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

3D printing, Airbnb, assortative mating, carbon footprint, Clayton Christensen, collapse of Lehman Brothers, creative destruction, crowdsourcing, delayed gratification, disruptive innovation, 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, longitudinal study, low skilled workers, Lyft, Nelson Mandela, 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, Stanford marshmallow experiment, Stephen Hawking, Steve Jobs, The Future of Employment, uber lyft, women in the workforce, young professional

However, their value will increase as some of these friendships will continue to be the thread that defines the basis of a life identity. Jack’s intangible assets A major challenge over a lifetime is not just achieving the right level of tangible and intangible assets but also keeping the two in balance. Over a long life, this interplay becomes even more complicated and is at the root of why a three-stage life is no longer optimal. Earlier we modelled the tangible assets of Jack, Jimmy and Jane, and considered how growing longevity affects their finances. Now we review their productivity and vitality intangible assets. Tracking intangible assets is more complicated than financial assets because they are so difficult to measure with any accuracy and therefore to value. Stock market analysts can use a company’s share price to deduce the value of its intangible assets, such as brand and reputational value.

Stock market analysts can use a company’s share price to deduce the value of its intangible assets, such as brand and reputational value. It is not so straightforward with individual intangible assets, though economists are able to infer from the choices you make how much you value different activities. But it simply isn’t easy or perhaps even helpful to try and put a monetary value on intangible assets. However, although it is not possible to make a definitive value statement at any point in time, it is possible to infer the direction. Specifically we can ask: has the intangible asset decreased or increased depending on developmental activities? This is the qualitative approach we take here as we consider the state of Jack’s intangible assets. We begin by hypothetically modelling the appreciation and depreciation of Jack’s tangible and intangible assets over the course of his life. We look at his asset flow over the three key working phases of his life.

But to think about this only in terms of finances and work is to negate the very essence of being a human. The gift of a long life is fundamentally a much more intangible gift. 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. Take, for example, the strong skills and knowledge without which it is likely that career and earning potential will be very limited.


pages: 346 words: 89,180

Capitalism Without Capital: The Rise of the Intangible Economy by Jonathan Haskel, Stian Westlake

"Robert Solow", 23andMe, activist fund / activist shareholder / activist investor, Airbnb, Albert Einstein, Andrei Shleifer, bank run, banking crisis, Bernie Sanders, business climate, business process, buy and hold, Capital in the Twenty-First Century by Thomas Piketty, cloud computing, cognitive bias, computer age, corporate governance, corporate raider, correlation does not imply causation, creative destruction, dark matter, Diane Coyle, Donald Trump, Douglas Engelbart, Douglas Engelbart, Edward Glaeser, Elon Musk, endogenous growth, Erik Brynjolfsson, everywhere but in the productivity statistics, Fellow of the Royal Society, financial innovation, full employment, fundamental attribution error, future of work, Gini coefficient, Hernando de Soto, hiring and firing, income inequality, index card, indoor plumbing, intangible asset, Internet of things, Jane Jacobs, Jaron Lanier, job automation, Kenneth Arrow, Kickstarter, knowledge economy, knowledge worker, laissez-faire capitalism, liquidity trap, low skilled workers, Marc Andreessen, Mother of all demos, Network effects, new economy, open economy, patent troll, paypal mafia, Peter Thiel, pets.com, place-making, post-industrial society, Productivity paradox, quantitative hedge fund, rent-seeking, revision control, Richard Florida, ride hailing / ride sharing, Robert Gordon, Ronald Coase, Sand Hill Road, Second Machine Age, secular stagnation, self-driving car, shareholder value, sharing economy, Silicon Valley, six sigma, Skype, software patent, sovereign wealth fund, spinning jenny, Steve Jobs, survivorship bias, The Rise and Fall of American Growth, The Wealth of Nations by Adam Smith, Tim Cook: Apple, total factor productivity, Tyler Cowen: Great Stagnation, urban planning, Vanguard fund, walkable city, X Prize, zero-sum game

Asset managers would do so by building trust and long-term relationships in the industries where they chose to make their expertise. With the building of intangible assets and the lack of information in company accounts, the pressures for this change are there. Conclusion: Competing, Managing, and Investing in an Intangible Economy The growth of intangible investment has significant implications for managers, but it will affect different firms in different ways. Firms that produce intangible assets will want to maximize synergies, create opportunities to learn from the ideas of others (and appropriate the spillovers of others’ intangibles), and retain talent. These workplaces may end up looking rather like the popular image of hip knowledge-based companies. But companies that rely on exploiting existing intangible assets may look very different, especially where the intangible assets are organizational structure and processes.

THE FOUR S’S OF INTANGIBLES This chapter looks at the unusual economic characteristics of intangibles—the reasons why an intangible-rich economy exhibits different characteristics from a tangible-rich one. Those characteristics are summed up in four S’s, namely that intangible assets, relative to tangible assets, are more likely to be scalable, their costs are more likely to be sunk, and they are inclined to have spillovers and to exhibit synergies with each other. Investment changes all the time; from warehouses and wharves to mineshafts and mills; from machine tools and dynamos to cooling towers and cash registers, servers, and solar arrays. So why should we care about the move from tangible to intangible assets that we described in chapters 2 and 3? As we will show, intangible assets are different from tangible assets in a number of important ways. This means that a business that is reliant on intangibles will behave differently from a business with mainly tangible assets.

Physical assets can only be in one place at one time. Intangible assets, by contrast, can usually be used over and over, in multiple places at the same time. Once you’ve written the Starbucks operating manual in Chinese—an investment in organizational development—you can use it in each of the country’s 1,200-plus stores. The costs of developing the app Angry Birds—and investment in software—can be spread over an arbitrarily large number of downloads (currently well over two billion). And an aircraft engine manufacturer only needs to design a particular type of jet engine—an investment in R&D and design—once, before it can then make an arbitrarily large number of engines. This scalability applies to many sorts of intangible assets. Once a business has created or acquired an intangible asset, it can usually make use of it again and again at relatively little cost, compared to most physical assets.


pages: 285 words: 58,517

The Network Imperative: How to Survive and Grow in the Age of Digital Business Models by Barry Libert, Megan Beck

active measures, Airbnb, Amazon Web Services, asset allocation, autonomous vehicles, big data - Walmart - Pop Tarts, business intelligence, call centre, Clayton Christensen, cloud computing, commoditize, crowdsourcing, disintermediation, diversification, Douglas Engelbart, Douglas Engelbart, future of work, Google Glasses, Google X / Alphabet X, Infrastructure as a Service, intangible asset, Internet of things, invention of writing, inventory management, iterative process, Jeff Bezos, job satisfaction, Kevin Kelly, Kickstarter, late fees, Lyft, Mark Zuckerberg, Oculus Rift, pirate software, ride hailing / ride sharing, self-driving car, sharing economy, Silicon Valley, Silicon Valley startup, six sigma, software as a service, software patent, Steve Jobs, subscription business, TaskRabbit, Travis Kalanick, uber lyft, Wall-E, women in the workforce, Zipcar

Network orchestrators capitalize on the ability of their networks to grow organically as individuals spread the network among those they influence. Intangible Assets Require New Management Practices The surge of available intangible assets creates both risk and opportunity for companies. Leaders of digital network organizations realize that success now relies on their ability to manage intangible assets as well as, if not better than, their tangible counterparts. Unfortunately, most corporate leaders have thirty or more years of experience in managing physical assets, and five or fewer years in managing intangible assets. Let’s discuss the key differences in modern management, both the good and the bad. VAST NETWORKS OF INTANGIBLE ASSETS ARE AVAILABLE TO YOU. Digital technology facilitates rapid-fire communication, collaboration, and sharing with those around you.

The hope is that an asset-light strategy will enable greater market flexibility and focus on the core business, which is property management and not real estate. Principle 2, Assets: From Tangible to Intangible The second principle is to move from tangible to intangible assets. On the left side of the spectrum are companies with physical products, very little intellectual capital, and low use of human capital, either internally or through external networks. On the right side of the spectrum are companies based entirely on intangible assets such as intellectual property or relationships. These companies usually rely on digital technology to support the scaling of their intangible assets. Those companies on the far right side of the spectrum are network orchestrators that differentiate themselves by accessing the intangible assets of an external network rather than owning and managing assets. Often the assets that they access through their network are wholly intangible.

On average, manufacturing companies, such as the one that made your computer, trade at valuations 2× revenues, whereas companies that generate new intellectual capital such as software trade at valuations 5× revenues. Thus, the market values tangible assets and intangible assets differently than corporations and accountants do. The Sources of Value Are Changing As recently as 1975, 83 percent of the market value of the S&P 500 companies was made up of tangible assets. In those days, leaders had to focus on plants, inventory, and production. By 2015, however, the proportions had reversed. In 2015, some 84 percent of market value was now composed of intangible assets.1 Intangible assets are grounded in people. Things such as our ideas, our relationships, our advocacy, and our experiences are of great value to other people and organizations, and these assets do not diminish with use.


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

Albert Einstein, asset allocation, asset-backed security, Brownian motion, business cycle, business process, buy and hold, 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, dogs of the Dow, equity premium, fixed income, implied volatility, index fund, intangible asset, interest rate swap, inventory management, London Interbank Offered Rate, margin call, 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

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. However, if a company entered into a legal agreement to operate under another company’s patent, with no plans for extending the agreement, it would have a limited life and would be classified as a definite asset. Investopedia explains Intangible Asset Although intangible assets do not have the obvious physical value of a factory or equipment, they can prove very valuable and can be critical to a company’s long-term success.

Goodwill often arises when one company is purchased by another company. 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? A model for determining the intrinsic value of a stock on the basis of a future series of dividends that grow at a constant rate.

