I think he stopped short of a more controversial observation (for this audience), that capitalising these expenses for tax purposes is actually closer to GAAP/what's happening in the financial statements, and the prior treatment could be viewed as a tax stimulant to encourage development.

When viewed through this lens, are growing companies trying to have their cake and eat it too - get the boost to GAAP net income for stock comp purposes etc, but defer the cash tax to future years. This perspective ties everything together for me, in terms of understanding the incentives of the players here.

I think the other piece mentioned elsewhere is the very real cash flow implications for fast growing companies, in particular those that might be smaller and with more limited access to financing (which also isn't free...). And the idea that it's a pretty blunt tool... 5 yrs for all development... every product is different and as others point out lifecycles are often much shorter.

For most items, there is harmony between GAAP and tax. Even though Section 174 is a tax code item, the implications of it must be properly presented on your GAAP financials. Therefore the auditors opine on it

While one of the biggest differences between GAAP and tax is the depreciation schedules for various assets, the definition of the items is generally the same.