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From later in the article: "Mr. Page said he looks to Berkshire Hathaway Inc., the insurance-focused conglomerate run by billionaire Warren Buffett, as a model

From later in the article: "Mr. Page said he looks to Berkshire Hathaway Inc., the insurance-focused conglomerate run by billionaire Warren Buffett, as a model for how to run a large, complex company, [...] " I recall hearing a guest on the a16z podcast say something along the lines of 'high-growth tech companies eventually become big boring banks,' but I can't remember who said it. Is there a notable quote to this effect?

scott_karana 11y ago
Your quote might be correct, but I think Berkshire Hathaway is anything but a boring bank. Do you read Buffet's yearly letters? They're great. http://www.berkshirehathaway.com/letters/2014ltr.pdf http://www.berkshirehathaway.com/letters/2014ltr.pdf
- coliveira 11y ago
  What makes Buffet a financial genius is exactly the fact that he likes boring companies, as he himself acknowledges. So, there is certainly a lot to be learned from Berkshire Hathaway, but while it is not a traditional bank or insurer, it is most certainly a company that only invests in boring, profitable businesses.
  - tim333 11y ago
    They have the occasional less boring ones. Netjets fractional jet ownership and BYD electric and other cars for example.
- nickpsecurity 11y ago
  Thanks for posting it. That was the report on a business I actually enjoyed reading. It has personality and good advice embedded in it. If I was a shareholder, this particular quote would have me feeling quite assured: "Indeed, we are far more conservative in avoiding risk than most large insurers. For example, if the insurance industry should experience a $250 billion loss from some mega-catastrophe – a loss about triple anything it has ever experienced – Berkshire as a whole would likely record a significant profit for the year because of its many streams of earnings. We would also remain awash in cash and be looking for large opportunities in a market that might well have gone into shock. Meanwhile, other major insurers and reinsurers would be far in the red, if not facing insolvency." Smart.
  - hartator 11y ago
    Not if the government will buy you out if you are facing insolvency. Taking more risks is actually the right thing to do in this environment.
    - mercer 11y ago
      I suppose that depends entirely on what you consider to be 'the right thing to do'.
    - nickpsecurity 11y ago
      Good point. You can bet that popped into my mind when I was reading it: some of my own friends who saw it coming lost everything because they pulled their clients out of the bad investments. Which got bailed out and became the good investments. (sighs)
    - maxerickson 11y ago
      The government buyout was not a great deal for AIG shareholders: https://en.wikipedia.org/wiki/American_International_Group#Liquidity_crisis_and_government_bailout https://en.wikipedia.org/wiki/American_International_Group#L... The credit facility was secured by the stock in AIG-owned subsidiaries in the form of warrants for a 79.9% equity stake in the company It might be good for executives and other employees to take excess risks, but it probably isn't good for shareholders, they generally lose a substantial amount of their investment in an emergency bailout, most of it in a bankruptcy.
      - rodgerd 11y ago
        > The government buyout was not a great deal for AIG shareholders: Good. The legitimate use of taxpayer money in propping up for-profit organisations should be to prevent a broader social problem, not to guarantee the ROI of investors.
    - nostrademons 11y ago
      FWIW, we actually saw this in the last financial crisis, where Berkshire Hathaway funded a $2B bailout of Goldman Sachs that he exited for a healthy profit. A bailout is basically just redirecting the assets of the healthy part of the economy towards a part of the economy that has lost confidence, oftentimes at a profit (the government profited from the TARP bailout). The government does this using its power to tax. Berkshire does it through the power of Americans' insatiable demand for candy, sugar-water, freight transport, and peace of mind. Having large cash reserves just lets it participate in these deals where you would otherwise need a state-sized actor, much like how the Rothschilds owned much of 19th-century Europe.
walshemj 11y ago
Berkshire Hathaway is a totally diferent type of company (conglomerate ) to an advertising company. They where v popular in the 60/70's until the wheels came of and corporate raiders starting breaking them up.
- nostrademons 11y ago
  Google is also a technology conglomerate. Of the big emerging business lines at Google - Android/Play, GFiber/Loon, YouTube, self-driving cars, Nest & home automation, enterprise Google Docs, and AppEngine/Cloud - YouTube is the only one where the money comes from advertising. This is a major shift from the Eric Schmidt years; Eric would always say "Our next billion dollar business is our last billion dollar business." Larry's plan is clearly to own a major portion of the technology industry going forwards, using capital from Google's first successful business (Search) to fund direct investment in new technologies, the same way that Buffett used the float from his insurance company to acquire additional cash-generating businesses. It remains to be seen how successful he is at this; tech is very different from the brick & mortar businesses that Buffett got rich at, and small startups often have strong advantages over well-funded incumbents. But "Google is an advertising company" hasn't really been true, in terms of corporate strategy, since Larry took over.
  - msabalau 11y ago
    To a certain extent, one could imagine a tech conglomerate would be easier to manage than a traditional brick and mortar conglomerate, and least for the digital offerings. It's a lot easier to wind down less successful initiatives, and redeploy creative, skilled people to work that is more valuable. No sunk costs in production lines, inventory or call centers.
    - nostrademons 11y ago
      The problem - at least in my mental model, and it's possible I'm wrong, it's often dangerous to bet against Larry - is that new technology businesses often require a closeness to individual early adopters and speed of decision making that is impossible to achieve in a big company. The factors that make new tech businesses successful are often very subtle, and they're discovered only through long periods of direct interaction with users. When you're an engineer at Google, you don't have the freedom of direct-messaging an individual user, saying "Hey, what do you think? Got any suggestions for us?" and then immediately making the change and pushing it to production. In my experience, that seems to be essential for new tech products to catch on. (With the possible exception of Apple, who seem to be able to convince the consumer that they really want an Apple product regardless of what that product does. Even that lustre seems to be fading.)
dekhn 11y ago
no, it's "big companies ultimately become real estate managers"

