Google Is Now Part of Alphabet Inc. Who Cares?

Google Is Now Part of Alphabet. Who Cares?

Larry Page and Sergey Brin, the duo that revolutionized search by founding Google nearly 17 years ago, announced on August 10 that Google and its wide range of loosely associated companies -- including YouTube, longevity-research firm Calico and Internet of Things thermostat-maker Nest -- will now be part of a holding company called Alphabet.

Unless you own Google stock, which will soon convert to an equivalent amount of Alphabet stock, this has no effect on you. Resume your day. Google will still be Google and keep doing the things Google does, at least for the moment. Meet the new boss, same as the old boss.

Under the new structure, Google, Inc. becomes just one of many corporate assets held by Alphabet. From one perspective, this provides some cover from those pesky European Union lawsuits, while from another, this is a way for Brin and Page to cement their legacy as The Greatest Men Who Ever Lived.

Here are five possible reasons for Google's move, which likely has no bearing on you unless you have the good fortune of being in Page’s or Brin’s Last Will and Testament.

1. They want to be Warren Buffett. Everyone in business wants to be Buffett. With Berkshire Hathaway, he owns a stock market juggernaut that is one of the most successful holding companies in human history. With Alphabet, Brin and Page are betting that they can do for world-changing technology what Buffett has done with furniture retailers and Fruit of the Loom underwear: create the best collection of businesses on the planet.
2. They want to be Thomas Edison. Page and Brin have shown a tendency to emulate The Wizard of Menlo Park, both through their commitment to expensive research of seemingly outlandish ideas (Internet supplied by hot-air balloons, anyone?) and their tendency to patent every loose bit of intellectual property lying around the office. Patents tend to be more valuable than companies if you can create something people need, like the light bulb, or want, like motion pictures. Alphabet has started its life by inheriting a wealth of transformative technology, such as connected thermostats, self-driving cars, robotics and drones.
3. They want to avoid a crippling settlement. Less than four months after the European Commission threatened Google with $6 billion in fines for operating as a monopoly, Google has become isolated from Brin and Page’s other ventures. Europe has a bad habit of making its fines stick -- as Microsoft has learned -- and of forcing companies to abandon policies that threaten the much stricter privacy laws in effect in the European Union. Under the Alphabet structure, Page and Brin can invest profits from Google into their other companies, then spin Google off and keep those profits if the EU starts imposing crippling fines or unwinding the data collection that makes Google’s services work.
4. They're now part of a mature market. Search is old and boring, and Google itself is now part of what investors call a “mature” industry with no prospects for the explosive growth that defined its first decade. Once you reach the top, you can hand that company off to someone else and let it be. Android-powered smartphones are also hitting a point of maturity. If the adrenaline-pumping thrill of business development keeps you going, you need to keep pursuing new ventures.
5. They want to create yet another transformative company. Google forever changed the way we get information, and Brin and Page may be poised to transform some other aspect of our lives. Calico wants to help us live longer. Nest is at the forefront of a connected, automated world that we may control with our behaviors rather than our commands. Google’s self-driving cars may someday replace buses or taxicabs. All Alphabet needs is one Google-level breakthrough to become the most important company of the next 15 years, and its creation is the first step to finding that breakthrough.

Any one of the reasons above would make Alphabet a smart move. In the thinking of Page and Brin, it's likely all five. For Google users, it will be business as usual, but for Google -- now Alphabet -- shareholders, this is the Next Big Thing that will put considerable distance between the minds at Google and the fruit-named watchmakers in Cupertino.