(1) The paying off of debt in regular installments over a period of time. (2)The deduction of capital expenses over a specific period (usually over the asset’s life). More specifically, a method measuring the consumption of the value of intangible assets, such as a patent or a copyright. Investopedia explains Amortization If XYZ Biotech spent $30 million on a piece of medical equipment with a patent lasting 15 years, the company would record $2 million each year in amortization expense. Although amortization and depreciation often are used interchangeably, technically this is The Investopedia Guide to Wall Speak 11 incorrect because amortization refers to intangible assets, whereas depreciation refers to tangible assets. Related Terms: • Asset • Depreciation • Earnings before Interest, Taxes, Depreciation, and Amortization—EBITDA • Intangible Asset • Tangible Asset Annual Percentage Yield (APY) What Does Annual Percentage Yield (APY) Mean?


pages: 374 words: 94,508

Infonomics: How to Monetize, Manage, and Measure Information as an Asset for Competitive Advantage by Douglas B. Laney

3D printing, Affordable Care Act / Obamacare, banking crisis, blockchain, business climate, business intelligence, business process, call centre, chief data officer, Claude Shannon: information theory, commoditize, conceptual framework, crowdsourcing, dark matter, data acquisition, digital twin, discounted cash flows, disintermediation, diversification, en.wikipedia.org, endowment effect, Erik Brynjolfsson, full employment, informal economy, intangible asset, Internet of things, linked data, Lyft, Nash equilibrium, Network effects, new economy, obamacare, performance metric, profit motive, recommendation engine, RFID, semantic web, smart meter, Snapchat, software as a service, source of truth, supply-chain management, text mining, uber lyft, Y2K, yield curve

With 1.49 billion active monthly users, the value of each active account is about $211. 11 “Ocean Tomo Releases 2015 Annual Study of Intangible Asset Market Value,” Ocean Tomo Insights Blog, 05 March 2015, www.oceantomo.com/blog/2015/03-05-ocean-tomo-2015-intangible-asset-market-value/. 12 “Asset,” Merriam-Webster, accessed 09 February 2017, www.merriam-webster.com/ C:\Users\dlaney\Google Drive\InfonomicsBook\Manuscript\Merriam-Webster. http:\www.merriam-webster.com\dictionary\asset. 13 Investopedia Staff, “Asset,” Investopedia, 01 April 2016, www.investopedia.com/terms/a/asset.asp. 14 “Statement of Financial Accounting, Concepts No. 6, Elements of Financial Statements, a Replacement of FASB Concepts Statement No. 3 (Incorporating an Amendment of FASB Concepts Statement No. 2),” Financial Accounting Standards Board, December 1985, www.fasb.org/resources/ccurl/792/293/CON6.pdf. 15 “The Conceptual Framework for Financial Reporting,” IFRS Foundational Staff, 01 January 2014, www.ifrs.org/IFRSs/Documents/Technical-summaries-2014/Conceptual%20Framework.pdf. 16 “IAS 38—Intangible Assets,” IASPlus, Deloitte, www.iasplus.com/en/standards/ias/ias38. 17 Additionally, information meets each of the IFRS criteria for intangible assets. 18 “Technical Summary, IAS 38 Intangible Assets,” IFRS, 01 January 2014, www.ifrs.org/IFRSs/Documents/Technical-summaries-2014/IAS%2038.pdf. 19 IFRS criteria for intangible assets include: a) an intention to complete and use or sell it, b) an ability to use or sell it, c) it will generate probable future economic benefits and/or there is a market for it, d) an ability to measure reliably the expenditure attributable to it during its development. 20 “Technical Summary, IAS 38 Intangible Assets,” IFRS, 01 January 2014, www.ifrs.org/IFRSs/Documents/Technical-summaries-2014/IAS%2038.pdf. 21 It is generally understood that “similar items in substance” includes information assets. 22 “International Financial Reporting Standard 3, Business Combinations,” IFRS, 18 February 2011, http://ec.europa.eu/internal_market/accounting/docs/consolidated/ifrs3_en.pdf. 23 “Discussion Paper, Initial Accounting for Internally Generated Intangible Assets,” The Office of the Australian Accounting Standards Board, 2008, www.saica.co.za/Portals/0/Trainees/documents/DPInitialAccountingInternallyGeneratedIntangibleAssets.pdf. 24 “FASB Invitation to Comment, Agenda Consultation: Financial Accounting Standards Board,” FASB, 04 August 2016, www.fasb.org/cs/ContentServer?

As well, information that only you retain may not be within your control if others have rights to it—as is the case with some PII. To further establish the control aspect of an asset, accounting standards require the condition that it is identifiable. This applies specifically to intangible assets wherein there is some question of separability—meaning that they are not inexorably bound to another asset or unable to be quantified. International Accounting Standard 38 (IAS 38) details the requirements for identifying and capitalizing intangible assets. It defines intangible assets as “non-monetary assets which are without physical substance.” The standard further specifies that recognizable intangibles must be “identifiable (either being separable or arising from contractual or other legal rights).” This opens up another can of questions.

But we are no longer in the industrial age.4 Elliot suggested that in order for the U.S. to maintain its advantage, it must move to the “next plateau of transparency,” as he called it. Over a decade and a half since this hearing, what has been done to improve transparency or to formally account for information and other intangible assets while the economy has become ever more digital? Not much, according to Tom Linsmeier, retiring board member of Financial Accounting Standards Board (FASB), who said: “[T]he current accounting model fails to provide much information on most internally developed intangible assets, resulting in an often-increasing market to book ratio for these organizations and leaving users with little financial reporting information to make their valuation assessments.”5 Irrespective of what accountants say or do, Linsmeier told me, “Accounting standards boards should be asking for an increased disclosure of internally-generated assets.”6 Here we are in the midst of the Information Economy, and the eponymous major source of value in that economy is considered valueless by the custodians of what constitutes value!


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

activist fund / activist shareholder / activist investor, air freight, barriers to entry, Basel III, BRICs, business climate, business cycle, 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, 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, stocks for the long run, 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 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. To prepare for this mismatch, the company creates a deferred-tax liability when it makes the acquisition. To keep the balance sheet balanced, the company also increases intangible assets (known in accounting as “grossing up”) by the size of the new DTL.

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.

We recommend EBITA or NOPLAT. The difference between EBIT and EBITA is amortization of intangible assets. Most often, the bulk of amortization is related to acquired intangible assets, such as customer lists or brand names. Chapter 9 explained why we exclude amortization of intangibles from the calculation of ROIC and free cash flow. It is noncash, and, unlike depreciation of physical assets, the replacement of intangible assets is already incorporated in EBITA through line items such as marketing and selling expenses. So using EBITA is preferred, both from a logical perspective and because it leads to more comparable multiples across peers. To illustrate the distortion caused by amortization of acquired intangible assets, we compare two companies with the same size and underlying operating profitability.


pages: 401 words: 109,892

The Great Reversal: How America Gave Up on Free Markets by Thomas Philippon

airline deregulation, Amazon Mechanical Turk, Amazon Web Services, Andrei Shleifer, barriers to entry, bitcoin, blockchain, business cycle, business process, buy and hold, Carmen Reinhart, carried interest, central bank independence, commoditize, crack epidemic, cross-subsidies, disruptive innovation, Donald Trump, Erik Brynjolfsson, eurozone crisis, financial deregulation, financial innovation, financial intermediation, gig economy, income inequality, income per capita, index fund, intangible asset, inventory management, Jean Tirole, Jeff Bezos, Kenneth Rogoff, labor-force participation, law of one price, liquidity trap, low cost airline, manufacturing employment, Mark Zuckerberg, market bubble, minimum wage unemployment, money market fund, moral hazard, natural language processing, Network effects, new economy, offshore financial centre, Pareto efficiency, patent troll, Paul Samuelson, price discrimination, profit maximization, purchasing power parity, QWERTY keyboard, rent-seeking, ride hailing / ride sharing, risk-adjusted returns, Robert Bork, Robert Gordon, Ronald Reagan, Second Machine Age, self-driving car, Silicon Valley, Snapchat, spinning jenny, statistical model, Steve Jobs, supply-chain management, Telecommunications Act of 1996, The Chicago School, the payments system, The Rise and Fall of American Growth, The Wealth of Nations by Adam Smith, too big to fail, total factor productivity, transaction costs, Travis Kalanick, Vilfredo Pareto, zero-sum game

At its peak, it accounted for about two-thirds of Helsinki’s stock exchange market capitalization, almost half of corporate research and development, and about 20 percent of Finnish exports.d We should be careful, then, when comparing consolidated firm revenues (including foreign sales) to domestic GDP. Finally, the Intangible Assets hypothesis contains several ideas. Intangible assets are nonphysical in nature. They include intellectual property, like patents and copyrights, but extend to vague or fuzzy assets, such as brand recognition. Economists Nicolas Crouzet and Janice Eberly (2018) argue that industry leaders are often firms that are very good at producing intangible assets. In fact, they argue that this is how they became leaders in the first place. The attractive feature of a theory of intangible assets is that it can explain concentration both through increasing productivity (superstar firms) and through decreasing domestic competition since intangible assets can create barriers to entry. To test this idea, we will look carefully at intangible investments across firms and industries in Chapter 5.

When we go about measuring investment, we encounter the important distinction between tangible and intangible investment. A significant share of today’s capital is intangible. It includes patents, software, chemical formulas, databases, artistic value, special employee training, design, processes, and brand recognition. Intangible assets are not just about information technologies, however. Some intangible assets rely on computers—software and databases—but some are embedded in people, organizations, and brands. Intangible assets are also important in classic, “old-fashioned” manufacturing industries. Economists are pretty good at measuring tangible investment. Tangible assets are usually purchased from another firm, as opposed to produced internally. If a firm needs a new truck, it buys it from a truck manufacturer; it does not build the truck itself.

Under the Lower Search Costs hypothesis, small changes in productivity or innovation lead to large swings in market shares. Instead we see increased persistence and stability of market shares. FIGURE 3.2  Turnover at the top. See text for details. Figures 3.2 and 3.3 are consistent with decreasing domestic competition. They are also consistent with the hypotheses of the rise of superstar firms and the role of intangible assets if we assume that the comparative advantages of leaders have become more persistent. Why that would be the case is unclear, however. I have often heard arguments that intangible assets are subject to higher increasing returns to scale than tangible assets, but I have not seen convincing evidence that this is the case. In fact, I will show later that standard estimates of returns to scale have not changed much over the past twenty years. But at this point we can simply acknowledge that Figures 3.2 and 3.3 could be consistent with a rising persistence of stardom.


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

active measures, Affordable Care Act / Obamacare, barriers to entry, business cycle, business process, buy and hold, Claude Shannon: information theory, Clayton Christensen, commoditize, conceptual framework, corporate governance, creative destruction, Daniel Kahneman / Amos Tversky, discounted cash flows, disruptive innovation, 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

TREAT INTANGIBLES AS ASSETS In the United States, a poorly reasoned, 40-year old accounting rule (SFAS No. 2, 1974) that predates the software, biotech, Internet, energy alternatives, wireless, nanotech, and other intangibles-intensive industries still governs the accounting for R&D—the driver of many intangibles. 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. Even the government-produced National Income Accounts (issued by the Bureau of Economic Analysis) now consider most intangible expenditures—primarily on software, R&D, and brands—as investments rather than expenses for purposes of national economic accounting.5 We know what you, accountants, are now thinking: Intangibles are uncertain and notoriously difficult to value, so how can we report their values on the balance sheet?

That’s what we do in this, Part II, of the book: carefully outline, with full empirical support, the main reasons for the continuous decline in the relevance or usefulness of financial information to investors and other corporate stakeholders. 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. Corporate investment in intangible capital now surpasses investment in physical assets by a wide margin, and the gap keeps growing.

“While German companies pulled back on machinery investment during the crisis, R&D spending continued to rise.”1 The reason for this dramatic shift in the productive resources of the business sector is compelling: Corporate value and growth are increasingly driven by intangible assets, whereas physical capital (like factories, machines, or inventory) is just an enabler—a commodity—equally available to all competitors and hence a marginal creator of value and competitive advantage. So is, by the way, financial capital: stocks and bonds.2 Value is created nowadays by ideas and smart implementation.3 The Wall Street Journal reports that six companies: Amazon, Google, Apple, Facebook, Gilead and Walt Disney, “ . . . account for more than all of the $199 billion in market-capitalization gains in the S&P 500 [so far in 2015].”4 Guess what’s common to these companies: Their business models totally rely on intangible assets (patents, brands, movie rights, etc.). It is important to realize that intangibles aren’t creating value just at high-tech, Internet, or pharmaceutical businesses.


