
Eric Schmidt Plans To Sell 3.2M Google Shares - rohit6223
http://techcrunch.com/2013/02/08/google-chairman-eric-schmidt-plans-to-sell-3-2m-google-shares-42-of-his-stake-in-the-company/
======
ChuckMcM
Anyone who can end up with > 1B$ in cash after taxes and fees at the end of
the day is in an interesting place.

I have really been impressed with the gusto in which Bill and Melinda Gates
have thrown their fortune behind their philanthropy goals. From a cultural
history perspective, older families with dynastic wealth tended to get
diversified as the generations spread wider and wider, but modern day
generations are quite narrow, between one an four families at any given time,
rarely spreading.

Many people believe that as production capacity outstrips demand at any cost
point we'll enter a sort of 'star trek' like period where nobody has to work.
Of course somebody has to do some work, but who that will be, that will be the
economic factor of the times.

With fertility at 1.6 births per family then for a 21st century family
patriarch, a billion dollars in a trust fund could probably provide a living
for you descendants pretty much forever.

~~~
_delirium
It'll be interesting to see how that plays out. The "negative" possibility is
a reemergence of old-style landed gentry, where wealth passes down from
generation to generation with relatively little perturbation or erosion,
interrupted only in the case of the "bad apple" bone-headed heir who actively
blows the family fortune. It's interesting that both Gates and Buffett pretty
consciously opted out of finding out how that would play out.

Of people currently in the list of top-20 richest people, the ones to observe
(successfully into multigenerational territory) seem to be the Waltons, Kochs,
and Bettencourt. But probably more, since the cutoff for top-20 is $22
billion, and you hardly need that much to start a multigenerational fortune,
especially if people aren't having a lot of kids anymore.

I wonder if there's enough data to put together a graph of how previous
American fortunes fared, actually. What did the trajectory of the Rockefeller
estate look like as it was split among heirs and invested in various forms?

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lifeisstillgood
This seems a well timed move by Schmidt.

Google share price has had a lot priced into it recently (Jumps on self
driving cars, google glasses etc) and the Inevitable drop in QE means the
price is going to have to slow. Not decline, just grow slower.

That's not to say google is in particular trouble, but their growth markets
for the future are BIG markets, fibre, cars, home automation - All markets
that need lots of pump priming, lots of infrastructure work and that will
eventually become ubiquitous.

There may not be a lot of profit in the markets or google may not be able to
capture it but there will be a lot of cash, and that maybe google's destiny -
PG&E.

Just my two cents (been reading up on profitability and ROI of 19C railways -
fascinating)

~~~
taligent
Their work on Google Fibre is definitely an interesting one and there is a
huge opportunity there if they can get navigate their way around the massive
players there already. But Google is playing smart by lobbying governments to
open up competition.

The car opportunity is pretty much non existent for them. All of the top 20
car manufacturers have had projects for years and Volvo, Toyota already have
plans to launch in 2014. They may look to someone like Tesla for a partnership
but they are niche.

~~~
wamatt
Interesting that you're appear so dismissive of Google's self driving cars.

I'm not claiming you're necessarily wrong, but I am intrigued about the other
self driving options and how they surpass Google's solution?

It would appear to be a widely held belief, that Google is the pioneer and
leader in the field, at least with respect to the software/AI.

~~~
taligent
> It would appear to be a widely held belief

Among people who don't know much about the automotive industry.

The software/AI is secondary to the ability of the solution to work in
hundreds of millions of cars in hundreds of countries (all with varying
regulations) under an infinite array of conditions. The car companies have
decades of experience at this. Google has none. And even worse they have a
penchant for beta software and a concerning inability to ship products
properly.

So whilst Google's software may be technically better (I don't know) in the
grand scheme of things it is a meaningless consideration.

~~~
yid
Sigh. Stop rationalizing your pet Google peeves.

> _The software/AI is secondary to the ability of the solution to work in
> hundreds of millions of cars in hundreds of countries (all with varying
> regulations) under an infinite array of conditions._

No it doesn't. It's perfectly fine if it works even with _one_ car model if
that spurs demand and further development. It's perfectly fine if the self-
driving system initially only works in "good" conditions, since a driver
should always be prepared to take over. It's perfectly fine if the system
detects ice or snow and sets off a shit-ton of alarms warning the driver to
take over. No initial offering of a brand new technology ever deals with every
imaginable scenario.

> _The car companies have decades of experience at this._

The car companies have decades of experience designing mechanical and
electromechanical systems. Their software expertise _sucks_. Other than the
Tesla, have you seen the dismal state of modern car software? Even BMW uses a
system of rotary dials, and "apps" are just _now_ becoming commonplace.

Robust self-driving cars involve an unimaginable amount of software
complexity. There are machine vision algorithms, sensor fusion algorithms,
estimation and planning algorithms, learning algorithms, and probably a bevy
of common-sense heuristics. There needs to be extensive testing of these
algorithms, and careful bounds on their latency and reliability. These are
_computer science_ problems, not automotive problems.

> _Google has none._

Google has cash. They can acquire people and expertise. See [1]

> _And even worse they have a penchant for beta software and a concerning
> inability to ship products properly._

May I be bold enough to presume that the vast array of smart people they've
hired might have realized that Gmail and self-driving cars require different
approaches to software development....

[1] [http://www.wired.com/autopia/2012/11/ron-medford-google-
nhts...](http://www.wired.com/autopia/2012/11/ron-medford-google-nhtsa/)

~~~
notdrunkatall
Quite right.

Just like TSLA is going to beat the big car companies at electric cars, so too
will GOOG beat them at self-driving ones.

The electro-mechanical and mechanical aspect of a self-driving car is the easy
part; it is the software that will be where the real innovation occurs, and
Google has arguably more software expertise than any other organization on the
planet, and much, much more than any car company.

