Cash Cow Disease: The Cognitive Decline of Microsoft and Google
ronburk.blogspot.com
ronburk.blogspot.com
The original purpose of the XBox was to kill the profit margins on Sony's cash cow, the playstation. It succeeded in that, and Sony is no longer threatening Microsoft across a range of areas. This was a wise strategic move, and profit was not the main motive.
According to Google's Q3 release, Google's annualized run rate on mobile is over a billion dollars. Android is a disproportionate share of that. Android is not a waste of resources for Google. It is a profit center.
As for Wave, it was a great experiment. It didn't work out. But lots of ideas from Wave are showing up in docs. I think it was a worthwhile risk to take, and Google learned something from it.
The one thing that I agree with the article on is that Microsoft's mobile strategy is severely broken. But the reasons for it are more complex than simply saying that Microsoft has a bunch of cash.
And now I'm going to try to forget having read that article.
What areas are those and why do we we think that spending billions with a "b" on Xbox to kill Sony's profits was a more effective defence of those areas than spending those same or fewer billions with a "b" making those areas more competitive?
And more importantly, are any of these areas Sony threatened actual cash cow businesses like Windows or Office?
Yes. Microsoft thought that Windows in the consumer marketplace was threatened.
Here was the theory that both companies had then (and maybe still have). A digital convergence between media and computers is inevitable. Whoever controls that platform will see a large growth in business. Whichever gets replaced will see a large drop in business. One of the keys to winding up in control of that platform was to get richer content for your platform. The key to that was to deliver a DRM system that Hollywood liked.
With that in mind take another look at Sony's WebTV, Microsoft's Media Center, the Blu-ray vs HD DVD war, and moves towards DRM from both companies over the last decade. The battle so far has been a draw. WebTV failed to dent the PC market place. Blu-ray won. Consumers don't like DRM, but a certain amount of it has been shoved down our throats anyways.
Incidentally I believe that Sony still thinks this could happen, and this is one reason that they are involved in the Google TV platform.
You're describing spending billions of dollars to become the dominant player in an uncertain business in the hope that someday down the road you will be able to recoup all your billions by enjoying a monopoly position. But (a) they have spent years on this and are only fighting to a draw, and (b) it's not clear that by the time one of them "wins" that the business will work the same way for media that it did for PC software or operating systems.
They are trying to replicate the business model for Windows, and failing, while meanwhile companies like Apple, Amazon, and Google are bringing entirely new business models to the marketplace.
As Mitch Hedberg would put it, that's a double-whammy.
In the case of the Xbox, Microsoft did both. It spent money developing the Xbox. It spent money investing in Windows. It also took lessons from the Xbox to make Windows itself a better gaming platform. And finally the cost of the Xbox approach was not as much as you'd think, because the division stood to recoup much of its costs.
How much did this cost Microsoft in the end? Less than you'd think, given the article. While it is true that costs were measured in billions and profits in millions, those costs were fixed development costs in the low billions, and profits recently have been quarterly profits in the hundreds of millions. I believe that at this point, over all generations of the Xbox, Microsoft is in the black. (But if they had invested their money differently, they could be further in the black.)
So what was the result in the end? I think they sliced something like a quarter off of Sony's profit margin. Almost for free. And Sony failed to execute on their strategy of having TVs replace PCs in the home.
Whatever you think of the merits of the strategy, Microsoft clearly thinks it works. They have used it repeatedly. For example look at Bing. And I wonder whether Google TV is an attempt to return the favor.
At the time many things are obscured by "the fog of war," however, in publicly traded businesses the wrong course is perfectly obvious after the fact by examining the result as measured by the return on investment in the stock.
If you wish to laud Microsoft's choices, carry on without me.
Microsoft's fundamental business problem is that they are on the wrong side of some disruptive innovations. And that is a very difficult business problem to face. No matter how competent the management, if a company is caught in that trap it is normal to see poor returns in the stock market. Read _The Innovator's Dilemma_ and _The Innovator's Solution_ for more on that.
Microsoft's problems are made more difficult by the fact that Bill Gates stepped down and left Steve Ballmer in charge. They went from having one of the most effective CEOs out there to someone who I think is a liability.
However, despite those factors, it is still possible to look at specific decisions and have opinions on how good or bad they were. And I think that Bill Gates' decision to start the Xbox was good.
I think it is possible and laudable to make up your own mind about specific business decisions. However, it isn't really possible for us to argue the point unless we can agree on a metric for measuring their efficacy.