Financial Statement Analysis: A Practitioner's Guide by Martin S. Fridson, Fernando Alvarez

business cycle, corporate governance, credit crunch, discounted cash flows, diversification, Donald Trump, double entry bookkeeping, Elon Musk, fixed income, information trail, intangible asset, interest rate derivative, interest rate swap, negative equity, new economy, offshore financial centre, postindustrial economy, profit maximization, profit motive, Richard Thaler, shareholder value, speech recognition, statistical model, time value of money, transaction costs, Y2K, zero-coupon bond

As in many previous instances of companies writing down assets, Moody's and Standard & Poor's did not equate changes in accounting values with reduced protection for lenders. To be sure, if a company wrote off a billion dollars’ worth of goodwill, its ratio of assets to liabilities declined. Its ratio of tangible assets to liabilities did not change, however. The rating agencies monitored both ratios but had customarily attached greater significance to the version that ignored intangible assets such as goodwill. HOW GOOD IS GOODWILL? By maintaining a skeptical attitude to the value of intangible assets throughout the New Economy excitement of the late nineties, Moody's and Standard & Poor's were bucking the trend. The more stylish view was that balance sheets constructed according to GAAP seriously understated the value of corporations in dynamic industries such as computer software and e-commerce. Their earning power, so the story went, derived from inspired ideas and improved methods of doing business, not from the bricks and mortar for which conventional accounting was designed.

Therefore, the relevance of goodwill to an analysis of asset protection is questionable. On the whole, the rating agencies appear to have shown sound judgment during the 1990s by resisting the New Economy's siren song. While enthusiasm mounted for all sorts of intangible assets, they continued to gear their analysis to tangible-assets-only versions of key balance sheet ratios. By and large, therefore, companies did not alter the way they were perceived by Moody's and Standard & Poor's when they suddenly took an ax to their intangible assets. More generally, asset write-offs do not cause ratings to fall. Occasionally, to be sure, the announcement of a write-off coincides with the disclosure of a previously unrevealed impairment of value, ordinarily arising from operating problems. That sort of development may trigger a downgrade.

The motivation might have been to increase reported earnings. If the transaction was structured as the Journal stated, the extra money paid out to Dough-Re-Mi became part of an intangible asset, reacquired franchise rights, which would not amortize. That is, no scheduled, bit-by-bit write-down would reduce future earnings. On the other hand, when the very same dollars came back to Krispy Kreme, they would be recorded as interest income. In essence, according to the Wall Street Journal's story, Krispy Kreme manufactured earnings by taking money out of one pocket and putting it into another. The money given to Dough-Re-Mi to cover the closing costs also became an intangible asset, again assuming the Journal's account was accurate. Had Krispy Kreme instead repurchased the franchises and then closed the stores, it would have incurred an expense.


pages: 141 words: 40,979

The Little Book That Builds Wealth: The Knockout Formula for Finding Great Investments by Pat Dorsey

Airbus A320, barriers to entry, business process, call centre, creative destruction, credit crunch, discounted cash flows, intangible asset, knowledge worker, late fees, low cost airline, low cost carrier, Network effects, pets.com, price anchoring, risk tolerance, risk/return, rolodex, shareholder value, Stewart Brand

Moats are structural characteristics inherent to a business, and the cold hard truth is that some businesses are simply better than others. 2. Great products, great size, great execution, and great management do not create long-term competitive advantages. They’re nice to have, but they’re not enough. 3. The four sources of structural competitive advantage are intangible assets, customer switching costs, the network effect, and cost advantages. If you can find a company with solid returns on capital and one of these characteristics, you’ve likely found a company with a moat. Chapter Three Intangible Assets You Can’t Pull Them Off A Shelf, But They Sure Are Valuable. “INTANGIBLE ASSETS” sounds like a grab-bag category for competitive advantage, and in some ways it is. On the surface, brands, patents, and regulatory licenses have little in common. But as economic moats, they all function in essentially the same way—by establishing a unique position in the marketplace.

As a result, while there are regional variations in gasoline pricing, refiners generally can barely eke out high-single-digit to low-teens returns on capital over a cycle, while aggregate producers and waste haulers enjoy much steadier returns on invested capital in the mid to upper teens over many years. One Moat Down, Three to Go Although intangible assets may be just that—I can’t haul a brand or patent off a shelf and show it to you—they can be extremely valuable as sources of competitive advantage. They key in assessing intangible assets is thinking about how much value they can create for a company, and how long they are likely to last. A well-known brand that doesn’t confer pricing power or promote customer captivity is not a competitive advantage, no matter how familiar people may be with it. And a regulatory approval that doesn’t create high returns on capital—think refiners—isn’t all that valuable.

Table of Contents Little Book Big Profits Series Title Page Copyright Page Foreword Acknowledgments Introduction Chapter One - Economic Moats Moats Matter for Lots of Reasons Chapter Two - Mistaken Moats Moat . . . or Trap? These Moats Are the Real Deal Chapter Three - Intangible Assets Popular Brands Are Profitable Brands, Right? Patent Lawyers Drive Nice Cars A Little Help from the Man One Moat Down, Three to Go Chapter Four - Switching Costs Joined at the Hip Switching Costs Are Everywhere Chapter Five - The Network Effect Networks in Action Chapter Six - Cost Advantages A Better Mousetrap Location, Location, Location It’s Mine, All Mine It’s Cheap, But Does It Last? Chapter Seven - The Size Advantage The Value of the Van Bigger Can Be Better Big Fishes in Small Ponds Make Big Money Chapter Eight - Eroding Moats Getting Zapped Industrial Earthquakes The Bad Kind of Growth No, I Won’t Pay I’ve Lost My Moat, and I Can’t Get Up Chapter Nine - Finding Moats Looking for Moats in All the Right Places Measuring a Company’s Profitability Go Where the Money Is Chapter Ten - The Big Boss The Celebrity CEO Complex Chapter Eleven - Where the Rubber Meets the Road Hunting for Moats Chapter Twelve - What’s a Moat Worth?


pages: 261 words: 63,473

Warren Buffett Accounting Book: Reading Financial Statements for Value Investing (Warren Buffett's 3 Favorite Books) by Stig Brodersen, Preston Pysh

discounted cash flows, fixed income, intangible asset, market bubble, money market fund, principal–agent problem, profit maximization, risk tolerance, time value of money

While cash may be nice to have today, companies may find themselves short-handed if the funds aren’t used to purchase more valuable assets or service expensive debt. Intangible assets—net (8) A corporation might also acquire intangible assets in a given year with the aim of improving its market position; for example, Coca-Cola might patent a new soft drinks recipe. That is often a good thing. Big investments in tangible assets do not always indicate a growing business. For many companies, the growth in tangible and intangible assets goes hand in hand. As in the above case, you will most likely find this line to be negative too. That is what you should be looking for. Sometimes a corporation will sell intangible assets if the assets fail to increase profitability or if they are no longer considered a part of the organization’s core operating activities. Sale of intangible assets such as patents and trademarks would result in an inflow of cash and this would be reported within the investing cash flow as an increase.

Capitalization is how intangibles like patents and trademarks are entered into the balance sheet. Just as tangible assets get depreciated, intangible assets also lose value if it is deemed that they cannot generate income. When intangible assets are depreciated, it’s called amortization. This is a very important category and one that Warren Buffett pays particular attention to. Since patents and trademarks provide a durable competitive advantage for a company, it is a great source of risk reduction. Additionally, intangible assets are generally unaffected by inflation. This means that as time marches on, the value of patents and trademarks increase in nominal dollars automatically. Goodwill (11 - Asset Column) Goodwill is also an intangible asset. Intangible means that it is something we cannot touch. So let’s see how goodwill occurs.

In general, I would say that if you cannot see a company’s moat, there are two reasons: the first is because it is not there; the second is that you do not sufficiently understand the company. In either case, you’ll assume a lot of risk if you invest in the company and you don’t understand its competitive advantage. Between all the very specific moats in industries, I would emphasize the following three: 1. Intangible assets such as brands and patents are one type of moat. Disney is an example. It is a strong brand and almost everyone in the world recognizes it. To demonstrate this idea, Warren Buffett uses the example of a mom picking up a movie for her kids on her way home from work. The Disney movie is $1 more expensive than another choice, and she does not know the quality of either of the movies. Which movie would she choose?


pages: 339 words: 88,732

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

"Robert Solow", 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 cycle, business intelligence, business process, call centre, Charles Lindbergh, 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, G4S, 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, post-work, 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

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.

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. The rate of patenting by American inventors has been increasing rapidly since the 1980s,19 and other types of intellectual assets have also grown.20 In addition, a lot of research and development (R&D) is never formalized as intellectual property but is still very valuable.

For instance, when companies spend millions of dollars on computer hardware and software for a new enterprise resource planning system, they typically also include process changes that are three to five times as costly as the original investments in hardware and software. 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. There are 43,200 hours of new YouTube videos created each day,22 as well as 250 million new photos uploaded each day on Facebook.23 Users also contribute valuable but unmeasured content in the form of reviews on sites like Amazon, TripAdvisor, and Yelp.


pages: 233 words: 67,596

Competing on Analytics: The New Science of Winning by Thomas H. Davenport, Jeanne G. Harris

always be closing, big data - Walmart - Pop Tarts, business intelligence, business process, call centre, commoditize, data acquisition, digital map, en.wikipedia.org, global supply chain, high net worth, if you build it, they will come, intangible asset, inventory management, iterative process, Jeff Bezos, job satisfaction, knapsack problem, late fees, linear programming, Moneyball by Michael Lewis explains big data, Netflix Prize, new economy, performance metric, personalized medicine, quantitative hedge fund, quantitative trading / quantitative finance, recommendation engine, RFID, search inside the book, shareholder value, six sigma, statistical model, supply-chain management, text mining, the scientific method, traveling salesman, yield management

Thus far, most quantitative analyses are about relatively tangible entities: inventory units, dollars, customers, and so forth. Most organizations realize, however, that intangible assets and capabilities are extremely important in their competitive success. For more than a decade, there have been arguments in favor of measuring and managing intangibles, which include such factors as human capital, intellectual capital, brand, R&D capability, and other nonfinancial assets. Numerous articles and books have been written on the subject, and there is a consensus that intangible assets are important to both company success and external perceptions of company value. In an Accenture/Economist Intelligence Unit survey, for example, “today’s senior executives see managing intangible assets as a major issue. Fully 94 percent consider the comprehensive management of intangible assets important; 50 percent consider it one of the top three management issues facing their company.”8 Someday, perhaps, intangible assets will be reported upon by companies as a part of their regular financial reporting processes, and they may be forced to create and report on analytics involving intangibles.

Fully 94 percent consider the comprehensive management of intangible assets important; 50 percent consider it one of the top three management issues facing their company.”8 Someday, perhaps, intangible assets will be reported upon by companies as a part of their regular financial reporting processes, and they may be forced to create and report on analytics involving intangibles. This has also been advocated by Robert Kaplan and David Norton of Balanced Scorecard fame.9 There is no need to wait until such reporting is mandated by regulation, however. In the near future, we believe, companies will begin to take steps today to analyze and report intangible assets. If there is enhanced value and competitiveness in managing intangibles, there is no reason why executives can’t begin to make decisions and take actions based on intangible assets and capabilities now. Technology could play a substantial (but not exclusive) role in generating and analyzing intangible capabilities.10 Intangibles are not easily reducible to a set of numbers, and hence this type of analysis will often involve work with text and other less structured forms of information.

