During a rare internal fireside chat in March, Babak Parviz, an Amazon vice president, praised the CEO, Andy Jassy, as his mentor for making his team think harder about the financial viability of its projects.
Parviz led Grand Challenge, Amazon’s in-house skunkworks lab, created in 2014. Before Amazon, Parviz led a similar team at Google called Google X.
“Poor Andy has been trying to make me a better businessperson,” Parviz said at the event, a recording of which Insider obtained. “I’m not sure how much he has succeeded, but he’s been trying to turn this engineer into someone who can also think about business issues in a deeper way.”
Six months later, Parviz was gone.
While it’s unclear why Parviz decided to take a leave of absence, Amazon wanted to significantly reduce the size of Grand Challenge and potentially shut it down, according to two people familiar with the team. Amazon is broadly reducing expansion efforts as it faces a growth slowdown. Amazon’s representative declined to comment.
Amazon isn’t the only one. Tech titans are pulling back on more experimental projects and “moonshot” ideas — or assigning them to the graveyard entirely — amid a gloomy economic climate. In the past few weeks, Microsoft has scaled back the ambitions of its moonshots division, Facebook has shrunk its experimental products group, and Google has slashed projects that don’t align with its CEO’s broader mission to pursue artificial intelligence.
Inside the company, leaders blame market uncertainties — but insiders also point to a new era of Big Tech that marks a shift away from risk-taking founders and toward Wall Street-appeasing pragmatism.
“The moonshot strategy has been abandoned for the extremely short-term ‘show me something,'” one Microsoft employee told Insider. “It’s not a market for long bets.”
Moonshots are getting scaled back
When Google’s cofounders, Larry Page and Sergey Brin, spun up Google X in 2010, there was little structure, few rules, and a clear mandate: Work on radical ideas that will change the world. It was a space for engineers to cook up ideas from driverless cars to space elevators. Waymo, Alphabet’s self-driving-car unit, was originally an X project, as was its drone unit, Wing. Page and Brin championed X projects they loved, helping them gain funding and headcount within the unit.
“If there was a project they loved, it would be protected,” a former X employee said.
The idea caught on. Other tech giants spun up their own special teams to pursue “moonshot” projects. Parviz, who created the once hyped Google Glass, left Google X in 2014 to start Amazon’s Grand Challenge. Two years later, Facebook introduced its answer to Google X, Building 8, where it set about exploring, among other things, brain-computer interfaces to let users type using their mind.
Creating spaces for longer-term, bigger-picture thinking has also been a way for tech companies, in theory, to avoid falling behind competitors. They could act as effective recruiting tools: Come work with us, and you’ll get to work on groundbreaking ideas.
Today, the constellation of these skunkworks divisions has changed. Employees working on these bigger bets are discovering they are the first to be cut in times of market uncertainty. Companies are reallocating those resources to surefire growth prospects.
As Page and Brin have stepped away from Alphabet to fund moonshots on their own terms (and dollars), its chief financial officer, Ruth Porat, has worked to rein in spending on some of the company’s costlier research-and-development projects. Meanwhile, the CEO, Sundar Pichai, has consolidated his vision of Google as an AI-first company, and insiders wonder whether this new era of leadership is at odds with the founders’ moonshot thinking.
Some of those fears are being realized: This month, Google cut half the projects in its Area 120 incubator, sparing only the AI-first projects, TechCrunch reported.
Facebook recently scaled back its New Product Experimentation division, which came out of the Building 8 team. The group, which built features and products like a now defunct speed-dating app and Hotline, a tool for creators and fans to interact, is now dedicated to working on short-form video, the newsletter Platformer reported. Earlier this year, the company scrapped development of a smartwatch and reined in investment in an upscale version of its augmented-reality glasses. Facebook is putting its worker energy and resources into keeping pace with TikTok and rebuilding its advertising business. Facebook did not respond to a request for comment.
Microsoft formed a new organization just last year for emerging technologies like quantum computing. An internal growth-strategy document Insider viewed indicated that despite lofty goals such as “harnessing the laws of physics to enable the near infinite possibilities of commercial quantum computing,” the unit would immediately focus on core businesses like selling its technology to the government and telecommunications industry to fund future bets.
The strategy drew criticism from some within Microsoft who worry the focus on “maintaining revenue” lacks ambition.
“We were supposed to be an innovation organization making long-term bets,” a Microsoft employee told Insider. “Our claims don’t add up to what reality is.”
For smaller companies, market turmoil can mean even more dramatic moonshot cutbacks.
