But with last year's stock market collapse, the loss of interest in IPOs and the absence of a next big thing, the moonshot mentality has weakened, if not exactly died. The current craze for generative AI looks strong precisely because it is already being used and appears to have a solid financial footing. But before we mourn the loss of entrepreneurial spirit, it is important to recognize that the cyclical nature of these interests is also a key feature of tech's ethos and economy. Venture investors will always want returns and founders will always want to try something new. JL
Gerrit DeVynck and colleagues report in the Washington Post:
The ethos of “move fast and break things” and billions in venture capital funding from Silicon Valley investors helped (startups) become goliaths. Mature companies have bigger legal liabilities, making it harder to push out new products and keep up with start-ups. But for founders who began their businesses in dorm rooms and garages, the threat of a start-up disrupting them was ever-present. As the decade-long bull market came to an end and tech stock prices fell, pressure to cut costs and layoffs and cost-cutting flooded Silicon Valley. The big-idea projects that were to become the revenue-drivers of the future have been particularly hard hit. “Moonshot labs ebb and flow, but that culture is never going away, it’s how these companies were born.”But that next big moneymaker hasn’t materialized. Revenue still comes overwhelmingly from advertising. Google has shuttered most of its so-called “moonshots” — from internet-delivering balloons to glucose-measuring contact lenses.
And even the most advanced of its side projects — self-driving car lab Waymo and health-care tech start-up Verily — are now confined by the limits of regular businesses. On Wednesday, Waymo laid off 8 percent of its workforce, adding to a previous round of cuts in January.
The Waymo layoffs are just the latest example of a new reality that has settled over Big Tech: The age of the moonshots is over.
As the decade-long bull market came stuttering to an end and tech stock prices fell throughout last year, pressure to cut costs from Wall Street built and in the past few months a deluge of layoffs and cost-cutting has flooded Silicon Valley. The big-idea side projects that were supposed to become the revenue-drivers of the future have been particularly hard hit, with some of them being completely dismantled, and others facing deep cuts.
“They’ve assumed that everything that they touch is going to work. And in reality, it’s not,” said Roger McNamee, a veteran venture capitalist who was an early investor in Facebook before becoming a high-profile critic of social media’s impact on society.
Higher interest rates means the investment needed to keep spending on money-losing projects is getting harder to find, he said. Big Tech is “retrenching to protect their core business. And so I think you’re going to see them offloading one thing after another.”
Google and Meta did not have immediate comment.
Giving up the moonshot dream marks another stage in the companies’ march into middle age. Google, Facebook and Amazon all grew rapidly from start-ups to tech giants through the first two decades of the millennium by upsetting the balance forged by companies that came before them.
The ethos of “move fast and break things” and billions in venture capital funding from Silicon Valley investors helped them become goliaths in their own right. But for founders who began their businesses in dorm rooms and garages, the threat of the next nimble start-up coming to disrupt them too was ever-present.
Making a space for risky, bizarre and overly ambitious ideas was their solution to avoid the stasis that had hit bigger companies from previous generations.
When Google went public in 2004, its founders Larry Page and Sergey Brin wrote a letter to potential investors, warning them not to expect the quarter-by-quarter financial focus that most public companies are forced to heed. They set up Google X, a research lab focused on only the weirdest and riskiest ideas, and told their employees they should spend part of their time on projects completely unrelated to their day jobs.
“Google is not a conventional company. We do not intend to become one,” they wrote. Page repeated the line in the 2015 announcement about the creation of the Alphabet holding company.
The biggest tech companies have indeed managed to stave off disrupters. But it wasn’t always through reinventing themselves with internally created big ideas. Apple, Amazon, Google and Facebook made hundreds of acquisitions over the past two decades, buying both sizable up-and-coming competitors and tiny start-ups. Google’s Android operating system, Facebook’s mobile advertising business and Amazon’s audiobooks empire all initially came through acquisition. (Amazon founder Jeff Bezos owns The Washington Post.)
In October, a month before announcing widespread layoffs, Amazon began winding down its exploratory internal incubator, Grand Challenge. The team — at one point so secretive employees weren’t supposed to utter its name — worked on projects like Echo Frames, Amazon’s stab at smart glasses, and even cancer research, CNBC first reported in 2018.
Team leader Babak Parviz, who came from Google X in 2014, left Amazon in October. His departure was followed by news that most of the group’s projects would be shut down, including Amazon Glow, a projector device for kids, and Amazon Explore, a virtual tourism product.