Dave Mittereder, “Pervasive Business Intelligence: Enhancing Key Performance Indicators,” DM Review, April 2005, http://www.dmreview.com/article_sub.cfm?articleID=1023894. 7. M. McDonald and M. Blosch, Gartner’s 2006 EXP CIO Survey (Stamford, CT: Gartner, Inc., January 2006). 8. Accenture, “Intangible Assets and Future Value: An Accenture Study Conducted by the Economist Intelligence Unit,” January 2005, http://www.accenture.com/Global/Services/By_Subject/Shareholder_Value/R_ and_I/SurveyAssets.htm. 9. Robert S. Kaplan and David P. Norton, “Measuring the Strategic Readiness of Intangible Assets,” Harvard Business Review, February 2004, 52–63. 10. We addressed this issue in Jeanne G. Harris and Thomas H. Davenport, “The Information Environment for Intangible Asset Management,” Accenture Research Note, June 2004, http://www.accenture.com/Global/Research_and_Insights/Institute_For_High_Performance_Business/By_Publication_Type/Research_Notes/TheAssetManagement_old.htm. 11.


pages: 444 words: 86,565

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

asset allocation, asset-backed security, bank run, barriers to entry, business cycle, 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, stocks for the long run, technology bubble, time value of money, transaction costs, yield curve

Otherwise, the company’s valuation would be influenced by an expanding or diminishing PP&E base, which would not be representative of a steady state business. 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. Therefore, it is more common to simply model amortization with depreciation as part of one line-item (D&A).

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. As D&A is a non-cash expense, it is added back to EBIAT in the calculation of FCF (see Exhibit 3.4).

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: 202 words: 72,857

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

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, Kickstarter, Mark Zuckerberg, negative equity, passive income, payday loans, self-driving car, Snapchat, Stephen Hawking, Steve Jobs, stocks for the long run, stocks for the long term, 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. 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.

Step two of your plan should be to create a passive income from rental income and through trading the money markets, with a possible long-term view to creating a passive income from a business. 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. If you choose a business that you are not passionate about you will not work hard enough at it.

You can e-mail us at info@wealthdragons.co.uk or call +44 (0)1908 69 88 60. Index Abundance thinking Accountability Action, taking importance of law of attraction and parallel universe perspective Wealth Dragon principles Adapt: Why Success Always Starts with Failure (Harford) Aggression Apartment buildings Apathy Appreciation of assets The Art of War (Sun Tzu) Assets and asset building control over deal making strategy intangible assets net worth calculation wealth strategy for Attraction, law of Auctions Awaken the Giant Within (Robbins) Ayers, Nathaniel Bank loans. See Loans Bank repossessions Bankruptcy Beliefs, about wealth Below market value (BMV) Bill & Melinda Gates Foundation Books, author’s recommendations Bradbury, Ray Brand building Branson, Richard Britain. See Great Britain Buddha Buffett, Warren Business creation Cannabis house, John’s story Cash in bank account Celebrity lifestyle Chain angels Chanel, Coco Change Charity.


pages: 271 words: 52,814

Blockchain: Blueprint for a New Economy by Melanie Swan

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, 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, uber lyft, 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). An example of using the blockchain to control and transfer limited-run artworks is Swancoin, where 121 physical-world artworks, crafted on 30 × 30 cm varnished plywood, are available for purchase and transfer via the Bitcoin blockchain (see Figure 2-1).51 Any asset can be registered in the blockchain, and thus its ownership can be controlled by whoever has the private key.

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. We may be at the dawn of a new revolution. This revolution started with a new fringe economy on the Internet, an alternative currency called Bitcoin that was issued and backed not by a central authority, but by automated consensus among networked users.

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: 288 words: 64,771

The Captured Economy: How the Powerful Enrich Themselves, Slow Down Growth, and Increase Inequality by Brink Lindsey

"Robert Solow", Airbnb, Asian financial crisis, bank run, barriers to entry, Bernie Sanders, Build a better mousetrap, Capital in the Twenty-First Century by Thomas Piketty, Carmen Reinhart, Cass Sunstein, collective bargaining, creative destruction, Credit Default Swap, crony capitalism, Daniel Kahneman / Amos Tversky, David Brooks, diversified portfolio, Donald Trump, Edward Glaeser, endogenous growth, experimental economics, experimental subject, facts on the ground, financial innovation, financial intermediation, financial repression, hiring and firing, Home mortgage interest deduction, housing crisis, income inequality, informal economy, information asymmetry, intangible asset, inventory management, invisible hand, Jones Act, Joseph Schumpeter, Kenneth Rogoff, Kevin Kelly, knowledge worker, labor-force participation, Long Term Capital Management, low skilled workers, Lyft, Mark Zuckerberg, market fundamentalism, mass immigration, mass incarceration, medical malpractice, Menlo Park, moral hazard, mortgage debt, Network effects, patent troll, plutocrats, Plutocrats, principal–agent problem, regulatory arbitrage, rent control, rent-seeking, ride hailing / ride sharing, Robert Metcalfe, Ronald Reagan, Silicon Valley, Silicon Valley ideology, smart cities, software patent, too big to fail, total factor productivity, trade liberalization, transaction costs, tulip mania, Uber and Lyft, uber lyft, Washington Consensus, white picket fence, winner-take-all economy, women in the workforce

For publicly listed US corporations, this ratio has increased about 20 percent since 1970.5 Since a company’s market value represents the estimated present value of the income stream from its assets, a rise in Tobin’s Q means a rise in the value of intangible assets. Intangible assets can be benign in origin and may include a trusted brand name, intellectual capital that results from research and development (R&D) spending, organizational capital that results from an efficient structuring of production and management, or the human capital of key employees. But another source of intangible assets is government-created barriers to entry or special subsidies. The increase in Tobin’s Q surely reflects the increasing relative importance of intangible productive assets in the post-industrial information economy, but it may also be a warning sign of an increase in rent-seeking.

RegData represents a modest step forward: it analyzes restrictive text strings from the Code of Federal Regulations (words like “shall,” “must,” “may not,” “permitted,” and “required”) to estimate the extent of regulation overall and in specific industries.13 James Bessen of the Boston University School of Law has used RegData to test whether rising corporate profits and Tobin’s Q values simply reflect greater investment in intangible productive assets (as measured by corporate spending on R&D, advertising, and “organizational capital”) or instead are driven by rents. Bessen found that both intangible assets and regulation are strongly associated with the rise in corporate returns and valuations since 1970. But because investments in intangible assets have decreased relative to tangible assets since 2000, Bessen concludes that rents have accounted for much of the increase in profits and Tobin’s Q values during the twenty-first century. Further, his statistical tests reject reverse causality, namely, that rising corporate returns and valuations are leading to increased regulation.14 In sum, recent trends sound a number of alarm bells that warn of a rise in rents across the US economy.

See inequality inequality, 1–6 capitalism and, 7 folk theory of, 5 finance and, 35, 62–63 geographic, 115–23 government as source of, 11 intellectual property and, 81–84 land-use regulations and, 115–23 occupational licensing and, 103, 105–6, 108 post-New Deal, 29 prevention of through competition, 8 inflation, 2, 40, 59, 77, 111 information bias and, 136–40 deliberative politics and, 14 imbalance and, 139–40 “information spillovers” and, 114 innovation, 6 concentration of industry and, 20 copyright/patent law and, 64–65, 71–75, 167, 193n8 efficiency and, 16 financial sector, 42 growth rate and, 24–25, 186n15 profits and, 19 regulatory capture and, 17 scarcity of, 16 total factor productivity and, 78–79 institutional bias, 147–48, 170, 175 institutional weakness, 8–9 intangible assets, 19–20, 23 intellectual capital, 20 intellectual property, 64–89. See also copyright/patent law benefits of protecting, 64–65 concentrated benefits and, 131 costs of expansion of, 75–81 digital era and, 70–71 European views on, 65, 76, 195n32 information imbalance and, 139–40 institutional bias and, 149 market failure and, 68–69, 74 monopolies and, 85 morality of, 84–89, 195n32 policy image and, 141–45 rent-seeking and, 64 interest rates, 40, 51–54, 59 International Monetary Fund (IMF), 60 Internet.


pages: 523 words: 111,615

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

"Robert Solow", accounting loophole / creative accounting, affirmative action, bank run, banking crisis, Berlin Wall, bonus culture, Branko Milanovic, BRICs, business cycle, 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, different worldview, 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, hedonic treadmill, 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, 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.


Buy Then Build: How Acquisition Entrepreneurs Outsmart the Startup Game by Walker Deibel

barriers to entry, Clayton Christensen, commoditize, deliberate practice, discounted cash flows, diversification, Elon Musk, family office, financial independence, high net worth, intangible asset, inventory management, Jeff Bezos, knowledge worker, Lean Startup, Mark Zuckerberg, meta analysis, meta-analysis, Network effects, new economy, Peter Thiel, risk tolerance, risk/return, rolodex, software as a service, Steve Jobs, supply-chain management, Y Combinator

Current assets include very liquid items like cash and equivalents, any marketable securities, accounts receivable, inventory, and prepaid expenses. 136 Long-term assets reflect assets owned by the company that are harder to convert into cash—items like illiquid investments; fixed assets like buildings, land, or the widget-making machine example above; as well as accumulated depreciation and intangible assets. Intangible assets include things like software that was developed by the company, patents or certain intellectual property, and goodwill. Let’s unpack a few of these terms. DEPRECIATION Depreciation is an accounting tool that allows companies to devalue assets over their useful life. Let’s take the widget-making machine example above. This machine is not expected to last forever. Let’s say the predicted useful life is ten years—that’s how long it’s expected to be operational before it needs to be replaced.

Instead, you, as an acquisition entrepreneur, will be looking to acquire a company’s infrastructure only so far as its ability to generate cash flow. GOODWILL Goodwill is an intangible asset that represents the value over and above the value of the hard assets. For example, let’s say a drop-shipping based, eCommerce company with no real estate, inventory, or assets of any kind generates $250,000 in earnings every year for the owner. When the company is bought for $800,000 (3.2 multiple on $250,000), where is the value booked? In goodwill. Goodwill can also be referred to as a “customer list” or any other intangible asset name that was acquired at a premium over asset value. LIABILITIES Liabilities headline the right side of the balance sheet and outline what the company owes. Here’s where the debts will be found for bank loans, equipment purchases, lines of credit, as well as accounts payable, rent, tax, utilities, and any customer prepayments will be listed.

