http://www.vox.com/2015/8/12/9140477/google-alphabet-larry-page-charity
"You know, if I were to get hit by a bus today," Google co-founder Larry Page once reportedly said, "I should leave all of it to Elon Musk."
That's admittedly an unorthodox way to handle one's estate. Most
wealthy individuals leave their money either to heirs or to a charitable
foundation. But as Page later explained, he thought the Tesla
Motors/SpaceX CEO could do more good with the money. In an interview with Charlie Rose,
Page mentioned Musk's idea of "backing up humanity" by creating a
parallel civilization on Mars as an example of an effective way to
improve the world through business. "That’s a company, and that’s
philanthropical," he said.
In retrospect, now that he's founding Alphabet as a way to keep researching big moonshot ideas,
Page's comments seem less like idle musings and more like a coherent
theory of how to best use his money to change the world: not by giving
it away, but by investing it in projects he thinks could be truly
revolutionary.
As the above chart shows, the main factor in whether a country
escapes extreme poverty is whether its economy grows. You can see an animated version of the graph covering many years here.
Page's career is premised on the idea that advancing technology
through a for-profit company can meaningfully improve people's lives —
and indeed, there's a decent argument to be made that, historically,
profit-motivated technical advances have helped people more than charity
has.
If you look at the major forces of progress in world history,
philanthropy isn't high up there. Scientific research and technological
innovation, however, are. The most important force in lifting people out
of extreme poverty has, at least since the Industrial Revolution, been economic growth,
which is boosted by scientific discovery but not by charity.
Improvements in life expectancy have been driven both by increased
wealth and by medical advances, which are often funded and backed by
pharmaceutical companies and other for-profit actors.
Even major charitable success stories stand on the backs of
technological and medical innovation. The eradication of smallpox was a
major humanitarian undertaking, but one that required the invention of
readily deployable vaccines. The Green Revolution — which dramatically
increased crop yields in Mexico, India, and elsewhere — was sponsored by
the Ford and Rockefeller Foundations, but worked by spreading existing
technological improvements in farming to poor countries.
Ken Thompson (left) and Dennis Ritchie, who invented UNIX and C at Bell Labs. (The Jargon File)
So let's suppose you're Larry Page. You have billions upon billions
of dollars. You feel, as any decent billionaire would, an urge to give
back to the world. You could do that by starting a foundation and giving
away your money, or you could join Warren Buffett and dedicate your money to someone else's foundation, so you don't have to worry about setting up a totally new one.
But you're not necessarily good at running a foundation, or even at
picking the best one out of the existing options. What you are good at
is making consumer products. It seems like if you want to do some good
for the world, that's a useful skill set to draw upon. Things like
Google Maps and Gmail and Hangouts and Android have already made life
better for millions of people. Why not do more of that — and do it
bigger?
This may not be the most profitable path for Google. But then
again, AT&T didn't reap most of the benefits when its Bell Labs
researchers invented the laser, or the transistor, or UNIX or the C
programming language. Those advances trickled out and made the whole
world better. Same goes for Xerox, whose Xerox PARC researchers invented
the graphical user interface, which made widespread computer ownership
and usage possible, and then saw companies like Apple and Microsoft
profit from it while Xerox got little back.
Google's self-driving car; if these go to market, they could save thousands of lives, help end congestion, and improve the world in countless other ways. (Google)
Alphabet gives Page the freedom to pursue those kinds of bigger
projects. The reorganization's main purpose is to cleave the core
functionality of Google — search, Maps, Docs, Gmail, YouTube, etc. —
from the company's more far-out research projects: self-driving cars, giant wind-energy-collecting kites, attempts to radically extend human lifespans, balloon-based wifi provision,
etc. By placing those initiatives as subsidiaries of a company, just
like Google, Page is signaling that he regards them as peers of similar
importance, and suggesting that Alphabet's focus as a company will be
just as much on exploring those kinds of moonshots as on improving
Google's core business. The self-driving cars aren't a fun hobby
supported by the search engine business, in other words. They're an
equally crucial part of the business.
Page also frees himself, and Sergey Brin, to focus on those
projects rather than on Google qua Google. Page and Brin's time and
attention are scarce and valuable resources at Alphabet, and by
committing them to moonshots, Page improves their likelihood of success
on the margin.
He's also suggesting that he's going to use his own money to
enforce a vision of Alphabet/Google as a company that invests in
ambitious, crazy-seeming ideas. Page and Brin have purposefully
structured Google such that not all shareholders have equal voting power
— and so that the minority of shares (only about 14 percent) owned by Page and Brin wind up having a majority of votes.
Because Google sells "Class C" stock that has no voting power, it can
still raise money from investors without giving up any control.
Page wants Google to be doing more to aggressively change the world. And Alphabet is set up to enable just that.
This releases Page and Brin from any need to pursue share buybacks,
pay out big dividends, or otherwise appease investors. Instead, profits
can be plowed back into investments, including the long-shot projects
Page is so passionate about. This only works, though, if he and Brin
hold on to their stakes. If they were to sell them off and give the
money to a foundation, they'd lose their ability to force Alphabet to
invest in ambitious ideas. But by holding on to the roughly $30 billion
apiece in Google stock they own, they can raise many more billions from
investors to spend on self-driving cars, wind energy kites, and
defeating death itself. They're leveraging their money to get even more
money for the charitable cause Page thinks is most important: major,
revolutionary innovation.
Page said as much in his interview with Rose, arguing that using
his money to influence and benefit his own company was the best method
he had for doing good. "You're working because you want to change the
world. You want to make it better. Why isn't the company that you work
for worthy not just of your time but your money as well?" he asked
(emphasis mine). "I mean, but we don't have a concept of that. That's
not how we think about companies, and I think it's sad, because
companies are most of our effort. They're where most of people's time
is, where a lot of the money is, and so I think I'd like for us to help
out more than we are."
Page wants Google to be doing more to aggressively change the world. And Alphabet is set up to enable just that.
