10 Things Learned From The Alphabet Shareholders Meeting

Deciphering Alphabet

In their first meeting with shareholders since Alphabet’s founding last year as the parent of Google, company executives reaffirmed their commitment to pay equity and artificial intelligence efforts while fielding pressure over political lobbying and Alphabet’s membership in the U.S. Chamber of Commerce.

The inaugural annual shareholders’ meeting at the company’s headquarters in Mountain View, Calif. saw Executive Chairman Eric Schmidt, Chief Legal Officer David Drummond, CFO Ruth Porat, Google CEO Sundar Pichai and other execs participate in a free-ranging discussion with both institutional investors and everyday human beings who years ago decided to take a chance on the IPO of a promising search vendor.

The Alphabet execs (not including founders Larry Page and Sergey Brin, neither of whom attended) were happy to discuss topics ambitious and diverse, but the conversation, remarkably, never turned to products such as search engines, advertising services or the cloud.

Instead, Alphabet’s stockholders seemed more concerned about the company's social obligations, political activities, technological moonshots, and the schwag they would leave Mountain View with, than any profitable current or emerging businesses.

Pay Equity

Making sure women are paid on par with men is a serious concern for some Alphabet shareholders, who tried to bind the company's executives to their previously stated pay equity goals. Those shareholders said they wanted Alphabet to be a leader on the issue, not a laggard.

While a resolution asking Alphabet to report the company's policies and goals to narrow the gender pay gap was rejected, Schmidt and Drummond said Alphabet is deeply concerned about the issue and strives to achieve equity.

The concerned shareholders wanted Google to emulate Intel, which has provided information on base salaries, bonuses and stock awards as metrics to identify pay gap problems and identify how they would be remediated.

One investor said a 2014 analysis reported that senior software engineers at Google who were women earned $25,000 less annually than their male counterparts.

Schmidt said the company hires and compensates employees in accordance with its deeply held principles of fairness and non-discrimination.

Political Lobbying

Another rejected resolution sought to have Alphabet be more transparent about its government lobbying efforts and other political activities.

The resolution asked Alphabet to identify how it works to affect legislation and public policy through political spending, including the so-called "dark money" it gives to trade associations. Alphabet supports about 140 such groups, they said.

One shareholder said Alphabet spent $79 million to lobby the federal government over the last five years; another said the company was the single most frequent corporate visitor to the White House.

Schmidt said the White House claim wasn't one that could be confirmed as true.

The same shareholders praised Alphabet for cutting ties with ALEC (American Legislative Exchange Council) over the lobbying group's denial of climate change.Another rejected resolution sought to have Alphabet be more transparent about its government lobbying efforts and other political activities.

Chamber of Commerce

While Alphabet bravely led a corporate exodus away from ALEC, it's still a member of the U.S. Chamber of Commerce, which also lobbies against environmental regulations and clean energy mandates.

Some shareholders said membership in the Chamber conflicts with the company's stated positions on the environment. They asked for Alphabet to withdraw from the business group -- just like Apple had done -- and speak out to distance itself from the Chamber's climate positions.

Schmidt said maintaining membership is something that has been debated internally. He added that Alphabet also disagrees with the Chamber’s position on certain copyright laws being promoted by the film industry.

On balance, being a Chamber member helps Alphabet in many ways, Schmidt said, but that relationship is periodically evaluated.

Self-Driving Cars

Shareholders were particularly interested in hearing about progress in getting self-driving cars on the road. One said he was getting older, and wanted to make sure he could soon have one to get around.

The main roadblock at this point is government prohibition, Alphabet execs said.

Alphabet is now testing its autonomous vehicles, Schmidt said, and the company has entered into a deal with Fiat Chrysler to modify 100 minivans.

Schmidt said the technology should be considered a national priority, with 32,800 people projected to die this year on U.S. highways. Self-driving cars carry the potential to greatly reduce auto fatalities, he said.

Google CEO Sundar Pichai said the tech industry has been working on the problem for more than a decade, and the technology is mostly there.

"It works, it's time to make it legal, to literally be testing it," Schmidt said.

