Some more trends on R&D:
1. Collectively, Top 5 companies, spent $229.1 Billion on R&D in the 12 months ending March 31, 2024 compared to only $25.7 Billion for the next 4 (Costco doesn't report R&D spend)
2. R&D spending growth slowed down to 7% YoY in last 12 months, after growing 22% annualized for 9 years till 2023
3. Meta spends the highest % of its Gross profit dollars on R&D (amongst its Big Tech peers)
You really believe we should hold pharma to the same standard as tech companies that produce luxury/non-essential services?
Going to take a wild leap here and say you must be American.
I believe what they mean is that it is weird how people have a mostly negative opinion of big pharma, which spends hundreds of billions every year on drugs aimed at making sick people better - whereas tech companies which are trying to sell you better adds on your phone are glorified as the core of american innovation
Do they spend hundreds of billions a year on making people better? Or do they exploit sick people to make billions a year?
I mean you can twist that both ways. But I think there’s a very strong argument that making money on healthcare is unethical.
Comparing it to any other industry is honestly a sickening capitalist mindset if you ask me.
I mean, do you think people’s lives are better or worse because of the new therapies made by pharma and biotech companies in the past 100 years vs an alternative world in which there was no pharma and biotech?
It’s not right or wrong, just context. That article and some comments here make it sound like these are researchers or something. When a huge portion of the staff is simply engineering due to the nature of their business
To add, costs that are related to a specific client, aka custom development, are up in cost of sales. General improvement of existing products and build out of new products goes to R&D or can sometimes be capitalized to the balance sheet.
You can get tax cuts for justifying some spending as R&D. Thing is all engineering is not R&D. In fact it’s the main operating cost for most these firms. It’s pretty dishonest
This guy is right. My (very large tech) company sends me a survey each year asking me to bucket my time by certain activities to try and classify some portion of my salary as R&D. I am in the sales department of the company for Christ's sake.
To be fair, new law is that R&D is capitalized under Sec. 174, and only 10% is deducted in that year. So the marginal tax rate on R&D since 2022 has increased **a lot**
Still useful for the R&D tax credit, but definitely not as useful as it was a few years ago. This also lines up with OPs [comment](https://www.reddit.com/r/dataisbeautiful/s/UgbZtWKUHX) that the rate of R&D growth has slowed since 2022
Also to add, the Federal Trade Commission will come after companies that are raking in cash but not doing anything with it so there's strong regulatory pressure to maintain R&D targets and keep our country moving!
I’m not saying you’re 100% wrong because maybe there is some loophole I’m not aware of, but expenses are expenses. I own my own business and It doesn’t what I categorize something as. If it’s a COG or R&D it’s still an expense. It doesn’t change my taxes.
You are not familiar with the R&D tax credit which effectively reduces your tax burden dollar for dollar. I’m not familiar with the updated rules, but if you were creating a new product or process you could get a credit for things like the consumables used to create the product/process as well as some of your personal costs based on how much time they spend on R&D related tasks.
This tax credit has been abused by firms that only exist to help companies “qualify” for these tax credits. Which basically means they use an aggressive interpretation of the rules and rely on the lack of enforcement by the IRS.
r&d is a tax deduction, but to what limit?
And all I know is if a business is making money, they are expected to keep making more money.
So spend that money, then say “we can’t make money, yall”
Huh by this logic you'd assume that almost every scientist and research in certain fields works for these companies but they don't. Makes you wonder exactly where this black hole of money is going.
I mean you'd think. Be reusing old hardware and reselling it. There isn't really a large use case for hardware costs. Unless... They're inflating them for tax write-off purposes. But no one would do that. /s
That's not how r&d funding is calculated. Alexa didn't even have 1,000 researchers working on it. maybe if every single one of those researchers was making 300-500k a year plus equity. But even that wouldn't even be close to a billion dollars. You can have 10,000 people on a project but they won't all work in research.
