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Why There Aren't More Googles (2008)

paulgraham.com

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Re: Why There Aren't More Googles (2008)

#21

Post by PakG1 »

benlivengood wrote: post #4
adamsmith wrote: post #2

> I've tried to explain this to VC firms. Instead of making one $2 million investment, make five $400k investments. Would that mean sitting on too many boards? Don't sit on their boards. Would that mean too much due diligence? Do less. If you're investing at a tenth the valuation, you only have to be a tenth as sure. This turned out to be absolutely right, and the That said with the benefit of more hindsight I think…

> That said with the benefit of more hindsight I think the reason there are no more Googles is that FAANG has a stronghold on the largest technology markets. And the FAANGs are willing to pay very large amounts of cash to acquire promising startups. EDIT: Also why is it that the majority of the large tech companies are essentially marketplaces? Is there really that much friction in traditional markets (physical goods…

I would say yes. Ronald Coase did some excellent work to explain how transaction costs get in the way of optimizing economic activity among and within firms. Traditional marketplaces would clearly have higher transaction costs than these newer marketplaces. Search costs are much higher, coordination costs are much higher, and data analysis is much harder. Tech has a huge advantage in making all three of these things much lower and thereby making transaction costs much lower. Heck, just by not accepting cash, I bet they make transaction costs significantly lower than the traditional marketplaces. Heck, just by not having to operate point-of-sale card swiping devices, I bet they significantly lower the transaction costs too.

He won a Nobel Prize if that matters. I think his two seminal works, “The Nature of the Firm” and “The Problem of Social Cost” do really well to explain why tech is winning so much compared to traditional marketplaces. Especially “The Problem of Social Cost”, which explains how externalization of transaction costs creates advantageous and unfair effects.

Re: Why There Aren't More Googles (2008)

#22

Post by boltefnovor »

tehlike wrote: post #20
boltefnovor wrote: post #16

I often think about how YouTube was the bargain of the century. YouTube would be one if the biggest companies ever if it had remained independent.

I feel similar for android.

Android needed google to grow, YouTube didn’t.

Re: Why There Aren't More Googles (2008)

#24

Post by bertr4nd »

bryanrasmussen wrote: post #15
bertr4nd wrote: post #12

Something I don’t understand in this article is the “People won’t understand your ideas if they’re any good.” Like, the idea behind Google is, “Let’s make another search engine, but make it really good.” That’s not a crazy idea, is it? Was the problem that VCs thought existing engines were good enough and that Google’s wouldn’t be enough better to be worthwhile?

That's not really an idea though, that's a goal, the idea is the description of how you will reach your goal, which in Google's case was PageRank.

I was being glib in the description but it’s not like PageRank is a crazy idea either, is it?

The reason I’m prodding at this is because there are different ways in which someone can fail to understand the value of an idea. The value proposition for Google doesn’t seem far-fetched at all, but I could believe that investors simply didn’t believe PageRank was a good enough idea to displace then market leaders.

Re: Why There Aren't More Googles (2008)

#25

Post by prox »

bruceb wrote: post #19
boltefnovor wrote: post #16

I often think about how YouTube was the bargain of the century. YouTube would be one if the biggest companies ever if it had remained independent.

Problem with them was the massive about of money they were burning on servers and being sued by RIAA (Music companies) and MPAA (Film companies) among others. They needed a big infusion of capital. Instagram on the other hand could have remained independent and succeeded.

I think instagram is one of the (few) companies that could eventually have eclipsed Facebook really.

Re: Why There Aren't More Googles (2008)

#26

Post by erik »

bertr4nd wrote: post #12

Something I don’t understand in this article is the “People won’t understand your ideas if they’re any good.” Like, the idea behind Google is, “Let’s make another search engine, but make it really good.” That’s not a crazy idea, is it? Was the problem that VCs thought existing engines were good enough and that Google’s wouldn’t be enough better to be worthwhile?

In the late 90's starting a new search engine would have seemed crazy to many. It was a competitive market, there were major incumbents, profit potential seemed low, and it wasn't obvious that search could be significantly improved upon.

Re: Why There Aren't More Googles (2008)

#27

Post by bryanrasmussen »

bertr4nd wrote: post #24
bryanrasmussen wrote: post #15

Earlier quoted context omitted.

That's not really an idea though, that's a goal, the idea is the description of how you will reach your goal, which in Google's case was PageRank.

I was being glib in the description but it’s not like PageRank is a crazy idea either, is it? The reason I’m prodding at this is because there are different ways in which someone can fail to understand the value of an idea. The value proposition for Google doesn’t seem far-fetched at all, but I could believe that investors simply didn’t believe PageRank was a good enough idea to displace then market leaders.

first of all from our viewpoint PageRank doesn't seem like a crazy idea, I suppose at the time it would have seemed not crazy but interesting and unproved, thus very risky.

Furthermore it is my experience that people sometimes do not understand the value proposition of even simple things if those things are new, the value of the new must be demonstrated and often overwhelmingly.

Re: Why There Aren't More Googles (2008)

#29

Post by mtgx »

eismcc wrote: post #5
adamsmith wrote: post #2

> I've tried to explain this to VC firms. Instead of making one $2 million investment, make five $400k investments. Would that mean sitting on too many boards? Don't sit on their boards. Would that mean too much due diligence? Do less. If you're investing at a tenth the valuation, you only have to be a tenth as sure. This turned out to be absolutely right, and the That said with the benefit of more hindsight I think…

They also have a stronghold on a lot of the talent that would make the next big thing.

As in they buy them out. There should be a more laws preventing this from happening for large corporations.

We now see that Google Search is turning more and more to AI. Perhaps if Google didn't buy DeepMind, but some other smaller competitor did, they could've turned that into an advantage against Google.

Either way, it was a loss for the market for DeepMind to be bought by Google instead of forcing Google to come-up with its internal competitor.

Companies with billions in profit should be "incentivized" to use that money to create their own competitors against threats - not buy them all out (often just to kill them). I think we can all argue that large companies buying out small competitors is a net negative for the economy at large.

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