GOOGL - Google

[Spekulatius]

It had been over a year since I purchased some GOOG, but after hours I forced myself to pull the trigger on a small piece. There's some moderate "concerns" but Google is basically the new Visa. It's "everywhere you want to be".

 

All jokes aside, its core business remains moaty, and the growth is still there. Youtube IMO is really becoming a dominant piece of internet real estate. Whereas I view BRK as the perfect collection of "old economy" businesses, I consider Google to be the perfect collection of "new economy" businesses/assets. I dont expect massive outperformance here, but it's more stable and better diversified IMO than the FB's, AMZN's, AAPL's, and NFLX's of the investing universe. Only company(of the big ones) that I'd say is better situated is MSFT.

 

I added a bit during the last downdraft in December. At a roughly $50/ year run rate, it trades at 22x earnings (neglecting the cash) and in-line with the revenue growth rate.

[mjs111]

On the conference call, Ruth Porat mentioned that R&D costs, capex, and hiring were all going to moderate continuing into 2019 compared to what we saw in this quarter.

 

Mike

[Liberty]

Also, the number of employee’s is up 23%’ a bit more than revenues. Same problem than FB, where costs are rising faster than revenues. I get the increased losses at Google ventures, but the margin and cost trends in the core business are a bit worrisome.

 

Apart from all the obvious stuff (want to catch up to AMZN and MSFT and be a real hyperscale cloud player), I think now's probably a good time for all these businesses to depress their profitability because of politics. Whatever they invest today in capex probably is pulled forward from the future. Amazon has gone through these cycles.

[meiroy]

"So, starting with R&D, the main driver is our ongoing investment in engineers, in particular, in Google and then as I said, the sizable increase in accrued comp for other bets. And just to build that out a bit more, give you a bit more color, in certain other vets, employees are compensated through equity-based programs. And that's because we believe that this alignment of interests is valuable. We do assess valuation on an ongoing basis. And at a minimum, we do a formal valuation assessment once every 12 months or when there's a significant event.

 

And what you're seeing in the fourth quarter is the impact of higher valuation in certain other bets. And as we've talked about previously, a goal with the Alphabet structure is to enable us to build new businesses that would make a positive impact and create long-term value. And it's still early days. We're very excited about the opportunities we see. And so, what you're seeing is the impact here of valuation. The way we approach it is very consistent with the way start-ups are typically valued"

 

So basically what happened is that this is some tax planning one or more of the companies got higher valuation on paper and so there is some umm equity based compensation to attract and retain great minds, just like with start-ups.

 

 

[cameronfen]

"So, starting with R&D, the main driver is our ongoing investment in engineers, in particular, in Google and then as I said, the sizable increase in accrued comp for other bets. And just to build that out a bit more, give you a bit more color, in certain other vets, employees are compensated through equity-based programs. And that's because we believe that this alignment of interests is valuable. We do assess valuation on an ongoing basis. And at a minimum, we do a formal valuation assessment once every 12 months or when there's a significant event.

 

And what you're seeing in the fourth quarter is the impact of higher valuation in certain other bets. And as we've talked about previously, a goal with the Alphabet structure is to enable us to build new businesses that would make a positive impact and create long-term value. And it's still early days. We're very excited about the opportunities we see. And so, what you're seeing is the impact here of valuation. The way we approach it is very consistent with the way start-ups are typically valued"

 

So basically what happened is that this is some tax planning one or more of the companies got higher valuation on paper and so there is some umm equity based compensation to attract and retain great minds, just like with start-ups.

 

This may be me being dense, but I'm not sure I follow what you are trying to get at?  Are you trying to say officers think google is expensive?  Or that this comp scheme is good? 

[meiroy]

"So, starting with R&D, the main driver is our ongoing investment in engineers, in particular, in Google and then as I said, the sizable increase in accrued comp for other bets. And just to build that out a bit more, give you a bit more color, in certain other vets, employees are compensated through equity-based programs. And that's because we believe that this alignment of interests is valuable. We do assess valuation on an ongoing basis. And at a minimum, we do a formal valuation assessment once every 12 months or when there's a significant event.

