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That makes sense. But why diversity needlessly ? Isn't google's core search suffering ? Red Bull / Coke don't diversify but they are not exactly ecosystems eith

That makes sense. But why diversity needlessly ? Isn't google's core search suffering ? Red Bull / Coke don't diversify but they are not exactly ecosystems either.

saaaaaam 6y ago
You say that, but Coca Cola apparently owns more than 500 brands globally https://en.m.wikipedia.org/wiki/List_of_Coca-Cola_brands https://en.m.wikipedia.org/wiki/List_of_Coca-Cola_brands
vikramkr 6y ago
Coca cola is really diversified. Just because they're all drinks doesn't mean that they haven't diversified across sectors of the refreshment industry - it depends on how you define a core product. Google sees themselves as "organizing the worlds' information" which is a core that lets them do pretty much whatever they want. I don't know if they've done anything as offbrand as Coca Cola purchasing Columbia Pictures, which was a thing they actually did for some reason. And a counterpoint to red bull and coke is pretty much every other consumer packaged good company out there, like P&G or Pepsi, who are also the companies that might find themselves aquiring red bull once the founders move on. And in terms of diversifying needlessly - obviously, nobody doing the diversifying thinks its needless. Everyone is convinced that it's positive NPV, lowers overall risk, allows them to unlock "synergies," etc etc etc. There's been a swing away from that as conglomerates like GE are dismantling, but especially if you get financial analysists involved, it's nto hard to come up with a model that shows diversifying will lower your risk. And also, in case this isnt obvious, the most important thing here is more money equals good. If your bonus is based on hitting a sales target, why not acquire a company to boost division revenues and meet that target? And if you can make money (or think you can make money) by entering a new business area, why wouldn't you? Google doesn't see search as suffering or think their moonshots are the reason for that, otherwise they'd be redirecting investment towards saving their cash cow. They might be wrong, but they think this will make more money.
- foobar_ 6y ago
  You are right. This thinking is finance thinking as opposed to product thinking. It seems corporations are acting as hedge funds once they hit this stage of quasi monopoly / oligopoly. In reality it's just squashing the competition and increasing sales numbers. It's just a quirk of the law that it seems legal. I literally can't think of one silicon valley acquisition that actually ended in synergy.
  - vikramkr 6y ago
    They probably literally brought in hedge fund people to be their CFO. And it's not hard to hire McKinsey to make a slide deck backing up your strategy to acquire a company for whatever reason. Interestingly, actual hedge funds tend to not like companies that act like hedge funds. They want companies that are focused on one area since they think they're better at diversifying their portfolios than the management at these portfolio companies. They'd rather have fine grained control over what markets/products/industries/regions they have exposure to, and you cant do that with these messy conglomerates. That's why fiscal discipline being imposed at Google looked like separating business units and providing insights into the individual business units of the company, so even if investors in alphabet can't control what alphabet diversifies into, they can at least understand and evaluate it.
    - foobar_ 6y ago
      That's probably it, the CFO. I've mostly been sold on Jeremy Corbyn's ideas on worker cooperatives. I like open source based economies, they seem to encourage innovation and are fairly similar. The concept of hedge fund is completely fine as well. Messy conglomerates though! Ughh it's like a code refactor gone wrong 90% of the time. I guess I like my naive capitalism of build a product, sell, make money and keep everyone happy.

That makes sense. But why diversity needlessly ? Isn't google's core search suffering ? Red Bull / Coke don't diversify but they are not exactly ecosystems either.

saaaaaam 6y ago

You say that, but Coca Cola apparently owns more than 500 brands globally https://en.m.wikipedia.org/wiki/List_of_Coca-Cola_brands https://en.m.wikipedia.org/wiki/List_of_Coca-Cola_brands

vikramkr 6y ago

Coca cola is really diversified. Just because they're all drinks doesn't mean that they haven't diversified across sectors of the refreshment industry - it depends on how you define a core product. Google sees themselves as "organizing the worlds' information" which is a core that lets them do pretty much whatever they want. I don't know if they've done anything as offbrand as Coca Cola purchasing Columbia Pictures, which was a thing they actually did for some reason. And a counterpoint to red bull and coke is pretty much every other consumer packaged good company out there, like P&G or Pepsi, who are also the companies that might find themselves aquiring red bull once the founders move on. And in terms of diversifying needlessly - obviously, nobody doing the diversifying thinks its needless. Everyone is convinced that it's positive NPV, lowers overall risk, allows them to unlock "synergies," etc etc etc. There's been a swing away from that as conglomerates like GE are dismantling, but especially if you get financial analysists involved, it's nto hard to come up with a model that shows diversifying will lower your risk. And also, in case this isnt obvious, the most important thing here is more money equals good. If your bonus is based on hitting a sales target, why not acquire a company to boost division revenues and meet that target? And if you can make money (or think you can make money) by entering a new business area, why wouldn't you? Google doesn't see search as suffering or think their moonshots are the reason for that, otherwise they'd be redirecting investment towards saving their cash cow. They might be wrong, but they think this will make more money.

foobar_ 6y ago
You are right. This thinking is finance thinking as opposed to product thinking. It seems corporations are acting as hedge funds once they hit this stage of quasi monopoly / oligopoly. In reality it's just squashing the competition and increasing sales numbers. It's just a quirk of the law that it seems legal. I literally can't think of one silicon valley acquisition that actually ended in synergy.
- vikramkr 6y ago
  They probably literally brought in hedge fund people to be their CFO. And it's not hard to hire McKinsey to make a slide deck backing up your strategy to acquire a company for whatever reason. Interestingly, actual hedge funds tend to not like companies that act like hedge funds. They want companies that are focused on one area since they think they're better at diversifying their portfolios than the management at these portfolio companies. They'd rather have fine grained control over what markets/products/industries/regions they have exposure to, and you cant do that with these messy conglomerates. That's why fiscal discipline being imposed at Google looked like separating business units and providing insights into the individual business units of the company, so even if investors in alphabet can't control what alphabet diversifies into, they can at least understand and evaluate it.
  - foobar_ 6y ago
    That's probably it, the CFO. I've mostly been sold on Jeremy Corbyn's ideas on worker cooperatives. I like open source based economies, they seem to encourage innovation and are fairly similar. The concept of hedge fund is completely fine as well. Messy conglomerates though! Ughh it's like a code refactor gone wrong 90% of the time. I guess I like my naive capitalism of build a product, sell, make money and keep everyone happy.