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Yes, perhaps, but the counter to this is that they could "benefit from the closed system of vertical integration" that seems to be all the rage these days. I co

Yes, perhaps, but the counter to this is that they could "benefit from the closed system of vertical integration" that seems to be all the rage these days. I could envision a scenario where they partner with existing manufacturers for a couple years, then "courageously" break off and produce their own vehicle in order to "control the process".

jerf 10y ago
That would be one hell of an ecosystem to bootstrap, even starting with a partnership with an existing company, even for Google. Building "a" car isn't that hard. Building a car that conforms with all regulations, has had all the testing done on it, can be manufactured at any useful scale, and, oh, also is something that people want to buy, is not a problem that should be underestimated. (Yes, props to Tesla. They did it. Well... mostly, at least, but it's at least a reasonable guess they're on a success trajectory. It's still a hard problem.) It would probably be easier for Google to manufacture their own computing hardware from scratch, and as far as I know, they don't do that. Yes, they get it customized because they are a big customer, and they've at least dabbled in phone hardware, but even that wasn't "from scratch". I've got a 2013 Nexus tablet, and it's got all sorts of things in it that aren't from Google. As big as Google may be, they are not infinitely big, and they have the paradoxical problem of being too successful to take on every little business. Large profitable businesses can't economically afford to take on new businesses that are significantly less profitable than their current businesses, because the rational business decision then is to reallocate the resources being given to the unprofitable sub-business and give them to the profitable sub-business to make more profits. [1] The car industry is very hit-driven due to the need to sell enough cars to overcome massive fixed costs, but even at in their most profitable years I'm not sure the car companies came even close to Google's profitability. I'm not taking the time to look that claim up, because I'm sure that even if they did, they never did it year after year after year the way Google has. [1] Obviously I'm simplifying a complex thing here. I understand that's a complicated topic, but details would be an unimportant-to-my-point waste of time for all.
- iainmerrick 10y ago
  Large profitable businesses can't economically afford to take on new businesses that are significantly less profitable than their current businesses Whoa there, isn't that completely backwards? Who can afford to invest in new businesses if not large, profitable companies? because the rational business decision then is to reallocate the resources being given to the unprofitable sub-business and give them to the profitable sub-business to make more profits. [...] Obviously I'm simplifying a complex thing here. I understand that's a complicated topic, but details would be an unimportant-to-my-point waste of time for all. (Edit to add: I think that apparent paradox is easily resolved by thinking in terms of long-term versus short-term investment.) I agree there are complications, but fundamentally, big profitable companies are the ones which have spare resources to invest. One problem is company culture and skill sets, and the difficulty of ramping up in a new area, but that's why big tech companies try things like internal "startup incubators" with lots of autonomy. Amazon in particular seems really effective at expanding into new areas.
  - jerf 10y ago
    It's not clear to me that Amazon actually has one business line that is both huge and so massively profitable that it prevents them from spreading out. They are huge, but they don't make the profits that Google, Microsoft, or Apple does. I wouldn't be surprised to see AWS get spun out as it continues to grow in the next 3-10 years, because unless the trajectory of that subbusiness changes, it threatens to become the business that is too profitable to put resources anywhere else.
    - iainmerrick 10y ago
      But Amazon has explicitly chosen to keep its margins tight, and aggressively invest for expansion. In a sense they choose not to make huge profits. They're famous for it! I still don't buy your general point. It's true that some large companies have run into trouble because they were afraid of damaging their core product. But that's a risk everyone's aware of now -- the whole "innovator's dilemma" thing. What's an example of a large successful company that was thereby prevented from spreading out? I don't mean companies that failed due to complacency, or overly rigid business practices, but where their size actually worked against them. (Hmm, possibly we really mean the same thing, we're just describing it in different ways...)
chrisdbaldwin 10y ago
Google will want ad revenue from the captive audience in the self driving car. Control the self driving car ecosystem in the long term and avoid the cost of manufacturing and compliance in the short. I like the assumption that they will "come back" into the space, because it's a great play.

jerf 10y ago

That would be one hell of an ecosystem to bootstrap, even starting with a partnership with an existing company, even for Google. Building "a" car isn't that hard. Building a car that conforms with all regulations, has had all the testing done on it, can be manufactured at any useful scale, and, oh, also is something that people want to buy, is not a problem that should be underestimated. (Yes, props to Tesla. They did it. Well... mostly, at least, but it's at least a reasonable guess they're on a success trajectory. It's still a hard problem.) It would probably be easier for Google to manufacture their own computing hardware from scratch, and as far as I know, they don't do that. Yes, they get it customized because they are a big customer, and they've at least dabbled in phone hardware, but even that wasn't "from scratch". I've got a 2013 Nexus tablet, and it's got all sorts of things in it that aren't from Google. As big as Google may be, they are not infinitely big, and they have the paradoxical problem of being too successful to take on every little business. Large profitable businesses can't economically afford to take on new businesses that are significantly less profitable than their current businesses, because the rational business decision then is to reallocate the resources being given to the unprofitable sub-business and give them to the profitable sub-business to make more profits. [1] The car industry is very hit-driven due to the need to sell enough cars to overcome massive fixed costs, but even at in their most profitable years I'm not sure the car companies came even close to Google's profitability. I'm not taking the time to look that claim up, because I'm sure that even if they did, they never did it year after year after year the way Google has. [1] Obviously I'm simplifying a complex thing here. I understand that's a complicated topic, but details would be an unimportant-to-my-point waste of time for all.

iainmerrick 10y ago
Large profitable businesses can't economically afford to take on new businesses that are significantly less profitable than their current businesses Whoa there, isn't that completely backwards? Who can afford to invest in new businesses if not large, profitable companies? because the rational business decision then is to reallocate the resources being given to the unprofitable sub-business and give them to the profitable sub-business to make more profits. [...] Obviously I'm simplifying a complex thing here. I understand that's a complicated topic, but details would be an unimportant-to-my-point waste of time for all. (Edit to add: I think that apparent paradox is easily resolved by thinking in terms of long-term versus short-term investment.) I agree there are complications, but fundamentally, big profitable companies are the ones which have spare resources to invest. One problem is company culture and skill sets, and the difficulty of ramping up in a new area, but that's why big tech companies try things like internal "startup incubators" with lots of autonomy. Amazon in particular seems really effective at expanding into new areas.
- jerf 10y ago
  It's not clear to me that Amazon actually has one business line that is both huge and so massively profitable that it prevents them from spreading out. They are huge, but they don't make the profits that Google, Microsoft, or Apple does. I wouldn't be surprised to see AWS get spun out as it continues to grow in the next 3-10 years, because unless the trajectory of that subbusiness changes, it threatens to become the business that is too profitable to put resources anywhere else.
  - iainmerrick 10y ago
    But Amazon has explicitly chosen to keep its margins tight, and aggressively invest for expansion. In a sense they choose not to make huge profits. They're famous for it! I still don't buy your general point. It's true that some large companies have run into trouble because they were afraid of damaging their core product. But that's a risk everyone's aware of now -- the whole "innovator's dilemma" thing. What's an example of a large successful company that was thereby prevented from spreading out? I don't mean companies that failed due to complacency, or overly rigid business practices, but where their size actually worked against them. (Hmm, possibly we really mean the same thing, we're just describing it in different ways...)

chrisdbaldwin 10y ago

Google will want ad revenue from the captive audience in the self driving car. Control the self driving car ecosystem in the long term and avoid the cost of manufacturing and compliance in the short. I like the assumption that they will "come back" into the space, because it's a great play.