The trend: Alphabet is overhauling Google’s secretive moonshot lab, X Development.
- Following moonshot project cuts last year, Google leadership is scaling back on sci-fi endeavors like space elevators, levitation, and teleportation in favor of money-making initiatives.
- X’s division head, Eric “Astro” Teller, has set new goals for X. They include delivering Alphabet a rate of return exceeding 26% and spinning out 20 companies with at least four valued at over 5% of Alphabet’s market capitalization by 2030, per Insider.
Recent projects give an indication of the moonshot trajectory.
- Mineral graduated from X to become an Alphabet subsidiary tasked with harnessing robotics and machine learning (ML) to help secure the world’s food supply in the face of climate change.
- Another project, Tidal, uses cameras, computer vision, and ML to devise ways to protect the world’s seagrass beds as part of carbon sequestration efforts.
An economic adaptation: In 2010, X was created as a lab that would distinguish itself by exploring the innovation frontier, not by inventing profitable spinoffs.
Things have changed in the past decade. With the tech industry feeling the brunt of a looming recession, increasing industry competition, and pressure from Wall Street investors, Google no longer has an appetite for incurring billions of dollars of losses in the name of pushing the innovation needle.
- A primary issue for Alphabet is weaker ad sales, especially for YouTube, which curtailed Google’s overall revenue growth last year.
- Things aren’t looking great for 2023. We downgraded our global ad spending growth estimate from 8.9% to 6.9% for the year.
The climate factor: Climate projects aren’t new for X, but there’s a clear refocusing, which is a sign of where Google thinks demand is headed.
- The lab’s latest climate initiatives—including Tapestry X, which is working on grid optimization—share the theme of managing climate change fallout in energy and agriculture.
- It’s a shift happening elsewhere at the company as Google partners with GM and Ford to scale up virtual power plants and Google Cloud launches a climate startup accelerator.
- The pivot isn’t out of charity but a signal that Google sees climate change as becoming a top economic driver and a threat to its business interests.
- Escalating climate change is incentivizing previously shunned techno-fixes for the problem, which bodes well for companies like Google capturing government funding.