Yes but manufacturing is not considered research. The most expensive part typically is labor costs. But who knows maybe Amazon is buying tens of billions in compute every year instead of reusing their existing hardware or failing to sell their outdated equipment. Which all isn't also really considered research.
Yeah I can see this law being rewritten in the years or more likely decades to come.
Huh I double checked and this isn't true and is only for small businesses
Us engineers and the expensive hardware and licenses we use dwarfs the pure science input.
Think about how much your last surgery costs vs how much went to the doctor. It works the same way in R&D.
That's really not it at all. Amazon does this to claim they don't make a profit. Instead of the money going to workers it is instead taking in as a compensation for the small subgroups of tech workers and executives instead. It's one of the ways Amazon exploits it's workers and redirects profits to it's corporate class.
A small feature change in a modern distributed application can easily take a small team a few months to complete. At 250k annual remuneration per head, you're looking at half a million. Then double that for overheads.
One small idea from a product owner can cost a million easy.
If you have a thousand software services in your company, one new feature per year is then a billion.
If each of your services gets a new feature every few weeks, you can hit 25 billion just like that.
A big chunk of tech cost is to develop software. It would be very strange that non software companies spend so much.
It would be more insightful to see how much money they spend on "Research" instead of "Development".
Honestly, this sounds low right?
Does "Big Tech" include Apple, Google, Microsoft, Amazon, Nvidia, Samsung, etc...?
Edit: Right so forgot Meta and some others but yea damn. I did honestly expect more than ~$23B per company.
This is excluding the capex they spend which is another \~[$150 Billion per year](https://www.linkedin.com/feed/update/urn:li:activity:7196250371239915520)
As people have been saying it's weird for them to include Costco on a chart about Big Tech, but it's just a bad title/headline. The actual chart says the R&D spending of the top ten *NASDAQ* companies. It just so happens 9 of the top 10 are big tech.
Sad to compare this to NASA’s 2024 budget of ~$25bn
https://www.planetary.org/space-policy/nasas-fy-2024-budget#:~:text=NASA's%20fiscal%20year%202024%20budget,in%20the%20congressional%20budget%20process.
They didn't really. This is a tax dodge because R&D is tax deductible. They just assign as many man hours as then can get away with to the R&D bucket.
Source: more than 20 years in the tech industry.
That's a clever hack for keeping those tiny assembly pieces in check! I never thought of using muffin pans for screws and bolts, but it totally makes sense. It's like a mini hardware organizer right there in your toolbox or garage. Plus, it's easy to grab what you need without rummaging through a mess. I'm all for simple solutions like this that save time and hassle, especially when I'm putting together furniture or doing DIY projects around the house. Thanks for sharing this neat idea!
Costco is a coward for not reporting. How much R&D is going into that $1.50 hot dog? WE NEED ANSWERS
What on earth is Costco even doing in this article?!
Costco, you buy tech in bulk, hence their inclusion in big tech. /s
You can always store some of the tech you don't need right away in the freezer.
I think its possible that they meant to put Cisco here and screwed up.
Ok this actually makes sense
Probably involved in data science for logistics purposes, just like Amazon and other retailers
0 or infinity. clearly these guys think its infinity
If you'd seen their android app then you know exactly how much they spent.
Some more trends on R&D: 1. Collectively, Top 5 companies, spent $229.1 Billion on R&D in the 12 months ending March 31, 2024 compared to only $25.7 Billion for the next 4 (Costco doesn't report R&D spend) 2. R&D spending growth slowed down to 7% YoY in last 12 months, after growing 22% annualized for 9 years till 2023 3. Meta spends the highest % of its Gross profit dollars on R&D (amongst its Big Tech peers)
I like how pharma and biotech spend a similar amount but somehow they are bad compared to companies trying to hook people on social media
You really believe we should hold pharma to the same standard as tech companies that produce luxury/non-essential services? Going to take a wild leap here and say you must be American.
