Ruth Porat

In recent years, one of the most powerful people in the financial and technology worlds has been Ruth Parratt. She served as chief financial officer for Morgan Stanley and then the chief financial officer for Google and Alphabet. She now serves as president and Chief Investment Officer for Alphabet. I sat down with her recently in Davos to talk about what she's going to do in her new position and how she's going to invest more than one hundred billion

Is that right?

I am, And it's great to be here with you.

So you have three jobs, CFO, President, you get three salaries for that.

I think I'm doing okay, okay, So.

Everybody wants to talk to you here because you've got a lot of money. You've got over one hundred million dollars of cash to invest, so people want to see you. Why do you come to Davos because people are just going to be bombarding you give me money for this or that. Is it really worth the effort to slept all the way here or are you happy to come here and you actually meet people you actually want to see?

Well, I've actually been coming here since I ran tech banking at Morgan Stanley back in the nineties and was hunting for fees, and so I think it's sort.

Of become one stop shopping. You make the trip and.

Then you get to see people from Asia and Africa, Middle East, Europe, so it's just that one stop shop.

Well, let's talk about your background now that you mentioned it. Where did you grow up?

I grew up. I was born in England, mostly grew.

Up in California, California. Your father was a professor at Stanford or something like that.

My father actually was a Holocaust refugee.

So my father escaped from Vienna right after Krystal Knock and made it to Palestine high school education.

He ended up in enrolling in the.

British Army, fought in the Balla Bella Laman and in the army taught himself physics because he figured if he survived he needed something that somebody valued after the war that actually that work, that plan worked. He ended up getting to England, where I was born, and then eventually got to the United States, who was sponsored by Senator Kennedy. So he spent his whole career at Harvard and then at Stamford. So I mostly grew up in.

California, California, Okay, So you're in Stanford for a nice area, Silicon Valley. Why would you want to go to a business school at Wharton? Why did you go across the country to go to business school? And why did you want to go to business school to begin with? Why not be a physicist like your father?

Well?

I loved Wharton, so I'm not going to give you that. You know, I thought I was going to end up being First of all, I I got married. My husband was a lawyer on Wall Street, so I was commuting. But I thought that I would go into investment. I thought I'd go into consulting, and then I took this amazing merger's accounting class, kind of geeky, and decided I was going to go into mergers and acquisitions.

So ended up on the East Coast.

Okay.

So she ultimately became the CFO of Morgan Stanley. Okay, and many people thought you might go in the government someday, and you actually could have been the CEO of Morgan Stanley. Why would you leave the important world of finance for something less significant like technology?

Why would you do that?

You know, kind of right time, right place, Like when I was the CFO of Morgan Stanley. I started in that position January first, twenty ten, when James Gorman took over as CEO, and I think he's an all star CEO, absolutely amazing, great partner. And when we started, it was twenty ten, so after the financial crisis, but Morgan Stanley was still very challenged. You know, Moody's was going to downgrade the bank at one point. It was it was kind of shaky.

And I think that he and.

We, together the team, led this extraordinary kind of recovery and it got to the point in twenty fifteen where I was ready for the next chapter, and then I got this call.

Right of Google. It seemed okay, so all right, wade that.

Move before we get the good Well, you were at Morgan's Stanley when the great meltdown, the Great Financial Crisis of seven o eight occurred, and it is said that people thought that Morgan Stanley and Goldman Sachs and everybody else was going to go under. Were you living through that and did you actually think Morgan Stanley was going to make it at that time?

There were days I did not. It was bad.

So I was running financial institutions banking at the time, and probably the most meaningful part of my career was when Hank Paulson called and said, I need advice. I need some bankers here, and so I went and led a team that worked on Fanny Freddy and then AIG and those were very, very challenging days.

And coming out of it at the we.

Did Fanny Freddy and then we did AIG, put them into conservatorship, and I had some Morgan Stanley. John mackwa CEO at the time, and he said, okay, you're in charge of liquidity, figure out liquidity. And of course days before what very much was running out of liquidity, there was no way to get liquidity. In fact, one day we were trying to figure out what to do when I was on the trading floor and I'm like, can we maybe sell the chairs?

There were Herman Miller chairs.

I thought that might be a solution that was supposed to be funny, but it was actually.

