Hacker News Reader

Comment by theoneill | Hacker News Reader

Google has two classes of stock.

That's fine. But let's assume all 81% of institutions hold "less privileged" (likely non-voting) stock, it doesn't matter if they can't vote. They can vote with their checkbooks (allocate investments to other stocks) and that is bad for Google's stock price.

Your comment reminds me of how people set out a company to you know build a legacy, make some money, change the world, whatever. But then this MBA financials guy comes around and shows how with some book engineering you can get 5% more out of your company each year (by cutting costs for example) - and you agree with him. A year later you got 7% out and the company still stands. And then one says, this is good - lets keep doing this, final result - the company is gone 5years from now.

I'm not saying that cutting costs, trying to not pay the taxes and massage of investors is stupid and worthless. What I'm trying to say is that Entrepreneurs start out to build companies that do stuff. But sometimes they just get so much into intricacies of "little stuff that matters" that they forget the big picture.

So for each action (or at least each major action) an executive should ask himself, how does this make this company better at being a company that does stuff people want. And cliche answer - it will help it because shareholders will get more out of it in short term is one of the worst.

So can you please explain to me how lower stock price affects google's ability to do what it does?

The only thing I can think of is that with a flat or lowering stock price, employee options aren't going to be as attractive as they were which means that it will be more difficult to attract and retain the best staff.

Its not just that - if a firm needs financing stock price and its trend is of great importance for purpose of setting the interest rate and/or price of equity.

As far as staff goes - Google is well beyond the point where the stock options are the motivation for staff. Google's stock won't grow 100-1000x in next 10 years. It's impossible. Also working for Google today is not a risky activity anymore.

Today one would join Google: a) To experience the googly world and to leverage that experience in the future. b) To work with some of the best and brightest in the world and to use this experience as litmus benchmark for himself. c) To earn a competitive salary without much risk. d) To work on some project that the rest of the world is not aware of or deems to risky of an enterprise. e) To see how Larry & co. organized this miracle and to learn from it.

Google ain't the company it was anymore. It also never was anything like other "like" companies - Larry and Sergey made sure of it. And Larry & Sergey would IMHO rather run it into the ground than to make it another corporate monster like any other.

The pundits of course want to sell the story how Google will magically rise for 30% a year for some arcane reasons. What Larry did was refuse them alibi for such course of events. And this drop in stock price - I attribute to sell off from short term funds that were looking to cash in on Larry's take over - however they didn't analyze it enough to see what is coming.

Also regarding Google's opportunities. Google cannot grow on adsense anymore. If it wants to become an industry figure like IBM it will need to diversify (and that is exactly what it's doing for some time now). Google is not a marketing company. Or at least it doesn't want to be one. It wants to be a tech company - thats why it is betting massive stakes on green energy, robotic cars, artificial intelligence, etc...

Google's intentions seem clear to me - it is trying to become a GE, Bosch or Siemens of 21st century - and focus on quarterly results is not a way to go about it.

Unfortunately, when people give you money (aka investors), they have certain expectations and you have responsibilities to them. And Google needs the money that the public markets enables them to have to fund operations, hire, grow, innovate, etc.

Again, this doesn't mean Google should engage in short-term B.S. that Wall St trades in, but they will need to be accountable to shareholders in some fashion - probably through detailing their vision. And they can articulate that they're managing for the long-term which is a great and desirable thing. But just saying "give us money, we're really smart" is not going to cut it. That's part of the hassle of being a public company - you are answerable to others.

Emotional arguments about why MBA/finance guys are bad may get folks excited but the reality is that both parties need each other. Thinking they don't is myopic, naive or probably both.

I'm not arguing that MBA's are evil or something. I have just noticed that companies tend to overdo their financial engineering to a point where the company is a perfect financial machine but it is unable to produce anything worthwhile or innovate or whatever.

Entrepreneurs should treat finance as a tool not become a tool for the finance. What I mean is that sometimes you need to tell your accountant: Yes, what you propose makes sense from financial perspective - but it might severely cripple our vision and diminish our ability to reach our long term goals.

Nowadays to many treat finance as religion. And they don't even take a dump without their accountant.

If you are a stockholder in Google, the easy answer to this is that if you don't believe in this "long-term vision" barely articulated by Page then you are free to ask for your capital back (by selling your shares). As Page and Brin are still the majority holders of google's voting stock they can pretty much do whatever they want (although it might not be in their long-term interest).

Reply on news.ycombinator.com