intangible asset

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pages: 344 words: 94,332

The 100-Year Life: Living and Working in an Age of Longevity by Lynda Gratton, Andrew Scott

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3D printing, Airbnb, assortative mating, carbon footprint, Clayton Christensen, collapse of Lehman Brothers, creative destruction, crowdsourcing, delayed gratification, diversification, Downton Abbey, Erik Brynjolfsson, falling living standards, financial independence, first square of the chessboard, first square of the chessboard / second half of the chessboard, future of work, gender pay gap, gig economy, Google Glasses, indoor plumbing, information retrieval, intangible asset, Isaac Newton, job satisfaction, low skilled workers, Lyft, Network effects, New Economic Geography, old age dependency ratio, pattern recognition, pension reform, Peter Thiel, Ray Kurzweil, Richard Florida, Richard Thaler, Second Machine Age, sharing economy, side project, Silicon Valley, smart cities, Stephen Hawking, Steve Jobs, The Future of Employment, women in the workforce, young professional

In this chapter we focus on the priceless – on intangible assets. Intangible assets play a crucial role in all our lives. For most of us, while money is indeed important, it is not an end in itself. We make money for what it can deliver for us. For most people, a good life would be one with a supportive family, great friends, strong skills and knowledge, and good physical and mental health. These are all intangible assets and it is not surprising they are as important as financial assets when it comes to building a productive long life. However, these intangible assets are not independent from tangible ones; rather they play an important reciprocal role in the development of tangible assets.

If you move country you cannot sell one friend and buy another in a new place, and if the knowledge you have mastered is no longer valuable, it cannot simply be sold and new skills bought. The impact of this irreversibility is that care has to be taken when choices are made about investing in intangible assets and there has to be concern about a sudden loss in value. Just as an earthquake can render a house worthless, so external shifts can make intangible assets lose value. Yet just because intangible assets can’t be easily priced or traded doesn’t mean they aren’t valuable.2 Questions about the importance of intangible assets relative to tangible assets is a recurring theme across literature and religions.3 Take, for example, studies in the psychology of what creates a happy purposeful life.

In other words, as a country becomes richer, happiness doesn’t appear to increase and this suggests that other factors dominate in what gives people a sense of well-being.5 Of course, none of this means that money doesn’t matter. While money can’t buy intangible assets outright, you still need money and financial security to invest in your intangible assets; money helps buy gym memberships, family holidays and peace of mind to share leisure with loved ones. And just as money helps support intangible assets, these in turn help support financial success. These are important inter-linkages and getting the balance right is crucial for planning for a 100-year life. Asset-rich Given this definition of intangible assets, the list of possibilities to consider is potentially huge. For instance, there is evidence that beauty is an important asset.


pages: 892 words: 91,000

Valuation: Measuring and Managing the Value of Companies by Tim Koller, McKinsey, Company Inc., Marc Goedhart, David Wessels, Barbara Schwimmer, Franziska Manoury

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activist fund / activist shareholder / activist investor, air freight, barriers to entry, Basel III, BRICs, business climate, business process, capital asset pricing model, capital controls, Chuck Templeton: OpenTable, cloud computing, commoditize, compound rate of return, conceptual framework, corporate governance, corporate social responsibility, creative destruction, credit crunch, Credit Default Swap, discounted cash flows, distributed generation, diversified portfolio, energy security, equity premium, fixed income, index fund, intangible asset, iterative process, Long Term Capital Management, market bubble, market friction, meta analysis, meta-analysis, Myron Scholes, negative equity, new economy, p-value, performance metric, Ponzi scheme, price anchoring, purchasing power parity, quantitative easing, risk/return, Robert Shiller, Robert Shiller, shareholder value, six sigma, sovereign wealth fund, speech recognition, survivorship bias, technology bubble, time value of money, too big to fail, transaction costs, transfer pricing, value at risk, yield curve, zero-coupon bond

The DTA for tax loss carryforwards ($600 million) shows up as a nonoperating asset and should be valued separately. The deferred-tax liability related to the acquired intangibles ($2,050 million) is treated as an offset to the intangible asset itself, since the asset was grossed up for hypothetical taxes when the asset was created. Why net deferred taxes for intangible assets against acquired intangibles? When a company buys another company, it typically recognizes intangible assets for intangibles that are separable and identifiable (such as patents). These intangible assets are amortized over their estimated life on the GAAP income statement, but since the amortization is not deductible in most countries for tax purposes, a mismatch will occur.

REORGANIZING THE ACCOUNTING STATEMENTS: IN PRACTICE 185 EXHIBIT 9.8 UPS: Deferred-Tax Assets and Liabilities $ million Reported in UPS 10-K, note 12 Reorganized financials 2011 2012 2013 Assets Pension and postretirement benefits Loss and credit carryforwards Insurance reserves Vacation pay accrual Stock compensation Other deferred-tax assets Deferred-tax assets 2,106 259 696 208 211 635 4,115 4,608 258 737 209 159 708 6,679 3,086 279 765 224 70 709 5,133 Valuation allowance Deferred-tax assets, net (205) 3,910 (220) 6,459 (251) 4,882 Liabilities Property, plant, and equipment Intangible assets, capitalized software 1 Intangible assets, acquired 2 Other Deferred-tax liabilities Net deferred-tax assets (liabilities) 2011 2012 2013 259 (205) 54 258 (220) 38 279 (251) 28 Operating deferred taxes Loss and credit carryforwards Valuation allowance Loss and credit carryforwards, net of taxes Insurance reserves Vacation pay accrual Stock compensation Other deferred-tax assets Property, plant, and equipment Intangible assets, capitalized software1 Other deferred-tax liabilities Operating deferred-tax assets (liabilities) 696 737 765 208 209 224 211 159 70 635 708 709 (3,607) (3,624) (3,613) (878) (969) (1,023) (554) (617) (651) (3,235) (3,359) (3,491) Nonoperating deferred taxes Pension and postretirement benefits 2,106 4,608 3,086 Intangible assets, tax gross-up Intangible assets, acquired2 (73) (66) (93) Net deferred-tax assets (liabilities) (1,202) 1,183 (498) (3,607) (3,624) (3,613) (878) (969) (1,023) (73) (66) (93) (554) (617) (651) (5,112) (5,276) (5,380) (1,202) 1,183 (498) 1 Estimated at the marginal tax rate times capitalized software. 2 Estimated at the marginal tax rate times acquired intangibles.

REORGANIZING THE ACCOUNTING STATEMENTS: IN PRACTICE 185 EXHIBIT 9.8 UPS: Deferred-Tax Assets and Liabilities $ million Reported in UPS 10-K, note 12 Reorganized financials 2011 2012 2013 Assets Pension and postretirement benefits Loss and credit carryforwards Insurance reserves Vacation pay accrual Stock compensation Other deferred-tax assets Deferred-tax assets 2,106 259 696 208 211 635 4,115 4,608 258 737 209 159 708 6,679 3,086 279 765 224 70 709 5,133 Valuation allowance Deferred-tax assets, net (205) 3,910 (220) 6,459 (251) 4,882 Liabilities Property, plant, and equipment Intangible assets, capitalized software 1 Intangible assets, acquired 2 Other Deferred-tax liabilities Net deferred-tax assets (liabilities) 2011 2012 2013 259 (205) 54 258 (220) 38 279 (251) 28 Operating deferred taxes Loss and credit carryforwards Valuation allowance Loss and credit carryforwards, net of taxes Insurance reserves Vacation pay accrual Stock compensation Other deferred-tax assets Property, plant, and equipment Intangible assets, capitalized software1 Other deferred-tax liabilities Operating deferred-tax assets (liabilities) 696 737 765 208 209 224 211 159 70 635 708 709 (3,607) (3,624) (3,613) (878) (969) (1,023) (554) (617) (651) (3,235) (3,359) (3,491) Nonoperating deferred taxes Pension and postretirement benefits 2,106 4,608 3,086 Intangible assets, tax gross-up Intangible assets, acquired2 (73) (66) (93) Net deferred-tax assets (liabilities) (1,202) 1,183 (498) (3,607) (3,624) (3,613) (878) (969) (1,023) (73) (66) (93) (554) (617) (651) (5,112) (5,276) (5,380) (1,202) 1,183 (498) 1 Estimated at the marginal tax rate times capitalized software. 2 Estimated at the marginal tax rate times acquired intangibles. pensions), debt (such as implicit interest), or debt equivalents (such as restructuring expenses). 3. Intangible assets, gross-up: As discussed earlier, deferred-tax liabilities related to amortization of acquired intangibles should be netted against acquired intangibles.


pages: 353 words: 88,376

The Investopedia Guide to Wall Speak: The Terms You Need to Know to Talk Like Cramer, Think Like Soros, and Buy Like Buffett by Jack (edited By) Guinan

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Albert Einstein, asset allocation, asset-backed security, Brownian motion, business process, capital asset pricing model, clean water, collateralized debt obligation, computerized markets, correlation coefficient, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, discounted cash flows, diversification, diversified portfolio, dividend-yielding stocks, equity premium, fixed income, implied volatility, index fund, intangible asset, interest rate swap, inventory management, London Interbank Offered Rate, margin call, market fundamentalism, money market fund, mortgage debt, Myron Scholes, passive investing, performance metric, risk tolerance, risk-adjusted returns, risk/return, shareholder value, Sharpe ratio, short selling, statistical model, time value of money, transaction costs, yield curve, zero-coupon bond

In an acquisition, the amount paid for the company over book value usually accounts for the target firm’s intangible assets. Investopedia explains Goodwill Goodwill is seen as an intangible asset on the balance sheet because it is not a physical asset such as buildings and equipment. Goodwill typically reflects the value of intangible assets such as a strong brand name, good customer relations, good employee relations, and patents or proprietary technology. Related Terms: • Balance Sheet • Book Value • Generally Accepted Accounting Principles—GAAP • Intangible Asset • Tangible Asset Gordon Growth Model What Does Gordon Growth Model Mean?

Also, many IPOs are issued by companies going through a transitory growth period and are subject to additional uncertainty about their future values. Related Terms: • Equity • Private Equity • Underwriter • Investment Bank • Stock 140 The Investopedia Guide to Wall Speak Intangible Asset What Does Intangible Asset Mean? A company’s nonphysical assets, such as intellectual property (items such as patents, trademarks, copyrights, and business methodologies), goodwill, and brand recognition; an intangible asset can be classified as either indefinite or definite. A company’s brand name is considered an indefinite asset, as it stays with the company as long as the company continues operations.

Related Terms: • Asset • Book Value • Intangible Asset • Net Tangible Assets • Price to Tangible Book Value—PTBV Tangible Net Worth What Does Tangible Net Worth Mean? A measure of the physical worth of a company minus any value derived from intangible assets such as copyrights, patents, and intellectual property. Tangible net worth is calculated by taking a firm’s total tangible assets and subtracting the value of all liabilities and intangible assets. Tangible net worth is calculated as shown here: Tangible Net Worth = Total Assets − Liabilities − Intangible Assets Investopedia explains Tangible Net Worth In personal finance, tangible net worth is the sum of all of a person’s tangible assets (cash, home, cars, etc.) minus any liabilities that person may have.

The End of Accounting and the Path Forward for Investors and Managers (Wiley Finance) by Feng Gu

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active measures, Affordable Care Act / Obamacare, barriers to entry, business process, Claude Shannon: information theory, Clayton Christensen, commoditize, conceptual framework, corporate governance, creative destruction, Daniel Kahneman / Amos Tversky, discounted cash flows, diversified portfolio, double entry bookkeeping, Exxon Valdez, financial innovation, fixed income, hydraulic fracturing, index fund, information asymmetry, intangible asset, inventory management, Joseph Schumpeter, Kenneth Arrow, knowledge economy, moral hazard, new economy, obamacare, quantitative easing, quantitative trading / quantitative finance, QWERTY keyboard, race to the bottom, risk/return, Robert Shiller, Robert Shiller, shareholder value, Steve Jobs, The Great Moderation, value at risk

It mandates the immediate expensing of practically all internally generated research and development efforts.4 And not just R&D. Practically all other internal investments in intangible assets—brands, know-how, business systems—are immediately expensed. The folly of this wide-ranging accounting rule is made clear by looking once more at Figure 8.1 (p. 82) portraying the total corporate investment in tangible and intangible assets. Ironically, most of the investments reflected by the fast-rising So, What to Do with Accounting? A Reform Agenda 215 curve—intangible assets—are denied assets status by accountants, whereas those on steep decline—tangible assets—proudly populate corporate balance sheets.

To avoid undue reader suspense, here are, in essence, the three major reasons for accounting’s relevance lost: 1. The inexplicable accounting treatment of intangible assets—the dominant creators of corporate value. Something remarkable happened to the US economy, and to varying degrees of similarity to other developed countries, in the past four decades: While aggregate US investment in tangible assets (things you can touch, like property, 77 78 WHY IS THE RELEVANCE LOST? plant and equipment, inventory, etc.) has decreased by over a third, corporate investment in intangible assets (patents and know-how, brands, information and business systems, and human capital) rose by almost 60 percent, from 9 percent to 14 percent of gross value added.

This creates a widening chasm between firms’ values, as reflected by share prices, and financial data—a chasm that is partially responsible for the declining association between financial information and share prices, which we have documented in Part I. The three usefulness-diminishing factors we just outlined are not conjectures; nor are they speculation. In what follows, we will empirically prove, for the first time, that these three factors or causes— intangible assets, accounting estimates, and unrecorded business events—are primarily responsible for the deterioration in the usefulness of financial information. We will also show that the impact of each of the three factors has increased over time, mirroring the documented decrease in the usefulness of financial information.


pages: 339 words: 88,732

The Second Machine Age: Work, Progress, and Prosperity in a Time of Brilliant Technologies by Erik Brynjolfsson, Andrew McAfee

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2013 Report for America's Infrastructure - American Society of Civil Engineers - 19 March 2013, 3D printing, access to a mobile phone, additive manufacturing, Airbnb, Albert Einstein, Amazon Mechanical Turk, Amazon Web Services, American Society of Civil Engineers: Report Card, Any sufficiently advanced technology is indistinguishable from magic, autonomous vehicles, barriers to entry, basic income, Baxter: Rethink Robotics, British Empire, business intelligence, business process, call centre, Chuck Templeton: OpenTable, clean water, combinatorial explosion, computer age, computer vision, congestion charging, corporate governance, creative destruction, crowdsourcing, David Ricardo: comparative advantage, digital map, employer provided health coverage, en.wikipedia.org, Erik Brynjolfsson, factory automation, falling living standards, Filter Bubble, first square of the chessboard / second half of the chessboard, Frank Levy and Richard Murnane: The New Division of Labor, Freestyle chess, full employment, game design, global village, happiness index / gross national happiness, illegal immigration, immigration reform, income inequality, income per capita, indoor plumbing, industrial robot, informal economy, intangible asset, inventory management, James Watt: steam engine, Jeff Bezos, jimmy wales, job automation, John Markoff, John Maynard Keynes: Economic Possibilities for our Grandchildren, John Maynard Keynes: technological unemployment, Joseph Schumpeter, Kevin Kelly, Khan Academy, knowledge worker, Kodak vs Instagram, law of one price, low skilled workers, Lyft, Mahatma Gandhi, manufacturing employment, Marc Andreessen, Mark Zuckerberg, Mars Rover, mass immigration, means of production, Narrative Science, Nate Silver, natural language processing, Network effects, new economy, New Urbanism, Nicholas Carr, Occupy movement, oil shale / tar sands, oil shock, pattern recognition, Paul Samuelson, payday loans, price stability, Productivity paradox, profit maximization, Ralph Nader, Ray Kurzweil, recommendation engine, Report Card for America’s Infrastructure, Robert Gordon, Rodney Brooks, Ronald Reagan, Second Machine Age, self-driving car, sharing economy, Silicon Valley, Simon Kuznets, six sigma, Skype, software patent, sovereign wealth fund, speech recognition, statistical model, Steve Jobs, Steven Pinker, Stuxnet, supply-chain management, TaskRabbit, technological singularity, telepresence, The Bell Curve by Richard Herrnstein and Charles Murray, The Signal and the Noise by Nate Silver, The Wealth of Nations by Adam Smith, total factor productivity, transaction costs, Tyler Cowen: Great Stagnation, Vernor Vinge, Watson beat the top human players on Jeopardy!, winner-take-all economy, Y2K

Research by Michael Luca of Harvard Business School has found that the increased transparency has helped smaller independent restaurants compete with bigger chains because customers can more quickly find quality food via rating services like Yelp, reducing their reliance on brand names’ expensive marketing campaigns.17 The intangible benefits delivered by the growing sharing economy—better matches, timeliness, customer service, and increased convenience—are exactly the types of benefits identified by the 1996 Boskin Commission as being poorly measured in our official price and GDP statistics.18 This is another way in which our true growth is greater than the standard data suggest. Intangible Assets Just as free goods rather than physical products are an increasingly important share of consumption, intangibles also make up a growing share of the economy’s capital assets. Production in the second machine age depends less on physical equipment and structures and more on the four categories of intangible assets: intellectual property, organizational capital, user-generated content, and human capital. Intellectual property includes patents and copyrights.

Yet, while the hardware and software spending generally shows up as additions to the nation’s capital stock, the new business processes, which often outlast the hardware, are generally not counted as capital. Our research suggests that a correct accounting for computer-related intangible assets would add over $2 trillion to the official estimates of the capital assets in the United States economy.21 User-generated content is a smaller but rapidly growing third category of intangible assets. Users of Facebook, YouTube, Twitter, Instagram, Pinterest, and other types of online content not only consume this free content and gain the consumer surplus discussed above but also produce most of the content.

In 1776, he noted, “The man whose whole life is spent in performing a few simple operations, of which the effects are perhaps always the same, or very nearly the same, has no occasion to exert his understanding.”25 As we’ll discuss further later in the book, investments in human capital will be increasingly important as routine tasks become automated and the need for human creativity increases. Important as these intangible assets are, the official GDP ignores them. User-generated content, for example, involves unmeasured labor creating an unmeasured asset that is consumed in unmeasured ways to create unmeasured consumer surplus. In recent years, however, there have been some efforts to create experimental ‘satellite accounts.’ They track some of these categories of intangible assets in the U.S. economy. For instance, the new satellite accounts created by the Bureau of Economic Analysis estimate that investment in R&D capital accounted for about 2.9 percent of GDP and has increased economic growth by about 0.2 percent per year between 1995 and 2004.26 It’s hard to say exactly how large the bias is from miscounting all the types of intangible assets, but we are reasonably confident the official data underestimate their contribution.* New Metrics Are Needed for the Second Machine Age It’s a fundamental principle of management: what gets measured gets done.


pages: 202 words: 72,857

The Wealth Dragon Way: The Why, the When and the How to Become Infinitely Wealthy by John Lee

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8-hour work day, Albert Einstein, barriers to entry, Bernie Madoff, butterfly effect, buy low sell high, California gold rush, Donald Trump, financial independence, high net worth, intangible asset, Mark Zuckerberg, negative equity, passive income, payday loans, self-driving car, Snapchat, Stephen Hawking, Steve Jobs, Tony Hsieh, Y2K

They need to see that you are overflowing with energy and enthusiasm for your chosen venture. Don't forget that intangible assets can be appreciable, too. We mostly associate intangible assets with business creation. A business in itself is—potentially—an appreciable asset, made up of assets that are tangible (your goods and equipment) and assets that are intangible (your brand, reputation, and knowledge). Intangible assets are all part of your business's value. Some intangible assets can actually be measured on a business's balance sheet—a company's brand, any patents it holds, and its goodwill (the amount another company would pay to acquire the business in excess of its actual net value) can all have value.

Business Creation and Brand Building Does building a business sound like hard work? It is. But it is a highly effective way of creating passive income, as well as building a potentially appreciable asset. Remember that assets can be tangible or intangible. A brand is an intangible asset. Coca-Cola's huge worth is based on its brand, not the actual value of the contents of its products. Knowledge is an intangible asset. People often forget that investing in their own skills and knowledge is a good investment. What stops many people from starting a business is not knowing what business to start. Obviously it is critical to get the decision right.

Some intangible assets can actually be measured on a business's balance sheet—a company's brand, any patents it holds, and its goodwill (the amount another company would pay to acquire the business in excess of its actual net value) can all have value. But your greatest intangible asset is…you! You are actually your most valuable asset. While you live and breathe you have unlimited potential value and an opportunity to become wealthy. And no one has more control over how wealthy you can become than you. You are your own best asset. If your house burnt down, your business went bust, the insurance didn't pay out, and you were left bankrupt, you would still have your own skills and experience. It's so easy for people to forget this after a big catastrophe.


pages: 271 words: 52,814

Blockchain: Blueprint for a New Economy by Melanie Swan

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23andMe, Airbnb, altcoin, Amazon Web Services, asset allocation, banking crisis, basic income, bioinformatics, bitcoin, blockchain, capital controls, cellular automata, central bank independence, clean water, cloud computing, collaborative editing, Conway's Game of Life, crowdsourcing, cryptocurrency, disintermediation, Edward Snowden, en.wikipedia.org, ethereum blockchain, fault tolerance, fiat currency, financial innovation, Firefox, friendly AI, Hernando de Soto, intangible asset, Internet Archive, Internet of things, Khan Academy, Kickstarter, lifelogging, litecoin, Lyft, M-Pesa, microbiome, Network effects, new economy, peer-to-peer, peer-to-peer lending, peer-to-peer model, personalized medicine, post scarcity, prediction markets, QR code, ride hailing / ride sharing, Satoshi Nakamoto, Search for Extraterrestrial Intelligence, SETI@home, sharing economy, Skype, smart cities, smart contracts, smart grid, software as a service, technological singularity, Turing complete, unbanked and underbanked, underbanked, web application, WikiLeaks

Smart Property The blockchain can be used for any form of asset registry, inventory, and exchange, including every area of finance, economics, and money; hard assets (physical property); and intangible assets (votes, ideas, reputation, intention, health data, and information). Using blockchain technology this way opens up multiple classes of application functionality across all segments of businesses involved in money, markets, and financial transactions. Blockchain-encoded property becomes smart property that is transactable via smart contracts. The general concept of smart property is the notion of transacting all property in blockchain-based models. Property could be physical-world hard assets like a home, car, bicycle, or computer, or intangible assets such as stock shares, reservations, or copyrights (e.g., books, music, illustrations, and digital fine art).

Please consult a qualified professional if you require financial advice. 978-1-491-92049-7 [LSI] Preface We should think about the blockchain as another class of thing like the Internet—a comprehensive information technology with tiered technical levels and multiple classes of applications for any form of asset registry, inventory, and exchange, including every area of finance, economics, and money; hard assets (physical property, homes, cars); and intangible assets (votes, ideas, reputation, intention, health data, information, etc.). But the blockchain concept is even more; it is a new organizing paradigm for the discovery, valuation, and transfer of all quanta (discrete units) of anything, and potentially for the coordination of all human activity at a much larger scale than has been possible before.