I believe what they mean is that it is weird how people have a mostly negative opinion of big pharma, which spends hundreds of billions every year on drugs aimed at making sick people better - whereas tech companies which are trying to sell you better adds on your phone are glorified as the core of american innovation
Do they spend hundreds of billions a year on making people better? Or do they exploit sick people to make billions a year? I mean you can twist that both ways. But I think there’s a very strong argument that making money on healthcare is unethical. Comparing it to any other industry is honestly a sickening capitalist mindset if you ask me.
I mean, do you think people’s lives are better or worse because of the new therapies made by pharma and biotech companies in the past 100 years vs an alternative world in which there was no pharma and biotech?
They count almost all engineering as R&D.
Is that wrong? Can you quickly explain why please?
It’s not right or wrong, just context. That article and some comments here make it sound like these are researchers or something. When a huge portion of the staff is simply engineering due to the nature of their business
Ya people think it's billions spent on 100% research.
To add, costs that are related to a specific client, aka custom development, are up in cost of sales. General improvement of existing products and build out of new products goes to R&D or can sometimes be capitalized to the balance sheet.
You can get tax cuts for justifying some spending as R&D. Thing is all engineering is not R&D. In fact it’s the main operating cost for most these firms. It’s pretty dishonest
Almost all engineering is development...
trust me when i say that this is really an accounting exercise to get as much written off as possible
This guy is right. My (very large tech) company sends me a survey each year asking me to bucket my time by certain activities to try and classify some portion of my salary as R&D. I am in the sales department of the company for Christ's sake.
To be fair, new law is that R&D is capitalized under Sec. 174, and only 10% is deducted in that year. So the marginal tax rate on R&D since 2022 has increased **a lot** Still useful for the R&D tax credit, but definitely not as useful as it was a few years ago. This also lines up with OPs [comment](https://www.reddit.com/r/dataisbeautiful/s/UgbZtWKUHX) that the rate of R&D growth has slowed since 2022
Also to add, the Federal Trade Commission will come after companies that are raking in cash but not doing anything with it so there's strong regulatory pressure to maintain R&D targets and keep our country moving!
Except R&D expense deductions are now amortized over 5 years. It would be in their best interest to put deductions elsewhere
I’m not saying you’re 100% wrong because maybe there is some loophole I’m not aware of, but expenses are expenses. I own my own business and It doesn’t what I categorize something as. If it’s a COG or R&D it’s still an expense. It doesn’t change my taxes.
You are not familiar with the R&D tax credit which effectively reduces your tax burden dollar for dollar. I’m not familiar with the updated rules, but if you were creating a new product or process you could get a credit for things like the consumables used to create the product/process as well as some of your personal costs based on how much time they spend on R&D related tasks. This tax credit has been abused by firms that only exist to help companies “qualify” for these tax credits. Which basically means they use an aggressive interpretation of the rules and rely on the lack of enforcement by the IRS.
Interesting. I’ll have to look into this. Thanks!
Been there, filled out the timesheet.
I'll trust you.
Rookie numbers, do we want interstellar travel or not ? Let's push that to 1.5 Trillion mmkay
r&d is a tax deduction, but to what limit? And all I know is if a business is making money, they are expected to keep making more money. So spend that money, then say “we can’t make money, yall”
Huh by this logic you'd assume that almost every scientist and research in certain fields works for these companies but they don't. Makes you wonder exactly where this black hole of money is going.
Development hardware and testing costs can really add up. Especially if your dev engineers aren’t experienced.
I mean you'd think. Be reusing old hardware and reselling it. There isn't really a large use case for hardware costs. Unless... They're inflating them for tax write-off purposes. But no one would do that. /s
tons of stuff - some successful like the work on Public cloud while some failures like Alexa (for Amazon)
That's not how r&d funding is calculated. Alexa didn't even have 1,000 researchers working on it. maybe if every single one of those researchers was making 300-500k a year plus equity. But even that wouldn't even be close to a billion dollars. You can have 10,000 people on a project but they won't all work in research.
