
Google parent Alphabet ushers in ‘fiscal discipline era’ - e15ctr0n
http://americasmarkets.usatoday.com/2016/03/24/google-parent-alphabet-ushers-in-fiscal-discipline-era/
======
AReallyGoodName
Something to ponder.

Engineer hiring at the big silicon valley firms usually consists of 3 intense
rounds of technical interviews by peers and a huge amount of background checks
and screening.

Management hiring at the big silicon valley involves wining and dining with
millions on the table and it has seen some spectacular examples of hiring MBAs
with absolutely no past CEO experience -
[https://en.wikipedia.org/wiki/Carly_Fiorina#Hiring](https://en.wikipedia.org/wiki/Carly_Fiorina#Hiring)

MBA degrees are by far the most common masters degree, 126,214 new MBAs
graduating each year. Link -
[http://www.theatlantic.com/business/archive/2013/01/there-
ar...](http://www.theatlantic.com/business/archive/2013/01/there-are-
officially-too-many-mbas/266880/)

Meanwhile the number of new engineering graduates across all disciplines per
year is 126,194. Link - [http://www.computerworld.com/article/2508899/it-
careers/obam...](http://www.computerworld.com/article/2508899/it-careers/obama
---we-don-t-have-enough-engineers-.html)

This is leading to a cycle. Small startups run by the hard to hire engineers
smash the competition. They then get established and stagnate, they stop
hiring new engineers because it's too expensive (whilst hiring the more common
MBAs for millions) and they stagnate because of this.

Google came out of nowhere in the 90's as an innovative company of engineers.
They became huge. They're now going into MBA focused stagnation mode just like
HP, Yahoo, IBM and about a hundred other examples.

~~~
carlosnunez
> Management hiring at the big silicon valley involves wining and dining with
> millions on the table and it has seen some spectacular examples of hiring
> MBAs with absolutely no past CEO experience

Not quite. Hiring for high management positions is usually much more selective
and fickle, and the risk for people in those positions to succeed is much MUCH
higher than what most engineers need to deal with (hence the significantly
larger compensation delta). I've never been to B-School, but if I had to posit
a guess, they do do a better job of teaching people how to run existing
companies in various scenarios than what most engineers learn over their
career.

(Also, keep in mind that the biggest value of going to an expensive B-School
is the high value networking opportunities. This means that the school you
choose matters A LOT.

A lot of people get useless MBAs. :/ )

------
ChuckMcM
Yeah, pretty much as expected [1] :-) A good friend of mine was at Cisco when
this mindset hit really really hard. He said everyone learned to ask "Is what
I am working on Core to Cisco's business?" because if the answer was "no" it
meant you were on the way out until the answer was "yes". It certainly helped
inject tension into the employees at Cisco.

[1]
[https://news.ycombinator.com/item?id=10037511](https://news.ycombinator.com/item?id=10037511)

~~~
AnthonyMouse
It seems like business schools just don't teach how companies that are _that
big_ should be run. They teach all this stuff about externalizing costs and
internalizing benefits, but when your company owns the entire market (or even
half of it), you don't have to worry that much about how to internalize
benefits and prevent free riding because you're going to get the bulk of the
benefit from anything good that happens regardless.

So you see these hundred billion dollar companies still doing highly
inefficient things to internalize benefits as if they have a hundred
competitors because that's what people have been taught, when they should be
looking to the classic AT&T monopoly's example with Bell Labs.

You have the cash for a hundred moonshots and you're cutting things that could
be the future of the company? Why?

~~~
greglindahl
... because none of them are going to succeed? That's an excellent reason to
cut.

Just look at Google's financials. If they "sacrifice the future" and nuke
everything other than search and search advertisements, they'd make a LOT more
profit.

~~~
spc476
Xerox PARC invented a lot of stuff we now take for granted, network computers,
the GUI, object oriented programming, etc. And it wasn't cheap, and almost all
of it has _nothing_ to do with the core mission of Xerox.

But _one_ invention that popped out of PARC did---the laser printer. That one
invention paid for Xerox PARC _many_ times over (maybe a hundred times over---
PARC spent a few million but the laser printer pulled in a few billion).

Fundamental research is expensive in the short term, but it pays off
handsomely in the long term (unfortunately, longer than Wall Street will allow
it seems).

~~~
booop
> maybe a hundred times over---PARC spent a few million but the laser printer
> pulled in a few billion

Difference being Xerox made billions after spending a few million on research.
Alphabet/Google on the other hand have poured in billions into what are now
called their 'Other Bets' over the past two years and despite what impact
they've made the revenues have been dismal and growth was stagnant last year.