A blockchain is quite literally like a giant spreadsheet for registering all assets, and an accounting system for transacting them on a global scale that can include all forms of assets held by all parties worldwide. Thus, the blockchain can be used for any form of asset registry, inventory, and exchange, including every area of finance, economics, and money; hard assets (physical property); and intangible assets (votes, ideas, reputation, intention, health data, etc.). The Connected World and Blockchain: The Fifth Disruptive Computing Paradigm One model of understanding the modern world is through computing paradigms, with a new paradigm arising on the order of one per decade (Figure P-1). First, there were the mainframe and PC (personal computer) paradigms, and then the Internet revolutionized everything.


pages: 444 words: 86,565

Investment Banking: Valuation, Leveraged Buyouts, and Mergers and Acquisitions by Joshua Rosenbaum, Joshua Pearl, Joseph R. Perella

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asset allocation, asset-backed security, bank run, barriers to entry, capital asset pricing model, collateralized debt obligation, corporate governance, credit crunch, discounted cash flows, diversification, fixed income, intangible asset, London Interbank Offered Rate, performance metric, shareholder value, sovereign wealth fund, technology bubble, time value of money, transaction costs, yield curve

Amortization Amortization differs from depreciation in that it reduces the value of definite life intangible assets as opposed to tangible assets. Definite life intangible assets include contractual rights such as non-compete clauses, copyrights, licenses, patents, trademarks, or other intellectual property, as well as information technology and customer lists, among others. These intangible assets are amortized according to a determined or useful life.83 Like depreciation, amortization can be projected as a percentage of sales or by building a detailed schedule based upon a company’s existing intangible assets. However, amortization is often combined with depreciation as a single line item within a company’s financial statements.

A marginal tax rate of 35% to 40% is generally assumed for modeling purposes, but the company’s actual tax rate (effective tax rate) in previous years can also serve as a reference point.79 Depreciation & Amortization Projections Depreciation is a non-cash expense that approximates the reduction of the book value of a company’s long-term fixed assets or property, plant, and equipment (PP&E) over an estimated useful life and reduces reported earnings. Amortization, like depreciation, is a non-cash expense that reduces the value of a company’s definite life intangible assets and also reduces reported earnings.80 Some companies report D&A together as a separate line item on their income statement, but these expenses are more commonly included in COGS (especially for manufacturers of goods) and, to a lesser extent, SG&A. Regardless, D&A is explicitly disclosed in the cash flow statement as well as the notes to a company’s financial statements.

See asset based lending facility accelerated depreciation accountants accounting accounts payable accounts receivable accretion/(dilution) analysis accretive accrued liabilities acquisition currency acquisition-driven growth acquisition financing adjusted income statement adjustments balance sheet capital expenditures capital structure changes management projections mid-year convention non-recurring items purchase price and financing structure recent events synergies year-end discounting administrative agent administrative agent fee advisor affiliate affirmative covenants Alacra all-cash transaction amortization acquisition-related intangible assets, of deferred financing fees, of term loan schedule, for term loans . See also depreciation & amortization (D&A) amortizing term loans. See also term loan A announcement earnings transaction annual report. See Form 10-K antitrust arranger asset base asset based lending (ABL) facility asset sale gains on limitations on losses on term loan prepayment transaction attorneys auction .


pages: 523 words: 111,615

The Economics of Enough: How to Run the Economy as if the Future Matters by Diane Coyle

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accounting loophole / creative accounting, affirmative action, bank run, banking crisis, Berlin Wall, bonus culture, Branko Milanovic, BRICs, call centre, Cass Sunstein, central bank independence, collapse of Lehman Brothers, conceptual framework, corporate governance, correlation does not imply causation, Credit Default Swap, deindustrialization, demographic transition, Diane Coyle, disintermediation, Edward Glaeser, endogenous growth, Eugene Fama: efficient market hypothesis, experimental economics, Fall of the Berlin Wall, Financial Instability Hypothesis, Francis Fukuyama: the end of history, George Akerlof, Gini coefficient, global supply chain, Gordon Gekko, greed is good, happiness index / gross national happiness, Hyman Minsky, If something cannot go on forever, it will stop - Herbert Stein's Law, illegal immigration, income inequality, income per capita, industrial cluster, information asymmetry, intangible asset, Intergovernmental Panel on Climate Change (IPCC), invisible hand, Jane Jacobs, Joseph Schumpeter, Kenneth Arrow, Kenneth Rogoff, knowledge economy, labour market flexibility, light touch regulation, low skilled workers, market bubble, market design, market fundamentalism, megacity, Network effects, new economy, night-watchman state, Northern Rock, oil shock, Pareto efficiency, principal–agent problem, profit motive, purchasing power parity, railway mania, rising living standards, Ronald Reagan, selective serotonin reuptake inhibitor (SSRI), Silicon Valley, South Sea Bubble, Steven Pinker, The Design of Experiments, The Fortune at the Bottom of the Pyramid, The Market for Lemons, The Myth of the Rational Market, The Spirit Level, transaction costs, transfer pricing, tulip mania, ultimatum game, University of East Anglia, web application, web of trust, winner-take-all economy, World Values Survey, zero-sum game

As Amartya Sen put it: “The moral and legal responsibilities associated with transactions have in recent years become much harder to trace, thanks to the rapid development of secondary markets involving derivatives and other financial instruments.”4 This loss of traceability and trust is a serious matter. Apart from their buildings and computers, banks have no physical assets. Their stock market value is entirely an indicator of their intangible assets—which are, more or less, a measure of the extent to which they are trusted. Until the later part of the twentieth century, other companies had a market valuation that mostly reflected the value of physical assets, such as factories and machines, but a growing share of the value of all companies in recent decades has consisted of intangible items, including the important asset described as “goodwill.”

Bureau of Economic Analysis (BEA), which has often been at the forefront of practical statistical innovation, announced that it was exploring the feasibility of the experimental compilation of intangibles statistics in a “satellite account,” which would offer a comprehensive framework for assessing this form of value in the economy. This satellite would include human capital, the knowledge captured in computer databases and creative property such as movies and music, brand values and “organizational capital” for example.21 The aim of the work is to measure investment in intangible assets, but the BEA’s report notes that the main barrier is the absence of the underlying measurements—for example, businesses don’t record “investment in organizational capital” in their management accounts, so they can’t answer questions about it in BEA surveys. And as the statisticians observe, the absence of measurements indicates that the concepts currently applied to the idea of intangible investment are fuzzy.

., 127–28 Calculus of Consent, The: Logical Foundations of Constitutional Democracy (Buchanan and Tullock), 242 call centers, 131, 133, 161 Cameron, David, 288 capitalism: China and, 234; communism and, 96, 182–83, 209–13, 218, 226, 230, 239–40; community and, 27, 51, 65, 117–18, 137, 141, 152–54; cultural effects of, 25–29, 230–38; current crisis of, 6–9; democracy and, 230–38; Engels on, 14; fairness and, 134, 137, 149; growth and, 268, 275, 290, 293, 297; happiness and, 25–29, 33, 45, 53–54; historical perspective on, 3, 6, 14; institutions and, 240; market failure and, 226–30; Marx on, 14; measurement and, 182; mercantile economy and, 27–28; nutrition and, 10; profit–oriented, 18; Protestant work ethic and, 13–14; protests against, 211–13; rethinking meaning of, 9; social effects of, 25–26; values and, 209–13, 218, 226, 230–32, 235–36; well-being and, 137–39 carbon prices, 70–71 celebrities, 33 charitable giving, 33, 141 Checkpoint Charlie, 147 China, 161, 262, 280; capitalism and, 234; carbon emissions and, 63; changed demographic structure of, 90; convergence and, 122; declining population in, 98; energy use in, 63, 65; global manufacturing and, 149; inequality and, 125–26; Mao and, 10; middle class of, 125–26; as next major power, 94; one–child policy and, 95–96; population growth and, 95–96; purchasing power parity (PPP) and, 306n19; rise in wealth of, 81, 122–23, 125, 212; savings and, 87, 94, 100, 108; wage penalties and, 133; World Bank influence and, 163 cities, 308n29; face-to-face contact and, 165–68; size and, 165–66; structural changes in, 165–70; urban clustering and, 166 City of London, 147, 221 Clemens, Michael, 81 climate change, 5–7, 17, 24, 90, 238; carbon prices and, 70–71; Copenhagen summit and, 62, 64–65, 68, 162, 292; domestic dissent and, 66–71; future and, 75–83; geological history and, 69; global warming and, 57, 64, 66, 68; greenhouse gases and, 23, 29, 35, 59, 61–63, 68, 70–71, 83; Himalayan glaciers and, 66–67; incandescent light bulbs and, 59–60; InterAcademy Council and, 66–67; Intergovernmental Panel on Climate Change (IPCC) and, 59, 66–69, 82, 297; Kyoto Protocol and, 62–64; lack of consensus on, 66–71; Montreal Protocol and, 59; policy dilemma of, 58–62; policy recommendations for, 267, 280, 297; politics and, 62–65; social welfare and, 71–75; technology and, 59–60, 198 Coachella Value Music Festival, 197 Cobb, John, 36 Coca Cola, 150 coherence, 49 Cold War, 93, 112, 147, 209, 213, 239, 252 Collier, Paul, 77–78, 80, 82 Commerzbank, 87 Commission on the Measurement of Economic Performance and Social Progress, 37–38 communism: Berlin Wall and, 182, 226, 239; capitalism and, 96, 182–83, 209–13, 218, 226, 230, 239–40; Cold War and, 93, 112, 147, 209, 213, 239, 252; fall of, 209–13, 226, 239–40, 252; Iron Curtain and, 183, 239, 252; Leipzig marches and, 239; one-child policy and, 95–96; Velvet Revolution and, 239 community: civic engagement and, 140–41; globalization and, 148–49; intangible assets and, 149–52, 157, 161 (see also trust); public service and, 295; Putnam on, 140–41, 152–54 commuting, 45–47 Company of Strangers, The (Seabright), 148–49, 213–14 comprehensive wealth, 81–82, 202–3, 208, 271–73 consumerism, 22, 34, 45, 138 consumption: conspicuous, 11, 22, 45, 236; consumerism and, 22, 34, 45, 138; cutting, 61; downgrading status of, 11; downshifting and, 11, 55; Easterlin Paradox and, 39–44; global per capita, 72; of goods and services, 7, 10, 24, 35–36, 40, 82, 99, 161, 188, 191, 198, 214, 218, 228–29, 282; green lifestyle and, 55, 61, 76, 289, 293; growth and, 280, 295; happiness and, 22, 29, 40, 45; hedonic treadmill and, 40; increasing affluence and, 12; institutions and, 254, 263; Kyoto Protocol and, 63–64; measurement and, 181–82, 198; missing markets and, 229; natural resources and, 8–12, 58, 60, 79–82, 102, 112, 181–82; nature and, 58–61, 71–76, 79, 82; posterity and, 86, 104–5, 112–13; reduction of, 105; Slow Movement and, 27; trends in, 138; trilemma of, 13–14, 230–36, 275; values and, 229, 236 convergence, 5, 122 Copenhagen summit, 62, 64–65, 68, 162, 292 Crackberry, 205 Crafts, Nicholas, 156–57 credit cards, 2, 21, 136, 138, 283 Csikszentmilhalyi, Mihaly, 45–49 Cultural Contradictions of Capitalism, The (Bell), 230, 235–36 Czechoslovakia, 239 Daly, Herman, 36 Damon, William, 48 Dasgupta, Partha, 61, 73, 77–78, 80, 82 David, Paul, 156 Dawkins, Richard, 118 debit cards, 2 decentralization, 7, 159, 218, 246, 255, 275, 291 defense budgets, 93 democracy, 2, 8, 16, 312n19; capitalism and, 230–38; culture and, 230–38; fairness and, 141; growth and, 268–69, 285–89, 296–97; institutions and, 242–43, 251–52, 262; nature and, 61, 66, 68; posterity and, 106; trust and, 175; values and, 230–35 Denmark, 125 Dickens, Charles, 131 Diener, Ed, 48, 49 Discourse on the Origin and Basis of Inequality among Men (Rousseau), 114 distribution, 29, 306n22; Asian influence and, 123; bifurcation of social norms and, 231–32; consumerism and, 22, 34, 45, 138; Easterlin Paradox and, 39–44; fairness and, 115–16, 123–27, 134, 136; food and, 10, 34; of goods and services, 7, 10, 24, 35–36, 40, 82, 99, 161, 188, 191, 198, 214, 218, 228–29, 282; income, 34, 116, 123–27, 134, 278; inequality and, 123 (see also inequality); institutions and, 253; measurement and, 181, 191–99, 202; paradox of prosperity and, 174; policy recommendations for, 276, 278; posterity and, 87, 94; trust and, 151, 171; unequal countries and, 124–30; values and, 226 Dorling, Danny, 224, 307n58, 308n34 Douglas, Michael, 221 downshifting, 11, 55 downsizing, 175, 246, 255 drugs, 44, 46, 137–38, 168–69, 191, 302n47 Easterlin, Richard, 39 Easterlin Paradox, 39–44 eBay, 198 Economics of Ecosystems and Biodiversity project, The (TEEB), 78–79 economies of scale, 253–58 Economy of Enough, 233; building blocks for, 12–17; first ten steps for, 294–98; growth and, 182; happiness and, 24; institutions and, 250–51, 258, 261–63; living standards and, 13, 65, 78–79, 106, 113, 136, 139, 151, 162, 190, 194, 267; Manifesto of, 18, 267–98; measurement and, 182, 186–88, 201–7; nature and, 59, 84; Ostrom on, 250–51; posterity and, 17, 85–113; values and, 217, 233–34, 238; Western consumers and, 22 (see also consumption) Edinburgh University, 221 efficiency, 2, 7; evidence–based policy and, 233–34; fairness and, 126; Fama hypothesis and, 221–22; happiness and, 9, 29–30, 61; institutions and, 245–46, 254–55, 261; limits to, 13; nature and, 61–62, 69, 82; network effects and, 253, 258; productivity and, 13 (see also productivity); trilemma of, 13–14, 230–36, 275; trust and, 158–59; values and, 210, 215–16, 221–35 Ehrlich, Paul, 70 e-mail, 252, 291 “End of History, The” (Fukuyama), 239 Engels, Friedrich, 14 Enlightenment, 7 Enron, 145 environmentalists.


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Big Data: A Revolution That Will Transform How We Live, Work, and Think by Viktor Mayer-Schonberger, Kenneth Cukier

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23andMe, Affordable Care Act / Obamacare, airport security, AltaVista, barriers to entry, Berlin Wall, big data - Walmart - Pop Tarts, Black Swan, book scanning, business intelligence, business process, call centre, cloud computing, computer age, correlation does not imply causation, dark matter, double entry bookkeeping, Eratosthenes, Erik Brynjolfsson, game design, IBM and the Holocaust, index card, informal economy, intangible asset, Internet of things, invention of the printing press, Jeff Bezos, lifelogging, Louis Pasteur, Mark Zuckerberg, Menlo Park, Moneyball by Michael Lewis explains big data, Nate Silver, natural language processing, Netflix Prize, Network effects, obamacare, optical character recognition, PageRank, performance metric, Peter Thiel, Post-materialism, post-materialism, random walk, recommendation engine, self-driving car, sentiment analysis, Silicon Valley, Silicon Valley startup, smart grid, smart meter, social graph, speech recognition, Steve Jobs, Steven Levy, the scientific method, The Signal and the Noise by Nate Silver, The Wealth of Nations by Adam Smith, Turing test, Watson beat the top human players on Jeopardy!

The difference between a company’s book value and its market value is accounted for as “intangible assets.” It has grown from around 40 percent of the value of publicly traded companies in the United States in the mid-1980s to three-fourths of their value at the dawn of the new millennium. This is a hefty divergence. These intangible assets are considered to include brand, talent, and strategy—anything that’s not physical and part of the formal financial-accounting system. But increasingly, intangible assets are coming to mean the data that companies hold and use, too. Ultimately, what this shows is that there is currently no obvious way to value data.

Meanwhile, investors will also start to take notice of the option value of data. Share prices may swell for companies that have data or can collect it easily, while others in less fortunate positions may see their market valuations shrink. The data does not have to formally show up on the balance sheets for this to happen. Markets and investors will price these intangible assets into their valuations—albeit with difficulty, as the seesawing of Facebook’s share price in its first few months attests. But as accounting quandaries and liability concerns are alleviated, it is almost certain that the value of data will show up on corporate balance sheets and emerge as a new asset class.

Samek, “Prepared Testimony: Hearing on Adapting a 1930’s Financial Reporting Model to the 21st Century,” U.S. Senate Committee on Banking, Housing and Urban Affairs, Subcommittee on Securities, July 19, 2000. Value of intangibles—Robert S. Kaplan and David P. Norton, Strategy Maps: Converting Intangible Assets into Tangible Outcomes (Harvard Business Review Press, 2004), pp. 4–5. [>] Tim O’Reilly quotation—Interview with Cukier, February 2011. 7. Implications [>] Info on Decide.com—Cukier email exchange with Etzioni, May 2012. [>] McKinsey report—James Manyika et al., “Big Data: The Next Frontier for Innovation, Competition, and Productivity,” McKinsey Global Institute, May 2011 (http://www.mckinsey.com/insights/mgi/research/technology_and_innovation/big_data_the_next_frontier_for_innovation), p. 10.


pages: 1,042 words: 266,547

Security Analysis by Benjamin Graham, David Dodd

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activist fund / activist shareholder / activist investor, asset-backed security, backtesting, barriers to entry, capital asset pricing model, carried interest, collateralized debt obligation, collective bargaining, corporate governance, corporate raider, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, diversification, diversified portfolio, fear of failure, financial innovation, fixed income, full employment, index fund, intangible asset, invisible hand, Joseph Schumpeter, locking in a profit, Long Term Capital Management, low cost carrier, moral hazard, mortgage debt, Myron Scholes, p-value, Right to Buy, risk-adjusted returns, risk/return, secular stagnation, shareholder value, The Chicago School, the market place, the scientific method, The Wealth of Nations by Adam Smith, transaction costs, zero-coupon bond

First, Mohawk had been growing by acquiring some of the smaller players as part of an industrywide consolidation, so it gained economies of scale that allowed the company to reduce capital spending and lower its working capital needs. Even more important, the use of GAAP required Mohawk to take significant charges against its earnings to amortize the intangible assets it had picked up in its buying spree. (The difference between what a company pays for an acquisition and the acquired company’s book value goes on the balance sheet as an intangible asset called “goodwill.”) These charges reduced net income but did not take any cash out of the business. All told, we calculated that Mohawk was selling at less than seven times its free cash flow, an attractive valuation.

Investment initiatives—whether new products, new store openings, or brand launches—are almost always based on detailed business plans. These plans identify the costs of such initiatives with reasonable accuracy and the benefits more fancifully. Investors can use these data to estimate the cost of producing intangible assets. Industry managers with substantial experience will be able to estimate such costs. More importantly, many intangible assets trade just like real property. Cable franchises, clothing brands, new drug discoveries, store chains, and even music labels are bought by sophisticated buyers (usually larger companies) from sophisticated sellers (usually smaller companies).

Then we add back noncash charges such as depreciation and amortization, which are formulaic calculations based on historical costs (depreciation for tangible assets, amortization for intangibles) and may not reflect a reduction in those assets’ true worth. Even so, most assets deteriorate in value over time, and we have to account for that. So we subtract an estimate of the company’s cost of maintaining tangible assets such as the office, plant, inventory, and equipment; and intangible assets like customer traffic and brand identity. Investment at this level, properly deployed, should keep the profits of the business in a steady state. That is only the beginning. For instance, companies often misstate the costs of employees’ pension and postretirement medical benefits. They also overestimate their benefit plans’ future investment returns or underestimate future medical costs, so in a free cash flow analysis, you need to adjust the numbers to reflect those biases.


pages: 72 words: 21,361

Race Against the Machine: How the Digital Revolution Is Accelerating Innovation, Driving Productivity, and Irreversibly Transforming Employment and the Economy by Erik Brynjolfsson

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Amazon Mechanical Turk, Any sufficiently advanced technology is indistinguishable from magic, autonomous vehicles, business process, call centre, combinatorial explosion, corporate governance, creative destruction, crowdsourcing, David Ricardo: comparative advantage, easy for humans, difficult for computers, Erik Brynjolfsson, factory automation, first square of the chessboard, first square of the chessboard / second half of the chessboard, Frank Levy and Richard Murnane: The New Division of Labor, hiring and firing, income inequality, intangible asset, job automation, John Markoff, John Maynard Keynes: technological unemployment, Joseph Schumpeter, Khan Academy, Kickstarter, knowledge worker, labour mobility, Loebner Prize, low skilled workers, minimum wage unemployment, patent troll, pattern recognition, Paul Samuelson, Ray Kurzweil, rising living standards, Robert Gordon, self-driving car, shareholder value, Skype, too big to fail, Turing test, Tyler Cowen: Great Stagnation, Watson beat the top human players on Jeopardy!, wealth creators, winner-take-all economy, zero-sum game

—John Maynard Keynes, 1930 The individual technologies and the broader technological acceleration discussed in Chapter 2 are creating enormous value. There is no question that they increase productivity, and thus our collective wealth. But at the same time, the computer, like all general purpose technologies, requires parallel innovation in business models, organizational processes structures, institutions, and skills. These intangible assets, comprising both organizational and human capital, are often ignored on companies’ balance sheets and in the official GDP statistics, but they are no less essential than hardware and software. And that’s a problem. Digital technologies change rapidly, but organizations and skills aren’t keeping pace.

You don’t have to be an ardent Keynesian to believe that the best time to make these investments is when there is plenty of slack in the labor market. 11. Increase funding for basic research and for our preeminent government R&D institutions including the National Science Foundation, the National Institutes of Health, and the Defense Advanced Research Projects Agency (DARPA) with a renewed focus on intangible assets and business innovation. Like other forms of basic research, these investments are often underfunded by private investors because of the spillovers they create. Laws, Regulations, and Taxes 12. Preserve the relative flexibility of American labor markets by resisting efforts to regulate hiring and firing.


pages: 319 words: 89,477

The Power of Pull: How Small Moves, Smartly Made, Can Set Big Things in Motion by John Hagel Iii, John Seely Brown

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Albert Einstein, Andrew Keen, barriers to entry, Black Swan, business process, call centre, Clayton Christensen, cleantech, cloud computing, commoditize, corporate governance, creative destruction, Elon Musk, en.wikipedia.org, future of work, game design, George Gilder, intangible asset, Isaac Newton, job satisfaction, knowledge economy, knowledge worker, loose coupling, Louis Pasteur, Malcom McLean invented shipping containers, Maui Hawaii, medical residency, Network effects, old-boy network, packet switching, pattern recognition, peer-to-peer, pre–internet, profit motive, recommendation engine, Ronald Coase, shareholder value, Silicon Valley, Skype, smart transportation, software as a service, supply-chain management, The Nature of the Firm, the new new thing, too big to fail, trade liberalization, transaction costs

Because big institutions need us more than ever. Making money from intangible assets—from knowledge, brand, and other nonphysical sources of value—is the primary way corporations make profit these days.4 Many analysts have noted the increasing importance of intangible assets in business, but people often think about these assets in static form—for example, stocks of knowledge, established brands, and existing relationships. It is the growing pressure in the Big Shift to refresh these assets more frequently that makes institutions increasingly dependent on the individuals who create new intangible assets by interacting and collaborating with others.

