Who Can Really Say?

The Sunday NY Times has a front page class journalism piece today called "Google Goes Public? Search for 'Rich Get Richer'". Google is considering going public, and the article delves into who stands to make the big bucks if that happens. Here are the opening drive-by paragraphs:

Tiger Woods has his small stake. So do Shaquille O'Neal, Henry A. Kissinger and Arnold Schwarzenegger. All can be counted among that small club of people lucky enough to own a sliver of Google, one of the hottest companies in Silicon Valley and what could be the hottest deal on Wall Street this year.

Michael S. Ovitz, once a top Hollywood agent, pulled strings in an effort to enter a pool that was being offered to a group of rich investors and would eventually own a small piece of Google. But that was in the late 1990's, and apparently his star was already fading. Mr. Ovitz was turned away.

What we don't learn until the bottom of the article is that two venture capitalists, Ron Conway and Bob Bozeman, created two investment funds specializing in risky internet start-ups, that these funds invested in Google, and that it was one of these funds that Ovitz tried to join. Then we learn that one of the funds (the first and much smaller of the two) will do well if Google goes public, but the other fund has done so poorly to date with other investments that a successful Google public offering will only recoup the losses already suffered by the fund. Ovitz tried to get into one of these funds.

We also read of Stanford University, "one of the country's richest universities". It owns the Google search engine technology because it's inventors, two Stanford students, created it while working on a University funded project. Stanford licenses the technology to Google and also owns a piece of the company.

So what did we learn about how the "rich get richer"? Rich people make money by putting huge sums of it at risk (the two funds raised $180 million), losing most of it, and then breaking even or making some money, depending upon the timing of the investment. Rich universities make money by funding research.

How could this be? You mean the rich get richer by actually putting their money into high risk investments that sometimes pay off, or by funding research? All along I thought the rich just made money because they were, well, rich.

But what I still don't know is how the richest newspaper in the country get's away with stuff like this.

[Update: added link 4/27.]