Imagine a world where Google is a smaller private business than the global giant Alphabet. Surprisingly it was almost .. Sergey Brin, Larry Page and Larry Page, Google’s co-founders, were reluctant to make the company public. They feared that shareholders would take control of Google and force them into doing things they don’t like. After a chance encounter with Warren Buffett , their minds changed. Buffett described the two-tier stock structure he used to keep Berkshire Hathaway under his control, even though he didn’t own all of its stock. Brin and Page realized that they could use a similar strategy to maintain control over Google. When they launched their IPO, they modeled their stock structures on Berkshire’s.
That revelation comes from the book Super Pumped: The Battle for Uber by Mike Isaac, which came out in 2019, but is getting a lot of attention these days as the basis of a new Showtime series. Isaac is a long-time tech reporter at The New York Times and writes extensively about Silicon Valley. He recounts the story of an investor who told him that Google grew under their leadership. Page and Eric Schmidt were also CEO of Google. However, they resisted an IPO due to fear of losing control.
When they met with the Oracle of Omaha, they discussed their hesitation. Buffett explained to them the Class A and B shares that he used at Berkshire Hathaway. Buffett shares have one vote each. B shares only carry 1/10,000 vote per share. This allows the company to sell shares to investors, but it is protected from hostile takeovers and activist shareholders.
Although such shares are not common in the tech sector, Page and Brin decided to replicate the structure. In Google’s case (now Alphabet), A shares carry one vote, while B shares each carry 10 votes. Brin and Page between them own 51 percent of those B shares, giving them joint control of the company, even though they own less than 12 percent of its total shares.
They also copied another tactic of Buffett’s–before their 2004 IPO, they laid out their philosophy in a letter titled “‘An Owner’s Manual’ for Google Shareholders” which they freely admitted was largely inspired by Buffett’s 1996 “Owner’s Manual” for Berkshire shareholders. Brin and Page discussed their leadership philosophy and concerns about shareholders’ influence. They wrote:
“As a private company, we have concentrated on the long term, and this has served us well. We will do the exact same as a public company. We believe that outside pressures often lead companies to sacrifice long-term opportunities in order to meet quarterly market expectations. Sometimes this pressure has caused companies to man