See Jake von Slatt, “Gas Mask Sawdust Respirator,” Steampunk Workshop, http://steampunkworkshop.com/respirator.shtml. 14 Luke Plunkett, “Americans Spent 2008 Playing World of Warcraft, PlayStation 2 Games,” Kotaku, January 1, 2009, http://kotaku.com/5121962/americans-spent-2008-playing-world-of-warcraft-playstation-2-games#c. 15 Douglas Thomas, “Scalable Learning: From Simple to Complex in World of Warcraft,” On the Horizon 17, no. 1 (2009): 35-46 16 Ibid. 17 See, for instance, Wesley Yin-Poole, “French WoW Player Reaches Level 70 in 28 Hours,” Videogamer.com, January 17, 2007, http://www.videogamer.com/news/french_wow_player_reaches_level_70_in_28_hours.html. 18 SAP has more than 121,000 installed systems today. 19 Conversation with authors, October 2008. 20 Greg Noll, Riding Giants. 21 Matt Higgins, “Rough Waves, Tougher Beaches,” New York Times, January 22, 2009, http://www.nytimes.com/2009/01/23/sports/othersports/23surfing.html?_r=1. Chapter 5 1 Ellen Levy, interview with authors, September 20, 2009. 2 Ibid. 3 Ibid. 4 For more about how monetizing intangible assets drives corporate wealth creation, see Lowell Bryan and Claudia Joyce, Mobilizing Minds (New York: McGraw-Hill, 2007). 5 See John Hagel III, John Seely Brown, and Lang Davison, The 2009 Shift Index: Measuring the Forces of Long-Term Change (San Jose, Calif.: Deloitte Development, June 2009). 6 Andrew Keen, The Cult of the Amateur: How Today’s Internet Is Killing Our Culture (New York: Broadway Business, 2007). 7 Ian Millhiser, “Clarence Thomas’s America,” Huffington Post, April 14, 2009, http://www.huffingtonpost.com/ian-millhiser/clarence-thomas-america_b_186425.html. 8 Clay Shirky, “Newspapers and Thinking the Unthinkable,” blog posting, March 13, 2009, http://www.shirky.com/weblog/2009/03/newspapers-and-thinking-the-unthinkable/. 9 Matthew B.


pages: 219 words: 15,438

The Essays of Warren Buffett: Lessons for Corporate America by Warren E. Buffett, Lawrence A. Cunningham

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compound rate of return, corporate governance, Dissolution of the Soviet Union, diversified portfolio, dividend-yielding stocks, fixed income, George Santayana, index fund, intangible asset, invisible hand, large denomination, low cost carrier, oil shock, passive investing, price stability, Ronald Reagan, the market place, transaction costs, Yogi Berra, zero-coupon bond

It is recorded as an asset on the balance sheet and then amortized as an annual expense, usually 24 CARDOZO LAW REVIEW [Vol. 19:1 over forty years. So the accounting goodwill assigned to that business decreases over time by the aggregate amount of that expense. Economic goodwill is something else. It is the combination of intangible assets, like brand name recognition, that enable a business to produce earnings on tangible assets, like plant and equipment, in excess of average rates. The amount of economic goodwill is the capitalized value of that excess. Economic goodwill tends to increase over time, at least nominally in proportion to inflation for mediocre businesses, and more than that for businesses with solid economic or franchise characteristics.

In 1972 (and now) relatively few businesses could be expected to consistently earn the 25% after tax on net tangible assets that was earned by See's-doing it, furthermore, with conservative accounting and no financial leverage. It was not the fair market value of the inventories, receivables or fixed assets that produced the premium rates of return. Rather it was a combination of intangible assets, particularly a pervasive favorable reputation with consumers based upon countless pleasant experiences they have had with both product and personnel. Such a reputation creates a consumer franchise that allows the value of the product to the purchaser, rather than its production cost, to be the major determinant of selling price.

Should the investor impute a $2 per share amortization charge annually ($80 divided by 40 years) to calculate "true" earnings per share? And, if so, should the new "true" earnings of $3 per share cause him to rethink his purchase price? * * * * * We believe managers and investors alike should view intangible assets from two perspectives: (1) In analysis of operating results-that is, in evaluating the underlying economics of a business unit-amortization charges should be ignored. What a business can be expected to earn on unleveraged net tangible assets, excluding any charges against earnings for amortization of Goodwill, is the best guide to the economic attractiveness of the operation.


pages: 137 words: 36,231

Information: A Very Short Introduction by Luciano Floridi

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agricultural Revolution, Albert Einstein, bioinformatics, carbon footprint, Claude Shannon: information theory, conceptual framework, double helix, Douglas Engelbart, Douglas Engelbart, George Akerlof, Gordon Gekko, industrial robot, information asymmetry, intangible asset, Internet of things, invention of writing, John Nash: game theory, John von Neumann, moral hazard, Nash equilibrium, Norbert Wiener, Pareto efficiency, phenotype, Pierre-Simon Laplace, prisoner's dilemma, RAND corporation, RFID, Thomas Bayes, Turing machine, Vilfredo Pareto

During this span of time, Information and Communication Technologies (ICTs) evolved from being mainly recording systems - writing and manuscript production - to being also communication systems, especially after Gutenberg and the invention of printing - to being also processing and producing systems, especially after Turing and the diffusion of computers. Thanks to this evolution, nowadays the most advanced societies highly depend on information-based, intangible assets, information-intensive services (especially business and property services, communications, finance and insurance, and entertainment), and information-oriented public sectors (especially education, public administration, and health care). For example, all members of the G7 group - namely Canada, France, Germany, Italy, Japan, the United Kingdom, and the United States of America - qualify as information societies because, in each country, at least 70% of the Gross Domestic Product (GDP) depends on intangible goods, which are information-related, not on material goods, which are the physical output of agricultural or manufacturing processes.

Information has always had great value, and whoever has owned it has usually been keen on protecting it. This is why, for example, there are legal systems regulating intellectual property. Intellectual property rights concern artistic and commercial creations of the mind, and hence the relevant kinds of information and intangible assets. Copyrights, patents, industrial design rights, trade secrets, and trademarks are meant to provide an economic incentive to their beneficiaries to develop and share their information through a sort of temporary monopoly. Similarly, in many countries it is illegal to trade the securities of a corporation (e.g. bonds) on the basis of some privileged access to that corporation's non-public information, typically obtained while working for it (this is why it is referred to as insider trading).

The End of Power: From Boardrooms to Battlefields and Churches to States, Why Being in Charge Isn’t What It Used to Be by Moises Naim

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additive manufacturing, barriers to entry, Berlin Wall, bilateral investment treaty, business process, business process outsourcing, call centre, citizen journalism, Clayton Christensen, clean water, collapse of Lehman Brothers, collective bargaining, colonial rule, conceptual framework, corporate governance, creative destruction, crony capitalism, deskilling, disintermediation, don't be evil, failed state, Fall of the Berlin Wall, financial deregulation, Francis Fukuyama: the end of history, illegal immigration, immigration reform, income inequality, income per capita, intangible asset, intermodal, invisible hand, job-hopping, Joseph Schumpeter, Julian Assange, Kickstarter, liberation theology, Martin Wolf, mega-rich, megacity, Naomi Klein, Nate Silver, new economy, Northern Rock, Occupy movement, open borders, open economy, Peace of Westphalia, Plutocrats, plutocrats, price mechanism, price stability, private military company, profit maximization, Ronald Coase, Ronald Reagan, Silicon Valley, Skype, Steve Jobs, The Nature of the Firm, Thomas Malthus, too big to fail, trade route, transaction costs, Washington Consensus, WikiLeaks, World Values Survey, zero-sum game

Economic and Social Commission for Asia and the Pacific Monograph Series on Managing Globalization: Regional Shipping and Port Development Strategies (Container Traffic Forecast), 2011. 26. David Goldman, “Microsoft’s $6 Billion Whoopsie,” CNNMoney, July 12, 2012, http://money.cnn.com/2012/07/02/technology/microsoft-aquantive/index.htm. 27. Thom and Greif, “Intangible Assets in the Valuation Process: A Small Business Acquisition Study”; Galbreath, “TwentyFirst Century Management Rules: The Management of Relationships as Intangible Assets.” 28. Interview with Lorenzo Zambrano, Monterrey, Mexico, 2011. 29. See The Gap Inc. and Inditex annual reports from 2007 to 2011. 30. Data obtained from Zara’s corporate website: http://www.inditex.com/en/who_we_are/timeline. 31.

And some companies still have an immense advantage due to their access to desired assets: for instance, the Russian mining mammoth Norilsk controls 30 percent of the world’s known nickel reserves and 45 percent of its platinum in Siberia. But even within these industries, the increasing importance of intangible assets holds true. Lorenzo Zambrano, the CEO of CEMEX, a Mexican cement company that has broken into the industry’s top ranks and become a global player, told me that “knowledge management” was the crucial factor behind his company’s ability to compete internationally with larger, more established rivals.

New York: Farrar, Straus & Giroux, 2005. Frydman, Carola, and Raven E. Sacks. “Executive Compensation: A New View from a Long-Term Perspective, 1936–2005,” FEDS Working Paper No. 200735, July 2007. Galbreath, Jeremy. “Twenty-First Century Management Rules: The Management of Relationships as Intangible Assets.” Management Decision 40, no. 2 (2002). Gammeltoft, Peter. “Emerging Multinationals: Outward FDI from the BRICS Countries.” International Journal of Technology and Globalization 4, no. 1 (2008). Ghemawat, Pankaj. World 3.0: Global Prosperity and How to Achieve It. Boston, MA: Harvard Business Review Press, 2011.


pages: 300 words: 77,787

Investing Demystified: How to Invest Without Speculation and Sleepless Nights by Lars Kroijer

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Andrei Shleifer, asset allocation, asset-backed security, Bernie Madoff, bitcoin, Black Swan, BRICs, Carmen Reinhart, cleantech, compound rate of return, credit crunch, diversification, diversified portfolio, equity premium, estate planning, fixed income, high net worth, implied volatility, index fund, intangible asset, invisible hand, Kenneth Rogoff, market bubble, money market fund, passive investing, pattern recognition, prediction markets, risk tolerance, risk/return, Robert Shiller, Robert Shiller, selection bias, sovereign wealth fund, too big to fail, transaction costs, Vanguard fund, yield curve, zero-coupon bond

Other assets Individual investors often tend to think too narrowly about incorporating all their assets when thinking about their personal portfolio. Your personal assets include everything, including intangible assets, and even potential liabilities. Here are a few ideas, some of which may seem far-fetched: Tangible assets: Investment portfolio Future pension (who guarantees it?) Security and generosity of government safety net Insurance policies Property holdings (do you own a house?) Private investments Company shares or options Future inheritance (morbid perhaps, but do you have a sense of timing and how it is invested?) Car and other possessions Intangible assets: Education and qualifications Languages you speak Current job and prospects (if you work in finance you already have a lot of direct and indirect exposure to the financial markets, and may want to temper adding to it through your investment portfolio) Previous job experience (will affect future earnings potential) Partner’s education and job Geographic flexibility Liabilities: Flexibility of liabilities – will you certainly incur them?

Index accountants active managers compared with index trackers, 2nd performance over time active personal portfolio management adding up the costs of advisory charges age life stages of financial planning and risk profile AIG allocations see investment allocations alternative investments alternative weightings ‘angel’ investing, 2nd annuities IRR (internal rate of return), 2nd apocalypse investing avoiding fraud and financial disasters and gold as security assets asset classes to avoid concentration risk customisation and noninvestment growth of, and overpayment of fees and institutional investors intangible and liabilities and portfolio theory in the rational portfolio, assets split tangible see also minimal risk assets avoiding fraud banks bailouts cash deposits with and financial disaster and gold as security and property investment Barclays US High Yield index Bernstein, William The Intelligent Asset Allocator bid/offer spread black swan events, 2nd, 3rd Bogle, John bonds bond indices, 2nd dollar domination of ETFs, 2nd and financial planning income from coupon payments indices and the rational portfolio adding other bonds to risk preferences, 2nd rebalancing your portfolio ‘risky’ bonds and liquidity shortterm, 2nd see also corporate bonds; government bonds; minimal risk assets Brazil government bonds broad-based portfolios and liquidity world equities, 2nd, 3rd, 4th, 5th Buffett, Warren, 2nd fee structure capital gains tax (CGT), 2nd, 3rd and gifts car insurance Case-Shiller House Price index, 2nd cash deposits deposit insurance government guarantees risk of CGT see capital gains tax (CGT) civil unrest collectibles commercial property market commodities, 2nd returns form company shares comparison sites, 2nd enhanced independent Contagion (film) corporate bonds adding to minimal risk assets, 2nd, 3rd and financial planning and credit quality ETFs, 2nd and financial planning liquidity of and minimal risk assets and portfolio theory, 2nd and the rational portfolio, 2nd, 3rd adjusting allocations, 2nd risk preferences real return expectations world corporate debt yields, 2nd costs see fees and expenses CRB Commodity index CRB Total Return index, 2nd credit ratings government bonds, 2nd, 3rd, 4th adding to minimal risk assets currency and government bonds, 2nd, 3rd, 4th matching and world equities currency-hedged investment products custody charges customisation Cyprus defined benefits pension schemes defined contribution pension schemes diversification and assets benefits of and corporate bonds, 2nd and equity market risk geographical and government bonds, 2nd and the rational portfolio, 2nd and world equities, 2nd Dow Jones index Industrial Average recovery from losses drop dead allocation early savers edge over the markets see investment edge efficiency frontiers EIS (Enterprise Investment Schemes) Elton, Edwin Modern Portfolio Theory and Investment Analysis emerging market companies listed on Western exchanges Enterprise Investment Schemes (EIS) equities and government and corporate bonds performance and portfolio theory and property investment and the rational portfolio allocations risk preferences, 2nd rebalancing your portfolio risk of diversification and false sense of security recovering from large losses standard deviation, 2nd, 3rd view that markets will always bounce back see also world equities equity risk premium and financial planning ETFs (exchange traded funds), 2nd, 3rd, 4th advantages to owning buying bonds, 2nd, 3rd commodity trading customisation fees and expenses in global property and gold trading implementing and index funds leveraged maturities and minimal risk bonds, 2nd physical or synthetic rebalancing your portfolio and taxes total expense ratio (TER) tracking errors European Union bonds, 2nd expenses see fees and expenses fat tails fees and expenses, 2nd adding up costs alternative investments benefits of paying lower fees and comparison websites financial advisers index trackers compared with active managers and investment edge pension plans and performance impact over time mutual funds, 2nd and the rational investor and the rational portfolio, 2nd rebalancing your portfolio Ferri, Richard All About Asset Allocation financial advisers, 2nd and comparison websites financial crisis 2008–09 and commodities trading and currency matching and government bonds yields and high risk preferences and liquidity and longterm financial planning, 2nd and market risk, 2nd, 3rd, 4th financial planning building your savings and the financial crisis 2008–09, 2nd and investment allocations, 2nd, 3rd and life stages and risk, 2nd risk surveys rules of thumb to consider supercautious savers financial software packages France government bonds fraud, avoiding frequent trading FTSE All-Share index FTSE All-Share Tracker fund FTSE NAREIT Global index, 2nd, 3rd fund pickers future performance mutual funds GDP and corporate bonds and world equity market value, 2nd Germany government bonds gifts and capital gains tax gold, 2nd as security Goldman Sachs government bonds adding to minimal risk assets, 2nd and financial planning and bank deposits banks and government defaults buying in base currency, 2nd credit ratings, 2nd, 3rd, 4th and diversification earnings ETFs, 2nd and the financial crisis (2008) and financial planning inflationprotected liquidity of longerterm maturity minimal risk and world equities, 2nd, 3rd and portfolio theory, 2nd, 3rd and the rational portfolio, 2nd, 3rd adjusting, 2nd, 3rd allocations, 2nd risk preferences real return expectations time horizons yields Greece government debt and bond yields hedge funds, 2nd, 3rd, 4th Japanese government bonds and liquidity high risk preferences home markets overinvestment in Icelandic banks income tax index funds, 2nd and ETFs and government bonds implementing maturities and minimal risk bonds, 2nd total expense ratio (TER) tracking errors index-tracking products, 2nd and active managers adding bonds to a portfolio compared with active managers, 2nd comparison sites, 2nd enhanced independent costs of fund changes and taxes future product development implementing license fees for and liquidity and mutual funds and the rational portfolio, 2nd, 3rd different risk preferences total expense ratio (TER), 2nd versus mutual fund returns over time world equities, 2nd see also ETFs (exchange traded funds); index funds India government bonds inflation earnings from minimal risk bonds inflation-adjusted government bonds inflation-protected bonds returns on world equities information/research costs institutional investors insurance buying deposit insurance schemes intangible assets interest rates cash deposits in banks government bonds, 2nd international investment investment allocations adding other government and corporate bonds and financial planning, 2nd, 3rd flexibility of financial goals life stages rebalancing your portfolio, 2nd investment edge, 2nd absence of, 2nd adding up the costs asset classes to avoid and commodities trading, 2nd and the competition different ways of having and expenses and performance picking your moment and private investments and the rational portfolio reconsidering your edge and world equities ‘invisible hand’ of the market IOUs (promissory notes) IRR (internal rate of return) annuities, 2nd iShares, 2nd Ishikawa, Tets How I Caused the Credit Crunch Japan commodities trading government bonds Nikkei index jewellery leverage ETFs and mortgages portfolios liabilities and the rational portfolio life insurance, 2nd life stages and financial planning liquidity equity portfolio and ‘risky’ bonds and ETFs minimal risk and private investments and the rational portfolio, 2nd, 3rd returns on illiquid investments selling your investment, 2nd localised risks avoiding and noninvestment assets Madoff, Bernie market capitalisation and world equities, 2nd market efficiency and inefficiency Mexico government bonds Microsoft investors, 2nd, 3rd and liquidity, 2nd mid-life savers minimal risk assets, 2nd adding other bonds to corporate bonds, 2nd, 3rd government bonds, 2nd adjusting the risk profile asset classes to avoid buying and diversification and equity markets ETFs and financial planning 50/50 split with world equities, 2nd, 3rd allocations government bonds earnings inflation-protected time horizons of inflationprotected bonds and liquidity as optimal portfolio and portfolio theory, 2nd in the rational portfolio, 2nd, 3rd, 4th, 5th, 6th real return expectations and world equities, 2nd Morgan Stanley mortgages and currency matching and leverage MSCI World Index, 2nd, 3rd, 4th mutual funds fees and performance, 2nd and index trackers national economies and equity market risk OEICs (openended investment companies) oil trading, 2nd optimal portfolio theory minimal risk asset past performance and future performance Paulson, John pension funds, 2nd, 3rd benefits and charges defined benefits schemes underfunded performance and fees index trackers versus active managers versus mutual funds portfolio theory and government bonds optimal and the rational investor price impact private equity capital, 2nd private investments, 2nd and liquidity privatisations and world equities professional investment managers property market investments, 2nd avoiding and financial disasters institutional investors and liquidity and the rational portfolio US subprime housing markets, 2nd, 3rd rational investing, 2nd core of ongoing tasks of rational portfolio adding other bonds to adjusting allocations and equity risk return expectations asset classes to avoid assets and liabilities assets split checklist corporate bonds, 2nd diversification financial benefits of and financial disasters geographical diversification government bonds, 2nd, 3rd, 4th, 5th implementation incorporating other assets and investment edge key components of a and liquidity, 2nd, 3rd and pension plans and portfolio theory and risk preferences risk/return profile, 2nd, 3rd, 4th tailoring to specific needs and circumstances tax adjustments tax benefits of holding and tax efficiency, 2nd, 3rd, 4th world equities, 2nd, 3rd, 4th see also minimal risk assets rebalancing your portfolio ticket size REITs (Real Estate Investment Trusts) residential property market retirees investment allocation retirement annuities and financial planning risk cash deposits credit risk and corporate bonds of equity markets equity risk premium high risk preferences and longterm financial planning, 2nd and the optimised market and the rational portfolio, 2nd, 3rd asset split risk preferences risk expertise websites risk surveys risk/return profile equity markets and financial planning, 2nd, 3rd and long-term financial planning minimal risk assets adding government and corporate bonds to pension plans and portfolio theory and the rational portfolio, 2nd, 3rd, 4th, 5th rebalancing your portfolio world equities riskless investment choice, 2nd S&P 500 index and the CRB Commodity index Index Tracker Portfolio standard deviation stocks volatility savings ‘doing nothing’ with and long-term financial planning life stages SD see standard deviation (SD) selling investments and liquidity software packages Spain government bonds standard deviation (SD) building your savings and equity market risk, 2nd, 3rd synthetic ETFs Taleb, Nassim Nicholas The Black Swan, 2nd tangency points tangible assets tax efficient proxies tax wrappers, 2nd taxes, 2nd advisers or accountants questions to ask benefits of the rational portfolio capital gains tax (CGT), 2nd, 3rd, 4th creating trading lots and financial disaster and pension plans, 2nd rational portfolio adjustment realising losses against tax advice websites tax efficiency and the rational portfolio, 2nd, 3rd, 4th tax schemes tax-sheltered or optimised products transaction tax, 2nd technology-focused funds, 2nd TER (total expense ratio), 2nd This Time is Different: Eight Centuries of Financial Folly (Reinhart and Rogoff) total expense ratio (TER), 2nd transaction taxes, 2nd, 3rd transfer charges turnover costs unit trusts, 2nd United Kingdom bank deposits and credit guarantee equities government bonds credit rating earnings from sterling investors United States corporate bonds, 2nd Dow Jones index, 2nd equity market, 2nd risk, 2nd, 3rd and total expense ratio government bonds credit ratings dollar investors earnings from versus property investment sub-prime housing market, 2nd, 3rd Vanguard, 2nd, 3rd, 4th, 5th, 6th FTSE AllShare index venture capital, 2nd Virgin FTSE All-Share Tracker fund volatility and financial planning predicting future Waal, Edmund de The Hare with Amber Eyes world equities adjusting the rational portfolio alternative weightings defining diversification benefits, 2nd, 3rd ETFs expected returns and financial planning 50/50 split with minimal risk assets, 2nd, 3rd investment allocation and high risk preferences indices liquidity of market value and minimal risk assets, 2nd overweighing ‘home’ equities and portfolio theory and the rational portfolio, 2nd, 3rd, 4th allocations risk preferences real return expectations US market, 2nd ‘Investing Demystified delivers, with great clarity and lucidity, the best possible advice you can get when it comes to personal investments and financial planning.’

