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MetaBlogging via JoeBeda: This is an interesting thread on Google's position on it's engineer's "pet projects".

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There is a big difference between pet projects being permitted and being encouraged.   At Google it is actively encouraged for engineers to do a 20% project.  This  isn't a matter of doing something in your spare time, but more of actively  making time for it.  Heck, I don't have a good 20% project yet and I need one.   If I don't come up with something I'm sure it could negatively impact my review.
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