Download now: The Downfall of Cable, and the Rise of 5G!

Google, The Destroyer!

How Alphabet (NASDAQ: GOOGL) is shedding its good guy image for a stake of the $1.7 billion defense market

Written by Jason Stutman
Posted April 6, 2018 at 8:00PM

Internet search giant Alphabet Inc. (NASDAQ: GOOGL) has long enjoyed the public perception of being a jovial, gentle giant.

Visit the company’s homepage for Search, and you’re met with a playful Google logo. It’s the same color scheme as a goofy and disarming umbrella hat.

Visit one of its corporate locations, and you’ll find Ms. Pac-Man arcades, plush beanbags, and rooms reminiscent of an elementary school playground.

Ask leadership about diversity, and they’ll tell you Google is an oasis of integrity and justice.

In Google-land, everyone is always smiling, safe, and “making the world a better place.”

Google’s PR machine has no doubt been a roaring success in recent years. It currently ranks as the third-most admired company in the world according to Forbes and, despite its near monopoly on user data, has managed to dodge any massive privacy concerns like those currently hounding social media rival Facebook.

Alarm bells are quietly ringing, though, that Google’s days of untainted perception are fading away. As a result of recent revelations surrounding its business practices, Google may be slipping out of the public’s good favor — as are a number of other major tech firms today.

Don’t Be Evil (Unless There’s Money in It)

When Google first filed its S-1, preparing for an IPO back in 2004, the company included the now-famous motto of its corporate code of conduct: “Don’t be evil.”

Founders Larry Page and Sergey Brin argued at the time that the culture behind the motto “prohibited conflicts of interest, and required objectivity and an absence of bias.”

But speaking to that motto in 2010, industry legend Steve Jobs candidly told an audience of Apple employees, "It's bullshit," and they all roared in response. Jobs, and others in the know, have long seen Google not as a bastion of good but rather as a potential wolf in sheep’s clothing.

Five years after Steve Jobs made those comments, Google’s parent company Alphabet Inc. conveniently dropped the “Don’t be evil” motto, replacing it with “Do the right thing.” Seemingly, the company wanted to distance itself from the phrasing... and recent revelations may reveal that was a good idea.

In its corporate restructuring, Alphabet Inc. made it clear it’s becoming much more than just a search and advertising company. It wants to touch every aspect of tech, from consumer devices to driverless cars and, more controversially, defense and aerospace.

Google, The Destroyer

In March, it was first revealed by Gizmodo that Alphabet had quietly secured a contract with the Department of Defense to work on “algorithmic warfare.” In short, the company is providing the U.S. military with its artificial intelligence capabilities for use in autonomous drone strikes.

Google was clever enough to proxy the contract through a Northern Virginia technology staffing company by the name of ECS Federal, but eventually the information leaked... and it’s damaging Google’s cheerful image.

Citing Google’s old motto “Don’t be Evil,” employees are now protesting the company’s role in the DoD’s “Algorithmic Warfare Cross-Functional Team,” code-named Project Maven. Already, Project Maven has reportedly been used in drone strikes against ISIS.

As the New York Times reported on Wednesday:

Thousands of Google employees, including dozens of senior engineers, have signed a letter protesting the company’s involvement in a Pentagon program that uses artificial intelligence to interpret video imagery and could be used to improve the targeting of drone strikes.

The letter, which is circulating inside Google and has garnered more than 3,100 signatures, reflects a culture clash between Silicon Valley and the federal government that is likely to intensify as cutting-edge artificial intelligence is increasingly employed for military purposes.

Alphabet, of course, has no intention of caving as far as we can see. There’s big money in military contracting, and as warfare continues to become more digitized, companies like Google are beginning to realize their assets extend well beyond consumer tech.

Here’s what a Google spokesperson told Bloomberg in response to the controversy:

Military use of machine learning naturally raises valid concerns. We’re actively discussing this important topic internally and with others as we continue to develop policies and safeguards around the development and use of our machine learning technologies.

Not only is there no indication here that Google intends to take a step back on Project Maven, but there’s outside evidence it isn’t the only highly admired tech firm competing for big military contracts.

According to reports from Business Insider this week, Amazon (NASDAQ: AMZN) is close to winning a massive $10 billion contract from the Pentagon to overhaul its IT systems, part of what’s being called the Joint Enterprise Defense Infrastructure, or “JEDI,” program.

These revelations, of course, don’t make either Amazon or Alphabet “evil” by default, but they do make them scarier. Undeniably Orwellian in nature, this cozying up between data-enriched tech conglomerates and an increasingly intrusive U.S. government warrants real concern amongst the public.

That said, it also opens the doors to substantial revenue streams for big tech from the $1.7 trillion defense industry. The same way automakers are being disrupted by Silicon Valley, aerospace and defense contractors now face the same threat of competition from Alphabet, Amazon, and their ilk.

It’s not just about the software, either...

This week, The Verge revealed that Waymo (an Alphabet subsidiary) and Honda (NYSE: HMC) will be building a self-driving delivery vehicle together. In 2016, Google introduced the Pixel, alongside an ecosystem of in-house smart devices.

For years, the market had been operating under the assumption that Alphabet doesn’t have the knack for hardware, but that perception is officially outdated — and not just in terms of consumer tech.

Investors should expect a similar string of events to unfold with aerospace and defense, as Google and its peers — perhaps at the expense of looking a little bit “evil” — could become military powerhouses in their own right.

Until next time,

  JS Sig

Jason Stutman

follow basic @JasonStutman on Twitter

Jason Stutman is Wealth Daily's senior technology analyst and editor of investment advisory newsletters Technology and Opportunity and The Cutting Edge. His strategy for building winning portfolios is simple: Buy the disruptor, sell the disrupted.

Covering the broad sector of technology and occasionally dabbling in the political sphere, Jason has written hundreds of articles spanning topics from consumer electronics and development stage biotechnology to political forecasting and social commentary.

Outside the office Jason is a lover of science fiction and the outdoors, and an amateur squash player at best. He writes through the lens of a futurist, free market advocate, and fiscal conservative. Jason currently hails from Baltimore, Maryland, with roots in the great state of New York.


Buffett's Envy: 50% Annual Returns, Guaranteed