
Apple Is Getting More Bang for Its R&D Buck - bko
http://www.bloomberg.com/news/articles/2015-11-30/apple-gets-more-bang-for-its-r-d-buck
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jacobolus
I wish Apple would spend some more R&D money fixing up their Mac application-
level software, which in my opinion has been on a gradual decline since about
2005.

More seriously though, Apple’s revenue is much higher than these companies,
and their R&D budget is still in the same order of magnitude (larger than
Qualcomm or Facebook, about the same size as Google). So the answer here seems
to be that they have a more efficient business model or participate in larger
markets than Facebook or Qualcomm or Google.

~~~
nier
Would it be rational to assume that even Apple has a hard time coming by
quality people and all their A players are already busy laying the ground work
for whatever product category they are about to enter next?

For example, if that might be a car they will need much better software and
that from day one, otherwise people will die. The lack of polish on OS X might
be an indication that they are working on something big. Not necessarily big
for us, but a huge effort for them.

~~~
jacobolus
I assume that’s a big part of it. It’s disappointing though, because there are
huge possibilities for user interface improvement in systems like file
managers, “office” software, web browsers, image/video/audio/&c. tools,
developer tools, and so on, for someone willing to invest serious time and
money in getting the core abstractions right instead of chasing shiny new
small features.

It’s depressing that for example the file manager from BeOS is still better
than anything we have in current machines, and that the OS X file manager
isn’t fundamentally anything but a mashup of the ones from NeXT and from
original Mac, with slightly different chrome.

~~~
derefr
What's stopping a third party from making the software-with-better-core-
abstractions you're talking about, and selling it—on the Mac App Store even?

~~~
jacobolus
In most cases, nothing in particular (the file manager is a bit different, as
it needs work at the operating system level). But software projects competing
in established markets which require many years of development to catch up to
“industry standard” tools are hard to get off the ground, because new untested
ideas are risky and there are few short-term payoffs. I would love to see new
products competing in all these areas.

The one I’m most familiar with, Photoshop-style image editors, is based on
core abstractions dating from research done on 1970s graphics workstations
with far-too-literal adaptations of darkroom photography practices with 19th
century ideas about how color works embedded deeply, and there is huge room
for improvement if someone is willing to reimplement everything from scratch
on better foundations. It’s a several-year multiple-developer kind of effort
though.

I’m sorry about Apple in particular because it seemed like their Mac
application software teams were on a roll from ~1997–2005, but have sort of
stalled since then. (Some of what they’ve done since has been awesome, but
overall in my opinion there’s been substantially less great stuff in the past
10 years than in the 8 years before that, and many apps feel severely
neglected.)

I am thankful that Apple (with help from Qualcomm, Samsung, Intel, etc.) keeps
pushing the hardware side though. The new stylus, “retina” displays, better
battery life in thinner computers and tablets, etc. are wonderful.

~~~
pjc50
Careful about ditching too many paradigms at once; you'll end up with
something like Kai's power tools, which everyone agreed were revolutionary but
always remained a curiousity. This industry does not like having to retrain.

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simonh
Here's an article by Horace on Aymco in 2012 on this same subject [1]. Back
then Apple was spending just north of $600 million a quarter on R&D (in 2011,
which is when he had figures for). Since then to reach $8 billion a year,
Apple would have had to increase spending by over %30 per year. That's a very
impressive ramp up in spending, especially when sustained over a substantial
period of time.

The thing is their revenue growth has been so spectacular, it's swamped their
otherwise dramatic increase in investment in R&D on a proportional basis.

[1] [http://www.asymco.com/2012/01/30/you-cannot-buy-
innovation/](http://www.asymco.com/2012/01/30/you-cannot-buy-innovation/)

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roymurdock
R&D accounting for tech companies should somehow factor in M&A spend as this
is becoming the de facto way to "generate" research and IP for large tech
companies.

> Apple’s relative thriftiness extends to its vaunted advertising and
> marketing operations. The company spent $3.5 billion on advertising and
> marketing over the past four quarters, while Google spent about $8.8 billion
> in the past three. R&D spending isn’t worthwhile if it never leaves the lab,
> says Tim Swift, a business professor at St. Joseph’s University in
> Philadelphia. “Apple’s products are going through some of the most effective
> and sophisticated marketing we’ve ever seen,” he says. “That’s the other
> half of what makes Apple the most productive R&D spender.”

Surprising to see that Apple also spends less than 50% of what Google does in
direct advertising. Amazing what kinds of costs you can cut when you have such
strong marketing already built into the name, look, and design of your
product.

~~~
guyzero
Google's sales and marketing expense category consists of the following items
(from their 10K) - some (perhaps most) of it is actually stock comp for sales
& marketing employees.

• Labor and facilities-related costs for our personnel engaged in sales and
marketing, sales support, and certain customer service functions;

• Advertising and promotional expenditures related to our products and
services; and

• Stock-based compensation expense for our employees engaged in sales, sales
support, and certain customer service functions.

