Even if Alphabet was reluctant to invest their own profits, can't they borrow cheaply too?
Employees of Google that work on GoogleX projects that graduate no longer technically work for Google, but for the new company and they no longer receive Google shares, but new company shares (in this case Waymo, Loon is another example ).
This forces the company and employee incentives to be aligned since the value of the employee equity is tied to the success of the specific GoogleX project and not Google itself.
When a company graduates if a lot of employees don't want to stay on the project and choose to stay at Google, that itself might be a bad sign (though it could also just be employee risk preference).
I think companies graduate when they're less pure R&D and closer to marketability. If they can't survive on their own at that point it may be because there isn't a market, the timing isn't right, or any other reason that can cause a startup to fail.
This system prevents Google from pouring money into something that's never tested in an environment where it can actually fail. It puts moonshot projects in an environment where they're truly tested and don't just become places where money is spent without any ability to measure success.
It's my understanding that graduated companies have their own hiring methods and can make their own independent decisions in general. They would also need to raise their own money.
It’s better to know if something will not succeed and you can’t easily tell without testing in the market.
The incentive alignment with equity seems like the most critical piece and it has the bonus of rewarding employees for taking on the extra risk.
This lets you spin out big ideas without spending all of your money - a little like running internal VC (one big success could make up for all of the other failures).
I think at this level capital is not really the main constraint. It's attracting talent and creating a culture/environment where success is possible, even then that's just a necessary but insufficient prerequisite for success among all of the other non-capital reasons a startup might not succeed.
Google then re-acquired it.
Speculation, but perhaps Google was concerned about it getting acquired by a competitor as it used a lot of core Google search technology. Or, perhaps Google knew that the acquisition cost would spiral upwards if they waited much longer. Or, perhaps it just proved out the hypothesis that the product was viable, so better to bring it back in-house.
But I would call it successful by conventional metrics: it found product-market fit, had good customer traction, and was acquired at a decent (though not crazy) valuation.
From my experience working there, this is the sort of concept they would be attracted to. Google gets a benefit from either scenario.
From the counter party part of this deal, the "investors" either lose their money, or they get a fixed amount of 'upside' when Google re-acquires.
They're at least responsible for a large chunk of ML research, which is directly to directly improve their products (Maps, Photos, YouTube, etc.).
They are fishing for understanding of the market and sometimes general approaches or parameters of possibility. You are providing free insight. It’s the same when you pitch a VC. You just give them more and more free insight. Hopefully they provide value in return.
The short part gives you some cash now and if the stock drops even further, you can cover the short and keep the profit. But if the stock goes up, just when there is a margin call you've got an "in the money" call option to cover it. So if it is shooting up you exercise the call, cover the short with half the shares, and profit when the other half keep shooting up.
Anyone can nominally do this on any stock, but there are tax advantages to the company that does it with one of their own subsidiaries.
That has been their get-out-of-jail-free card since, well forever.
plaintiff: "Your honor these share holders are suing the company for violating its fiduciary duty."
company; "Your honor, we know that some share holders may not always agree with the majority, but we made sure that over 50% of the share holders were on board with every decision we've made. We move to dismiss."
Judge: "You have documented that the majority agreed?"
company: "Yes your honor"
Judge: "And every shareholder has access to the bylaws of the company which state in clear and unequivocal terms that all decisions will be decided by a simple majority vote?"
company: "Yes your honor."
One is VirusTotal, which is super important to the security community but I don't think generates enough revenue to live on its own.
The other is a strange "Splunk Lite" offering that as far as I could tell the main selling point was it was way cheaper because Google gave them free/discounted storage. The search was terrible. It didn't highlight important things or hide the mundane. When I saw a demo it didn't even support IPv6 yet.
But I guess every moonshot factory has to have its Challenger disaster to learn a few lessons.
the inclusion of a non-revocable license to core technology is a common part of such structures because it gives the people who take the risk some proof against management changes that otherwise sink such deals.
Niantic was spun off from Google.
I would not be so dismissive of it -- there are good reasons to have separate companies. You can offload some risk by getting co-venture (as in Waymo's case.) More importantly, you can have other critical partners be co-invested with skin in the game. In the case of Waymo, if I were trying to raise funding, I might get money from P&C Insurance companies -- it could help align great future partnerships that make 1+1=3.
