Alphabet (Google)

Alphabet's 2015 restructuring promised moonshots at scale - autonomous vehicles, longevity research, delivery drones. Google would become a holding company, each 'Other Bet' operating like an independent startup with its own CEO, P&L, and strategic freedom. Seven years later, the experiment had mostly failed. Other Bets lost $6.1 billion in 2022, Loon shut down, and even Waymo - the star performer - struggled to escape Google's orbit. What went wrong?

The Isolation Paradox. Ventures operating in automotive, healthcare, or aviation need those industries' expertise to succeed. But Alphabet kept Other Bets geographically co-located, sharing talent pools, using Google infrastructure, and importing Google culture. Waymo hired primarily ex-Google engineers who brought software development practices - but self-driving cars require automotive manufacturing, regulatory navigation, and supply chain management that Google doesn't have. Access to Google's resources prevented the specialization that would make Other Bets competitive. True isolation would have meant separate locations, separate talent pools, separate technology - but then they'd lose the Google advantage.

The structure did enable countercurrent architecture: Search profits (35% margins) fund moonshots losing $5B+ annually while maintaining 20%+ overall margins. This biological temperature regulation - cool zones funding hot zones - provides option value on different futures. The lesson: you can't have both resource leverage and genuine differentiation. Spin-outs need isolation to evolve unique capabilities, but isolation eliminates the synergies that justify keeping them inside.