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Comment by formercoder | Hacker News Reader

What? Sure I can. It’s on the income statement. Then I can show that some firms see more of a return on that R&D spending than others, and that impacts how valuable they are.

It’s the same as how some firms get more return out of spending the same amount on factories as others. They are better factories.

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I have to say, you're really walking right into this one. Your approach, that everything about the business can be quantified and then optimized is exactly why MBAs kill companies. The relationship between the employees and the company and the customers and the product is fundamentally emotional and therefore beyond quantification. R&D is fundamentally hopeful and creative and that future potential cannot be quantified either. Accounting is a fine management tool, especially for optimization of companies and products that already have the magic. Don't let those nice cognitive tools turn you into a paperclip maximizer.

> What? Sure I can. It’s on the income statement.

It's on the income statement five years from now, not the one you have when you're making the decision today. The R&D paid for five years ago will commonly have been under different market conditions.

> Then I can show that some firms see more of a return on that R&D spending than others, and that impacts how valuable they are.

The question is, how do you cause your company to be the one getting more of a return?

Time being a factor is exactly why you capitalize R&D, which means make it an asset on your balance sheet. The second question is definitely an interesting one however I usually look at businesses more from an outside in view -so it’s not what I think about every day.

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