It’s hard to change the world without a scalable business model.
That’s what Obi Felten told the crowd at Fortune’s MPW Next Gen Summit in Laguna Niguel, Calif., on Tuesday. Felten is one of the top executives at Alphabet’s research arm, X, formerly known as Google X and birthplace to the tech giant’s “moonshots,” ambitious projects that aim to solve major world problems with cutting edge technology. Notable moonshot projects include Project Loon, which wants to provide internet connectivity to remote areas of the world using balloons, and Waymo, Google’s self-driving car company.
Embed from Getty ImagesIn the case of Waymo, Felten told Fortune senior writer Michal Lev-Ram that her team decided one way to reduce the massive number of global driving deaths would be to remove drivers from the equation by developing autonomous driving technology. That idea might have been considered “science fiction” as recently as a decade ago, Felten said, but now Waymo is testing its driverless ride-hailing service on public roads in Arizona. “That’s really exciting, because something that sounded crazy and unfeasible even five years ago is becoming reality in our lifetime,” Felten said.
However, not all of Alphabet’s moonshots make it that far, and all of those projects together accounted for roughly $3.6 billion in operating losses last year alone. So, Lev-Ram asked Felten, why does Alphabet keep pumping money into X rather than focus on the company’s core advertising business that generated more than $24 billion in revenue in the most recent quarter?
“At the end of the day, we are a bet that the shareholders are making on being able to generate new businesses. Our goal is to make new Alphabet companies that one day can be as big as Google,” Felten said, adding that such a job gets harder every day as Google itself grows bigger and bigger.
That ultimate goal requires that Felten and her team evaluate any new project based on its potential to both “make the world a radically better place” as well as its viability as a business that can grow and sustain itself. On the latter front, Alphabet’s projects usually eventually take on major partners, such as Waymo’s pacts with the likes of Lyft, Chrysler, and others.
The idea of changing the world isn’t at odds with making a buck, Felten said. In fact, the latter is usually necessary. “If you want to solve really large problems in the world, unless it’s a sustainable business, it probably won’t scale,” she said. “So, finding those things where there’s both profit and purpose is sort of our sweet spot.”
Obi Felten 