I think if anything, it causes the bar to be super duper high to fully launch, which is why I’m very pessimistic on Level 5 driving happening anytime in the near future. AGI is not solved, not even remotely, and if death is the consequence, Waymo will probably dissolve before launch.
If all the AI did was decide you're unfit to drive, that it take over for a few minutes to get to the next stop and pull over and call the cops on you, we might save more lives by that alone.
For stopping people from driving, you'd have to solve the social issues there first somehow. "Our car stops you from driving if it thinks you're incompetent" isn't something that sells more cars. Maybe the government could mandate it, and that's the government's responsibility.
I could see something like that as part of a “supervised driver” safety feature. Like maybe you enable it when your kids use the car or if you rent the car out to strangers.
Why not just install the existing breathalyzers in every car right now?
Hit by a human, decent chance they flee and if you track them down, it’ll probably be some uninsured drunk with a negative net worth.
This definitely would have been a consideration at some point along the journey.
You're naive if you think it wasn't.
Of course a waymo car will kill somebody at some point. Everybody knows it's going to happen, and there's no way google/alphabet hasn't essentially priced in that risk. If they were afraid of killing people, they wouldn't have gotten into cars in the first place.
Alphabet can (and will likely) invest $xB more money for initial business ramp-up but if you want to create the next Google probably money from their own pocket might not be enough. This is particularly important as they need to heavily invest into physical assets with very high upfront costs.
FYI, Uber has 10 millions of drivers across the world and if you want to match that number, you're gonna need $100B even with super conservative assumption of $10k per car (and the actual cost will likely be much higher). Doing something like this by Alphabet alone is extremely risky given that the technology is still in a very young stage.
Cars will quickly start paying off, even if each car only pulls in 10 rides of $10 each every day, it'll probably pay for itself in a year.
Even founders who can self fund, raise money from investors as you don't want to own all the risk in any risky endeavor.
* Free version of Uber/Lyft based on a Google ad/maps referral as described by this patent 
* Free up peoples commute times so there eyeballs are free to use Google more (watch Youtube, use Google Search, read Google News). Perhaps even access free in-Waymo wifi that only allows Google domain access.
They have monopolies in these two areas and therefore neither requires 100% ownership in Waymo.
It's not just about getting money, it's also about getting money from the right people. Investors with the pull/clout/insight/etc they need. Investors who know people or who know people who know people. Perhaps people who have political connections or regulatory access. People with insight in the automotive industry. People with ties to media for favorable coverage. It's about getting money from people in position to help them. It's like a movie production that bring in producers who has connections to local governments that can expedite the process of shutting down a bridge or highway to film on for a day.
Alphabet has "limitless" amount of money but there is also a "limitless" amount of money outside of alphabet wanting to buy into waymo. So for waymo, it's really not about getting money but getting the right type of investors. It's a two way street. Investors want to buy into waymo and waymo wants to buy into investors.
If you can get money from someone else it shows that it has value in the marketplace generally.
A few confounders I haven't seen though:
1) Waymo is its own entity, but its brand is linked to Google/Alphabet. A reader of this article will be clear on that by the time they have gotten through the sub-headline.
Any success or catastrophic failure of Waymo/self-driving will have Google spoken of in the same breath as Waymo.
2) Capital Allocation & Diversification
- Google had $119 Billion of cash on hand at the end of FY2019 earning no return. More than any other company.
- Alphabet is not Berkshire Hathaway waiting in the wings to deploy its capital in a downturn or buy up unrelated businesses.
- Diversification is a fine strategy, but when you have this much capital to allocate—and ostensibly Alphabet has this much because they don't know what to do with it—not fully funding Waymo itself doesn't make sense.
3) The Waymo blog post about this that Rutledge linked below gives a possible alternative 
> “Today, we're expanding that team, adding financial investors and important strategic partners who bring decades of experience investing in and supporting successful technology companies building transformative products. With this injection of capital and business acumen, alongside Alphabet, we’ll deepen our investment in our people, our technology, and our operations, all in support of the deployment of the Waymo Driver around the world.”
Building technology is hard, but building out a car company that can produce vehicles on any scale is also hard. Tesla and Elon now know this.
So maybe by opening up to outside investment they allow strategic partners to share in the risk and outsized reward of success.