~~~
AnthonyMouse
You're looking at it on the wrong timescale. Two years is nothing. This is,
again, the failing of modern business school and investor logic. If you spend
a billion dollars a year to produce something that will go on to generate ten
billion dollars a year in profit forevermore, but produces nothing for the
first five or so years, looking at it on a two year timescale is clearly not
going to produce an accurate picture of its long-term profitability.

------
dm8
Isn't Google X that works on risky long term bets? And once projects graduate
they are folded as new companies (or bets) within Alphabet.

My understanding was that Google X is modeled after Google's own founding.
Long term, research project that was successfully commercialized within 5-7
years (I believe Google started as a research project in 96).

So once companies graduate in stable/mature businesses, shouldn't they be hold
to any mature/public company standards?

~~~
smaddox
Yeah, because splitting R&D into short term and long term commercial impact
worked so great in academia. /s

The valley of death is directly caused by this mindset. R&D in the middle
doesn't get funded because either side thinks it's outside of their scope.

------
simplemath
>Her appointment was broadly seen as an effort to restore confidence in
investors who were alarmed by increased spending and speculative investments
in new technologies.

I hate that this is how the world is.

------
apalmer
i am not sure i understand how this is supposed to work, if we are being
really logical in the financial discipline shouldnt like 75% of alphabet
subsidiaries shut down?

~~~
iaw
If you're familiar with the Time Value of Money [1] you can compare the
discounted future revenue streams from the non-profitable subsidiaries to
their current cost of operations (vs. a sale price).

Boston Dynamics is, conservatively, more than 5 years off from having a
product that anyone will purchase (the marines don't want their bulldogs).
Other non-profitable ventures may have more near-term revenue streams that
outweigh their present cost of operation.

Hope that makes sense.

[1]
[https://en.wikipedia.org/wiki/Time_value_of_money](https://en.wikipedia.org/wiki/Time_value_of_money)

~~~
TheOtherHobbes
>you can compare the discounted future revenue streams from the non-profitable
subsidiaries to their current cost of operations (vs. a sale price).

Not really. CFOs like to think they can. But the idea that anyone can estimate
the revenue stream of a company five years - _five years_ \- away from
profitability is just entrail reading.

No one can see that far ahead. And in Google's case, with the ad industry in
serious danger, it needs to give itself as many options for medium term
survival as possible.

Relying on Google X or a cloud service to deliver isn't enough, IMO.

~~~
discodave
Cloud service (assuming you mean AWS/IaaS/PaaS competitor) is realistic since
AWS is doing $10B run rate right now taking money out of legacy vendors like
nobody's business.

------
InclinedPlane
[https://youtu.be/JBJh6U3Kv90?t=5](https://youtu.be/JBJh6U3Kv90?t=5)

Seems like Google is all grown up now. How long until they are perceived by
the public as being as stodgy and gross as IBM and Microsoft? The big downside
here is that despite all of Google's amazing stock of talent they've been a
remarkably dysfunctional company for most of their existence. They are almost
genetically incapable of having real products (defined as things consumers pay
for) or real customer relationships. They are absolutely horrible when it
comes to investing in their businesses enough to see them to full maturity.
Youtube and google docs (or drive or whatever they're calling it) could easily
be multi-billion dollar businesses on their own, but their featureset, market
stance, customer relations, etc. have been so poorly improved year over year
that instead they merely stumble forward.

A lot of this comes about because of google's corporate culture and business.
Google revenue is basically all ads from google search plus some backbone
networking (ISP/peering) business and then a tiny sliver of "other" (all of
their "products"). Not only is there no priority for ramping up their other
product lines into real businesses they are making so much money so easily
from their main business there are no consequences for failure. So at google
there's basically the main stuff that makes a ton of money and then everything
else is a romper room of unseriousness and inconsequentiality. Add on to that
google's quote flat unquote management structure and their median 1-year
tenure and you have to really wonder how the business even functions at a
basic level.

In some ways they look like a towering monument of unassailable talent and
market advantage, but in other ways they look like a teetering house of cards
ready to fall over with the next stout breeze. And it seems like so much of
the tech industry is in similar shape. No, I don't mean that it's all going to
collapse tomorrow or anything like that, I just mean that it's shot through
with strong veins of dysfunction at every level and through every aspect.

~~~
douche
It is kind of amazing how Google let their lead in online office collaboration
fizzle out. Now, Microsoft obviously is no slouch, but Google Docs was out
with essentially the same feature set as it has now for nearly a decade before
the online versions of Office in Office365 came out and became really useful.
Now Office 365 is cleaning up in the old corporate settings where Office has
always been dominant, plus racking up a lot of the education niche that Google
Docs had gained a big share of.