Mastering Book-Keeping: A Complete Guide to the Principles and Practice of Business Accounting by Peter Marshall

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accounting loophole / creative accounting, asset allocation, double entry bookkeeping, information retrieval, intangible asset, the market place

Public companies listed on UK or other European stock exchanges already use the international terms such as: UK term Profit and loss account Debenture Turnover Stock Debtors Creditors Profit and loss account b/d Provision for doubtful debts Long-term liabilities International term Income statement Loan note Revenue Inventory Accounts receivable Accounts payable Retained profits Allowance for doubtful debts Non-current liabilities 147 ARMSTRONG ENGINEERING BALANCE SHEET as at 31 Mar 200X INTANGIBLE ASSETS Goodwill 5,000 FIXED ASSETS Freehold premises Plant and machinery Less depreciation 35,000 Motor van Less depreciation Total fixed assets CURRENT ASSETS Stock Debtors Less provision for doubtful debts Cash at bank Cash in hand 15,000 750 14,250 8,000 1,600 6,400 55,650 60,650 9,000 10,000 2,000 8,000 10,000 50 27,050 Less CURRENT LIABILITIES Creditors Working capital TOTAL ASSETS 12,000 15,050 75,700 Financed by CAPITAL Opening balance Add profit for period 63,050 19,100 82,150 6,450 75,700 Less drawings TOTAL LIABILITIES Fig. 98.

Assuming that the creditors had agreed to his transferring to the limited company the responsibility for the debts he had, as a sole proprietor, personally owed to them (by no means always the case), the opening balance sheet of the new company would be as shown below. ARMSTRONG ENGINEERING LTD BALANCE SHEET as at 31 Mar 200X INTANGIBLE ASSETS Goodwill 5,000 FIXED ASSETS Freehold premises Plant and machinery Motor van Total fixed assets 35,000 14,250 6,400 CURRENT ASSETS Stock Debtors Cash at bank Cash in hand 55,650 60,650 9,000 8,000 10,000 50 27,050 Less CURRENT LIABILITIES Creditors Working capital 12,000 15,050 75,700 Financed by Authorised share capital 100,000 Ordinary shares @ £1.00 each 100,000 Issued Share Capital 75,700 Ordinary shares @ £1.00 each 75,700 Fig. 99.

(2) Define the term Shareholders’ Funds (what does it comprise on a Ltd Company Balance Sheet)? Share capital and reserves (3) Debentures are a less risky investment than ordinary shares as they carry a fixed rate of interest. (4) Goodwill shown on a Ltd Company Balance Sheet would be shown as an intangible asset. (5) When comparing a Ltd Company’s current assets with its current liabilities it is a measure of liquidity. (6) In a partnership details of interest on capital, salaries, interest on drawings and shares of profit would be stated in the: partnership agreement / deed of partnership. (7) Why would a Revaluation Reserve appear on the Balance Sheet of a Ltd Company?


pages: 287 words: 82,576

The Complacent Class: The Self-Defeating Quest for the American Dream by Tyler Cowen

affirmative action, Affordable Care Act / Obamacare, Airbnb, Alvin Roth, assortative mating, Bernie Sanders, Black Swan, business climate, circulation of elites, clean water, David Graeber, declining real wages, deindustrialization, desegregation, Donald Trump, drone strike, East Village, Elon Musk, Ferguson, Missouri, Francis Fukuyama: the end of history, gig economy, Google Glasses, Hyman Minsky, Hyperloop, income inequality, intangible asset, Internet of things, inventory management, knowledge worker, labor-force participation, labour mobility, low skilled workers, Marc Andreessen, Mark Zuckerberg, medical residency, meta analysis, meta-analysis, obamacare, offshore financial centre, Paul Samuelson, Peter Thiel, purchasing power parity, Richard Florida, security theater, sharing economy, Silicon Valley, Silicon Valley ideology, Skype, South China Sea, Steven Pinker, Stuxnet, The Great Moderation, total factor productivity, Tyler Cowen: Great Stagnation, upwardly mobile, Vilfredo Pareto, working-age population, World Values Survey

The result is that some markets have a greater element of winner-take-all, as is suggested by the data on corporate valuations. If we look at the S&P 500 stock index in 1975, the category of “intangible assets” accounted for about 18 percent of the value of American capital. Most American capital was in physical assets, such as machines and factories, tangible items that can be purchased and replicated if need be. Today, over 80 percent of the value of the S&P 500 is due to intangible assets, including trademarks, patents, brand name reputation, consumer goodwill, and other factors. That’s a big leap upward, from below 20 percent to above 80 percent for the value of corporate intangibles.

Hirst, Damien history, models of homeownership Hsieh, Chang-Tai Huang, Te-Sheng Huckleberry Finn (Twain) Hurricane Katrina I Love Lucy (sit-com) immigration African and European Union and labor force and mobility and segregation See also migration incarceration crisis inequality income and mobility and returns on capital information technology (IT) and the Complacency Class and instability and matching and policing and productivity and segregation and social protest infovores infrastructure innovation and crime and culture decline in historical trends and living standards and matching and mobility and monopoly and productivity R&D and segregation and technology instability and crime domestic and dynamic future global and government and higher education See also social protests and riot intangible assets International Monetary Fund internet dating investment drought Ip, Greg Iran Iraq ISIS iTunes Jasper, James M. Jim Crow era job creation job switching Johnson, Ron Kalia, Ajay Kalven, Harry, Jr. Katz, Lawrence Kent State shootings Kerouac, Jack Keynes, John Maynard King, Martin Luther, Jr.


pages: 289 words: 113,211

A Demon of Our Own Design: Markets, Hedge Funds, and the Perils of Financial Innovation by Richard Bookstaber

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affirmative action, Albert Einstein, asset allocation, backtesting, beat the dealer, Black Swan, Black-Scholes formula, Bonfire of the Vanities, butterfly effect, commoditize, commodity trading advisor, computer age, computerized trading, disintermediation, diversification, double entry bookkeeping, Edward Lorenz: Chaos theory, Edward Thorp, family office, financial innovation, fixed income, frictionless, frictionless market, George Akerlof, implied volatility, index arbitrage, intangible asset, Jeff Bezos, John Meriwether, London Interbank Offered Rate, Long Term Capital Management, loose coupling, margin call, market bubble, market design, merger arbitrage, Mexican peso crisis / tequila crisis, moral hazard, Myron Scholes, new economy, Nick Leeson, oil shock, Paul Samuelson, Pierre-Simon Laplace, quantitative trading / quantitative finance, random walk, Renaissance Technologies, risk tolerance, risk/return, Robert Shiller, Robert Shiller, rolodex, Saturday Night Live, selection bias, shareholder value, short selling, Silicon Valley, statistical arbitrage, The Market for Lemons, time value of money, too big to fail, transaction costs, tulip mania, uranium enrichment, William Langewiesche, yield curve, zero-coupon bond, zero-sum game

But the relationship between the cost of assets and the value of the enterprise does not work as well for companies with intangible assets, and these increasingly form the basis of 137 ccc_demon_125-142_ch07.qxd 2/13/07 A DEMON 1:46 PM OF Page 138 OUR OWN DESIGN economic value today. Intangible assets—ideas, patents, proprietary software, brand names, trade secrets, trademarks, and copyrights—have values that cannot be extracted from their costs. The reach of intangibles is extensive; as Charles Leadbeater has said, “modern corn is 80 percent science and 20 percent corn,” alluding to the extensive lab development behind hybrid corn seed. By some estimates, intangible assets now make up 80 percent of the value of the S&P 500.

By some estimates, intangible assets now make up 80 percent of the value of the S&P 500. They are what provide companies with their franchise value, sometimes bordering on monopolistic market position. Intangible assets are the product of imaginative people who walk out the door every night; others are formulas locked in a vault. And in many cases, once they have been created and the intellectual property has been claimed, they cannot be reproduced at any price. One simple indication that the current accounting conventions do not reflect the actual value of the enterprise is the disconnect that has appeared between market and book value. In the industrial era of the railroads, market value was all but defined by book value.


pages: 478 words: 126,416

Other People's Money: Masters of the Universe or Servants of the People? by John Kay

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Affordable Care Act / Obamacare, asset-backed security, bank run, banking crisis, Basel III, Bernie Madoff, Big bang: deregulation of the City of London, bitcoin, Black Swan, Bonfire of the Vanities, bonus culture, Bretton Woods, call centre, capital asset pricing model, Capital in the Twenty-First Century by Thomas Piketty, cognitive dissonance, corporate governance, Credit Default Swap, cross-subsidies, dematerialisation, diversification, diversified portfolio, Edward Lloyd's coffeehouse, Elon Musk, Eugene Fama: efficient market hypothesis, eurozone crisis, financial innovation, financial intermediation, financial thriller, fixed income, Flash crash, forward guidance, Fractional reserve banking, full employment, George Akerlof, German hyperinflation, Goldman Sachs: Vampire Squid, Growth in a Time of Debt, income inequality, index fund, inflation targeting, information asymmetry, intangible asset, interest rate derivative, interest rate swap, invention of the wheel, Irish property bubble, Isaac Newton, John Meriwether, light touch regulation, London Whale, Long Term Capital Management, loose coupling, low cost carrier, M-Pesa, market design, millennium bug, mittelstand, money market fund, moral hazard, mortgage debt, Myron Scholes, new economy, Nick Leeson, Northern Rock, obamacare, Occupy movement, offshore financial centre, oil shock, passive investing, Paul Samuelson, peer-to-peer lending, performance metric, Peter Thiel, Piper Alpha, Ponzi scheme, price mechanism, purchasing power parity, quantitative easing, quantitative trading / quantitative finance, railway mania, Ralph Waldo Emerson, random walk, regulatory arbitrage, Renaissance Technologies, rent control, Richard Feynman, risk tolerance, road to serfdom, Robert Shiller, Robert Shiller, Ronald Reagan, Schrödinger's Cat, shareholder value, Silicon Valley, Simon Kuznets, South Sea Bubble, sovereign wealth fund, Spread Networks laid a new fibre optics cable between New York and Chicago, Steve Jobs, Steve Wozniak, The Great Moderation, The Market for Lemons, the market place, The Myth of the Rational Market, the payments system, The Wealth of Nations by Adam Smith, The Wisdom of Crowds, Tobin tax, too big to fail, transaction costs, tulip mania, Upton Sinclair, Vanguard fund, Washington Consensus, We are the 99%, Yom Kippur War

But you will also want to include many assets that are valuable and even tradable, but which are not things you can easily touch and feel: a copyright, part of the radio spectrum, an entitlement to walk across someone’s land or to emit smoke or extract water. Some assets – such as software – are on the borderline between the tangible and the intangible. Many goods and services have dematerialised. Possession of knowledge is as important as the ownership of physical property. These intangible assets have far greater significance today than Marx imagined (with wideranging implications). But this extension of the concept of capital should not – at least for present purposes – be taken too far. Economists talk about ‘human capital’, derived from education and training, which although not tradable is manifestly valuable.

Apple’s future customers do not, however, report any matching liability, and perhaps they should not, since they will buy the company’s products only if they are delighted to do so. The difference between the value of Apple as a company and the value of its physical assets might be quantified as an ‘intangible asset’, the value of the ‘Apple brand’. But this reasoning is essentially circular. The ‘Apple brand’ is no more, or less, than the company, its products and its operations. The ‘brand value’ is simply a number calculated to make the stock market value of the company and the book value of its assets the same.2 To attach value to Apple stock far in excess of Graham’s book value is to recognise that a modern economy rests on design and ideas rather than on physical activity.

Indeed the scale of demand for government funding and higher loan-to-value mortgages requires such funding. Asset managers should occupy the same central role in the investment channel that banks enjoy in the deposit channel. The goals are similar. Good and stable returns for savers, economic and financial stability. Control of costs. Flows of information about physical and intangible assets and their management, which promote economic efficiency for the benefit of savers, consumers, employees and taxpayers. Managed intermediation by asset managers, which has no need of daily valuation and redemption, potentially offers greater flexibility and the opportunity for asset managers and their customers to escape the tyranny of public markets and the predation of the high-frequency trader.

Culture and Prosperity: The Truth About Markets - Why Some Nations Are Rich but Most Remain Poor by John Kay

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Albert Einstein, Asian financial crisis, Barry Marshall: ulcers, Berlin Wall, Big bang: deregulation of the City of London, California gold rush, complexity theory, computer age, constrained optimization, corporate governance, corporate social responsibility, correlation does not imply causation, Daniel Kahneman / Amos Tversky, David Ricardo: comparative advantage, Donald Trump, double entry bookkeeping, double helix, Edward Lloyd's coffeehouse, equity premium, Ernest Rutherford, European colonialism, experimental economics, Exxon Valdez, failed state, financial innovation, Francis Fukuyama: the end of history, George Akerlof, George Gilder, greed is good, Gunnar Myrdal, haute couture, illegal immigration, income inequality, industrial cluster, information asymmetry, intangible asset, invention of the telephone, invention of the wheel, invisible hand, John Meriwether, John Nash: game theory, John von Neumann, Kenneth Arrow, Kevin Kelly, knowledge economy, labour market flexibility, late capitalism, light touch regulation, Long Term Capital Management, loss aversion, Mahatma Gandhi, market bubble, market clearing, market fundamentalism, means of production, Menlo Park, Mikhail Gorbachev, money: store of value / unit of account / medium of exchange, moral hazard, Myron Scholes, Naomi Klein, Nash equilibrium, new economy, oil shale / tar sands, oil shock, Pareto efficiency, Paul Samuelson, pets.com, popular electronics, price discrimination, price mechanism, prisoner's dilemma, profit maximization, purchasing power parity, QWERTY keyboard, Ralph Nader, RAND corporation, random walk, rent-seeking, Right to Buy, risk tolerance, road to serfdom, Ronald Coase, Ronald Reagan, second-price auction, shareholder value, Silicon Valley, Simon Kuznets, South Sea Bubble, Steve Jobs, telemarketer, The Chicago School, The Death and Life of Great American Cities, The Market for Lemons, The Nature of the Firm, the new new thing, The Predators' Ball, The Wealth of Nations by Adam Smith, Thorstein Veblen, total factor productivity, transaction costs, tulip mania, urban decay, Vilfredo Pareto, Washington Consensus, women in the workforce, yield curve, yield management

It is possible to estimate returns on human capital-the value of additional earnings that people can expect from an investment in schooling or an MBA. 8 Successful businesses-businesses with competitive advantages from distinctive capabilities-are worth more than the value of their buildings, their plant, and their stocks. Accountants used to call this the goodwill of the business. For the shop, the pub, or the small manufacturer, that was an appropriate term. The intangible asset was the loyalty of satisfied customers. The modern economy has many different kinds of distinctive capabilities and so many different kinds of intangible assets: competitive advantages based on brands or reputations with groups of customers; strategic assets such as patents and copyrights or local monopolies; structures of relationships with suppliers or employees. "Our people are our greatest asset" is a cliche of company reports, and there is a lot in it.

But there is desperation in the term social capital. Putnam fears he can attract the attention of his audience only by expressing himself in economic terms. There is much to be said for reserving the term capital for what can be bought and sold in the market for capital. Some, but not many, intangible assets meet this test; human capital does not, and social capital certainly not. Education and skills are an asset and so is the glue that holds society together, but they are not in this sense capital. {15} ........................... . General Equilibrium The Coordination Problem Revisited ••••••••••••••••••••••••••••••••••••• It is now time to go back to the problem posed in chapter 11.

Insider trading is the use of information gained through a relationship with the firm-e.g., as director or adviser. It is now illegal in Britain, the United States, and many other countries. 8. See, for example, estimates of rates of return to higher education in Harkness and Machin (1999). 9. These "intangible assets" are the capitalized value of rents arising from competitive advantages. This is why "Tobin's q" -the ratio of the market value of a company to its tangible assets-can appropriately exceed one. 10. Putnam (2000). 11. "Americans of all ages, all conditions, all minds, constantly unite." Tocqueville (1835), 489.


pages: 317 words: 87,566

The Happiness Industry: How the Government and Big Business Sold Us Well-Being by William Davies

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1960s counterculture, Airbnb, business intelligence, Cass Sunstein, corporate governance, dematerialisation, experimental subject, Exxon Valdez, Frederick Winslow Taylor, Gini coefficient, income inequality, intangible asset, invisible hand, joint-stock company, lifelogging, market bubble, mental accounting, nudge unit, Philip Mirowski, profit maximization, randomized controlled trial, Richard Thaler, road to serfdom, Ronald Coase, Ronald Reagan, science of happiness, selective serotonin reuptake inhibitor (SSRI), sentiment analysis, sharing economy, Slavoj Žižek, smart cities, Smart Cities: Big Data, Civic Hackers, and the Quest for a New Utopia, Steve Jobs, The Chicago School, The Spirit Level, theory of mind, urban planning, Vilfredo Pareto

In the mental and moral world indeed he may produce new ideas; but when he is said to produce material things, he really only produces utilities; or in other words, his efforts and sacrifices result in changing the form or arrangement of matter to adapt it better for the satisfaction of wants.18 During the 1980s, it became fashionable to declare that capitalism had suddenly become based upon ‘knowledge’, ‘intangible assets’ and ‘intellectual capital’, following the demise of many heavy industries in the West. In truth, the economy was reconceived as a phenomenon of the mind a whole century earlier. Capitalism became oriented around consumer desire, directed by that most alluring spokesman for our silent inner feelings, money.

By the 1980s, an employee’s customer care, service ethic and enthusiasm were not simply mental resources, which existed to help churn out more products: they were the product. The importance of employee happiness and psychological engagement becomes all the greater once corporations are in the business of selling ideas, experiences and services. Businesses speak of ‘intangible assets’ and ‘human capital’ in the hope of capturing this amorphous workplace ethos, but in practice it is nothing which resembles either an asset or capital. Some other way of conceiving of work is required. Secondly, the concept of health started to undergo some profound changes. In 1948, the newly founded World Health Organization redefined health as ‘a state of complete physical, mental and social well-being’ – an almost utopian proposition that few of us ever attain for very long.

., 28, 30 The Hidden Persuaders (Packard), 73, 74 Hilton, Steve, 191 homo economicus, 61–2 Hoover, Herbert, 100 HOPE (Hawaii’s Opportunity Probation with Enforcement) programme, 235 Hospital Anxiety and Depression Scale, 175 Hsieh, Tony, 113 Hudson Yards real estate project (NYC), 233–4, 235, 237 human capital, 126, 151, 160 human existence, ideal form of, 112 human optimality/optimization, 5, 129, 274 human resource management, 189, 238, 276 human resources profession, 108, 133 Hume, David, 14 Hyde Park (Chicago), 148 idealism, 27, 181 Ignite U, 134 imipramine, 162 income inequality, 34, 144. See also economic inequality Increasing Access to Psychological Therapies programme, 111 indices, 176 individual choice, theory of, 59 Influence: The Psychology of Persuasion (Cialdini), 238 Infoglut (Andrejevic), 260 Ingeus, 110, 112 insurance fraud, 42, 44, 45, 46 intangible assets, 126 internet addiction, 204–5, 207 internships, 274 interventions, 17, 20, 35, 108, 111, 265 Introduction to the Principles of Morals and Legislation (Bentham), 22 introspection, 22, 48, 63, 64, 78, 86 iPhone 6, 26, 135 iproniazid, 162 J. Walter Thompson (JWT), 93, 94, 95, 97, 215–16, 217, 218, 220, 225, 242 James, William, 83, 84, 86 Jawbone UP, 240 Jennings, Richard, 49, 50, 51 Jevons, William Stanley and Chicago School of economics, 150–1 childhood, 47–8 on commodities, 58 as converting economics into form of psychological mathematics, 116 on decision-making, 59 as fascinated with machine-like qualities of the mind, 56 on happiness, 113 on how we experience pleasures and pains, 65, 66 as imagining mind through metaphors of geometry and mechanics, 62 introduction of to economics, 60 on the mind as mechanical balancing device, 264 on money as yielding happiness, 114 and natural sciences, 59 as obsessed with understanding fluctuations in pleasure, 84 as one developer of theory of utility maximization, 62 on pleasure and pain having own discernible quantities, 61 reading of economics, 50, 55 representation of capitalism, 57 on true comprehension of Value, 54 as turning market into mind-reading device, 57 vision of calculating hedonist, 56 weight-lifting experiments of, 49, 59 Jobs, Steve, 161 Johns Hopkins University, 92 Johnson & Johnson, 94 Jourard Self-Disclosure Scale, 165 Jung, Minah, 182 just noticeable difference, 30, 36, 37 justice, theory of, 62 JWT (J.


pages: 443 words: 98,113

The Corruption of Capitalism: Why Rentiers Thrive and Work Does Not Pay by Guy Standing

3D printing, Airbnb, Albert Einstein, Amazon Mechanical Turk, Asian financial crisis, asset-backed security, bank run, banking crisis, basic income, Ben Bernanke: helicopter money, Bernie Sanders, Big bang: deregulation of the City of London, bilateral investment treaty, Bonfire of the Vanities, Bretton Woods, Capital in the Twenty-First Century by Thomas Piketty, carried interest, cashless society, central bank independence, centre right, Clayton Christensen, collapse of Lehman Brothers, collective bargaining, credit crunch, crony capitalism, crowdsourcing, debt deflation, declining real wages, deindustrialization, Doha Development Round, Donald Trump, Double Irish / Dutch Sandwich, ending welfare as we know it, eurozone crisis, falling living standards, financial deregulation, financial innovation, Firefox, first-past-the-post, future of work, gig economy, Goldman Sachs: Vampire Squid, Growth in a Time of Debt, housing crisis, income inequality, information retrieval, intangible asset, invention of the steam engine, investor state dispute settlement, James Watt: steam engine, job automation, John Maynard Keynes: technological unemployment, labour market flexibility, light touch regulation, Long Term Capital Management, lump of labour, Lyft, manufacturing employment, Mark Zuckerberg, market clearing, Martin Wolf, means of production, mini-job, Mont Pelerin Society, moral hazard, mortgage debt, mortgage tax deduction, Neil Kinnock, non-tariff barriers, North Sea oil, Northern Rock, nudge unit, Occupy movement, offshore financial centre, oil shale / tar sands, open economy, openstreetmap, patent troll, payday loans, peer-to-peer lending, Plutocrats, plutocrats, Ponzi scheme, precariat, quantitative easing, remote working, rent control, rent-seeking, ride hailing / ride sharing, Right to Buy, Robert Gordon, Ronald Coase, Ronald Reagan, savings glut, Second Machine Age, secular stagnation, sharing economy, Silicon Valley, Silicon Valley startup, Simon Kuznets, sovereign wealth fund, Stephen Hawking, Steve Ballmer, structural adjustment programs, TaskRabbit, The Chicago School, The Future of Employment, the payments system, Thomas Malthus, Thorstein Veblen, too big to fail, Uber and Lyft, Uber for X, Y Combinator, zero-sum game, Zipcar

However, the global corporate landscape is changing fast. So-called ‘idea-intensive’ firms – in pharmaceuticals, media, finance and information technology – now account for 31 per cent of the profits of Western corporations, up from 17 per cent in 1999. They are global rentiers, deriving income from possession of ‘intangible assets’ such as patents, brands and copyright under a strengthened intellectual property regime constructed since the 1990s (see Chapter 2).25 And the industrialised-country share in global profits is set to decline; multinationals from emerging market economies already account for a quarter of the Fortune Global 500 biggest companies in the world and McKinsey expects them to account for half by 2025.

