6 ms·

Just because they have the money, doesn't mean they would take any deal. Think of all the companies they could buy with a $100bn+; they prefer to hold cash at -

Just because they have the money, doesn't mean they would take any deal. Think of all the companies they could buy with a $100bn+; they prefer to hold cash at -2% real return. Expected returns are the crucial factor here. Alphabet is sharing risks, waiting for better opportunities to deploy the cash. There's a realization that beating services like Uber and Lyft on cost per ride (to undercut on price) will be hard and require significant capital without a clear path to sustained profitability. The economics aren't hard to understand: You can either pay one person (out of a - growing- pool of tens of millions of willing drivers) ~$15 an hour (depending on geography) in a $20k car or you can pay very little per hour in a 250k for the car + a gigantic engineering team + compute infrastructure. It can make sense on a large scale, but it'll be hard to do. Alphabet is sitting on a golden goose: their ad & search business (and the network they've built around that) is the perfect monopoly. Close to unbreakable and getting stronger over time (you won't be able to build a better search engine than Google unless you have as much data as Google). Why would they dilute their superb EBIT margins, rapid growth and extreme salability with the low-margin, ultra-high competition ride-sharing market? Think of paying a driver as renting compute on a extremely capable vision processing, decision making, robotic driver that costs you very little. As unemployment (eventually) increases again, the market will be flooded with unbelievable amounts of idle human minds. There's a general theme here: It's not enough to teach a computer to do something as good as a human, you have to undercut on price as well. For this reason, I believe that hair dressers have less to fear from automation than Radiologists. The "we need to sell to a third party so that our shareholders can figure out the valuation of this division"-argument is mute because it isn't applied to the countless other parts of Alphabet (or any other company). E.g. Youtube and Google Cloud can be valued based on financial data given to the SEC, though I admit, sometimes spinoffs do unlock value.

