Google Makes So Much Money, It Never Had to Worry About Financial Discipline

When you have a lot of money, a lot of things work because you have a lot of money. You often see the same thing with people trying to emulate pro-athletes training methods. A genetically gifted pro-athlete can often succeed in spite of their training, and not necessarily because of their training.

That said, the margins on the search advertising business are shrinking, and have been for years now. You can cover for that by eliminating profligate spending and then eventually you can't. I think Ruth is the right person to handle that transition but its going to hurt in terms of people feeling that "the magic is gone."

When that happens, Google is going to have to start rewarding operational efficiency gains at least as strongly as they currently reward popular science project type gains. And then it will be very interesting to see how they change and if the era of "but Google offers its employees ..." will be over.

I hope the free sodas stay though.

In fact, I think your comment "Google doesn't do what it does to be successful, it does it because it is successful" is completely ignoring how Google came to be successful in the first place, which was doing what you're saying it does because it's successful. Reading something like "How Google Works" goes over this exact thing in detail.

Another common example, "Companies with happier employees are more successful." But perhaps causality is the other way, "Employees become happy when their companies succeed."

Those things aren't mutually exclusive and almost certainly are both true

But surely the cultures these companies create are very different. Or is Google secretly a lot like Microsoft in the '90s?

I love this line.

Correct, and commonly the case. There is a corollary as well - often the company (not commenting on G specifically) does not know precisely why they are/were a success, i.e. what very specific details were important vs other specific details that look important, but aren't.

This lack of insight happens all the time and company culture can become fixed on things that they did as they became successful but were red herrings. A kind of cargo cult effect. One example I would give from Google is the early focus on "top school, top grades" "A" players as hiring filters - turns out that was useless, or worse. Kudos for figuring that out - but there are probaby at least a dozen other strong beliefs cooked in to the culture that are simply coincidental to success, not essential.

- "Why can't everyone stop being poor and get a job; it's not that hard!"

Most tech companies by far succeeded because they were in the right place at the right time - But post-rationalization can make anyone look like a genius; and the illusion can last forever.

Revenue solves everything

I'd say it's an unsolvable problem, and that's good!

What breakthrough projects are good at is pushing the envelope and inventing whole new technologies. These technologies are then experimented with by smaller firms a few years later, and the winners of this scramble bring the technology to market.

This is a spaghetti against the wall kind of market research; I think it's impossible to solve the problem of how to identify a new market and win it over. You can definitely have an informed approach that reduces risk, but it's not a technical problem that can be systematically solved.

There will always be risk where there is reward. If it was possible to systematically identify new business opportunities, there would be many more players in the entrepreneurship business, and commensurately lower profits. In fact, an "informed approach" can sometimes lead you to discount real opportunities as too pie-in-the-sky.

We need different risk propositions to make an economy with more niches for different kinds of people. I don't think the difficulty of identifying new breakthrough businesses (presumably with breakthrough profits) is a problem at all.

A key thing about startups is that they don't have much riding on them. If they fail, you can just dissolve the company, and the worst thing that happens is that people lose money and people lose jobs.

If a big corporation tries to do the same thing, there are a lot more encumbrances that elevate the risk levels quite a bit. There's a mothership that wants to protect its reputation, there are internal social pressures to start throwing money at problems, there is risk of tort situations that originated in the "startup" having wide-ranging repercussions throughout the company. No sane company is going to look at that minefield and conclude that it really is safe to sit back and let people do the "move fast and break things" thing without having to worry about meddling suits. The risk/reward for shareholders just isn't there.

I do wonder how much coverage glass would have gotten had it not had the Google halo around it.

Personally, I think Google should just funnel all the profits into GV.

Allow something like ten people years and a reasonable amount of hardware, and when you run out of that, come back for more budget or make revenue.

I haven't worked at google, but from experience at large companies, having the basics set for huge scale helps a lot (and avoids choice paralysis) so you can concentrate on doing the thing you wanted to do.

Developing great systems or internals, then trying to find a use for them is one thing. Google Glass was a crap product without a purpose (from the beginning).

That aside, Google doesn't know what to do with clever, ingenious, or well-Engineered systems/tools/libraries/components/etc. They'll wrap them in sh-t, then use them to try to promote it.