While the timing of changes in government regulation is hard to predict, self-driving cars should be on the road in a matter of years, not decades, they said.

Connectivity

Alphabet is taking seriously its efforts to bring greater network connectivity to the masses.

Google Fiber is now in five cities: Kansas City; Provo, Utah; Atlanta; Nashville and Austin. Another 22 are being planned.

While the Fiber subsidiary is laying cable to households, Alphabet is also working on point-to-point wireless solutions that have become far less expensive, and can deliver gigabyte-per-second performance, thanks to strides in semiconductor research.

Schmidt also pointed to the company’s work testing signals from a network of balloons deployed in the stratosphere — known as Project Loon — that one day could beam the internet to remote regions of Brazil and Africa, bringing connectivity to many impoverished populations around the globe.

Artificial Intelligence

Google's pioneering efforts in artificial intelligence were a hot topic at the shareholders’ meeting.

With the DeepMind project, Google’ has conquered the world champion of the game of Go, once "thought to be incomputable," Schmidt said.

The algorithm powering AlphaGo, the winning program, mimics human intuition by applying reinforcement learning, "a new way’ in which machine learning can maximize performance by taking in feedback from its own environment, he said.

AlphaGo proved that reinforcement learning could work, which made it a historic computer science breakthrough, Schmidt said.

While an investor doubted the relevance of that achievement to the academic advancement of AI, Schmidt said the technology will prove highly significant to other applications, and will become pervasive.

DeepMind just announced a partnership with the UK’s National Health Service to predict outcomes for patients with a particular kidney disease, Schmidt said.

Assistant Amore

Google co-founder Larry Page (pictured) has said he wants the company's search engine to advance to become a suggestion engine that helps users with their day-to-day lives.

To that end, Google built an internal tool, Assistant, which uses artificial intelligence to decide how best to serve its human masters and simplify their lives.

Google was so impressed with Assistant that about six months ago, it decided to let it loose by crafting "smart replies" to emails. But the engineers didn't realize what a tender heart the digital helper had.

Assistant excelled more at affectionate replies than smart ones.

"So, they ran it, they turned it on, and its most common reply was, ’I love you,’" Schmidt said.

That wasn't the tone most business users thought appropriate for their professional correspondence.

"So, let's just say that there were some bugs," Schmidt said.

Life Sciences

Alphabet believes it can make major inroads in diagnosing diseases, improving surgical processes, even extending human life.

Verily, the company's life sciences group, is developing tools in partnership with Verb Surgical solutions that incorporate robotic capabilities by using machine learning. Verily is also working on contact lenses that contain the world's smallest battery and WiFi to monitor glucose levels for people with diabetes.

Schmidt said the problem of "imaging in radiology" has now been solved by computers, which can diagnose diseases such as diabetic retinopathy -- which makes victims blind -- better than ophthalmologists can.

The reason? Google engineers see many more eyes than doctors do.

And through the Google Brain Initiative, Google's platforms will manipulate life sciences data and generate insights that can propel medical breakthroughs.

Schmidt assured shareholders that Verily has "a very, very strong oversight group" to ensure the proper controls are in place over medical research.

Google Town

A group under Alphabet, Sidewalk Labs, is re-thinking the way cities work.

Alphabet believes it can apply new technologies to improve transportation and other infrastructure and make cities run more efficiently, safely and harmoniously.

"We're sort of educating people on what is possible using the merger of digital technology and the problems that have (been) in those cities for a very long time," Schmidt said. "This is a platform that's again innovative and revolutionary."

Schwag-gate

One attendee complained that this year's confab didn't produce the schwag that stockholders had come to expect back in the Google days.

"I thought we were going to get (a) cute little bag or cap or mug," the shareholder lamented. "I know to you it's not that big but to me it is. Can you bring it back?"

So, is the restraint in doling out schwag a sign that Alphabet is imposing the financial discipline investors have been calling for?

Apparently not.

Schmidt (pictured) graciously apologized for the lack of gift baggies, claiming it was an oversight and the necessary measures would be taken to make sure such a failing won’t happen again.

To the relief of all, the tense situation was remediated. An employee rushed to the Google company store and returned with 100 hats before the meeting was over.