jnathsf 7y ago
Mute or moot? I thought it was moot
- TecoAndJix 7y ago
  Grammarly says “moot”. I love learning these things! https://www.grammarly.com/blog/moot-point/ https://www.grammarly.com/blog/moot-point/
smallgovt 7y ago
>> You can either pay one person (out of a - growing- pool of tens of millions of willing drivers) ~$15 an hour (depending on geography) in a $20k car or you can pay very little per hour in a 250k for the car + a gigantic engineering team + compute infrastructure. It can make sense on a large scale, but it'll be hard to do. I believe this $250K figure will end up being off by a multiple of 2. As an example, the cost of LIDAR (the most expensive piece of many SDC's) has dropped by an order of magnitude over the past couple years. (A quick google search for a source on this claim yields: https://qz.com/924212/what-it-really-costs-to-turn-a-car-into-a-self-driving-vehicle/ https://qz.com/924212/what-it-really-costs-to-turn-a-car-int...) The biggest questions around SDC's seems to really be around safety & feasibility. If these criteria are met, I can't imagine the overall cost per mile driven will be higher than manual labor. And, even if autonomous driving doesn't undercut on price, they will beat human drivers on both quality & convenience. Most people don't enjoy having a human driver who sometimes smells bad and tries to talk to you (not to mention the uptick in assault reports). And, since the cost of under-utilization will be much lower for SDC's, you can bet the average wait time for SDC's will be lower than Uber. >> There's a general theme here: It's not enough to teach a computer to do something as good as a human, you have to undercut on price as well. I think the more apt statement is: Consumers care about price, quality, safety, and convenience. A winning solution has to be significantly better in at least one of these categories (price being only one possibility).
- mxschumacher 7y ago
  Uber does 40m rides a month with human drivers, I don't believe people are generally turned off by the smell of their drivers. The rating system is pretty brutal. I've certainly never had this problem. Uber doesn't pay for the downtime, its the drivers that take all the losses. I find the security question interesting: Would you rather have a human in the car to potentially protect you from outside attackers, or is the general fear that the driver him/herself with assault you? I think with cameras and identity checks the risk from the driver can be reduced. Regarding your last point: Yes, do the same for less or something better for the same, both are possible paths to winning in the marketplace.
- kayoone 7y ago
cameldrv 7y ago
I agree with this in general, but a couple of points: 1. Suppose a vehicle operates in revenue service for 8 hours per day, 365 days per year, that's a labor cost of $44k. If the hardware lasts five years, you break even if the hardware/upkeep costs of the self driving part are less than $220k, which seems very doable. 2. I think that Alphabet's golden goose is more vulnerable than ever. Google's search results have become so ad-infested that the mere willingness to dial down the number of ads is enough. What good are great organic search results if the user never sees them because there are only one or two on the entire first page?
- farisjarrah 7y ago
  Self driving hardware is far cheaper then 200k these days. You can turn a Honda Civic into basically Tesla level self driving for like a grand with comma.ai
  - deleted 7y ago
    [deleted]
  - davidcbc 7y ago
    Or I can let go of my steering wheel and let my car naturally crash into road barriers for free
scarface74 7y ago
Close to unbreakable and getting stronger over time (you won't be able to build a better search engine than Google unless you have as much data as Google). While it’s true that I don’t see anyone beating Google at search, Facebook and Amazon can deliver better targeted ads and they are harder to block. No one beat MS on the desktop - the desktop became less relevant.
- thedance 7y ago
  Highly questionable. Facebook has been serving me Spanish-language ads for years, just because I said in my profile that I live in Venezuela, a country I've never even visited. None of my friends ever post on FB in Spanish and I don't speak it. I don't think FB has any sophisticated ad targeting tech to speak of. To me it looks like they just go off your profile, which is pretty basic.
  - dannyw 7y ago
    Your anecdotes don’t match with Facebook’s valuation in an efficient market.
    - icebraining 7y ago
      Why? FB valuation makes sense as long as the competition isn't any better.
  - tkgally 7y ago
    I have a similar experience with Instagram. I am an American male living in Japan, but most of the Instagram ads I see are in Hebrew and for female-targeted products (including menstruation supplies). I know no Hebrew and have no connection to Israel, but a Google search reveals that there is an Israeli woman with the same name as mine.
gurjeet 7y ago
s/mute/moot/
nradov 7y ago
Don't worry about radiologists. With a aging population and a growing cohort of the "worried well" there is effectively infinite demand for radiology. If the easy parts are automated that just means the total volume of images to be read will increase.
- mxschumacher 7y ago
  Given the demographic situation in the western world and China, nobody with medical skills will have to worry much about finding employment - I agree. I wanted attack the "intuitive" point a lot of people make about AI: "The simpler your job, the more easily it will be replaced by a computer". I think this position only focuses on what is technologically feasible, not about the realities of the labor market. There are many people who work for so little, it won't be feasible to try to undercut them on price for a long time. So radiologists are so extremely expensive by comparison that they're a better target for automation solutions.
deleted 7y ago
[deleted]
adrianmonk 7y ago
> they prefer to hold cash at -2% real return. I'm not trained in any sort of finance, and not that this invalidates your point, but I believe it's not literal cash cash. It's just low-risk, liquid investments. From the Alphabet Investor Relations page (https://abc.xyz/investor/ https://abc.xyz/investor/), you can find a link to their 2019 Form 10-K (https://www.sec.gov/Archives/edgar/data/1652044/000165204420000008/goog10-k2019.htm#sA684753F92655042AAF482AB21F2C37B https://www.sec.gov/Archives/edgar/data/1652044/000165204420...). P. 50 of that has a balance sheet, where you can see that at the end of 2019, they had $18.5 billion in "Cash and cash equivalents" and $101.2 billion in "Marketable securities". So about 15% of it is cash, and the other 85% is some kind of investment. Then, on p. 56, they give a little more detail what these categories mean: > Cash equivalents and marketable securities consist primarily of time deposits, money market and other funds, highly liquid debt instruments of the U.S. government and its agencies, debt instruments issued by foreign governments, debt instruments issued by municipalities in the U.S., corporate debt securities, mortgage-backed securities, and asset-backed securities. Anyway, they are probably getting a real return better than -2%. Maybe even slightly positive.
- mxschumacher 7y ago
  Yes, it's not $130bn in a checking account. Inflation measurements vary, but I see recent figures of around 2% for the US. Here are the returns of short term government debt from the treasury: https://www.treasury.gov/resource-center/data-chart-center/interest-rates/Pages/TextView.aspx?data=yield https://www.treasury.gov/resource-center/data-chart-center/i... I doubt that they're investing in any kind of aggressive higher yielding or longer duration bonds or Asset backed securities. So maybe the real yield is closer to -1% ? Studying the income and cash flow statement, we should be able to calculate their return on their "cash" position.
seanmcdirmid 7y ago
What about for long distance rides? I could imagine wanting to pay basic car rental fees for a car that would drive me and my family across the state from Seattle to Spokane.
- mxschumacher 7y ago
  While I don't know about the infrastructure situation in the area you are referring to, I think that Waymo won't be competing against planes, trains and long-distance buses anytime soon.
  - seanmcdirmid 7y ago
    Not many people take buses or trains for that route, most people drive and some fly. I could also see it working for 1 or 2 hour drives (like a weekend in the north cascades).
alasdair_ 7y ago
> Close to unbreakable and getting stronger over time (you won't be able to build a better search engine than Google unless you have as much data as Google). Google actually lost market share of search last year, mostly to Amazon (lots of people just do their product-related searches on Amazon now).
- mxschumacher 7y ago
  Yes, the competition with Amazon is really intense. Market share might have been lost, Alphabet's bottom line has not been hurt as a result.

