Speaker 1: Bloomberg Audio Studios, podcasts, radio news.
Speaker 2: There's a place on the Mountain View campus of Google's
Speaker 2: parent company, Alphabet, where many of its most ambitious experimental
Speaker 2: ideas have been immortalized in a kind of technology museum.
Speaker 2: Some of the projects on display are considered successes, like Waimo,
Speaker 2: Alphabet's self driving car company that's deployed driverless vehicles on
Speaker 2: the streets of San Francisco.
Speaker 1: We have been the first company to open up in
Speaker 1: the first writing service to the public, now expanding it
Speaker 1: to the largest contiguous service area on the planet.
Speaker 2: Others are infamous flops, like Google Glass, an attempt at
Speaker 2: high tech glasses, or Project Loon, a network of high
Speaker 2: flying balloons that were meant to soar over remote parts
Speaker 2: of the world, beaming Internet down to homes and businesses.
Speaker 1: Do we have any idea when there we might be
Speaker 1: a commercialization of the Balloom project.
Speaker 2: Of the project, it remains to be seen. I mean
Speaker 2: they were the last ones grounded in twenty twenty one.
Speaker 2: Other out there products have yet to be released, and
Speaker 2: all of them came out of one corner of Alphabet's
Speaker 2: business that's long been shrouded in mystery. A special projects
Speaker 2: group called X. Nope, I'm not talking about Elon Musk's
Speaker 2: rebranded Twitter. This is Alphabets X, also known as the
Speaker 2: Moonshot Factory. X.
Speaker 1: I think captured the public imagination and it really captured
Speaker 1: my imagination too. I remember hearing about X in particular
Speaker 1: when I was a young tech reporter getting started in
Speaker 1: the Valley and it was shrouded in secrecy.
Speaker 2: Julia Love covers Google and Alphabet for Bloomberg News, and
Speaker 2: she recently visited x's headquarters for a tour of the
Speaker 2: lobby where the X Museum is housed.
Speaker 1: It's a really cool space. So you walk in and
Speaker 1: there is a gigantic loon balloons suspended from the cla,
Speaker 1: but then right across the way there is telecommunications terminal
Speaker 1: from Project Tara, which is an offshoot of Project Loom
Speaker 1: that is still a live business that could spin out soon.
Speaker 1: And so I think it's really a space that captures
Speaker 1: the story of X.
Speaker 2: But Julia says it's the future of X that is
Speaker 2: the most uncertain because in the past few years, Julia's
Speaker 2: reporting found the Moonshot Factory has seen its budget shrink,
Speaker 2: its ambitions curtailed, and its free wheeling spirit reined in
Speaker 2: as Alphabet has doubled down on its core products and
Speaker 2: shifted focus to artificial intelligence. Some former employees say x
Speaker 2: has evolved from a renegade team encouraged to invent the
Speaker 2: next Google into a glorified startup incubator. Today on the show,
Speaker 2: how Alphabet's Moonshot Factory came hurtling down to Earth and
Speaker 2: what it means for the future of tech innovation in
Speaker 2: the age of AI. This is the big take from
Speaker 2: Bloomberg News. I'm Sarah Holder, So Julia, bring us back
Speaker 2: to the launch of Google's Moonshot project. What was the
Speaker 2: lab created to do in twenty ten?
Speaker 1: This lab was born at a moment of really high
Speaker 1: ambition for Google. It was twenty ten and the search
Speaker 1: engine was already thriving pretty much ubiquitous. But the founders
Speaker 1: had big ambitions far outside of search, and so they
Speaker 1: were already very interested in self driving cars, and they
Speaker 1: were in touch with a professor at Stanford known as
Speaker 1: Sebastian's Run who they wanted to work with, and they
Speaker 1: decided that they would like to create a special lab
Speaker 1: to house that self driving car project and some other
Speaker 1: aspirations they had that were very far from the core business.
Speaker 2: And this was in Google's heady don't be evil days, right.
Speaker 2: How did X fit into that vision of the company?
Speaker 1: Yeah, so I think that I's really symbolized this impact
Speaker 1: that Google hoped to have in the world. They looked
Speaker 1: into things like teleportation, whoa, really nothing was off limits.
Speaker 2: You mentioned Thrun, the head of X in its early days.
Speaker 2: What was Thrun's priority early on?
Speaker 1: Throun is a really interesting figure. He was skeptical of
Speaker 1: corporate innovation labs, but he did ultimately agree to come
Speaker 1: on board, and before he set up, he took a
Speaker 1: look back at the other labs that had existed previously,
Speaker 1: places like Bell Labs, the famous Xerox park, and he
Speaker 1: just he tried to assess the key principles that he
Speaker 1: wanted to emulate, and that was to have very lean teams,
Speaker 1: to hire the very best people in the world, and
Speaker 1: to dole out bonuses to incentivize them.