Even the way they try to promote their products is laughable. It sounds like poorly done attempts to spin absolute crap to make it seem as though it's something else. Why don't you just have what you're pushing not be absolute crap? Can't do that? Don't know how?

I fail to see what was innovative or groundbreaking about Google Glass and the other crap they pitch as being such. Driverless cars? Is the driving of a car the real problem, or even a problem?

Driverless cars sound cool in a way (would grab my attention), but the technology has long been created. What's on display now is a lack of ability to think about or come up with ways to take such technology and put it to use.

What they're also making clear is that they're investing not because they see the many potential future applications, but because they don't know and are just picking something to try to say "me too," or to have its failure clearly demonstrate the pointlessness of trying to innovate, or because this or that name is associated with it, etc.

They have no real idea what they are doing. They just do stuff.

Also, the moonshots are strange, because while they like making themselves seem progressive or innovative, they don't do anything without a "business reason."

  > After a while someone realised that a group of engineers 
  were consistently booking shitty travel around the same time,
  and then travelling first class the rest of the year.

I think you did a good job telling the story, but maybe I'm missing how gaming travel expenses is unique to Google.

Firing someone cost money, affect teammates' motivation, and make people unhappy. "Hi Mr X, I saw you managed to extract a significant benefit from the travel allowance policy. Congratulations! Please don't do that again, or you'll have to go through Mr Y for validation next time. Have a good day!". Here you go.

This isn't what happened. The first iteration of Google self-driving cars, the modified Lexus', had wheels alright. What Google found and told the industry was "almost autonomous seems to be more dangerous than not autonomous at all", explained by the driver getting bored and complacent. This isn't surprising to people doing Human Factors, and while Tesla certainly made money off ignoring it, the result has already been tragic.

In the most recent quarter, Tesla posted a $22 million profit, which was their first profit since first quarter 2013. There have been many times in Tesla's history where things were tight and risky. Things are looking good now, so it is exciting and Tesla seems to be going in a great direction.

It all comes back to Google having tons of money and thus being able to do things Googley.

Which is not to say that Tesla is Doing It Wrong -- I personally am a much bigger fan of focused, iterative improvement than of wasteful throw-spaghetti-at-the-wall "moon shots." It just feels unfair to compare the two.

I wonder if he bought into the press likening him to Tony Stark...

Not really, there's a fundamental difference in the approach and desired result. Tesla is going for Level 3 autonomy (some human help needed on trip), Google attitude is more of Level 4 or bust.

There are pros and cons to both approaches.

Only killing a few people in the process, but hey who am I to judge?

If one gathers all of their businesses which sell ads under "ads" , well, sure they have one business, the same as microsoft has only one business: "software".

But i'm sure their different ad businesses might have different risk factors, so in totality, they're stable. And BTW, Android made $33B (probably mostly indirectly) according to the oracle trial. Also youtube is a $9B business growing at 20%(probably waiting for the shift of brand ads from tv).

>> Automatic driving may pay off, but that is being a component supplier to an car company, not a high-profit business.

Having control on Android, Google Maps, and Waze puts them in right place for people ordering transportation. Couple that with possible network and data effects, and brand of the self driving business and Google's possible big advantage on self driving cars could put them in a good place in the future self driving ecosystem, not just a component supplier.

I don't agree that not developing a side-business is what cost Nokia their throne.

Very simply put, it was because they rested on their laurels. A Nokia executive told me the original iPhone is going to fail and used the Nokia N95 spec sheet as the only argument. It was the most impressive smartphone of the time but he completely failed to look ahead, as Nokia had a huge market share, large R&D budget, their own factories and no real competition.

Of course the new platforms crushed Nokia while they had several half-hearted attempts to follow them. They were completely setup to be crushed by any disrupter with money and a vision.

By the number of projects most are side projects that make a loss, but the really big ones have a big contribution to Google's success (via ads).

I remember when Apple launched their own Map service I was thinking that there is no way they were going to tackle something in the real-world "meat-space" the same way Google did to produce Streetview and gather improved map data.

They literally put a fleet of cars on the street and drove down a majority of the roads, big and small, in the United States and then in many other countries.