jnathsf 7y ago

Mute or moot? I thought it was moot

TecoAndJix 7y ago
Grammarly says “moot”. I love learning these things! https://www.grammarly.com/blog/moot-point/ https://www.grammarly.com/blog/moot-point/

smallgovt 7y ago

>> You can either pay one person (out of a - growing- pool of tens of millions of willing drivers) ~$15 an hour (depending on geography) in a $20k car or you can pay very little per hour in a 250k for the car + a gigantic engineering team + compute infrastructure. It can make sense on a large scale, but it'll be hard to do. I believe this $250K figure will end up being off by a multiple of 2. As an example, the cost of LIDAR (the most expensive piece of many SDC's) has dropped by an order of magnitude over the past couple years. (A quick google search for a source on this claim yields: https://qz.com/924212/what-it-really-costs-to-turn-a-car-into-a-self-driving-vehicle/ https://qz.com/924212/what-it-really-costs-to-turn-a-car-int...) The biggest questions around SDC's seems to really be around safety & feasibility. If these criteria are met, I can't imagine the overall cost per mile driven will be higher than manual labor. And, even if autonomous driving doesn't undercut on price, they will beat human drivers on both quality & convenience. Most people don't enjoy having a human driver who sometimes smells bad and tries to talk to you (not to mention the uptick in assault reports). And, since the cost of under-utilization will be much lower for SDC's, you can bet the average wait time for SDC's will be lower than Uber. >> There's a general theme here: It's not enough to teach a computer to do something as good as a human, you have to undercut on price as well. I think the more apt statement is: Consumers care about price, quality, safety, and convenience. A winning solution has to be significantly better in at least one of these categories (price being only one possibility).

mxschumacher 7y ago
Uber does 40m rides a month with human drivers, I don't believe people are generally turned off by the smell of their drivers. The rating system is pretty brutal. I've certainly never had this problem. Uber doesn't pay for the downtime, its the drivers that take all the losses. I find the security question interesting: Would you rather have a human in the car to potentially protect you from outside attackers, or is the general fear that the driver him/herself with assault you? I think with cameras and identity checks the risk from the driver can be reduced. Regarding your last point: Yes, do the same for less or something better for the same, both are possible paths to winning in the marketplace.
kayoone 7y ago

cameldrv 7y ago

I agree with this in general, but a couple of points: 1. Suppose a vehicle operates in revenue service for 8 hours per day, 365 days per year, that's a labor cost of $44k. If the hardware lasts five years, you break even if the hardware/upkeep costs of the self driving part are less than $220k, which seems very doable. 2. I think that Alphabet's golden goose is more vulnerable than ever. Google's search results have become so ad-infested that the mere willingness to dial down the number of ads is enough. What good are great organic search results if the user never sees them because there are only one or two on the entire first page?

farisjarrah 7y ago
Self driving hardware is far cheaper then 200k these days. You can turn a Honda Civic into basically Tesla level self driving for like a grand with comma.ai
- deleted 7y ago
  [deleted]
- davidcbc 7y ago
  Or I can let go of my steering wheel and let my car naturally crash into road barriers for free

scarface74 7y ago

Close to unbreakable and getting stronger over time (you won't be able to build a better search engine than Google unless you have as much data as Google). While it’s true that I don’t see anyone beating Google at search, Facebook and Amazon can deliver better targeted ads and they are harder to block. No one beat MS on the desktop - the desktop became less relevant.

