Making money and changing the world: are they compatible?
The quarterly results of Alphabet, Google’s parent company and under whose umbrella it operates, show revenue of $36.1 billion, somewhat below expectations, due in part to a strong dollar and the record $1.7 billion fine imposed by the European Union, about which the company had already issued a profit warning. The company grew by 17% compared to the 19% expected by analysts, which led to a 7.34% drop in its share price before the markets opened.
More striking, however, are the items filed under “other bets”, which include subsidiaries such as its autonomous vehicle division, Waymo, health sciences research company Verily, fiber access provider Google Fiber, along with other projects such as Calico, Chronicle, DeepMind, Jigsaw, Loon, Sidewalk Labs and X): whose combined losses add up to $868 million, compared to $571 million for the same quarter last year.
The strategy seems clear: a company whose search engine changed the world continues to live — and very well — from its profits (the company is currently worth around $900 billion), but is also working on other projects with the potential to further change the world with very long incubation cycles. When Google created Alphabet, the holding company destined to work on projects in the alpha (early) phase, it stated unequivocally: “Google is not a conventional company. We do not intend to become one.” Conventional companies do not work on autonomous driving, curing diseases, improving life in cities or providing internet access through balloons. These projects, which aim to change the world as we know it, could eventually end up making money and being good investments, but when they were set up, represented such a high risk that very few investors were prepared to back them. This is entrepreneurship carried to the maximum and that would be difficult for any company to undertake and that Google is doing so for a galaxy of reasons, from personal interest to the collective good and that it executes with its arsenal of strategic tools.
How would you define a project that has invested hundreds or thousands of millions of dollars to develop technology for a self-driving car, which once it has reached a reasonable level of maturity will then require many more billions to build a huge fleet and a factory of its own, and that, possibly, when it is up and running, will then face myriad competitors all determined to put it out of business? How about a company that develops the largest longitudinal health study in history, with ten thousand volunteers who regularly undergo analytics of all kinds? These kinds of projects can, eventually, have huge economic potential… but that’s not why they were set up, because from a risk analysis point of view, they make little sense. Sure, for some time now, UBS has valued Waymo at around $135 billion based on the lead it developed over its competitors, but that’s not why Waymo was created. We’re talking here about “someone has to do it,” or “here’s an important problem that needs solving” or “let’s change the world because we can and because we believe in it,” but that is a long way from a standard economic analysis taken in isolation.
Making money is important, and so is keeping your shareholders happy. But more important in terms of motivation, life goals, mission and a sense of being part of something huge is when a company also knows it can possibly change the world with a moonshot. Would Google be worth more without these projects? Say what you like about Google or technology companies in general, but it’s good to know there are projects and visions out there like these…
(En español, aquí)
Making money and changing the world: are they compatible?
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