The 70/20/10 Rule
70% core business, 20% adjacent, 10% new ideas — the allocation that paid for every Google failure
- Difficulty
- Moderate
- Time to result
- ~months to results
- Steps
- 4
- Confidence
- 94%
Larry Page and Sergey Brin's resource-allocation rule, which Schmidt ran as CEO: put 70% of people and money into the core business (search and ads), 20% into adjacent businesses like cloud, and 10% into genuinely new ideas. The 10% bucket is where Google X and Google Brain came from — a team of ten or fifteen people whose machine-learning work generated tens of billions of dollars in extra profits over a decade. The point is that one 10% winner funds a very large number of cancelled projects, so you can afford to fail fast without threatening the core.
Origin
Larry and Sergey devised the split at Google; Schmidt implemented it as CEO and watched the 10% bucket produce Google Brain, which preceded even DeepMind and became the engine of Google's AI advantage.
Core principles
- 01Fast failure is only affordable if the core business is deliberately protected.
- 02One 10% winner pays for a decade of cancelled experiments.
- 03Adjacent bets (the 20%) are the bridge between today's revenue and tomorrow's.
- 04Cancelling a project should reconfigure people, not end careers.
How to run it
- 1
Ring-fence 70% for the core
Allocate 70% of headcount and budget to the business that currently pays the bills, and defend it from experimentation.
Pro tip Name the core explicitly — at Google it was search and ads, nothing else.
- 2
Spend 20% on adjacent businesses
Fund businesses one step out from the core that share your architecture and reach, like Google's cloud business.
Watch out Adjacent is not 'anything new' — it should exploit assets you already own.
- 3
Reserve 10% for genuinely new ideas
Put the last 10% into speculative work with no obvious link to the core, structured as its own unit like Google X.
Pro tip Google Brain was ten to fifteen people and generated tens of billions in extra profit over a decade.
- 4
Cancel fast and redeploy people
Kill the ideas that do not work, then move the team onto the next thing rather than punishing them for the failure.
Pro tip Schmidt's joke: the best CFO is one who has just gone bankrupt, because they will never let it happen again.
Watch out If being cancelled ends someone's career, nobody will take the 10% bets.
In the wild
Google X's first product was Google Brain, one of the first machine-learning architectures, built by a team of ten or fifteen people and predating DeepMind.
→ It generated tens of billions of dollars of extra profit over a decade, funding a long list of cancelled experiments.
Common mistakes
Treating the 10% as optional
Companies under pressure cut the speculative bucket first, which removes the only source of the next core business; Google protected it precisely because it was small.
Is it for you?
Best for
Leaders of scaling or large companies deciding how to split resources between today's revenue and future bets.
Not ideal for
Pre-product-market-fit startups whose entire headcount should be on finding the core.
From the transcript
“at Google we had this 72010 rule that Larry and Sergey came up with 70% of the Core Business 20% on adjacent business and 10%…”
“Google brin's team of 10 or 15 people generated 10 20 30 40 billion dollars of extra profits over a decade so that pays for…”
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Eric Schmidt