Speaker 2: How did X interact with the rest of Google.
Speaker 1: At the time, X was really isolated. It was kind
Speaker 1: of viewed as the place where the cool kids in
Speaker 1: goodle sat. I think this leadership felt that in order
Speaker 1: to really achieve their mission, they had to be not
Speaker 1: only isolated from the rest of Silicon Valley, but isolated
Speaker 1: from Goodle.
Speaker 2: How unique was this approach in the tech industry at
Speaker 2: the time, where there's this sort of side project, secret
Speaker 2: layer where all the cool stuff is made.
Speaker 1: X really kicked off a wave of grade area ambition
Speaker 1: in Silicon Valley. There are now many corporate labs that
Speaker 1: kind of tached on ex to their name. We saw
Speaker 1: Facebook setting up an initiative like this. Amazon Goodle itself
Speaker 1: created an in house innovation lab Area one twenty. I
Speaker 1: think it was a time when tech companies were flesh
Speaker 1: with cash and they wanted to experiment.
Speaker 2: Experimentation as their goal. Making a bunch of money wasn't
Speaker 2: the number one priority for.
Speaker 1: X Sebastian Thrun told me he gave projects as much
Speaker 1: money as they wanted. He was not really aware of
Speaker 1: his budget, but that became very top of mind as
Speaker 1: the years wore on.
Speaker 2: Tren ended up leaving in twenty twelve. Who took over.
Speaker 1: The person who took over is Astro Teller. He was
Speaker 1: Threund's right hand man when the lab was being founded,
Speaker 1: and then he took the reins. He's the grandson of
Speaker 1: Edward Teller, who's the father of the hydrogen bomb, and
Speaker 1: he has really devoted his life to finding the formula
Speaker 1: for innovation within big companies. Was a little more mature
Speaker 1: when he took the reins. I think that he sought
Speaker 1: to really systematize as his approach to have an engine
Speaker 1: so that they could be birth new projects. He set
Speaker 1: up a team called rapid EVL that would stress test
Speaker 1: dozens and dozens of ideas to find the most promising
Speaker 1: and along the way, it was almost kind of like
Speaker 1: a video game where they would set goals for the
Speaker 1: projects and if they met them, then they would unlock
Speaker 1: more resources. And the vision was that X would be
Speaker 1: the birthplace of new companies that, when they reached a
Speaker 1: certain point of maturity, would graduate into the family and
Speaker 1: become a letter in the alphabet.
Speaker 2: So what were some of the signs X's vaunted position
Speaker 2: was starting to change? When does that pivot point start
Speaker 2: to happen?
Speaker 1: All along, projects were being killed. From the very early
Speaker 1: days of X, it was always a place where the
Speaker 1: vast majority of ideas just wouldn't work out. But over
Speaker 1: time there was much more of a sense of the
Speaker 1: moonshots having to show a business plan Alphabet didn't want
Speaker 1: to pour money into a venture and figure out a
Speaker 1: business plan later. The lab was definitely under more scrutiny
Speaker 1: ever since the formation of Alphabet, because that gave investors
Speaker 1: a lot more visibility into just how much money Alphabet
Speaker 1: was spending on the moonshots. So that was when the
Speaker 1: heat started to turn up a bit. And then during
Speaker 1: the pandemic, I think the lab started to fall on
Speaker 1: some hard times. It was a moment ironically when budgets
Speaker 1: were tightening within X, but in Silicon Valley it was
Speaker 1: a huge venture capital boom. Vcs were looking for startups
Speaker 1: to write chicks for and so some startups and X
Speaker 1: had a feeling that they would be better funded if
Speaker 1: they were on the outside. And then I think the
Speaker 1: other real turning point was the launch of chat GPT,
Speaker 1: which really just became a five alarm fire for goodle
Speaker 1: and prompted the executives to really focus on the core
Speaker 1: business and artificial intelligence.
Speaker 2: After the break. How that five alarm fire turned up
Speaker 2: the heat at Alphabet and what it meant for the
Speaker 2: X Lab, for its employees, and for the company's vision
Speaker 2: of its future. By the mid twenty tens, X had
Speaker 2: become this moonshot factory. It survived changing leadership alphabetization, but
Speaker 2: then in twenty twenty two, something else happened that causes
Speaker 2: Google to panic. The rise of generative AI and the
Speaker 2: launch of chat GPT. How does Google react to chat gpt?
Speaker 1: Chat GPT touches off a panic within Doodle. It's uncomfortable
Speaker 1: because they actually invented much of the technology that underpinned
Speaker 1: chat GPT, but now it seems like they're being leap
Speaker 1: fraud in this field that they helped create. And there's
Speaker 1: a real fear that people will start using chat GPT
Speaker 1: for search and that Doodle will be left in the dust.
