Warren Buffett's modest office inspired Google's change to Alphabet, says chairman Eric Schmidt

Key Points
  • Schmidt says Googlers were impressed by scale of Buffett's success, given that his offices were housed in 'just one floor' of Omaha office building.
  • Meanwhile, shareholders voted down a slew of proposals directing Alphabet to produce reports on things like equal gender pay, charitable giving and political contributions.
  • Google co-founders Sergey Brin and Larry Page control nearly all of voting power thanks to multi-class share structure.
Eric Schmidt, chairman of Alphabet Inc.
David Paul Morris | Bloomberg | Getty Images

Alphabet executive chairman Eric Schmidt told shareholders Wednesday that the company's 2015 restructuring out of its Google roots into a holding company was inspired by a visit long ago with billionaire investor Warren Buffett.

Schmidt also predicted that the updated structure will allow the company to "bring revolutionary benefits to billions of people."

Schmidt and Google co-founders Sergey Brin and Larry Page were impressed by the success of Buffett, CEO and chair of Berkshire Hathaway, especially given the modesty of its headquarters.

"The scale of the success of his model" impressed the three Googlers, especially given that Berkshire Hathaway's executive offices were "on just one floor, the 14th floor of a building in Omaha," Schmidt said during the company's annual meeting in Mountain View, CA.

The trio decided they should mimic Buffett's principles, including "the independence of the CEO" and "a strong brand" for the parent company.

While many have likened Alphabet's structure to that of Berkshire Hathaway, Schmidt's comments drew a direct line between the Oracle of Omaha, the world's third-richest person, and what he called "the genesis of Alphabet" nearly two years ago.

Schmidt and other Alphabet executives, including chief legal officer David Drummond, also noted that Alphabet's current executive offices take up only half a floor, making them even leaner than Berkshire Hathaway's.

The new Alphabet structure separated Google's core business -- selling digital advertising -- from its more experimental long-term businesses like investing (GV), internet access (Access), home automation (Nest) and health technology (Verily and Calico), which it calls Other Bets.

The change was needed to help speed the company's ability to innovate in new markets, Schmidt said, quoting from a letter by Brin and Page arguing that true innovation was 'revolutionary, not evolutionary.'

According to Schmidt, Alphabet's mission goes beyond Google's original goal of organizing all the world's information.

"With this structure, with this innovation, we can bring revolutionary benefits to billions of people globally," said Schmidt, who served as Google's CEO from 2001 to 2011.

Later, Schmidt also drew a small laugh when he conceded just how complex some new Google technologies are, including machine learning and artificial intelligence.

They are "hard for me to understand, and I have a Ph.D." in computer science from the University of California, Berkeley, Schmidt admitted.

Earlier, shareholder proposals urging Alphabet to generate annual reports on a series of corporate issues, including equal gender pay, philanthropic giving and political lobbying, were voted down.

Page and Brin control the vast majority of shareholder voting power thanks to a multi-class share structure Google implemented when it went public in 2004 and revised a decade later.

Alphabet is now the second-most valuable company in the world, with a market cap of $682 billion. Wall Street analysts expect its sales to rise 19 percent this year to $108 billion.