I really like the way you put that.
This is a result of perhaps super success at an early age (the founders), not enough hunger (to much money), hiring what you think are the best and the brightest (surprise - all those tests don't really work as our high achievers who designed them thought they would) and not recognizing the role of luck in your previous success. Used to be known in the past as becoming "fat and lazy" - I think that was the saying.
But that's pretty much exactly it. Google managed to build something early on that is difficult to compete with, and now they are resting on it. The company revenues are split up into 3 parts: search/ads, backbone internet, and "other". Where "other" is a tiny fraction of the whole that is almost inconsequential to their profit margin.
It's a "problem" that a lot of companies have where they are in a position where revenue is actually too easy. That may seem like a blessing but it has many downsides and typically chokes growth potential. The consequences for failure at a functional company are usually pretty significant. If SpaceX builds a rocket that doesn't work or if Toyota builds a car that absolutely nobody wants that hurts the bottom line. And it drives the company to do better. But at google what are the consequences? If someone at google makes an unprofitable product, well, that's the norm. It just gets tossed in the "other" bin with everything else and everyone laughs and goes back to their free lunches and complementary massages.
It's a romper room filled with nerf toys. And many folks at google are seemingly content to luxuriate in that environment. Why would anyone at google willingly push themselves out into the cold, unforgiving, and desolate world of real-world business where actions have serious consequences when they can just futz around in the "other" play room, slap ads on their "products" and call it a day?
Google has no drive to make youtube the best it can be. And the same goes for gdocs, gmail, app engine, or any other thing they make.
Another example would be the entertainment industry. Or I guess advertising industry or sports team...
Creative or highly competitive. Because you can't hit it so big that the losses don't matter. You are only as good as your last hit film, tv show, or game win.
Google has this tremendous cash cow.
Warren Buffett has plenty of cash. But for him the game is taking that cash and trying to get more cash. (And of course keeping up the image of being Warren Buffett drives him as well). And he has competition for his investment dollars as well.
But then they succeeded so quickly that they haven't had that same level of hunger to actually do something risky that needed to succeed. Today google is just as likely to shut down an old project than to launch something new.
We are resorting to working on a platform for video discovery and monetization, since we just got disgusted as both content creators on YouTube and also as consumers (and found so many other people have the same disgust).
They have search and ads, and an utter inability to actually build anything else or connect with a customer base. For a company this is like having cancer. It's astounding that they can ignore the situation to such a degree.
Youtube is already an amazing force in the world, and that's with google half-assing so much of it. With enough work it could be a multi-billion dollar business and the next generation of media. Instead it'll probably take years while individuals and 3rd parties figure out ways to do what google fails to do (make content more explorable and discoverable, for one, make paid revenue models possible, for another) for them to catch on and build the functionality into youtube directly.
Meanwhile, instead of building improvements they're paying this stupid google plus strategy tax.
Google is chasing facebook when they should be chasing HBO, and amazon, and the discovery channel. It's like they live in a giant mansion with a huge lawn where a bunch of super talented people have been camping out for a while, trying to figure out how to make the next generation of video work. And everyday google gets out of bed, looks out over that scene, grunts, scratches its ass, thinks maybe they should just call the cops to get rid of the hooligans, then goes off to watch Judge Judy.