Speaker 1: At the end of the day, the search advertising is
Speaker 1: what funds everything else, and so if people stopped turning
Speaker 1: to Doodle for search, then everything else would grind to
Speaker 1: a halt.
Speaker 2: And then what does that panic mean for X?
Speaker 1: I think it means that the company really drills down
Speaker 1: much more on its core competencies in search, making sure
Speaker 1: that search is innovating and keeping up with the times,
Speaker 1: and also in artificial intelligence. And so it means that
Speaker 1: F's is just less top of mind for alphabet leadership.
Speaker 2: This was an important turning point for X. Sources told
Speaker 2: Julia that X has become less willing to bet on
Speaker 2: expensive out there ideas. The lab's budget has shrunk this year,
Speaker 2: and projects that originated within X are increasingly being spun
Speaker 2: out as standalone startups. Julia spoke with one former ex
Speaker 2: employee who's experienced this transition firsthand, Catherine Zealand.
Speaker 1: Catherine Zealand came up with a really interesting project. She
Speaker 1: was inspired by her grandmother who was struggling with mobility,
Speaker 1: and so Catherine wanted to create a product that could
Speaker 1: help her grandmother and others move about the world. And
Speaker 1: so she started tinkering with an exoskeleton, and it was
Speaker 1: a project that just really became beloved by EX leadership
Speaker 1: and the people within the lab. But as time went on,
Speaker 1: the tone started to shift. They started encouraging her to pivot,
Speaker 1: to look into making an exoskeleton for warehouse workers, or
Speaker 1: to looked into make immersive video game controllers, and that
Speaker 1: just wasn't what Catherine wanted to do. She and her
Speaker 1: team were always really drawn to that original vision of
Speaker 1: helping everyday people to move, and so Catherine started to
Speaker 1: question whether her future was within it.
Speaker 2: Eventually, Catherine decided to leave X and spin out her
Speaker 2: exoskeleton project into a startup called Skip Innovations Incorporated. Her
Speaker 2: salary is lower and the office is less cushy, but
Speaker 2: she can control how the technology is developed and marketed.
Speaker 2: But inside Alphabet, current employees are also grappling with the
Speaker 2: effects of X's shift.
Speaker 1: I think that feelings are mixed. I've heard from sources
Speaker 1: that some people are excited about the freedom that they
Speaker 1: will have under this new structure, but it is a
Speaker 1: big change for employees. I think there are some people
Speaker 1: who feel like this changes the purpose of that it
Speaker 1: distances itself from birthing the next doodle, and so there
Speaker 1: is some sadness about that.
Speaker 2: And what does the company say about this new chapter
Speaker 2: For X.
Speaker 1: They are really framing this as just an organic evolution
Speaker 1: of their mission. They see it as something that will
Speaker 1: really amplify their impact in the world by helping these
Speaker 1: companies go to market faster, and so now is really
Speaker 1: formalizing that path. They're putting in place a team that
Speaker 1: is helping startups meet with investors, helping them learn how
Speaker 1: to pitch, and they seem to be gearing enough to
Speaker 1: bring many more of these startups into the world.
Speaker 2: This broader pullback of some of these ambitious projects is
Speaker 2: happening at other companies too. We've seen Apple abandoning its
Speaker 2: Apple Car project, Meta walking back some of its hardware efforts.
Speaker 2: What is this story at X tell us about how
Speaker 2: big Silicon Valley is willing to dream these days.
Speaker 1: So it's an interesting moment for innovation because I think
Speaker 1: that you see big tech companies still innovating, but in
Speaker 1: a very focused way. Brutal, for example, is all in
Speaker 1: on AI. Amazon and Microsoft are also pouring resources into that,
Speaker 1: and so I think that there's more innovation happening outside
Speaker 1: of these big companies than we once saw.
Speaker 2: Love says, in some ways, the story of Alphabet's Moonshot
Speaker 2: lab is also a story of a wildly successful company
Speaker 2: settling into middle age, focusing its energies and resources. Moving forward,
Speaker 2: Love expects to see x hone its focus around projects
Speaker 2: that involve AI and to bring some of its moonshot
Speaker 2: ideas back to Earth. This is the big take from
Speaker 2: Bloomberg News. I'm Sarah Holder. This episode was produced by
Speaker 2: Adrianna Tapia. It was edited by Stacy Vanicksmith and Mark Million.
Speaker 2: It was mixed by Blake Maples. It was fact checked
Speaker 2: by Thomas lou Our senior producers are Kim Gitttleson and
Speaker 2: Naomi Shaven. Our senior editor is Elizabeth Ponso. Nicole bimsterbor
Speaker 2: is our executive producer. Sage Bauman is our head of podcasts.
Speaker 2: Thanks so much for listening. Please follow and review The
Speaker 2: Big Take wherever you get your podcasts. It helps new
Speaker 2: listeners find the show. We'll be back tomorrow.