From an empirical perspective, a theory ("XBox is a good decision") is only meaningful if it is falsifiable. I only have two metrics in my toolbox for starting a new line of business: The ROI of the specific business and the ROI on the stock overall.
However, not all discussions neatly map to empirical methods, and even then there are other metrics besides those two ROIs. If you are saying that there is some validity to this discussion that can't be measured quite so neatly, if there are these "strategic" considerations that require a leap of faith to appreciate, well I can't argue with you.
I'm not trying deflate your argument by suggesting it's faith-based. Most corporations make a lot of decisions that aren't falsifiable. Executives stand up all the time and say, "it looks bad but it could have been worse," and it's very difficult to naysay them because we can't run A/B testing and find out whether Microsoft-Xbox does better or worse than Microsoft+Xbox.
So... In the spirit of Christmas I will wish you well and thank you for sharing your opinions in a reasoned tone.
I think it is also important to pay attention to the timeline. The Xbox decision was made under Bill Gates. The Apple missteps were made under Steve Ballmer. There may be a reason for that...
You have to remember that this started back in 2000 (or so). Nobody had a clear vision of Netflix or Roku or Hulu.
I don't think they ever worried that Sony would take Office, but I think the fear was that they would move computing to appliances and take Windows revenue... now that fear is the iPad will do it.
Mobile wasn't exactly a hot industry 10 years ago. It's the job of a hundred billion dollar company like MS to make big investments in billion dollar markets, sure, but I don't think there's any denying Xbox was a miscalculation on MS's part.
See the market caps of Apple and MS now for lessons learned.
You make this sweeping statement but do not explain it beyond suggesting that a couple of details may be incorrect. Please provide justification that the central argument of the article is incorrect.
Go read the article carefully. The "details" I criticized include every significant supporting example offered. The fact that the article got them all wrong should make you suspicious of the grandiose reasoning that they were meant to support.
In short there is no evidence that having cash makes companies stupid. Companies with cash should be doing a certain amount of experimentations with it. They should experiment with projects outside of their core area. And the fact that it isn't obvious to you why they are doing something doesn't mean that they don't have a good reason to do it.
There is no black and white, and not every decision/project can be put in the same sack (even though lots of em are the result of what the article says)
If you think that btilly is not describing and then praising wealth destruction in that quote about Microsoft's Xbox business, please downvote this comment. Thanks.
HOW TO DESTROY WEALTH:
When I spend $100 on materials and labor, and I can -- at best -- sell the result to you for $80, $20 of wealth is destroyed. Why? Because the original $100 came from the creation of wealth equal to that, and I transformed that $100 into something that is now only worth $80. Literally, wealth was destroyed.
If you'd like a more concrete analogy, what Microsoft did is a lot like taking a a 1 carat diamond and smashing it into diamond dust. Only the arrangement of matter has changed, but in terms of wealth, the diamond dust is worth far less than the sparkling 1 carat diamond.
It's the same with the $100. As a $100 bill, it is worth exactly $100. Microsoft took that $100 and spend it on labor and materials. The matter in the world stayed the same. But the new arrangement of matter (an Xbox) was only worth $80 to the world. Microsoft destroyed $20 in wealth to the world.
This, in a nutshell, is what Microsoft did with the Xbox. Sony was doing something the world wanted with the Playstation. They were literally spending $100 and getting $120 in value out of it. That's what wealth creation looks like.
Microsoft did the opposite. Even worse, they did so in order to make it impossible for Sony to create wealth, too. In my book, reducing the wealth of the world for something so stupid, so small, as to "eliminate competition" is about the worst sin a business can do.
The literally billions of dollars of wealth destroyed at both Sony and Microsoft by the behavior of Microsoft has hurt the world in enumerable ways. For all we know, had the money been returned to shareholders, we may have made more progress on green energy. Or food production. Or water purification. Or cancer research. Or any of the other things we could have done instead of destroying wealth.
That is why the OP is so off base. And why the rest of you should upvote my comment like crazy. Wealth destruction is bad, full stop.
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Per the article, Xbox itself wasn't itself intended to be a large revenue stream.
It was (again, per the article) intended to protect other existing revenue streams of Microsoft from a competitor (Sony) that had been enjoying increasing success with gaming products, and a competitor that was then likely to use that success and that revenue to start competing against Microsoft in other arenas and other products.
And yes, Xbox does look to have been a wise move.
