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This reminds me of a talk I watched with Peter Thiel and Eric Schmidt. I know Thiel is controversial, but he was well-meaningly digging at Google for running ou

• defertoreptar 7y ago
  The only way he doesn't have a point is if Google thinks its company is significantly undervalued, in which case buybacks are smart. Their CEO, Sundar Pichai, gets a huge stock-based compensation, so you have to factor in how management has a large incentive to grow the stock value, but not necessarily in the long term (making buybacks desirable regardless of whether the company is actually cheap or not).
  • navigatesol 7y ago
    >Their CEO, Sundar Pichai, gets a huge stock-based compensation I'm as cynical as they come, but I'm skeptical that all people at these levels are that driven by their compensation. They are ultra-wealthy, and forever will be; a few extra million here or there isn't anything compared to what they stand to lose in wealth and reputation in the face of negative public sentiment. But I could be wrong.
    • ergothus 7y ago
      > I'm skeptical that all people at these levels are that driven by their compensation. All of your arguments make sense...except that we see people at these levels take actions to increase their compensation so frequently, even at the risk of their reputations. I don't know about Pichai personally, nor can I explain WHY the mega-rich are so interested in getting richer when it can't possibly change their day-to-day or even long-term comfort, but there does seem to be a lot of evidence suggesting they are motivated by that.
      • eitally 7y ago
        I don't disagree, but in the case of Pichai specifically: https://www.bloomberg.com/news/articles/2019-05-29/google-ceo-turned-down-a-big-stock-award-after-lavish-payouts https://www.bloomberg.com/news/articles/2019-05-29/google-ce...
      • johannes1234321 7y ago
        For some it is a competition. If you are on Forbes' top 10 it can be a sport to "beat" others on that list and rank up. Some (see Bill Gates) see that that competition is of little value and look for ways to spend their fortune in "sensible" ways.
        • lonelappde 7y ago
          It's silly to say that the person who spent decades scheming his way to to the top that list at the expenses of an entire industry, is not "seeing the value in that competition”. He just mellowed out when he got old and his wife convinced him.
      • cameronbrown 7y ago
        The rich are interested in getting richer because it's fun. And there are real benefits for thousands of people to growing an organisation. It's easy to justify.
    • Spooky23 7y ago
      I don't know Sundar Pichai, but evidence suggest that folks of similar means make many decisions based on personal financial outcomes. They may not "need" the money, but it's a good scorecard.
  • ergothus 7y ago
    > if Google thinks its company is significantly undervalued, in which case buybacks are smart Honest questions here, as my stock understanding is fairly limited: Why does a company care if it's "undervalued"? How does a buyback actually change that valuation? (doesn't the market cap remain the same after the purchase?)
    • theonemind 7y ago
      No expert, but as a first guess, with their "insider information" (as the first party), if they believe the market undervalues them, they also expect a future correction (their price rising when they show revenue/market share/whatever proves the market wrong) and then they profit.
    • Klathmon 7y ago
      I think the idea is that if they think they are "undervalued", they can buy the stock back now for X and sell it for >X later to raise more cash for when they need it.
      • nostrademons 7y ago
        Or just that they can buy more shares in the buyback for the same amount of cash. All of the per-share fundamentals will go up more in that case, because there are fewer shares outstanding. Eventually, if the stock is truly undervalued, the market will realize it as shares are taken off the market and ownership is concentrated among those who recognize the value of the business, and the stock price will pop upwards.
    • johannes1234321 7y ago
      Buying the stock is a way for distributing money to their share holders. Similar to a dividend.
      • andrekandre 7y ago
        it would be interesting if companies that size would distribute more to their employees one fantasy calculation i do a lot is google-profits / total-google-employees or apple-profits / total-apple-employees and you get something like half a million dollars a year (60 billion dollars of profit divided by 132,000 apple employees for example) in the above scenario, work a few years at a company like google or apple and your a millionaire basically... what would happen to the economy if suddenly there was hundreds of thousands of millionaires? how many new businesses and ventures could be started? would it in the end be good or bad economy? what about the company if it only had a few billion of liquid assets on hand instead of hundreds? would it make a difference?
• ralph84 7y ago
  Once you get to Google or Apple scale, you’re essentially a government and run into the same problems with central planning that governments do. It’s absolutely the right move to return the money to shareholders and let them reallocate it to more economically promising endeavors. That doesn’t make a statement about innovation stagnation on the whole, it just reflects the reality of diminishing returns to scale.
  • dmix 7y ago
    Why not buy some companies and get some proper entrepreneurs back into the mix of management? I can't remember any recent major Google acquisitions. No mega company really has to have internal innovation. And I doubt the pretend internal startups ala skunkswork with an unlimited budget and extensive runways are a real replacement for innovation popping out of the marketplace among the bodies of a hundred other failed/acquihired startups.
