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Comment by jsnell | Hacker News Reader

Where's the economic proof of impossibility? As far as I know Waymo has not published any official numbers, and any third party unit profitability analysis is going to be so sensitive to assumptions about e.g. exact depreciation schedules and utilization percentages that the error bars would inevitably be straddling both sides of the break-even line.

> with no evidence that the system can generalize, profitably, outside the limited areas it’s currently in

That argument doesn't seem horribly compelling given the regular expansions to new areas.

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Analyzing Alphabet’s capital allocation decisions gives you all the evidence necessary.

It’s safe to assume that a company’s ownership takes the decisions that they believe will maximize the value of their company. Therefore, we can look at Alphabet’s capital allocation decisions, with respect to Waymo, to see what they think about Waymo’s opportunity.

In the past five years, Alphabet has spent >$100B to buyback their stock; retained ~100B in cash. In 2024, they issued their first dividend to investors and authorized up to $70B more in stock buybacks.

Over that same time period they’ve invested <$5B in Waymo, and committed to investing $5B more over the next few years (no timeline was given).

This tells us that Alphabet believes their money is better spent buying back their stock, paying back their investors, or sitting in the bank, when compared to investing more in Waymo.

Either they believe Waymo’s opportunity is too small (unlikely) to warrant further investment, or when adjusted for the remaining risk/uncertainty (research, technology, product, market, execution, etc) they feel the venture needs to be de-risked further before investing more.

>believes their money is better spent buying back their stock,

Alphabet has to buy back their stock because of the massive amount of stock comp they award.

> Alphabet has to buy back their stock because of the massive amount of stock comp they award.

Wait, really? They're a publically traded company; don't they just need to issue new stock (the opposite of buying it back) to employees, who can then choose to sell it in the public market?

It's much better comp if the value of the stock goes up.

They could issue more stock, but Alphabet has decided to keep the number of outstanding shares the same, it's a thing they do for shareholders.

Isn’t there a point of diminishing returns? Let’s assume they hand over $70B to Waymo today. Can Waymo even allocate that?

I view the bottlenecks as two things. Producing the vehicles and establishing new markets.

My understanding of the process with the vehicles is they acquire them then begin a lengthy process of retrofitting them. It seems the only way to improve (read: speed up) this process is to have a tightly integrated manufacturing partner. Does $70B buy that? I’m not sure.

Next, to establish new markets… you need to secure people and real estate. Money is essential but this isn’t a problem you can simply wave money at. You need to get boots on the ground, scout out locations meeting requirements, and begin the fuzzy process of hiring.

I think Alphabet will allocate money as the operation scales. If they can prove viability in a few more markets the levers to open faster production of vehicles will be pulled.

Yes, correct, you’re restating the “risk/uncertainty” in the form of various concrete hypotheses. :)

Within the context of the original discussion around whether self-driving is here, today, or not, I think we can definitively see it’s not here.

To be clear, buying back stock is one of the ways they can invest in Waymo (and other business units).

Since Alphabet buybacks mostly just offset employee stock compensation, the main thing they are getting for this money is employees.

I would prefer if they just give employee bonuses rather than this indirect form of compensation

This is just a quirk of the modern stock market capitalist system. Yes, stock buybacks are more lucrative than almost anything other than a blitz-scaling B2B SAAS. But for good of society, I would prefer if Alphabet spent their money developing new technologies and not on stock buybacks / dividends. If they think every tech is a waste of money, then give it to charity, not stock buybacks. That said, Alohabet does develop new technologies regularly. Their track record before 2012 is stellar, their track record now is good (Alphafold, Waymo, Tensorflow, TPU etc), and it is nowhere close to being the worst offender of stock buybacks (I’m looking at you Apple), but we should move away from stock price over everything as a mentality and force companies to use their profits for the common good.

That's a very hand wavy argument. How about starting here:

> Mario Herger: Waymo is using around four NVIDIA H100 GPUSs at a unit price of $10,000 per vehicle to cover the necessary computing requirements. The five lidars, 29 cameras, 4 radars – adds another $40,000 - $50,000. This would put the cost of a current Waymo robotaxi at around $150,000

There are definitely some numbers out there that allow us to estimate within some standard deviations how unprofitable Waymo is

(That quote doesn't seem credible. It seems quite unlikely that Waymo would use H100s -- for one, they operate cars that predate the H100 release. And H100s sure as hell don't cost just $10k either.)

You're not even making a handwavy argument. Sure, it might sound like a lot of money, but in terms of unit profitability it could mean anything at all depending on the other parameters. What really matters is a) how long a period that investment is depreciated over; b) what utilization the car gets (ot alternatively, how much revenue it generates); c) how much lower the operating costs are due to not needing to pay a driver.

Like, if the car is depreciated over 5 years, it's basically guaranteed to be unit profitable. While if it has to be depreciated over just a year, it probably isn't.

Do you know what those numbers actually are? I don't.

I know for a fact Waymo uses TPU’s not GPU, maybe it is equivalent to 4 H100’s but TPU vs GPU is somewhat apples vs oranges

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