Christopher Schmidt

Google today announced that the board has approved $70B of stock buybacks.

Stock buybacks are not considered a universal good: "Some economists and investors argue that using excess cash to buy up stocks in the open market is the opposite of what companies should be doing, which is reinvesting to facilitate growth (as well as job creation and capacity)."

At Google that might mean things like (for example) "Choosing not to fire 12,000 employees."

Apr 25, 2023 at 9:10pmWeb
Show threadstoneheadApr 25, 2023

@crschmidt On my 'to read' book pile is 'Subprime Attention Crisis' by Tim Hwang (2020), which is about the true value of advertising on the internet. Hwang argues that this is the next tech bubble to burst.

Maybe Hwang is too alarmist, but I hope that Google is preparing themselves for something like this - they should know best, right? Otherwise the company might risk even more unnecessary damage.

Show threadChristopher SchmidtApr 25, 2023
@stonehead Google has not had any meaningful impact to its financials from changes in the industry. Expanding beyond revenue directly from ads has been a longstanding thing (folks have been fearing the end of the internet advertising era for at least half a decade), but in the context of Google making a bunch of silly, unnecessary decisions, it's sort of out of scope.
Show threadwakingrufusApr 25, 2023
@crschmidt
Stock buybacks are one thing... But paired with layoffs? Pure evil
Show threadChristopher SchmidtApr 25, 2023

@wakingrufus Yeah, if you really can't come up with anything else to do with your money, buybacks are not an unreasonable thing to think about.

But "Keep paying the people we hired earlier this month" seems like it should have been in scope of something Google could have considered doing with its money.

Show threadAlex ZaniApr 25, 2023
@crschmidt @wakingrufus I'm so glad that they lied to us about why they were saving their cash reserves. That's always just fantastic.
Show threadChristopher SchmidtApr 25, 2023

@AlexandreZani @wakingrufus "We have a giant bankroll to ensure that we can weather any short-term financial difficulties!"

*labor gains a modicum of leverage*

"_almost_ any short-term financial difficulties!"

Show threadPeter ButlerApr 25, 2023
@crschmidt @wakingrufus It is quite an inflection point when a business stops paying its employees and starts spending on boosting its stock price. It doesn’t bode well to me, but I am not an "investor"
Show thread➡ [email protected]Apr 26, 2023
@crschmidt @wakingrufus bonuses for workers should be your only option if you can't think of any reasonable reinvestment use.
Show threadPär BjörklundApr 26, 2023
@crschmidt @wakingrufus give maintenance the same benefits as software developers. Don't rely on contractors to avoid benefits. Lower prices, donate a truckload to charities. There are a lot of things one could do with 70B.
Show threadBoredomFestivalApr 25, 2023
@crschmidt <maury_lie_detector> "You said we needed layoffs and cutbacks due to 'different economic reality'. The $70B stock buyback and $226M bonus determined that was a lie."
Show threadS NielsenApr 26, 2023
@BoredomFestival @crschmidt I'm sure the consequences for the now even more obvious lies will be severe! [/sarcasm]
Show threadPeter ButlerApr 25, 2023
@crschmidt I’m not an expert in this area at all, but it always has seemed like stock price manipulation to me. No?
Show thread🥥 Tucker Carlson's Nuts 🥥Apr 26, 2023
@peterbutler @crschmidt 🥥 Stock buy-backs -- like #Google's $70-billion one -- WERE stock price manipulation until Saint Ronald Reagan said they weren't. 🥥
Show threadGarrett WollmanApr 26, 2023
@crschmidt Paying a dividend would be less distortive!
Show threadChristopher SchmidtApr 26, 2023
@wollman Overall, capital repayments as a tool for managing excess financial capacity make some sense in some cases. (Apple buys back a shitton of stock every year, as well as having a large dividend.) But not if you're going to claim financial hardship at the same time!!
Show threadGarrett WollmanApr 26, 2023
@crschmidt A big chunk of that is simply tax arbitrage and shouldn't exist.
Show threadChristopher SchmidtApr 26, 2023
@wollman Yup.
Show threadJustinApr 26, 2023
@crschmidt it's funny because they're called public companies, though they're rarely there for public good, most often private good, that of the owners/stockholders.
Show threadIain HarperApr 26, 2023

@crschmidt @icing I read somewhere that at current inference costs, if Google were to deploy an LLM into all searches this would mean an increase of $30bn a year to direct costs because of their (current scale).

This plus the fact that 80% of revenue comes from search ads, suggests that they will find it really hard to respond to the threats and disruption from generative search.

You don’t see many young, hungry companies doing buybacks.

Show thread🥥 Tucker Carlson's Nuts 🥥Apr 26, 2023
@iainh @crschmidt @icing 🥥 How ironic that #Google -- a company that made a fortune on "disruption" -- is about to get it's face eaten by the face-eating leopard of #disruption via #AI. 🥥
Show threadPierre BourdonApr 26, 2023

@crschmidt as @mrothwell pointed out on Musk's website, in the last year alone Google has done $10M worth of stock buybacks per laid off FTE. Absolutely ridiculous.

https://twitter.com/devilmonastery/status/1650968170973347841

Michael R. on Twitter

“@luisbruno 120 billion in giveaways (50 in 2022, 70 in 2023), or ten million per fired employee.”

Twitter
Show threadPete WrightApr 26, 2023
@crschmidt just think, with that money they could build one chat app and stick with it for more than a year…
Show threadjoApr 26, 2023
@crschmidt I mis-read that at first as "Google announced that Bard approved..."
Show threadChristopher SchmidtApr 26, 2023
@jo Bard is pretty wishy-washy on the topic, but ChatGPT is pretty clear that this choice is "bold move, Cotton" territory.
Show threadJorge StolfiApr 26, 2023

@crschmidt

Dividends are fair: all shareholders get a return proportional to their investment.

Stock buybacks force stockholders to gamble: take the premium now, or hope that the share price will go up as predicted by theory.

This has the perverse effect of distributing the company's past profits to those shareholders who have LESS faith in the company's future profitability.

Thus information asymmetry hits even passive investors, not just traders. And invites insider trading...