Not too long ago we were making a capital pitch to a respected Silicon Valley venture capitalist. He seemed to understand our ideas about the emerging Next Economy, and he agreed that the world had better be headed that way soon to avoid serious risks to civilization. Looking through the 80-some constituents of our Green Alpha Next Economy Index (GANEX), he praised our vision of combining all the necessary elements of the future green economy in one place. He was seemingly in love with our names in solar, wind, batteries, basic research, transportation, water, wave power, green building, etc. But then, looking at one name, he stopped short. “Google?” he asked, “what the hell does search have to do with the green economy?” He literally laughed out loud. We had two follow-on meetings with this guy (no investment was ultimately forthcoming, incidentally), and each time, he ridiculed our competence to correctly model the next economy on the basis of this one holding. Now I don’t think that just because you wear the title of VC means you need to know everything, but, in this case, there’s only one word for this guy’s reaction: clueless.
Google, whatever else it may be (a lot), is not just an example of a Next Economy company. It is arguably the example (for now) of the best, most clear sighted, realistic, practical enterprise of smart people who, when confronted with the complicated realities of a populous, warming, resource-constrained world, decided to put up rather than shut up. Why?
First, Google’s core search business, despite what Mr. VC might think, is itself critical to a sustainable future. Fast, relevant searches, combined with Google’s myriad efficiency boosters (think Maps and mobile payments), streamline and render more productive not only obvious things like office productivity, but also enable the increasingly rapid advancement of science, technology and other pursuits that benefit from real-time availability of very precise information. For all I know, Google is attempting to quantify the dollars or percentages this adds to our gross world product, but suffice it to say that the effects are significant. Forrester calculated that Google Apps alone provide businesses with a 307% return on investment. Smart tech economists will no doubt render better opinions than mine on this, so I’ll move on to a few of the company’s other pursuits.
Renewable energy. It was my turn to laugh when I heard a CNBC anchor say that Google’s investments in zero-carbon, renewable energy were “distracting from core business” and “damaging the firm’s value.” On the contrary, Google’s accurate vision of our growing need for domestic, secure, safe, not poisonous, less-vulnerable-to-natural-disasters energy means that their holdings will be perfectly positioned to provide a commodity that, exactly like search, we never stop needing: electricity. Google, for all its size and wealth, is actually in the early stages of building a dynamic conglomerate. Consider this selected list of the company’s many green energy investments:
- $55 million into the Alta Wind Energy Center in Kern County, California. This wind station will generate 1.5 gigawatts, which can meet the demand of some 450,000 homes.
- $168 million into the Ivanpah Solar Electric Generating System (solar thermal), which may be the “largest solar energy project in the world” at a capacity of 392 Mojave sun-powered megawatts, approximately equivalent to the requirements of 140,000 homes.
Image: rendering of the completed Ivanpah project (source www.brightsourceenergy.com)
- $100 million into the Caithness Shepherds Flat wind farm, “with capacity of up to 909 megawatts (about 325,000 homes’ worth), located immediately south of the Columbia River in north-central Oregon, on approximately 32,000 acres.”
- Undisclosed but no doubt very large investment into undersea transmission cables off the Atlantic coast designed to allow Eastern cities to tap into massive offshore wind potential. Google owns “41.7% of the development phase of the project,” according to the WSJ. The entire 350-mile project is valued at $5 billion.
So, wind, solar and infrastructure. A good long-view mix if your goal is to be a dominant energy player in 10 or 20 years. All in, I count at least US$455 million invested so far by Google into renewable energies. There could be more I’m not aware of, and there’s certainly more to come. And Google’s Next Economy efforts aren’t limited to energy.
Creative applications. Google is tinkering with ways to ignite and boost the next economy that we hope will soon become commonplace in business and daily experience. For example, they were early to install solar carports and electric vehicle (EV) charging to employees, and as far as I know were the very first to offer inductive charging plates so that all an EV driving employee need do to juice up is park at the Mountain View HQ campus, and walk away. For EV drivers who don’t work there, Google has added all publicly-usable EV charging stations to Google Maps. Back at their “core business,” Google is employing creative ways to minimize not only the power but also the fresh water impacts at data centers via new ideas such as using sea water as a coolant. In the realm of finance, Google Payments has every chance of catching on huge and accelerating economies right at the point of sale. And it’s rumored that Google may be endeavoring to improve upon the Bureau of Labor Statistics’ Consumer Price Index with their own Google Price Index. Google’s being tight lipped about the project, but we’re sympathetic to the ideal, since providing a redefined metric to benchmark the economy that matters most is what we’re doing too.
Image: Google green transportation initiatives (source: http://www.ideaconnection.com)
Now, in aggregate, we ask the question, who if not Google stands to profit when the imperatives of the next economy become evident? What enterprises will thrive when, for example, coal is in relative terms far too expensive to keep mining and burning? Who will loom large as peak oil becomes increasingly expensive or a hostile OPEC decides simply to turn down the spigot? Who will be positioned to seamlessly conduct business when the policy world finally does come around to limiting greenhouse and toxic emissions? It’ll be entities such as Google and Germany who, despite the almost complete failure of U.S. and international policy to devise programmatic prescriptions for change, have decided to forge ahead.
The way we here at Green Alpha ® Advisors model the Next Economy and thus build our portfolios starts with us asking “which companies are leading the way to the future, green economy?” and “what firms existing now can we imagine thriving in that world?” We believe Google qualifies both ways and will be able to persist in a model of the next economy even 50 years out. Further, as opinion leaders, Google is bringing their brand of non-linear thinking into the mainstream, which in itself is a positive game changer.
If Google is crazy, it’s crazy like a mutant nuclear fox on steroids. We love their ongoing growth prospects and have been betting on them in our benchmark GANEX since that index’s first day, December 30, 2008. We’re not selling GOOG shares any time soon. Folks who say Google has reached maturity (or has even bubble status) fail utterly to grasp the company’s vision to become a global leader in much more than search and information. More than that, they fail to understand the demanding requirements of the Next Economy.
Garvin Jabusch is the cofounder of Green Alpha Advisors, LLC and manages The Sierra Club Green Alpha Portfolio -- a unique blend of Green Alpha Advisors' Next Economy universe and the Sierra Club's proprietary green-investment guidelines.