As WIPO noted, ‘Strong brands can create high barriers to market entry, as new competitors may not be able to bear the high advertising costs of inducing consumers to switch to their products.’31 According to WIPO, between 1987 and 2011 US investment in brands accounted for 22 per cent of all investment in intangible assets, exceeding research and development and design. Globally, companies invested $466 billion in brands in 2011 (excluding in-house investment in marketing), with US companies in the lead. The value of the top 100 global brands was $3.3 trillion in 2015.32 Brand value can be a high proportion of a firm’s market capitalisation – a third, on average, according to a study by Interbrand, but some put it much higher.33 Coca Cola’s brand may contribute one half of its market capitalisation.

Baldwin, The Copyright Wars: Three Centuries of Trans-Atlantic Battle (Princeton: Princeton University Press, 2014.) 29 ‘Academics want you to read their work for free’, The Atlantic, 26 January 2016. 30 ‘Do not enclose the cultural commons’, Financial Times, 19 April 2009. 31 WIPO, World Intellectual Property Report: Brands – Reputation and Image in the Global Market Place (Geneva: World Intellectual Property Organization, 2013). 32 BrandZ Top 100 Most Valuable Global Brands 2015 (Millward Brown, 2015). 33 Ian McClure suggests that intangible assets have risen from 20 per cent to 80 per cent of US corporate value since 1975. I. McClure, From a Patent Market for Lemons to a Marketplace for Patents: Benchmarking Intellectual Property in its Evolution to Asset Class Status, mimeo, May 2015. 34 K. Tienhaara, ‘Resisting the “law of greed”’, greenagenda.org.au, September 2015. 35 ‘Free exchange: Game of zones’, The Economist, 21 March 2015, p. 65. 36 C.


pages: 169 words: 43,906

The Website Investor: The Guide to Buying an Online Website Business for Passive Income by Jeff Hunt

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buy low sell high, Donald Trump, frictionless, frictionless market, intangible asset, medical malpractice, passive income, Ralph Waldo Emerson, Skype, software as a service

Because many of the products are digital or service-oriented, there is limited cost invested in goods sold. “The difference between a successful person and others is not a lack of strength, not a lack of knowledge, but rather a lack in will.” —Vince Lombardi Businesses have traditionally had physical and intangible assets. Websites have a third category of assets: digital assets. They are tangible because you can actually see them. You can go to a website and download the eBook or look at the pictures and read the articles. However, they are not physical, and they do not have the same level of cost as physical assets.

Other Valuation Considerations Assets sometimes come into play when valuing websites. By assets, I mean physical property that will hold much or all of its value over a long period of time. This includes typical business assets, like facilities, automobiles, tools, machines, computer equipment, and inventory. There may also be digital assets, like software, or intangible assets, like patents. However, if a piece of software purchased today with the website won’t be able to be sold a year from now, either with or apart from the website, it may not have any current appreciable value. Only ascribe value to assets if they can be sold quickly. Only ascribe value to assets if they can be sold quickly.


pages: 306 words: 78,893

After the New Economy: The Binge . . . And the Hangover That Won't Go Away by Doug Henwood

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accounting loophole / creative accounting, affirmative action, Asian financial crisis, barriers to entry, borderless world, Branko Milanovic, Bretton Woods, capital controls, corporate governance, corporate raider, correlation coefficient, credit crunch, deindustrialization, dematerialisation, deskilling, ending welfare as we know it, feminist movement, full employment, gender pay gap, George Gilder, glass ceiling, Gordon Gekko, greed is good, half of the world's population has never made a phone call, income inequality, indoor plumbing, intangible asset, Internet Archive, job satisfaction, joint-stock company, Kevin Kelly, labor-force participation, liquidationism / Banker’s doctrine / the Treasury view, manufacturing employment, means of production, minimum wage unemployment, Naomi Klein, new economy, occupational segregation, pets.com, profit maximization, purchasing power parity, race to the bottom, Ralph Nader, Robert Gordon, Robert Shiller, Robert Shiller, Ronald Reagan, shareholder value, Silicon Valley, Simon Kuznets, statistical model, structural adjustment programs, Telecommunications Act of 1996, telemarketer, The Bell Curve by Richard Herrnstein and Charles Murray, The Wealth of Nations by Adam Smith, total factor productivity, union organizing, War on Poverty, women in the workforce, working poor, Y2K, zero-sum game

One of the boldest is Baruch Lev, an NYU accounting professor who shed his fields reputation for caution, rudely violating Italo Svevo's dictum that there's no room for dreams in double entry. (No marginal figure, in August 2000 Lev won the aptly named Wildman Medal, given by the American Accounting Association, for making the year's greatest contribution to his profession.) Lev dreams in numbers—or, more precisely, he wants to put numbers on "intangible assets, ideas, brands, ways of working, and franchises," as an introduction to an interview with Lev in the New Economy bible Fast Company put it (Webber 2000). Lev argues that the 500-year-old discipline, invented by the 14th-century Venetian mathematician Luca PacioH, is simply inadequate to the ineffable glories of 21st-century capitalism.Today, knowledge, not things, rule.

.^ That's what drove the stock-market rally, promoted the exuberant mood, and provided the cash to keep things going. New Economists would argue that conventional measures of profit- After the New Economy profit rate, 1952-2002 nonfinancial corporations 07o ''■'■■"''' 1952 1958 1964 1970 1976 1982 1988 1994 2000 ability shown here—^profits divided by the value of the capital stock—undervalues intangible assets like brand names, patents, and ways of working. But to include them as capital would lower the profit rate—and since the value of such intangibles has pu-tatively been rising, adding them to capital would reduce the great upsurge of the 1980s and 1990s. Conceptually, these intangibles seem instead like ways of increasing profit—though often at the expense of competitors.


pages: 263 words: 75,455

Quantitative Value: A Practitioner's Guide to Automating Intelligent Investment and Eliminating Behavioral Errors by Wesley R. Gray, Tobias E. Carlisle

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activist fund / activist shareholder / activist investor, Albert Einstein, Andrei Shleifer, asset allocation, Atul Gawande, backtesting, beat the dealer, Black Swan, capital asset pricing model, Checklist Manifesto, cognitive bias, compound rate of return, corporate governance, correlation coefficient, credit crunch, Daniel Kahneman / Amos Tversky, discounted cash flows, Edward Thorp, Eugene Fama: efficient market hypothesis, forensic accounting, hindsight bias, intangible asset, Louis Bachelier, p-value, passive investing, performance metric, quantitative hedge fund, random walk, Richard Thaler, risk-adjusted returns, Robert Shiller, Robert Shiller, shareholder value, Sharpe ratio, short selling, statistical model, survivorship bias, systematic trading, The Myth of the Rational Market, time value of money, transaction costs

Asset quality is measured as the ratio of noncurrent assets other than plant, property and equipment to total assets. AQI measures the proportion of total assets where future benefits are more opaque and the assets are considered intangible. The measure may indicate attempts at cost deferrals in the form of intangible assets on the balance sheet. SGI = sales growth index. Ratio of sales in year t to sales in year t − 1. Sales growth does not indicate manipulation; however, high sales growth does create certain expectations for management—many of which are unsustainable. Managers who face decelerating fundamentals and who currently manage high-expected-growth firms have high incentive to manipulate earnings.

The BM performance pattern offers no evidence for the hypothesis that balance-sheet-based value measures perform better than income or cash flow statement TABLE 7.5 Price Ratio Performance During Economic Expansions value metrics when the economy generates more returns from tangible assets (e.g., property, plant and equipment) relative to intangible assets (e.g., human capital, research and development, and brand equity). Overall, there is little evidence that a particular price ratio delivers better performance than all other metrics during expanding economic periods. Table 7.6 again shows no clear evidence that a particular price ratio consistently outperforms all other strategies in contracting economic periods.


pages: 515 words: 126,820

Blockchain Revolution: How the Technology Behind Bitcoin Is Changing Money, Business, and the World by Don Tapscott, Alex Tapscott

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Airbnb, altcoin, asset-backed security, autonomous vehicles, barriers to entry, bitcoin, blockchain, Bretton Woods, business process, Capital in the Twenty-First Century by Thomas Piketty, carbon footprint, clean water, cloud computing, cognitive dissonance, commoditize, corporate governance, corporate social responsibility, creative destruction, Credit Default Swap, crowdsourcing, cryptocurrency, disintermediation, distributed ledger, Donald Trump, double entry bookkeeping, Edward Snowden, Elon Musk, Erik Brynjolfsson, ethereum blockchain, failed state, fiat currency, financial innovation, Firefox, first square of the chessboard, first square of the chessboard / second half of the chessboard, future of work, Galaxy Zoo, George Gilder, glass ceiling, Google bus, Hernando de Soto, income inequality, informal economy, information asymmetry, intangible asset, interest rate swap, Internet of things, Jeff Bezos, jimmy wales, Kickstarter, knowledge worker, Kodak vs Instagram, Lean Startup, litecoin, Lyft, M-Pesa, Marc Andreessen, Mark Zuckerberg, Marshall McLuhan, means of production, microcredit, mobile money, money market fund, Network effects, new economy, Oculus Rift, off grid, pattern recognition, peer-to-peer, peer-to-peer lending, peer-to-peer model, performance metric, Peter Thiel, planetary scale, Ponzi scheme, prediction markets, price mechanism, Productivity paradox, QR code, quantitative easing, ransomware, Ray Kurzweil, renewable energy credits, rent-seeking, ride hailing / ride sharing, Ronald Coase, Ronald Reagan, Satoshi Nakamoto, Second Machine Age, seigniorage, self-driving car, sharing economy, Silicon Valley, Skype, smart contracts, smart grid, social graph, social software, Stephen Hawking, Steve Jobs, Steve Wozniak, Stewart Brand, supply-chain management, TaskRabbit, The Fortune at the Bottom of the Pyramid, The Nature of the Firm, The Wisdom of Crowds, transaction costs, Turing complete, Turing test, Uber and Lyft, unbanked and underbanked, underbanked, unorthodox policies, wealth creators, X Prize, Y2K, Zipcar

“There will always be those who refuse to follow the protocol, who abscond and hide secret value in parallel off-grid networks, what we call the black market, off balance sheet, shadow banking.”69 How does one reconcile non-transaction-based accounting measures, particularly the recognition of intangible assets? How are we going to track intellectual property rights, brand value, or even celebrity status—think Tom Hanks? How many bad films must this Oscar winner make before the blockchain impairs the Hanks brand value? The argument for triple-entry accounting is not against traditional accounting.

Sure, the networks have enabled companies to outsource to low-cost geographies. But the Internet dropped transaction costs inside the firm as well. From Hierarchy to Monopoly So companies today remain hierarchies, and most activities occur within corporate boundaries. Managers still view them as a better model for organizing talent and intangible assets such as brands, intellectual property, knowledge, and culture, as well as for motivating people. Corporate boards still compensate executives and CEOs far beyond any reasonable measure of the value they create. Not incidentally, the industrial complex continues to generate wealth, but not prosperity.

Through smart contracts, an entrepreneur could automate many aspects of a company’s operations: purchase orders, payroll, interest on debt, and financial audits in real time. Two new models for individual entrepreneurship will gain traction: METERING EXCESS CAPACITY. From the centralized sharing economy to the distributed metering economy, individuals will be able to loan out their spare beds, wheelbarrows, oxen, and other tangible and intangible assets to peers in a network based on reputation scores. Blockchain enables previously impossible revenue streams such as metering Wi-Fi, electricity generated from roof-installed solar panels, Netflix subscriptions, latent computing power in your phone, and other household appliances—all through micropayments and smart contracts.


pages: 287 words: 44,739

Guide to business modelling by John Tennent, Graham Friend, Economist Group

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correlation coefficient, discounted cash flows, double entry bookkeeping, intangible asset, iterative process, purchasing power parity, RAND corporation, shareholder value, the market place, time value of money

But this ignores the fact that the benefit of most assets is more likely to be derived over time rather than moving with market values. The method used is to spread the cost of the asset over an estimated period of benefit or useful economic life. This spreading concept, or matching of cost against the years that derive benefit, is known as “depreciation” for tangible assets and “amortisation” for intangible assets. A common exception to this principle is land, which, unless the land value is being eroded by the business (such as is in mining), need not be depreciated. In most companies, the administration required for capitalising and depreciating assets means small assets are often written off on purchase.

A decline in the ratio may indicate that the company is over-provided with assets and could free up capital with some disposals. Rapid growth in the ratio may indicate that capacity constraints have been reached and more time for maintenance and repairs should be considered. The ratio is normally confined to just tangible fixed assets – the ones used operationally. Intangible assets included in the ratio (or evaluated individually) can give rise to some strange results over the life of a model which do not help in interpreting performance. For example, goodwill may be amortised and hence the ratio is likely to rise year on year for this reason alone. Working capital turnover This measure indicates how well the cash cycle of stock/inventory, debtors/receivables and creditors/payables is managed. 202 16.

How to Form Your Own California Corporation by Anthony Mancuso

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corporate governance, corporate raider, distributed generation, estate planning, information retrieval, intangible asset, passive income, passive investing, Silicon Valley

In return for the issuance of           (number of shares)           3 shares of stock of the corporation, transferor(s) hereby sell(s), assign(s), and transfer(s) to the corporation all right, title, and interest in the following property: All the tangible assets listed on the inventory attached to this bill of sale and all stock in trade, goodwill, leasehold interests, trade names, and other intangible assets [except           (any nontransferred  (address assets shown here)       4] of      (name of prior business)      5, located at      6. of prior business)   In return for the transfer of the above property to it, the corpo­­ ration hereby agrees to assume, pay, and discharge all debts, ­duties and obligations that appear on the date of this agree­ment on the books and owed on account of said business [except                      (any unassumed ­ liabilities shown here)           7].

In return for the issuance of __________________________________ shares of stock of the corporation, transferor(s) hereby sell(s), assign(s), and transfer(s) to the corporation all right, title, and interest in the following property: All the tangible assets listed on the inventory attached to this Bill of Sale and all stock in trade, goodwill, leasehold interests, trade names, and other intangible assets except _____________________________ _______________________________________________________________________ _______________________________________________________________________ _______________________________________________________________________ _______________________________________________________________________ of ________________________________________________________ , located at ______________________________________________________________________ .


pages: 368 words: 32,950

How the City Really Works: The Definitive Guide to Money and Investing in London's Square Mile by Alexander Davidson

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accounting loophole / creative accounting, algorithmic trading, asset allocation, asset-backed security, bank run, banking crisis, barriers to entry, Big bang: deregulation of the City of London, capital asset pricing model, central bank independence, corporate governance, Credit Default Swap, dematerialisation, discounted cash flows, diversified portfolio, double entry bookkeeping, Edward Lloyd's coffeehouse, Elliott wave, Exxon Valdez, forensic accounting, global reserve currency, high net worth, index fund, inflation targeting, intangible asset, interest rate derivative, interest rate swap, John Meriwether, London Interbank Offered Rate, Long Term Capital Management, margin call, market fundamentalism, Nick Leeson, North Sea oil, Northern Rock, pension reform, Piper Alpha, price stability, purchasing power parity, Real Time Gross Settlement, reserve currency, Right to Buy, shareholder value, short selling, The Wealth of Nations by Adam Smith, transaction costs, value at risk, yield curve, zero-coupon bond

Sometimes, the integration of two companies can be problematic and not all deals enhance shareholder value, at least in the short term. Disclosure and regulation When acquisitions take place, it is hard to assess their value creation due to significant goodwill expenditure, coupled with under-reporting of intangible assets and a general lack of disclosure, according to Intangible Business, a brand valuation consultancy. The FTSE 100 reported about £40 billion spent on acquisitions in 2006, and over half of this expenditure was put down to goodwill, according to a survey by Intangible Business. One conclusion was that the International Financial Reporting Standards (IFRS) 3, the accounting standard for business combinations, had failed in its objective of showing investors how their money was being spent on acquisitions.

Under IFRS, the cost of stock options estimated at the date of grant has been included as an expense on the income statement for the first time. Many companies have restructured their remuneration schemes to avoid calculating the expense, which requires option valuation models. Goodwill must be recognised and tested annually for impairment, and there must be significant disclosure of key assumptions and sensitivities. Valuing of intangible assets such as brands has proved more complex than anticipated, according to accountants. Dividends are no longer accrued, unless they are declared before the year end. Deferred taxes are calculated on revaluations as well as on timing differences and feedback suggests that this broad area of accounting has been challenging, as predicted.


pages: 391 words: 97,018

Better, Stronger, Faster: The Myth of American Decline . . . And the Rise of a New Economy by Daniel Gross

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2013 Report for America's Infrastructure - American Society of Civil Engineers - 19 March 2013, Affordable Care Act / Obamacare, Airbnb, American Society of Civil Engineers: Report Card, asset-backed security, Bakken shale, banking crisis, BRICs, British Empire, business process, business process outsourcing, call centre, Carmen Reinhart, clean water, collapse of Lehman Brothers, collateralized debt obligation, commoditize, creative destruction, credit crunch, currency manipulation / currency intervention, demand response, Donald Trump, Frederick Winslow Taylor, high net worth, housing crisis, hydraulic fracturing, If something cannot go on forever, it will stop - Herbert Stein's Law, illegal immigration, index fund, intangible asset, intermodal, inventory management, Kenneth Rogoff, labor-force participation, LNG terminal, low skilled workers, Mark Zuckerberg, Martin Wolf, Maui Hawaii, McMansion, money market fund, mortgage debt, Network effects, new economy, obamacare, oil shale / tar sands, oil shock, peak oil, Plutocrats, plutocrats, price stability, quantitative easing, race to the bottom, reserve currency, reshoring, Richard Florida, rising living standards, risk tolerance, risk/return, Silicon Valley, Silicon Valley startup, six sigma, Skype, sovereign wealth fund, Steve Jobs, superstar cities, the High Line, transit-oriented development, Wall-E, Yogi Berra, zero-sum game, Zipcar

As Peter Elkind wrote in Fortune in May 2001, “Among the stocks she has never downgraded are Priceline, Amazon, Yahoo, and FreeMarkets—all of which have declined between 85% and 97% from their peak.” Meeker concluded that America’s liabilities vastly outweighed its assets. But she ignored some of America’s tangible assets, such as the nation’s holdings of gold and its huge stock market capitalization. And she ignored many of the nation’s intangible assets, like the ability to conjure up giant global Internet companies from nothing. In the summer of 2011 I was at a dinner with Tung Chee Hwa, the billionaire shipping magnate and former chief executive of Hong Kong, and a handful of journalists. When one of my colleagues mentioned Meeker’s analysis, he was somewhat incredulous.

Financial Investments, 38–39 unions, 78, 136, 166, 174, 206 efficiency economy and, 62–63 Uniqlo, 92–93, 144 United Kingdom, 4–5, 19, 29, 46, 110–11, 202 bank bailouts in, 38–39 exports and, 103, 121–22, 125, 129 FDI and, 84, 86, 95 in history, 13–14, 25, 46 timely policy decisions and, 32, 38–39 United States: exceptionalism of, 21 in future, 24 in history, 12–16, 18, 25, 61, 81–82, 97, 99, 141, 200, 205–6, 218 tangible and intangible assets of, 22, 25 and unpopularity of Americans, 3 United States of Europe, The (Reid), 19 UPS, 76–77, 182 US Block Windows, 169 U.S. Chamber of Commerce, 146–47 Vale Columbia Center on Sustainable International Investment, 94 Vestas, 85–86 Vietnam, 15, 26, 128, 140, 168–69, 177, 230 Virginia, 13, 88–91, 103 Volvo, 88 von Claparede, Clemens, 91–92 Wallquest, 110–14, 116, 119 Wall Street Journal, 3, 5, 41, 84, 87, 96, 161, 185, 203, 212, 227 China and, 165, 167 exports and, 100–101, 103, 106–8, 125 Walmart, 141, 218, 227 efficiency economy and, 62, 68, 75–76 supersizing and, 202, 207 W&H Properties, 70 Wang, David and Mei Xu, 176–77 Wang Feng, 165 Wanzek, Terry, 158 Washington Mutual, 39, 46 Washington Post, 6, 172 Waste Management, 65–66 Wedding of the Waters (Bernstein), 206 Weill, Sandy, 85 Weiner, Stephanie, 188 Welch, Jack, 146 Wells Fargo, 37–38 Wessel, David, 100 Whirlpool, 173 White, Martha C., 108 Whitney, Richard, 13 Will, George, 5 Williams, Brad, 96 Williams, Deron, 126 Willis, Bruce, 129–30 Willoughby, Jack, 47 wind turbines, 26, 85–86, 178 Wolf, Martin, 28–29 Woodside, Chuck, 104–5 World Economic Forum, 3–4, 26, 86, 172, 197–98, 203 World War I, 14, 24–25, 137 World War II, 2, 7, 17–18, 24–25, 61 Worth, 170–71 Wylie, Andrew, 127 Yagerman, Justin, 76–77 Yanai, Tadashi, 93 Yergin, Daniel, 106 Yessbuts, 217 Yoplait, 89 Yum Brands, 138–39 Zakaria, Fareed, 19 Zandi, Mark, 31, 207 Zions Bank, 38 Zipcar, 192–93, 195 Zuckerberg, Mark and Randi, 197 Zynga, 18, 84, 201 About the Author Daniel Gross, economics editor and columnist at Yahoo!


pages: 323 words: 90,868

The Wealth of Humans: Work, Power, and Status in the Twenty-First Century by Ryan Avent

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3D printing, Airbnb, American energy revolution, assortative mating, autonomous vehicles, Bakken shale, barriers to entry, basic income, Bernie Sanders, BRICs, call centre, Capital in the Twenty-First Century by Thomas Piketty, Clayton Christensen, cloud computing, collective bargaining, computer age, creative destruction, dark matter, David Ricardo: comparative advantage, deindustrialization, dematerialisation, Deng Xiaoping, deskilling, Dissolution of the Soviet Union, Donald Trump, Downton Abbey, Edward Glaeser, Erik Brynjolfsson, eurozone crisis, everywhere but in the productivity statistics, falling living standards, first square of the chessboard, first square of the chessboard / second half of the chessboard, Ford paid five dollars a day, Francis Fukuyama: the end of history, future of work, gig economy, global supply chain, global value chain, hydraulic fracturing, income inequality, indoor plumbing, industrial robot, intangible asset, interchangeable parts, Internet of things, inventory management, invisible hand, Jacquard loom, James Watt: steam engine, Jeff Bezos, John Maynard Keynes: Economic Possibilities for our Grandchildren, Joseph-Marie Jacquard, knowledge economy, low skilled workers, lump of labour, Lyft, manufacturing employment, Marc Andreessen, mass immigration, means of production, new economy, performance metric, pets.com, price mechanism, quantitative easing, Ray Kurzweil, rent-seeking, reshoring, rising living standards, Robert Gordon, Ronald Coase, savings glut, Second Machine Age, secular stagnation, self-driving car, sharing economy, Silicon Valley, single-payer health, software is eating the world, supply-chain management, supply-chain management software, TaskRabbit, The Future of Employment, The Nature of the Firm, The Spirit Level, The Wealth of Nations by Adam Smith, Thomas Malthus, trade liberalization, transaction costs, Tyler Cowen: Great Stagnation, Uber and Lyft, Uber for X, very high income, working-age population

Mankiw, Gregory, ‘Yes, the Wealthy Can Be Deserving’, The New York Times, 6 February 2014. 25. Corn, David, ‘Romney Tells Millionaire Donors What He Really Thinks of Obama Voters’, www.motherjones.com, 17 September 2012. 26. On a PPP-adjusted, per capita basis; data from the IMF. 27. Ocean Tomo, ‘Annual Study of Intangible Asset Market Value’, LLC, 2015. 28. Weil, David, The Fissured Workplace: Why Work Became So Bad and What Can be Done to Improve It (Cambridge, MA: Harvard University Press, 2014). 29. US Census Bureau, New Residential Construction. 30. S & P Case-Shiller Home Prices Indexes. 31. ‘The model minority is losing patience’, The Economist, 3 October 2015; IMF data. 32. 

