When Google filed to become a public company in 2004, it did so with one of the clearest company mottos in history: "Don't be evil." What Google really means by "don't be evil" has always been subject to its executives' interpretation. Last year, Google's corporate philosophy evolved further, into "You can make money without doing evil."
In an SEC filing Tuesday announcing the creation of a new parent company for Google, dubbed Alphabet, there was no mention of evil of any kind. (Unsurprisingly, people joked on Twitter that this would now allow Google to be evil.)
Alphabet will be a collection of companies, as my colleague Damon Beres reported. Search, ads, maps, YouTube and Android will all stay with Google. Google's other businesses will now be subsidiaries of Alphabet, including:
The companies within the newly establish
So why did Google co-founders Larry Page and Sergey Brin do it?
They say Alphabet will be "about businesses prospering through strong leaders & independence," as Page wrote in a blog post Monday. Page says he and Brin are excited about pursuing the following alpha-bet-y things:
- Getting more ambitious things done.
- Taking the long-term view.
- Empowering great entrepreneurs and companies to flourish.
- Investing at the scale of the opportunities and resources we see.
- Improving the transparency and oversight of what we’re doing.
- Making Google even better through greater focus.
- And hopefully... as a result of all this, improving the lives of as many people as we can.
Taken at face value, the shift to Alphabet is about Google giving each of these components more autonomy, as Timothy Lee highlighted at Vox. (There's also an unconfirmed rumor floating around that in making Sunder Pichai the new Google CEO, Alphabet kept its talented former senior vice president of products from leaving to run Twitter.)
Although that's possible, my guess is that Alphabet is intended to make it easier for Google's founders to focus on the company's non-search-engine businesses and give the extremely capable Pichai responsibility for running Google as the world shifts to mobile devices. Neither Page nor Brin are old men, at 42 and 41, respectively, but they're both parents of young children and have always liked to dream big. This frees them up to pursue those interests.
Page and Brin may also have been aiming to give their shareholders a clearer view of all of the company's finances, as Kara Swisher suggested at Recode:
In fact, in my opinion, it is in the numbers where you can find the real reason for the move, imposing on the company a new transparency with regard to its far-flung and very different divisions from the money-making search unit to the more unusual ones like its money-sucking efforts with drones and prolonging human life.
In Harry McCracken's view, Alphabet is the "ultimate Larry Page move," enabling him to "give Pichai the job without pulling himself away from the parts of Google he's passionate about."
And other hotshot executives — ones currently at Google, or yet to be hired— will presumably like Page's statement that Alphabet's big businesses will be run by their own CEOs, without much interference from Larry or Sergey.
Page could have pulled off much of this without introducing a new corporate moniker or turning Google into (my fingers still have trouble typing these words) a wholly owned subsidiary. But as he reminded us in his blog post, Google went public in 2004 with the declaration, "Google is not a conventional company. We do not intend to become one." It's in the company's nature to do deeply idiosyncratic things that sound at first blush like they might be a prank or a mistake.
Restructuring Google and forming Alphabet may not be so unconventional at all: It fits a pattern the Economist identified in 2013 of conglomerates coming back into fashion, three decades after the heyday of the Japanese kairetsu and South Korean chaebol.
Whether the restructuring enables Google and the other subsidiaries to be prosperous remains to be seen, but Page is putting down an "alpha bet" that the move will increase their focus and agility, both of which will be crucial in a hyper-competitive market:
We’ve long believed that over time companies tend to get comfortable doing the same thing, just making incremental changes. But in the technology industry, where revolutionary ideas drive the next big growth areas, you need to be a bit uncomfortable to stay relevant.
Given the extraordinary influence, power and reach of the new Alphabet Inc., billions of people will be hoping it is more like the company Google's founders initially envisioned than the evil conglomerates and umbrella corporations that populate dystopian science fiction universes.
How you view Alphabet's influence as a citizen or the financial impact of this change as investor likely depends on whether you trust Larry Page, as Ben Thompson observed. Brin, given his childhood experience in an actual evil empire, the former U.S.S.R., knows that the ill men do lingers long after their passing, while the good is far too often interred with them.
With the shift, Page and Brin can focus more on creating products, services and infrastructure that will change the world using their immense resources than on running Google. Here's hoping it's for the better.