 

And what you're seeing in the fourth quarter is the impact of higher valuation in certain other bets. And as we've talked about previously, a goal with the Alphabet structure is to enable us to build new businesses that would make a positive impact and create long-term value. And it's still early days. We're very excited about the opportunities we see. And so, what you're seeing is the impact here of valuation. The way we approach it is very consistent with the way start-ups are typically valued"

 

So basically what happened is that this is some tax planning one or more of the companies got higher valuation on paper and so there is some umm equity based compensation to attract and retain great minds, just like with start-ups.

 

This may be me being dense, but I'm not sure I follow what you are trying to get at?  Are you trying to say officers think google is expensive?  Or that this comp scheme is good?

 

My comment was about the increase in capex. The above was said by Ruth Porat during the earnings call.

 

 

[saltybit]

Handling the long tail of self driving cars - lecture from a waymo ML engineer

[WayWardCloud]

Handling the long tail of self driving cars - lecture from a waymo ML engineer

 

Thanks for sharing!

I've been watching several MIT videos by Lex Fridman lately (he has a great interview with Kyle Vogt as well).

 

As an investor, I tend to focus my interest not on understanding fully the technology but on trying to identify the beliefs of other market actors about it and whether they might be way wrong at times, because this is where the opportunity lies. So on self-driving cars there appears to be a huge disconnect between the opinion of many (a majority of?) people and the declarations of several, usually highly reliable, companies such as Alphabet, General Motors and others, who say they are quarters away from deploying massive uber-like fleets of vehicles in majors cities. This difference is what has gotten me bullish on self driving cars as an investment (I own some GM and GOOG).

 

Biases I am betting against I have identified on the other side of the trade:

 

- Some older people seem to not believe it's for real in the first place because similar technologies have been promised too much in the past and they have grown cynical. I call this the "where's the flying car I was promised by the year 2000 when I was growing up?" effect.

 

- Political beliefs. Now this one was my biggest surprise. I would have never expected that going from point A to point B safely, cleanly and faster than by foot could be politically charged for some people but oh god it is. There's lunatics attacking Waymo cars with shovels. Driving, for some people, seems to be an activity that defines their actual identity and worth so they feel threatened by the computer. (It seems to be the same people who hold dear against their hearts the freedom of polluting a lot).

 

- Irrational demands in terms of safety. If you read newspaper articles such as the ones reporting on a Tesla on Autopilot that crashed into a truck and killed its owner or the ones about that Uber self driving car killing a pedestrian - and if you talk about it with your friends and families - you'll see that the overwhelming majority of people think self driving cars should only be allowed on roads when 100% safe, which of course is impossible, instead of doing the correct reasoning of comparing their level of safety with the one of the average human driver. There's about 30,000 deaths each year in the US caused by driving accidents (they just don't make a newspaper article about each of those). If for example autonomous vehicles are able to "only" kill 3,000 then the rational thing to do would be to push for an as fast as possible adoption to save those 27,000 lives per year right away (and in the meantime the 3000/years will keep decreasing thanks to the technology getting better and better). But that is unacceptable for most people. This one irrational bias has very real implications and cannot be just brushed off like the first two because people influence laws through politicians who tell them what they want to hear so they could slow down progress and stall my investment from performing well even if I believe they are "wrong" about what solution SHOULD be deployed.

 

- Lastly, there's some engineers who object self driving cars being imminent who sound like they actually know what they're talking about and are definitely not falling into those biases but actually make good arguments. That category is the only one that really worries me some times to times and I don't know what to think about Anguelov's answer to that student's question at 59:05. He definitely knows his subject and he should if anything be biased bullish and yet when asked how far away actual mass deployment is he seems a bit uncomfortable and says "its not a technology you can just crank up" and "it will take some time"...

[saltybit]

Drago (the engineer) did get asked about his thoughts on how the future might look like.. it sounds like waymo will take a very measured approach

[saltybit]

https://www.cnbc.com/2019/02/12/google-cloud-ceo-thomas-kurian-google-will-compete-more-aggressively.html

 

Thomas Kurian’s first public comments as Google Cloud CEO..

