The belt tightening in Silicon Valley continues.
Alphabet (GOOG, GOOGL) on Monday announced it would make cuts at its division, X, which invests in moonshot projects, Bloomberg reported.
Bloomberg reported the company would make “dozens of cuts” at the unit, mostly focused on support staff, suggesting there remains some appetite at the tech giant to find solutions to problems way outside its usual realms (read: money-making realms) of search and digital ads.
But in an email to staff obtained by the outlet, Astro Teller, who leads X, wrote the company is “expanding our approach to focus on spinning out more projects as independent companies funded through market-based capital.”
Teller added: “We’ll do this by opening our scope to collaborate with a broader base of industry and financial partners, and by continuing to emphasize lean teams and capital efficiency.”
Which stands out to us on two counts.
The first is a leader at Alphabet acknowledging that the terms on which the tech giant agreed to make these investments had contained few economic parameters. In its most recent quarter, Alphabet’s “Other Bets” segment incurred an operating loss of $1.2 billion.
Now, it is the company’s prerogative to make these investments. After all, the losses aren’t being hidden from shareholders, and there is perhaps an argument that the pioneering spirit of the company — which was founded more as a science project than a money-making endeavor — is retained by losing this money almost intentionally. But it appears this calculation has changed at Alphabet as the company focuses more on AI and a Valley-wide impulse to cut costs offers the company cover to trim in other areas.
The second notable part of this new is how Alphabet plans on going about getting costs under control at this unit.
The company is essentially outsourcing discipline to outside investors who will look to earn a return beyond any cultural benefits from their investment. At the end of its most recent quarter, Alphabet employed 182,000 people.
Management teams can say all the right things and implement all the right best practices to increase efficiency and so on and so forth. But at an organization about the size of Fort Lauderdale is going to be hard to steer in a new direction no matter how forceful your directive.
And while X is a small carve out from the larger Alphabet parent, trying to change the culture anywhere within an organization this large will take more than a tight memo; t will take, as usual in corporate America, dollars and cents.
Which should come as little surprise. After all, culture was part of the reason for X’s existence in the first place.
