Your reasoning is based on the belief that Google is sacrificing productivity by not giving all employees office. GP is directly contradicting that line of thought, which makes the rest of it fall apart.
there is two narratives, which do you think is more likely:
1. Google is dogfooding it's own products to improve them and make them competitive and stop potential data/privacy/security leaks by using external software.
2. Google is trying to save 20 bucks
There is nothing wrong with Google docs or sheets and I have used them both. But sooner or later you make enough documents or work with enough spreadsheets you're going to want or need some feature that office has.
Why should it be an either/or thing? Both are valid reasons for Google to prefer its employees use Docs. However the fact that you can choose to use MS Office without any special permissions somewhat undermines your reasoning in point 1.
Google may be a rich company but it's also a very frugal company in many ways, particularly wrt technology (they pioneered the "huge amounts of redundant cheap hardware" approach to DC construction, for example). When Googlers were being coaxed into switching to Docs from MS Office, the financial benefits were front and centre to that pitch.
