Even if Alphabet was reluctant to invest their own profits, can't they borrow cheaply too?
Employees of Google that work on GoogleX projects that graduate no longer technically work for Google, but for the new company and they no longer receive Google shares, but new company shares (in this case Waymo, Loon is another example [0]).
This forces the company and employee incentives to be aligned since the value of the employee equity is tied to the success of the specific GoogleX project and not Google itself.
When a company graduates if a lot of employees don't want to stay on the project and choose to stay at Google, that itself might be a bad sign (though it could also just be employee risk preference).
I think companies graduate when they're less pure R&D and closer to marketability. If they can't survive on their own at that point it may be because there isn't a market, the timing isn't right, or any other reason that can cause a startup to fail.
This system prevents Google from pouring money into something that's never tested in an environment where it can actually fail. It puts moonshot projects in an environment where they're truly tested and don't just become places where money is spent without any ability to measure success.
It's my understanding that graduated companies have their own hiring methods and can make their own independent decisions in general. They would also need to raise their own money.
[0]: https://loon.com/
It’s better to know if something will not succeed and you can’t easily tell without testing in the market.
The incentive alignment with equity seems like the most critical piece and it has the bonus of rewarding employees for taking on the extra risk.
This lets you spin out big ideas without spending all of your money - a little like running internal VC (one big success could make up for all of the other failures).
I think at this level capital is not really the main constraint. It's attracting talent and creating a culture/environment where success is possible, even then that's just a necessary but insufficient prerequisite for success among all of the other non-capital reasons a startup might not succeed.
Google then re-acquired it.
Speculation, but perhaps Google was concerned about it getting acquired by a competitor as it used a lot of core Google search technology. Or, perhaps Google knew that the acquisition cost would spiral upwards if they waited much longer. Or, perhaps it just proved out the hypothesis that the product was viable, so better to bring it back in-house.
But I would call it successful by conventional metrics: it found product-market fit, had good customer traction, and was acquired at a decent (though not crazy) valuation.
One is VirusTotal, which is super important to the security community but I don't think generates enough revenue to live on its own.
The other is a strange "Splunk Lite" offering that as far as I could tell the main selling point was it was way cheaper because Google gave them free/discounted storage. The search was terrible. It didn't highlight important things or hide the mundane. When I saw a demo it didn't even support IPv6 yet.
But I guess every moonshot factory has to have its Challenger disaster to learn a few lessons.
From my experience working there, this is the sort of concept they would be attracted to. Google gets a benefit from either scenario.
From the counter party part of this deal, the "investors" either lose their money, or they get a fixed amount of 'upside' when Google re-acquires.
That has been their get-out-of-jail-free card since, well forever.
plaintiff: "Your honor these share holders are suing the company for violating its fiduciary duty."
company; "Your honor, we know that some share holders may not always agree with the majority, but we made sure that over 50% of the share holders were on board with every decision we've made. We move to dismiss."
Judge: "You have documented that the majority agreed?"
company: "Yes your honor"
Judge: "And every shareholder has access to the bylaws of the company which state in clear and unequivocal terms that all decisions will be decided by a simple majority vote?"
company: "Yes your honor."
"case dismissed."
The short part gives you some cash now and if the stock drops even further, you can cover the short and keep the profit. But if the stock goes up, just when there is a margin call you've got an "in the money" call option to cover it. So if it is shooting up you exercise the call, cover the short with half the shares, and profit when the other half keep shooting up.
Anyone can nominally do this on any stock, but there are tax advantages to the company that does it with one of their own subsidiaries.
They're at least responsible for a large chunk of ML research, which is directly to directly improve their products (Maps, Photos, YouTube, etc.).
They are fishing for understanding of the market and sometimes general approaches or parameters of possibility. You are providing free insight. It’s the same when you pitch a VC. You just give them more and more free insight. Hopefully they provide value in return.
the inclusion of a non-revocable license to core technology is a common part of such structures because it gives the people who take the risk some proof against management changes that otherwise sink such deals.
https://en.m.wikipedia.org/wiki/Pokémon_Go
Niantic was spun off from Google.
I would not be so dismissive of it -- there are good reasons to have separate companies. You can offload some risk by getting co-venture (as in Waymo's case.) More importantly, you can have other critical partners be co-invested with skin in the game. In the case of Waymo, if I were trying to raise funding, I might get money from P&C Insurance companies -- it could help align great future partnerships that make 1+1=3.
I think if anything, it causes the bar to be super duper high to fully launch, which is why I’m very pessimistic on Level 5 driving happening anytime in the near future. AGI is not solved, not even remotely, and if death is the consequence, Waymo will probably dissolve before launch.
If all the AI did was decide you're unfit to drive, that it take over for a few minutes to get to the next stop and pull over and call the cops on you, we might save more lives by that alone.
For stopping people from driving, you'd have to solve the social issues there first somehow. "Our car stops you from driving if it thinks you're incompetent" isn't something that sells more cars. Maybe the government could mandate it, and that's the government's responsibility.