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cromwellian
I read this as "how Apple relies on the R&D of other companies" For example,
the quote about how IBM spent 100x as much on R&D as Apple.

IBM has produced 6 Nobel prize winners that lead to revolutionary advancements
in the industry which Apple "innovation" relies on. There would be no iPhone
without the investments in basic research and process that has done been done
at IBM, Bell Labs, Intel, et al. When I worked at IBM, I couldn't wait to read
the next IBM Systems Journal, it was the only piece of "corporate" internal
communications in any company I've ever worked for that I looked forward to. I
worked at IBM T.J. Watson in the 90s and one of the things told to us during
orientation is that our budget, and our research was separate and independent
from the commercial divisions of IBM and we were free to work on stuff that
wasn't necessarily commercially viable.

Something rubs me the wrong way about this article and Apple's R&D spending.
R&D spending is wasteful, it is a gamble, but every once in a while, it
produces something incredible that leads to a huge net positive externality
for the world. Some of the greatest inventions were done on research no one
ever thought would have any commercial usage. These days politicians decry
studies on bear DNA, or Shrimps on Treadmills, but who's to say these won't be
vitally important things 20 years from now?

Part of relying on the research advancements of others, standing on the
shoulders of giants, IMHO, is to take your success and your profits, and
invest them, continuing a kind of scientific "social contract" for those that
come after you.

Hoarding profits and bragging about how you can get away with making lots of
money without having to hire many researchers is IMHO, a kind of parasitical
attitude.

On top of that, is the tendency of people to credit Apple for all
advancements, even those that were tweaks on hard work done by others. Do I
credit Apple for their graphics performance, or Microsoft, AMD, PowerVR,
NVidia, SGI, and everyone else who over the past decade have invested
massively into consumer 3D acceleration? Do I credit Apple for amazing battery
improvements, or Intel or Samsung investments into NAND? Is the A9X more
important than TSMC/Intel/Samsung fab innovations? Or IBM's introduction of
STM, Magnetic Storage, Eximer Lasers?

Science and Innovation are social endeavors relying on a community of shared
progress. The secretive way Apple does R&D, their lack of publishing, and the
way they promote this 'lone genius/inventor' view of the company rubs me the
wrong way. I'm not saying Apple hasn't innovated, especially in mobile
software, but won't should brag about not doing basic research, and banking a
hundred billion in offshore cash to be used for what, stock buybacks?

Just what is wrong with say, spending some of that money to fund research into
say, quantum computing or medicine? Does every damn thing have to be
applicable to the next iPhone?

~~~
phaus
>Shrimps on Treadmills

Serious question, meant with no sarcasm at all: Can you give an example of
something as ridiculous as the shrimp on treadmills study that cost a fortune
and ended up being incredibly important in a way that wasn't immediately
obvious at the time the study was conducted?

~~~
cromwellian
The shrimps on treadmills study didn't cost a fortune, that was ridiculous and
dishonest conservative demogogueing over it with fictitious accounting.

It's like when a politician will say "This government project spent $1 billion
to build a highway, and only produced 1000 jobs, at a cost of $1 million per
job!" without looking at the other thing the project produced: a new highway!

The shrimp treadmill cost only $47 to
make.([http://chronicle.com/blogs/conversation/2014/11/13/how-a-47-...](http://chronicle.com/blogs/conversation/2014/11/13/how-a-47-shrimp-
treadmill-became-a-3-million-political-plaything/)) and was trying to figure
out a way to determine food safety, you know, like whether the shrimp we're
eating are diseased.

I'm pretty sure if you total up the money spent on number theorists over the
past several decades, it all looked ridiculous numerical masturbation, up
until the point where public key cryptography was invented.

By contrast, military R&D is HIDEOUSLY expensive by several orders of
magnitude. The people whining about a $50 shrimp treadmill need to get their
fucking head in order and look at the cost of the F-35.

~~~
phaus
Thanks for answering. Now it makes a lot more sense. I wasn't aware of the
follow-up articles, only the original politically-fused exaggerations.

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philip1209
These seem like different horizons on investments. Apple seems to be
dedicating a lot of resources to projects with 5 year horizons, while Google
seems to be dedicating a lot of resources to projects with 20 year horizons.
Neither strategy is wrong, but of course you would expect better ROI in a
short period than money spent on fundamental research at a (relatively) new
company.

~~~
rarepostinlurkr
Technology goes really fast. 20 years is insane, I'm not sure I'd bet a
technology business on where we'd be in 20 years. 5 seems risky but worth
thinking through. Probably not worth planning for except in the most abstract
of ways.

~~~
philip1209
I agree - but I'd describe things like self-driving cars or curing cancer as
fundamental research rather than technology.

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mamon
TL;DR: 3.5% of $233bln is more than 21% of $12.5bln. Is this just an article
about basic math, or am I missing something?