Curiously though, only one of the six outside investors listed seem to be "strategic." That would be Magna International, "a leading global automotive supplier."
The other investors are:
- AutoNation: a used/new car buying/selling website
- Andreessen Horowitz: VC firm
- Canada Pension Plan Investment Board
- Silver Lake: private equity
- Mubadala Investment Company: United Arab Emirates sovereign wealth fund
From the outside looking in, I have further questions as to how those are "strategic" investments that could help develop and/or bring Waymo cars to market.
tl;dr Alphabet/Google has so much capital it needs to deploy not using it to fully fund Waymo is curious. Waymo is not a distinct brand from Google/Alphabet. It's not readily apparent how six of the seven outside investors chosen for the "strategic" investment add value beyond capital.
The ability to raise money is itself a test - if you can't get third parties to invest then that's not a great sign. Google's judgement may be impaired by being so close to it.
They could easily self-fund, but then they wouldn't get that signal. Forcing a company to survive out of the nest will influence the decisions the stakeholders make, they can't relax knowing that Google will just fund things no matter what, they have to be focused on shipping something people want.
At least that would be my guess.
It's a clever way to try and prevent the lethargic energy that comes from being a big company along with the inability for large companies to innovate outside their narrow domain (often even within it).
Couldn't these also be considered strategic in the regional/political/regulatory sense? Access to people with strong connections having skin in the game.
By keeping Waymo separate, shareholders can make their own choice as to how much they want to invest in search/advertising vs. self-driving cars. They're drastically different risk/reward profiles.
Obviously this isn't something a company usually does, but that's because either a division is small, or it has significant links to the rest of the company, or there's a clear joint strategy.
But Waymo is expected to be huge, and there's really essentially zero link to the ads/search/cloud/media that is Google's bread and butter.
As I said a couple months ago, the "Waymo" name is a sign. If they really believed in the product, it would be called "Google Self-Driving Cars".
Point being that google has quite a few inconsistencies in their naming (which is a thing in itself) and their not applying Google brand to Waymo at this point is any indication.
Blogger was also an acquisition (from the future founder of Twitter), and it already had a strong brand.
Whereas in 2011 there was a lot of marketing tying self-driving cars <=> Google.
There could be other reasons for the separate brand, like managing bad PR from a crash, but I would also classify that under "don't have confidence".
In contrast Tesla seems to be staking their brand on self-driving. I feel like this could backfire in the next 5-10 years, but Elon will probably make some other advance/launch to distract from that. Self-driving has already fallen behind Tesla's claims, but he can keep the media busy enough with other stories.
It's par the course for X graduates to get their own brand.
Google Video is a thing, it was Google's competitor to YouTube before Google bought YouTube. (And YouTube was already called YouTube before Google bought it.)
It'll look bad on the brand when the news is reporting how, "Google self-driving car kills family en route to Disneyland".
I'm not saying self-driving cars are dangerous, but it's just the numbers. People will die and self-driving car deaths will be shocking news and make headlines for a long time. I wouldn't want my brand name anywhere near them.
As a result Rolls Royce cars are... huh, no, people actually nod right along, that makes sense, Rolls Royce jet engines, I would want a reliable, high quality jet engine and that's what I associate with this car brand. Most people have no idea it isn't even the same company.
News outlets will connect Google to such deaths regardless. "Google car kills two" the headline will say, and Google's PR person will know better than to insist "Actually it should say Waymo not Google".
It looks bad if it becomes a trend. "Man dies in car crash" isn't going to destroy your brand. Ask every single car company in the world. Even Volvo, whose brand is specifically all about safety. It requires a trend, which is what hurt Boeing recently, bad news after bad news without respite, that'll do it. But there's no reason to think Waymo will ship something dangerous enough to cause such a trend.
There's a difference between someone crashing their own Volvo, and someone sitting in the backseat of a Waymo that misinterprets the lane markers and crashes into a barrier. One is not news, one is front page news.
I guarantee the first Waymo death is going to be publicized everywhere. It doesn't need to be a trend, and as I said, it doesn't mean the cars are more dangerous than human drivers. However, it's going to be news. There are going to be all sorts of moral debates when an algorithm decides to drive over a child instead of turning into an oncoming car. People will want answers. How does Waymo rank the value of different lives? I imagine it'll be news for the next decade until there are thousands of deaths and it becomes normal.
