> Spin "the other bets" out as a separate company.
Aha, glad somebody is seeing the same thing I'm seeing.
The problem with Google is that it is too large, and too successful. Their idea of having experimental projects is a good one, the problem is that Google makes so much money that they don't commit to them. They become too dilettante about them.
The fix is to do spin-offs, say keeping a minority stake at less than 20%. This generates capital for Google, gives them a share of the upside, but they don't have too much influence on the spin-off. So it's Death or Glory for the spin-off. They are forced to make whatever it is they invented work, or face extinction. There is a smaller management team, focussed on success.
This strikes me as a much better proposition than what we see at the moment, with Google just dabbling around pouring money into something they'll eventually get bored with.
You'd think that what with all the big brains at Google, someone would have thought of this. Maybe someone at Goldmans should make a pitch.
The issue is if they did this, what would happen is:
1) An enormous pile of cash would accumulate on Google's balance sheet.
2) The spinoffs would be subject to normal commercial rules about risk, rate of return and such.
3) The spinoffs couldn't be "brand Google." Which is a not-inconsiderable thing.
Couldn't they just be in the Google family? Like there's a startup I work adjacent to called aker BP. BP owns a 30% stake. But aker BP is a separate company that's publicly traded.
Right. Spin off a company and the spin-off now needs all those corporate functions that cause many developers to ask "What do all those people do?" It's not purely duplicative as such things scale with size to a certain degree. And it depends to some degree on how the spin off is structured but there's almost certainly a lot of incremental headcount and other expense.
Spin "the other bets" out as a separate company.
Capitalize it separately.
Literally just don't have it as part of the parent company.
The only advantage of having the company inside the "parent" increasingly becomes accounting tricks.
Concealing excess profits via shuffling them to the "other bet" is the biggest trick of them all.
All publicly listed companies actively hide profits from shareholders.
Who might want the capital as a dividend.