Reader beware: I'm not a computer scientist, my undergrad is in philosophy, and I went way down the rabbit hole for this one.
"I worry about someone in a garage inventing something that I haven't thought of." - Bill Gates' response to a question about which competitor scares him the most... in 1998, the same year Google was founded... in the garage pictured above.
The brainchild of two Stanford grad students, Google is THE Silicon Valley success story, the American myth made manifest.
And on their way to the top, Sergey & Larry humiliated the who's who of West Coast elite, including:
- Excite CEO George Bell, who told Brin & Page that their then nascent search engine was not worth $1mm (CAGR at the time of this writing: 97.77%) back in 1999.
- Legendary VC Bill Gurley, who "declined to pursue" because the company was 1) a science project, and 2) run by PhD students, mortal sins in the venture capital world.
- OG SV titan and the first person to build three different $1bb+ companies Jim Clark, who declared Kleiner Perkins' $25mm Google investment as proof positive we were in a bubble (we were, but that's not the point).
This was a terrible oversight.
In fact, this might be the biggest mistake of omission in investing history, given that Google controls the way we access information, owning 90% (!) of the internet search market globally:
Google's monopoly is so total that the company owns the entire podium, with Images & YouTube winning silver and bronze, respectively.
Still, analysts have long decried Google's dependence on a single revenue stream, with search ads producing the overwhelming majority of their profits.
And with growth in ad revenue finally slowing, what's to stop GOOG from collapsing?
It's Not Water Vapor
A PC is a ridiculous device. The idea is so complicated and expensive. What the world really wants is to plug into a wall to get electric power and plug in to get data - Larry Ellison (in 1995!!!)
If you've read my Salesforce post (and if you haven't, you should!), you know that I'm a big fan of cloud computing as a business, and Google just might execute on a scale no one has heretofore dared dream, capturing both consumer and the enterprise.
Anecdotally, I use YouTube WAY more than Netflix or PrimeVideo... so much so that I sprung for a YT premium subscription, something I'm normally loathe to do.
And because of the company's ad chops, GOOG can price discriminate all the way down to free, preventing a new competitor from disrupting bottom up.
Up Up Down Down Left Right Left Right B A Select Start (2 Players)
Time will tell if the Stadia gaming initiative will bear fruit, but the search giant is taking the right approach, eliminating all but the one essential piece of hardware - the controller - from the end user experience, and promoting portability across screens.
And normally I'd be extremely pessimistic about a consumer company going after the enterprise: corporations might be rational, profit-seeking artificial person's from the outside, but internally they are politically siloed complex systems...
But Page & Brin hired this man, Thomas Kurian.
Software is an IQ business - Bill Gates
Oracle is the original enterprise software company, and there is a reason Larry Ellison paid Kurian $70mm per year - TK is one of the most effective executives in Silicon Valley history, with a deep understanding of both business (beginning his career at Mckinsey) and technology (Summa Cum Laude Princeton Electrical Engineering grad).
Under Kurian's leadership, Google has been steadily poaching top account executives from across the valley.
This was a great hire.
Why Join The Navy When You Can Be a Pirate?
"Well, Steve [Jobs]... I think it's more like we both had this rich neighbour named Xerox and I broke into his house to steal the TV set and found out that you had already stolen it." - Bill Gates
But genius only gets you so far, and technology monopolies get into trouble when brilliant founders go crazy/get distracted or sales & marketing takes over.
The foundation of the modern information economy - the semiconductor - was built by a group of disgruntled employees (the traitorous 8 in SV lore) who abandoned their nobel-prize-winning-but-paranoid-and-delusional CEO.
Oracle only exists today because IBM's management team was too stupid to listen to one of their in-house IBM Fellows (the most prestigious technical title in the world at the time), giving Larry Ellison the chance to pilfer the idea for a Relational Database Management System (RDBMS) and beat Big Blue to market.
Bill Gates & Steve Jobs raided Xerox PARC's brain trust, plundering both the Graphical User Interface (GUI) and plenty of high level talent, laying the groundwork for Microsoft and Apple, the number 1 and number 2 most valuable companies in the world at the time of this writing.
(side note: hilarious Cracked article here on all of the cool shit Xerox came up with but never capitalized on). )
And despite Gates pillaging XRX, even MSFT has (at least until very recently) done a terrible job of aligning R&D with business, operating Microsoft Research as a science project largely disconnected from the greater organization...
Shooting The Moon
We create radical new technologies to solve some of the world's hardest problems. - Google X Motto
Google is different.
Unlike the monopolies of yore, Google has taken steps to fortify itself against brilliant idiocy.
Believe it or not, former CEO Eric Schmidt was actually working at Xerox PARC in 1979, the same year Gates & Jobs made their fateful visits, and got a front row seat to the carnage that followed.
And maybe at first blush, some of Google's moonshots...
- Self driving
- Alternative energy
- Life Extension
- Venture Capital
- Internet Balloons
- Delivery Drones
- Optical Communications
- Glass for Enterprise
- Energy Kites (What the...?)
...sound outlandish, but all of them have readily recognizable (and scalable!) commercial applications.
Better still, unlike Jobs, who ignored the advice of Warren Buffett, the Google guys attribute the genesis of the Alphabet structure to the Oracle of Omaha...
Great minds think alike
...but you've heard this story before, and it's not that interesting.
While conducting research for the Amazon post, my close friend, quantitative counterpart and Bayesian brother-in-arms Phil "Judgment Day" C. told me:
"Amazon is the only company to have cracked the code of solving problems internally, then releasing the platform to the market to stay competitive."
Google appears to be doing the inverse: solving real world problems at scale and then bringing solutions in-house.
For example, in 2009, Google acquired CAPTCHA (an acronym for Completely Automated Public Turing test to tell Computers and Humans Apart) and since then has provided it as a free service to protect websites from spam and abuse...
The question is: why?
For any simulation theorists out there, a CAPTCHA is sometimes referred to as a "reverse-turing test." So....