The Changing Nature of Tech Companies

Much talk about Google restructuring into holding company Alphabet and its various subsidiaries. Which is of course a brilliant move when it comes to solving their succession problem. So well done.

Many commentators have compared the new structure to Berkshire Hathaway, but that really doesn’t seem right. Berkshire buys mature companies, whereas I would assume that Alphabet will very much want to grow new businesses inside.

It might make more sense to compare Alphabet to the organizational model of a major film studio or entertainment company.

The parallels are obvious: A talent-driven business, with huge upsides and high downsides, a limited ability to predict success for any given project (so you better have a portfolio of them), and a reasonably short half-life for products with only a small handful of franchises enjoying mid- or long-term success. 

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