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Alphabet overtakes Apple to become most cash-rich company

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Re: Alphabet overtakes Apple to become most cash-rich company

#31

Post by johannes1234321 »

ergothus wrote: post #12
navigatesol wrote: post #9

Earlier quoted context omitted.

> Their CEO, Sundar Pichai, gets a huge stock-based compensation I'm as cynical as they come, but I'm skeptical that all people at these levels are that driven by their compensation. They are ultra-wealthy, and forever will be; a few extra million here or there isn't anything compared to what they stand to lose in wealth and reputation in the face of negative public sentiment. But I could be wrong.

> I'm skeptical that all people at these levels are that driven by their compensation. All of your arguments make sense...except that we see people at these levels take actions to increase their compensation so frequently, even at the risk of their reputations. I don't know about Pichai personally, nor can I explain WHY the mega-rich are so interested in getting richer when it can't possibly change their day-to-day o…

For some it is a competition. If you are on Forbes' top 10 it can be a sport to "beat" others on that list and rank up. Some (see Bill Gates) see that that competition is of little value and look for ways to spend their fortune in "sensible" ways.

Re: Alphabet overtakes Apple to become most cash-rich company

#32

Post by BoiledCabbage »

AlanSE wrote: post #28
wufufufu wrote: post #16

In StarCraft, you always want to be at 0 minerals and 0 gas because that means you are maximizing your investment into buildings and units. People make fun of you if you don't have the skill to optimize for this.

This comment said the same thing as the 4-paragraph comment about corporate finance. Yet somehow so much easier to understand.

The difference is cost of failure. If you lose a game you play another, so tolerance for risk taking is high. If Google or APPL screws in an economic downturn up they go bankrupt and don't get a second chance.

Cost of failure is a huge decider of optimal behavior.

Re: Alphabet overtakes Apple to become most cash-rich company

#33

Post by IpV8 »

aero142 wrote: post #24
wufufufu wrote: post #16

In StarCraft, you always want to be at 0 minerals and 0 gas because that means you are maximizing your investment into buildings and units. People make fun of you if you don't have the skill to optimize for this.

Google is clearly ultra late game zerg. They are floating minerals, gas, and larvae to remax on a tech switch. This analogy is holding up surprisingly well.

Apple is about to drop their mineral line

Re: Alphabet overtakes Apple to become most cash-rich company

#34

Post by gvhst »

mercules wrote: post #29
noego wrote: post #11

Finance 101: Being cash-rich is a major advantage in environments where fundraising is a major hurdle, and where the funds can be put to productive use very quickly. For example, for a startup to raise funds for a major marketing campaign, it has to go through a lengthy and attention-demanding process of pitching to VCs and negotiating terms. Hence why having a big war-chest ready to fire, can be a competitive advant…

At the same time, companies with a strong warchest are better prepared to weather the storm of an economic downturn and to afterwards, purchase valuable assets for pennies on the dollar.

Buffett puts this well when he says:

> “Every decade or so, dark clouds will fill the economic skies, and they will briefly rain gold. When downpours of that sort occur, it's imperative that we rush outdoors carrying washtubs, not teaspoons. And that we will do.”

The thing here is you have to be confident in your ability to deploy capital during those downturns. Your average expected return over multiple cycles (cash returns mid/late cycle + opportunistic investments beginning of cycle) needs to be higher than broad equity returns.

Re: Alphabet overtakes Apple to become most cash-rich company

#35

Post by jjeaff »

noego wrote: post #11

Finance 101: Being cash-rich is a major advantage in environments where fundraising is a major hurdle, and where the funds can be put to productive use very quickly. For example, for a startup to raise funds for a major marketing campaign, it has to go through a lengthy and attention-demanding process of pitching to VCs and negotiating terms. Hence why having a big war-chest ready to fire, can be a competitive advant…

Ya, that's finance 101. But here's Finance 5400:

Smart, wealthy shareholders love cash hoarding. Especially if the cash is held tax free in overseas accounts.