If your car is worth $35,000 January 1st and $27,000 on December 31st of the same year, you didn’t actually spend the difference, you just lost value. The IRS allows this depreciation to be subtracted as an expense from the net income so that you do not need to pay taxes on those dollars that were invested in the equipment in the first place. Amortization works the same as depreciation but is applied to intangible assets like goodwill. So, you can actually take depreciation and amortization and add it back to net earnings to discover the cash generated in addition to what’s reported on net income. Principal payments paid on debt, however, 142 are not expensed by a company. A business with interest payments will clearly have principal payments as well. You’ll need to subtract the principal to understand the current true cash flow of the company.


pages: 398 words: 111,333

The Einstein of Money: The Life and Timeless Financial Wisdom of Benjamin Graham by Joe Carlen

Albert Einstein, asset allocation, Bernie Madoff, Bretton Woods, business cycle, business intelligence, discounted cash flows, Eugene Fama: efficient market hypothesis, full employment, index card, index fund, intangible asset, invisible hand, Isaac Newton, laissez-faire capitalism, margin call, means of production, Norman Mailer, oil shock, post-industrial society, price anchoring, price stability, reserve currency, Robert Shiller, Robert Shiller, the scientific method, Vanguard fund, young professional

Meredith, then a security-analysis instructor at the New York Stock Exchange), addresses this issue (among others) item by item. According to its preface, the purpose of the book is to enable one to read the financial statements of a business “intelligently”52 so that one becomes “better equipped to gauge its future possibilities.”53 For example, when discussing the potentially misleading reporting of a company's intangible assets (i.e., nonphysical resources such as goodwill, intellectual property, etc.), Graham writes that “little if any weight should be given to the figures at which intangible assets appear on the balance sheet.”54 Instead, Graham counseled that “it is the earning power of these intangibles, rather than their balance sheet valuation, that really counts.”55 Similarly, Graham assails corporate reporting of property values (“the same misleading results which were obtained before the war by overstating property values are now sought by the opposite stratagem of understating these assets”56), the “book value” item on the balance sheet, meant to represent the value of all of the assets available for the security in question (“if the company were actually liquidated the value of the assets would most probably be much less than the book value [of the stock]”57), reported earnings figures (“look out for booby traps in the per-share [earnings] figures”58), and more.

According to its preface, the purpose of the book is to enable one to read the financial statements of a business “intelligently” so that one is “better equipped to gauge its future possibilities.”30 The Interpretation of Financial Statements is packed with the discerning analytical wisdom associated with Graham. For example, when discussing the potentially misleading reporting of a company's intangible assets, Graham writes: “In general, it may be said that little if any weight should be given to the figures at which intangible assets appear on the balance sheet…. It is the earning power of these intangibles, rather than their balance sheet valuation, that really counts.”31 He also warns against overly simplistic methods of stock selection and encourages a full analysis of all relevant metrics. For example, he warned against those who would use the current-asset-value figure as the deciding factor in their analysis: “When a stock is selling at much less than its current asset value, this fact is always of interest, although it is by no means conclusive proof that the issue is undervalued.”32 That same year, Graham's Storage and Stability: A Modern Ever-Normal Granary (the first of two full-length books about macroeconomics) was published.

earnings yield: The inverse of the Price to Earnings (P/E) ratio, the earnings yield is calculated by dividing per-share earnings (of the most recent twelve-month period) by the stock's current market price. fixed charges: Expenses that recur consistently as part of the regular course of business (e.g., insurance payments, loan payments, etc.). goodwill: Unlike such tangible assets such as cash or inventory, goodwill is a balance-sheet item that represents intangible assets such as brand-name recognition, strength of client (or supplier) relationships, and the like. intangible assets: Nonphysical resources such as goodwill, intellectual property, and so forth. liquidity: The extent to which an asset can be converted, both quickly and wholly (i.e., without a price discount), to its cash equivalent. long-term debt: Loans and financial obligations due in over one year. margin trading: The practice of purchasing stock with borrowed funds.


pages: 304 words: 82,395

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

23andMe, Affordable Care Act / Obamacare, airport security, 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, Joi Ito, 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, paypal mafia, performance metric, Peter Thiel, 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, Thomas Davenport, Turing test, Watson beat the top human players on Jeopardy!

The issue affects more than just a company’s balance sheet: the inability to properly value corporate worth arguably produces business risk and market volatility. 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. The day Facebook’s shares opened, the gap between its formal assets and its unrecorded intangible value was nearly $100 billion.

Putting the data on the books may make the firm legally liable for it, the legal eagles argued, which they thought was not such a good idea. 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. How will data be valued? Calculating its worth will no longer mean simply adding up what’s gained from its primary use.

In the end, it was over $100 billion, or five cents, as we extrapolated ourselves based on his calculation. Value gap of physical assets and intangible ones—Steve M. 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.


Principles of Corporate Finance by Richard A. Brealey, Stewart C. Myers, Franklin Allen

3Com Palm IPO, accounting loophole / creative accounting, Airbus A320, Asian financial crisis, asset allocation, asset-backed security, banking crisis, Bernie Madoff, big-box store, Black-Scholes formula, break the buck, Brownian motion, business cycle, buy and hold, buy low sell high, capital asset pricing model, capital controls, Carmen Reinhart, carried interest, collateralized debt obligation, compound rate of return, computerized trading, conceptual framework, corporate governance, correlation coefficient, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, cross-subsidies, discounted cash flows, disintermediation, diversified portfolio, equity premium, eurozone crisis, financial innovation, financial intermediation, fixed income, frictionless, fudge factor, German hyperinflation, implied volatility, index fund, information asymmetry, intangible asset, interest rate swap, inventory management, Iridium satellite, Kenneth Rogoff, law of one price, linear programming, Livingstone, I presume, London Interbank Offered Rate, Long Term Capital Management, loss aversion, Louis Bachelier, market bubble, market friction, money market fund, moral hazard, Myron Scholes, new economy, Nick Leeson, Northern Rock, offshore financial centre, Ponzi scheme, prediction markets, price discrimination, principal–agent problem, profit maximization, purchasing power parity, QR code, quantitative trading / quantitative finance, random walk, Real Time Gross Settlement, risk tolerance, risk/return, Robert Shiller, Robert Shiller, shareholder value, Sharpe ratio, short selling, Silicon Valley, Skype, Steve Jobs, The Nature of the Firm, the payments system, the rule of 72, time value of money, too big to fail, transaction costs, University of East Anglia, urban renewal, VA Linux, value at risk, Vanguard fund, yield curve, zero-coupon bond, zero-sum game, Zipcar

You will find that, when you are faced with this type of problem, the trick is to transform the present value of the cash flow into an equivalent annual flow, that is, the total cash per year from buying and operating the asset. 6-1 Applying the Net Present Value Rule Many projects require a heavy initial outlay on new production facilities. But often the largest investments involve the acquisition of intangible assets. For example, U.S. banks invest about $10 billion annually in new IT projects. Much of this expenditure goes to intangibles such as system design, programming, testing, and training. Think also of the huge expenditure by pharmaceutical companies on research and development (R&D). Merck, one of the largest pharmaceutical companies, spent $11 billion on R&D in 2010. The R&D cost of bringing one new prescription drug to market has been estimated at $800 million. Expenditures on intangible assets such as IT and R&D are investments just like expenditures on new plant and equipment. In each case the company is spending money today in the expectation that it will generate a stream of future profits.

., accounting) values rather than market values.14 The market value of the company finally determines whether the debtholders get their money back, so you might expect analysts to look at the face amount of the debt as a proportion of the total market value of debt and equity. On the other hand, the market value includes the value of intangible assets generated by research and development, advertising, staff training, and so on. These assets are not readily salable and, if the company falls on hard times, their value may disappear altogether. For some purposes, it may be just as good to follow the accountant and ignore these intangible assets. This is what lenders do when they insist that the borrower should not allow the book debt ratio to exceed a specified limit. Notice also that these measures of leverage ignore short-term debt. That probably makes sense if the short-term debt is temporary or is matched by similar holdings of cash, but if the company is a regular short-term borrower, it may be preferable to widen the definition of debt to include all liabilities.

Why did A Corporation pay an $8 million premium over B’s book value? There are two possible reasons. First, the true values of B’s tangible assets—its working capital, plant, and equipment—may be greater than $10 million. We will assume that this is not the reason; that is, we assume that the assets listed on its balance sheet are valued there correctly.18 Second, A Corporation may be paying for an intangible asset that is not listed on B Corporation’s balance sheet. For example, the intangible asset may be a promising product or technology. Or it may be no more than B Corporation’s share of the expected economic gains from the merger. A Corporation is buying an asset worth $18 million. The problem is to show that asset on the left-hand side of AB Corporation’s balance sheet. B Corporation’s tangible assets are worth only $10 million. This leaves $8 million.


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Security Analysis by Benjamin Graham, David Dodd

activist fund / activist shareholder / activist investor, asset-backed security, backtesting, barriers to entry, business cycle, buy and hold, 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 airline, low cost carrier, moral hazard, mortgage debt, Myron Scholes, 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. It was akin to buying a bond yielding 14%, with a decent chance that the coupon payments would rise over time.

This analysis can be supplemented by expert information. 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). The prices paid in these private market transactions are presumably made with the alternative cost of internal development in mind.

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.


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The Great Tax Robbery: How Britain Became a Tax Haven for Fat Cats and Big Business by Richard Brooks

accounting loophole / creative accounting, bank run, Big bang: deregulation of the City of London, bonus culture, Bretton Woods, carried interest, Celtic Tiger, collateralized debt obligation, commoditize, Corn Laws, corporate social responsibility, crony capitalism, Double Irish / Dutch Sandwich, financial deregulation, haute couture, intangible asset, interest rate swap, Jarndyce and Jarndyce, mega-rich, Northern Rock, offshore financial centre, race to the bottom, shareholder value, short selling, supply-chain management, The Chicago School, The Wealth of Nations by Adam Smith, transfer pricing

It was tearing itself apart in pursuit of tax avoidance. ‌5 ‌Breaking Up Isn’t Hard to Do The companies that carve themselves up and send the pieces round the world for tax avoidance Multinational enterprises have long understood that the most valuable things they possess are often not the bricks, mortar and machinery of their physical operations but their intangible assets: their know-how, patents, trademarks and brands. The profits to be made from a drug, for example, drop like a stone when a patent expires and ownership of the formula behind it lapses. Well-known breakfast cereals sell for a great deal more than ‘brand X’ not just because of the crappy toys inside the box. With the growth of international trade in the twentieth century, such intangible assets could be increasingly turned to profit not just in their country of development but across in the world. In 1900 Coca-Cola sold its first bottle in Britain. By 1920 it had 1000 bottlers in countries all over the world.

Rights, patents, trademarks, licences, sub-licences and much else could be transplanted at the stroke of a lawyer’s pen to companies in low-tax areas that would receive payments for allowing related companies in ‘normal’ tax rate countries to use their new ‘intangible’ assets. And the international rules of the game – drawn up without foreseeing a time when multinationals would break themselves up for tax avoidance – dictated that the tax results of these arrangements must be respected. For British multinationals there remained a major hurdle to overcome. The same 1984 ‘controlled foreign companies’ laws that tackled British multinationals diverting financing income into tax haven subsidiaries applied equally to the parking of intangible assets in such offshore companies. In the same way that they couldn’t stuff these companies with interest payments reducing taxable profits in countries with normal tax rates, neither could they use them as receptacles for royalties or other fees.