Really scary at the time, and so no, it was hard.

But we did this whole series of different teams and it worked. You know, MUFG came in, they were an incredible partner. The government came in, we became a Fed regulated bank. But there were some very scary times and a lot of important lessons.

Okay, so you got that deal done.

Then presumably some headhunter called you up and said you should be the CFO of Google And did you how did you tell John Mack or James Gorman you were going to leave to be the CFO of a tech company?

Was that easy to do?

So twenty fifteen, Morgan Stanley was in a really good spot. I happened to be with Bill Campbell, an and iconic leader in Silicon Valley. He's been written about as the trillion dollar coach. He coached Steve Jobs, Larry Sergei, Sundar Eric.

So it's a privileged with them.

And at the time I said, you know, I'm ready for the next chapter, but the one thing I'm not going to do is be CFO again. We spent two hours in his living room and at the end, he said, okay, I heard you clearly not CFO, And I said exactly, and he said, okay.

So the best I've got the best idea for CFO of.

Google, And of course I immediately said, well, I hadn't thought of that one.

That one is interesting.

But did you tell him this would mean you wouldn't be able to work with private equity people as closely as you had been.

You know, somewhat. Times hardship in life is worthwhile.

So what's it like moving from the East Coast, where everything is finance and money, to the West Coast, where everything is technology.

Did you fit in right away?

And did you really know how to use all the computer things that they give you to use?

So it was it was It was pretty fun.

There were plenty of times where I would sit around in meetings and literally I would be googling terms, And at one meeting, Larry Page actually caught me googling terms and he kind of pointed that out to other people in the room, which was a little embarrassing. But I figured there were some things that I could do that they can do, and so it was a learning curve and my dad always he taught me at a young age,

But did you understand what they were talking about from the beginning, or did you have a special tutor that's taking technology for deedails I had.

Actually run tech Banking into Google Public, so I had a little sneak preview.

So today for people who are not experts on Google and Google Search, Larry Page really developed the page system I guess was called, and it was unique. But when he came to get the initial money in Silicon Valley, people said, well, there's plenty of search engines out here. They're like twelve or thirteen search engine companies, and so people didn't think it was anything so unique.

What turned out to be.

So unique about the page system that it made Google such a powerful company.

I actually remember those days because I was one of the people who said, why do we need It was actually the eighth search engine? Why do you need the eight search engine? And I was at Morgan Stanley at the time nineteen ninety eight running banking, and our research analyst, Mary Meeker and iconic analyst, pulled her team together and said, you know what, Let's do a test. Let's look at all the search engines. Let's do queries and see speed

And that has been the ethos all along.

We still to this day have more than one hundred product innovations every quarter. The whole idea is continue challenging ourselves about how to make the product better, more relevant, faster. And what's extraordinary sitting where we are today is how searches evolve. So back then it was ten blue links. Whoever's old enough in this room to remember ten blue links, That's what it was.

And then it went to.

Image search, voice search, and now multimodal search. If I want your tie, I can take a picture of your tie, and then I can just I can lens it, and I can find a place to buy your tie. So this whole evolution of search just keeps extending the runway for a search.

So it's very different obviously today than it was.

I suppose I do a Google search on something. Maybe I shouldn't be doing a Google search on or.

Something not that you ever do.

I wouldn't do that, but I just theoretically can somebody from Google, an officer like you look up what I've searched.

No, you cannot, absolutely, yeah, protected right or protected.

Even if the government comes along.

We do not look at what you search. Can go into incognitumo, but we do not look at what you search.

Okay.

So the company a long time was spelled was called Google, and Google used to be spelled differently. Why did they spell Google that way as opposed their way it was originally spelled, which was e L. Did they not know that was spelled differently?

Well, there are a couple of stories around this.

So one of the stories that I think is true and fun is that one of the early venture checks actually wrote it that way, so they went with it.

Okay, so why did Google is the brand name that's working very well, companies making a lot of money and so forth, But why did you need to go to alphabet?

And who came up with that name?

So Larry and Sergei had a vision about kind of the next iteration, and there were a lot of different things that they were investing in, the whole spirit of which is you want to make sure you're investing for long term, investing for the future. And in the earliest days, what they did is they created something called X. It was the moonshot factory within Google Google X, and it gave birth to things like Gmail, I mean made it was really relevant for all of the type of innovation

So it used to be.

