In Page & Brin’s Alphabet, S is for “Singularity” … and the Future of the Corporation
Page and Brin did it again. With the rollout of Alphabet, they reminded us they are still the most consistent and visionary leaders in business today. Like it or not, Google’s founders have one central ambition: bringing about the Singularity. And for that purpose, Alphabet isn’t the perfect organizational vehicle to achieve this goal … but it’s very good. And it basically shows us how corporations large and small can restructure to survive and thrive in high-velocity, high-complexity markets.
For those still unfamiliar with the concept of the technological Singularity, it is the point in the future where a set of man-made technologies (with artificial intelligence at their center) will evolve to a level of capacity and sophistication as to transcend our mental and physical capabilities so far beyond our biology that we can no longer call ourselves purely “human”.
Contrary to popular belief, the race to the Singularity isn’t a new development, but simply the culmination of mankind’s quest for transcending the limitations its own biology by repurposing its environment through invention, from stone tools and weapons (meant to augment our very weak natural ability to smash and kill) to the Hyperloop (to dramatically augment our naturally limited ability to travel long distances in short periods of time).
But there is little question that what’s coming next - and nobody knows exactly when that is, anywhere between 2029 and 2050- will profoundly transform the human experience.
These exponentially accelerating technologies, as my mentors Peter Diamandis and Ray Kurzweil call them (although some are advancing rapidly, others rather slowly), are being developed and refined in a wide variety of fields, from computing to materials science to medicine and biology, with certain fields, such as AI, impacting the entire field of Singularity.
Every Singularity technology is a letter in Page and Brin’s Alphabet, and it is safe to say that the holding’s future portfolio of R&D projects and companies will cover the entire spectrum of Singularity Tech. It’s possible that, in 20 years from now, our entire lives will be lived within Alphabet’s ecosystem of products and services. Alphabet could be the operating system for our lives.
Where Google serves as the hub of our online lives, Alphabet’s ambition is to breed technologies to become hubs in our offline lives: transportation, health, relationships, entertainment, government, community, etc., with a strong preference for technology that is lower on Maslow’s hierarchy of needs (safety, security and physiological needs), hence solves bigger problems (and - theoretically- generates bigger profits). And this ambition is so powerful and fundamental that Alphabet’s only competitor at this stage (and for many years to come) is the US government.
A holding company is a fitting framework for this ambition, as this is a flexible yet coherent organizational vehicle for the development of the many - often cross-over- technologies that Page and Brin think could both solve fundamental global problems and propel the world toward the Singularity. Better: it is the best possible organizational framework in the face of increasing complexity and accelerating change in the marketplace.
Ask any CEO, marketer, government official, fund manager, what their biggest problem is, and you will get several variations of the same answer: “there is too much complexity in my environment. I no longer fully understand my industry, my business model, my customers, my constituents, my competitors”.
And it’s getting worse. The operational refresh rate, whereas in business or war (ask CENTCOM how their campaign against ISIS is doing) is accelerating. The combination between the explosion of mobile computing, the open distribution of all knowledge, and the decline of ideological and institutional frameworks, has created a world extraordinarily complex, far beyond the understanding of our minds, and still largely out of reach for our statistical models.
Once the monopoly of powerful institutions managed by a limited number of elites carefully trained to understand their environment and replicate one model of success, disruptive innovation is now in the hands of almost anybody. The tools to inflict mass disruption (positive and negative) on our societies or markets have never been cheaper and more available. And this environment of exploding innovation and change creates tremendous and highly dynamic complexity. Entire industries rise and fall in a matter of years, threats, opportunities or competitors can arise from anywhere, customers can switch lifestyles, purchasing habits, or brand attachment, in a matter of hours.
Quantitative people like me strongly believe this complexity can be mitigated, perhaps even managed, by applying a combination of systems engineering methods (systems thinking) and complex statistical analysis (machine learning) of large datasets to build holistic predictive models to inform how the future is shaping up.
In short, we don’t believe in chaos: we just think the high-velocity environment we live in is just beyond the reach of our current tools, methods and thinking, but we’re working hard on building better tools to at least boil down market complexity to a few possible scenarios.
But to what organizational framework can this methodology best be applied? Like all institutions (political parties, armies, nation-states, etc.) the traditional organizational model of the corporation is in decline. By the time large matrix-based companies have understood their environment and set strategy to thrive in it, marketplace conditions have changed, and that strategy is no longer a fit.
Corporations are also wired for efficiency, where the high-velocity marketplace requires the maintenance of human/financial/organizational resources that can be quickly deployed towards changing market conditions/scenarios, but in the meantime are simply organizational slack.
Anybody who has tried to sell a new and breakthrough product or service to a corporation knows exactly what I’m talking about: executives don’t have time to think about the future, let alone plan for it, when they’re already swamped by managing today with optimized staff sizes.
These are only two in a wide variety of scenarios where traditional corporations wither and die, their market share slowly gobbled by small, cheap, creative and organizationally nimble startups.
There is a better way.
In the face of profound change, we need change at the most profound level: organizational models.
This is what Alphabet is showing us.
Instead of trying to design perfect plans in the face of exponential complexity in the marketplace, current and future corporations will need to think holistically (eg, think in terms of ecosystems) about market risk to identify all the possible scenarios for their growth, and hedge their strategy by placing small bets on each of them. In a nutshell: they’ll need to become portfolio managers, where every item in their portfolio (a startup they invested in, an R&D project they have decided to fund, a social movement they are involved in) is a possible scenario for how their industry, business model, customers, will evolve in the future. This is what Alphabet is: a portfolio management company, just like Warren Buffett’s Berkshire Hathaway.
Page and Brin had set out to set this process in motion for Google by setting up Google Ventures and Google X, but the organizational and regulatory constraints of being a large public corporation were too high. Obviously, this organizational approach is easier for companies with a “cash cow” business like Google’s ad products. It allows Alphabet to place bets that are bigger, more long-range, and have a higher payoff. But it also carries the danger that, in a less resource-constrained environment, companies will get too rich, and people will get too enthusiastic or too sloppy about future market scenarios. Google has shown us the downside of this position with the failure of products such as Glass or Google Plus.
Just like financial portfolio management, strategic corporate portfolios need a healthy mix of safe and risker bets, with risk in this case being the probability that an industry, market, customer or competitor future will become a reality considering current trends and signals. And just like portfolio investing, riskier bets also need to have a higher payoff.
Besides Google, a few companies have very successfully started their journey on this path. Qualcomm, in particular, is one of the most strategically aware companies in the world today. Its collection of R&D projects, "intra-preneurship" initiatives and corporate venture capital portfolio should be the envy of the tech industry.
Like Qualcomm and Alphabet, only the companies that take the full measure of what future they face, how deeply they need to change (understand the value of inefficiency in the face ofd uncertainty, for example), and how to manage risk in the face of high-velocity markets, will survive the next wave of disruption.