    • cameronbrown 7y ago
      > Why not buy some companies and get some proper entrepreneurs back into the mix of management? I can't remember any recent major Google acquisitions. Firebase (acquired in 2014) seems to qualify as semi-recent given it's become a massive product line in a few years.
      • ethbro 7y ago
        Buying best of breed solutions that integrate with their cloud is as good an ever-present option as I can think of. It adds value to their cloud, is responsive to actual customer desires, and generally seems like a bargain at the right stage (a Google-supported tool being more valuable than a third-party GCP tool, even with Google's questionable dedication to longevity). Just don't make the IBM / MS mistake and think adding more PMs to previously successful company is a good idea.
    • Shounak 7y ago
      Notably they also recently acquired Looker
• bduerst 7y ago
  Thiel is also on a jingoist bend against Google, so I would take whatever he says with a grain of salt. I saw him on CNBC claiming that Google was unpatriotic for dropping the government project Maven (machine vision for millitary drones) and that Google was also a Chinese sympathizer - despite there being no evidence and also the fact that you can't even use Google in China. The same Google employees that revolted against and killed Maven also did so against project Dragonfly. Thiel is on the board at Facebook so this could be part of his strategy for stirring the pot.
  • baobrain 7y ago
    He went way beyond "Chinese sympathy", accusing Google of treason and claiming they're infiltrated by the Chinese. https://www.axios.com/peter-thiel-says-fbi-cia-should-probe-google-9846a042-e689-49bc-bdc7-595988ce5d8c.html https://www.axios.com/peter-thiel-says-fbi-cia-should-probe-...
    • deleted 7y ago
      [deleted]
  • lunchables 7y ago
    I think most people would agree he has an agenda, but your post is just an ad hominem attack against Thiel and doesn't address the original poster's question at all.
    • bduerst 7y ago
      It is true that my comment is an ad hom attack, but as it speaks to the motive (and potential hypocrisy) of the speaker, it is not fallacious. It also speaks to the question as to whether or not Thiel has a point, hence the idiom "take with a grain of salt".
      • buzzerbetrayed 7y ago
        The fact that it speaks to his motive is exactly what makes it fallacious. People’s motive’s have nothing to do with whether or not what they are saying is true or false. They are either speaking truth or not. Motives can explain WHY they are saying something untrue. But not IF what they are saying is untrue. You are saying that Thiel has a reason to lie. But you aren’t addressing whether or not he is actually lying. Instead of attacking what he said, you are attacking him.
• Jun8 7y ago
  Here's an HBR article that addresses some of the misunderstandings in maligning buy back programs: https://hbr.org/2018/03/are-buybacks-really-shortchanging-investment https://hbr.org/2018/03/are-buybacks-really-shortchanging-in.... They comment that: "... when we look at CAPEX and R&D as a percentage of revenue ... over the past 25 years, we see that the overall investment intensity of S&P 500 firms, while quite volatile on a year-to-year basis, has been rising over the past decade, and is now near peak levels not seen since the late 1990s." If you had $25B to start a company what idea would you tackle?
  • bjelkeman-again 7y ago
    I wouldn’t start one company. I would take a leaf out of Y Combinator’s book, and start funding lots a small startups, as well as advising them. I’d would attempt at investing in such a way that I create an ecosystem of companies that can learn from each other and support each other. I’d focus on climate resilience. Lots of current practices will be disrupted by changes we are already seeing. Easy? Probably not, but I think it could work well.
    • johannes1234321 7y ago
      If Y Combiantor is doing that already why should Google? They can observe the development and then buy the winner (with a premium) If Google/Alphabet does too many investments which fail shareholders will cry.
    • nostrademons 7y ago
      Google's done that repeatedly with Google Labs, GMail Labs, Google X, Area 120, department-internal projects like Search Demo Days, 20% time, Google Ventures, giving high-performing employees a charter to work on whatever they want for a couple quarters, etc. It never seems to work, and it never seems to work for the reasons outlined in The Innovator's Dilemma. Big companies are held hostage by their customers. A new company needs to a.) find new customers b.) be hungry and c.) have total freedom to configure the market around oneself. None of these exist within the cushy environment of a big company - a.) is contradictory with maintaining Google's brand image, b.) is contradictory with continuing to pay the people involved in these efforts, and c.) is contradictory with Google getting first dibs on the spoils of these efforts.