It's an industry that's going to be full of "firsts" and that's going to be the news. Waymo drives over dog while auto-piloting to a parking lot. Waymo mistakes grocery cart for stroller and swerves into elderly man. Waymo kills cyclist when poor weather disrupts censors. It doesn't matter if they ship something safe. Get enough cars on the road and these things will happen and people will be talking about it.
No. That's a trolley problem. It's an interesting intellectual exercise, you can maybe win a debate team trophy for your rousing defence of one choice or the other - but these moral decisions aren't actually what drivers do whether they're humans or a powerful AI.
People keep acting as though this is an unprecedented situation and invoking weird moral beliefs about thinking machines, when it's actually utterly routine. Let's try another exercise:
How many headlines have you read about a specific brand of elevator decapitating a child? Is it none? Do you see anybody pushing for the big elevator manufacturers to have to reveal how they "rank the value of different lives"? No?
That's not because nobody dies this way, it's because we say oh that's just a machine obviously if things go wrong you can get seriously injured and the machine doesn't know if you're a nun or a basketball champion it isn't trying to kill/ not kill anybody in particular it's just a machine.
Humans are often tempted to try "escape manoeuvres" and these almost invariably go wrong, we don't teach machines to try such manoeuvres because the machines are trained based on real performance data not someone's model of themselves as an immortal superhero.
One of the first Waymo crashes was somebody trying an escape manoeuvre. They found themselves in a potential collision so rather than the correct thing (brake to reduce speed, hit the thing you're colliding with because it's too close) they tried an abrupt swerve, lost control of course, crossed a median and smashed into the unrelated oncoming Waymo car at high speed writing off both vehicles. Humans do stuff like that, you can try training them not to but they won't listen. But the machines do not have that problem, so less "Should I kill the nun, the pregnant woman or the Olympic champion?" and more "Despite maximum braking effort a collision has become inevitable. Preparing safety systems for impact".
"Waymo Adds $750 Million to War Chest as Driverless Cars Prove Tough to Deploy"
If I were a investor that invested in individual stocks (which I am not), my money would be on Tesla over the long run here.
Yes, Tesla may be getting more data in the field, but Waymo is still much further ahead with actual fully self-driving car without anyone at the wheel (within a small region + good weather). Also worth pointing out that the quality of the data also matters, not only the quantity.
Tesla is ahead where it counts, sales. it feels like waymo was already 'successful' in small regions with good weather not requiring complex thought situations in 2018. meanwhile tesla is improving designs, expanding capabilities, and selling cars.
I'm not a tesla fan boy, but I definitely prefer their approach in terms of iteration (not sure if I agree with the tech choices).
Where it counts for what? Tesla has demonstrated it can sell non-autonomous cars, Waymo has not, but the GP's point is it's not clear what bearing that has on making an autonomous car work.
I'll give you a hint, the technology doesn't define the product.
Product here is "L4 self-driving technology", not "car" as you seem to be implying. Yes, Tesla is shipping cars, but they are nowhere close to L4 self-driving (aka no one at the steering wheel).
> they actually have a product in the market
No they don't. They have a car on the market, and an L2 driving assistant. As I was implying above and again repeated by the post you replied to, there's no indication that you can transition from L2 to L4 in a gradual manner, so "L2 product in the market" means absolutely nothing.
Here's an analogy for you, I'm saying that Google is ahead of Intel in making a Quantum chip, and you tell me that Intel is right now shipping millions of classical chips, therefore they are closer to making quantum chips. My argument is that the jump from L2 to L4 is similar to classical vs quantum chips, and shipping millions of L2 cars does not mean you're any closer to L4 technology.
Why is this where it counts? And if it were, wouldn't this mean that Ford/GM are way ahead of Tesla?
I suspect we will see a replay here of the ULA versus SpaceX history of the last ten years, and at the end, Google is going to look up and wonder "what happened" while Tesla continues to dominate the actual market.
My expectation is that Tesla gets better and better but doesn't move beyond a driver assistance package for a very long time. None of the hardware sold today ends up being FSD.
Waymo remains limited in scope by its business model. It rolls out driverless taxis to more and more cities, but you can't buy a Waymo FSD car, and it remains geofenced for a decade or more.
