The co-founders of Google were afraid of losing control of the company with the IPO: this is how Warren Buffett solved the problem

The co-founders of Google were afraid of losing control of the company with the IPO: this is how Warren Buffett solved the problem

The co-founders of Google were afraid of losing control of the company with the IPO: this is how Warren Buffett solved the problem

Alphabet, the parent company of Google, is among the world's most valuable companies, with a market capitalization of $2 trillion. But the story could have been very different. Its co-founders, Sergey Brin and Larry Page, came close to avoiding going public in 2004.

But everything changed thanks to a conversation with Warren Buffett.

"According to one investor, Brin and Page agreed to go public only after meeting Warren Buffett, the legendary American business tycoon, who familiarized the two young founders with the dual-class stock structure," writes Mike Isaac, technology correspondent for The New York Times, in his book Super Pumped: The Battle For Uber.

Google's co-founders were reluctant to go public, fearing inexperienced investors would tell them what to do, claim quick profits and pressure them to make changes if growth slowed, Isaac says.

They only agreed to the idea after Buffett suggested they issue two classes of shares, which would guarantee them control of the company.

Los cofundadores de Google tenían miedo a perder el control de la compañía con la salida a bolsa: así resolvió Warren Buffett el problema

The search and advertising giant issued "A" shares with a single voting right when it went public in 2004. Meanwhile, its co-founders hoarded "B" shares with 10 voting rights each, ensuring they wouldn't they would be outclassed in important decisions.

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Similarly, Berkshire Hathaway - Buffett's investment vehicle - offers "A" shares that carry one vote each, and "B" shares that carry 1/10,000th of a vote per share. Buffett's nearly 239,000 "A" shares mean he controls 31.5% of Berkshire's voting rights, despite having only a 15.8% economic stake in the company.

Brin and Page explained the dual-class share structure in their founders' letter to investors ahead of Google's IPO. They titled the letter to Google shareholders Owner's Manual.

"Much of this letter was inspired by Warren Buffett's texts in his annual reports and his 'Owner's Manual' for Berkshire Hathaway shareholders," the couple wrote in a footnote, tipping their hats to the Berkshire boss.

Buffett also inspired the creation of Alphabet in 2015. Brin, Page and former Google CEO Eric Schmidt had visited the investor several years earlier and realized that emulating Berkshire's decentralized and autonomous structure would allow them to scale their company to new heights.