There have been more than a few comments over the years of companies having used press releases and roadmaps and deliberate leaks to freeze a market; to effectively remove the wind from a potential competitor's sails. Steps taken to change the business environment that the competitor is operating in.
BTW: the difference between tactics and strategy is analogous to the differences between sales and marketing. Confuse the two at your corporate peril.
Is the downvoting on some kind of logarithmic scale? I've lost something like 27 karma points, so clearly something is happening. Any ideas?
UDPATE: I suppose it could be that people can't read it anymore, and so the downvotes have stopped. Hard to say. My karma has started creeping back up though.
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In your example, no wealth is actually destroyed in the global sense, only relative to your bank balance (where you lost $20). Most people would call this a negative return on investment rather than wealth destruction.
The $100 you spent on labour and materials doesn't disappear into the ether - it is transferred to the people who worked for you and manufactured your materials. They could well do much more productive things with the cash than you and raise the wealth of the society accordingly.
Granted, Microsoft may not have used their resources particularly efficiently and there are indeed opportunity costs with their strategy, but who's to say that these resources would've been optimally used?
When wealth is converted into $100 for trade with someone (e.g. Microsoft, by buying Windows and Office products) and Microsoft takes that $100 and converts it into something that can only be traded for $80, it has destroyed wealth, even though the original $100 of money is still around (it paid for materials and labor after all). The "world" still has the $100 that Microsoft used to have, but instead of having $100 worth of wealth to trade it for, Microsoft has stupidly destroyed wealth and now there is only $80 of wealth to trade for.
So yes, the money is the same, but the wealth actually did decrease, by $20. Someone, somewhere is stuck with $20 and nothing to buy after the Xbox is sold for $80, thanks to Microsoft. Global wealth was destroyed; the amount of $100 bills stayed the same.
When I enter into a trade, the amount of wealth I gain is my utility for the item I am purchasing. The amount of wealth I lose is my utility for what I'm giving away. This is true whether we are trading money for goods, or baseball cards for other baseball cards. Money is just a convenient item that people want which can easily be used to keep score. But since we each value the item at a different price than the trade, we can both become wealthier when we trade. It happens all the time. It happens every time I purchase an apple from the store that the shopkeeper was not willing to eat, but which I am.
Let's go back to your example. In your example the person who spent $80 and was willing to spend $100 winds up $20 off wealthier than they were before. That $20 can be traded for some other item of sufficiently higher value, so all the money is likely to remain in circulation.
There are other people for whom the item was only worth $90. They are now willing to buy it. And each one that does winds up $10 wealthier. That's new wealth spread around the world.
The seller, in your example Sony, now winds up benefiting less from each trade. But they still benefit. And they get new trades that they wouldn't have made before. They might or might not wind up wealthier at the new price point. But even if they become less wealthy, the world as a whole is more wealthy.
Incidentally the figures are bigger than you indicate. According to Sony's stock report for Oct-Dec 2000, they were making $175 in profit per PS2 sold. I believe that the Xbox got them to drop the retail price by over $100. At that point Sony was still making a handsome profit. Just less handsome than it had been. (And in truth they didn't have to drop it that much, I think they were trying to make the Xbox too expensive for Microsoft to stick it out. At that price point they made money and Microsoft lost money on every single console sold.)
What you didn't get right was my example. I'm not talking about a situation where Microsoft is pricing a $100 product at $80. That does not result in wealth destruction, as you explained in detail. (It does result in less $$$ in Microsoft's bank account, though.)
My example was specifically about an Xbox that people were only willing to pay $80 for, and that Microsoft spent $100 to create. (Obviously, $100/$80 are illustrative, not actual figures.)
I will continue to assert that spending $100 to create a product that no one else values at more than $80 does, in fact, destroy global wealth. And that that is a Bad Thing, not "wise". You're free to continue to tell people the opposite.
You might not be making a profit up front, but there can well be profit from convincing a customer into a particular revenue stream.
If the company with products you describe, over many years, lost money consistently and it was not due to just "giving away" product at lower than the market would pay but was truly because the market would not pay the company's cost of production for the goods and services offered, then in that case, the company will have destroyed global wealth.
Happens all the time.
Later generations of the console had much better profit margins for them.
Cash cow businesses have a cash flow that they either return to investors or reinvest themselves. The only metric for success reinvesting the cash flow is whether the company's stock grows at a higher rate than investors could obtain for themselves if they invested the dividends in the market.
Microsoft has consistently failed this test. It doesn't matter whether their investments are purported to be defensive to protect their main businesses or offensive to develop new sources of cash flow.
