What separates Big Tech from its smaller peers is the ability to make big bets.
Since 2012, Meta (formerly Facebook) has spent $56 billion on Reality Labs (its virtual reality and metaverse division). So far, it has brought in $7 billion in revenue.
Estimates are that Amazon’s Alexa has lost the company at least $11 billion and maybe as much as $40 billion.
Google’s Cloud business has lost $35 billion, with the first quarterly profit only coming in the first quarter of 2023.
This article makes the case that those loses are okay. As these businesses scale into trillion dollar valuations, they need to be willing to make bets at a scale we can’t really fathom. Jeff Bezos explained this in his 2017 shareholder letter.
“As a company grows, everything needs to scale, including the size of your failed experiments. If the size of your failures isn’t growing, you’re not going to be inventing at a size that can actually move the needle.”
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“We all know that if you swing for the fences, you’re going to strike out a lot, but you’re also going to hit some home runs. The difference between baseball and business, however, is that baseball has a truncated outcome distribution. When you swing, no matter how well you connect with the ball, the most runs you can get is four. In business, every once in a while, when you step up to the plate, you can score 1,000 runs.”
This article from Matthew Ball considers the platform businesses that run so much of our lives today – Apple, Google, Amazon – and the bets that they are making to build their next billion-user product.
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