I've heard this phrased as "Google has the good fortune to be operating in a field where being 90% right 90% of the time is more than good enough"

If the search result you want is number 3 instead of number 1, that's totally acceptable. If your ad-targeting is good but not perfect, you can still make enormous amounts of money.

There are other domains where 90%/90% is absolutely unacceptable: avionics, medical life support, rocket propulsion, etc.

It's a problem for all big companies, not specific to Google.

For instance, there used to be a policy at Microsoft, that only projects aiming at over $100M of revenues would be attempted.

It doesn't make sense to go for smaller than that when you operate at that scale.

Google Fi and Fiber are counterarguments to this claim. It's pretty obvious their interest in these markets is to influence the oligopolistic prices and practices, not dominate them.

Actually, before you get to the other examples you gave, there is another aspect of that, which is the social aspect. Think about Google Glass. That project, and its failure, really opened my eyes to the reality of Google: that it is one giant bubble, and the people living in that bubble don't comprehend what it is like to not be in it.

When I first read about Google Glass, the very first thing I thought of was, "man, people are going to find this thing waaay too intrusive." I ended up being right. When stories started coming out about Google Glass wearers being asked to not wear them in public places, Google realized the project was a failure, so they canned it.

Streetview seemed like an excellent idea to me and is a Maps feature I like using (which would be even better if the pictures were more detailed and VR-/life- like). Buying or renting a bunch of cars/planes to manually take those pictures, however, seemed like a stupid idea (dumb way to do it), like another brute force approach, and like them trying to grunt their way through the problem using large amounts of cash.

Some may like such approaches, but I'd see them as inelegant and a waste of money (how it's implemented, not the actual idea).

Hmm. Google might actually be a good candidate for tackling the "smart power grid" problem.

Also, it's funny how many random things are being worked on, as it seemed impossible to get time or support to work on anything. I wonder what process/reasoning goes into deciding who gets to work on their own thing.

This company is so typical regarding many things that most of their PR/marketing sound like outright lies.

Similarly i can't shake the feel that the handset division of Nokia, never mind similar efforts at HP, got sunk because of board room having blinders for all but the quarterly earnings report.

Michael Dell effectively rescued his company from board room rampant shorttermism some years back because of just such a problem.

And we basically witnessed Nokia and HP effectively crash and burn because of boardroom demands for short term profits while the execs were trying to pull of long term "pivots".

This is a surprisingly good analogy. Look at Steph Curry in the NBA. He takes a ton of awful long range 3-point shots, but he also makes a ton of them (45.4% in 2015-2016 compared to league average 35.4%). But some people are arguing that he's actually a detriment to the future of basketball because kids are emulating him instead of learning fundamentals:

>"Even watching this weekend, everyone is trying to hit the three and there are a number of big guys that are pretty good that aren't seeing the ball at all," Johnson said at an EYBL stop in Indianapolis in April. "It's like guards feel like they have to shoot the three to reach their goals, but it comes at the sacrifice of actually playing a team game. There's a lot of guys chucking a lot of bad shots without actually knowing how to get their teammates involved and create for other people."

http://www.sbnation.com/nba/2016/6/13/11876304/stephen-curry...

(It's probably already clear that there's a lot of power in an AI-first approach, but it's worth noting that this change didn't just happen with Sundar's blog post last month. A better way to look at it is to realize that if Google has been running their custom machine learning ASICs for over a year now, they must have started designing them well before that, which, to me, was amazingly early. Google acquired DeepMind in 2014.)

Not all those bets will, or have to, work, as long as some of them work out really well. I'm curious to see what happens with VR, for example. But I think AI is the most obvious central bet, in the same that that mobile was beforehand.

That's 3,000 people working on bigger things, and another 3,000 supporting what is.

If you want to do something even more aggressive (which doesn't like such a bad idea if the top 5% are actually working on more important things, rather than it just being claimed/heralded as the plan), then get rid of all products other than search + ads (therefore Android and Chrome), YouTube, and GMail (which would first have to freed from political gridlock and modernized).

I'll mention the obvious (the plan relies on properly identifying the top 10%), as it seems the idiots there fall for politicking, posturing, BS'ing, or whatever else leaves them drawn toward "meh"-quality people and toward screwing over everyone else.