The concept was refined when the body set up to administer the United States’ Marshall Plan for the post-war reconstruction of Europe – what is now the Organization for Economic Cooperation and Development (OECD) – effectively became the custodian of the rules of international taxation (as before, smoothing out the wrinkles in international taxation was recognized as an important pillar of a stable world economic order).‌3 Crucially, in its 1963 ‘model’ taxation treaty, on which countries would base their bilateral agreements, the OECD made a point of ensuring that transfer prices must reflect the value of intangible assets such as patents and trademarks. This was logical: independent parties did indeed pay royalties for using such assets, the legal protections for which were also being strengthened across the world (making them still more valuable). Or the prices paid commercially for goods reflected the technology, know-how and brands that had gone into making and marketing them. As countries signed up to thousands of taxation treaties incorporating this OECD principle in the 1970s and 80s, the world’s tax system became bound to it.


pages: 380 words: 109,724

Don't Be Evil: How Big Tech Betrayed Its Founding Principles--And All of US by Rana Foroohar

"side hustle", accounting loophole / creative accounting, Airbnb, AltaVista, autonomous vehicles, banking crisis, barriers to entry, Bernie Madoff, Bernie Sanders, bitcoin, book scanning, Brewster Kahle, Burning Man, call centre, cashless society, cleantech, cloud computing, cognitive dissonance, Colonization of Mars, computer age, corporate governance, creative destruction, Credit Default Swap, cryptocurrency, data is the new oil, death of newspapers, Deng Xiaoping, disintermediation, don't be evil, Donald Trump, drone strike, Edward Snowden, Elon Musk, en.wikipedia.org, Erik Brynjolfsson, Etonian, Filter Bubble, future of work, game design, gig economy, global supply chain, Gordon Gekko, greed is good, income inequality, informal economy, information asymmetry, intangible asset, Internet Archive, Internet of things, invisible hand, Jaron Lanier, Jeff Bezos, job automation, job satisfaction, Kenneth Rogoff, life extension, light touch regulation, Lyft, Mark Zuckerberg, Marshall McLuhan, Martin Wolf, Menlo Park, move fast and break things, move fast and break things, Network effects, new economy, offshore financial centre, PageRank, patent troll, paypal mafia, Peter Thiel, pets.com, price discrimination, profit maximization, race to the bottom, recommendation engine, ride hailing / ride sharing, Robert Bork, Sand Hill Road, search engine result page, self-driving car, shareholder value, sharing economy, Shoshana Zuboff, Silicon Valley, Silicon Valley startup, smart cities, Snapchat, South China Sea, sovereign wealth fund, Steve Jobs, Steven Levy, subscription business, supply-chain management, TaskRabbit, Telecommunications Act of 1996, The Chicago School, the new new thing, Tim Cook: Apple, too big to fail, Travis Kalanick, trickle-down economics, Uber and Lyft, Uber for X, uber lyft, Upton Sinclair, WikiLeaks, zero-sum game

These companies aren’t “attention merchants” in the same way that Google and Facebook are. And they don’t have entire business models built on selling and monetizing data. But they do leverage data to increase their return on investment. It’s telling that the fastest way to become one of those top 10 percent of companies holding 80 percent of corporate wealth is to figure out how to leverage not physical assets or even capital, but the value of “intangible” assets, including data, patents, intellectual property, and networks. Companies in every industry are counting on such electronic data to spur growth over the next several years. Data-driven artificial intelligence could generate up to almost $6 trillion in revenues for companies that deploy it successfully. (The biggest gains now come in sales and supply-chain management.)40 Most of the CEOs I’ve spoken to are extremely bullish on the subject, claiming their AI investments yield between 10 and 30 percent returns.

Among this group, the top 10 percent (the “superstar” companies) take 80 percent of economic profits—defined as a company’s invested capital multiplied by its returns above the cost of that capital. The top 1 percent alone take 36 percent of the pie.32 We already know who some of the top 10 percent are—they include high-margin Big Tech companies (Facebook, Apple, Amazon, and Google), as well as a number of others who have been able to exploit the value of intangible assets such as software, data, patents, and brands (these would include not just technology firms but also a good number of financial, biotech, and pharmaceutical companies). We also know that the network effect allows such companies to capture markets quickly and at scale, giving them what’s known in the start-up world as the “first scaler advantages.” This process is aided by the fact that we have shifted from a “tangible” economy, based on physical goods, to one based more on intangibles—namely intellectual property, ideas, and data.

Whether it’s made up of Twitter users, Uber drivers, Airbnb hosts, or Instagram influencers, the network is worth far more than the value of any single node within it. The key point is that users beget users, which allows the players who can grab the most market share quickly to dominate entire industries seemingly overnight. This is not unique to Google, as we’ve seen. But it is much easier these days to grab market share if you are big, and can leverage data and intellectual property across networks. These intangible assets can scale far, far faster and further than the products and services of old.33 Networked businesses are case studies in how what goes big, goes bigger still. But as Varian and Carl Shapiro acknowledge, there’s a dark side to the feedback loop: “Positive feedback [within platforms] also makes the weak get weaker.” In other words, even superstars of the networked era can fall, though typically to each other, rather than to upstarts.34 * * * — JUST LOOK AT the car industry for a sense of how profound the shift will be for traditional firms.


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

"Robert Solow", Amazon Mechanical Turk, Any sufficiently advanced technology is indistinguishable from magic, autonomous vehicles, business cycle, 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, 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. As a result, millions of people are being left behind. Their incomes and jobs are being destroyed, leaving them worse off in absolute purchasing power than before the digital revolution.

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. Banning layoffs paradoxically can lower employment by making it riskier for firms to hire in the first place, especially if they are experimenting with new products or business models. 13.


pages: 219 words: 15,438

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

buy and hold, 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 airline, low cost carrier, oil shock, passive investing, price stability, Ronald Reagan, the market place, transaction costs, Yogi Berra, zero-coupon bond

Accounting goodwill is essentially the amount by which the purchase price of a business exceeds the fair value of the assets acquired (after deducting liabilities). 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.

The capitalized value of this excess return is economic Goodwill. 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. Consumer franchises are a prime source of economic Goodwill.

Assume an investor buys the stock at $100 per share, paying in effect $80 per share for Goodwill Gust as would a corporate purchaser buying the whole company). 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. It is also the best guide to the current value of the operation's economic Goodwill. (2) In evaluating the wisdom of business acquisitions, amortization charges should be ignored also.


pages: 474 words: 120,801

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

additive manufacturing, barriers to entry, Berlin Wall, bilateral investment treaty, business cycle, 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, disruptive innovation, 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, “Twenty-First 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. “Zara: Taking the Lead in Fast-Fashion,” Businessweek, April 4, 2006. 32.

Not all of these intangibles can be easily measured—which has not stopped economists from trying.27 Of course, some industries are still predicated on very expensive operations, such as drilling for oil or building airliners. 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. Knowledge management, the “information systems, business models, and other ‘intangibles’ which have to do more with knowledge than with cement,” explain the company’s success, says Zambrano.28 CEMEX is another example of a new, innovative player from a country (Mexico) not known as a cradle of globally competitive companies that has upended the traditional power structure of an old, highly concentrated industry.

New York: Anchor Books, 2000. ——. The World Is Flat: A Brief History of the Twenty-First Century. 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. Gibler, Douglas M. International Military Alliances from 1648 to 2008. Washington, DC: Congressional Quarterly Press, 2010.


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

Albert Einstein, Andrew Keen, barriers to entry, Black Swan, business process, call centre, Clayton Christensen, cleantech, cloud computing, commoditize, corporate governance, creative destruction, disruptive innovation, Elon Musk, en.wikipedia.org, future of work, game design, George Gilder, intangible asset, Isaac Newton, job satisfaction, Joi Ito, 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

And our institutions will have nobody to follow, nobody to lead them out of the push world that is failing us so badly. We can do it. Why? 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. Innovation is an inherently human activity, one pursued and achieved by individuals.

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: 374 words: 97,288

The End of Ownership: Personal Property in the Digital Economy by Aaron Perzanowski, Jason Schultz

3D printing, Airbnb, anti-communist, barriers to entry, bitcoin, blockchain, carbon footprint, cloud computing, conceptual framework, crowdsourcing, cryptocurrency, Donald Trump, Edward Snowden, en.wikipedia.org, endowment effect, Firefox, George Akerlof, Hush-A-Phone, information asymmetry, intangible asset, Internet Archive, Internet of things, Isaac Newton, loss aversion, Marc Andreessen, means of production, minimum wage unemployment, new economy, peer-to-peer, price discrimination, Richard Thaler, ride hailing / ride sharing, rolodex, self-driving car, sharing economy, Silicon Valley, software as a service, software patent, software studies, speech recognition, Steve Jobs, subscription business, telemarketer, The Market for Lemons, transaction costs, winner-take-all economy

IP rights are an effort to overcome the inherent characteristics of intellectual resources and force them to behave more like tangible property. Importantly, not all intangible resources fall under the IP umbrella. Interests in debts, securities, and government franchises—think liquor licenses or taxi medallions—all concern intangible assets rather than tangible objects, but they aren’t regulated by IP law. Likewise, we can think of assets like digital currencies and virtual objects—a powerful weapon in your favorite video game, for example—in terms of property. The rules surrounding these relatively new intangible assets remain largely undefined.16 Digital objects don’t easily fit into either the IP or the personal property frameworks. Consider a digital movie you purchase from Apple. You browse on iTunes, find a movie that looks promising—we recommend Shane Carruth’s Upstream Color—and buy it for $12.99.

Plenty of transactions are easy enough to characterize as a rental, lease, or lending. You don’t own the books you borrow from the library. And your Netflix subscription doesn’t give you a property interest—personal, intellectual, or intangible—in the movies you watch. But when you pay a one-time fee for a copy of, or permanent access to, an ebook, game, or other digital media, that should be recognized as a sale that transfers ownership of a tangible or intangible asset. Courts struggle to define and identify sales in large part because they can’t decide whether to rely on the privately drafted declarations of copyright holders or facts about a transaction beyond the license. There is no better example of this floundering than a pair of cases argued on the same day in front of the same three-judge panel of the Court of Appeals for the Ninth Circuit, a court whose territory includes both Hollywood and Silicon Valley.

We outlined the sorts of considerations we think courts should take into account there in chapter 4. They include the length of possession by the consumer, whether payment is one-time or ongoing; and how the transaction is characterized to the public. In short, we think a one-time payment made in exchange for permanent or open-ended possession of or access to a digital good—whether it’s a tangible copy or an intangible asset—results in ownership. That’s especially true when the transaction is characterized using words like “sale,” “buy,” or “own.” So when you click “Buy Now” and pay $9.99 for a digital movie, you own it, even if no permanent copy is ever stored on your device. And when you exchange cash for a coffee maker, you own both the hardware and the software embedded in it. Assuming the court is dealing with an owner, next it has to decide whether the actions they have taken fall within the scope of exhaustion.