At Snap, the era of outlandish or simply fun projects that make little to no money has ended. The company recently conducted mass layoffs and is cutting costs, including shutting down its Pixy mini drone; its accelerator program, Yellow; nearly all its TV and streaming efforts; and its entire Games vertical.
Instead, Snap is focusing on its “core strengths” like messaging and filters, its founder and CEO, Evan Spiegel, said during September’s Code conference. Snap declined to comment.
Long-term bets are not paying off
A tough market is pushing these companies to become more efficient, but these moonshots also haven’t paid off after years of work.
In 2015, Google formalized its moonshot philosophy in a new corporate structure and became Alphabet, creating space to spin its biggest bets into individual companies. Some bets, like Waymo and Verily, have shown promise, though they generate little revenue. Some have been shuttered, including Loon, a company that built balloons to beam high-speed internet.
Astro Teller, the lead of Google’s moonshots unit, X, has celebrated failure as a way to encourage employees to try new projects without fear. But employees say tight budgets and increased scrutiny of projects have made it harder to get ideas off the ground. X has also hired more leaders with venture-capital backgrounds and better business experience, according to two former employees. In the past two years, conversations around finding ways to support projects with external funding sources have increased, those people said.
“When you bring in the VCs, you’re thinking about returns and the market, which is the complete opposite direction to what moonshots need to be,” one of the former employees said.
An X representative declined to comment on this story but directed Insider to comments Teller had made, including a 2018 Wall Street Journal interview in which he said: “Our job is to make new businesses for Alphabet, things that hopefully can be both as good for the world as Google has been and as valuable as Google has been. High bars to clear, but that’s our aspiration.”
Amazon’s Grand Challenge also struggled to find success, despite hiring its first chief business officer, Tom Sly, last year. Its highest-profile spin-out, the telehealth-services unit Amazon Care, abruptly shut down in August. Other projects that came out of Grand Challenge, like the Echo Frames smart glasses and the virtual traveling service Amazon Explore, have seen little traction.
The group is now building other ambitious projects across 3D printing, supply-chain management, and health therapeutics, according to people familiar with the team. But insiders worry that Amazon may curb the group’s resources, as many of the projects are far from reaching financial sustainability.
“If you go after a problem that’s likely global because it impacts tens of millions or hundreds of millions of people, and we have a potential solution for this problem, we want to have a believable trajectory for this solution to eventually pay its own bills,” Parviz, the former Grand Challenge vice president, said at the March event.
At Microsoft, the future of the HoloLens, one of its biggest moonshot ideas, is uncertain. Insider reported in February that Microsoft had killed plans for the next HoloLens headset, known internally as “Project Calypso.” The unit dispersed after HoloLens’ cocreator Alex Kipman resigned in June, following Insider’s reporting on allegations that he’d behaved inappropriately toward women employees.
Big Tech is going back to the basics
To be sure, Big Tech companies are still investing in interesting bets. Amazon has secret projects spread across the company, including cancer vaccines, drone delivery services, quantum computing, and warehouse automation.
But those projects have made more advancements than Grand Challenge’s pie-in-the-sky-type ideas, one employee said.
A Microsoft representative said the company’s massive long-term bets in areas like artificial intelligence are spread across teams, and it spent $25 billion on research and development in its 2022 fiscal year.
Facebook has arguably tried turning itself into one big moonshot, renaming itself Meta last year to reflect a new focus on building the metaverse. Its CEO, Mark Zuckerberg, wants his company to be at the forefront of what he envisions as an immersive digital world where people using avatars seamlessly interact online.
But its Reality Labs division, responsible for building out the metaverse and other virtual-reality technology, has seen mounting losses. In April, Zuckerberg said that he was “planning to slow the pace” of these new investments and that he wanted to “level-set on our business trajectory.”
Alphabet has spun out two robotics companies from its moonshots lab in the past 18 months: Everyday Robotics and Intrinsic. Its Google Labs division is working on more futuristic projects in virtual and augmented reality.
But Pichai sees cloud and AI as his moonshots, people close to him say, and under his watch Google has sharpened its focus on these areas. At this year’s Google IO conference, where Brin once skydived to demo Google Glass, the company talked up how AI would change the way people search the web and use maps.
Some employees are skeptical that Pichai is interested in the Waymo-level bets that drove the founders.
“Sundar is an execution guy. He’s very careful about not rocking the highly successful boat,” a former senior X employee said. “He’s not the guy saying, ‘Hey, we should give X more money because it’s the future for Google.'”