., Why Nations Fail: The Origins of Power, Prosperity, and Poverty (London: Profile Books, 2012) 5. The Firm as an Information-Processing Organism   1. OECD, Entrepreneurship at a Glance 2015, August 2015.   2. Coase, R. H., ‘The Nature of the Firm’, Economica, Vol. 4, No. 16 (Nov. 1937).   3. Ocean Tomo, ‘Annual Study of Intangible Asset Market Value’, LLC, 2015.   4. Clayton M. Christensen (1952–), Kim B. Clark Professor of Business Administration at the Harvard Business School, and author of The Innovator’s Dilemma: When New Technologies Cause Great Firms to Fail (Cambridge, MA: Harvard Business Review Press, 1997).   5. 


pages: 120 words: 39,637

The Little Book That Still Beats the Market by Joel Greenblatt

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backtesting, index fund, intangible asset, random walk, survivorship bias, transaction costs

In addition to working capital requirements, a company must also fund the purchase of fixed assets necessary to conduct its business, such as real estate, plant, and equipment. The depreciated net cost of these fixed assets was then added to the net working capital requirements already calculated to arrive at an estimate for tangible capital employed. NOTE: Intangible assets, specifically goodwill, were excluded from the tangible capital employed calculations. Goodwill usually arises as a result of an acquisition of another company. The cost of an acquisition in excess of the tangible assets acquired is usually assigned to a goodwill account. In order to conduct its future business, the acquiring company usually only has to replace tangible assets, such as plant and equipment.

Schaum's Outline of Bookkeeping and Accounting, Fourth Edition (Schaum's Outlines) by Joel Lerner, Rajul Gokarn

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intangible asset

These assets, sometimes called fixed assets or plant assets, are used in the operation of the business rather than being held for sale, as are inventory items. Other Assets. Various assets other than current assets, fixed assets, or as­ sets to which specific captions are given. For instance, the caption “In­ vestments” would be used if significant sums were invested. Often com­ panies show a caption for intangible assets such as patents or goodwill. In other cases, there may be a separate caption for deferred charges. If, 22 BOOKKEEPING AND ACCOUNTING however, the amounts are not large in relation to total assets, the various items may be grouped under one caption, “Other Assets.” Current Liabilities. Debts that must be satisfied from current assets with­ in the next operating period, usually one year.


pages: 756 words: 167,393

The Tylenol Mafia by Scott Bartz

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Donald Trump, en.wikipedia.org, intangible asset, inventory management, Just-in-time delivery, life extension, Ronald Reagan, Ted Kaczynski, the scientific method, too big to fail

Section 936 allowed corporations to shelter from federal tax a substantial amount of U.S. income obtained from products with intangible assets, such as drug patents, manufactured in Puerto Rico. In 1982, Congress made changes to Section 936 to “lessen the abuse caused by companies’ claiming tax-free income generated by intangibles developed outside of Puerto Rico.” The Tax Equity and Fiscal Responsibility Act of 1982 established that, in general, income from intangible assets, such as patents, trademarks, and trade names, transferred by a parent company to its Section 936 subsidiary would be taxable to U.S. shareholders.

The Tax Equity and Fiscal Responsibility Act of 1982 established that, in general, income from intangible assets, such as patents, trademarks, and trade names, transferred by a parent company to its Section 936 subsidiary would be taxable to U.S. shareholders. But the Act still gave corporations the right to claim income attributable to certain intangible assets as nontaxable. Thus, even after 1982, Section 936 corporations were able to shelter from federal tax a substantial portion of the income earned on certain products manufactured in Puerto Rico. Carl Vergari’s only interest in J&J’s Puerto Rican operation was in discovering where the Tylenol manufactured there was actually packaged. What Vergari had already come to understand, or was very close to understanding, was that the Tylenol from Lot AHA090, in the second bottle of cyanide-laced Tylenol, had been shipped from Puerto Rico in bulk containers and had then undergone the packaging process at a repackaging facility in the continental United States.


pages: 670 words: 194,502

The Intelligent Investor (Collins Business Essentials) by Benjamin Graham, Jason Zweig

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3Com Palm IPO, accounting loophole / creative accounting, air freight, Andrei Shleifer, asset allocation, buy low sell high, capital asset pricing model, corporate governance, corporate raider, Daniel Kahneman / Amos Tversky, diversified portfolio, Eugene Fama: efficient market hypothesis, George Santayana, hiring and firing, index fund, intangible asset, Isaac Newton, Long Term Capital Management, market bubble, merger arbitrage, money market fund, new economy, passive investing, price stability, Ralph Waldo Emerson, Richard Thaler, risk tolerance, Robert Shiller, Robert Shiller, Ronald Reagan, shareholder value, sharing economy, short selling, Silicon Valley, South Sea Bubble, Steve Jobs, survivorship bias, the market place, the rule of 72, transaction costs, tulip mania, VA Linux, Vanguard fund, Y2K, Yogi Berra

Several forces can widen a company’s moat: a strong brand identity (think of Harley Davidson, whose buyers tattoo the company’s logo onto their bodies); a monopoly or near-monopoly on the market; economies of scale, or the ability to supply huge amounts of goods or services cheaply (consider Gillette, which churns out razor blades by the billion); a unique intangible asset (think of Coca-Cola, whose secret formula for flavored syrup has no real physical value but maintains a priceless hold on consumers); a resistance to substitution (most businesses have no alternative to electricity, so utility companies are unlikely to be supplanted any time soon).5 The company is a marathoner, not a sprinter.

According to Morgan Stanley, a generous total of 185 companies passed Graham’s test. Moderate price-to-book ratio. Graham recommends a “ratio of price to assets” (or price-to-book-value ratio) of no more than 1.5. In recent years, an increasing proportion of the value of companies has come from intangible assets like franchises, brand names, and patents and trademarks. Since these factors (along with goodwill from acquisitions) are excluded from the standard definition of book value, most companies today are priced at higher price-to-book multiples than in Graham’s day. According to Morgan Stanley, 123 of the companies in the S & P 500 (or one in four) are priced below 1.5 times book value.

A generation or more ago it was the standard rule, recognized both in average stock prices and in formal or legal valuations, that intangibles were to be appraised on a more conservative basis than tangibles. A good industrial company might be required to earn between 6 per cent and 8 per cent on its tangible assets, represented typically by bonds and preferred stock; but its excess earnings, or the intangible assets they gave rise to, would be valued on, say, a 15 per cent basis. (You will find approximately these ratios in the initial offering of Woolworth preferred and common stock in 1911, and in numerous others.) But what has happened since the 1920s? Essentially the exact reverse of these relationships may now be seen.


pages: 2,045 words: 566,714

J.K. Lasser's Your Income Tax by J K Lasser Institute

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Affordable Care Act / Obamacare, airline deregulation, asset allocation, collective bargaining, distributed generation, employer provided health coverage, estate planning, Home mortgage interest deduction, intangible asset, medical malpractice, medical residency, money market fund, mortgage debt, mortgage tax deduction, passive income, Ponzi scheme, profit motive, rent control, Right to Buy, telemarketer, transaction costs, urban renewal, zero-coupon bond

A sale of property that allows for tax deferment if at least one payment is received after the end of the tax year in which the sale occurs. The installment method does not apply to year-end sales of publicly traded securities. Dealers may not use the installment method. Investors with very large installment balances could face a special tax; see 5.21. Intangible assets. Intangible assets that come within Section 197, such as goodwill, are amortizable over a 15-year period; see 42.17. Inter vivos or lifetime trust. A trust created during the lifetime of the person who created the trust. If irrevocable, income on the trust principal is generally shifted to the trust beneficiaries; see 39.6.

If the useful life of an item is less than a year, its cost, including sales tax on the purchase, is deductible. Otherwise, you generally may recover your cost only through depreciation except to the extent first-year expensing applies (42.3). IRS regulations provide safe harbors, including a “12-month” rule, for expenditures relating to intangible assets or benefits (40.3). - - - - - - - - - - Caution Penalties and Fines Penalties or fines paid to a government agency because of a violation of any law are not deductible. You may deduct penalties imposed by a business contract for late performance or nonperformance. - - - - - - - - - - EXAMPLE A new roof is installed on your office building.

In the case of art objects and antiques used as business assets, the useful life requirement remains relevant because such assets are not subject to exhaustion, wear or tear, or obsolescence. The IRS may continue to dispute and litigate cases in which depreciation is claimed on assets with indeterminable useful lives. For example, in a private ruling, the IRS did not allow a developer to depreciate street improvements that had been turned over to a city. The improvements were an intangible asset that improved the developer’s access to its real estate projects, but this asset had an unlimited life. There was no determinable useful life because the city had agreed to maintain and replace the improvements as necessary, and there was no evidence that the city would ever assess the developer for replacement costs.


pages: 197 words: 59,946

The Thank You Economy by Gary Vaynerchuk

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Apple's 1984 Super Bowl advert, augmented reality, business process, call centre, Chuck Templeton: OpenTable, crowdsourcing, en.wikipedia.org, hiring and firing, intangible asset, Jeff Bezos, new economy, pre–internet, Skype, social software, Tony Hsieh

When I started out, I didn’t have the name recognition of Robert Parker, or the clout of Wine Spectator, so I didn’t talk about Gary Vaynerchuk or Wine Library—I talked about Chardonnay. Social media gives you the opportunity to take your business to its fullest potential. Grab it. The Answer Is Always the Same I think we’re entering a business golden age. It took a long time for people to recognize the value of intellectual capital, whose intangible assets don’t show up on a spreadsheet, couldn’t be tracked, and couldn’t be expressed in dollars. Now it’s widely understood that intellectual capital is part of the backbone of every organization, and worth protecting. While the ability to form relationships has always been considered a subset of intellectual capital, social media has catapulted that skill into a wealth-building category.


pages: 322 words: 77,341

I.O.U.: Why Everyone Owes Everyone and No One Can Pay by John Lanchester

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asset-backed security, bank run, banking crisis, Berlin Wall, Bernie Madoff, Big bang: deregulation of the City of London, Black-Scholes formula, Celtic Tiger, collateralized debt obligation, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, Daniel Kahneman / Amos Tversky, diversified portfolio, double entry bookkeeping, Exxon Valdez, Fall of the Berlin Wall, financial deregulation, financial innovation, fixed income, George Akerlof, greed is good, hindsight bias, housing crisis, Hyman Minsky, intangible asset, interest rate swap, invisible hand, Jane Jacobs, John Maynard Keynes: Economic Possibilities for our Grandchildren, John Meriwether, laissez-faire capitalism, light touch regulation, liquidity trap, Long Term Capital Management, loss aversion, Martin Wolf, money market fund, mortgage debt, mortgage tax deduction, mutually assured destruction, Myron Scholes, negative equity, new economy, Nick Leeson, Norman Mailer, Northern Rock, Own Your Own Home, Ponzi scheme, quantitative easing, reserve currency, Right to Buy, risk-adjusted returns, Robert Shiller, Robert Shiller, Ronald Reagan, shareholder value, South Sea Bubble, statistical model, The Great Moderation, the payments system, too big to fail, tulip mania, value at risk

GROUP COMPANY 2007 £m 2006 £m 2007 £m 2006 £m ASSETS Cash and balances at central banks 17,866 6,121 — — Treasury and other eligible bills subject to repurchase agreements 7,090 1,426 — — Other treasury and other eligible bills 11,139 4,065 — — Treasury and other eligible bills 18,229 5,491 — — Loans and advances to banks 219,460 82,606 7,686 7,252 Loans and advances to customers 829,250 466,893 307 286 Debt securities subject to repurchase agreements 100,561 58,874 — — Other debt securities 175,866 68,377 — — Debt securities 276,427 127,251 — — Equity shares 53.026 13.504 — — Investments in Group undertakings — — 43,542 21,784 Settlement balances 16,589 7,425 — — Derivatives 337,410 116,681 173 — Intangible assets 48,492 18,904 — — Property, plant and equipment 18,750 18,420 — — Prepayments, accrued income and other assets 19,066 8,136 127 3 Assets of disposal groups 45,954 — — — TOTAL ASSETS 1,900,519 871,432 51,835 29,325 LIABILITIES Deposits by banks 312,633 132,143 5,572 738 Customer accounts 682,365 384,222 — — Debt securities in issue 273,615 85,963 13,453 2,139 Settlement balances and short positions 91,021 49,476 — — Derivatives 332,060 118,112 179 42 Accruals, deferred income and other liabilities 34,024 15,660 8 15 Retirement benefit liabilities 496 1,992 — — Deferred taxation 5,510 3,264 3 — Insurance liabilities 10,162 7,456 — — Subordinated liabilities 37,979 27,654 7,743 8,194 Liabilities of disposal groups 29,228 — — — Total liabilities 1,809,093 825,942 26,958 11,128 Minority interests 38,388 5,263 — — Equity owners 53,038 40,227 24,877 18,197 TOTAL EQUITY 91,426 45,490 24,877 18,197 TOTAL LIABILITIES AND EQUITY 1,900,519 871,432 51,835 29,325 Our business school chums will have no trouble working this one out: from the huge levels of assets and liabilities and the fact that the main category of liabilities is customer deposits, it will be immediately apparent that this business is a bank.


pages: 295 words: 66,824

A Mathematician Plays the Stock Market by John Allen Paulos

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Benoit Mandelbrot, Black-Scholes formula, Brownian motion, business climate, butterfly effect, capital asset pricing model, correlation coefficient, correlation does not imply causation, Daniel Kahneman / Amos Tversky, diversified portfolio, Donald Trump, double entry bookkeeping, Elliott wave, endowment effect, Erdős number, Eugene Fama: efficient market hypothesis, four colour theorem, George Gilder, global village, greed is good, index fund, intangible asset, invisible hand, Isaac Newton, John Nash: game theory, Long Term Capital Management, loss aversion, Louis Bachelier, mandelbrot fractal, margin call, mental accounting, Myron Scholes, Nash equilibrium, Network effects, passive investing, Paul Erdős, Paul Samuelson, Ponzi scheme, price anchoring, Ralph Nelson Elliott, random walk, Richard Thaler, Robert Shiller, Robert Shiller, short selling, six sigma, Stephen Hawking, survivorship bias, transaction costs, ultimatum game, Vanguard fund, Yogi Berra

As with all such strategies, however, the increased returns tended to shrink as more people adopted it. A ratio that seems to be more strongly related to increased returns than price-to-dividends or price-to-earnings is the price-to-book ratio, P/B. The denominator B is the company’s book value per share—its total assets minus the sum of total liabilities and intangible assets, divided by the number of shares. The P/B ratio changes less over time than does the P/E ratio and has the further virtue of almost always being positive. Book value is meant to capture something basic about a company, but like earnings it can be a rather malleable number. Nevertheless, a well-known and influential study by the economists Eugene Fama and Ken French has shown P/B to be a useful diagnostic device.


pages: 209 words: 80,086

The Global Auction: The Broken Promises of Education, Jobs, and Incomes by Phillip Brown, Hugh Lauder, David Ashton

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active measures, affirmative action, barriers to entry, Branko Milanovic, BRICs, business process, business process outsourcing, call centre, collective bargaining, corporate governance, creative destruction, credit crunch, David Ricardo: comparative advantage, deindustrialization, deskilling, Frederick Winslow Taylor, full employment, future of work, glass ceiling, global supply chain, immigration reform, income inequality, industrial cluster, industrial robot, intangible asset, job automation, Joseph Schumpeter, knowledge economy, knowledge worker, labour market flexibility, low skilled workers, manufacturing employment, market bubble, market design, neoliberal agenda, new economy, Paul Samuelson, pensions crisis, post-industrial society, profit maximization, purchasing power parity, QWERTY keyboard, race to the bottom, Richard Florida, Ronald Reagan, shareholder value, Silicon Valley, sovereign wealth fund, stem cell, The Bell Curve by Richard Herrnstein and Charles Murray, The Wealth of Nations by Adam Smith, Thomas L Friedman, trade liberalization, transaction costs, trickle-down economics, winner-take-all economy, working poor, zero-sum game

This requires elaborate accounting systems and mecha- Digital Taylorism 67 nisms of control that safeguard property rights. It is these concerns that are shaping the direction of technological and organizational change. If the profitability of companies depends on the productivity of knowledge, companies confront the problem of imposing their property rights over intangible assets and of how to manage what resides in their employees’ heads. This is a variation on the age-old issue of how to convert an individual’s capacity to think and act into added value for the company. For this reason, some management scholars, including Barbro Anell and Timothy Wilson, argue that the question of how to extract and distribute knowledge efficiently will not be answered by relying on the initiative and intellectual capital of knowledge workers, as it is difficult to control, standardize, or profit from ideas that remain in the heads of individual workers.


pages: 273 words: 21,102

Branding Your Business: Promoting Your Business, Attracting Customers and Standing Out in the Market Place by James Hammond

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Albert Einstein, call centre, Donald Trump, intangible asset, James Dyson, Jeff Bezos, market design, Ralph Waldo Emerson, Steve Jobs, the market place

11 concepts and ideas – something positively encouraged by the organisation and by founder Richard Branson, himself a powerful brand.) That’s not all. When your brand is strong, it’s actually worth something and becomes part of the intellectual property on your balance sheet. Valuation of brands as intangible assets has become a major area of focus for investors and shareholders. In 2005, for example, Interbrand/Business Week estimated the value of Coca-Cola’s brand (no, not the drink, or the bottling plants or the office furniture) to be a staggering $67.5 billion! By the time this book is published, it may well be that Microsoft has easily exceeded that valuation.


pages: 244 words: 79,044

Money Mavericks: Confessions of a Hedge Fund Manager by Lars Kroijer

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activist fund / activist shareholder / activist investor, Bernie Madoff, capital asset pricing model, corporate raider, diversification, diversified portfolio, family office, fixed income, forensic accounting, Gordon Gekko, hiring and firing, implied volatility, index fund, intangible asset, Jeff Bezos, Just-in-time delivery, Long Term Capital Management, merger arbitrage, new economy, Ponzi scheme, risk-adjusted returns, risk/return, shareholder value, Silicon Valley, six sigma, statistical arbitrage, Vanguard fund, zero-coupon bond

Essentially the MSCI World consists of 45 individual country index exposures, and deselecting one or several of those to suit the individual investor would administratively be a fairly simple thing to do. Similarly you could tailor the non-equity part of the portfolio. Taking this a stage further, you could analyse all the assets of the person or entity to figure out where there is existing exposure. This could include looking at things like your house, education, stock options, intangible assets (what you are good at, etc.), future inheritance, etc. and could even go as far as seeing how potential or real liabilities could be included. Again, these are important issues outside the scope of this book. A wish to the financial sector You would think that things get simple once you decide to buy an index exposure, but unfortunately not so.

The Intelligent Asset Allocator: How to Build Your Portfolio to Maximize Returns and Minimize Risk by William J. Bernstein

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asset allocation, backtesting, capital asset pricing model, commoditize, computer age, correlation coefficient, diversification, diversified portfolio, Eugene Fama: efficient market hypothesis, fixed income, index arbitrage, index fund, intangible asset, Long Term Capital Management, p-value, passive investing, prediction markets, random walk, Richard Thaler, risk tolerance, risk-adjusted returns, risk/return, South Sea Bubble, survivorship bias, the rule of 72, the scientific method, time value of money, transaction costs, Vanguard fund, Yogi Berra, zero-coupon bond

Bid price: A broker’s price to buy a stock or bond. Bond: Debt issued by a corporation or governmental entity. Carries a coupon, or the amount of interest it yields. Bonds are usually of greater than one-year maturity. (Treasury securities of 1–10 years’ maturity are called notes.) Book value: A company’s assets minus intangible assets and liabilities; very roughly speaking, a company’s net assets. Capital asset pricing model (CAPM): A theory relating risk and expected return. Basically, it states that the return of a security or portfolio is equal to the risk-free rate plus a risk premium defined by Glossary 189 its beta.


pages: 411 words: 95,852

Britain Etc by Mark Easton

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agricultural Revolution, Albert Einstein, British Empire, credit crunch, financial independence, garden city movement, global village, Howard Rheingold, income inequality, intangible asset, James Watt: steam engine, knowledge economy, knowledge worker, low skilled workers, mass immigration, moral panic, Ronald Reagan, science of happiness, sexual politics, Silicon Valley, Simon Kuznets, Slavoj Žižek, social software

In the nineteenth century, it was about access to and the effective use of industrial machines. In the twenty-first century, it is about access to and the effective use of knowledge. As the Economic and Social Research Council puts it: ‘Economic success is increasingly based upon the effective utilisation of intangible assets such as knowledge, skills and innovative potential as the key resource for competitive advantage.’ What do people mean by knowledge? A century ago knowledge was a tool. If you knew stuff you could use that to sell other tangible stuff. Now knowledge is increasingly the product in its own right.


pages: 349 words: 114,038

Culture & Empire: Digital Revolution by Pieter Hintjens

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4chan, airport security, anti-communist, anti-pattern, barriers to entry, Bill Duvall, bitcoin, blockchain, business climate, business intelligence, business process, Chelsea Manning, clean water, commoditize, congestion charging, Corn Laws, correlation does not imply causation, cryptocurrency, Debian, Edward Snowden, failed state, financial independence, Firefox, full text search, German hyperinflation, global village, GnuPG, Google Chrome, greed is good, Hernando de Soto, hiring and firing, informal economy, intangible asset, invisible hand, James Watt: steam engine, Jeff Rulifson, Julian Assange, Kickstarter, M-Pesa, mass immigration, mass incarceration, mega-rich, mutually assured destruction, Naomi Klein, national security letter, new economy, New Urbanism, Occupy movement, offshore financial centre, packet switching, patent troll, peak oil, pre–internet, private military company, race to the bottom, rent-seeking, reserve currency, RFC: Request For Comment, Richard Feynman, Richard Feynman, Richard Stallman, Satoshi Nakamoto, security theater, selection bias, Skype, slashdot, software patent, spectrum auction, Steve Crocker, Steve Jobs, Steven Pinker, Stuxnet, The Wealth of Nations by Adam Smith, The Wisdom of Crowds, trade route, transaction costs, union organizing, wealth creators, web application, WikiLeaks, Y2K, zero day, Zipf's Law