Defending Windows from competition, for example, is only useful to the extent that it helps the company's stock grow. If the stock does not grow, it would be better to preside over a gradual decline while throwing off as much cash as possible so that investors could invest the remaining dwindling cash flow in better companies.
Google is an entirely different animal because their stock is much more attractive to investors. As long as their stock continues to grow, management are able to get away with much more "wasteful" attempts to get lightning to strike again. But the moment its stock plateaus, they will be subject to the same merciless metric from me, namely can they establish that they can manage the company's stock price such that reinvesting cash is superior to giving it to shareholders to invest for themselves.
If you, hypotetically, are managing a cash cow business, your first mission as a manager is to protect that business. You have to develop long term relationships with clients, spot early all the competition, grow organically your main business and control costs so you don't end in jail when the bad times arrive.
Here comes the first problem. Usually, in the business sense, innovation isn't something 100% new, is something 10-30% new. You know, the car still have 4 wheels but now it comes with a sensor that makes parking easier. The problem appears when your innovations start to compete with your main product. To compatibilize that stuff (think the way MS killed the IE team) requieres very large amounts of quality managment, something that is as scarce as high quality programmers. Think politics (hey, that is MY business!), incentives (you told me to control costs, else I would have done that!) or resistance to change (that will be a failure, it will make us look bad in front of X and Y), etc.
The proposition of the author is one of the classics propositions to sterilize change: to spin off. Make the change independent from the current managers, let them suffer their rigidity... but it may not be the better business decision to spin off somthing that will compete with yourself in 80% of the business.
The article just tries to (mis)analize a management problem without relevant expertise in management and from an investment point of view, and commits the usual mistakes that inexperienced managers make to a level that is doesn't even spark the usual insighful analysis from a engineering POV from the HN crowd.
Given their stock buybacks and dividends they may just be doing that...
Also, the criteria for investing money you've described is baffling. I thought return on invested capital was based on earnings, not stock price.
I think you are confusing sentiment with fundamentals.
"Meanwhile, at Google, the cash cow is search-driven advertising. That allows the company to encourage engineers to waste 20% of their time on "projects", like Google Wave."
Apparently he thinks that a) A company should only stick to its core product. (and some how this is innovation) b) If a company experiments it is "waste" and crushes other smaller companies stifling innovation (which is why twitter got crushed... oh wait)
Waste of my time reading this.
But the net result of cash cow disease is a waste of brainpower, and a decrease in useful innovation.
From what I can tell, there isn't as much of a contradiction as you imply, and the author is merely advocating a spin-off technique for investing in non-core innovation.
Was the pitch line of Twitter good enough for you to consider it 'useful' before it became what it is?
What the "startup" mentality has that the cash cow companies lack is the sink-or-swim pressures that create success or failure from new projects. Market pressures, in other words. Cash cow companies can afford to have many projects in limbo, sucking time and energies away from progressing towards projects that will ultimately succeed.
Because cash cow companies (by their very nature) haven't had to develop many successful projects, they tend not to be very good at it. Not only that, but cash cow company executives often become fearful of any line of development that may undermine the cash cow's market performance. When those two factors coexist, you're left with a company that's not only painted itself into a corner, but has also forgotten how to paint.
BTW, I think Twitter sounded like a simple idea on paper, but certainly not a stupid one. If a small group of people finds a passionate use case, there are likely others out there who will feel the same.
Cash cow disease costs _stockholders_ untold (sometimes actively buried in accounting maneuvers) dollars. Consider Xbox, which consumed billions (that's with a 'b') before eventually turning a profit of millions (that's with an 'm'). If Xbox had been spun into a separate company, then Microsoft _stockholders_ could have kept those billions (with a 'b') and let _someone else_ decide to invest billions in trying to jump into the game console business.
(emphasis mine).
1) Android is growing like wildfire-- contributes over a billion to revenue last year it was claimed.
2) Google App Engine serves over a billion page load a day.
3) Google Apps? I love it--
etc etc.
Spin-off is a technique, but I don't think it's the only way to go.
Who's going to seriously invest in an online word processor or spreadsheet with Google apps squatting on the territory? Just MS.
Google apps is still pretty basic and they're not operating under commercial conditions, which means potentially the customer is not getting what they actually want.
I think in some ways he's wrong, not operating under commercial pressures is not necessarily a bad thing, but Google and Microsoft have recently been extremely weak on following through on promising technology, abandoning projects instead of pivoting.
