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Google’s purchase of Nest may be a far better idea than it seems.
I have found myself drawn into the debate over the recent acquisition of Nest by Google. As Nest is a maker of thermostats it is not a subject I would have paid the slightest attention to if it hadn’t been so extensively covered on the Tektalk podcast; by covered I mean panned, slated, poopooed, belittled, you get the drift. A lot of people seem to be somewhat shocked by the purchase as it cost Google 3.2 billion dollars. When Google itself has just under 60 billion in spendable assets then it makes 3.2 seem like a lot for a company I had never heard of until this week. Playing devil’s advocate I intend to defend the purchase. It seems to me that this is a lynch pin in the Google game plan.
My initial reason for looking deeper is that my wife feels the cold really badly. I mean Really Badly, with capital letters. When I am walking around the house in a Tshirt she will be wearing two cardigans and two blankets with a hot water bottle and the central heating on. The idea of being able to turn the heating on when we are still ten minutes away from home is something that we would want to have asap.
My second thought is that this is a perfect additional tile for Google Now. I have installed Google Now on a couple of occasions but aside from its excellent speech recognition it is of little use to me. I work at home, I don’t drive, immediately a lot of its use disappears. I also feel like an idiot talking to my phone in public and if I did I would find that it couldn’t find a 3g signal so I was wasting my time. Such is the problem of living in the countryside, if I use anything other than an ancient nokia I have no hope of getting 3g. If my heating could learn to control itself according to my motions then I would have a lovely toasty home all the time and my wife would be far more happy.
The best reason for my optimism in the purchase of Nest though is the money it will be able to save consumers. I have heard the opinion that this is an expensive purchase, and wasted money but when your heating can learn how best to save electric in doing your will then you are going to save a lot of money. Nest themselves reckon the saving will be about 20% of your heating bill. This will pay for itself in no time. Aside from the benefit of saving cash for your pocket you will also have the huge benefit of easing a great deal of stress on the environment. Climate change will be reduced, air will be cleaned, customers will save money, which they will probably spend on tablets, phones, and any number of things in the google play store.
The big problem with the whole deal is that everyone expects Google to misuse the information gleaned from these sensors. Everyone thinks that there is a wealth of advertising opportunities to be had from being able to monitor every movement of the owners of these devices. Of course everyone is right about this, but Google have promised not to take any sneaky peeks at this data. Google have said that they will only use the data for purposes in the operation of the devices themselves, heating related, etc. Given the billions spent on heating I am inclined to believe this, why alienate your customers to sell adverts to any other kind of business when you can use your knowledge to influence the sale of contracts that far overwhelm the amounts spent on mobile phones or broadband?
Another key in the puzzle that makes me think that Google will not look at the data is the even more recent news that they are going to be investing in Deepmind AI. They will not need to look at any data, if they take the AI in the right direction they will be able to rely on the devices themselves knowing exactly how to use the data to maximise profit and there will be no human to see any of the data at all. The data could be misused and noone would ever know because it could all happen inside the machines.
3.2 billion is a lot of money but in the long term it is less than most of use realise. Naturally if you or I had this kind of money we would most likely become overwhelmed by the possibilities and disappear off on a long holiday/spending spree that would never end. In multinational business dealing in the kind of devices that everyone can make use of it seems like a smaller amount. All the same it is still a lot. However as stage number one, the opening gambit of a far longer play, it might seem far less.
Nest is run by a team that have Apple pedigree. This is valuable. This is part of the legacy of the insight of Steve Jobs. He may be gone but some of his decisions live on, and his decisions hold a mystique when compared to the decisions of all other CEOs. There are a number of teams doing similar things with sensors and the ‘internet of things’ but they are all unknown quantities. When a company has access to the resources of Google and has a serious game plan then there is no point skimping over the odd billion and risking getting stuck with a bunch of numpties who have been mismanaging the company you are buying. If you buy tried and tested Apple veterans then you know you are getting quality. That is a weight off your mind because the odds severely suggest you have made the right choice. It is probable that there were some key patents involve in the acquisition. Home automation seems like it was the natural next step in Google Now’s design, they could have been balked by the patents held by Nest. There are other companies doing similar ‘internet of things’ tasks, but of them all, the combination of factors in Nest make it a no-brainer.
It is obvious that Google are playing a long game. In a way they are far more able to get away with this than most companies. Most companies have to worry about the next shareholder’s meeting and reporting the maximum amount of profits because they are always in competition with others and therefore need to cut costs all the time. Google is currently free from this rat race and is still able to dream. They have always been a very adventurous company willing to innovate to a massive extent and no matter what happens they can fall back on the massive profits brought in by being the go-to search engine, an actual verb in the dictionary. This allows them freedom from the usual constraints of short term operation that usually control the decisions of companies. Asimov wrote of a mathematician who predicted a thousand years of future in the foundation trilogy. Although a thousand years is excessive it is my belief that Google are focussing on the distant future. They probably have intentions of occupying a particular position in 2035 but in order to get there it is imperative they make this purchase now.
With most companies we all know what they are planning. We might not know the specs and the design of the next Blackberry or Ferrari, or Conran, but we know roughly what they will be doing. We know roughly what they are working on at this very moment. Google is not that kind of company. They could be working on anything. Is it software? Is it a phone, tablet, car, computer? Are they working on giant robots, drones, space craft? Nothing would surprise me with Google and for that reason I think that all the criticism of this purchase is looking at this all from the wrong angle. Nest is an expensive acquisition but it may not be long before it begins to make a lot of sense to the rest of us. The future is always coming and often it takes us by surprise. We ought to keep our eye on Nest to see where the next surprise comes from.
http://www.theguardian.com/technology/2014/jan/13/google-nest-labs-3bn-bid-smart-home-devices-market
http://www.theverge.com/2014/1/14/5307530/why-is-everyone-disappointed-by-google-buying-nest
Harry Monmouth's Two Penneth 