Larry Page, chief executive of Alphabet, Google’s parent company, announced his resignation on Tuesday, and Sundar Pichai, Google’s chief executive, will take over as chief executive. At the same time, Sergey Brin, another Google founder and president of Alphabet, announced his resignation. Google’s founders have long embraced Warren Buffett’s uninterventionised management style and have for years tried to turn their own companies into Berkshire Hathaway, the tech world’s Tuesday’s decision by both founders to step down ended all that effort.
Mr Page and Mr Brin founded Alphabet in 2015 to give themselves more time to invest in start-ups and left the responsibility for managing Google to Sundar Pichai. This model was inspired by Buffett’s approach. The Wall Street tycoon allocates capital to different businesses and lets the chief executives of independent companies decide how to operate.
Google’s founders effectively removed the structure by appointing Mr Pichai as chief executives of Google and Alphabet. Mr Pichai has been busy running Google’s vast digital advertising business, dealing with tough issues such as antitrust investigations and employee protests. Now, self-driving cars, health care, digital cities, delivery drones and Internet balloons are also a problem for him.
For many in the company, Alphabet’s purpose and structure have never really been clear since its inception. Google contributes more than 99% of Alphabet’s revenue. A former Google executive said putting Alphabet in charge could raise questions about alphabet’s entire purpose. Another former Google executive said the change would mean less pressure on Mr Pichai.
Financially, Alphabet has shown investors that it is not investing too much in ambitious “moon landing” projects, while highlighting the huge profitability of Google’s main business.
But the company’s structure has been in near-constant turmoil, with it struggling to create a new business independent of Google. In 2018, the company’s “other bets”, including driverless cars, Waymo and Healthcare Verily, lost a total of $3.4 billion, compared with a loss of nearly $1 billion in the previous quarter.
Nest, the smart device maker, was originally a separate Alphabet subsidiary, but was merged into Google’s hardware division last year. Pichai also included many of DeepMind’s artificial intelligence projects in Google’s management. The cybersecurity project, which made its public debut last year as an independent Alphabet subsidiary, was merged into Google’s cloud computing division in June. And Fiber, the once-high-profile fiber-optic communications business, is no longer expanding.
Some current and former Google employees believe Mr Pichai’s move shows that Alphabet’s start-up business will gain stronger corporate governance. Page and Brin are respected for their visionary technology, but their management skills are not very good.
Vinet Buch, a partner at Firebolt Ventures, a venture capital firm, worked as product management director at Google for more than eight years before leaving the company at the end of 2018. “This change could mean that other projects have to start really doing business,” he said. No longer a two-tier edude like the one before, only Google is an enterprise operation, while other projects have unlimited time spans to make a profit. “
Mr. Butch cites Nest as an example of how Mr. Pichai will run Alphabet and Google. The smart home equipment maker was originally hailed as a model for Alphabet’s independent business, with its own CHIEF executive, marketing department and even email address. But the company struggled to deliver its products on time, and the chief executive was forced to leave. “When Nest was incorporated into Google, Nest’s speed of shipments and the viability of these products in the market increased,” Butch said. “
The fact that people active in “other bets” such as Mr Page and Mr. Alphabet’s senior lawyer, David Drummond, has avoided talking to shareholders has also confused Wall Street. Mr Drummond will now report to Mr Pichai, the head of Alphabet.
“In the long run, things are much simpler: Sandell is the only sheriff in town,” analysts at evercore ISI, the investment bank, wrote in a note. “
The “new sheriff” is eager to play down his important role. “I want to make it clear that this shift will not affect Alphabet’s corporate structure or our day-to-day work,” Pichai wrote in an email to employees. “