If anyone can win that race, it's Google.

~~~
taligent
That's hilarious because Tesla doesn't exist outside the US where as today
electric cars can be purchased via GMs Volt program e.g GM Volt, Holden Volt,
Opel Ampera. Likewise when BMW releases their electric car it will overnight
be available in countless countries through their vast dealerships and
partnerships.

You are being naive if you think that technology alone is all you need in
business.

~~~
executive
Tesla store in Toronto
[http://photos.newswire.ca/images/download/20121116_C8623_PHO...](http://photos.newswire.ca/images/download/20121116_C8623_PHOTO_EN_20801.jpg)

------
TallboyOne
That's gotta be a good feeling. One I may never feel in 1000 lifetimes, but I
sure would love to know that feel.

~~~
rooshdi
A feeling of winning life's lottery? You've already won:

[http://www.globalissues.org/article/26/poverty-facts-and-
sta...](http://www.globalissues.org/article/26/poverty-facts-and-stats)

------
staunch
Is it worth the trouble to sell rather than borrow against it? Anyone have any
idea on the economics of borrowing against such a large amount of equity in
such a stable company?

~~~
ChuckMcM
Absolutely. Eric lived through the Dot Com explosion where he had multiple
millions of dollars in Sun stock that had he borrowed against he would have no
collateral today.

The first mistake made by young people who are suddenly 'rich' on paper
because the one stock they own is worth a lot of money, is borrow against it
as if it _was_ money. Only to have the stock value vanish and they end up
destroying what savings they did have repaying those loans.

There were a number of stories in the Mercury News about people who built
dream homes starting pre-bust, only to sell them for pennies on the dollar
post-bust because they couldn't afford them any more.

~~~
marssaxman
People _do_ that? Maybe it's just that I lived through the dot com explosion
too, but that seems astonishingly foolish - it might as well be gambling. If
you want to acquire some asset, like a house, sure, sell your stock and buy
the asset - but you don't get to have it both ways! You can't have the
security of a slow-appreciation asset like a house _and_ the upside of a
risky, high-appreciation asset like tech company stock. Use one to back the
other and you just amplify your risk.

~~~
wmf
CNet founder Halsey Minor bought a ton of real estate against his paper
fortune and then lost it all in the financial crisis:
[http://www.washingtonpost.com/lifestyle/magazine/the-
sorry-f...](http://www.washingtonpost.com/lifestyle/magazine/the-sorry-fate-
of-a-tech-pioneer-halsey-minor-and-historic-virginia-estate-carters-
grove/2012/05/30/gJQAwdJG4U_print.html)

Larry Ellison has been living off credit for the last decade or so; he's put
up ~$4B worth of Oracle stock as collateral.
[http://www.sfgate.com/news/article/Inside-look-at-a-
billiona...](http://www.sfgate.com/news/article/Inside-look-at-a-billionaire-
s-budget-Larry-2542603.php)
[http://www.forbes.com/sites/calebmelby/2012/09/25/larry-
elli...](http://www.forbes.com/sites/calebmelby/2012/09/25/larry-ellison-
americas-third-richest-man-down-1-billion-on-drop-in-oracle/)

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loceng
I would buy them all if I could..

~~~
taligent
Not me personally.

If Facebook Search even remotely takes off then that will siphon away a
significant amount of advertising that Google relies on. And Google has shown
a worrying inability to monetize any of their recent projects.
Docs/Gmail/Youtube/Android aren't making much money, Glasses is niche, none of
the OEMs are interested in their self driving car technology and their
Motorola acquisition has been an unquestionable disaster.

~~~
melvinram
YouTube is driving billion+ in ad revenue if I remember correctly.

~~~
taligent
Exactly. Which is 2% of their total yearly revenue.

They still rely far too heavily on their existing Google Search/Google Adsense
cash cows.

~~~
niketdesai
Yeah but this is the scenario many companies face. It's not like there are
THAT many companies with Billions in multiple revenue channels that aren't
effectively umbrella corporations.

Google funnels most of their diverse online product set back into the primary
money generator. I'm sure we'll see less of that in the future as there are so
many people that have pointed this out it's almost tiring.

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cremnob
When the news about the change in structure of the shares came out a while
back I decided that this is a company that I could never invest in (a big
enough discount to intrinsic value may change my mind). The execs can reduce
their economic interest in the company while maintaining control, which isn't
great for keeping their interests aligned with shareholders.

e: Here's a study that shows that companies with dual-class share structures
pay executives more in compensation than usual and make value destructive
acquisitions.

<https://papers.ssrn.com/sol3/papers.cfm?abstract_id=1080361>

~~~
magicalist
This is kind of a weird way to evaluate Google in particular since they
already have a dual class share structure. Just check their executive pay
levels and acquisition patterns, which you should do anyways. You don't need
to make a probabilistic argument when you have direct evidence.

Meanwhile, in many instances shareholders tend to be capricious and
uninterested in long term health, especially when particular shareholders are
heavyweights but in unrelated markets (e.g. hedgefunds under plurality voting
charters)

edit: also what jmillikin said, which is particularly apt since the study you
cite did not claim those results as more likely in dual-class companies, but
found them correlated with the _growth_ of the divergence between insider
voting rights and cash-flow rights.

~~~
cremnob
See my response to jmillikin. Your comment about the study's findings is
semantic, because it does claim that its more likely to happen:

"These findings support the hypothesis that managers with greater control
rights in excess of cash-flow rights are prone to waste corporate resources to
pursue private benefits at the expense of shareholders."

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Evbn
That is a huge amount to sell in one year. Wonder why he is unloading so fast.
Why not a 5 year plan?

