I just read something that sent me about 16 years down the old Memory Lane, and not in a good way.
Google parent Alphabet (GOOG -2.76%) (GOOGL -2.81%) may have inspired a modern version of Yahoo!'s Peanut Butter Manifesto moment. That might not mean much to you, if you weren't paying much attention to the online services space back then. So let's start with a quick history lesson.
The Peanut Butter Manifesto
The year is 2006. Yahoo! had survived the dot-com meltdown and grown into an online giant of the era. With a market cap of roughly $40 billion, the web portal operator played in the same weight class as Apple, BlackBerry, and Sony. Life was relatively good for Yahoo! and its investors -- or so it seemed.
But Brad Garlinghouse, then Yahoo!'s senior VP of "communications, community & front doors," penned the Peanut Butter Manifesto. The four-page memo pointed out a few disturbing flaws in Yahoo!'s operations and business culture, arguing that the company should stop trying to do everything for everyone and just pick something it could excel in. Garlinghouse compared Yahoo!'s unfocused approach to spreading peanut butter much too thin on a large slice of bread.
His senior VP title notwithstanding, The Economist called Garlinghouse "a manager just senior enough to be noteworthy." In other words, he didn't have the power to right any of these wrongs -- but enough clout to notice and expose them.
Image source: Getty Images.
At the same time, the twin revolutions of widespread social networks and a smartphone in every pocket were already afoot. Garlinghouse offered a few ideas on how to refocus Yahoo! into a tighter, more inspiring, and more profitable business. However, his senior executives didn't listen and Yahoo!'s downfall was about to turn unstoppable.
These days, Yahoo!'s web portals struggle on under the shared ownership of private equity firm Apollo Global and telecom giant Verizon Communications in a 90%/10% split. The Peanut Butter Manifesto didn't kill Yahoo!, but it shined a spotlight on the structural issues that eventually brought the company down. The ball was back in senior management's court, and it failed to save the company.
And if Garlinghouse's name rings a bell, it's because he's still making headlines in 2023. You probably know him as the CEO of Ripple Labs -- the company that owns and operates the Ripple cryptocurrency. The cross-border payment network's legal skirmish with the Securities and Exchange Commission may soon force regulators and lawmakers to set up a proper rulebook for owning and trading crypto.
More peanut butter?
Snap back to 2023, and now there seems to be a similar situation brewing in Alphabet. A relatively high-level executive published a blog post outlining seemingly fatal issues within the company's current business plan and corporate culture. This might be Alphabet's version of a Peanut Butter Manifesto -- a deeply disturbing idea to longtime shareholders such as yours truly.
This memo comes from Praveen Seshadri, who founded and led the mobile app development service AppSheet until Alphabet bought the company in 2020. Seshadri stayed on as a senior software engineer for three years, leaving the company last month, hoping to find and lead another tech start-up.
In his blog post, Seshadri argues that the world-changing passion that used to drive Google forward has gone, morphing it into a stagnant and eerily traditional business. The almighty dollar runs the show and dodging risk is everybody's top priority. No one wants to fight for great ideas or speak up for disappointed Google users, because "nothing is worth fighting for" in this culture.
Is it time to sell Alphabet stock?
What if Seshadri's description is a fair review of Alphabet's overall state of affairs? Widespread incentive to avoid business risks at any cost could be a fatal error, especially while Google's bread-and-butter online search business is under fire from ChatGPT and other artificial intelligence tools. From this point of view, my hand wants to crawl up and smash the "sell Alphabet stock" button.
I'm not quite ready to take that leap yet, though. Seshadri admits that it's just one person's experience in one specific part of Alphabet's massive machinery, and that other teams might have healthier work cultures. In that case, his blog post might be exactly the right medicine to inspire positive change across a patchwork of weak and strong pockets.
The truth, as always, probably lies between these extremes. At any rate, the ChatGPT challenge will probably steamroll other operating concerns in 2023. By the time top-level executives get around to addressing Seshadri's worries, the act of doing high-stakes battle together against other companies' generative AI tools may have moved Alphabet's work atmosphere closer to its idealistic roots.
So no, I'm not going to sell my Alphabet stock today. Seshadri has opened my eyes to a potential problem, but I need this data to be confirmed by other sources -- preferably many times over. If this is Alphabet's Peanut Butter Manifesto, the writing should be on the wall in blinking neon block letters soon enough.
And if not, I will continue to hold my Alphabet stock for the long haul. My investment thesis is based on the cornerstone idea that this company will find a way to adapt to myriad unexpected challenges. An internal culture in need of a revamp is just another challenge -- for now.