I could see something like that as part of a “supervised driver” safety feature. Like maybe you enable it when your kids use the car or if you rent the car out to strangers.
Why not just install the existing breathalyzers in every car right now?
Hit by a human, decent chance they flee and if you track them down, it’ll probably be some uninsured drunk with a negative net worth.
This definitely would have been a consideration at some point along the journey.
You're naive if you think it wasn't.
Of course a waymo car will kill somebody at some point. Everybody knows it's going to happen, and there's no way google/alphabet hasn't essentially priced in that risk. If they were afraid of killing people, they wouldn't have gotten into cars in the first place.
Alphabet can (and will likely) invest $xB more money for initial business ramp-up but if you want to create the next Google probably money from their own pocket might not be enough. This is particularly important as they need to heavily invest into physical assets with very high upfront costs.
FYI, Uber has 10 millions of drivers across the world and if you want to match that number, you're gonna need $100B even with super conservative assumption of $10k per car (and the actual cost will likely be much higher). Doing something like this by Alphabet alone is extremely risky given that the technology is still in a very young stage.
Cars will quickly start paying off, even if each car only pulls in 10 rides of $10 each every day, it'll probably pay for itself in a year.
Even founders who can self fund, raise money from investors as you don't want to own all the risk in any risky endeavor.
* Free version of Uber/Lyft based on a Google ad/maps referral as described by this patent [1]
* Free up peoples commute times so there eyeballs are free to use Google more (watch Youtube, use Google Search, read Google News). Perhaps even access free in-Waymo wifi that only allows Google domain access.
They have monopolies in these two areas and therefore neither requires 100% ownership in Waymo.
[1] https://techcrunch.com/2014/01/23/google-awarded-patent-for-...
It's not just about getting money, it's also about getting money from the right people. Investors with the pull/clout/insight/etc they need. Investors who know people or who know people who know people. Perhaps people who have political connections or regulatory access. People with insight in the automotive industry. People with ties to media for favorable coverage. It's about getting money from people in position to help them. It's like a movie production that bring in producers who has connections to local governments that can expedite the process of shutting down a bridge or highway to film on for a day.
Alphabet has "limitless" amount of money but there is also a "limitless" amount of money outside of alphabet wanting to buy into waymo. So for waymo, it's really not about getting money but getting the right type of investors. It's a two way street. Investors want to buy into waymo and waymo wants to buy into investors.
If you can get money from someone else it shows that it has value in the marketplace generally.
A few confounders I haven't seen though:
1) Waymo is its own entity, but its brand is linked to Google/Alphabet. A reader of this article will be clear on that by the time they have gotten through the sub-headline.
Any success or catastrophic failure of Waymo/self-driving will have Google spoken of in the same breath as Waymo.
2) Capital Allocation & Diversification - Google had $119 Billion of cash on hand at the end of FY2019 earning no return. More than any other company.
- Alphabet is not Berkshire Hathaway waiting in the wings to deploy its capital in a downturn or buy up unrelated businesses.
- Diversification is a fine strategy, but when you have this much capital to allocate—and ostensibly Alphabet has this much because they don't know what to do with it—not fully funding Waymo itself doesn't make sense.
3) The Waymo blog post about this that Rutledge linked below gives a possible alternative [1]
> “Today, we're expanding that team, adding financial investors and important strategic partners who bring decades of experience investing in and supporting successful technology companies building transformative products. With this injection of capital and business acumen, alongside Alphabet, we’ll deepen our investment in our people, our technology, and our operations, all in support of the deployment of the Waymo Driver around the world.”
Building technology is hard, but building out a car company that can produce vehicles on any scale is also hard. Tesla and Elon now know this.
So maybe by opening up to outside investment they allow strategic partners to share in the risk and outsized reward of success.
Curiously though, only one of the six outside investors listed seem to be "strategic." That would be Magna International, "a leading global automotive supplier."
The other investors are:
- AutoNation: a used/new car buying/selling website
- Andreessen Horowitz: VC firm
- Canada Pension Plan Investment Board
- Silver Lake: private equity
- Mubadala Investment Company: United Arab Emirates sovereign wealth fund
From the outside looking in, I have further questions as to how those are "strategic" investments that could help develop and/or bring Waymo cars to market.
tl;dr Alphabet/Google has so much capital it needs to deploy not using it to fully fund Waymo is curious. Waymo is not a distinct brand from Google/Alphabet. It's not readily apparent how six of the seven outside investors chosen for the "strategic" investment add value beyond capital.
The ability to raise money is itself a test - if you can't get third parties to invest then that's not a great sign. Google's judgement may be impaired by being so close to it.
They could easily self-fund, but then they wouldn't get that signal. Forcing a company to survive out of the nest will influence the decisions the stakeholders make, they can't relax knowing that Google will just fund things no matter what, they have to be focused on shipping something people want.
At least that would be my guess.
It's a clever way to try and prevent the lethargic energy that comes from being a big company along with the inability for large companies to innovate outside their narrow domain (often even within it).
