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<!DOCTYPE html>
<html>
<!--------------------------------------------------------------
-- file : money.html
-- purpose : Page for website Piet Lammertse
----------------------------------------------------------------
-- history :
-- 2026-02-20 new
--------------------------------------------------------------->
<!-- TODO --
Margins. Marges zijn typisch toch wel maal 2.5.
Voeg eerlijke handel van Sam en Moos toe : 5% winst,
inkoop $1, verkoop $5.
-- -->
<!-- FORMATTING- ---------------------------------------------->
<head>
<link rel="stylesheet" href="plammertse.css">
<title> Piet Lammertse on research investments </title>
</head>
<body>
<!-- NAVIGATION BAR ------------------------------------------->
<ul>
<li> <a href="index.html"> Home </a> </li>
<li> <a href="design.html"> Design </a> </li>
<li> <a style="background-color:#0000B0";
href="inventors.html" > Money </a> </li>
</ul>
<!-- TEXT PAGE ------------------------------------------------>
<h2> Money </h2>
<h4> money </h4>
<p> My nicest boss ever, once told me offhandedly
"I don't associate you with making money at all".
I am sure many of my bosses felt the same way about me.
They just didn't say it out loud.
</p>
<p> 
I have always worked in research and development
departments, and these are known in the trade as
"loss centers" where the money bleeds away,
as opposed to "profit centers" like sales,
where the money flows in.
</p>
<p> 
Needless to say I take a slightly more balanced view.
Cutting away all R & D is a common way
of cutting cost and improving the profit-to-loss ratio
or the productivity per employee or some such metric
of a company, in the short term.
But it is a lot like slash and burn farming.
It is not something you can do in the same place
for a very long time.
</p>
<h4> research investments </h4>
<p> I am not much of a businessman, but I have been
in the game long enough to pick up some tricks
of the trade.
</p>
<p> 
Investing is not necessarily a bad thing, but economically
it only makes sense if future profits warrant the initial outlay.
The question then becomes : how much profit will
justify which investment ? This metric is known
as ROI. The acronym stands for "Return On Investment".
</p>
<p> 
It would seem simple enough. If the future profit
outweighs the investment
( including some interest rate,
and with a risk factor taken into account ),
then the investment is worthwhile. But this is not
the whole story.
</p>
<h4> opportunity cost </h4>
<p> Anyone with money to invest
( or their own time, even )
has a choice on how to use it.
At any given time, there are al­ways many opportunities.
There is a kind of market here.
Some of these opportunities will give a future ROI
of $500 for every $100 invested, others maybe
twice as much.
If the going rate is 10:1, then it is not a good idea
to invest in something which will yield only 5:1,
because you can invest every dollar only once.
</p>
<p> 
An investment of $100 is "worth" $1000,
if you have the $100.
The cost of missing out on the $1000 return
is called the "opportunity cost".
So, a boss does not rate one hour of development work
as the $100 in­vestment that the employee
and their overhead may cost.
They rate it as an opportunity cost investment of $1000.
</p>
<h4> hard to swallow </h4>
<p> The opportunity cost argument is hard to swallow
for a young and enthusiastic engineer with a great idea.
</p>
<p> 
Instinctively, they will feel
that they should get funded as soon as the ROI is positive.
It feels like a grave injustice when the greedy boss says
that he needs another factor of 10.
</p>
<p> 
Most people, but especially students and university professors,
somehow feel that their own time is "free".
It has already been paid for by a government grant
or by someone else,
and the burden of proving a certain return on
investment is lifted.
The pleasure of working in such a low stress environment
( or in your own garage ) can outweigh
earning more money in industry.
</p>
<p> 
I am definitely not saying that a professor of archaeology should
have to prove that their science, or culture in general,
is useful in some foreseeable future.
The future is not foreseeable, and culture has a value
unto itself.
Not everything can be readily expressed in cash.
But even in such environments
it can be useful to consider that an hour can be spent
only once.
</p>
<h4> make or buy </h4>
<p> Returning to the bare cost
( not the opportunity cost )
of an hour's development work, there is always another
trade-­off which is known as the "make or buy" decision.
</p>
<p> 
You can copy a page of text by writing it out in longhand
yourself, or by making a photocopy.
In your spare time, the choice is yours.
You may value your own time at zero, and make your own lunch.
But working in a company, or after deciding that your own time
is a limited resource too, some trade-offs need to be made.
</p>
<p> 
The amazing thing in universities, and in unprofessional
development departments in industry, is that buying hardware
is seen as "real" money, and hours are there anyway.
It is quite common to have to spend three hours as a supplicant
and one hour of management time in meetings
to get a $50 hardware budget for a prototype approved.
Worse, it can easily be demanded
to spend another eight working hours to prove that this
particular hardware item is the cheapest or most
effective possible, and the $50 will not go wasted.
</p>
<p> 
I have been fortunate enough to work in companies where
bosses were teaching me the folly of such ways, urging
me to buy a few alternatives, pick the right one,
and discard the others within minutes.
It is so much more rational, and so much easier
on everyone's nerves.
Offhand, I would say that a development group should
be able to spend petty cash of at least $50 per week per person,
and sometimes much more if the tools of the trade
happen to be very expensive.
</p>
<p> 
My first boss in the aircraft company laughed in my face
when I wanted to cycle to the lab in Amsterdam to deliver
the daily flight test tape. He was very kind about it though.
He just said "you are worth to me so much more than a taxi driver".
</p>
<h4> there is never time to do it right... </h4>
<p> ... there is always time to do it over.
There is a balance between endless optimization
(" analysis paralysis ") and throwing
money away on ill considered plans.
And people do vary in their propensities.
</p>
<p> 
There is the type of person who will go on
"gold plating" forever unless forcefully reminded that it is best
to leave well enough alone ("don't make it too nice").
No one should be unnecessarily careless, but well docu­mented
and therefore recoverable mistakes are not necessarily a bad sign.
"If you never miss a plane, you're spending too much time in airports".
</p>
<p> 
On the other hand, there are bosses who think that driving
the schedule hard is the way to keep development cost down.
Such people need to be reminded that there is no such thing
as "first time right", and the first version of a design
is never a viable product, despite
exhortations in the software industry to "fail fast",
and "if you're not embarrassed by your first product,
your first product is late". This may be true of some
consumer software, but it is not true of any serious
product, particularly in hardware.
</p>
<!-- FOOTER --------------------------------------------------->
<br> <br>
<div class="footer"> P. Lammertse, 2026 </div>
</body>
</html>