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Eric Schmidt Plans To Sell 3.2M Google Shares (techcrunch.com)
27 points by rohit6223 1329 days ago | hide | past | web | 45 comments | favorite



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.


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?


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)


Inevitable drop in QE?

The Fed is going to increase QE substantially soon, not decrease it. They can't hold down the 10 and 30 year rates with the tens of billions they're throwing at it now, and the US Government can't afford to pay higher rates on (soon to be) $20 trillion in debt. The Fed also doesn't want to allow mortgage rates to rise much, because that would nuke the housing market inflation they've worked so hard to get moving.

The Fed has trapped itself in a death spiral that requires ever larger amounts of QE, and they have no intention of stopping (much less reducing their balance sheet). They speak to that in order to buy time, but they're lying and they know it.

The $85 billion per month they're monetizing now, will move to $125+ billion in the coming quarters.

With the currency wars going on now, the Fed will have to significantly increase the destruction of the dollar in order to stay with the other devaluing currencies (in order to prop up exports through artificial means that is).

That will push asset and commodity inflation up until something explodes, essentially repeating the last two bubble cycles the Fed created (late 1990s and mid 2000s). They're running the same playbook over and over again, refusing to learn from their mistakes.

The alternative is to stop propping up the economy with cheap money, which would lead to an immediate intense recession that no politician is willing to accept. So the outcome is obvious.


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.


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.


> 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.

To be precise, they swooped up the leaders in the field from the DARPA challenges, but same difference I suppose.


> 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.


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...


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.


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.



And you are being obtuse if you think that technology and reputation doesn't greatly impact sales.


Bitter much ? Can you point me to some data for your claims and their accuracy records ? So far I have not heard of any real world testing (> 100,000 miles), with an impeccable safety record. Maybe there is and I am just missing it.

Maybe you underestimate the technical hardness of the problem and what world class big data and machine learning can do for such a problem with an enormous number of scenarios.

This is like going back in time and saying book opportunity is pretty much non-existent for Amazon. B&N and Borders know how to do books, have amazing distribution around the country and they are working on their online book stores anyway (which is not even technically hard to do)


State of autonomous cars: http://en.wikipedia.org/wiki/Autonomous_car

And I might forward you to Formula 1 racing which is one of the most technologically sophisticated activities on the planet. The car companies involved e.g. Ferrari, Mercedes, McLaren are constantly dealing with big data, machine learning and real time simulations.

http://storagemojo.com/2012/11/02/big-data-in-formula-1-raci...

The idea that nobody can handle IT apart from web companies is a bit silly.


The sources you cite refer to a range of sensors that will be added to cars starting from 2014, like collision detection technologies. And the Volvo cars you always talk about are supposed to be in a train formation following a human-driven vehicle.

A different kind of project from the self-driving cars from Google. Actual self-driving cars by other companies are always research projects with unclear timescales.


    All of the top 20 car manufacturers have had projects for years and Volvo, Toyota already have plans to launch in 2014
That's interesting. I haven't read anything like it. Do you have a source?


Honestly there are so many sources its not funny.

Toyota/Audi at CES: http://www.extremetech.com/extreme/145035-toyota-audi-showca...

Volvo shipping in 2014: http://www.engadget.com/2012/12/03/volvo-self-driving-cars-2...

State of autonomous cars: http://en.wikipedia.org/wiki/Autonomous_car

And remember that the automative industry routinely share technologies within each group. So for example Audi technology may appear in all VW group brands e.g. Bentley, Porsche, SEAT, VW. Extrapolate across all the groups and Google's market opportunity evaporates pretty quickly.


And once again YOU are so wrong it's not even funny.

The sources you cite refer to a range of sensors that will be added to cars starting from 2014, like collision detection technologies. And the Volvo cars you always talk about are supposed to be in a train formation following a human-driven vehicle.

A different kind of project from the self-driving cars from Google. Actual self-driving cars by other companies are always research projects with unclear timescales.

Your need to despise something just because it's made by Google make you look pathetic. Just stop.


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


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

http://www.globalissues.org/article/26/poverty-facts-and-sta...


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?


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.


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.


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...

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.forbes.com/sites/calebmelby/2012/09/25/larry-elli...


Yes. I knew someone who got bought out about a year prior to the tech stock crash of 2000. He had a chance to cash out all his stocks about a month before the crash, but didn't.

It did not end well for him (divorce, no $2.3M home, no car, no money, etc.).


I understand that for a new company or a private company, but Google's stock is hardly comparable. I'm just curious how much it'd cost to lock in the value of his shares and then borrow against it.


Even if google itself isn't going anywhere, if the stock market falls over again it could cut a big chunk out of the value of everything, including "safe" companies like google.


And of course I'm sure that's not hard to account for with some simple financial instruments.


Enron was stable until it wasn't.


Yes, that's a totally reasonable comparison :-)


Agreed. Borrowing against stocks is akin to playing russian roulette with your financials.


I would buy them all if I could..


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.


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


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

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


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.


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


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.


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."


http://investor.google.com/corporate/2012/founders-letter.ht...

  > Larry, Sergey and Eric have agreed to subject their
  > shares to a Transfer Restriction Agreement. This
  > agreement will maintain the same link between their
  > voting and economic interests that exists today, even
  > if they sell some of their non-voting Class C shares.
  > If the founders or Eric wish to sell or transfer their
  > non-voting Class C shares, a “stapling” provision in
  > the agreement requires them to either sell an equal
  > number of Class B shares, or convert an equal number
  > of Class B shares into Class A shares. No other
  > stockholders will be subject to these restrictions
  > upon the transfer or sale of their shares.


While better than not having the agreement (which terminates when their share falls below 34% of voting power), the new share structure is not shareholder friendly. Class C shares can now be issued to employees or used for acquisitions, which would dilute the economic interest of shareholders without diluting their voting interest.


The TC article says their voting power is already only 25% combined (8% each)


The proxy statement says they collectively own more than half of the voting power.


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




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