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Value Investing: From Graham to Buffett and Beyond by Bruce C. N. Greenwald, Judd Kahn, Paul D. Sonkin, Michael van Biema

Andrei Shleifer, barriers to entry, Berlin Wall, business cycle, capital asset pricing model, corporate raider, creative destruction, Daniel Kahneman / Amos Tversky, discounted cash flows, diversified portfolio, Eugene Fama: efficient market hypothesis, fixed income, index fund, intangible asset, Long Term Capital Management, naked short selling, new economy, place-making, price mechanism, quantitative trading / quantitative finance, Richard Thaler, shareholder value, short selling, Silicon Valley, stocks for the long run, Telecommunications Act of 1996, time value of money, tulip mania, Y2K, zero-sum game

There is no need for us to forecast the future. The assets and liabilities exist today. Many of them are tangible (or quasi-tangible, like money in the bank account as confirmed by the bank), and these can be valued directly with great precision. Starting at the top of the balance sheet has another advantage. As we work down the asset list from cash at the top, whose value is unambiguous, to various intangible assets like goodwill, whose value is often highly problematic, we are made naturally aware of the decreasing reliability of the stated values. Graham himself preferred to rely totally on current assets that could be realized within a year and whose accounting values did not vary far from the actual cash that could be obtained by selling them. From these current assets he subtracted all the firm's liabilities to arrive at his famous net-net working capital figure for the value of the company.

No profitable businesses can be bought at these liquidation prices. The second valuation based on assets is to compare the price of the company's shares to the book value per share. The book value is the balance sheet entry for shareholder equity divided by the number of shares. Since equity by definition equals all the assets minus all the liabilities, book value can include the value of intangible assets such as goodwill and a number of other assets that may be worth considerably less than the balance sheet suggests. Buying stocks at a substantial discount to book value has been, as we have said, a successful investment strategy. No adjustment is made to the figures on the financial statement, which makes the strategy appropriate for investors who don't want to do a lot of work. Again, few successful businesses will be available for sale at book value, and even fewer at a discount sufficient to provide the margin of safety that the value investor seeks.

Any company trying to compete with Intel would need to spend considerably to build up an equivalent expertise. How much would be enough? Some analysts have suggested treating R&D as a capital investment and depreciating it on a straight-line basis over five years. If we simplify and say that this past year's outlays should be fully valued as an asset, last year's at 80 percent, and so on, we can calculate the value of an off-balance sheet intangible asset that estimates what a competitor would need to spend just to get into the business. For Intel in 1975, that amount would have been $27 million. This would have increased the reproduction costs of the assets by 40 percent, and the book value of equity from $74 to $101 million, a gain of 37 percent. There are other ways to gauge the costs of reproducing the knowledge base. If we used the sum of the last three years spent on R&D, the figure would be somewhat higher than our depreciated total; using the sum of the last two years would give us a slightly lower number.


Free Money for All: A Basic Income Guarantee Solution for the Twenty-First Century by Mark Walker

3D printing, 8-hour work day, additive manufacturing, Affordable Care Act / Obamacare, basic income, Baxter: Rethink Robotics, Capital in the Twenty-First Century by Thomas Piketty, commoditize, financial independence, full employment, happiness index / gross national happiness, industrial robot, intangible asset, invisible hand, Jeff Bezos, job automation, job satisfaction, John Markoff, Kevin Kelly, laissez-faire capitalism, longitudinal study, market clearing, means of production, new economy, obamacare, off grid, plutocrats, Plutocrats, precariat, profit motive, Ray Kurzweil, rent control, RFID, Rodney Brooks, Rosa Parks, science of happiness, Silicon Valley, surplus humans, The Future of Employment, the market place, The Wealth of Nations by Adam Smith, too big to fail, transaction costs, universal basic income, working poor

It is valued in the tens of billions but, like many twenty-first-century companies, most of its value does not lie in the ownership of Marx’s archetypical means of production: billowing factories, large tracts of land, railways, shipping lines, and the like. Accountants make a distinction between tangible and intangible assets. Examples of tangible assets besides Marx’s archetypical means of production are things like office chairs, computers, vehicles, equipment, and so on. Intangible assets are sometimes referred to as “nonphysical” assets. In saying that they are “nonphysical,” typically accountants do not mean to take a stand on the deep metaphysical issue about the ultimate substance or substances of the universe— they are dull accountants, after all. Very roughly, by “tangible assets,” accountants mean something that you could put a barcode on for inventory purposes, which is not generally possible with intangible assets. It is easy to imagine putting a barcode on land or vehicles owned by eBay, it is much more difficult to think about how to put a barcode on its proprietary software or the goodwill that eBay enjoys.

The thought about distributing shares of eBay to all citizens is, of course, only to illustrate a point. After all, US citizens already own something several orders of magnitude greater than eBay. US citizens have a large number of tangible assets under their control. We previously mentioned roads, but the list is far more extensive, for example, parks, bridges, tunnels, nuclear submarines, airports, universities, federally owned lands, and so on.6 The intangible assets of the United States include certain institutional arrangements for buyers and sellers, such as an advanced legal and judiciary system that makes the country an attractive place to do business. Just like eBay, the United States offers a market of trust. Indeed, the market of the United States is several orders of magnitude larger than that offered by eBay, so there is every reason to suppose that the intangible market of trust that United States offers to buyers and sellers is worth several orders of magnitude more than that offered by eBay.


file:///C:/Documents%20and%... by vpavan

accounting loophole / creative accounting, activist fund / activist shareholder / activist investor, asset allocation, Berlin Wall, business cycle, buttonwood tree, buy and hold, corporate governance, corporate raider, disintermediation, diversification, diversified portfolio, Donald Trump, estate planning, fixed income, index fund, intangible asset, interest rate swap, margin call, money market fund, Myron Scholes, new economy, price discovery process, profit motive, risk tolerance, shareholder value, short selling, Silicon Valley, Small Order Execution System, Steve Jobs, stocks for the long run, stocks for the long term, technology bubble, transaction costs, Vanguard fund, women in the workforce, zero-coupon bond, éminence grise

To comply with generally accepted accounting principles, or GAAP, many of these assets must be either depreciated (tangible assets such as buildings, furniture, and equipment) or amortized (intangible assets such as patents, trademarks, and copyrights). Depreciating an asset means allocating its cost as an expense over the period the company uses the asset to generate revenue. On the balance sheet, depreciable assets are shown at their original price, offset by depreciation that has accumulated over the years. Because depreciation is also an expense, it has the effect of reducing earnings in the income statement each year, which I'll explain below. Amortization similarly recognizes that an intangible asset has a limited useful life, and therefore a portion of the asset's cost is recorded as an expense each year. On the balance sheet, intangibles are recorded at their historical cost less amortization. GAAP used to require companies to amortize all intangible assets over a maximum of forty years.

GAAP used to require companies to amortize all intangible assets over a maximum of forty years. In 2001, the Financial Accounting Standards Board, which determines GAAP, eliminated any maximum life over which intangible assets must be amortized and instead required companies to write down the assets when they lose value. Listed after the assets on the balance sheet are the company's liabilities and the stockholders' equity. Total assets must equal the total liabilities and stockholders' equity. Liabilities are also classified as current and noncurrent. Current liabilities, which generally must be paid within a year, include such items as outstanding supplier invoices, short-term notes (or IOUs), the current portion of any long-term debt, and income taxes not yet paid. Noncurrent liabilities are those that are not due in the next year, such as the long-term portion of notes and mortgages (any interest payments due on these will appear as interest payable under current liabilities) and capital leases.


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

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.

He decided to form a limited company and transfer the assets and liabilities to it in return for ordinary shares. 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.

The relationship of net profit (and accounting for drawings) gives a return of: 14,630 / 95,830 = 15.3% She has retained £14,630 in the business. 282 Model answers to ICB Level III examination paper Question 5 Complete the following statements. (1) Define the term Capital Employed (what does it comprise on a Ltd Company Balance Sheet)? Total assets less Current liabilities or Capital and Reserves plus Long-term liabilities. (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? It arises when a tangible asset is revalued at a value greater than its carrying value


pages: 300 words: 77,787

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

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.’


pages: 137 words: 36,231

Information: A Very Short Introduction by Luciano Floridi

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, Laplace demon, moral hazard, Nash equilibrium, Nelson Mandela, 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.

In Oliver Stone's film Wall Street (1987), the main character, Gordon Gekko (Michael Douglas), declares that `the most valuable commodity I know of is information'. He was probably right. 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).


pages: 289 words: 113,211

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

"Robert Solow", 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. 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.


pages: 169 words: 43,906

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

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

With no buildings to buy, no fixtures or equipment to install, and no trucks to lease, the startup costs are minimal. Likewise, the ongoing costs are minimal. 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. As a result, once a digital asset is created, it can be sold at near 100% profit on an ongoing basis.

Instead, I use that knowledge as a criterion for selecting sites to buy. 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. If you can’t sell it today or a year from now on its own, you should not consider the value of the asset in the amount you are willing to pay for the website.


pages: 317 words: 87,566

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

1960s counterculture, Airbnb, business intelligence, 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, Panopticon Jeremy Bentham, 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, social intelligence, Social Responsibility of Business Is to Increase Its Profits, 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. Measurement revisited ‘I hesitate to say that men will ever have the means of measuring directly the feelings of the human heart’, wrote Jevons in The Theory of Political Economy.19 This must have been a difficult thing for him to admit.

Firstly, the nature of work in the West became progressively less physical over the second half of the twentieth century. 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: 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, business cycle, 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, 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, The Rise and Fall of American Growth, total factor productivity, Tyler Cowen: Great Stagnation, upwardly mobile, Vilfredo Pareto, working-age population, World Values Survey

Most likely, some leading firms have the ability and intent to launch well-known national brands backed by extensive marketing and product development, and other, smaller firms cannot match their pace. 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. It marks a fundamental change in the nature of American production, and in large part it stems from the long-standing shift away from manufacturing and toward services.

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. land use regulations Latin America Lemann, Nicholas Lettieri, John LGBT community gay culture LGBT Equality Index same-sex marriage and segregation Stonewall riot Libya Liszewski, Mark Liu Yonghao living standards and China and educational mobility and innovation and matching Logan, John R.


pages: 478 words: 126,416

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

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, buy and hold, 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, disruptive innovation, 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 airline, low cost carrier, M-Pesa, market design, millennium bug, mittelstand, money market fund, moral hazard, mortgage debt, Myron Scholes, NetJets, 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, 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. Others have used the term ‘social capital’ to describe the value of trust and social bonds.2 It is, perhaps, a minor side-effect of financialisation that so many commentators feel it necessary to use the language of finance to describe other social institutions far distant from the world of finance.

And this expectation is a real asset, created by the activities and record of the business, even if it is an asset of uncertain value. 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.

Although institutions that take deposits should be limited in their choice of assets to government bonds and residential mortgages, there is no reason why other financial institutions should not also own government bonds and make housing loans. 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.


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

"Robert Solow", Albert Einstein, Asian financial crisis, Barry Marshall: ulcers, Berlin Wall, Big bang: deregulation of the City of London, business cycle, 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, 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 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. All of these factors explain why the value of companies is greater than the value of their tangible assets. 9 Most recently, the sociologist Robert Putnam has written of social capital. 10 Putnam's thesis-encapsulated in the striking title of his book, Bowling Alone-is that group social activity in the United States has declined.