When Google was started, you had what was called twenty percent time, So for twenty percent of your time, you could do.

Whatever you wanted.

Theoretically it might be helpful at a company, but it wasn't supposed to be necessarily, so you still have twenty percent time or they go away.

Well, it was actually a little more structured than that. The goal was if you had some great engineering idea and you wanted to launch a new product, you could do it in one of two ways.

You could leave or you could be told.

You know what, in twenty percent of your time, why don't you go experiment with this and see if.

You can grow it.

So rather than having great ideas constantly leaving, the view as let's nurture the talent, let's give people these growth opportunities, let's give it a go. And so that's what the twenty percent time was.

Any twenty percent time product ever get to the market.

Well, a Gmail is not an inconsequential billions of users. Google Brain came out of that. It's our core part of our AI business, and then we've continued to evolve it, so it moved over to become ax.

Weymo came out of it.

So there's quite quite a bit and quite a bit of features and applications.

Think of waymo. Are we going to have driverless cars in our lifetime?

Well, I welcome everybody to come to San Francisco because you can actually hail a way Moo in San Francisco, hop in it and get where you want to go.

And it's pretty remarkable.

Have you done that?

Absolutely brilliant safe.

It's so safe that the most fascinating part is within about fifteen seconds people are bored because it's so safe there, like they.

Realize, you know, we don't need a helmet or in the nuget's safe?

Right?

Do you need a helmet with many drivers on the road.

So for a young woman that's watching this or a young man, and what are the recommendations you'd have to get ahead? And the finance world technology we're is it be smarter than other people, be nicer than the other people, be harder working.

What is it that takes to be successful?

Well, there's no substitute for hard work, because the hard work actually gets you smarter enough the learning curve faster. So most certainly that's one of them. I think the other I've already said chart your career work for somebody who's going to take a risk on you and give you runway. But very importantly, we need to do that

Be air cover.

And the other is keep learning and keep growing. And when you're plateauing, my line was what's my highest and best use and don't do it on a specific timeline, but keep evolving and if you go to the right people, they'll keep opening doors and take those doors.

And then finally, use your voice.

You have a challenge that many people would like to have but they don't have, which is you've got over one hundred billion dollars of cash, and so are you going to invest that in private equity firms, or are you going to do new technology? What are you going to do with one hundred billion dollars more than one hundred billion dollars of cash? And you know, have you thought about that? You have people coming up to you all the time with great ideas for that cash.

We do as you would imagine. So, look, we're continuing to invest in the business. There's a lot of extraordinary upside in the business. And then we do make investments and acquisitions, so do all of our peers. There's a lot that's exciting going on in the world, and so we're looking across the board. Starts within the business, then it goes to investments and acquisitions, then obviously return to capital through a not in consequential share repurchase program.

Let's talk about artificial intelligence.

Artificial intelligence has gotten a lot of publicity in the last year or so, and open ai has got an enormous amount of it, and they have an affiliation with another technology company.

I can't remember the name of it. I've heard that another one.

But do you have your own kind of open ai company or do you do it all internally? And what do you do to compete with open ai? And this other technology company.

So we've had We've been infusing product at Google with AI for more than a decade. In fact, billions of people today are benefiting from AI across our products. It's benefiting what you see in search, in maps, and commerce and YouTube. You know, I just mentioned multimodal search, the ability to search with your camera, when you search for your kids and photos, that's AI. So AI has continued to be a way to enhance what the product experiences.

What's the excitement of work in technology in the Silicon Valley? Is it even more exciting than working in finance? Or not quite as exciting?

But okay, it's hard to believe it's more exciting, ed.

I mean, we're living in the most extraordinary time with AI. Bill Gates just said that I completely agree. Engineers who've been at Google since inception are saying that this is the most exciting time in computer science in our lifetime, which always strikes me as profound because Google's done okay, And what's extraordinary about it really goes to building on this decade of innovative work in AI. And so where are we now.

We're at the What we're doing.

Is we're addressing some of the most profound social challenge is with AI in ways that are transformative. So to give you an a couple of examples, I think that one of the extraordinary places for all of us, and we've heard a lot about it.

