This was a terrible way to run a company then and now. It leads to an incoherent product strategy. It doesn't provide the persistence required to pursue strategies that take many years to eventuate. Google succeeded in spite of this culture, not because of it; they found an immensely profitable niche, which enabled them to hire huge amounts of incredible talent, which covered up their cultural problems.
Also, this is a great example of a recurring problem: successful organisations venerate their culture, so that every part of it is assumed to be essential to their success until very painful experiences prove otherwise.
Another example: Linux developers thinking that managing patches by email is the best approach ever, because Linux is dominant.
[Disclaimer: I work at Google.]