Google is loosing its spirit (and may go evil)

I love the products and services of Alphabet and its subsidiary Google. I love android; I love gmail; I love search! As an investor I love the business model and market leadership!

A few weeks ago, Google re-names itself to Alphabet. The new name transports the idea of their much better than google, which is just the name of their search service. Alpha-bet describes betting on alpha or first grade ideas.

As they re-named the company, the management shifted from the slogan "don't do evil" to "do the right thing". This cultural shift will hurt the company in the long run!

Alphabet/Google-critics argue, that without the "don't do evil" motto, Alphabet is now officially evil - why else changing the motto?

The Alphabet management argues that a positive definition of their motto will yield to better results in efficiency, compliance and obeying the law, while allowing flexible motto definitions for each business unit.

"Evil" is better understood than "right"
Lets ask Jacobi the mathematician - "What do you think about re-naming Google to Alphabet?", "Inverse, always inverse".

Lets inverse the problem of moral and ethics. Answer the following 2 question and write down all answers which come up in your head in bullet point form.
  • I want to be evil, what evil can I do?
  • I want to be right, what right can I do?
Now count the number of bullet points for each answer. My "infinite" wisdom tells me that your evil list is much longer than your right list. That is not because you are evil. It is because every human being has a pretty clear understanding of what actions are evil.

Lets apply the "don't do evil" motto to decision making. When I come up with a decision I check it against my mental checkpoint. The last check point is the question "I want to do X. Is X evil?". In 80% of the cases I will reject a yes - sorry, I am not an angel, I have annoying neighbours ;-)

Lets experiment with "do the right thing" as a check list point. "I want to do X. Is X the right thing?". This question does not provide any value to my decision making process. I run down my decision making process to come up with the right decision and as part of that I ask myself "is it the right thing?". Its like a circular conclusion. I conclude that the new motto is not helpful as a check list item.

Incentive caused-bias
Now to my second argument. Charlie Munger introduced the term "incentive caused-bias". Basically this bias distorts your perception in the direction of your incentive. Its very present in sales people. An example:

I buy my shoes at a small, family owned retailer. In the past they paid their sales staff by the hour. I received very good consultation, about which shoe I should choose, how to treat the shoe well and so on.

The minute they shifted to a commission-based payment system, the sales staff always recommended me the most expensive shoes, even if it was obvious that the shoe is not for a young value investor but for the grandpa of the young value investor.

Conclusion
My conclusion is that "do the right thing" motto will cause a lot of trouble for Alphabet in future. Firstly, its inferior to "don't be evil" motto for moral and ethical business decision making. Secondly, the decision maker at Alphabet will choose what is the right thing based on what pays the biggest incentive - not on what is actual the right thing.

Kommentare

  1. Interesting standpoint. I did not know about this slogan change.

    Incentive caused bias: currently I am reading 'The complete investor' by Tren Griffin about Charlie Munger. Should have read more about/from Munger earlier, because you really should read that stuff, if you are in investing.

    Thank you
    Tom

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    1. If you like Charlie you should read "Poor Charlies Almanack" and "Seeking Wisdom". Both books pound in how to think like Charlie and his mental models. Both books are hard to get in Europe. You may order it via http://poorcharliesalmanack.com/

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    2. Do you recommend 'The complete investor'?

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  2. I am not through with reading it, and I do not know the two books you mentioned before. Maybe there is nothing new, if you know these.

    But for now, I recommend it, yes.

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