His reputation in the industry is somewhat mixed - would be interesting to see what happens

[Jurgis]

@WayWardCloud:

 

I think Waymo currently is encountering something that is intersection of safety and performance and irrational human decision making. E.g. the situations like merging into freeway or a congested lane. Self-driving cars can handle that mostly. But there are situations when this is not easy/dangerous. What humans do in such situations, they just do it (muscle in). But from self-driving car perspective such muscling in would be unsafe, so the code is not tuned to be aggressive. So the self driving car just gives up or at best stops which makes the merging even tougher. And this annoys all the humans behind it and possibly precipitates humans muscling on the self-driving car even more, which it then considers even unsafer situation to deal with.

 

I'm not sure how this is going to be solved. It might be possible to make the car more aggressive in certain situations, but that would likely make it less safe. Humans just don't think that some maneuvers are 100-1000x riskier than others. They just do them anyway.

 

 

There are other issues to be resolved like weather (rain, snow) and poor road markings. I think these are easier to solve technologically, since they are pretty much science/engineering problems rather than world/humans/safety intersection problems.

 

Just to mention, there are also:

- 'unexpected situations' problems, i.e. where something happens that is not adequately recognized and handled by car.

- humans trolling the car problems, e.g. someone just walking in front of a car in a street where self driving car cannot go around the human.

- quality-of-life problems: I and (most) Uber/Lyft drivers drive risky but save time like merging at last moment into congested exit lane. Would humans accept safer car that takes 40 minutes to get somewhere when risky human does it in 20?

 

For these reasons, I am more in a Tesla'ish-give-self-driving-but-keep-steering-wheel-and-controls-for-human camp rather than Waymo-full-auto-no-steering-wheel-and-controls camp. Although I understand Waymo's argument against the "Tesla'ish" camp.  8)

[Liberty]

https://www.blog.google/inside-google/company-announcements/investing-13-billion-2019/

 

Sundar post about their 2019 investment plans:

 

Today we’re announcing over $13 billion in investments throughout 2019 in data centers and offices across the U.S., with major expansions in 14 states

[LightWhale]

https://www.cnbc.com/2019/02/12/google-cloud-ceo-thomas-kurian-google-will-compete-more-aggressively.html

 

Thomas Kurian’s first public comments as Google Cloud CEO..

His reputation in the industry is somewhat mixed - would be interesting to see what happens

 

What kind of feedback are you guys hearing about GCP?

 

Various SV guys involved with cloud initiatives seem to repeat the same concern, that GCP is not doing so well vs AWS and Azure. Specifically, the technology is progressive and great for software people, but complicated for less sophisticated users and migration is tough because GCP is less costumer oriented & Google engineers too spoiled to do nitty-gritty work. 

[Jurgis]

Anecdotally, I have tried Google Cloud recently and it's full of obscure magic incantations. OTOH, I think that's mostly true about any cloud or even data center setup. Although TBH I haven't used AWS recently and Azure at all. 8) Likely once you work for some time you know the magic incantations by heart or at least have them written in some personal doc for copy/click/paste.

[walkie518]

Anecdotally, I have tried Google Cloud recently and it's full of obscure magic incantations. OTOH, I think that's mostly true about any cloud or even data center setup. Although TBH I haven't used AWS recently and Azure at all. 8) Likely once you work for some time you know the magic incantations by heart or at least have them written in some personal doc for copy/click/paste.

I've used Google Cloud.  I've played around w/AWS.  I have not touched Azure. 

 

Google Cloud is fine. It's a little clumsy as far as implementation goes.  Credentials and keys could be done in a way that's a little smarter and while the dashboard doesn't look cluttered, it's not always easy to find exactly what you're looking for.  Looking up documentation leaves a lot to be desired.  There are docs for very simplistic use cases, but they don't spell everything out as one might expect.  The feature set is richer than expected but doesn't touch AWS.   

[LightWhale]

Anecdotally, I have tried Google Cloud recently and it's full of obscure magic incantations. OTOH, I think that's mostly true about any cloud or even data center setup. Although TBH I haven't used AWS recently and Azure at all. 8) Likely once you work for some time you know the magic incantations by heart or at least have them written in some personal doc for copy/click/paste.

I've used Google Cloud.  I've played around w/AWS.  I have not touched Azure. 

 

Google Cloud is fine. It's a little clumsy as far as implementation goes.  Credentials and keys could be done in a way that's a little smarter and while the dashboard doesn't look cluttered, it's not always easy to find exactly what you're looking for.  Looking up documentation leaves a lot to be desired.  There are docs for very simplistic use cases, but they don't spell everything out as one might expect.  The feature set is richer than expected but doesn't touch AWS. 

