Google and Its Hidden Costs
April 26, 2016
I read “Alphabet: Sunk by Hidden Costs.” (You will have to register or maybe pay to read the source article containing the MBA analysis.) I was a bit surprised at the notion of hidden costs. Money comes in. Money goes out. The only reason money is hidden relates to the popular human pass time of not keeping track of what people, products, etc. cost and making a comprehensible notation of who authorized the expenditure, when, and why. Without this information, money is not hidden. Money is just ignored. Cash flow or venture funding is okay. We will be fine.
The write up points out that Google’s financial results were hooked to “some hidden costs.” The write up points out:
One place to blame for the bigger than expected loss is the Other Bets category. The loss in these long shot investments surged to $802 million from only $633 million last year. The operating loss was only $140 million higher than last year when excluding the stock-based compensation. Surely, analysts factored in larger losses from this sector.
“Surely.”
The Alphabet Google has its math and science club projects. Is the “money is plentiful” concept a mismatch with the spending for cheating death, Loon balloons, and dealing with legal hassles?
Hidden costs underscore management and detail behaviors. MBA speak may not make the problem go away. Google’s failure rate with start ups may follow a normal distribution. Hidden money just underscores the risk associated with these ventures.
Stephen E Arnold, April 26, 2016
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