- Mubadala Investment Company: United Arab Emirates sovereign wealth fund
Couldn't these also be considered strategic in the regional/political/regulatory sense? Access to people with strong connections having skin in the game.
By keeping Waymo separate, shareholders can make their own choice as to how much they want to invest in search/advertising vs. self-driving cars. They're drastically different risk/reward profiles.
Obviously this isn't something a company usually does, but that's because either a division is small, or it has significant links to the rest of the company, or there's a clear joint strategy.
But Waymo is expected to be huge, and there's really essentially zero link to the ads/search/cloud/media that is Google's bread and butter.
As I said a couple months ago, the "Waymo" name is a sign. If they really believed in the product, it would be called "Google Self-Driving Cars".
Point being that google has quite a few inconsistencies in their naming (which is a thing in itself) and their not applying Google brand to Waymo at this point is any indication.
https://en.wikipedia.org/wiki/Google_Video
Blogger was also an acquisition (from the future founder of Twitter), and it already had a strong brand.
Whereas in 2011 there was a lot of marketing tying self-driving cars <=> Google.
There could be other reasons for the separate brand, like managing bad PR from a crash, but I would also classify that under "don't have confidence".
In contrast Tesla seems to be staking their brand on self-driving. I feel like this could backfire in the next 5-10 years, but Elon will probably make some other advance/launch to distract from that. Self-driving has already fallen behind Tesla's claims, but he can keep the media busy enough with other stories.
Google Video is a thing, it was Google's competitor to YouTube before Google bought YouTube. (And YouTube was already called YouTube before Google bought it.)
It's par the course for X graduates to get their own brand.
It'll look bad on the brand when the news is reporting how, "Google self-driving car kills family en route to Disneyland".
I'm not saying self-driving cars are dangerous, but it's just the numbers. People will die and self-driving car deaths will be shocking news and make headlines for a long time. I wouldn't want my brand name anywhere near them.
As a result Rolls Royce cars are... huh, no, people actually nod right along, that makes sense, Rolls Royce jet engines, I would want a reliable, high quality jet engine and that's what I associate with this car brand. Most people have no idea it isn't even the same company.
News outlets will connect Google to such deaths regardless. "Google car kills two" the headline will say, and Google's PR person will know better than to insist "Actually it should say Waymo not Google".
It looks bad if it becomes a trend. "Man dies in car crash" isn't going to destroy your brand. Ask every single car company in the world. Even Volvo, whose brand is specifically all about safety. It requires a trend, which is what hurt Boeing recently, bad news after bad news without respite, that'll do it. But there's no reason to think Waymo will ship something dangerous enough to cause such a trend.
There's a difference between someone crashing their own Volvo, and someone sitting in the backseat of a Waymo that misinterprets the lane markers and crashes into a barrier. One is not news, one is front page news.
I guarantee the first Waymo death is going to be publicized everywhere. It doesn't need to be a trend, and as I said, it doesn't mean the cars are more dangerous than human drivers. However, it's going to be news. There are going to be all sorts of moral debates when an algorithm decides to drive over a child instead of turning into an oncoming car. People will want answers. How does Waymo rank the value of different lives? I imagine it'll be news for the next decade until there are thousands of deaths and it becomes normal.
It's an industry that's going to be full of "firsts" and that's going to be the news. Waymo drives over dog while auto-piloting to a parking lot. Waymo mistakes grocery cart for stroller and swerves into elderly man. Waymo kills cyclist when poor weather disrupts censors. It doesn't matter if they ship something safe. Get enough cars on the road and these things will happen and people will be talking about it.
No. That's a trolley problem. It's an interesting intellectual exercise, you can maybe win a debate team trophy for your rousing defence of one choice or the other - but these moral decisions aren't actually what drivers do whether they're humans or a powerful AI.
People keep acting as though this is an unprecedented situation and invoking weird moral beliefs about thinking machines, when it's actually utterly routine. Let's try another exercise:
How many headlines have you read about a specific brand of elevator decapitating a child? Is it none? Do you see anybody pushing for the big elevator manufacturers to have to reveal how they "rank the value of different lives"? No?
That's not because nobody dies this way, it's because we say oh that's just a machine obviously if things go wrong you can get seriously injured and the machine doesn't know if you're a nun or a basketball champion it isn't trying to kill/ not kill anybody in particular it's just a machine.
Humans are often tempted to try "escape manoeuvres" and these almost invariably go wrong, we don't teach machines to try such manoeuvres because the machines are trained based on real performance data not someone's model of themselves as an immortal superhero.
One of the first Waymo crashes was somebody trying an escape manoeuvre. They found themselves in a potential collision so rather than the correct thing (brake to reduce speed, hit the thing you're colliding with because it's too close) they tried an abrupt swerve, lost control of course, crossed a median and smashed into the unrelated oncoming Waymo car at high speed writing off both vehicles. Humans do stuff like that, you can try training them not to but they won't listen. But the machines do not have that problem, so less "Should I kill the nun, the pregnant woman or the Olympic champion?" and more "Despite maximum braking effort a collision has become inevitable. Preparing safety systems for impact".