 

Thanks, good to have some hands-on reviews

[meiroy]

https://arstechnica.com/cars/2019/02/googles-waymo-risks-repeating-silicon-valleys-most-famous-blunder/

 

An interesting read, including the comments.

[VAL9000]

Here's a guess on where Waymo is.

 

First, some recent data points:

- Waymo has entered into a number of partnerships with a lot of car manufacturers (incl. Nissan/Renault, Jaguar, Chrysler)

- Waymo recently announced a manufacturing facility in Michigan

- Safety drivers are still required for even the most forgiving environments

- Drivers are clamoring for self-driving technology, to the point of giving their lives to act as beta testers

 

With this in mind, my guess is that the self-driving utopia that Waymo envisions as its mission is a long way off, but Waymo's L4 capability is commercially viable today.  The timeline for utopia is probably decades out, but here's what can be done today:

- Integrate Waymo/Android/Google technology into passenger vehicles as an option.  Likely Waymo will offer their technology with no expectation to profit on the hardware, instead opting for a service or other platform-driven revenue stream.

- Deploy L4 tech to owners of this package, essentially making the passenger the safety driver a la Tesla Autopilot

- Continuously upgrade L4 tech OTA until L5 autonomy is attained, also like Tesla, but with more advanced hardware, deeper data set and better AI

 

This approach makes sense to me because:

- Waymo can establish market share sooner if the outcome is that consumers cling to vehicle ownership

- Waymo can begin collecting substantially more data on driving habits and enhanced/augmented maps

- There is a ton of value in L4 tech for anybody who even commutes a little every day, and most auto manufacturers are in no position to capture that value

 

As a consumer my feelings are:

- I would easily pay $5k for the hardware and $25-50 per month if it meant I could text and drive most of the way to the office and back. 

- I wouldn't trust Tesla's approach to L4 automation as it stands today.  I'd look at GM / Cruise closely but would still prefer Waymo.

- I'd have a hard time accepting the hideous LIDAR and associated Waymo hardware package as it stands.

 

As Waymo my main fear is that on day 1 my competitors are going to buy one of these cars and reverse engineer my hardware, which is probably much harder to do when every vehicle is owned by Waymo and loaded to the gills with vehicle tracking software.  Harder... unless you hire away one of my product leaders and have them divulge the company's secrets (heh).

 

I could be completely wrong here, but I do think there's a current market opportunity that meets Waymo's ambitions halfway while also accelerating its development.  Personally I'd love for the opportunity to "vote with my wallet" on this one.

[Jurgis]

Here's a guess on where Waymo is.

 

First, some recent data points:

- Waymo has entered into a number of partnerships with a lot of car manufacturers (incl. Nissan/Renault, Jaguar, Chrysler)

- Waymo recently announced a manufacturing facility in Michigan

- Safety drivers are still required for even the most forgiving environments

- Drivers are clamoring for self-driving technology, to the point of giving their lives to act as beta testers

 

With this in mind, my guess is that the self-driving utopia that Waymo envisions as its mission is a long way off, but Waymo's L4 capability is commercially viable today.  The timeline for utopia is probably decades out, but here's what can be done today:

- Integrate Waymo/Android/Google technology into passenger vehicles as an option.  Likely Waymo will offer their technology with no expectation to profit on the hardware, instead opting for a service or other platform-driven revenue stream.

- Deploy L4 tech to owners of this package, essentially making the passenger the safety driver a la Tesla Autopilot

- Continuously upgrade L4 tech OTA until L5 autonomy is attained, also like Tesla, but with more advanced hardware, deeper data set and better AI

 

This approach makes sense to me because:

- Waymo can establish market share sooner if the outcome is that consumers cling to vehicle ownership

- Waymo can begin collecting substantially more data on driving habits and enhanced/augmented maps

- There is a ton of value in L4 tech for anybody who even commutes a little every day, and most auto manufacturers are in no position to capture that value

 

As a consumer my feelings are:

- I would easily pay $5k for the hardware and $25-50 per month if it meant I could text and drive most of the way to the office and back. 

- I wouldn't trust Tesla's approach to L4 automation as it stands today.  I'd look at GM / Cruise closely but would still prefer Waymo.

