What does the establishment of Alphabet mean for Google's future development? What kind of corporate structure innovation is this?

Let's put it this way: you can imagine this whole situation as a steamed bun shop run by a skilled artisan.

Initially, this artisan was exceptionally skilled. His meat buns (Google Search, advertising business) were famous far and wide, business was booming, and he made a lot of money. This was his core business.

Later, with money and broader interests, the artisan started exploring other things. He wanted to research how to make buns fly directly to customers' homes (drone projects), how to create longevity-inducing steamed bread (life sciences projects), and even how to build an autonomous bun delivery vehicle (self-driving projects).

Before Alphabet was formed, all these disparate research projects were mixed together in the "steamed bun shop" main store. This led to problems:

1. Unclear Accounting: Outsiders would look and exclaim, "Wow, why is this bun shop spending so much money researching flying buns? Is the main business no longer profitable?" This made investors very worried, as they couldn't clearly see how profitable the core bun business truly was.
2. Management Confusion: The bun-making artisan and the scientists researching flying buns required completely different working environments, evaluation standards, and corporate cultures. Forcing them together in one "shop" made everyone uncomfortable and led to very low efficiency. Researchers even had to abide by the bun shop's rules and regulations, which tied their hands.

And so, Alphabet was born.

The artisan had an epiphany. He established a large conglomerate called "Alphabet," becoming its chairman himself.

Then, he took the original "steamed bun shop" as is, renamed it "Google," and made it solely responsible for all the profitable core businesses like meat buns and vegetable buns (Search, Android, YouTube, etc.). He handed it over to a capable lieutenant (Sundar Pichai, the current CEO) to focus on expanding and strengthening the bun business.

At the same time, those money-losing, short-term unprofitable "fantasy" projects, such as flying buns (Wing), longevity-inducing steamed bread (Verily), and autonomous bun vehicles (Waymo), were each established as independent small companies, also falling under the Alphabet group. Each small company has its own CEO, its own goals, and its own budget.

The benefits of this architectural innovation, or its significance for the future, became clear:

1. Financial Transparency, Reassuring Investors: Now, when people look at financial reports, Google is Google – highly profitable, with profits clearly visible. The new projects are separate new projects; although they are still burning cash, they don't affect confidence in Google's core business. This is called "risk isolation."
2. Letting Professionals Do Professional Work: Each small company has a very pure objective. Google's team focuses solely on perfecting internet services and advertising. Waymo's team concentrates on autonomous driving. Everyone performs their respective duties without being distracted by other businesses, allowing them to move faster.
3. "Buying Insurance" for the Future: Google's search business cannot be a cash cow forever. By incubating this large number of future-oriented companies, if autonomous driving succeeds one day, or if there's a breakthrough in life sciences, the Alphabet group will have new growth points. This is called "diversification," or not putting all your eggs in one basket.

So, simply put, the formation of Alphabet was a "separation of the family." It involved managing the mature, profitable "eldest son" (Google) separately from a group of "younger sons" (other innovative businesses) who are still in school and require investment. This ensures the eldest son continues to earn steadily to support the family, while giving the younger sons enough freedom and resources to explore the future and see which one might become great. This is a clever strategy for giant corporations to maintain innovative vitality and organizational flexibility.