Wednesday, August 12, 2015

Is Alphanet like Berkshire Hathaway?

Google has rebranded itself as Alphabet. People are suggesting that Alphabet is like Berkshire Hathaway. I don't think that is an apt analogy, I think GE is a better analogy, but even that falls short.

Berkshire Hathaway is essentially a financial investing vehicle for Warren Buffet. He uses it to buy companies that are cheap. Alphabet is not fundamentally a financial investing vehicle, and it will not be used to buy companies that are cheap. While Buffet is folksy and charming and well loved, Alphabet will be making venture style investments not private equity style investments. Being the Berkshire Hathaway of the Internet sounds great, just like being the Google of the Beverage Industry, but I don't see how it goes further than that.

GE is a better analogy because it is a conglomerate, like Alphabet, with independently operating units, which share broad market information to work a little better. This is very Google, and it should be very Alphabet since Google has a strong competitive advantage in knowing almost everything that happens on the Internet and where the money is (via AdWords, Search, and Analytics).

GE also has world famous management discipline because running conglomerates is hard, and I'm not sure if Google has that discipline now but hopefully it may develop it in the future.

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