Such digital authorities are the digital successors to the industrial-age nation-state. Digital society is not a single authority, it is many. When an authority tries to cheat, the outcome is simple: people abandon it. The freedom to leave one on-line community and go to another is unquestioned and unparalleled in the real world. Knowledge Finally, we have the intangible asset called "knowledge." Of all the websites in the world, one is precious beyond any measure, and becoming more so every day, and that is Wikipedia. Any attempt to describe how important and valuable Wikipedia is would fail by understatement. As a species, we only really have two fundamental assets: ourselves, and our knowledge.


pages: 385 words: 111,807

A Pelican Introduction Economics: A User's Guide by Ha-Joon Chang

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Affordable Care Act / Obamacare, Albert Einstein, Asian financial crisis, asset-backed security, bank run, banking crisis, banks create money, Berlin Wall, bilateral investment treaty, borderless world, Bretton Woods, British Empire, call centre, capital controls, central bank independence, collateralized debt obligation, colonial rule, Corn Laws, corporate governance, corporate raider, creative destruction, Credit Default Swap, credit default swaps / collateralized debt obligations, David Ricardo: comparative advantage, deindustrialization, discovery of the americas, Eugene Fama: efficient market hypothesis, eurozone crisis, experimental economics, Fall of the Berlin Wall, falling living standards, financial deregulation, financial innovation, Francis Fukuyama: the end of history, Frederick Winslow Taylor, full employment, George Akerlof, Gini coefficient, global value chain, Goldman Sachs: Vampire Squid, Gordon Gekko, greed is good, Gunnar Myrdal, Haber-Bosch Process, happiness index / gross national happiness, high net worth, income inequality, income per capita, information asymmetry, intangible asset, interchangeable parts, interest rate swap, inventory management, invisible hand, Isaac Newton, James Watt: steam engine, Johann Wolfgang von Goethe, John Maynard Keynes: Economic Possibilities for our Grandchildren, John Maynard Keynes: technological unemployment, joint-stock company, joint-stock limited liability company, Joseph Schumpeter, knowledge economy, laissez-faire capitalism, land reform, liberation theology, manufacturing employment, Mark Zuckerberg, market clearing, market fundamentalism, Martin Wolf, means of production, Mexican peso crisis / tequila crisis, Northern Rock, obamacare, offshore financial centre, oil shock, open borders, Pareto efficiency, Paul Samuelson, post-industrial society, precariat, principal–agent problem, profit maximization, profit motive, purchasing power parity, quantitative easing, road to serfdom, Robert Shiller, Robert Shiller, Ronald Coase, Ronald Reagan, savings glut, Scramble for Africa, shareholder value, Silicon Valley, Simon Kuznets, sovereign wealth fund, spinning jenny, structural adjustment programs, The Great Moderation, The Market for Lemons, The Spirit Level, The Wealth of Nations by Adam Smith, Thorstein Veblen, trade liberalization, transaction costs, transfer pricing, trickle-down economics, Vilfredo Pareto, Washington Consensus, working-age population, World Values Survey

A 2005 report by Christian Aid, the development charity, documents cases of under-priced exports like TV antennas from China at $0.40 apiece, rocket launchers from Bolivia at $40 and US bulldozers at $528 and over-priced imports such as German hacksaw blades at $5,485 each, Japanese tweezers at $4,896 and French wrenches at $1,089.17 The Starbucks and Google cases were different from those examples only in that they mainly involved ‘intangible assets’, such as brand licensing fees, patent royalties, interest charges on loans and in-house consultancy (e.g., coffee quality testing, store design), but the principle involved was the same. When TNCs evade taxes through transfer pricing, they use but do not pay for the collective productive inputs financed by tax revenue, such as infrastructure, education and R&D.


pages: 382 words: 92,138

The Entrepreneurial State: Debunking Public vs. Private Sector Myths by Mariana Mazzucato

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Apple II, banking crisis, barriers to entry, Bretton Woods, California gold rush, call centre, carbon footprint, Carmen Reinhart, cleantech, computer age, creative destruction, credit crunch, David Ricardo: comparative advantage, demand response, deskilling, endogenous growth, energy security, energy transition, eurozone crisis, everywhere but in the productivity statistics, Financial Instability Hypothesis, full employment, G4S, Growth in a Time of Debt, Hyman Minsky, incomplete markets, information retrieval, intangible asset, invisible hand, Joseph Schumpeter, Kenneth Rogoff, knowledge economy, knowledge worker, natural language processing, new economy, offshore financial centre, Philip Mirowski, popular electronics, profit maximization, Ralph Nader, renewable energy credits, rent-seeking, ride hailing / ride sharing, risk tolerance, shareholder value, Silicon Valley, Silicon Valley ideology, smart grid, Steve Jobs, Steve Wozniak, The Wealth of Nations by Adam Smith, Tim Cook: Apple, too big to fail, total factor productivity, trickle-down economics, Washington Consensus, William Shockley: the traitorous eight

As superior outcomes lead to new products and/or services that, in turn, improve the quality of lives, create new employment opportunities for the able workforce, significantly increase the nation’s foreign export and competitiveness, and then lead to significant increase in tax revenues, it is often believed that investments in innovation would eventually be reinvested in the nation’s tangible and intangible assets. Through this upward cycle of multiplying State investments in the science and technology base, the national economy would pave the way for future sustainable prosperity. And yet, the irony of these successes is that as companies such as Apple, Google, GE, Cisco etc. are flourishing financially, their home economy is struggling to find its way out of debilitating economic issues like the growing trade deficit against Asian economies, declining manufacturing activities, increasing unemployment, widening budget deficits, inequality, deteriorating infrastructure etc.


pages: 363 words: 107,817

Modernising Money: Why Our Monetary System Is Broken and How It Can Be Fixed by Andrew Jackson (economist), Ben Dyson (economist)

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bank run, banking crisis, banks create money, Basel III, Bretton Woods, call centre, capital controls, cashless society, central bank independence, credit crunch, David Graeber, debt deflation, double entry bookkeeping, eurozone crisis, financial exclusion, financial innovation, Financial Instability Hypothesis, financial intermediation, floating exchange rates, Fractional reserve banking, full employment, Hyman Minsky, inflation targeting, informal economy, information asymmetry, intangible asset, land reform, London Interbank Offered Rate, market bubble, market clearing, Martin Wolf, means of production, money: store of value / unit of account / medium of exchange, moral hazard, mortgage debt, negative equity, Northern Rock, price stability, profit motive, quantitative easing, Real Time Gross Settlement, regulatory arbitrage, risk-adjusted returns, seigniorage, shareholder value, short selling, South Sea Bubble, The Great Moderation, the payments system, The Wealth of Nations by Adam Smith, too big to fail, total factor productivity, unorthodox policies

If this leads to a fall in the price of the asset then leverage will increase, requiring further asset sales – a positive feedback loop. Adrian and Shin conclude that the pro cyclical behaviour of banks in response to changes in leverage is likely to exacerbate fluctuations in asset markets. i. Technically, it is defined as Tier 1 capital ∕ (Total assets – intangible assets) – see D’Hulster (2009). Problems with intervening – unintended consequences of fiscal policy Government intervention can create problems for the economy in the long run. Taking the case of fiscal interventions first, the suggestion that the government should act counter-cyclically is relatively uncontroversial and has been standard economic practice since Keynes.


pages: 378 words: 110,518

Postcapitalism: A Guide to Our Future by Paul Mason

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Alfred Russel Wallace, bank run, banking crisis, banks create money, Basel III, basic income, Bernie Madoff, Bill Gates: Altair 8800, bitcoin, Branko Milanovic, Bretton Woods, BRICs, British Empire, business process, butterfly effect, call centre, capital controls, Cesare Marchetti: Marchetti’s constant, Claude Shannon: information theory, collaborative economy, collective bargaining, Corn Laws, corporate social responsibility, creative destruction, credit crunch, currency manipulation / currency intervention, currency peg, David Graeber, deglobalization, deindustrialization, deskilling, discovery of the americas, Downton Abbey, drone strike, en.wikipedia.org, energy security, eurozone crisis, factory automation, financial repression, Firefox, Fractional reserve banking, Frederick Winslow Taylor, full employment, future of work, game design, income inequality, inflation targeting, informal economy, information asymmetry, intangible asset, Intergovernmental Panel on Climate Change (IPCC), Internet of things, job automation, John Maynard Keynes: Economic Possibilities for our Grandchildren, Joseph Schumpeter, Kenneth Arrow, Kevin Kelly, knowledge economy, knowledge worker, late capitalism, low skilled workers, market clearing, means of production, Metcalfe's law, money: store of value / unit of account / medium of exchange, mortgage debt, Network effects, new economy, Norbert Wiener, Occupy movement, oil shale / tar sands, oil shock, Paul Samuelson, payday loans, Pearl River Delta, post-industrial society, precariat, price mechanism, profit motive, quantitative easing, race to the bottom, RAND corporation, rent-seeking, reserve currency, RFID, Richard Stallman, Robert Gordon, Robert Metcalfe, secular stagnation, sharing economy, Stewart Brand, structural adjustment programs, supply-chain management, The Future of Employment, the scientific method, The Wealth of Nations by Adam Smith, Transnistria, union organizing, universal basic income, urban decay, urban planning, Vilfredo Pareto, wages for housework, women in the workforce

A study for the SAS Institute in 2013 found that, in an attempt to put a value on data, neither the cost of gathering it, nor its market value, nor the future income it might generate could be adequately calculated. Only through a form of accounting that included non-economic benefits and risks could companies actually explain to their shareholders what their data was really worth.6 The report showed that while ‘intangible assets’ were growing on US and UK company balance sheets at nearly three times the rate of tangible assets, the actual size of the digital sector in the GDP figures had remained static. So something is broken in the logic we use to value the most important thing in the modern economy. However, by any measure, it is clear that the mix of inputs has altered.


pages: 292 words: 85,151

Exponential Organizations: Why New Organizations Are Ten Times Better, Faster, and Cheaper Than Yours (And What to Do About It) by Salim Ismail, Yuri van Geest

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23andMe, 3D printing, Airbnb, Amazon Mechanical Turk, Amazon Web Services, augmented reality, autonomous vehicles, Baxter: Rethink Robotics, bioinformatics, bitcoin, Black Swan, blockchain, Burning Man, business intelligence, business process, call centre, chief data officer, Chris Wanstrath, Clayton Christensen, clean water, cloud computing, cognitive bias, collaborative consumption, collaborative economy, commoditize, corporate social responsibility, cross-subsidies, crowdsourcing, cryptocurrency, dark matter, Dean Kamen, dematerialisation, discounted cash flows, distributed ledger, Edward Snowden, Elon Musk, en.wikipedia.org, ethereum blockchain, Galaxy Zoo, game design, Google Glasses, Google Hangouts, Google X / Alphabet X, gravity well, hiring and firing, Hyperloop, industrial robot, Innovator's Dilemma, intangible asset, Internet of things, Iridium satellite, Isaac Newton, Jeff Bezos, Kevin Kelly, Kickstarter, knowledge worker, Kodak vs Instagram, Law of Accelerating Returns, Lean Startup, life extension, lifelogging, loose coupling, loss aversion, Lyft, Marc Andreessen, Mark Zuckerberg, market design, means of production, minimum viable product, natural language processing, Netflix Prize, Network effects, new economy, Oculus Rift, offshore financial centre, p-value, PageRank, pattern recognition, Paul Graham, peer-to-peer, peer-to-peer model, Peter H. Diamandis: Planetary Resources, Peter Thiel, prediction markets, profit motive, publish or perish, Ray Kurzweil, recommendation engine, RFID, ride hailing / ride sharing, risk tolerance, Ronald Coase, Second Machine Age, self-driving car, sharing economy, Silicon Valley, skunkworks, Skype, smart contracts, Snapchat, social software, software is eating the world, speech recognition, stealth mode startup, Stephen Hawking, Steve Jobs, subscription business, supply-chain management, TaskRabbit, telepresence, telepresence robot, Tony Hsieh, transaction costs, Tyler Cowen: Great Stagnation, urban planning, WikiLeaks, winner-take-all economy, X Prize, Y Combinator, zero-sum game

Needless to say, given that even defining the term culture has proven enduringly difficult, this is a particularly challenging step. According to noted hotelier Chip Conley, “Culture is what happens when the boss leaves.” We think that pretty much sums it up, and would only add that culture is a company’s greatest intangible asset. (As many have observed, including Joi Ito, head of the MIT Media Lab, “Culture eats strategy for breakfast.”) From the “HP Way” and IBM’s “Think” to Google’s playrooms and Twitter’s warehouse, it is hard to overstate culture’s added value. Very few people would argue that a big part of Zappos’ success (and its billion-dollar valuation) is not due to its company culture.

All About Asset Allocation, Second Edition by Richard Ferri

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activist fund / activist shareholder / activist investor, asset allocation, asset-backed security, barriers to entry, Bernie Madoff, capital controls, commoditize, commodity trading advisor, correlation coefficient, Daniel Kahneman / Amos Tversky, diversification, diversified portfolio, equity premium, estate planning, financial independence, fixed income, full employment, high net worth, Home mortgage interest deduction, implied volatility, index fund, intangible asset, Long Term Capital Management, Mason jar, money market fund, mortgage tax deduction, passive income, pattern recognition, random walk, Richard Thaler, risk tolerance, risk-adjusted returns, risk/return, Robert Shiller, Robert Shiller, selection bias, Sharpe ratio, survivorship bias, too big to fail, transaction costs, Vanguard fund, yield curve

Blue Chip Stocks Common stocks of well-known companies with a history of growth and dividend payments. Bond Covenant The contractual provision in a bond indenture. A positive covenant requires certain actions, and a negative covenant limits certain actions. Book Value A company’s assets, minus any liabilities and intangible assets. Broker/Broker-Dealer An individual or firm that buys or sells mutual funds or other securities for the public. Capital Gain/Loss The difference between the sale price of an asset—such as a mutual fund, stock, or bond—and the original cost of the asset. Capital Gains Distributions Payments to mutual fund shareholders of gains realized during the year on securities that the fund has sold at a profit, minus any realized losses.


pages: 345 words: 87,745

The Power of Passive Investing: More Wealth With Less Work by Richard A. Ferri

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asset allocation, backtesting, Bernie Madoff, capital asset pricing model, cognitive dissonance, correlation coefficient, Daniel Kahneman / Amos Tversky, diversification, diversified portfolio, endowment effect, estate planning, Eugene Fama: efficient market hypothesis, fixed income, implied volatility, index fund, intangible asset, Long Term Capital Management, money market fund, passive investing, Paul Samuelson, Ponzi scheme, prediction markets, random walk, Richard Thaler, risk tolerance, risk-adjusted returns, risk/return, Sharpe ratio, survivorship bias, too big to fail, transaction costs, Vanguard fund, yield curve, zero-sum game

The market (or index) is assigned a beta of 1.00, so a portfolio with a beta of 1.20 would have seen its share price rise or fall by 12 percent when the overall market rose or fell by 10 percent. bid-ask spread The difference between what a buyer is willing to bid (pay) for a security and the seller’s asking (offer) price. book value A company’s assets, minus any liabilities and intangible assets. book-to-market value (BtM) The book value of a company divided by its market value. broker/broker-dealer An individual or firm that buys or sells mutual funds or other securities for the public. capital gain/loss The difference between the sale price of an asset—such as a mutual fund, stock, or bond—and the original cost of the asset.


pages: 327 words: 90,542

The Age of Stagnation by Satyajit Das

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9 dash line, accounting loophole / creative accounting, additive manufacturing, Airbnb, Albert Einstein, Alfred Russel Wallace, Anton Chekhov, Asian financial crisis, banking crisis, Berlin Wall, bitcoin, Bretton Woods, BRICs, British Empire, business process, business process outsourcing, call centre, capital controls, Capital in the Twenty-First Century by Thomas Piketty, Carmen Reinhart, Clayton Christensen, cloud computing, collaborative economy, colonial exploitation, computer age, creative destruction, cryptocurrency, currency manipulation / currency intervention, David Ricardo: comparative advantage, declining real wages, Deng Xiaoping, deskilling, disintermediation, Downton Abbey, Emanuel Derman, energy security, energy transition, eurozone crisis, financial innovation, financial repression, forward guidance, Francis Fukuyama: the end of history, full employment, gig economy, Gini coefficient, global reserve currency, global supply chain, Goldman Sachs: Vampire Squid, happiness index / gross national happiness, Honoré de Balzac, hydraulic fracturing, Hyman Minsky, illegal immigration, income inequality, income per capita, indoor plumbing, informal economy, Innovator's Dilemma, intangible asset, Intergovernmental Panel on Climate Change (IPCC), Jane Jacobs, John Maynard Keynes: technological unemployment, Kenneth Rogoff, knowledge economy, knowledge worker, labour market flexibility, labour mobility, light touch regulation, liquidity trap, Long Term Capital Management, low skilled workers, Lyft, Mahatma Gandhi, margin call, market design, Marshall McLuhan, Martin Wolf, Mikhail Gorbachev, mortgage debt, mortgage tax deduction, new economy, New Urbanism, offshore financial centre, oil shale / tar sands, oil shock, old age dependency ratio, open economy, passive income, peak oil, peer-to-peer lending, pension reform, Plutocrats, plutocrats, Ponzi scheme, Potemkin village, precariat, price stability, profit maximization, pushing on a string, quantitative easing, race to the bottom, Ralph Nader, Rana Plaza, rent control, rent-seeking, reserve currency, ride hailing / ride sharing, rising living standards, risk/return, Robert Gordon, Ronald Reagan, Satyajit Das, savings glut, secular stagnation, seigniorage, sharing economy, Silicon Valley, Simon Kuznets, Slavoj Žižek, South China Sea, sovereign wealth fund, TaskRabbit, The Chicago School, The Great Moderation, The inhabitant of London could order by telephone, sipping his morning tea in bed, the various products of the whole earth, the market place, the payments system, The Spirit Level, Thorstein Veblen, Tim Cook: Apple, too big to fail, total factor productivity, trade route, transaction costs, unpaid internship, Unsafe at Any Speed, Upton Sinclair, Washington Consensus, We are the 99%, WikiLeaks, Y2K, Yom Kippur War, zero-coupon bond, zero-sum game

American entertainment, fashion, and style remain influential. The US has favorable demographics and is still a magnet for immigration. The country's preeminence is based on complex systems and processes that are difficult to replicate. A World Bank study estimated that 80 percent of its wealth derives from intangible assets, such as property rights, the judicial system, skills, and the knowledge and trust embedded within its society. America's ability to reinvent itself and change is crucial. Faced with massive problems of low or slowing growth, a lack of competitiveness, and excessive debt levels, Japan, Europe, and many emerging nations have struggled to agree on and implement the required reforms.


pages: 606 words: 87,358

The Great Convergence: Information Technology and the New Globalization by Richard Baldwin

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3D printing, additive manufacturing, Admiral Zheng, agricultural Revolution, air freight, Amazon Mechanical Turk, Berlin Wall, bilateral investment treaty, Branko Milanovic, buy low sell high, call centre, Columbian Exchange, commoditize, Commodity Super-Cycle, David Ricardo: comparative advantage, deindustrialization, domestication of the camel, Edward Glaeser, endogenous growth, Erik Brynjolfsson, financial intermediation, George Gilder, global supply chain, global value chain, Henri Poincaré, imperial preference, industrial cluster, industrial robot, intangible asset, invention of agriculture, invention of the telegraph, investor state dispute settlement, Isaac Newton, Islamic Golden Age, James Dyson, knowledge economy, knowledge worker, Lao Tzu, low skilled workers, market fragmentation, mass immigration, Metcalfe’s law, New Economic Geography, out of africa, paper trading, Paul Samuelson, Pax Mongolica, profit motive, rent-seeking, reshoring, Richard Florida, rising living standards, Robert Metcalfe, Second Machine Age, Simon Kuznets, Skype, Snapchat, Stephen Hawking, telepresence, telerobotics, The Wealth of Nations by Adam Smith, trade liberalization, trade route, Washington Consensus

In the Dyson example, for instance, offshoring helped create new jobs and higher pay for engineers in Malmesbury. Trade policy must therefore aim at making global value chains (GVCs) work better. For G7 nations, this means writing trade rules that help their firms maximize the value of the tangible and intangible assets. To understand the point, it helps to rethink goods. One can think of a Toyota Land Cruiser not as a vehicle but rather as a bundle of Japanese labor, capital, innovation, and managerial, marketing, engineering, and production know-how. In 1982, the Land Cruiser could be exported to any nation without regard to the destination’s property rights because it was basically impossible to unbundle the inputs.

