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Eric Schmidt: How He Uses 5-Year Plans to Predict the Next $100 Billion Company

By Eric Schmidt · Investing · 1 min read

Schmidt says the 'build a product, hire a salesforce, sell to the customer' strategy is insufficiently scalable. You need something more clever. He always does 5-year plans to figure out what's coming.

Key Points

The traditional build-sell-charge strategy produces a reasonable business — but not a huge one
All the really big companies invented a new way to access information that didn't require that full cycle
Schmidt's prediction: crowdsource knowledge from users, learn it with ML, sell it back as a better service

Do a plan over the next five years. Try to figure out what your growth rate will be. Then try to figure out what a more scalable strategy would be.

Good But Not Good Enough

Schmidt: If you went to business school, you were taught — build a great product, organize a salesforce, sell it to the customer, charge a fair price, make the customer happy. Seems like that's what business is about, right?

That strategy is insufficiently scalable in a global market that's all interconnected. It'll produce a reasonable business, but not a huge business. It's just too hard to hire all those salespeople. You have to have a more clever strategy.

That strategy is insufficiently scalable. It'll produce a reasonable business. But not a huge business.

The 5-Year Plan

Schmidt: Many people talk to me about their new ideas. The problem is — they're good, but they're not good enough. The specific question I would say is: do a plan over the next five years. Try to figure out what your growth rate will be. Then try to figure out what a more scalable strategy would be.

Typical example — somebody builds some interesting app they want to charge $10 for. I ask — why couldn't you give the app away for free and upsell the users?

Do a 5-year plan. Try to figure out what a more scalable strategy would be.

What He Predicted 5 Years Ago

Schmidt: Five years ago I said publicly that the future will be apps on smartphones that use Google Maps, GPS, and do something useful. What I should have said was Uber. But I wasn't smart enough to say — people actually want a personal transportation system. That was up for Travis and his co-founder to invent in Paris.

Five years ago I said the future would be smartphone apps with GPS. What I should have said was Uber.

The Next $100 Billion Company

Schmidt: What do I think five years from now? Systems that use fast networks, powerful machine learning — but they're going to use the crowd to learn something.

I'll give you a trivial example. I know nothing about dermatology and I have a million dollars. I'm going to pay dermatologists $1 to categorize skin samples. Put that into my machine learning system. Run it through. Then I'm going to sell the same service to dermatologists — because my system will be more accurate than the individual diagnosis.

That model — crowdsource information in, learn it, sell it — is in my view a highly likely candidate for the next hundred billion dollar corporations. If I were starting a company, I'd start with that premise. How can I get my users to teach me, then sell to them a service that's better than their knowledge? It's a win for everybody.

Crowdsource information in, learn it, sell it back. That's a highly likely candidate for the next $100B company.