3 Reasons Alphabet Inc (GOOG) Wants to Build “Smart Cities”

Dan Doctoroff, CEO of Sidewalk Labs, an Alphabet Inc (GOOG, GOOGL) portfolio company, recently gave a revealing Q&A session over at Quora.

3 Reasons Alphabet Inc (GOOG) Wants to Build "Smart Cities"

He addressed questions surrounding the mission of Sidewalk Labs, which, like many projects at GOOG, can seem a little far-fetched.

Its aim is to help build “smart cities” — urban areas that use technology to solve problems like traffic congestion, housing affordability, public health issues and fossil fuel dependencies.

And, while the famous mantra of the GOOG IPO was “Don’t be evil,” you can rest assured Alphabet has some economic incentives of its own behind pushing Sidewalk Labs’ initiatives.

GOOG’s Motives Behind “Smart Cities”

While I do believe there’s a hint of altruism to Sidewalk Labs, let’s remember, shall we, that Alphabet is a public company and as such, it has a responsibility to GOOG stock holders. These are three ways Sidewalk’s “smart cities” should benefit the parent company long-term.

Make room for self-driving cars!

When asked by one Quora user, “What technology should we expect cities to realistically adopt within the next 5-10 years,” Doctoroff listed a few things, but spent the most time on driverless cars:

“And autonomous vehicles will be a reality. They used to be science fiction, but I expect before too long we’ll see AVs in service as taxis in some urban areas. And if we manage them right, they will be great for cities, making streets safer, reducing congestion, and freeing up so much of the valuable real estate we use on parking today.”

I would not at all be surprised to see GOOG compete head-to-head against Uber once its self-driving cars get on the road, which Google is very anxious to see happen. Tesla Motors Inc (TSLA) CEO Elon Musk all but admitted this last year on a conference call when he coyly admitted operating a ride-hailing service would make sense once it could produce autonomous vehicles at scale.

Let’s get back to the issue of parking that Doctoroff brought up, though, because that leads into GOOG’s next financial motivation behind smart cities.

Affordable housing reduces GOOG’s costs.

The inflation in housing prices is an objectively bad thing for Silicon Valley. San Francisco and its suburbs have become insanely pricey places to live, which makes moving there less attractive for potential employees.

It also means GOOG has to pay its employees more just for them to earn living wages, so if smart cities make better use of mobility solutions like autonomous vehicles and carpooling, congestion eases up, parking decks disappear in favor of apartments and real estate prices have less upward bias.

Smart cities should increase the use of Alphabet’s products.

According to Doctoroff,

“We are still building buildings the same way we did in the 1920s. Building techniques could be a significant area where tech has the potential to radically reduce costs, whether it is in new designs, new materials, and new construction techniques.”

The Wall Street Journal put it more directly, saying:

“Alphabet is putting the final touches on a proposal to get into the business of developing giant new districts of housing, offices and retail within existing cities.”

Unsurprisingly, these will be high-tech constructions that will likely heavily feature GOOG products. You can already see this happening with LinkNYC, an Alphabet initiative aimed at converting New York City phone booths to high-tech “communication hubs” for the public.

Doctoroff says the centers will feature a tablet that can access not only free internet (wonder what the default search engine will be?), but also “civic and consumer applications” at no cost. Let’s not pretend to be shocked when 90% of those apps are related to Alphabet in one way or another.

At the end of the day, I think smart cities are … smart.

We have to improve housing affordability, and who isn’t for reducing traffic congestion? We’ve dug ourselves into a hole from a city planning perspective, and given perennial budget deficits and the dysfunctional, do-nothing nature of modern American politics, we have little choice but to turn to smart cities sponsored by corporate America.

As of this writing, John Divine did not hold a position in any of the aforementioned securities. You can follow him on Twitter at @divinebizkid or email him at editor@investorplace.com.

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Article printed from InvestorPlace Media, https://investorplace.com/2016/05/alphabet-inc-goog-smart-cities/.

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