I had a chance to do work for a board member of a public company. For 10 years they invested in R&D which was an utter failure and used up the majority of cash flow generated from operations.
After halting most of R&D, cutting costs, the company was able to be turned around and cash flow positive.
Capital should go wherever returns are best. If you have a steel company and you are at the top of the cycle, investing in steel plants or doing acquisitions in the steel space will be a destructive use of capital.
Let's say you are Google and you do indeed believe that startup valuations are getting too high to warrant acquisitions. Maybe you pull back and look for other opportunities. You have $33B in cash and 10-years are only yielding ~3%.
You're better off redeploying that capital to somewhere that will be truly accretive versus chasing bad deals or sticking in treasuries. Maybe right now the current R&D ideas just aren't appealing either. So you decide to sit tight in that area and go do a real estate deal where you can get a good IRR.
Study Henry Singleton, the founder of Teledyne and see how he chose to allocate capital wherever he could get the most value at that particular point in time.
McDonald's for example, owns or leases huge amounts of real-estate, which they sublease to their franchisees. One reason for this is to maintain control over the franchisees. A franchise owner can't decide to close up and open a Burger King instead, because McDonald's would cancel his lease on the property.
I'm not sure how owning real-estate relates to what Google does. They are not a retailer so the physical location of their offices is not critical. Even if a particular opportunity is a "good deal" it's still a distraction from their core business. Even if management and maintenance is subbed out, somebody in Google has to keep an eye on things to some degree.
Some businesses are just too dysfunctional to survive.
This company was plagued with leadership issues (CEO/founder had been forced out because of bad board members, new CEO had 0 industry experience and was utterly incompetent) plus because of the cash flow problem, geography, and loss of key customers, the company just could not afford to go out and beef up the R&D staff.
So the next best thing was to replace a couple of the bad board members, cut costs, clean up operations, make the company profitable, and then shop it around.
"organize the world's information" - what information is being organized?
"and make it universally accessible" - are they going to make the building universally accessible?
"and useful" - I'm sure the building is useful without Google owning it :)
"organize the world's information" - what information is being organized?
"and make it universally accessible" - are they going to make the paperclips universally accessible?
"and useful" - I'm sure paperclips are useful without Google owning them :)
Google really shouldn’t ever buy paperclips and the ones they bought in the past were clearly wrongheaded investments.
My step dad owns a few faucet stores, granted totally different field, in the Bay Area, he owns the buildings of all his stores and the value of his real estate holdings are the equivalent of the value of his business.