In What Ways Is Google Trying To Be Like Berkshire Hathaway? by S&C Messina
Google has just (red: early 2015) gotten P&C insurance agency licenses in 26 states, maybe more by now. Based on chats I’ve had with people in the insurance industry and auto business, I have a hunch as to what they’re going for, and it could be massive on a global scale if they play their cards right.
If insurance is the business of collecting and measuring data and risk variables of clients, who has more accurate data on customers and businesses than anyone else? Who is trying to disrupt the auto industry more than anyone else with self-autonomous vehicles? If vehicles do become self-driving, who is going to pay the auto insurance premiums in the future: The car owner-drivers as they do today? Or like manufacturers and operators of railcars and trains, will the auto OEMs and the future operators (i.e “Amtraks”) bear this liability with product performance guarantees and warranties and business liability coverage?
This post gives some insight into what I think Google might be doing at some point, that is, potentially generating a source of long-term leverage from insurance float or OPM: If Warren Buffett had to start today, could he still reach his current level of wealth? In other words, while their competitors put $1.00 into an asset and get $1.10 back for a 10% return, Google could put $1.00 into the EXACT same asset, but instead get $1.15 or $1.20 back for a 15% or 20% return on their money via the use of leverage or OPM (See link above re: OPM).
Update: I’ve been getting questions regarding this post, so I have abbreviated it as it’s much easier and less confusing to explain in person some of the technical points I referenced in an earlier version. So feel free to contact me for the longer answer that goes into a more elaborate discussion.