The Lines Worth Reading Between

Apple’s latest earnings have an interesting note: their research spending is the highest it’s been since 2006.

Research and development is a fancy business way of saying “doing new things.” When my previous employer entered the great recession of 2008, the plan to weather the storm was to double-down on R&D. By investing in new products when the market was slow, the company would have those products ready when the market was ready to buy. Our part of the company–tasked with entering a new market for the company–was one of the few areas allowed to hire new employees.

The economy’s recovery in general is up for debate, but the advice is sound: research and development is a key investment for any company, particularly product-based companies (which any software company is, SaaS not withstanding). It’s almost too obvious: as annoying as constant calls for Apple to release a new product are, they do have a point. New products and innovations are the lifeblood of these companies. Which is why every company invests in research and development.

To provide some context, simple research is a constant cost. A company sets aside a certain amount every year to pay a certain number of people to spend a certain amount of time exploring new ideas. Google is (or at least was) famous for its “20% time” that allows any engineer in the company to spend time exploring. Microsoft has an entire division devoted to exploration. Apple obviously has its own research and development; they would be unable to update their products annually without it.

When a project is close to completion, things change. Completing a project means investing in quality assurrance and testing. It means finalizing all of the little details that make the difference between a “good” product and a “great” one. What was once a fixed cost suddenly becomes more variable.

Which brings me back to the inital observation: the last time Apple’s R&D spending was this high was in 2006. Apple’s most important product of the last 10 years–the iPhone–was introduced in 2007.

By now there’s too much smoke for there not to be some kind of watch-like device from Apple, most likely to be introduced this Tuesday. And given Apple’s increase in research spending, it’s going to be a big deal.

Personally, I can’t wait. You?

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