Over the past year, we’ve written articles on a few of Google’s (GOOG) more far-out projects and spinoffs, including Fiber, Calico, and Baseline. Fiber is a project rolling out inexpensive ultra-fast internet to domestic consumers; Calico is a company aiming to radically extend the human lifespan; and Baseline is capturing big data about the state of a healthy human body. In the article that follows this one, we’ll note GOOG’s new initiative in nanomedicine.
We recently read a long interview with Google co-founder Larry Page in the Financial Times. His partner, Sergey Brin, stepped back from close involvement with daily operations some time ago to concentrate on Google X, the company’s “moonshot” division. Now Page seems to be headed in the same direction. In the interview he reveals an engineer’s mind that’s passionately concerned with big picture thinking, and with how Google can contribute to solving human problems in what he views as a pivotal period in the planet’s history.
GOOG made its initial public offering a little more than a decade ago, in April, 2004. For much of its life as a public company, news about the outlandish ambitions of its founders -- driverless cars, for example, or global WiFi to be provided by a flotilla of balloons in the stratosphere -- was greeted with almost childlike enthusiasm.
Ten years on, some of that enthusiasm has started to fade. Many analysts now ask hard questions: Will any of these projects come to profitable fruition? Can GOOG maintain its search advertising dominance in the shift to mobile, and face down competitors such as Facebook (FB) , who have their own strengths to leverage? In a sense, GOOG seems for now to be just an internet advertising firm, and in practical terms, nothing else.
Analysts’ cautions are warranted. However, we don’t want to miss the big picture about GOOG. That big picture may not cause us to want to own the company’s stock under any and all conditions. But we do see in the orientation of Brin and Page a breadth of human and entrepreneurial vision that is lacking in most other big firms -- even big tech firms such as Apple (AAPL) . We believe that the kind of thinking Page and Brin are engaged in is critical to the long-term prospects of the U.S. and global economies.
One major difference between the Google guys and other visionaries is that they now have a war chest of more than $60 billion with which to pursue their goals.
Automation and the Future of Work
Many analysts see the current convergence of artificial intelligence, big data, and robotics as a wave of change which may transform work -- with automation making rapidly growing inroads into traditional white-collar jobs. From this perspective, the hollowing out of the middle class which was prompted by the first big wave of globalization and automation is poised to continue its march from the factory floor into the office cubicle.
This is the sort of issue that Page is thinking about. Although the company’s mission statement is “to organize the world’s information and make it universally accessible and useful,” its real mission in Page’s and Brin’s eyes is much broader -- as Page puts it, “The societal goal is our primary goal.”
That means Page -- the CEO of one of the world’s largest tech companies -- spends much of his time thinking about the kinds of existential issues that probably come up in a lot of late-night conversations among geeky college students. If automation will win out, why should we work? If so many people don’t like what they’re doing, why should they do a job less efficiently than a computer just because they need a paycheck? If automation makes manufacturing 10 times as efficient as it used to be, rather than 10 percent more efficient, will that spark a powerful deflationary wave as prices drop? How can people be motivated in such an environment? What will happen to the democratic process as a result of these changes?
But there are differences between Page’s thinking and a late-night conversation of engineering students in a dormitory.
First, Page may be a futurist, but he’s also a realist. He says of the coming disruptions, “There’s no way around [them]. You can’t wish [them] away.” He sees things from a practical perspective; those who have seen him in meetings comment on his zeal to get into the technical details of a project.
Second, the success of GOOG has given him power. So far, Page and Brin have used GOOG’s cash to support a panoply of far-sighted projects -- to the point now where it may be starting to irk investors. He says, “One thing we’re doing is providing long-term, patient capital.”
We would say he’s doing more than that. Tech now offers aggressive startups the potential for huge financial gains. Page’s and Brin’s company is pursuing financial gains successfully, but especially as they both step back from day-to-day operations, they are holding another focus.
Page thinks that Silicon Valley has, to some extent, lost its way, with venture capital narrowly focused on app development, e-commerce platforms, and similar projects. In short, the “moonshot” perspective is missing. It’s there that the Google guys really want to make a difference.
Why Moonshots Matter
What is the “moonshot mindset”? We would describe it as an open-minded, inquisitive, expansive view of the world, its problems, and its future. Further, it has an approach rooted in the practicality of engineering, as well as an optimistic and ambitious drive to solve problems, even when those problems seem to be overwhelming and intractable. And it thinks very long-term.
Our take-away from Page is that in his view, the moonshot mindset is at the heart of what GOOG is. He recognizes that GOOG will come up against limits as it seeks to continue developing as a moonshot mindset company.
He sees that it is fighting against the odds -- with most tech companies that reach GOOG’s size and success failing to transition into the next tech phase, whatever it may be.
Moonshots matter, though, because it is this breadth of imagination that leads to the solution of intractable problems.
So we are very encouraged to see that the men running the second-largest tech company in the world are conscientiously focused on them, even as critics begin to question whether they make sense for the immediate bottom line.
Where government is increasingly polarized and dysfunctional, we think it is a healthy sign that powerful entrepreneurs are willing to think this way. History shows that ultimately, it is transformative ideas that provide solutions to the world’s most difficult problems.
Whether or not we own GOOG stock for clients at any given time is a tactical matter. However, if GOOG continues to grow both in its present bread-and-butter business, and maintain the moonshot mindset, we would not be surprised to find that the company was still alive and thriving in 50 years -- and facing down the problems of the next 50 years.
Investment implications: Moonshots may be long shots, but they’re the truly transformative power of human ingenuity at work. Stay focused on companies’ nearer-term and more prosaic goals, but also look to see who is thinking big and aiming to solve daunting global problems. In the past, such moonshot thinking has often led to huge gains for the companies that were able to put it into practice.
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