thedance 7y ago
Highly questionable. Facebook has been serving me Spanish-language ads for years, just because I said in my profile that I live in Venezuela, a country I've never even visited. None of my friends ever post on FB in Spanish and I don't speak it. I don't think FB has any sophisticated ad targeting tech to speak of. To me it looks like they just go off your profile, which is pretty basic.
- dannyw 7y ago
  Your anecdotes don’t match with Facebook’s valuation in an efficient market.
  - icebraining 7y ago
    Why? FB valuation makes sense as long as the competition isn't any better.
- tkgally 7y ago
  I have a similar experience with Instagram. I am an American male living in Japan, but most of the Instagram ads I see are in Hebrew and for female-targeted products (including menstruation supplies). I know no Hebrew and have no connection to Israel, but a Google search reveals that there is an Israeli woman with the same name as mine.

gurjeet 7y ago

s/mute/moot/

nradov 7y ago

Don't worry about radiologists. With a aging population and a growing cohort of the "worried well" there is effectively infinite demand for radiology. If the easy parts are automated that just means the total volume of images to be read will increase.

mxschumacher 7y ago
Given the demographic situation in the western world and China, nobody with medical skills will have to worry much about finding employment - I agree. I wanted attack the "intuitive" point a lot of people make about AI: "The simpler your job, the more easily it will be replaced by a computer". I think this position only focuses on what is technologically feasible, not about the realities of the labor market. There are many people who work for so little, it won't be feasible to try to undercut them on price for a long time. So radiologists are so extremely expensive by comparison that they're a better target for automation solutions.

deleted 7y ago

[deleted]

adrianmonk 7y ago

> they prefer to hold cash at -2% real return. I'm not trained in any sort of finance, and not that this invalidates your point, but I believe it's not literal cash cash. It's just low-risk, liquid investments. From the Alphabet Investor Relations page (https://abc.xyz/investor/ https://abc.xyz/investor/), you can find a link to their 2019 Form 10-K (https://www.sec.gov/Archives/edgar/data/1652044/000165204420000008/goog10-k2019.htm#sA684753F92655042AAF482AB21F2C37B https://www.sec.gov/Archives/edgar/data/1652044/000165204420...). P. 50 of that has a balance sheet, where you can see that at the end of 2019, they had $18.5 billion in "Cash and cash equivalents" and $101.2 billion in "Marketable securities". So about 15% of it is cash, and the other 85% is some kind of investment. Then, on p. 56, they give a little more detail what these categories mean: > Cash equivalents and marketable securities consist primarily of time deposits, money market and other funds, highly liquid debt instruments of the U.S. government and its agencies, debt instruments issued by foreign governments, debt instruments issued by municipalities in the U.S., corporate debt securities, mortgage-backed securities, and asset-backed securities. Anyway, they are probably getting a real return better than -2%. Maybe even slightly positive.

mxschumacher 7y ago
Yes, it's not $130bn in a checking account. Inflation measurements vary, but I see recent figures of around 2% for the US. Here are the returns of short term government debt from the treasury: https://www.treasury.gov/resource-center/data-chart-center/interest-rates/Pages/TextView.aspx?data=yield https://www.treasury.gov/resource-center/data-chart-center/i... I doubt that they're investing in any kind of aggressive higher yielding or longer duration bonds or Asset backed securities. So maybe the real yield is closer to -1% ? Studying the income and cash flow statement, we should be able to calculate their return on their "cash" position.

seanmcdirmid 7y ago

What about for long distance rides? I could imagine wanting to pay basic car rental fees for a car that would drive me and my family across the state from Seattle to Spokane.

mxschumacher 7y ago
While I don't know about the infrastructure situation in the area you are referring to, I think that Waymo won't be competing against planes, trains and long-distance buses anytime soon.
- seanmcdirmid 7y ago
  Not many people take buses or trains for that route, most people drive and some fly. I could also see it working for 1 or 2 hour drives (like a weekend in the north cascades).

alasdair_ 7y ago

> Close to unbreakable and getting stronger over time (you won't be able to build a better search engine than Google unless you have as much data as Google). Google actually lost market share of search last year, mostly to Amazon (lots of people just do their product-related searches on Amazon now).

mxschumacher 7y ago
Yes, the competition with Amazon is really intense. Market share might have been lost, Alphabet's bottom line has not been hurt as a result.