emphasizes the importance of resolving challenges such as unemployment, particularly among youth and older individuals.

Porat’s valuable Wall Street experience gave her battle scars, providing pattern recognition and preventing mistakes. She values such experiences, especially when combined with optimistic entrepreneurs in tech companies, creating a powerful partnership. The notion of “battle scars” in candidates can help companies build ahead of requirements.

Reputation Management and Corporate Social Responsibility

The reputation disparity between Wall Street bankers and tech companies is notable. However, Porat warns that tech companies could face similar reputational risks if they fail to address public concerns. Google’s initiatives in computer science training and information accessibility exemplify efforts to use technology for social good.

The Role of Finance in Fast-Growing Tech Companies

In fast-growing tech companies, CFOs play a crucial role in building systems and controls ahead of requirements, ensuring the company maintains a competitive edge through innovation or business models.

Lessons from the Tech Bubble of the 1990s

Porat draws parallels between the current tech sector correction and the tech bubble of the 1990s. Unlike the 1990s, today’s tech sector has a much broader impact, reaching a larger online audience. Porat draws parallels between the current tech sector correction and the tech bubble of the 1990s. She notes that today’s tech sector has a much broader impact, reaching a larger online audience.

Combining Wall Street Expertise with Silicon Valley Innovation

Porat values her Wall Street training for its lessons in resilience and pattern recognition, which have been instrumental in her Silicon Valley career. She advocates for merging the analytical skills of Wall Street with the optimism and innovation of Silicon Valley to drive success.

Notes by: oganesson