Here over lunch, is healthcare. And part of the reason is.

It's the ability with AI to aggregate so much data that you can actually have a level of diagnosis that is better than what specialists can do. So one example breast cancer. Back in twenty fifteen, Google had a breakthrough in detection early detection of metastatic breast cancer. One in seven women will be diagnosed with breast cancer. I was one of those. I've had breast cancer twice, so when I heard about this, I did the only rational thing.

With food scarcity.

You can improve crop yields by looking at pest issues, in forming. We're looking at so many different ways that AI can make a difference on the most profound issues. One last one, because it's you asked, am I excited about it? Yes, It's better than even finance, climate change, you know, SOS crisis alerts extraordinary. We've seen the impact of buyers and flooding, two hundred and fifty million people a year affected by flooding. But with AI, we can

On climate change to be realistic about it.

These are things that you think that AI can really make us make more readily, make us able to solve climate change. Is at your point you think we can.

Well, there's both adaptation and mitigation.

So around climate change we have a whole other set of efforts going on. So, for example, one of the major sources of emissions is what you see right out the window here start stop from cars. We have something called Project green Light which streamlines that so you don't have the start stops. We have something else that looks at planes. Major source of carbon footprint are contrails, what many of us think are the beautiful white plumes off

You've been public about your breast cancer. You've talked about it, written about it, and so worth why did you go public about it? Many women say they don't want it to be known that they might have breast cancer. Maybe that's right or wrong, But why were you so willing to be public about it?

It is a really personal thing. And when I was first diagnosed, I didn't want to talk about it. I was at a bank one a few women. You know, I was bald, and it's like, it's not what you want.

To talk about.

But I got to the point where I realized, in this day and age, if you get the right care, actually these diseases are manageable, and the scariest part is not knowing. And so to me, it was important to actually make it clear this is manageable, you can.

Get through it, and to actually be a resource for people.

So for many women, you're a role model. You have a successful career in finance and technology. You were on your first husband.

Right yeah, yeah, and hanging on hanging on right. So and you have three kids, and so you've done it all.

You've had it all your you know, have a successful career, successful marriage, healthy, happy kids. Can you tell us something that doesn't make us so feel jealous about you? Because you're I mean here, you know everybody can't be as good as you, So make us feel that everything isn't perfect for you? Leaving aside the breast cancer, so that everybody else doesn't feel like they're not going to be able to live up to your standards.

Oh man, other than other Thandians. Look, I think that.

One of the most important lessons I learned early in my career. You know, as a woman in banking, there weren't many of us. It wasn't the easiest environment. There were a lot of men I've now gently decided to call blockheads, but you know, they were worse than blockheads, and they made it difficult, and you learned to be resilient. The one thing is I was going to outlast them, and that would be the joy that came from it.

Unfortunately, there are obviously a lot.

Of extraordinary men at Morgan Stanley. There weren't enough senior women in the day, and there are more now. And so I learned to chart my career. I went to people who would take a risk on me, and I said, what's my highest and best use? And they opened doors that I didn't know existed. And to me, that's the most important is those hard day's bad lessons. I just chalk them up to being lessons, so I don't actually record them.

So what do you do when you're not working on technology, being a wife, being a mother, You have a tennis player, or you're a golfer. What do you do for relaxation the content you have time for relaxation, Well, I.

Kind of merge things because there's nothing more joyful to me than going on hikes with my kids or bike rides with my kids, and so it's you.

Know, it's a lot of that.

Are your parents alive now?

They are not?

And did they live to see your success before they passed away?

They did.

My mom, actually, when I was a young kid, said she was a psychologist, and she said what's really important for women is have your own identity and a career outside of them home.

She told me that when I was eight, my little sister was six.

For some reasons, he thought that's the time you need to send that message.

So I'm grateful to her for that message.

Your father did he ever say this is better than being a physicist what you're doing.

My dad was pretty remarkable, you know.

The tale end of that story about his journey from no high school education to a PhD in a career at Stanford is he said education is your passport for freedom and so the only point he impressed on us over and over was really focus on education, keep opening doors, and take risks. If he didn't take the risk he took to get himself out of Austria to teach himself physics, he wouldn't have made it. And he was so grateful

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