~~~
InclinedPlane
Precisely. Both google drive and youtube have the potential to be businesses
that are each on their own as influential, as important, and _as profitable_
as google is in its entirety currently. But google doesn't have the drive, or
the need, to put in the work to make them such. Instead they just sort of
piddle along with half-assed improvements as time goes by. And really at some
point some other competitor is going to put enough of its own pieces together
to eat google's lunch and then they'll be on the sidelines. Google is only
unassailable because the rest of the industry is even more dysfunctional, not
because it's so strong. That's also true of Apple and facebook and Microsoft
and so many other tech giants.

~~~
dilemma
Interesting thought: What if the reason that Google is unable to find a second
source of revenue outside of advertising, is the size and importance of the ad
revenue itself and the effect it has on the organization?

~~~
InclinedPlane
Yes, that's precisely my point. There's no incentive (no hunger) to build up a
product into something mature and heavily profitable because of the ad revenue
trough. And there's no consequences for failure or missteps for the same
reason. This leads to a fundamental lack of seriousness in developing products
and customer relationships, which stunts google's development compared to what
it could be.

~~~
disgruntledphd2
Otherwise known as the falling into a moneypit and suffocating problem.

------
zupreme
This is unfortunate, but all too common among so-called "unicorn" startups.

Often its their willingness to take big chances that gets them to the top of
their market. But once they get there (especially after going public) the
"adult supervision" takes over and they lose what made them successful in the
first place almost as soon as the finance professionals or sales people take
over.

I'm not sure why it's so hard to understand that technology companies should
be run by technology professionals. Would anyone walk into a hospital and
suggest that it should be run by someone other than a doctor?

Of course any successful tech company should employ finance professionals, but
they should help the company achieve its mission, not define the mission.

~~~
zenkat
You think hospitals are run by doctors? That's cute.

~~~
e15ctr0n
Hospitals are run by hospital administrators who have special skills in this
area and are usually not doctors.
[https://en.wikipedia.org/wiki/Health_administration](https://en.wikipedia.org/wiki/Health_administration)

Administrators and doctors usually loathe each other because they see things
from very different points of view.

------
msoad
Google is the new Microsoft. Google's IPO filing stated that "Google is not an
ordinary company and don't intent to be one" but it seems when a company has
60,000 employees it can't not be an ordinary big corporation.

Facebook is the new Google I believe.

~~~
anirudh24seven
I think Facebook, as a slightly younger company, seems to be on the same path
as Google. Brilliant engineers, concerns around privacy, similar business
models, big acquisitions, huge ambitions, etc.

What would prevent Facebook from taking Google's path in a few years (assuming
a similar scenario continues)?

~~~
visarga
Google, Microsoft and Apple have problems finding the next big thing, that's
true. But, at the same time, Apple sits on millions of apps developed by
external devs, same with Google and Microsoft. Each company has attracted a
ton of developer investment and that portfolio will remain valuable.

~~~
ocdtrekkie
Yup, as long as they have the current market share, app devs won't invest in
other platforms. Meaning Google and Apple (in mobile) and Microsoft (on
desktop) can mostly rest on their laurels.

~~~
EvanPlaice
See React Native, and Universal Angular2.

Both Facebook and Google are gearing up to aggresively go after the mobile
market. Apple is stagnating after Steve Jobs' passing and both companies taste
blood inn the water.

------
nsxwolf
Can we admit there is a downturn now, or are we still collectively denying it?

------
vgeek
Tough news for anyone in the SEO industry. Better go ahead and get AdWords
certified.

~~~
Implicated
Can you elaborate on what you mean by this? I'm curious how this is going to
effect SEO/PPC in your eyes.

~~~
datamingle
If Google hits tough times, they might have more adword clients to the top of
search results instead of organic sites using SEO.

------
horsecaptin
How often do we hear about Apple's internal changes in direction /
philosophical shifts as they happen? How often do Apple's own employees hear
about it?

------
pg_bot
Google has lost its edge, I don't know any startups that are being built today
that are worried about being put out of business by them. While they have been
working on a bunch of products that have gotten a lot of PR in the last 3
years nothing they have built has stuck. Google+ and Glass were failures,
their foray into hardware and robotics has been a mixed bag, and their core
services have been stagnating. If I were to make a bold prediction, I don't
think they will ever release another great product internally.

~~~
raldi
I was gonna say Google Drive, but wow, it's nearly four years old at this
point.

Still, don't you think self-driving cars are going to be a huge success?

~~~
greglindahl
No. If the only potential customers are huge car companies, they're going to
prefer to build their own self-driving car tech to paying a high price for
Google's.

~~~
funwithjustin
That's hilarious. Most American car companies can barely build cars, let alone
self-driving cars.