Amazon Care, a major telehealth player the company shut down in August, was also a product of Grand Challenge. Rather than continue to support that project, Amazon acquired start-up One Medical.
Amazon CEO Andy Jassy replaced founder Bezos in the role in 2020. Where Bezos was known as a visionary risk-taker, Jassy — best-known for running Web Services, Amazon’s successful cloud computing arm — has a reputation as a pragmatic businessperson.
Bezos made experimentation and bravery, or what he famously called a “Day One” mentality, a core part of the company’s culture. But a former Amazon employee who worked on Grand Challenge and spoke on the condition of anonymity due to a nondisclosure agreement said that culture has changed in recent years.
Is Amazon “not just growing up, but getting old?” the former employee asked. “It does feel like Day 2.”
Amazon spokesperson Brad Glasser said in an email that Amazon will “continue to invest” in Grand Challenge and “continues to pursue bold bets in myriad areas, including bringing broadband to millions of people around the world through Kuiper, building the world’s most useful personal AI, reimagining healthcare, and getting the first driverless taxis on the road, to name a few.”
“We have a long track record of turning bold bets into meaningful businesses and are optimistic about all of these areas” he said.
Despite major investment, some of Amazon’s most ambitious projects have failed to get off the ground. In 2013, Bezos made headlines when he announced on “60 Minutes” that Amazon was already testing delivery by drone. But 10 years later, Bezos has moved on, and Amazon’s drone operation, tied up in regulatory red tape, has made few real-world deliveries.
Economic pressures do have an impact on funding for moonshot labs, but that doesn’t mean the spark of innovation will die inside the companies, said Peter Diamandis, a tech entrepreneur and investor. He, in the mid-1990s, founded the X Prize competition to encourage private companies to develop spacecraft, something that at the time was still mostly the realm of the world’s richest governments.
“We’re going to see these moonshot labs ebb and flow depending on corporate profitability, but that culture is never going away — it’s how these companies were born,” he said.
Google’s Waymo wasn’t the only one of the company’s side projects hit by recent cuts. Verily, which is one of a handful of health-care-related projects the company launched over the years, worked on a range of topics including breeding sterile mosquitoes to lower the spread of insect-borne diseases and helping run coronavirus-testing centers during the beginning of the pandemic. When Google announced its layoffs on Jan. 20, Verily was disproportionately hit, cutting 15 percent of its staff.
Area 120, a part of Google that served as an internal start-up “incubator,” lost most of its employees and will soon be completely shut down. The department represented one of Google’s defining quirks — letting some employees spend time on projects outside of their regular jobs, and even stay at the company sometimes to launch start-ups rather than leave and do it on their own. Those days seem to be over now.
Bigger, more mature companies have bigger legal liabilities, making it harder to push out new products and keep up with start-ups, Diamandis said.
“That’s a really big dilemma for big companies,” he said. “It becomes harder to innovate and take real chances and risk.”
A similar dynamic has been playing out over the past year when it comes to new generative artificial intelligence tools that can produce text, images, sounds and videos that look and feel like they were created by humans. Start-ups like OpenAI and Stability AI pushed their products out to the public, capturing a wave of marketing attention and wonder at the new tools, even though much of the technology was based on ideas developed earlier by the Big Tech companies.
Microsoft spent billions of dollars on a deal with OpenAI to use the company’s technology in its new Bing search chatbot, and Google and Facebook are rushing to produce their own versions of the tech, pushing past guardrails they had instituted in the past to ensure the powerful tech was safe to use before getting it in the public’s hands.
Facebook parent Meta is still investing billions into its long-term gamble to build out immersive digital realms known as the metaverse, despite the slow traction among users. CEO Mark Zuckerberg envisions that virtual and augmented-reality-powered service will become the next great computing platform, as people work, play and shop through their own avatars in the metaverse.
But even Zuckerberg has been forced to trim costs and refocus his existing employees on the company’s top business objectives in the face of falling revenue and an uncertain economic future. Over the past year, Meta has cut its investment in or halted the development of several products and services such as the Facebook News tab, its newsletter product, Bulletin, and its video-calling device line, Portal.
Earlier this year, Zuckerberg proclaimed that 2023 would be the “year of efficiency” and pledged to trim management layers and speed up the company’s decision-making.
The shift is a major change for the tech industry’s culture, where employees would jump from well-paying jobs at Big Tech companies to risky start-ups, comfortable in the assumption that they could return if the smaller company didn’t work out.
“I think that’s being tested right now,” McNamee said. “If people working in Silicon Valley become more risk averse, the implications are profound.”
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