~~~
brwnll
Your missing something.

Reading beyond the infographic, the article is really about how Apple is able
to offset the need for R&D dollars (which as expanded from $4b in 2013 to
$8.5b in 2015) by being an overwhelming large consumer of components ($29b
committed next year).

This causes the suppliers to invest heavily in R&D to be able to "wow" Apple
and lock up big contracts with their innovations, instead of Apple needing to
do it directly.

The most interesting part to me is if this speaks to a counterpoint of the
slow direction Apple appears to be taking moving more and more in house. This
appears to indicate there is significant value by keeping key partners
separate and in the free market, even with the lessened control of being a 3rd
party.

~~~
derefr
Seen that way, Samsung Electronics is basically an Apple subsidiary kept at
arm's length to keep the market forces going.

~~~
illumen
Apple is a marketing arm of Samsung.

~~~
tellarin
I see what you did there. "... marketing ARM..." Clever. ;-)

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iMuzz
Tl;dr: Apple only spends 3.5% of its revenue on R&D versus companies like
Google, Qualcomm, and Facebook who spend 15%, 22%, and 21% respectively. (2015
stats)

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mark_l_watson
Well, their absolute R&D spend seems to be working very well for them!

That said, I wish Apple would invest more in their web services. I find
iCloud, Siri, etc. to be not as good as services from Google and Microsoft.

Because of (at least what I percieve is) Apple's fairly strong stand on the
basic human right of privacy, I would probably award them all of by business
is their web services were much better.

As it is, in addition to Apple gear I also use a Chromebook, Android phone,
and even a Windows 10 laptop (I was curious to kick the tires of Windows 10).

~~~
lrem
I'm pretty sure I have read about some pretty strong stands for privacy from
both other companies you mentioned too.

~~~
mark_l_watson
I am a huge fan of Google's services but they do make money from our personal
information.

I am hopeful that Microsoft will evolve into a strong supporter of privacy,
but with some (hopefully temporary) issues with Windows 10, I will wait and
see what happens.

~~~
soylentcola
They make money from personal info but not necessarily in a way that would
automatically be considered a violation of privacy.

The best way I can think of it is to compare to cable TV. Insert some other
service if you've never had or wanted cable TV. Right now I pay something like
$40/mo for cable TV and still have to watch something like 15-18 minutes of
advertising per hour of programming.

The "Google version" of cable TV would either be free or cost a nominal $5/mo
subscription and their algorithm would automatically use my viewing history to
determine which ads might be applicable to me. As a result, I'd only have to
watch a single 5 minute ad segment in the middle of every hour-long program.
The better odds of a given ad being applicable would make the ad time more
valuable so they wouldn't need to run as many to make the same amount of
profit. Likewise, people and companies that want to reach potential customers
waste less of their advertising and publicity budget on viewers that would
never buy their products.

So, gross oversimplification aside, there's "making money from personal info"
and there's "using data to make the same money from less advertising than
traditional methods". I'm sort of on the fence myself and somewhat playing
devil's advocate here but it's something that's often lost in discussions.

My main concerns are that government, law enforcement, or criminals would gain
access to data that I only agreed to share with one company's algorithms. My
main point is that "making money from personal data" can sound a lot like
"selling my personal info to god knows who" which I've never known to be the
case regarding Google or any of the info that's collected by Microsoft in
newer versions of Windows.

My main conflict is between two things: a reflexive distrust of the motives of
business and an acknowledgement that some really cool things (and plenty of
mundane but still good things) only work when you have the data to power them.
It's definitely a complex issue and not something I'll solve in an overly-long
comment while I waste the last 10 minutes before it's time to go home.

~~~
mark_l_watson
Thanks for your comment. It is a complex issue for me also. I get a lot of
value from Google Now and even FB has value because it lets me know what
family and friends are doing.

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drpgq
Is whatever was spent on something like buying FaceShift counted as R&D
spending?

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return0
That's a polite way to say that apple is spending less on R&D.

~~~
eric_h
They're spending less per dollar of revenue, but the amount they're spending
in absolute terms is totally comparable to other big tech companies.

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senthilnayagam
apple is not a standalone research company, it is market driven, with its
purchasing power for components and tooling budget is making its vendors
innovate and that shows up

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wrsh07
Are acquisitions considered money spent on R&D?

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krallja
Thanks for the autoplaying video ad!

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anindyabd
I read this as: how successful you are has nothing to do with how innovative
you are.

The Apple formula: keep innovations at a minimum, but market all your products
as the coolest thing that anyone has ever seen anywhere. With enough of a
marketing budget, everyone will believe you.

~~~
bcohn91
From the article:

> Apple’s relative thriftiness extends to its vaunted advertising and
> marketing operations. The company spent $3.5 billion on advertising and
> marketing over the past four quarters, while Google spent about $8.8 billion
> in the past three.