scott_karana 11y ago

Your quote might be correct, but I think Berkshire Hathaway is anything but a boring bank. Do you read Buffet's yearly letters? They're great. http://www.berkshirehathaway.com/letters/2014ltr.pdf http://www.berkshirehathaway.com/letters/2014ltr.pdf

coliveira 11y ago
What makes Buffet a financial genius is exactly the fact that he likes boring companies, as he himself acknowledges. So, there is certainly a lot to be learned from Berkshire Hathaway, but while it is not a traditional bank or insurer, it is most certainly a company that only invests in boring, profitable businesses.
- tim333 11y ago
  They have the occasional less boring ones. Netjets fractional jet ownership and BYD electric and other cars for example.
nickpsecurity 11y ago
Thanks for posting it. That was the report on a business I actually enjoyed reading. It has personality and good advice embedded in it. If I was a shareholder, this particular quote would have me feeling quite assured: "Indeed, we are far more conservative in avoiding risk than most large insurers. For example, if the insurance industry should experience a $250 billion loss from some mega-catastrophe – a loss about triple anything it has ever experienced – Berkshire as a whole would likely record a significant profit for the year because of its many streams of earnings. We would also remain awash in cash and be looking for large opportunities in a market that might well have gone into shock. Meanwhile, other major insurers and reinsurers would be far in the red, if not facing insolvency." Smart.
- hartator 11y ago
  Not if the government will buy you out if you are facing insolvency. Taking more risks is actually the right thing to do in this environment.
  - mercer 11y ago
    I suppose that depends entirely on what you consider to be 'the right thing to do'.
  - nickpsecurity 11y ago
    Good point. You can bet that popped into my mind when I was reading it: some of my own friends who saw it coming lost everything because they pulled their clients out of the bad investments. Which got bailed out and became the good investments. (sighs)
  - maxerickson 11y ago
    The government buyout was not a great deal for AIG shareholders: https://en.wikipedia.org/wiki/American_International_Group#Liquidity_crisis_and_government_bailout https://en.wikipedia.org/wiki/American_International_Group#L... The credit facility was secured by the stock in AIG-owned subsidiaries in the form of warrants for a 79.9% equity stake in the company It might be good for executives and other employees to take excess risks, but it probably isn't good for shareholders, they generally lose a substantial amount of their investment in an emergency bailout, most of it in a bankruptcy.
    - rodgerd 11y ago
      > The government buyout was not a great deal for AIG shareholders: Good. The legitimate use of taxpayer money in propping up for-profit organisations should be to prevent a broader social problem, not to guarantee the ROI of investors.
  - nostrademons 11y ago
    FWIW, we actually saw this in the last financial crisis, where Berkshire Hathaway funded a $2B bailout of Goldman Sachs that he exited for a healthy profit. A bailout is basically just redirecting the assets of the healthy part of the economy towards a part of the economy that has lost confidence, oftentimes at a profit (the government profited from the TARP bailout). The government does this using its power to tax. Berkshire does it through the power of Americans' insatiable demand for candy, sugar-water, freight transport, and peace of mind. Having large cash reserves just lets it participate in these deals where you would otherwise need a state-sized actor, much like how the Rothschilds owned much of 19th-century Europe.

walshemj 11y ago

Berkshire Hathaway is a totally diferent type of company (conglomerate ) to an advertising company. They where v popular in the 60/70's until the wheels came of and corporate raiders starting breaking them up.

nostrademons 11y ago
Google is also a technology conglomerate. Of the big emerging business lines at Google - Android/Play, GFiber/Loon, YouTube, self-driving cars, Nest & home automation, enterprise Google Docs, and AppEngine/Cloud - YouTube is the only one where the money comes from advertising. This is a major shift from the Eric Schmidt years; Eric would always say "Our next billion dollar business is our last billion dollar business." Larry's plan is clearly to own a major portion of the technology industry going forwards, using capital from Google's first successful business (Search) to fund direct investment in new technologies, the same way that Buffett used the float from his insurance company to acquire additional cash-generating businesses. It remains to be seen how successful he is at this; tech is very different from the brick & mortar businesses that Buffett got rich at, and small startups often have strong advantages over well-funded incumbents. But "Google is an advertising company" hasn't really been true, in terms of corporate strategy, since Larry took over.
- msabalau 11y ago
  To a certain extent, one could imagine a tech conglomerate would be easier to manage than a traditional brick and mortar conglomerate, and least for the digital offerings. It's a lot easier to wind down less successful initiatives, and redeploy creative, skilled people to work that is more valuable. No sunk costs in production lines, inventory or call centers.
  - nostrademons 11y ago
    The problem - at least in my mental model, and it's possible I'm wrong, it's often dangerous to bet against Larry - is that new technology businesses often require a closeness to individual early adopters and speed of decision making that is impossible to achieve in a big company. The factors that make new tech businesses successful are often very subtle, and they're discovered only through long periods of direct interaction with users. When you're an engineer at Google, you don't have the freedom of direct-messaging an individual user, saying "Hey, what do you think? Got any suggestions for us?" and then immediately making the change and pushing it to production. In my experience, that seems to be essential for new tech products to catch on. (With the possible exception of Apple, who seem to be able to convince the consumer that they really want an Apple product regardless of what that product does. Even that lustre seems to be fading.)

dekhn 11y ago

no, it's "big companies ultimately become real estate managers"