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In finance class we learned it should be investors who make that decision not google. Therefore they could just break it into google and all its other companies so the investor can invest what they chose to. If they want to invest in risky bets they can. If they want to invest in core google assets they can.

The issue is other than ad words their other bets are not nearly as profitable.




There is a halo effect around new ventures which helps recruiting. Google got a lot of smart people get really excited building great software to serve advertising. But, if all they do is maintain software they are not going to attract top talent without obscene salary's.

PS: I suspect they probably spent less on self-driving cars than they gained back from that Halo.


I think that a "should" statement is a bit inapplicable. Investors may choose a different stock if they don't like the particulars of Alphabet. It has some significant downsides: founders owning 10% of equity but having a majority of votes; large investments in ventures unlikely to succeed (Fiber, Calico).


"should" from a market efficiency standpoint. By being an all or nothing proposition, it makes it hard for investors to buy in if they are fundamentally against one technology (e.g. user data mining) but want to support another (e.g. self driving cars). It ultimately results in the entire company being less valuable than the sum of its parts (think Yahoo where it's Alibaba holdings alone were worth more than its market cap).

In other words, by having so many diverse bets, investors in Alphabet have to buy into all of those bets. So the number of investors that believe in all of those bets is smaller than the sum of all investors that would invest in each one individually.


It all depends on whether investors or Google executives are better allocators of capital.

Google executives certainly think they're better and for the time being it seems investors agree.


>it seems investors agree.

It seems some* investors agree. There is no way to know how much more they could be worth if they were separate entities.


I guess nobody ever invests in index funds, then.


An index fund won't suddenly invest in unicorns or whatever else on a whim. They follow a particular plan (e.g. track a sector, track the S&P, whatever).


The members of an index fund are supposed to have little correlation; not the same goes for Alphabet's divisions.


Quite a few index funds comprise members that have very high correlation with each other, e.g. funds that track sector-specific indexes in health care, natural resources, etc.


That is what investors like to think. Google management thinks differently (and that is their right for their company).


Not being tongue in cheek here - actually quite serious: How do you feel about Apple and Braeburn Capital?


Or Berkshire Hathaway, to really nail the point home.


Fwiw afaik it would be more tax efficient if Google makes those investments rather than investors reallocating after dividend / cap gains tax.


Moonshot sounds a lot better than tax arbitrage-based VC


Investors do not have control of Alphabet, they don't have voting rights in effect.




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