11-02-2010 COMMENTARY - NET WORLD - WHY G…

COMMENTARY - NET WORLD - WHY GOOGLE CAN SAY NO TO CHINA

ESTHER DYSON

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Usually, disclosure statements go at the end of an article, but let me start with
mine. I sit on the board of Yandex, a Russian search company w ith roughly 60%
market share in Russia, compared w ith Google Inc.'s 20% or so. I am also an
investor in and adviser to AnchorFree Inc., the company that offers Hotspot Shield,
a publicly accessible virtual private network that allows users to keep their
browsing private, w hether they are concerned about thieves stealing their banking
details or about governments monitoring where they surf. W e have about one
million users monthly in China, out of seven million w orldw ide. And I sit on the
board of 23andMe Inc., a company co-founded by the w ife of Sergey Brin, the co-
founder of Google. So, I have a variety of interests in the topic of Google's recent
moves in China.

In the beginning, I supported Google's presence in China.

My fundamental belief is that every time a user gets information, it reinforces a little part of the brain that says,
"It's good to know things. It's my right to have information, w hether it's about train schedules, movie stars, or
the activities of the politicians who make decisions that affect my life."

If you can ask questions about some things but not about others, eventually you start to w onder about that fact
itself.
Google's (and my) hopes that it could help liberate China look a little naïve now.

Of course, censorship is not a big secret in China. China employs approximately 30,000 people as censors. They
have names and faces, and they may negotiate with a publisher about a particularly sensitive topic. They are
less likely to negotiate with bloggers, because there are so many bloggers, but the government reportedly does
train bloggers in how to post in support of government policy, and if you are lucky you can get a job doing the
government's bidding.

So why has Google made a fuss and threatened to walk out of China? The answer probably stems from a
combination of--or rather, a changing calculus around--business interests and values. The censorship issue has
long grated at Google (Brin, w ith his Russian background, is reported to be especially hostile to ce nsorship), but
the company could argue that transparency about censorship was better than not serving China at all.

The censorship, how ever, has been getting w orse. Perhaps the initial argument w as wrong: Exposing Chinese
censorship has done little to reduce it. Many Chinese support government censorship. They see it as a w ay to
maintain civility and order. They know that their government is fragile, and they consider criticism harmful rather
than cleansing.

At the same time, w hile China represents a huge market in the ever-receding future, it has not been an
especially lucrative market for Google so far. Baidu Inc., the indigenous Chinese rival to Google, benefits in many
ways both from government support and from home-team nationalism among users.

More generally, China probably looks less appealing to investors now than it did a few years ago, no t so much
because of the Chinese economy as a whole, but because of constraints on the ability of any foreign entity to
make serious long-term profits.

This grow ing disillusion was already present w hen a wave of cyber attacks on Google forced the compa ny to
reassess its entire China strategy. There are certainly other w ays that Google could have handled the issue--for
example, by capitulating to the Chinese government's various requests. That would certainly not have
comported w ith Google's public values--and it would probably have been a bad business decision as we ll.

When you go into a situation like this, you alw ays have one option left, which is to w alk aw ay. If you cannot do
that, you have no negotiating power. But if you do have that option, you must be ready to exercise it.

That is what Google has done in China. The company can't go back to the old situation. Nor is China likely to say,
"W e w eren't hacking you...and w e promise never to do it again."

So, while Google is unlikely to re-enter China for the foreseeable future, the company has improved its
negotiating position in whatever other disputes it might have in the future (and it has w on support from the US
government).

What can Google do now? My friends at AnchorFree want Google to support Hotspot Shield in some form or
other, although Google's exit from China might be support enough.
Hotspot Shield is one of the best ways of scaling the w all to peer outside the locked-down Chinese Internet and
use sites such as Tw itter, Facebook, and, of course, Google.com (as opposed to Google.cn).

Like Google in the past, AnchorFree may operate more effectively by being discreet, without loud support from
Google or other foreign interests. Its w ebsite is often blocked in countries such as China (and many in W est

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Asia), but there are usually other w ays to obtain the softw are. Google, too, may be blocked, but the re are ways
to get to it for those w ho are determined. The next steps are up to the Chinese users themselves.

In the end, China know s that it can't make the Internet airtight. So, someone in the Chinese government is
probably having regrets.

It's tempting to predict how this will end. But I think it w on't end. As within Google, so w ithin China: decisions
are made, but not everyone agrees with them. There's a conflict between business interests and moral values.
The tug-of-w ar w ill continue for the foreseeable future. But in this little battle of a long w ar, transparency has
won.

©2010/PROJECT SYNDICATE Esther Dyson, chairman of EDventure Holdings, is an active investor in a variety of
start-ups around the w orld. Her interests include information technology, healthcare and private aviation and
space travel.

Respond to this column at networld@livemint.com.

EMAIL

netw orld@livemint.com

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