But in Google's case it can be especially toxic, it's then difficult for others to enter those markets as suddenly there's a free competitor. That's not healthy and on that I agree with the author.
But isn't this the grave we've dug for ourselves (as software developers)? We've pivoted the whole market so that software has no intrinsic value on its own?
Look at WordLens for example. Mindblowing technology. If you could only get it in a standalone piece of HW the markup would purely be a function of the HW cost. As it is, they started pricing at $5. And as ridiculously cheap that is I can see people saying, "Why isn't it 99 cents?"
At this point the horse is out of the barn. The value of your product is no longer the utility of the product, but rather how well advertisers can leverage your audience.
Although that makes me think, there's great advertising angles with WordLens since you know what words/signs people are looking at. I freaking went to sleep thinking about that product... sorry for the tanget. :-)
By keeping the cost lowish, they're discouraging immediate competition, but can still make a large profit if they market it right. And that video certainly looks like the right marketing to me!
For most people software has the value of a Happy Meal prize.
http://gigaom.com/mobile/augmented-reality-translations-word...
read the last line of the WordLens review... "A price cut would also help a lot." $5 is too much to pay for this app! A medium caramel frappucino from Starbucks is almost $5!
It just seems like over the past 20 years I've seen this evolution of programmers building intricate valuable product, to now it being generally viewed as disposable crap... even the best stuff. It only has value when coupled with HW or is a service.
There are 6 listed here: http://en.wikipedia.org/wiki/Office_suite
Google's word processor began life as a startup (Writely). It now has real-time collaborative editing from Google's Etherpad acquisition.
This was an acquisition.
2) Google App Engine serves over a billion page load a day.
Is it profitable? (I'm actually ignorant here.. not snarkiness).
3) Google Apps? I love it--
As do I, but not yet so much to pay for it.
Spin-off is a technique, but I don't think it's the only way to go.
Indeed, I'm not sure even the author is suggesting it's the only way.
The market incumbent strives upmarket and creates a performance oversupply (a surplus of features in excess of customer demand) which opens space below for a downmarket competitor to disrupt upmarket.
Maybe I was the one user that really enjoyed using wave, it is a great collaboration tool if you have between 2 and 8 people working on one thing. We wrote entire(60+pages) of design documents in wave. Its also a great note taking tool since for example in class, especially if you have many people working together on the same set of notes.
And now to get to the "20% of wasted time", this time is NOT wasted. It is an investment in the companies ability to innovate and also in their employees themselves. Without time to spend on other projects, one starves the creative mind, which is bad for the individual and especially bad for the company as a whole.
But Wave was not a 20% project, and that is probably one of the reasons it flopped, it got over hyped and over engineered in ways that would never have happened if it had been a 20% project.
Did you use it?
It is the only collaboration tool i know that works well on Windows/Mac/Linux. Yes it has its bugs, and I agree it could be implemented differently. But there is nothing like it, especially when many people want to edit the same document,
Real innovation is so radical there is no business case for it until you create demand for it.
That said, I do not totally agree with the article. Last time I tried out duckduckgo and blekko, google was still better. Googles word processing and spreadsheets are getting better, and the android phones seems to be the only alternative in the iphone class right now.
Poor, short-sighted leadership is the root cause of cash cow disease, not the profit itself.
No, but it makes space for the kind of complacency that stifles it. Also, having a successful product that's your cash cow makes it hard for you to develop the next-generation product that will kill it, specially if it does so by generating lower revenue.
Having huge amounts of cash also help you to make very bad product decisions. In order to learn what it learned with Wave, did Google really have to create such a monstrous flop? Couldn't it be a private beta or an internal tool? Couldn't it be a private beta? As for the original Xbox, I am not sure the only reason for its existence was to hurt Sony. It's very nice to say "we intended it to fail" years after you release a second-generation product. Microsoft was into games before, with Sega (the Saturn ran a version of WinCE). Did Microsoft really have to release the Kin?
But I agree with you on one thing: Microsoft is the Grand Master of using vaporware and half-assed products to damage the competition. Why would anyone consider the date Courier was "shown" be days before what was suspected to be the date Apple would announce its tablet? I also disagree with the article when it considers Google's 20% time a waste. Neither them nor we know what is the Next Great Thing that will make search-driven ads obsolete. They, like us, have no idea. That's why they encourage creative people to shoot in all directions: because one will eventually hit something big.