Which company wins the race to being able to buy a car without a steering wheel that will take you anywhere? I could see Tesla winning that.
But Waymo is in a position to capture significant economic benefit by being an Uber competitor and providing logistics in the meantime, if they can scale up quickly enough.
Regardless of how it goes, it's going to be fun to watch.
Waymo started with the iterative approach, and threw it out of the window after they observed what Tesla is observing now: Humans suck at monitoring. Their testers started doing all kinds of crap while the car they were supposed to be supervising was driving, including texting, make-up and taking a nap.
Waymo identified the risks, and had the luxury to take a step back, and re-aim the moonshot. Tesla made the same discovery, but can't (or at least didn't) go back and say "we need to re-evaluate our approach to FSD" - and instead keep trying to get people to stay attentive at the monotone task of monitoring the vehicle, while continue to keep the blame on the human when they crash and die.
Now Waymo is in the position of being not only the current leader in self-driving tech (having cars without drivers on the road), but also having the perception of being the responsible player in the field, putting safety over profit&sales. Having the first cars without drivers on the road allows them to help inform legislation in that space, while Tesla is still struggling to convince their test drivers (=customers) to pay attention and not crash.
There is a lot more that Tesla is lacking before self-driving. I'm baffled that people here are suggesting otherwise?
Recognizing traffic lane "darts" as a bifurcation of the current lane and not as a new lane to travel in.
Recognizing stopped fire trucks and other vehicles partially or fully obstructing the lane the vehicle is traveling in.
Comparing the amazing capabilities of Waymo cars to the Tesla toy is very misleading.
Every accident, i hear them talk about how autopilot is not driverless, as fully self driving does not imply driverless. As it is a driver assistance system that requires human oversight and control.
On the other hand, there are constant claims of Tesla being the only one with driverless cars on the road.
It’s way too early to know which approach will be the “winner”.
Personally, if i were invested in these companies my money would be on the ones developing autonomous car tech over the ones who aren't. Tesla and Waymo can both be leaders here.
What am I missing?
Here's the summary via 2 examples.
1. Example of gathering data that needs further labeling
To implement neural network (NN) to recognize stop signs they program the cars to recognize things that look like stop signs and deploy that to the fleet of over 600 thousand cars on the road. The cars send those "might or might not be a stop sign" images back to tesla and they get manually labelled and added to a training set. They gather enough images and the "recognize stop signs" feature is done. Apply the same logic to other recognition tasks: recognize cars, pedestrians, animals, speed signs, traffic lights etc.
Yes, labeling is expensive but everyone else (including Waymo) has the same cost.
But Waymo has even bigger cost of driving around to collect those images.
Tesla makes gross profit on every car they sell and they got 600 thousand people driving for them for free. Waymo has 600 cars, each of them reportedly costing over $200k and they have to pay drivers at least minimum wage for each hour of driving.
That's why Google is reportedly is spending $1 billion a year on Waymo and why they need $3 billion of additional investment to keep going.
2. Example of gathering data that doesn't need labeling
Consider implementing NN to recognize cut in i.e. other cars entering your lane in front of you.
They deploy a first version trained on small sample, running in shadow mode i.e. it makes predictions for cut ins but doesn't act on it.
When it makes wrong prediction, it sends the clip of the cut in back to Tesla. This doesn't need manual labeling. They know whether the car did cut in or not so they can rewind time and automatically label the past car action.
So in failure cases, they record what a human would have done.
On the other hand I think with the collapse of the economy and skyrocketing unemployment, the price for a human driver may plummet. Remains to be seen if the increased demand in deliveries is enough to offset the voids left in the rest of the economy.
Not quite perfect, but does the job for me :)
Not available on AMO or Chrome Webstore, unfortunately, but is very easy to install on Firefox, and requires just a bit of effort on Chrome.
They are not building their own cars, haven't partnered with any automakers either. In fact they discussed with a bunch of them and couldn't convince any company to partner with them. Most of the automakers already are investing heavily in their own autonomous tech stack. Unless they blow everyone out of the water with their technology I don't see them selling their stuff to automakers.
The only path then is an Uber competitor. That means they have to acquire a fleet custom made for their solution. That is a huge investment a large undertaking, not sure Waymo has it in them to do it. This is not Google wave to abandon so I am sure they will not do so, however I will not be surprised if people grow frustrated by the lack of clarity.
