How much was creating Google worth?

by JonahSinick 6y2nd Jun 201348 comments

3


I would greatly appreciate feedback on whether the assumptions in this post, as well as the conceptual framework, are reasonable. I recognize that I don't address positive externalities explicitly. I think that they may be picked up implicitly, but am unsure about this. 

Sergey Brin and Larry Page made an outsized contribution to society by speeding the development of high quality online content filtering by creating Google. They became spectacularly wealthy as a result, but plausibly produced far more value than they captured.

One can estimate the value of creating Google by trying to place oneself in the shoes of somebody with average US earnings in 2000 (~$45,000/yr) and thinking about how much one would be willing to pay for Google to have been created, rather than its counterfactual replacement some years later.

Assumption 1: The counterfactual replacement would have been created 3 years later (in expectation).

Assumption 2: Contingent on knowing assumption 1, the mean 2000 US citizen would be willing to pay at least $1/week (about 0.3% of his or her income).

The average person spends about 15% of his or her income on utilities and entertainment combined. In view of this, we’ll assume

Assumption 3: The mean American would not be willing to pay more 5% of his or her income for three years.

Assumption 4: The percentage of income that one would be willing to pay for Google is approximately uniform over the entire population.

Putting these assumptions together, and using the fact that world GDP in 2000 was about $60 trillion, we get a ballpark estimate of the value of Google of 0.6 trillion — 9 trillion.

Since Brin and Page have total net worth about $40 billion, the remarks above suggest that they produced between 15x and 225x as much value as their aggregate earnings.

Thoughts?