Frugal Innovation: How to Do Better With Less by Jaideep Prabhu Navi Radjou

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3D printing, additive manufacturing, Affordable Care Act / Obamacare, Airbnb, Albert Einstein, barriers to entry, Baxter: Rethink Robotics, Bretton Woods, business climate, business process, call centre, Capital in the Twenty-First Century by Thomas Piketty, carbon footprint, cloud computing, collaborative consumption, collaborative economy, Computer Numeric Control, connected car, corporate social responsibility, creative destruction, crowdsourcing, Elon Musk, financial exclusion, financial innovation, global supply chain, income inequality, industrial robot, intangible asset, Internet of things, job satisfaction, Khan Academy, Kickstarter, late fees, Lean Startup, low cost carrier, M-Pesa, Mahatma Gandhi, megacity, minimum viable product, more computing power than Apollo, new economy, payday loans, peer-to-peer lending, Peter H. Diamandis: Planetary Resources, precision agriculture, race to the bottom, reshoring, ride hailing / ride sharing, risk tolerance, Ronald Coase, self-driving car, shareholder value, sharing economy, Silicon Valley, Silicon Valley startup, six sigma, smart grid, smart meter, software as a service, Steve Jobs, supply-chain management, TaskRabbit, The Fortune at the Bottom of the Pyramid, The Nature of the Firm, transaction costs, unbanked and underbanked, underbanked, women in the workforce, X Prize, yield management, Zipcar

But Booz & Company (now Strategy&) and innovation consultants Doblin (part of Deloitte, one of the big four professional services firms) claim that two-thirds of new products fail within two years and 96% do not generate enough sales to recoup their cost of capital. Indeed, the US generates intellectual property worth over $5 trillion, nearly 35% of its economy. But US firms waste over $1 trillion annually in underused IP – such as patents, copyrights and know-how – because they fail to extract maximum value from these intangible assets. BTG (British Technology Group), an international specialist health-care company, reports that over two-thirds of US firms own technologies they fail to exploit, and on average 35% of technologies patented by US companies are wasted because these organisations lack a clear commercial strategy.


pages: 273 words: 87,159

The Vanishing Middle Class: Prejudice and Power in a Dual Economy by Peter Temin

2013 Report for America's Infrastructure - American Society of Civil Engineers - 19 March 2013, affirmative action, Affordable Care Act / Obamacare, American Legislative Exchange Council, American Society of Civil Engineers: Report Card, anti-communist, Bernie Sanders, Branko Milanovic, Bretton Woods, capital controls, Capital in the Twenty-First Century by Thomas Piketty, carried interest, clean water, corporate raider, Corrections Corporation of America, crack epidemic, deindustrialization, desegregation, Donald Trump, Edward Glaeser, Ferguson, Missouri, financial innovation, financial intermediation, floating exchange rates, full employment, income inequality, intangible asset, invisible hand, low skilled workers, low-wage service sector, mandatory minimum, manufacturing employment, Mark Zuckerberg, mass immigration, mass incarceration, means of production, mortgage debt, Network effects, New Urbanism, Nixon shock, obamacare, offshore financial centre, oil shock, Plutocrats, plutocrats, Powell Memorandum, price stability, race to the bottom, road to serfdom, Ronald Reagan, secular stagnation, Silicon Valley, Simon Kuznets, the scientific method, War on Poverty, Washington Consensus, white flight, working poor

Cohen 2015a; Associated Press 2015; Dougherty 2016. 12 Personal and National Debts The discussion in part III has concentrated on tangible assets used by the low-wage sector, willingly or unwillingly: prisons, schools, bridges, and public transportation. It is now time to add some intangible assets and liabilities that affect the low-wage sector. This chapter interprets the treatment of debts in a dual economy. Individual debts are concentrated in bad mortgages and education loans. Societal debts come from the efforts of a democratic government to reduce risks for its members. Individual debts are contracted between borrowers and lenders.


pages: 831 words: 98,409

SUPERHUBS: How the Financial Elite and Their Networks Rule Our World by Sandra Navidi

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activist fund / activist shareholder / activist investor, assortative mating, bank run, barriers to entry, Bernie Sanders, Black Swan, Bretton Woods, butterfly effect, Capital in the Twenty-First Century by Thomas Piketty, Carmen Reinhart, central bank independence, cognitive bias, collapse of Lehman Brothers, collateralized debt obligation, commoditize, conceptual framework, corporate governance, Credit Default Swap, credit default swaps / collateralized debt obligations, crony capitalism, diversification, East Village, Elon Musk, eurozone crisis, family office, financial repression, Gini coefficient, glass ceiling, Goldman Sachs: Vampire Squid, Google bus, Gordon Gekko, haute cuisine, high net worth, hindsight bias, income inequality, index fund, intangible asset, Jaron Lanier, John Meriwether, Kenneth Arrow, Kenneth Rogoff, knowledge economy, London Whale, Long Term Capital Management, Mark Zuckerberg, mass immigration, McMansion, mittelstand, money market fund, Myron Scholes, NetJets, Network effects, offshore financial centre, old-boy network, Parag Khanna, Paul Samuelson, peer-to-peer, performance metric, Peter Thiel, Plutocrats, plutocrats, Ponzi scheme, quantitative easing, Renaissance Technologies, rent-seeking, reserve currency, risk tolerance, Robert Gordon, Robert Shiller, Robert Shiller, rolodex, Satyajit Das, shareholder value, Silicon Valley, sovereign wealth fund, Stephen Hawking, Steve Jobs, The Future of Employment, The Predators' Ball, too big to fail, women in the workforce, young professional

Network strength provides network power, and the most successful executives reach the top not solely based on their analytical skills, but because of their strong relational aptitude. We all begin our professional lives with our own personal human capital, but at a certain level executives are expected to cultivate wide and deep professional networks. Relational capital is an intangible asset that reflects the value inherent in a person’s relationships. The more high-level the relationships and the greater their strength, the more valuable the “relational capital”. It is a prized asset, because in a knowledge economy where almost everything can be replicated, a person’s relationships are unique.


pages: 992 words: 292,389

Conspiracy of Fools: A True Story by Kurt Eichenwald

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Asian financial crisis, Burning Man, computerized trading, corporate raider, estate planning, forensic accounting, intangible asset, Irwin Jacobs, John Markoff, Long Term Capital Management, margin call, Negawatt, new economy, oil shock, price stability, pushing on a string, Ronald Reagan, transaction costs, value at risk, young professional

Glisan made a short presentation, saying that demand for the company’s bonds was soft but that Enron still had more liquidity than it needed. Lay recognized Causey. In the middle of all these troubles, the company had to deal with another issue: the rules had changed for the accounting of certain intangible assets. The arcane revision meant Enron would have to report a noncash reduction in earnings of $200 million in the first quarter of 2002. But it wasn’t as bad as it could have been, Causey said. The intangible assets acquired in the purchase of Wessex Water by Azurix so many years before did not have to be written down. Causey left the meeting, and Lay turned to the most serious issue. “I would like to open up a discussion, to see if any members of the board have a recollection of obtaining any information about the financial returns earned by Andy Fastow through the LJM structures,” he said.


pages: 341 words: 116,854

The Devil's Playground: A Century of Pleasure and Profit in Times Square by James Traub

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Anton Chekhov, Broken windows theory, Buckminster Fuller, delayed gratification, Donald Trump, fear of failure, intangible asset, Jane Jacobs, jitney, light touch regulation, megastructure, New Urbanism, Peter Eisenman, Plutocrats, plutocrats, price mechanism, rent control, Ronald Reagan, upwardly mobile, urban planning, urban renewal

Had the city chosen to pay those costs itself—as it had in other projects, such as the recent Battery Park City in lower Manhattan—it could more readily have dictated terms to developers. But the Koch administration made the fateful decision to sacrifice a large measure of public control in exchange for private investment. In doing so, it also surrendered pieces of the sky, and of the urban landscape: intangible assets that seemed, at least to city planners, far easier to part with than money. And so the Koch administration preserved public control of the project by surrendering precious public assets. Commercial development was not only a means to some other good on 42nd Street, but an end in itself. The city had been trying since the 1960s to shift development westward; by the late 1970s, the west side of midtown retained the low scale it had had for generations, while the east side was choking on office buildings.


pages: 402 words: 110,972

Nerds on Wall Street: Math, Machines and Wired Markets by David J. Leinweber

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AI winter, algorithmic trading, asset allocation, banking crisis, barriers to entry, Big bang: deregulation of the City of London, butterfly effect, buttonwood tree, buy low sell high, capital asset pricing model, citizen journalism, collateralized debt obligation, corporate governance, Craig Reynolds: boids flock, creative destruction, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, Danny Hillis, demand response, disintermediation, distributed generation, diversification, diversified portfolio, Emanuel Derman, en.wikipedia.org, experimental economics, financial innovation, fixed income, Gordon Gekko, implied volatility, index arbitrage, index fund, information retrieval, intangible asset, Internet Archive, John Nash: game theory, Kenneth Arrow, Khan Academy, load shedding, Long Term Capital Management, Machine translation of "The spirit is willing, but the flesh is weak." to Russian and back, market fragmentation, market microstructure, Mars Rover, Metcalfe’s law, moral hazard, mutually assured destruction, Myron Scholes, natural language processing, negative equity, Network effects, optical character recognition, paper trading, passive investing, pez dispenser, phenotype, prediction markets, quantitative hedge fund, quantitative trading / quantitative finance, QWERTY keyboard, RAND corporation, random walk, Ray Kurzweil, Renaissance Technologies, Richard Stallman, risk tolerance, risk-adjusted returns, risk/return, Robert Metcalfe, Ronald Reagan, Rubik’s Cube, semantic web, Sharpe ratio, short selling, Silicon Valley, Small Order Execution System, smart grid, smart meter, social web, South Sea Bubble, statistical arbitrage, statistical model, Steve Jobs, Steven Levy, Tacoma Narrows Bridge, the scientific method, The Wisdom of Crowds, time value of money, too big to fail, transaction costs, Turing machine, Upton Sinclair, value at risk, Vernor Vinge, yield curve, Yogi Berra, your tax dollars at work

If the riskreward trade-off is there, these new banks could lend directly to the old banks that are solvent. As existing solvent banks regain confidence in the availability of funds, they too will start lending. The insolvent old banks will be allowed to fail gracefully, and many of their good operational, human, and intangible assets will be preserved as they are bought by the new banks. Perhaps most importantly, there is a considerable amount of private capital on the sidelines (both at home and abroad) that would love to invest in the American financial system, just not in banks with shrinking/toxic assets and uncertain access to credit.


pages: 298 words: 43,745

Understanding Sponsored Search: Core Elements of Keyword Advertising by Jim Jansen

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AltaVista, barriers to entry, Black Swan, bounce rate, business intelligence, butterfly effect, call centre, Claude Shannon: information theory, complexity theory, correlation does not imply causation, en.wikipedia.org, first-price auction, information asymmetry, information retrieval, intangible asset, inventory management, life extension, linear programming, megacity, Nash equilibrium, Network effects, PageRank, place-making, price mechanism, psychological pricing, random walk, Schrödinger's Cat, sealed-bid auction, search engine result page, second-price auction, second-price sealed-bid, sentiment analysis, social web, software as a service, stochastic process, telemarketer, the market place, The Present Situation in Quantum Mechanics, the scientific method, The Wisdom of Crowds, Vickrey auction, Vilfredo Pareto, yield management

Nowadays, branding is nearly anything that differentiates products or services in such a way that makes them more familiar and desirable than similar products or services [5]. Research has shown that brands have a significant impact on consumers’ perception and selection of products. Branding is a top business priority, as a brand is a company’s most valuable intangible asset [6]. Branding is an essential element in sponsored search. Branding traits are inherent to the entire process, from the search engine selection, to the search engine results page (SERP), to the individual ad, to the advertiser’s Web site. We know that brands affect searchers’ relevance judgments of results in a variety of subjective, affective, cognitive, and contextual manners [7, 8].


pages: 457 words: 128,838

The Age of Cryptocurrency: How Bitcoin and Digital Money Are Challenging the Global Economic Order by Paul Vigna, Michael J. Casey

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3D printing, Airbnb, altcoin, bank run, banking crisis, bitcoin, blockchain, Bretton Woods, California gold rush, capital controls, carbon footprint, clean water, collaborative economy, collapse of Lehman Brothers, Columbine, Credit Default Swap, cryptocurrency, David Graeber, disintermediation, Edward Snowden, Elon Musk, ethereum blockchain, fiat currency, financial innovation, Firefox, Flash crash, Fractional reserve banking, hacker house, Hernando de Soto, high net worth, informal economy, intangible asset, Internet of things, inventory management, Julian Assange, Kickstarter, Kuwabatake Sanjuro: assassination market, litecoin, Long Term Capital Management, Lyft, M-Pesa, Marc Andreessen, Mark Zuckerberg, McMansion, means of production, Menlo Park, mobile money, money: store of value / unit of account / medium of exchange, Network effects, new economy, new new economy, Nixon shock, offshore financial centre, payday loans, Pearl River Delta, peer-to-peer, peer-to-peer lending, pets.com, Ponzi scheme, prediction markets, price stability, profit motive, QR code, RAND corporation, regulatory arbitrage, rent-seeking, reserve currency, Robert Shiller, Robert Shiller, Satoshi Nakamoto, seigniorage, shareholder value, sharing economy, short selling, Silicon Valley, Silicon Valley startup, Skype, smart contracts, special drawing rights, Spread Networks laid a new fibre optics cable between New York and Chicago, Steve Jobs, supply-chain management, Ted Nelson, The Great Moderation, the market place, the payments system, The Wealth of Nations by Adam Smith, too big to fail, transaction costs, tulip mania, Turing complete, Tyler Cowen: Great Stagnation, Uber and Lyft, underbanked, WikiLeaks, Y Combinator, Y2K, zero-sum game, Zimmermann PGP

But “smart contracts” need not be limited to finance. When paired with “smart property”—where deeds, titles, and other certifications of ownership are put in digital form to be acted upon by software—these contracts allow the automatic transfer of ownership of a physical asset such as a house or a car, or an intangible asset, such as a patent. Similarly, the software initiates the transfer when contractual obligations are met. With companies now busily putting bar codes, QR codes, microchips, and Bluetooth antennae on just about every gadget and piece of merchandise, the emerging “Internet of Things” should make it possible to transfer ownership in many kinds of physical property in this manner.


pages: 442 words: 39,064

Why Stock Markets Crash: Critical Events in Complex Financial Systems by Didier Sornette

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Asian financial crisis, asset allocation, Berlin Wall, Bretton Woods, Brownian motion, capital asset pricing model, capital controls, continuous double auction, currency peg, Deng Xiaoping, discrete time, diversified portfolio, Elliott wave, Erdős number, experimental economics, financial innovation, floating exchange rates, frictionless, frictionless market, full employment, global village, implied volatility, index fund, information asymmetry, intangible asset, invisible hand, John von Neumann, joint-stock company, law of one price, Louis Bachelier, mandelbrot fractal, margin call, market bubble, market clearing, market design, market fundamentalism, mental accounting, moral hazard, Network effects, new economy, oil shock, open economy, pattern recognition, Paul Erdős, Paul Samuelson, quantitative trading / quantitative finance, random walk, risk/return, Ronald Reagan, Schrödinger's Cat, selection bias, short selling, Silicon Valley, South Sea Bubble, statistical model, stochastic process, Tacoma Narrows Bridge, technological singularity, The Coming Technological Singularity, The Wealth of Nations by Adam Smith, Tobin tax, total factor productivity, transaction costs, tulip mania, VA Linux, Y2K, yield curve

In these circumstances, the buy decision is based on the belief that you are among the first to realize that the corresponding stock is underpriced. The reverse is expected to occur if the market price is larger than the fundamental value. However, in practice, there are severe difficulties in obtaining a precise estimation of the fundamental value, as it is not clear how to value some of the important intangible assets of a company such as the quality of its managers, its position in its market niche, and so on. In addition, predicting future earnings and their growth is an inexact science, to say the least. This has a very important consequence that we now discuss. An important feature of our model is the nonlinear dependence of the net order size as a function of the difference between the logarithm of the price and the logarithm of the fundamental value.


pages: 603 words: 182,781

Aerotropolis by John D. Kasarda, Greg Lindsay

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3D printing, air freight, airline deregulation, airport security, Akira Okazaki, Asian financial crisis, back-to-the-land, barriers to entry, Berlin Wall, big-box store, blood diamonds, borderless world, British Empire, call centre, carbon footprint, Cesare Marchetti: Marchetti’s constant, Clayton Christensen, cleantech, cognitive dissonance, commoditize, conceptual framework, credit crunch, David Brooks, David Ricardo: comparative advantage, Deng Xiaoping, deskilling, digital map, edge city, Edward Glaeser, failed state, food miles, Ford paid five dollars a day, Frank Gehry, fudge factor, full employment, future of work, Geoffrey West, Santa Fe Institute, George Gilder, global supply chain, global village, gravity well, Haber-Bosch Process, Hernando de Soto, hive mind, if you build it, they will come, illegal immigration, inflight wifi, intangible asset, interchangeable parts, Intergovernmental Panel on Climate Change (IPCC), intermodal, invention of the telephone, inventory management, invisible hand, Jane Jacobs, Jeff Bezos, Kangaroo Route, knowledge worker, kremlinology, labour mobility, Marchetti’s constant, Marshall McLuhan, Masdar, mass immigration, McMansion, megacity, Menlo Park, microcredit, Network effects, New Economic Geography, new economy, New Urbanism, oil shale / tar sands, oil shock, peak oil, Pearl River Delta, Peter Thiel, pets.com, pink-collar, pre–internet, RFID, Richard Florida, Ronald Coase, Ronald Reagan, Rubik’s Cube, savings glut, Seaside, Florida, Shenzhen was a fishing village, Silicon Valley, Silicon Valley startup, Skype, smart cities, smart grid, South China Sea, South Sea Bubble, sovereign wealth fund, special economic zone, spice trade, spinning jenny, stem cell, Steve Jobs, supply-chain management, sustainable-tourism, telepresence, the built environment, The Chicago School, The Death and Life of Great American Cities, The Nature of the Firm, thinkpad, Thomas L Friedman, Thomas Malthus, Tony Hsieh, trade route, transcontinental railway, transit-oriented development, traveling salesman, trickle-down economics, upwardly mobile, urban planning, urban renewal, urban sprawl, walkable city, white flight, white picket fence, Yogi Berra, zero-sum game

The discs that end up in your PC or DVR are made of components stamped in its Asian factories, sent by plane to Orange County for final assembly, and then flown out again. Western Digital’s output is typical of American exports and manufacturing in the Instant Age. Our exports are airborne to an even greater extent than our imports—at last count around $554 billion worth, or more than half the total. As America’s intangible assets have cratered—$12 trillion in household wealth has simply evaporated—its exports of goods and services have arguably been the only thing keeping the economy afloat. (That, and government stimulus.) President Barack Obama’s prescription for a “new economic foundation” amounts to “export more and consume less”—a goal made explicit in his first State of the Union address, in which he called for a doubling of exports within five years.


pages: 272 words: 19,172

Hedge Fund Market Wizards by Jack D. Schwager

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asset-backed security, backtesting, banking crisis, barriers to entry, beat the dealer, Bernie Madoff, Black-Scholes formula, British Empire, Claude Shannon: information theory, cloud computing, collateralized debt obligation, commodity trading advisor, computerized trading, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, delta neutral, diversification, diversified portfolio, Edward Thorp, family office, financial independence, fixed income, Flash crash, hindsight bias, implied volatility, index fund, intangible asset, James Dyson, Long Term Capital Management, margin call, market bubble, market fundamentalism, merger arbitrage, money market fund, oil shock, pattern recognition, pets.com, Ponzi scheme, private sector deleveraging, quantitative easing, quantitative trading / quantitative finance, Right to Buy, risk tolerance, risk-adjusted returns, risk/return, riskless arbitrage, Rubik’s Cube, Sharpe ratio, short selling, statistical arbitrage, Steve Jobs, systematic trading, technology bubble, transaction costs, value at risk, yield curve

We used to argue, why buy a piece of commercial real estate with a 6 percent cap rate or a bond with a 7 percent yield if you could buy a business like Macy’s with a 20 percent cap rate? For financial companies and banks, I use some of the following: Price/tangible book value—The tangible book value (TBV) is equal to the book value minus intangible assets, such as patents and goodwill. Assuming the loans on a bank’s balance sheet have been appropriately accounted for—a big assumption considering the events in the financial industry over the past several years—a bank trading around its TBV would represent the value at which one could theoretically liquidate the bank.


pages: 602 words: 177,874

Thank You for Being Late: An Optimist's Guide to Thriving in the Age of Accelerations by Thomas L. Friedman

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3D printing, additive manufacturing, affirmative action, Airbnb, AltaVista, Amazon Web Services, autonomous vehicles, Ayatollah Khomeini, barriers to entry, Berlin Wall, Bernie Sanders, bitcoin, blockchain, Bob Noyce, business process, call centre, centre right, Chris Wanstrath, Clayton Christensen, clean water, cloud computing, corporate social responsibility, creative destruction, crowdsourcing, David Brooks, demand response, demographic dividend, demographic transition, Deng Xiaoping, Donald Trump, Erik Brynjolfsson, failed state, Fall of the Berlin Wall, Ferguson, Missouri, first square of the chessboard / second half of the chessboard, Flash crash, game design, gig economy, global supply chain, illegal immigration, immigration reform, income inequality, indoor plumbing, intangible asset, Intergovernmental Panel on Climate Change (IPCC), Internet of things, invention of the steam engine, inventory management, Irwin Jacobs: Qualcomm, Jeff Bezos, job automation, John Markoff, John von Neumann, Khan Academy, Kickstarter, knowledge economy, knowledge worker, land tenure, linear programming, Live Aid, low skilled workers, Lyft, Marc Andreessen, Mark Zuckerberg, mass immigration, Maui Hawaii, Menlo Park, Mikhail Gorbachev, mutually assured destruction, pattern recognition, planetary scale, pull request, Ralph Waldo Emerson, ransomware, Ray Kurzweil, Richard Florida, ride hailing / ride sharing, Robert Gordon, Ronald Reagan, Second Machine Age, self-driving car, shareholder value, sharing economy, Silicon Valley, Skype, smart cities, South China Sea, Steve Jobs, supercomputer in your pocket, TaskRabbit, Thomas L Friedman, transaction costs, Transnistria, urban decay, urban planning, Watson beat the top human players on Jeopardy!, WikiLeaks, women in the workforce, Y2K, Yogi Berra, zero-sum game

Here is one way to think about it: in every major economic shift, “a new asset class becomes the main basis for productivity growth, wealth creation, and opportunity,” argued Byron Auguste, a former economic adviser to President Obama who cofounded Opportunity@Work, a social venture that aims to enable at least one million more Americans to “work, learn, and earn to their full potential” in the next decade. “In the agrarian economy, that asset was land,” Auguste said. “In the industrial economy it was physical capital. In the services economy it was intangible assets, such as methods, designs, software, and patents.” “In today’s knowledge-human economy it will be human capital—talent, skills, tacit know-how, empathy, and creativity,” he added. “These are massive, undervalued human assets to unlock”—and our educational institutions and labor markets need to adapt to that.”


pages: 1,336 words: 415,037

The Snowball: Warren Buffett and the Business of Life by Alice Schroeder

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affirmative action, Albert Einstein, anti-communist, Ayatollah Khomeini, barriers to entry, Bob Noyce, Bonfire of the Vanities, Brownian motion, capital asset pricing model, card file, centralized clearinghouse, collateralized debt obligation, computerized trading, corporate governance, corporate raider, Credit Default Swap, credit default swaps / collateralized debt obligations, desegregation, Donald Trump, Eugene Fama: efficient market hypothesis, global village, Golden Gate Park, Haight Ashbury, haute cuisine, Honoré de Balzac, If something cannot go on forever, it will stop - Herbert Stein's Law, In Cold Blood by Truman Capote, index fund, indoor plumbing, intangible asset, interest rate swap, invisible hand, Isaac Newton, Jeff Bezos, John Meriwether, joint-stock company, joint-stock limited liability company, Long Term Capital Management, Louis Bachelier, margin call, market bubble, Marshall McLuhan, medical malpractice, merger arbitrage, Mikhail Gorbachev, money market fund, moral hazard, NetJets, new economy, New Journalism, North Sea oil, paper trading, passive investing, Paul Samuelson, pets.com, Plutocrats, plutocrats, Ponzi scheme, Ralph Nader, random walk, Ronald Reagan, Scientific racism, shareholder value, short selling, side project, Silicon Valley, Steve Ballmer, Steve Jobs, supply-chain management, telemarketer, The Predators' Ball, The Wealth of Nations by Adam Smith, Thomas Malthus, too big to fail, transcontinental railway, Upton Sinclair, War on Poverty, Works Progress Administration, Y2K, yellow journalism, zero-coupon bond

*25Assuming the Dow averaged four percent a year, a partner’s thousand-dollar investment in BPL would turn into $5,604 after twenty years at nine percent—$3,413 more than the $2,191 that an owner of the Dow would have. Return to text. *26Later Remington Rand merged with Sperry and became Sperry Rand, then, after merging with Burroughs in 1986, it became Unisys. Return to text. *27If a company’s book value is $1 million and a buyer pays $3 million, the remaining $2 million is for intangible assets—some specifically identifiable, like trademarks and patents, the rest unidentifiable customer “goodwill.” Accounting rules used to require sellers to gradually charge off, or amortize, these costs over time. Return to text. *28Wite-Out and Liquid Paper are opaque correction fluids, once commonly painted over typewritten material so that words would either disappear or could be typed over.