They also like trusting their intuition, while twisting, mangling, and misinterpreting data in whatever way will push/support their biased self-serving point of view.

- Obviously productive ones: Gmail, Google Analytics, Android, Android TV, Maps, Youtube, OpenSocial, Chrome, because they all participate to "universally trackable users",

- Skeptical projects: Fiber, Flights, Google Scholar, TensorFlow, Chrome OS, GDrive, GApps for Business,

- Pet projects that may be fun but don't seem to serve as leverage: GCE (yes, their cloud solution), Google+, Go, Google Earth, Google Play/Music, Google Wallet, Google Glass, GGroups, GFinance, GTranslate, Google Fonts, Google Classroom, Inbox, Wave, Hangouts, Google News, Google Currents, Google Keep, Google Now, Wave...

Therefore... If they wanted to stay as lean as possible, would they have come up with the right list straight away? What makes products "obviously" part of the first list?

[1] https://en.wikipedia.org/wiki/List_of_Google_products

Something like this was going to happen. Hurray for Google for doing it before rather than after some major disaster or embarrassment.

But she also sounds like one of the few responsible adults in the place with a hand on the purse-strings, whose job is to ensure that there is an Alphabet and Google in 10 years, shiny toys be damned.

I feel their current approach is sensible. Research at a for profit organization has to have a path to profitability. Long term this will enable them to more efficiently distribute their funds to projects that will see the light of day, generate revenue, and feedback into the cycle.

M(r)?s. Porat is merely efficiently carrying out financial accountability, which is what your CFO should be doing. Their job title should simply be "Boring Buzzkill", which if they live up to it they are doing a fantastic job!!

My problem isn't with Google spending tons of money on "far out" things, it's with those "far out" things not actually being far out.

If they were spending billions to develop teleportation, anti-aging (both internally and skin/beauty-wise), intelligence/fluidity increasing drugs, disease cures, etc, then I'd be all about it. Especially if they were making progress, as another problem is setting out to develop teleportation, making no progress after 5 years, then continuing anyway.

There are also nearer-term things to work on like wireless charging, batteries with increased capacity (and/or more efficient/passive energy usage), solar/wind/nuclear power to add variety to energy sources, lower cost Tesla Model S equivalents (rather than the brute force approach being used by Tesla with the Model 3), etc.

There also more relevant education in schools (actual knowledge and skills, rather than an indoctrination with "smile, show up on time, conform, and do what you're told"), streamlining/elimination of politics (government), elimination of middle-management and company politics, ending hunger, getting rid of prejudice and inequality, minimizing crime (especially violent crime), etc.

In the grand scheme of things, they are really doing nothing, going nowhere, and spending endless amounts of money doing it.

Also, there are the crap products they keep releasing. Something needs to be done to put an end to that crappiness.

But Yahoo was an advertising and media company.

Yahoo never quite managed to resolve that conflict, which rose straight to the top, and it kept causing stupid things like the massive amount of money that was poured into their own search engine instead of focusing on the content and services that actually had users continue to come back and stay within the network (e.g. Mail never made much money, but a large portion of users went to the Yahoo homepages to log into their e-mail, and a good portion would end up clicking on various news articles etc.)

Lots and loss of engineering effort went into project that'd never have been greenlit if Yahoo had accepted earlier what it was.

But Yahoo had a great deal of Google-envy at the point I was there, and it coloured a lot of decisions. At the same time, Yahoo didn't have the cash to operate like Google. E.g. where Google engineers could order servers by the dozens without justifying it, I had to present my arguments to a harware review group in Sunnyvale (I ran a team in Europe) to get a single new server to run the European billing system that processed millions of dollars worths of payments. So on one hand they wanted to be more like Google, on the other hand they didn't want to pay or it, and meanwhile what made Yahoo money was first and foremost the content side.

If I remember correctly, they had to take a significant amount of server resources from other teams in order to launch Google Instant.

That letter also included the famous "don't be evil." Does anyone really think that in a few hundred years time, people aren't going to look back and laugh at the feeble rationalizations that have currently taken hold to convince otherwise clued-in people that the most pervasive surveillance apparatus in the world isn't at least a little bit evil?