An Owner’s Manual for Google’s Shareholders

The situation

By 2004 Google was the world’s most popular search engine and highly profitable, thanks to advertising placed alongside search results. It had grown large enough that it would soon be required to disclose its finances publicly whether or not it listed its shares. The founders, Larry Page and Sergey Brin, were wary of public markets. They had watched technology companies after the dot-com crash manage their businesses around quarterly earnings, and they believed Google’s success depended on long-term projects and on independence from short-term pressure.

What the letter argues

The letter opens with a declaration: “Google is not a conventional company. We do not intend to become one.” It credits Warren Buffett’s letters to Berkshire Hathaway shareholders as an influence and calls itself an owner’s manual, explaining how the company would be run and what shareholders should expect.

On the long term, it borrows Buffett’s line that the company will not “smooth” its results, and states: “We do not plan to give earnings guidance in the traditional sense.” On risk, it is specific: “We will not shy away from high-risk, high-reward projects because of short term earnings pressure,” and it gives an example of the kind of bet it means, saying Google “would fund projects that have a 10% chance of earning a billion dollars over the long term.”

On control, it explains the dual-class structure: Class B shares, held by the founders and other existing shareholders, would have ten votes per share, while the Class A shares sold to the public would have one. The purpose was to protect the company’s independence and ability to innovate.

On culture and values, it describes the practice of encouraging employees “to spend 20% of their time working on what they think will most benefit Google,” states that “our employees, who have named themselves Googlers, are everything,” and introduces the motto that became famous: “Don’t be evil.” It closes the theme with an aspiration: “We aspire to make Google an institution that makes the world a better place.”

On the offering itself, it explains the choice of an auction: “Our goal is to have a share price that reflects an efficient market valuation of Google,” fair to small and large investors alike.

The decision it carried

The letter announced several connected decisions: a dual-class structure, no traditional earnings guidance, an auction-based offering instead of the usual allocation by investment banks, and a public commitment to long-term, risky projects. Together they were designed to let Google behave like a private company while having public shareholders.

What happened

Google went public on 19 August 2004 at $85 a share. The founders retained control and used it. Over the following years Google acquired Android and YouTube, built Gmail, Maps and Chrome, and invested in long-term projects ranging from self-driving cars to artificial intelligence, many of which produced little revenue for years. In 2014 it added a third class of shares with no votes, extending founder control further, and in 2015 it reorganised under a holding company, Alphabet, to separate the core business from riskier ventures.

The dual-class model spread. Many technology companies that went public afterwards adopted similar structures, often citing Google’s example. In 2019, when Page and Brin stepped back from executive roles, they wrote that the 2004 letter’s central tenets still held.

How to read it as a product manager

The letter is a lesson in setting expectations before you need to defend them.

It defines the game. By stating in advance that results would be lumpy, that there would be no guidance and that risky projects would be funded, the founders made later decisions look like keeping a promise rather than breaking discipline.

It quantifies risk appetite. “A 10% chance of earning a billion dollars” is far more useful than “we take bold bets.” Product leaders can use the same technique when asking for room to experiment: describe the odds and the size of the prize.

It builds protection into structure. Promises can be broken under pressure; voting control is harder to override. Product teams have their own versions: separate budgets for exploratory work, protected time, or independent units.

And it shows the double edge of values statements. “Don’t be evil” was quoted back at Google for years by critics whenever its decisions were questioned. A memorable value creates a standard that outsiders will use.

The decision, examined closely

What triggered it

Google was approaching the number of shareholders that would require it to file public financial reports. Once its finances were public, the main advantage of staying private would be gone, so the founders decided to go public and to shape the terms as far as they could.

The constraints

Investors and the investment banks that manage IPOs expected conventional structures and practices. An unusual offering risked a lower valuation or a failed deal. The founders also had to persuade regulators and the market that an auction and a dual-class structure were legitimate.

What the author was optimising for

The letter optimises for the founders’ ability to direct the company over decades. Every element, from voting control to the refusal to give guidance, protects long-term decision-making from short-term market pressure.

Second-order effects

The structure normalised founder control in technology companies, which shifted power away from public shareholders across the industry. It also allowed some of the most valuable products of the following decades to be developed inside Google without shareholder pressure to cut them. And it made Google’s leadership largely unaccountable to outside investors, which became a matter of debate as the company’s influence grew.

The counterfactual

With a conventional structure, Google might have faced pressure to cut long-term projects during difficult years, and some acquisitions might never have been made. It might also have been more responsive to outside investors on questions of governance and spending. The letter traded one set of risks for another.

What is contested

Corporate governance experts and some large investors have long criticised dual-class structures for weakening accountability, and some stock indexes have restricted companies that use them. Supporters argue that founder control enables long-term investment that public markets undervalue. The motto “Don’t be evil” was later moved within Alphabet’s code of conduct, and critics have used it to question the company’s conduct. These debates continue.

Sources and limitations

Quotations were verified against the copy of the letter on Alphabet’s investor relations website. Details of the IPO and later events come from widely reported company history. The assessment of the structure’s effects is the author’s interpretation; this page does not take a position on the governance debate beyond describing it.