Belt tightening continues in Silicon Valley.
Alphabet (GOOG, GOOGL) announced Monday that it will make cuts to its X division, which invests in moon projects, Bloomberg reported.
Bloomberg reported that the company will make “dozens of cuts” at the unit, mostly focused on support staff, suggesting that there is still some desire at the tech giant to find solutions to problems outside its usual areas (read: money-making areas) of search and digital advertising. .
But in an email to employees obtained by the company, Astro Teller, who leads X, wrote that the company is “expanding our approach to focus on creating more ventures as independent companies funded through market-based capital.”
“We will do this by opening our scope to collaboration with a broader base of industrial and financial partners, and by continuing to focus on lean teams and capital efficiency,” Taylor added.
Which stands out to us from two aspects.
The first is an admission by one of the leaders at Alphabet that the terms under which the technology giant agreed to make these investments contained few economic criteria. In its last quarter, the alphabet “Other Bets” The sector incurred an operating loss With a value of $1.2 billion.
Now the company has the right to make these investments. After all, losses are not hidden from shareholders, and there might be an argument that the pioneering spirit of the company — founded more as a scientific enterprise than a money-making endeavor — is preserved by losing that money almost intentionally. But that calculus appears to have changed at Alphabet as the company focuses more on artificial intelligence, and a Valley-wide drive to cut costs provides the company with cover to cut back in other areas.
The second notable part of this new is how Alphabet plans to continue to control costs in this unit.
The company essentially outsources the discipline to outside investors looking to earn a return beyond any cultural benefits from their investments. At the end of the last quarter, Alphabet employed 182,000 people.
Management teams can say all the right things and implement the right best practices to increase efficiency, etc., etc. But in an organization the size of Fort Lauderdale, it will be difficult to steer in a new direction no matter how strong your direction.
Which should come as little surprise. After all, culture was part of the reason X existed in the first place.
“Web maven. Infuriatingly humble beer geek. Bacon fanatic. Typical creator. Music expert.”