Driverless taxis to cancer drugs Google's moonshots are serious business

When Google renamed itself Alphabet Inc. in 2015, co-founder Larry Page said that the new name meant one sentence: alpha-betting, such as "betting on investment returns over investment". Google's financial statements include so-called "other stocks" - subsidiaries working on projects ranging from self-driving cars to cancer treatments, not auctioning to improve the world, but the best commercial potential - average returns .

These may be the opening days for "other stocks", which absorb about $ 3.2 billion in capital costs and reported about ₹ 24.3 billion in operating losses from the name change. Finally, Sanford C., who recently attempted to evaluate the components of the alphabet separately. Bernstein and co-analyst Mark Schmulick suggested that they might have "other stocks" worth more than $ 75 or $ 50 billion per component to see if these estimates would be worth more than the current amount. This is 2.9% of its total valuation - which is not bad for businesses that make quarterly returns of 0.3% to 0.5% based on an alphabet.

However, more than half of the analysis of "other bets" comes from self-driving taxi company Waymo LLC, where CEO John Grofik's self-driving pledge, which was lifted last month, was as early as some tech hopes a few years ago. Was not completed. . Wemo was considered by some investors to be more than $ 100 billion at the time; The number is said to have been around 30 billion. It is not yet clear how the business will make money in the future.

Other crescent letters are formed very slowly. In a recent call for revenue, CEO Sundar Pichai mentioned only two "other stocks" - biotech research and development company Waymo and Calico. Calico and its partner Abby Inc. announced in the first year that their two molecules would enter the first phase of clinical trials, but the announcement came with a warning from Calico founder Arthur Levinson that the companies' outlook was "patient" and "tenacious" " is required . "

The "other bets" of the characters - even X, the "Moonshot Factory" that creates the most exciting projects, such as trying to catch (stop) wind power in kites - seem to be insured against the Xerxes Park rule , A very innovative laboratory. Since the 1970s, many inventions have failed to commercialize the Copier company, including the graphic user interface or commercial version of the mouse. Apple co-founder Steve Jobs covered the reasons for the failure in a popular interview in 1995:

When you have a monopoly on the market, the sales and marketing people run the company. The production company has ended. Companies forget the meaning of making great products. [Researchers] of Xerox PARC called those who drove Xerox 'toner heads'. They have no clue about computers or what it can do.

Google is part of an Internet advertising duo that is close to the search monopoly, so Google executives - advertising leaders, as you might call them - may be tempted to spark lucrative core business-related ideas. Cancer Roots? Taxi without drivers? Electric kite, for God's sake? However, in the alphabet, the Moon was considered a possible trade from the beginning; Although the tolerance for trial and error is relatively high, there is pressure on project founders to find opportunities to improve and improve the business model. One finds ways to demonetize the "other stock" and move into new areas in the process; An excellent example is the Alphabet Health Assistant which has changed to insurance in the last year.
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But the character is still a large company, with unavoidable bureaucracy on one side and a lot of resources on the other side. Performance allows for its proliferation and secure mainstream revenue flow. It is unclear whether Google's support has any significant benefit for research and development projects - in other words, they do no better or better than traditional enterprise funds (which have attracted some projects). Google's) or even in higher education institutions.

For example, Deep Mind Technologies Ltd., a UK-based artificial intelligence company, is one of the "other stocks" that have made significant progress in using artificial intelligence for 3D models. Protein form - but is bath use better here? Carnegie Mellon University, the global leader in artificial intelligence research as measured by published documents, had assets of more than $ 2 billion last year. Deep Mind incurred losses of around $ 1.2 billion in 2018 and 2019, according to a recent report filed by Companies House in the UK - and Google's Irish subsidiary waived a $ 1.5 billion debt in 2019, which was originally the parent company Cloud Were used to train their models. Computer resources. Google donated most of its revenue to Deep Mind.

If Alphabet's goal is ultimately something new, and there are no longer markets going to its search corner, consider Moonshot projects as potential businesses and think of them as products and business models that are probably the right approach. While only a few of them dominate their businesses, Google may eventually stop making 92.5% of its revenue from its core business, 81% of which came without advertising. But since most alphabet projects are in crowded areas such as self-driving, AI or biotech, even successful projects are more likely to grow into monopolies; Google's cloud business - not Moonshot, but one-sided - is strong, but not global.