• sharcerer 7y ago
  I think Google invests a lot. Look at CapitalG, GV etc. And now within Google itself, 2 projects which I think are aiming to become platforms: Stadia, Fuschia. Personally, I have been disappointed with Google in the AR front. Haven't heard much about investments/ acquisitions. OTOH, Apple has been acquihiring small teams, investing in microLEDs etc. Though, overall Alphabet's investments are much diverse.
  • MegaButts 7y ago
    You think Stadia is viable considering the lag? It's obviously worthless for competitive or even serious gamers. I am skeptical it will be enticing for casual gamers.
    • beefalo 7y ago
      I think it will be really enticing for people that want to play sports games but don't want to invest in a console. Those customers are also not going to be the ones concerned about latency.
      • izzydata 7y ago
        It has no real advantages to buying a console because you still have to buy the games individually as they explained. It is no different than financing a gaming console except you could eventually pay it off unlike Stadia.
        • cameronbrown 7y ago
          imo Stadia needs to switch to a Netflix style subscription-model to be financially viable (from a consumer standpoint)
          • beefalo 7y ago
            I don't think it is out of the realm of possibility and I see them taking the same path as Netflix currently. They are launching with big games that people know, but they need to get people hooked with new exclusive games, and a bunch of cheap stuff so they can have the "Play 10k games for $X/month" marketing tagline.
• jammygit 7y ago
  He elaborated on the idea in Zero to One. Amazing book and highly relevant here
• friendlybus 7y ago
  That stagnation can be argued to exist in google. But I'd argue Elon and bezos (up until recently) have been pushing tech hard. The DARPA robotic challenges and biochemical engineering and ml that keep chugging along in the background will provide competitors to goog if they sit on their web advertising model forever.
• pyb 7y ago
  It's hard not to acree with Thiel here. We only need to look at Elon Musk to realize that there are still plenty of opportunity for moonshot investments. What does Elon know that Google as a whole doesn't?
  • adventured 7y ago
    > What does Elon know that Google as a whole doesn't? It's not what he knows per se, it's what he does, it's the source of his motivation for being and doing. It's that invention and innovation is most often driven by individuals - whether acting together or in solitary - in pursuit of something that matters to them. You saw this throughout the industrial revolution. You saw it at Bell Labs and Xerox PARC. You saw it with regards to the individuals that pushed the Internet and tech universe forward, from Ted Hoff to Dennis Ritchie to Tim Berners Lee. It wasn't a giant corporation and team of 100 people that created Doom and Quake. It was a tiny team of highly motivated people doing something that mattered to them. That same conceptual story frequently occurs throughout modern history. Elon Musk desperately wanted (wants) to build Tesla and SpaceX. Steve Jobs cared about Apple as though he were maniacal about it, like it was his true love. Who at the very top of Alphabet/Google cares about anything they do there that much? I haven't seen any evidence that there is anyone at the top of their organization that fits that.
    • georgewsinger 7y ago
      Weird that this is downvoted.
      • deleted 7y ago
        [deleted]
      • tim333 7y ago
        I think maybe the downvoters feel the Google guys do care. Though it seems more >We are excited about… Getting more ambitious things done. Taking the long-term view. Empowering great entrepreneurs and companies to flourish. that they are into empowering the organisation rather than being into particular bits of tech like iPhones or rockets.
• skybrian 7y ago
  This argument relies on a fallacy of binary thinking: either you have ideas or you don't. It's perfectly fine to say that you have lots of investment ideas, but they don't add up to needing $100 billion to implement them. Especially when you are earning more cash every quarter.
  • ehsankia 7y ago
    Exactly, just because you have a lot of cash doesn't mean you should force investment into things that may not make sense. It's like if you had a huge buffet and force fed yourself until you threw up. If anything, Google probably gets flak for having too many ideas and being all over the place. People keep saying they need more focus, yet when they do that, they get accused of not having any more ideas...
    • siruncledrew 7y ago
      Investors and board members would be way more wary of how the company is run if Google decided to do drastic things outside the scope of their core business (like Google Amusement Parks) for superfluous reasons, which would further make them lose money is the stock sinks. At Google’s size they can invest a lot in R&D and product iterations, but because they are so big the innovation seems way less drastic relative to their size. Put it this way, if I put a new motor, deck, and paint on a small boat, it would seem like I did a lot, whereas if a giant cruise ship did the same thing, it wouldn’t really carry the same impact to outside viewers.
      • ehsankia 7y ago
        I mean, at the alphabet scale, they have pretty wild stuff like waymo, loon, verily, calico, wing, etc. Even at Google, there's pretty cool tech too like stadia, soli, duplex, and so on.
