Musk's Moonshot Merger

"Google was a website. (Still is.) You could go to the website and type in a question and Google would give you a good answer. This was useful, so Google had a lot of users. Advertisers would pay a lot to reach them, so the website made a lot of money. This had, for Google, huge economies of scale: It answered the questions and serve the ads algorithmically, so as more people came to the website and asked more questions, its revenue increased rapidly"

"but its costs just some servers in data centers did not. So Google had all of this extra money, and it spent some of that money on what were colloquially called moonshots, risky ambitious long-term bets with uncertain payoffs, like building self-driving cars and curing death. (Some of this stuff happened in a division that Google called X.) Investor enthusiasm for moonshots waxed and waned over time, but at a high level the strategy made sense."

A decade ago Google operated primarily as a website that answered user questions and delivered advertisements. Its search product attracted many users, and advertisers paid heavily to reach that audience, producing large revenue with low marginal costs. The search system ran algorithmically on servers, so revenue scaled rapidly while costs grew slowly. Google reinvested surplus funds into risky, ambitious, long-term 'moonshot' projects targeting physical-world problems, such as self-driving cars and life-extension efforts, often organized in a division called X. Investor enthusiasm for those bets fluctuated, but the model paired profitable software economics with investment in capital-intensive physical innovations.

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