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The fact that companies like Facebook and Google are spending billions of dollars/year on undisclosed research projects is in my view a gigantic failure of corp

The fact that companies like Facebook and Google are spending billions of dollars/year on undisclosed research projects is in my view a gigantic failure of corporate governance. I think investors are going to be hugely disappointed when they find out that they thought they put their money into Internet advertising cash cows, and now that money is gone, spent on building jetpacks and space elevators. I do think those projects are very cool, but this is not the proper way to pursue them.

Retric 10y ago
Scale is important, google makes ~20 billion in profit per year making these relatively minor bets. Further even if these projects never return a dime directly they have a halo effect which helps the overall company.
- Analemma_ 10y ago
  > Scale is important, google makes ~20 billion in profit per year making these relatively minor bets. Sorry, what? The Other Bets segment loses $2.5 billion per year.
  - Retric 10y ago
    Which is included in Alphabet's $4.9 billion profit Q2 FY2016. Sure, they might have made an extra 0.6 billion that quarter, but it's not exactly a hidden bet. Further, these are R&D losses, so it's hard to say what the long term impact is, but it's unlikely to be exactly -2.5 billion / year.
digi_owl 10y ago
Then what is? Seems to me to be very similar to the glory days of PARC and such where they seemed to have the funds to research just about anything. Lets not forget that Xerox brought the world the GUI, laser printer and Ethernet by funding PARC, even if they in the end was not who ended up monetizing the tech (laser printer excluded).
- pinewurst 10y ago
  I don't think that's a good comparison. PARC efforts could at least be justified as being document related, which was solidly in sync with Xerox strategy. This "moonshot" stuff can't be classified as pure research as per Bell Labs/IBM Research or corporate goal focused. It's only a failed attempt to prove the capability propaganda that they communicate to the world.
- Tempest1981 10y ago
  Right, what are the other options? * Government? Would be targeted as waste. (Maybe sneak it into NASA?) * Startup? Would anyone fund it? No short term payout. * Non-profit? * Billionaire's pet project?
  - exergy 10y ago
    Perhaps it's the fact that I'm inexorably falling deeper into academia every year, but government research is definitely NOT a waste from my perspective. Some of the best PhD students, working on some of the most interesting projects in my experience all had DOE or EPA grant projects. I think this sort of research deserves a lot more money since, in my (biased) opinion, it pushes humanity forward through public access of research in the form of publications, theses, and the strict requirements that data be preserved for future reference.
    - a_imho 10y ago
      I think it is meant as not cost effective, as governments are usually very wasteful in redistributing resources.
      - eli_gottlieb 10y ago
        Wasteful compared to what? I mean, what does your normative budget look like for an R&D project?
      - flukus 10y ago
        I took it to mean that it would be targeted by people/media/politicians when they are trying to find ways to tighten their budgetary belts.
icebraining 10y ago
Just as an example, in Q2 of this year, Alphabet had a 21% YoY increase in revenue, and a 43% YoY increase in profit. Gigantic failure indeed. Besides, they're public companies. Investors might not know exactly which moonshot projects they're investing in, but the overall numbers are published four times a year. There's no major surprises.
- jgalt212 10y ago
  very true. Investors can always vote with their feet.
Tempest1981 10y ago
These moonshot projects also buy them "free" press, and may help attract smart people to go work there.
Xcelerate 10y ago
All you need is one of those projects to work to recoup the losses many times over. Relying solely on advertising revenue forever is probably a bad idea.
st3v3r 10y ago
It's never been a secret that the company is controlled by the founders. Any investor who invests not realizing this, and that they're going to throw money at research projects like this, has only themself to blame.
bbctol 10y ago
I think investors realize that they are putting their money into advertising cash cows, and Google investors are pretty satisfied; that money isn't "gone." If anything, it's the talented workers who go to Google for the promise of jetpacks and find themselves writing adwords code.

Retric 10y ago

Scale is important, google makes ~20 billion in profit per year making these relatively minor bets. Further even if these projects never return a dime directly they have a halo effect which helps the overall company.

Analemma_ 10y ago
> Scale is important, google makes ~20 billion in profit per year making these relatively minor bets. Sorry, what? The Other Bets segment loses $2.5 billion per year.
- Retric 10y ago
  Which is included in Alphabet's $4.9 billion profit Q2 FY2016. Sure, they might have made an extra 0.6 billion that quarter, but it's not exactly a hidden bet. Further, these are R&D losses, so it's hard to say what the long term impact is, but it's unlikely to be exactly -2.5 billion / year.

digi_owl 10y ago

Then what is? Seems to me to be very similar to the glory days of PARC and such where they seemed to have the funds to research just about anything. Lets not forget that Xerox brought the world the GUI, laser printer and Ethernet by funding PARC, even if they in the end was not who ended up monetizing the tech (laser printer excluded).

pinewurst 10y ago
I don't think that's a good comparison. PARC efforts could at least be justified as being document related, which was solidly in sync with Xerox strategy. This "moonshot" stuff can't be classified as pure research as per Bell Labs/IBM Research or corporate goal focused. It's only a failed attempt to prove the capability propaganda that they communicate to the world.
Tempest1981 10y ago
Right, what are the other options? * Government? Would be targeted as waste. (Maybe sneak it into NASA?) * Startup? Would anyone fund it? No short term payout. * Non-profit? * Billionaire's pet project?
- exergy 10y ago
  Perhaps it's the fact that I'm inexorably falling deeper into academia every year, but government research is definitely NOT a waste from my perspective. Some of the best PhD students, working on some of the most interesting projects in my experience all had DOE or EPA grant projects. I think this sort of research deserves a lot more money since, in my (biased) opinion, it pushes humanity forward through public access of research in the form of publications, theses, and the strict requirements that data be preserved for future reference.
  - a_imho 10y ago
    I think it is meant as not cost effective, as governments are usually very wasteful in redistributing resources.
    - eli_gottlieb 10y ago
      Wasteful compared to what? I mean, what does your normative budget look like for an R&D project?
    - flukus 10y ago
      I took it to mean that it would be targeted by people/media/politicians when they are trying to find ways to tighten their budgetary belts.

icebraining 10y ago

Just as an example, in Q2 of this year, Alphabet had a 21% YoY increase in revenue, and a 43% YoY increase in profit. Gigantic failure indeed. Besides, they're public companies. Investors might not know exactly which moonshot projects they're investing in, but the overall numbers are published four times a year. There's no major surprises.

jgalt212 10y ago
very true. Investors can always vote with their feet.

Tempest1981 10y ago

These moonshot projects also buy them "free" press, and may help attract smart people to go work there.

Xcelerate 10y ago

All you need is one of those projects to work to recoup the losses many times over. Relying solely on advertising revenue forever is probably a bad idea.

st3v3r 10y ago

It's never been a secret that the company is controlled by the founders. Any investor who invests not realizing this, and that they're going to throw money at research projects like this, has only themself to blame.

bbctol 10y ago

I think investors realize that they are putting their money into advertising cash cows, and Google investors are pretty satisfied; that money isn't "gone." If anything, it's the talented workers who go to Google for the promise of jetpacks and find themselves writing adwords code.