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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, g

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?

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?