  • Bluestrike2 7y ago
    There are opportunity costs and risks associated with holding onto excess cash. Continuing to hold that cash sort of implies at least some difficulties in making a decision on what to do with it. Doing nothing, or just sticking the cash in short-term securities, has a cost of its own. That's not the same as thinking the company has no ideas, of course. But for companies like Apple and Google, those ideas often aren't necessarily capital intensive ones--at least relative to the size of their cash holdings--and when they're successful, can wind up exacerbating the problem by generating...more cash.
• neonate 7y ago
  Here's a section of that debate: https://twitter.com/garrytan/status/1133942478501888000 https://twitter.com/garrytan/status/1133942478501888000
• jartelt 7y ago
  They already get a decent amount of flak for investing a lot of money in their Other Bets. Imagine how much shareholder animus there would be if they started investing 10s of billions more?
• tus88 7y ago
  How about just spending a few tens of thousands making Gmail fast again?
  • drusepth 7y ago
    What makes you think that'd only cost tens of thousands?
    • tus88 7y ago
      Well, for starters it used to be fast (so we know it can be done and they have the source code to reference), so I imagine a couple of months of dev time (tens of thousands?) would be enough to make significant improvements.
      • cma 7y ago
        Regression testing alone would probably cost over a million.
• sytelus 7y ago
  When you invest large sums into a new long term project it gets in as capex in your quarterly results, significantly altering your balance sheets and missing analyst expectations. There are tons of ambitious projects companies can invest in including medical research (ex. cancer medicines), communication networks (ex. ubiquitous wifi), transportation networks (ex. flying cars, underground tunnels), space (ex. astroid mining, zero-g manufacturing), robotics etc. Most of them will need a tremendous amount of capital and very long term vision. Typically stock market would support projects with low to medium capex and high payouts in near to medium term. Everything else would tank your stock. There is no dearth of interesting challenges and ambitious ideas but the way we have setup public companies, quarterly results and analyst expectations of continous growth simply doesn't allow big capital expenditures.
• crazygringo 7y ago
  It's a silly dichotomy. Investors want companies to invest where it makes competitive sense, in the amount that makes competitive sense, and return a dividend (or do buybacks) for all the cash beyond that. Investors only invest for the dividend/buyback ultimately -- if it didn't exist, every stock would be valued $0. I think it's perfectly clear to anyone that all of the tech Big 5 are plenty profitable enough to innovate plenty and also provide dividends/buybacks. The criticism is perhaps valid for a company 1/100th the size of Google, or maybe even 1/10th... but certainly not current Google-size.
• outside1234 7y ago
  Most academic research found that, overall, that dividend paying companies actually have more total return than non-paying companies. https://www.thebalance.com/why-dividend-stocks-outperform-non-dividend-stocks-357353 https://www.thebalance.com/why-dividend-stocks-outperform-no... Also, is buying back stock really any different than a dividend? I would say that it is, but only in the sense that most of that buy back money gets transferred to employees in stock grants.
  • mehrdada 7y ago
    s/employees/executives Power-law distribution in stock-based compensation.
• sova 7y ago
  Personally, I love and welcome this new era of StagnationTalk because it brings to light much of what is true in the Holocene: time limited, organizations persist with the teleology that they serve the existence of the organization, and not a higher purpose, that we are limited with information in our transactional decision-making and need to step-up the grid/infra with more intelligent digestibility of fresh information. innit interestin
• H8crilA 7y ago
  It is always better to return excess profits to the shareholders than to do stupid things. If there's nothing interesting to buy - you don't buy. I know we're deep into an amazing 10 year bull run and it seems like the more crazier things you buy the better you will fare, but things change. There will be buying opportunities in the future. And when I say buy it also means invest internally in new technology. And this has nothing to do with company's size.
• forgotmypw 7y ago
  It's not that they've run of ideas, it is that they've run out of market. There's only so much resources you can pull out of the set of people browsing the web. That set's size has stabilized. Its resources have been divided between largely online shopping and (indirectly) advertising, and the flow paths have been laid down and also stabilized. There's only so much new market every year, and there's only so much they can compete away from the other players, who are also in a similar position.
  • mantap 7y ago
    Google's problem is that if they enter existing industries, they attract the ire of competition regulators. Google could eat entire industries if they wanted to, but there would be hell to pay from the EU and US regulators. So they are stuck trying to innovate.
    • codeisawesome 7y ago
      I wonder how Google could help with solving climate change... perhaps that would be a very profitable problem to solve without regulators trying to stop them (because public goodwill)
• killjoywashere 7y ago
  what if they're forecasting a recession? Would it not be good to have cash on hand to start spending when the bottom appears close?
• vizzah 7y ago
  So just do stock buybacks (as Alphabet increasingly does) without admitting there's nothing else to invest in.