The new age “conglomerate” – Alphabet

The dominant form of corporation in 1980’s was the conglomerate (pdf). By the 1990’s this form had become deinstitutionalized.


Diversified firms were taken over and the unwanted parts were sold.

The new age takeover firms of the 1980’s are activist shareholders.

Yesterday’s news of the new alphabet is indicative of multiple long running trends:

  1. There was a need for ultra long range investments and Larry Page and Sergey were willing to make those bets.
  2. A cash generating business can help fund many other risky investments over time, which may or may not pay off, but will help move humankind forward.
  3. The limitations of a few activist shareholders need to be put aside for the greater good.
  4. Conglomerates allow for one idea from one portion of the business to help another in a different field innovate.
  5. Different business models in the same “corporation” or entity causes people to get confused.

Welcome to the new age conglomerate.

Google, I believe is the first of maybe 3-4 potential conglomerates, which will emerge over the next few years.

Facebook with Oculus and WhatsApp will likely be another candidate. WhatsApp’s business model is not clear, but Oculus will not likely make money from Ads. So, there’s a need to have a holding company for sure.

Uber (taxi business model, delivery business model, fleet management and ownership) will be possibly another.

Alibaba should be yet another, if already not down that path.

The only thing that’s challenging for these companies is if their structure has not been already setup to support the dual class stock voting structure, etc.

When you have multiple businesses with different models of making money, and you still want to hold them together, this new structure makes a lot of sense.

I only wish more companies in technology would adopt this model. Welcome Alphabet.


The thing I do think that’s going to be a challenge is that there will be less transparency about the “Google” part of the business. I really think that there will be less information shared about how YouTube or other parts of the Google business are performing. I am hoping otherwise, since that was mentioned in the letter, but I doubt it.