A self-driving car company will have to own a huge depreciating asset, and they’ll still need staff to clean & take care of the cars in addition to an enormously expensive engineering team and/or licensing payments.
What business model are these companies trying to fulfill? It seems like they are trying to solve a problem that doesn’t exist.
If all cars are self driving we can eliminate red lights and traffic signals because of machine coordination.
Better utilisation of cars will lead to a 5x to 10x decrease in traffic, and route planning algorithms will optimise pickups and simultaneous package delivery.
Your car can go and ferry people around rather than sit idle taking up parking spaces while you’re at work (copy paste this for 200,000 workers in the city) and make you money
The car can go fuel and charge itself and drive itself to servicing and cleaning.
And what if the ferrying people around part is a revenue share between the self driving car company and the car owner?
A more efficient service (algorithmic operation) which costs 40% less seems to be a no brainer.
A lot of the Tesla robotaxi fleet would be people that still own the cars but just deploy it to the fleet to make money for them.
It was all fine when they got free money from Google to power their experiments (cars, people, time). Now they're borrowing from their own value to pay investors for the loan.
I'd want to see some belt tightening from what is sure to be an overly large engineering team and lots of support staff, if there were ever to be the promise of becoming profitable (and to eventually pay for these loans from investors).
I predict they end up focusing on semi-autonomous trucks instead of cars for regular people.
Autonomous is going to be incredibly valuable and it's a hard problem that we'll have to keep hacking away at for a long time. Waymo has made more advancements than any other company. There is a big pack of companies all trying to get a piece of this pie and none of them may succeed in the short term, but Waymo looks to have the best shot.
But beyond that I am sure there is a market for self driving cars. Just don't know if / when they'll get to the point that they can sell it, but I'm a hell of a lot more sure about Waymo's product demand than I am Magic Leap's in terms of "Does anyone want this product / could you actually sell it?"
Waymo is there to help me get places easier. I like that. I'm not at all sure what Magic Leap was offering.
20,000 seems like a proof of concept. If you have 20,000 cars and they're mostly on the road, you could open your own Uber in a city...
The pandemic has proven that these goals and many more can be accomplished without any complicated, speculative AI technology, simply by taking full advantage of telecommuting and delivery. Obviously there is no profit to be made so it would make no sense for investors to do so, but I wonder what $3B could accomplish if it were put to the purpose of reducing the need to travel, rather than finding new ways to burn gasoline.
Besides, delivery would also benefit from this.
I wouldn't buy a car from Google because of this . Even if Google promised not to collect data I wouldn't believe them.
Google admits it tracked user location data even when the setting was turned off
Despite the glut of subprime car loans, the newer generations are buying less cars, and Waymo is probably not going to try to sell vehicles.
You're clearly extremely paranoid and not a car owner and also Waymo does not sell cars to consumers. They aren't trying to sell someone like you anything.
No one cares that you don't trust Google or that you wouldn't buy a car that's not for sale.
Yeah, a Waymo car is a whole different kettle of fish, but modern cars keep logs- if not location, then other data.
Um... Yes it's absolutely like that. They're using phoenix because it very little rain, so they can get cars that work ignoring bad weather
Afterwards they can scale out to other good weather cities and focus harder on expanding the weather they can drive in
I think this is pretty reasonable considering that for $5/ride I would expect there to be quite a lot of demand, and there's opportunities for things like food delivery as well.
I offer that it's entirely possible that the tracking you are attempting to avoid, you may be already entirely subject to, via things like Uber or your mobile phone.
I doubt there's any meaningful way to avoid IC/Telco/FAANG location/movement surveillance these days.
This is not to say that your decision is wrong (it's the same reason I cancelled my Cybertruck preorder!), just that I think people like us may be out of luck.
With a subcription for the trams/trains/busses in my area. I use taxis sometimes, but not Uber. On holidays I like to share a car with others. If you share the costs, cars aren't even expensive.
>This is not to say that your decision is wrong
Waymo would have all the same problems, except I doubt Waymo is targeting cars people would buy at all. Google seems set on delivering a transportation service. It's questionable if they'll ever sell their system at all.
"However having Tesla Motors maker of the Model S activate the car’s onboard computer and allowing it to drive"