And yes, as of December 2010, he is wrong about Android. It's a huge success and telcos, AFAIK, pay Google a fair amount to use it (although open-source, you pay for some apps like Gmail and contacts and to use the Android and Google trademarks). I am not sure whether he would sound better in August.
If Wave has any pressure to be a successful application, it would have been integrated with plain old SMTP e-mail, and would possibly be eating Gmail's lunch by now.
Word is they did. Apparently they had some contractual obligation to do so.
And I don't think they intend for XBox to fail, but the goal wasn't to make profit in of itself, but rather to block and clear the way for their own living room initiative.
Why would anyone consider the date Courier was "shown" be days before what was suspected to be the date Apple would announce its tablet?
Huh? Courier was first shown in 2009. Way before the iPad was announced. If anything MS cleard the field for the iPad by announcing they were killing the Courier project.
It was shown days before an Apple event. Rumors at the time pointed to Apple releasing its tablet at that event. They didn't and watching the rushed CGI video of a concept that would never become a product being released right before a non-event was priceless.
> If anything MS cleard the field for the iPad
I wouldn't hold my breath
http://mashable.com/2009/09/22/microsoft-courier/
MS cancels the Courier on April 29th -- the same month the iPad came out (and actually a day before the launch of the 3G version).
There doesn't seem to be a FUD play at all here, except in the eyes of the most ardent consipracy theorists. RBanffy? :-)
As for the September 9th event, it was disappointing. Lots of people expected a "one more thing" moment with what would become the iPad.
So, it was right after an Apple event and right before a couple product announcements from Apple.
See http://news.ycombinator.com/item?id=1991950 / http://www.reddit.com/r/IAmA/comments/ej32l/we_are_the_hotma...
where the hotmail team seemingly can't understand the reason why someone would need IMAP support when ActiveSync exists
The essence though is that the Googles of this world have completely different sets of requirements to the startups of this world. Additionally the public has expectation of the Googles that are vastly different to their expectation on smaller, younger company's. This is not Google or Microsoft screwing up, but rather dropping products that don't meet their requirements or what they perceive are the requirements of the public/customers.
I am no fanboi, almost the opposite in fact as far as Microsoft is concerned, but I do respect the power of these companies to lead and to innovate.
I think the main popular tech giant that seems to avoid most of the consequences of the cash cow disease is Apple. Even though they are turning a profit comparable to microsoft's, you don't see nearly as many spin-offs or research departments or other leakages. Pretty much the only things that come out of Apple are its top-of-the-line products.
While this is scary for someone who would one day like to work in an industrial reaearch lab, they certainly seem to know how to make money.
And going from there to iTunes, to merging the iPod and mobile phone everyone carries around, to arriving at the iPhone and iOS, and then to expand the screen size to build the iPad doesn't represent huge deviations from their core business.
Ping might fit within what the OP describes though.
MS and Google effectively become angel investors in startups of their choosing. This seems like a rational way to spend the money. And given that Apple is dominating the consumer market, giving money back to shareholders indirectly means funding Apple.
Meanwhile, at Google, the cash cow is search-driven advertising. That allows the company to encourage engineers to waste 20% of their time on "projects"
If I remember correctly, didn't Paul Buchheit create Gmail and AdSense on his 20% time?
Google's 20% time is one of the best things Google has even done, and many profitable projects have already come out of it - GMail and AdSense to name two.
How can people who make a profits of innovation (yes, the shareholders he is talking about) ignore so much on the process that leads to innovation ?
This is why I believe there is a problem with the stock market : people who buy stocks don't have a clue, they just want to gather profits.
This only lead to shortsighted investment, pushing management to take "actions" to reassure clueless shareholders like him.
the simple fact is, when you have a cash cow, you got extremely lucky. it's really hard to duplicate that so you do your best to support it and keep it going by creating an ecosystem around it and expanding it wherever you can. see: gmail, google webmaster tools, MS SQL server and friends, and so forth.
his real gripe seems to be, though he may not realize it, that companies aren't operated as short-running events that generate a burst of money for shareholders and then fizzle out and die. he doesn't seem to like the long-haul approach that has kept e.g. MS in business for 30 years.
And here we have yet another comment purporting to argue against the article, and inadvertently proving it's main thesis.
Google should give the profits back to shareholders instead of trying to duplicate or continue what you yourself agree was success that was "extremely lucky".
The author isn't expecting lightning to strike twice at Google, and thinks they should put the money back in the marketplace where it can be spent wisely.
The market will fix the issue better than lectures.