Berkshire Hathaway 2.0: Just a Holding Company?
The first news-cycle around this reorganization has often compared Google’s new structure to Berkshire Hathaway. True. From an organizational Google (Alphabet) has become a holding company. The subsidiaries are managed independently, and the Google founder’s roles resemble Warren Buffet’s role, steering the holding company, while leaving the day-to-day operations to various management teams. Larry Page will not be supervising product development or marketing activities. Instead, he allocates capital across portfolio companies and help set their course.
And yet, the parallels between Alphabet and Berkshire Hathaway stop here.
Let’s leave this organizational point of view and compare the Berkshire subsidiaries with the Google businesses in an operational sense. You don’t even have to look into the companies to see that there is a difference. Just the names tell a vivid story. On the side of Berkshire Hathaway, you have Acme Brick Company, Applied Underwriters, Buffalo News, Fruit of the Loom, Geico car insurance, and some other insurance businesses. On the other side you have Fiber, Google X, Nest Labs and Calico. As we all can see, while the first group could be pictured moving at the speed of a chess game, the Alphabet group of companies can be imagined with the energy level of a boxing match.
In fact, they are portfolio companies that are different from one another; operating at different speeds and in different markets. They require different types of management, different cultures, and different structures. But most importantly the younger Alphabet companies also have a very different risk profile, not only distinguishing them from Berkshire Hathaway, but also from the mature Google companies.
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