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Comment by Jun8 | Hacker News Reader

Here's an HBR article that addresses some of the misunderstandings in maligning buy back programs: https://hbr.org/2018/03/are-buybacks-really-shortchanging-in.... They comment that:

"... when we look at CAPEX and R&D as a percentage of revenue ... over the past 25 years, we see that the overall investment intensity of S&P 500 firms, while quite volatile on a year-to-year basis, has been rising over the past decade, and is now near peak levels not seen since the late 1990s."

If you had $25B to start a company what idea would you tackle?

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I wouldn’t start one company. I would take a leaf out of Y Combinator’s book, and start funding lots a small startups, as well as advising them. I’d would attempt at investing in such a way that I create an ecosystem of companies that can learn from each other and support each other. I’d focus on climate resilience. Lots of current practices will be disrupted by changes we are already seeing. Easy? Probably not, but I think it could work well.

Google's done that repeatedly with Google Labs, GMail Labs, Google X, Area 120, department-internal projects like Search Demo Days, 20% time, Google Ventures, giving high-performing employees a charter to work on whatever they want for a couple quarters, etc.

It never seems to work, and it never seems to work for the reasons outlined in The Innovator's Dilemma. Big companies are held hostage by their customers. A new company needs to a.) find new customers b.) be hungry and c.) have total freedom to configure the market around oneself. None of these exist within the cushy environment of a big company - a.) is contradictory with maintaining Google's brand image, b.) is contradictory with continuing to pay the people involved in these efforts, and c.) is contradictory with Google getting first dibs on the spoils of these efforts.

Google seem to solve that by spinning-out while keeping significant(probably) equity.

What's wrong with that ?

I thought that was what the creation of Alphabet was meant to solve.

I wouldn’t start one company. I would take a leaf out of Y Combinator’s book, and start funding lots a small startups, as well as advising them

There are only two YC companies that have gone public and both of those are still losing money -- PagerDuty and Dropbox and as far as I know, none have reached profitability.

Profitability=tax

I would call income tax a good problem to have, one which these companies don't have

A company like Dropbox does not need to keep its headcount to maintain their current product and extract profits (of which they lose a big chunk to corporate income tax). If they wanted to show profit they can easily tighten, focus, and get rid of R&D and new product development.

They aren’t cash flow positive. No company chooses not to be cash flow positive to avoid taxes. That’s not how things work. Do you feel the same way about Uber and Tesla? Do you think they aren’t showing a profit to avoid taxes or because they still haven’t figured out how to sell their products at a cost that will cover fixed and variable costs?

Are you really saying that these companies are losing money so they don't have to pay taxes?

Yes most companies do that on the books, including movie productions, Amazon, etc. It’s not because their business model still doesn’t work, it’s because the point of corporate income tax is to make sure the corporation doesn’t hoard money and instead reinjects it into business expenses such as payroll.

I realize that, but the companies I’m referring to - the VC backend companies and the YC backed public companies aren’t cash flow positive.

Yes but my point is that if they're reporting profits it'd mean they'd have run out of things to spend money on (R&D, employees, product dev, etc). The whole point of VC funding is that so much money will go towards product dev that they'd need external funding.

And how does that apply to a public tech companies that are still losing money like PagerDuty, Dropbox, Mongo, and ElasticCo?

They have the same obligation to shareholders to increase future profits, not to hoard cash, which is what income tax discourages.

If Y Combiantor is doing that already why should Google? They can observe the development and then buy the winner (with a premium)

If Google/Alphabet does too many investments which fail shareholders will cry.

> If you had $25B to start a company what idea would you tackle?

Medical. I would provide FDA approval process funding and indemnification for medical devices.

Medical is rife with areas that could be disrupted by startups. The blocking limitation is that you can't afford the funding to get clearance for your product.

Very nice. Dealing with FDA is very painful.

Great idea, not sure why you're bored down. The slow as shit FDA has killed more people than Stalin.

And yet the FDA was the reason why thalidomide didn't get approved and affected the US much less than elsewhere.

While I have lots of beef with the FDA and could easily write encyclopedic tomes on the subject, there is practically no other agency anywhere that actually makes sure before the fact that drugs or devices are actually better than nothing and actually fit for purpose.

The biggest problem is that the FDA could move much faster if they had a way to do detailed monitoring on things after approval. Alas, there is no incentive or system to handle that.

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