The share price is boosted allowing them to get returns in the form of pure capital gains.

If the company were to pay dividends, sure, most of those dividends would be taxed at capital gains rates as well. But that money has to be taxed at the highest US corporate income tax rate first. Thus, significantly reducing overall value.

To go a step further, the wealthy don't even have to cash out their shares as the price climbs and climbs. They can get low interest loans using the shares as collateral. This deferring taxes indefinitely and leaving all their capital in these huge companies that are outperforming the SP500 anyway.

Re: Alphabet overtakes Apple to become most cash-rich company

#36

Post by astrodust »

wufufufu wrote: post #16

In StarCraft, you always want to be at 0 minerals and 0 gas because that means you are maximizing your investment into buildings and units. People make fun of you if you don't have the skill to optimize for this.

Yeah, but what if you collected interest on your minerals and your game performance was based on return on investment in terms of minerals?

Re: Alphabet overtakes Apple to become most cash-rich company

#37

Post by nootka »

noego wrote: post #11

Finance 101: Being cash-rich is a major advantage in environments where fundraising is a major hurdle, and where the funds can be put to productive use very quickly. For example, for a startup to raise funds for a major marketing campaign, it has to go through a lengthy and attention-demanding process of pitching to VCs and negotiating terms. Hence why having a big war-chest ready to fire, can be a competitive advant…

How does cash raise market cap aside from maybe causing uninformed investors to drive the price up? Isn't market cap share price * shares outstanding? Hence, capitalization in the market, rather than capital available internally.

Re: Alphabet overtakes Apple to become most cash-rich company

#38

Post by 2_listerine_pls »

wufufufu wrote: post #16

In StarCraft, you always want to be at 0 minerals and 0 gas because that means you are maximizing your investment into buildings and units. People make fun of you if you don't have the skill to optimize for this.

Are you a StarCraft economist?

Re: Alphabet overtakes Apple to become most cash-rich company

#39

Post by tialaramex »

wufufufu wrote: post #16

In StarCraft, you always want to be at 0 minerals and 0 gas because that means you are maximizing your investment into buildings and units. People make fun of you if you don't have the skill to optimize for this.

That's a general rule, but there can be scenarios in which it isn't true, they're just far away from the "current meta" ie the way you'll usually see the game played.

There are strategies that play through late-game. Because resources are finite in StarCraft, after a certain point your income is always zero. At that point if one player has "money in the bank" they're actually ahead not behind, because they can build more units in response to their opponent's current composition which can't be countered.

Ordinarily for example if you're crushing a Protoss and they build a Dark Shrine as a last ditch, no problem get detection and shut DTs down before they cause trouble. But if you have no income and nothing left in the bank then you may just never be able to detect those DTs with what you have, and no way to build a detector. Now you're in a race - win before the DTs kill you.

There are some crazier corner cases, if you lose all workers and can't afford to build more then spending everything also becomes a bad idea for a similar reason and spending down to zero actually increases your risk of not being able to buy workers if somehow you lose them all.

Re: Alphabet overtakes Apple to become most cash-rich company

#40

Post by olde_fortran »

jjeaff wrote: post #35
noego wrote: post #11

Finance 101: Being cash-rich is a major advantage in environments where fundraising is a major hurdle, and where the funds can be put to productive use very quickly. For example, for a startup to raise funds for a major marketing campaign, it has to go through a lengthy and attention-demanding process of pitching to VCs and negotiating terms. Hence why having a big war-chest ready to fire, can be a competitive advant…

Ya, that's finance 101. But here's Finance 5400: Smart, wealthy shareholders love cash hoarding. Especially if the cash is held tax free in overseas accounts. The share price is boosted allowing them to get returns in the form of pure capital gains. If the company were to pay dividends, sure, most of those dividends would be taxed at capital gains rates as well. But that money has to be taxed at the highest US corpor…

Dividends at taxed at income tax rates
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