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Google execs cheery about Silicon Valley economy

The financial system of the United States and the rest of the world is in trouble, but Google's founders and CEO see Silicon Valley as a good place to weather the storm.

Stephen Shankland principal writer
Stephen Shankland has been a reporter at CNET since 1998 and writes about processors, digital photography, AI, quantum computing, computer science, materials science, supercomputers, drones, browsers, 3D printing, USB, and new computing technology in general. He has a soft spot in his heart for standards groups and I/O interfaces. His first big scoop was about radioactive cat poop.
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Stephen Shankland
3 min read

MOUNTAIN VIEW, Calif.--The national and global economy is suffering something between a setback and a meltdown, but Google's top executives said Wednesday they're bullish about Silicon Valley's economic prospects.

Google CEO Eric Schmidt
Google CEO Eric Schmidt Stephen Shankland/CNET News

"This is the sixth or seventh cycle I've seen in Silicon Valley. I think we're better positioned than ever," Chief Executive Eric Schmidt said of the Silicon Valley region during a meeting with reporters at the company's headquarters here.

Schmidt specifically said the venture capital community is more sophisticated and that a Northern California start-up can reach scale more easily. "Young people out of Stanford and Berkeley--they're able to get money early. Google is one of a long procession," he said. "I think it's completely due to the weather," he quipped, saying people get hooked on Silicon Valley's nice climate.

"I don't think there's anywhere else you'd rather be," added co-founder Larry Page. "We're investors in Tesla, for example. It's pretty amazing you can drive an electric car with a 220-mile range. Those are produced here. I don't see those anywhere else in the world."

With the credit crunch spreading from banks with subprime loans to hallowed Wall Street firms and beyond, the U.S. government has been bailing out major companies, notably with an $85 billion loan to insurance giant American International Group. On Thursday, central banks from the United States, Japan, Europe, England, and Switzerland began pumping out money to try to contain the crisis.

Plenty of cash
Regarding Google specifically, though, Schmidt said the company is in a good position to weather the economic storm. He gave himself some wiggle room, in case things get truly disastrous.

"The company has a very large amount of cash in very, very boring and secure investments. That was the right decision then and especially the right decision now. As a company, we're fine," Schmidt said. "The things that could affect us is if it affected our customers...If this debacle caused a huge change in economic situation, that could affect us."

Google co-founder Larry Page
Google co-founder Larry Page Stephen Shankland/CNET News

So there are signs of cold feet among the advertisers from which Google gets the vast majority of its revenue? Tim Armstrong, Google's president of advertising and commerce for North America, wouldn't answer specifically.

"In general, it's something we watch closely, but we've seen in multiple cycles we've gone through (that) as companies get concerned about what they're spending and how they're spending, they move toward more accountable platforms," Armstrong said. "Some companies have shifted even more money to the digital landscape. We have one of the most transparent, accountable models in the digital landscape," and Google is working to bring its ad system to newspapers, TV, and radio too.

There goes another bubble?
Although he's bullish overall, Schmidt said the current investor excitement around new Internet companies--he deliberately shied away from the term "bubble"--is waning. "There's clearly some slowdown in Web 2.0," Schmidt said.

That's fine with co-founder Sergey Brin. "The worrisome disease states of Silicon Valley were the bubbles. When it's too easy to get money, then you get a lot of noise mixed in with the real innovation and entrepreneurship," he said. "Tough times bring about the best."

Going green and clean
One current reinvention of Silicon Valley is its adoption of green technology such as new solar-panel technology; Google itself has invested in several renewable-energy start-ups. Page pointed specifically to geothermal energy as technology that could help in many areas around the world.

Google co-founder Sergey Brin
Google co-founder Sergey Brin Stephen Shankland/CNET News

"If you dig deep enough, you get heat," Page said. "We need to make drilling cheaper," though when Google looked for start-ups trying to reduce the cost of drilling, it found only about 10 people working on the area.

Schmidt added that green and clean technology start-ups are in a business that resembles earlier phases of Silicon Valley entrepreneurship.

"Clean tech is a little more like the semiconductor business. The amount of capital required to do it is significantly higher than in the IT (information technology) businesses I've been involved with. The economics for clean tech may not be the same as the Google economics. There are higher capital costs, longer supply chains, inventory risks, more manufacturing, and also the need to build that expertise in companies," Schmidt said. And though manufacturing costs also can be high, science and research can be done in Silicon Valley, and manufacturing elsewhere, as happens with the computer chip business, he added.

Disclosure: Stephen Shankland is married to a Tesla Motors employee.