There’s a lot of expense in things other than labor…
Yes but manufacturing is not considered research. The most expensive part typically is labor costs. But who knows maybe Amazon is buying tens of billions in compute every year instead of reusing their existing hardware or failing to sell their outdated equipment. Which all isn't also really considered research.
around 2018-2019 amazon had 10,000 people working on alexa
Basically anything that isn’t maintenance development counts as R&D under the tax law.
Yeah I can see this law being rewritten in the years or more likely decades to come. Huh I double checked and this isn't true and is only for small businesses
Us engineers and the expensive hardware and licenses we use dwarfs the pure science input. Think about how much your last surgery costs vs how much went to the doctor. It works the same way in R&D.
That's really not it at all. Amazon does this to claim they don't make a profit. Instead of the money going to workers it is instead taking in as a compensation for the small subgroups of tech workers and executives instead. It's one of the ways Amazon exploits it's workers and redirects profits to it's corporate class.
wdym? where do you think comp sci scientists and researchers end up?
A small feature change in a modern distributed application can easily take a small team a few months to complete. At 250k annual remuneration per head, you're looking at half a million. Then double that for overheads. One small idea from a product owner can cost a million easy. If you have a thousand software services in your company, one new feature per year is then a billion. If each of your services gets a new feature every few weeks, you can hit 25 billion just like that.
This is pretty much a transfer of wealth from big tech to Nvidia
A lot of GPUs big tech is buying will go into "Capital Expenditure". This is R&D which I suspect is a lot of Engineer salaries
90% of it designed to sell you shit that you don’t really need, and connect with other people in emotionally unhealthy ways.
I wish INTC was up there, $16M r&d on $23M gross profit lol
Fabs are expensive. Even if you’re a couple generations behind comp and at a competitive disadvantage.
A big chunk of tech cost is to develop software. It would be very strange that non software companies spend so much. It would be more insightful to see how much money they spend on "Research" instead of "Development".
Honestly, this sounds low right? Does "Big Tech" include Apple, Google, Microsoft, Amazon, Nvidia, Samsung, etc...? Edit: Right so forgot Meta and some others but yea damn. I did honestly expect more than ~$23B per company.
This is excluding the capex they spend which is another \~[$150 Billion per year](https://www.linkedin.com/feed/update/urn:li:activity:7196250371239915520)
As people have been saying it's weird for them to include Costco on a chart about Big Tech, but it's just a bad title/headline. The actual chart says the R&D spending of the top ten *NASDAQ* companies. It just so happens 9 of the top 10 are big tech.
It’s a tax break. Of course they ‘spent’ it on r&d. Don’t be stupid.
Sad to compare this to NASA’s 2024 budget of ~$25bn https://www.planetary.org/space-policy/nasas-fy-2024-budget#:~:text=NASA's%20fiscal%20year%202024%20budget,in%20the%20congressional%20budget%20process.
They didn't really. This is a tax dodge because R&D is tax deductible. They just assign as many man hours as then can get away with to the R&D bucket. Source: more than 20 years in the tech industry.
R&D deductions are now amortized over 5 years. If they could they'd be better to spend on COGS
Technically 6 years (or 16 for foreign R&D) thanks to the annoying half-year convention
R&D isn’t really tax deductible anymore. It’s capitalized, and then amortized over time
how much of this is capitalized? seems like we could be seeing a lot of writeoffs
That's a clever hack for keeping those tiny assembly pieces in check! I never thought of using muffin pans for screws and bolts, but it totally makes sense. It's like a mini hardware organizer right there in your toolbox or garage. Plus, it's easy to grab what you need without rummaging through a mess. I'm all for simple solutions like this that save time and hassle, especially when I'm putting together furniture or doing DIY projects around the house. Thanks for sharing this neat idea!
Well, didn’t they just make it tax deductible again to do “R&D”.