- I'd have a hard time accepting the hideous LIDAR and associated Waymo hardware package as it stands.

 

As Waymo my main fear is that on day 1 my competitors are going to buy one of these cars and reverse engineer my hardware, which is probably much harder to do when every vehicle is owned by Waymo and loaded to the gills with vehicle tracking software.  Harder... unless you hire away one of my product leaders and have them divulge the company's secrets (heh).

 

I could be completely wrong here, but I do think there's a current market opportunity that meets Waymo's ambitions halfway while also accelerating its development.  Personally I'd love for the opportunity to "vote with my wallet" on this one.

 

I think what you suggest is the way to go.

 

Unfortunately, Waymo has been somewhat adamant that Tesla-ish way "human-takes-over-when-self-driving-cannot-handle" is unsafe and that they want to go L5 with no steering wheel/controls/etc. for humans. I don't know if they will be smart enough to change that tune and release what you suggest: L4 package that can handle most situations.

[obtuse_investor]

Looking further out into the near future, I bet even if Waymo wins the battle, they could lose the war.

 

Imagine a world where Waymo succeeds in launching with l4 or l5 autonomous vehicles. What’s the incentive for intelligent competition to develop  l4 cars? Not much. As there are more and more l4 cars on the road, it would be easier for l3 cars to exist. So why not focus on those cheaper l3 cars?

 

It’s almost like herd immunity.

 

Waymo’s investment could be excellent for the world and humanity, but not for the alphabet shareholders.

 

I assume Waymo and alphabet leadership know of this. And they are planning to make Waymo into a different kind of business.

[petec]

- I would easily pay $5k for the hardware and $25-50 per month if it meant I could text and drive most of the way to the office and back. 

 

Probably exactly why they don’t do it. You’re not much use as a safety backup unless you’re concentrating. Accident rates would rise, caused by humans overestimating the system and not concentrating but inevitably blamed on Waymo, and the brand image of autonomous driving as a whole would suffer.

[WayWardCloud]

- I would easily pay $5k for the hardware and $25-50 per month if it meant I could text and drive most of the way to the office and back. 

 

Probably exactly why they don’t do it. You’re not much use as a safety backup unless you’re concentrating. Accident rates would rise, caused by humans overestimating the system and not concentrating but inevitably blamed on Waymo, and the brand image of autonomous driving as a whole would suffer.

 

That and I don't think any company has managed to build a driving system that adapts to your specific car's make/model. The integration of the software with the OEM car "hardware" has to run deep with functional redundancy etc (think airplanes).

Also by the way the cost per Waymo car is somewhere between 100k and 250k.

[Jurgis]

- I would easily pay $5k for the hardware and $25-50 per month if it meant I could text and drive most of the way to the office and back. 

 

Probably exactly why they don’t do it. You’re not much use as a safety backup unless you’re concentrating. Accident rates would rise, caused by humans overestimating the system and not concentrating but inevitably blamed on Waymo, and the brand image of autonomous driving as a whole would suffer.

 

I disagree with this.

 

You are not a safety backup. You are the unexpected situations backup. I.e. if the car cannot read the road in snowstorm, it stops (or otherwise safely hands over) and requires you to drive. If there is a policeperson directing traffic around a herd of cows on the road, the car hands over and requires you to drive. If bad people try to troll your car by surrounding it and not moving, you are there to call the police or press on gas and run them over. Also you can take over anytime you think the self driving car is making subpar (though possibly very safe) decisions.

 

Yes, this requires more than Tesla Autopilot (L2.5?). It requires L4ish. But is solves the issue of selling self driving cars before reaching L5.

[Liberty]

Pretty cool. Using ML to optimize wind farm output:

 

https://deepmind.com/blog/machine-learning-can-boost-value-wind-energy/

 

To date, machine learning has boosted the value of our wind energy by roughly 20 percent, compared to the baseline scenario of no time-based commitments to the grid.

[Liberty]

https://www.bloomberg.com/news/articles/2019-03-06/waymo-starts-selling-sensors-to-lower-cost-of-self-driving-cars

 

Waymo is set on Wednesday to begin selling the laser-mapping sensors used on its driverless vehicles to other companies—as long as the customers don’t compete with its core robotaxi business.