My friend Augustine F. pointed me to this "Chart of the Day" from Business Insider. He wasn't very impressed by it, and neither am I.
What should readers take away from this chart? The most notable feature is the sharp drop of the blue line paired with the essentially flat profile of the red line. The blue line shows declining annual growth in R&D budget while the red line displays the R&D budget as a percent of revenues.
The budget as a proportion of revenues stayed about the same over the years so it appears that the blue line should roughly mirror the growth rate of revenues as a whole. Not sure what's the big deal.
According to the authors, this chart shows that Microsoft lost its mojo. Specifically, they said:
For the 2005 fiscal year, R&D spending as percentage of revenue dropped 22% year-over-year. Between 2004 and 2007, Microsoft's R&D as percent of revenue fell below 15%. The average R&D as percent of revenue for the software industry is 16%.
With anti-trust issues in the rearview mirror, Microsoft is raising R&D spending.
It turns out the chart is an enemy of the message, not the messenger.
First, the 2005 fiscal year was the only one year in the entire chart in which R&D budget was reduced. In every other year, the budget increased. Second, the chosen scale for the red line makes it impossible to notice that the proportion stayed below 15% from 2004 to 2007. Moreover, one might argue that Microsoft raised its R&D budget during the dotcom years as the levels in 2004-7 did not appear excessively small if one takes the long view.
Besides, both data series measure the budget, which is the purported cause of some effect, which is not shown. Thus, the reader cannot relate this to a cause--effect relationship. How would we measure the output and quality of R&D?
The problem here is less with the format of the chart but with the message not being supported by the data.