Alphabet Google: Dreams of a Churning Welchian

October 10, 2015

I like the name General Electric. I liked the acronym GE. I am not sure about or I like the idea of an industrial company emulating GE or one of its Welchian variants. I am okay with GE becoming a software company. GE still makes jet engines, which in time of war may become a hot selling item.

Alphabet Google does not suggest a new version of GE. Alphabet Google does remind some Wall Street wizards of GE. That’s probably because there was a GE centric case at their business school and general awareness of Mr. Welch’s books and personal life. Who knew excitement brewed at the Harvard Business Review? Not me.

I read a woulda coulda shoulda write up called “Google’s Alphabet Could Become the Next GE.” Since we are dealing with supposition and hypothesis, let’s follow the logic.

According to the write up:

For GE, the success of the light bulb became a foundation for diversification and market dominance in areas like aircraft engines, oil and gas, and financial services. Similarly, the success of Google search will be the foundation to new products and services like hardware division Nest, its Life Sciences unit, and shipping, logistics, and shopping service, Express.

GE made stuff. Google sells ads. GE made more stuff, dallied in finance and a number of other disciplines and is now reinventing itself. I think Siemens is doing the same thing.

Google does bits and now wants to do many, many other things. The interests range from balloons to solving death, from doing evil to do the right thing, from controlling mobile phones to making money from said phones.

The write up asserts that Google can make a lot of money from home automation, life sciences (the death thing), local commerce, and broadband (just like AT&T and Verizon, bless their copper wire Bell heads). If these bets were not sufficient, the write up suggests that Alphabet can spell money with virtual reality, drones, and investments.

No mention of robots which are likely to be a hot property if there is a rapid shift from humans on the front line to robots in formation.

The write up points out that the parallel is not perfect. Okay, nice hedge. But it seems to me that my view from Harrod’s Creek is slightly different:

  1. Google (the old ad thing) is under lots of legal pressure. The reorganization may put some other folks in depositions and in court rooms.
  2. The big dogs at Google are bored and want to do more interesting things. Solving death is probably interesting because disease, ageing, and weird protein dances can trim one’s options. The efforts are, from my vantage point, math and science club projects. My hunch is that significant revenue may arrive but one has to sell something people want; for example, light bulbs.
  3. The search business is not an intellectual challenge. Search is now commoditized. There are alternatives to Google if one pokes around a bit. Academic interests? Well, check out General search? A combination of Yandex with one of the start up search systems like or might fill the gap. Want a pizza? Let the iPhone deliver.

Net net: Google is more like a microwaved version of Jimmy Ling’s vision. The structure, the diversity, and the sheer complexity of the LTV operation may be in Alphabet’s future.

Let’s talk turkey. Google’s revenue derives from ads. Prior to the Google IPO a legal dust up with Yahoo about the Overture/GoTo business model was resolved. Hooray for struggling Yahoo. Since the IPO Google has been unable to diversify its revenues. Look at the digital Wal-Mart-type outfit that Amazon has become. Good or bad, Amazon has diversified its revenues. To top off its success, Amazon won’t sell stuff from Google which won’t show Amazon videos. Yikes. Google has remained for more than a decade what Steve Ballmer called a one trick pony.

Now I am supposed to believe that this one trick parva equitum will morph into Northern Dancer’s progeny. I am skeptical, but I don’t have to earn my living whipping up excitement for a company increasingly well known in legal circles. Even Jack Welch dreams about what could be I assume. We know analysts do. Google does science projects.

Stephen E Arnold, October 10, 2015


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