Alphabet and Platforms of Platforms
The Alphabet announcement from Larry Page that he and Sergey Brin would reorganize themselves and Google makes perfect sense, at least for them. Google has long been Page’s and Brin’s platform for unconventional experimentation with exponential aspirations, and neither is an operator. Someone who worked closely with Page says that if you take Page an idea, he’ll push you to turn it into a robot that can accomplish 100x what you initially imagined, and then shit out the initial idea. Brin, meanwhile, has piloted the company’s still somewhat secretive invention lab Google[x] into bets on everything from self-driving cars to balloon-powered WiFi.
For years now, Google under Page has crept outwards from its core, into new things — biotech even — that Page freely admits “aren’t very related.” Early Google employee and now Yahoo! CEO Marissa Mayer has said, “You can’t understand Google, unless you know that both Larry and Sergey were Montessori kids.” As WIRED reported, in an adapted excerpt from Steven Levy’s book In the Plex:
She’s referring to schools based on the educational philosophy of Maria Montessori, an Italian physician born in 1870 who believed that children should be allowed the freedom to pursue their interests. “In a Montessori school, you go paint because you have something to express or you just want to do it that afternoon, not because the teacher said so,” she [Mayer] says. “This is baked into how Larry and Sergey approach problems. They’re always asking, why should it be like that? It’s the way their brains were programmed early on.”
(It so happens that another ever-expanding innovator of these times, Jeff Bezos of Amazon, is also a Montessori kid, but that’s another story.)
Page and Brin may have extraordinary curiosity, and Alphabet might just be the only way to functionally manage their diverse interests, yet their move is also part of a larger phenomenon.
We’re living in a platform economy and Alphabet isn’t simply a platform — it’s a platform of platforms.
The Platform Economy
That we’re living in a platform economy is old news. A platform business is defined by Stanford Business Professor William Barnett as a “medium that allows others to connect to it.” Uber, Lyft, and AirBnB are all platforms, as are 70% of “unicorn,” billion-plus-dollar startups globally. Amazon is obviously a platform business, and one that is expanding rapidly into new categories and businesses as “the everything store” as Brad Stone put it, as are half of the world’s top 20 companies according to research from the MIT Technology Review.
Apple, PayPal, Alibaba, eBay, and Facebook are all examples of multi-sided platforms that “enable direct interactions between two (or more) distinct types of affiliated customers.” The Apple App Store is a platform, and an extremely lucrative one at that, generating over $10 billion in revenue for third-party developers in 2014. (Don’t forget: Apple gets 30% of every app sold.) Meanwhile, the number of available apps compounds by the day. There’s a reason why average iPhone prices are climbing 10% annually at a time when hardware is a commodity — Apple’s ecosystem of mobile software is second to none. You could even make a good argument today that building the best platform is more important than building the best products.
Page and Brin are clearly thinking differently about the Alphabet platform than two-sided or multi-sided markets. They want to invent the future, and work to do so by utilizing Google’s platform and assets, which include their brand, capital, and vast networks of talent and insights about problems, complemented by sheer boldness and a hardwired willingness to bet big.
Take Calico Labs, which came to the fore as Google’s $750 million life sciences bet to “cure death,” as the initial announcement put it. The company is led by Arthur Levinson, Genentech’s former CEO, who was a Google board member from 2004 to 2009. Levinson was joined by Dr. Hal Barron, who had been head of product development and Chief Medical Officer at Genentech, and who some senior leaders at Genentech say resembles “the Steve Jobs of biotech” for his visionary product instincts. In the wake of Roche’s 2009 acquisition of Genentech, which left many less than happy about abrupt cultural changes — one can only imagine going from Silicon Valley to Swiss inclinations — Page and Brin utilized the riches and prestige of Google’s platform to snag Genentech’s top talents and bet big.
Google has historically done a superb job retaining its top leaders, including keeping Susan Wojcicki since the company’s very early days (Page and Brin started the company in her garage), who now leads YouTube. After Google acquired Android, co-founder Andy Rubin stayed at the company for nine years, and built Android into the world’s most popular mobile platform. Now, Nest founder Tony Fadell’s is channeling his inner Jonny Ive into reinventing Google Glass. “It wasn’t handed to me and said, ‘Tony clean it up,’” Fadell told the BBC, “I offered.”
Although Page’s and Brin’s exponential, moonshot thinking and questioning can make some people weary, it’s hard to find an equal for the stable of talent around them.
Nonetheless, business school professors and journalists will likely tie themselves up in knots making comparisons between Alphabet and GE, and trying to rationalize how Alphabet can achieve brand and market “synergies.” But that’s an old-world mindset. Berkshire Hathaway is Page’s comparison, but Warren Buffett spends 80% of his days reading and thinking, rather than constantly pushing people to stretch their inventiveness beyond human limits. Alphabet simply formalizes Page’s and Brin’s inclinations to act more like venture capitalist inventors than operators, focused on betting on a portfolio of the very best talent working on the world’s biggest problems. As long as they have a well-capitalized platform that feeds both big problems and huge talent, like Buffett, Page and Brin will be very busy for a very long time.
The next great race amongst the world’s most innovative companies will be who can create the most valuable platform of platforms.
Of course, all the bets could fail, but given how platform economics are driving value creation today, the smartest bet to be made is to become a platform of platforms. Although Google will remain the mother ship for some time, Page and Brin are not betting wholly on a multi-sided market platforms as are Apple, Amazon, and Alibaba.
Diversification brings with it pluses and minuses. As Box CEO Aaron Levie once tweeted, “Google is focused. On everything.”
The biggest question that remains is this: which company will create the most valuable, lasting, and resilient platform of platforms, including navigating shifting regulatory environments?
I wouldn’t bet against Larry Page.