Chapters 18 through 23 will describe many of these, and Putnam is right to worry that the institutions that are the basis not just of civil society but of economic life are being eroded. 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. How is it that market economies solved the coordination problems of production, exchange, and assignment so much more effectively than planned ones?

Ferguson (2001). 5. Many derivative packages are of this kind. 6. Fama and French, 2001. 7. 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. Chapter 15: General Equilibrium ••••••••••••••••••••••••••••••••••••• 1. Note that this is true of any coordinated system, whether the coordination is designed or not. 2.


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, Boris Johnson, Bretton Woods, business cycle, 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, disruptive innovation, 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, Sam Altman, 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, The Rise and Fall of American Growth, Thomas Malthus, Thorstein Veblen, too big to fail, Travis Kalanick, Uber and Lyft, Uber for X, uber lyft, Y Combinator, zero-sum game, Zipcar

Multinationals from industrialised countries captured over two-thirds of global profits, helped by big reductions in corporation taxes (which halved in some countries), low borrowing costs and access to cheap labour and materials.24 After-tax profits of US firms as a share of national income rose to their highest level since 1929. 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.

Brands that inspire customer loyalty and trust give firms more market power and enable them to charge more for their products than a simple mark-up over cost, thereby collecting more rental income. 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.


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Rewriting the Rules of the European Economy: An Agenda for Growth and Shared Prosperity by Joseph E. Stiglitz

Airbnb, balance sheet recession, bank run, banking crisis, barriers to entry, Basel III, basic income, Berlin Wall, bilateral investment treaty, business cycle, business process, Capital in the Twenty-First Century by Thomas Piketty, central bank independence, collapse of Lehman Brothers, collective bargaining, corporate governance, corporate raider, corporate social responsibility, creative destruction, credit crunch, deindustrialization, discovery of DNA, diversified portfolio, Donald Trump, eurozone crisis, Fall of the Berlin Wall, financial intermediation, Francis Fukuyama: the end of history, full employment, gender pay gap, George Akerlof, gig economy, Gini coefficient, hiring and firing, housing crisis, Hyman Minsky, income inequality, inflation targeting, informal economy, information asymmetry, intangible asset, investor state dispute settlement, invisible hand, Isaac Newton, labor-force participation, liberal capitalism, low skilled workers, market fundamentalism, mini-job, moral hazard, non-tariff barriers, offshore financial centre, open economy, patent troll, pension reform, price mechanism, price stability, purchasing power parity, quantitative easing, race to the bottom, regulatory arbitrage, rent-seeking, Robert Shiller, Robert Shiller, Ronald Reagan, selection bias, shareholder value, Silicon Valley, sovereign wealth fund, TaskRabbit, too big to fail, trade liberalization, transaction costs, transfer pricing, trickle-down economics, tulip mania, universal basic income, unorthodox policies, zero-sum game

According to the European Commission, its reported tax rate for European profits was as low as 0.005 percent in 2014. More broadly, according to the European Commission,13 the EU effective tax rate for digital businesses, such as online retailing or social media, which derive much or all of their value from the intangible assets of information and data, is 8.5 percent, or less than half the effective tax rate for traditional businesses (which are between 20.9 percent and 23.2 percent). This lower rate occurs because digital businesses are based on intangible assets that benefit both from specific tax incentives and the ease of shifting the recorded source of profits to low-tax jurisdictions. With aggressive tax planning, corporations can winnow down their effective taxation to essentially zero. This kind of tax avoidance and tax evasion†† is, of course, a global phenomenon, and it moved toward the top of the international community’s agenda after the 2008 crisis revealed an acute need for government revenue.

.§ Of course, firms that were constrained in their investment to retained earnings also had to cut back on investments, since, as we have noted, profits typically fell, sometimes dramatically, during the downturn. Moreover, as firms borrowed to survive, they were less able to access credit for investment. In short, the downturn constrained private investment in capital goods (equipment), as well as in intangible assets like intellectual property. At the same time, the downturn, exacerbated by austerity, hurt firm and bank balance sheets. The adverse effect on banks’ balance sheets was one of the reasons for the cutback in credit: banks were less able and willing to lend.¶ The worsening of firm balance sheets—the decrease in their net worth and in their cash positions—made many less willing to invest (even if they could get access to credit), and sometimes even less willing to produce.# The combination of weak private investment and sagging public investment meant, of course, that overall investment was depressed.


pages: 453 words: 117,893

What Would the Great Economists Do?: How Twelve Brilliant Minds Would Solve Today's Biggest Problems by Linda Yueh

"Robert Solow", 3D printing, additive manufacturing, Asian financial crisis, augmented reality, bank run, banking crisis, basic income, Ben Bernanke: helicopter money, Berlin Wall, Bernie Sanders, Big bang: deregulation of the City of London, bitcoin, Branko Milanovic, Bretton Woods, BRICs, business cycle, Capital in the Twenty-First Century by Thomas Piketty, clean water, collective bargaining, computer age, Corn Laws, creative destruction, credit crunch, Credit Default Swap, cryptocurrency, currency peg, dark matter, David Ricardo: comparative advantage, debt deflation, declining real wages, deindustrialization, Deng Xiaoping, Doha Development Round, Donald Trump, endogenous growth, everywhere but in the productivity statistics, Fall of the Berlin Wall, fear of failure, financial deregulation, financial innovation, Financial Instability Hypothesis, fixed income, forward guidance, full employment, Gini coefficient, global supply chain, Gunnar Myrdal, Hyman Minsky, income inequality, index card, indoor plumbing, industrial robot, information asymmetry, intangible asset, invisible hand, job automation, John Maynard Keynes: Economic Possibilities for our Grandchildren, joint-stock company, Joseph Schumpeter, laissez-faire capitalism, land reform, lateral thinking, life extension, low-wage service sector, manufacturing employment, market bubble, means of production, mittelstand, Mont Pelerin Society, moral hazard, mortgage debt, negative equity, Nelson Mandela, non-tariff barriers, Northern Rock, Occupy movement, oil shale / tar sands, open economy, paradox of thrift, Paul Samuelson, price mechanism, price stability, Productivity paradox, purchasing power parity, quantitative easing, RAND corporation, rent control, rent-seeking, reserve currency, reshoring, road to serfdom, Robert Shiller, Robert Shiller, Ronald Coase, Ronald Reagan, school vouchers, secular stagnation, Shenzhen was a fishing village, Silicon Valley, Simon Kuznets, special economic zone, Steve Jobs, The Chicago School, The Wealth of Nations by Adam Smith, Thomas Malthus, too big to fail, total factor productivity, trade liberalization, universal basic income, unorthodox policies, Washington Consensus, We are the 99%, women in the workforce, working-age population

‘Manu-services’ mean that we also underestimate the evolution of companies like Rolls-Royce, who make more money servicing and maintaining their engines than selling the engines themselves and yet continue to be viewed as a manufacturer rather than a supplier of services. It’s not only the output of services that’s intangible; the investment is too. Economists are debating whether better measurement of intangible assets would increase GDP. When research and development (R&D) and other intangible investments were included, US GDP was increased by 3 per cent.10 The OECD estimates that intangible investment, including that in human capital, such as education, and software, is as important as investment in tangible machinery and equipment in the UK.11 Since 2014, investment in private R&D has been included in UK GDP.

Walker, Vancouver: Fraser Institute ________, 1990, Institutions, Institutional Change and Economic Performance, Cambridge: Cambridge University Press North, Douglass C., Gardner Brown and Dean Lueck, 2015, ‘A Conversation with Douglass North’, Annual Review of Resource Economics, 7, pp. 1–10 OECD, 2012, ‘Income Inequality and Growth: The Role of Taxes and Transfers’, OECD Economics Department Policy Notes, No. 9 ________, 2013, ‘New Sources of Growth: Intangible Assets’, Paris: OECD; www.oecd.org/sti/inno/46349020.pdf ________, 2015, Economic Surveys: United Kingdom, Paris: OECD Ostry, Jonathan D., Andrew Berg and Charalambos G. Tsangarides, 2014, ‘Redistribution, Inequality, and Growth’, International Monetary Fund Staff Discussion Note SDN/14/02; www.imf.org/external/pubs/ft/sdn/2014/sdn1402.pdf Parsons, Talcott, 1931, ‘Wants and Activities in Marshall’, Quarterly Journal of Economics, 46(1), pp. 101–40 Pessoa, João Paulo and John Van Reenen, 2013, ‘Decoupling of Wage Growth and Productivity Growth?

Brian R. Mitchell, 1988, Abstract of British Historical Statistics, Cambridge: Cambridge University Press, pp. 869–73. 10.  Stephanie H. McCulla, Alyssa E. Holdren and Shelly Smith, 2013, ‘Improved Estimates of the National Income and Product Accounts: Results of the 2013 Comprehensive Revision’, US Bureau of Economic Analysis, Washington, DC 11.  OECD, 2013, ‘New Sources of Growth: Intangible Assets’, Paris: OECD; www.oecd.org/sti/inno/46349020.pdf 12.  Adam Smith, 1978 [1763], Lectures on Jurisprudence (alternative title for the Lectures on Justice, Police, Revenue and Arms), ed. Ronald E. Meek, David D. Raphael and Peter G. Stein, Oxford: Clarendon Press, p. 499. 13.  Smith, Wealth of Nations, bk I, ch. 2, para. 12. 14.  Adam Smith, 1759, The Theory of Moral Sentiments, London: A.


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The Great Economists: How Their Ideas Can Help Us Today by Linda Yueh

"Robert Solow", 3D printing, additive manufacturing, Asian financial crisis, augmented reality, bank run, banking crisis, basic income, Ben Bernanke: helicopter money, Berlin Wall, Bernie Sanders, Big bang: deregulation of the City of London, bitcoin, Branko Milanovic, Bretton Woods, BRICs, business cycle, Capital in the Twenty-First Century by Thomas Piketty, clean water, collective bargaining, computer age, Corn Laws, creative destruction, credit crunch, Credit Default Swap, cryptocurrency, currency peg, dark matter, David Ricardo: comparative advantage, debt deflation, declining real wages, deindustrialization, Deng Xiaoping, Doha Development Round, Donald Trump, endogenous growth, everywhere but in the productivity statistics, Fall of the Berlin Wall, fear of failure, financial deregulation, financial innovation, Financial Instability Hypothesis, fixed income, forward guidance, full employment, Gini coefficient, global supply chain, Gunnar Myrdal, Hyman Minsky, income inequality, index card, indoor plumbing, industrial robot, information asymmetry, intangible asset, invisible hand, job automation, John Maynard Keynes: Economic Possibilities for our Grandchildren, joint-stock company, Joseph Schumpeter, laissez-faire capitalism, land reform, lateral thinking, life extension, manufacturing employment, market bubble, means of production, mittelstand, Mont Pelerin Society, moral hazard, mortgage debt, negative equity, Nelson Mandela, non-tariff barriers, Northern Rock, Occupy movement, oil shale / tar sands, open economy, paradox of thrift, Paul Samuelson, price mechanism, price stability, Productivity paradox, purchasing power parity, quantitative easing, RAND corporation, rent control, rent-seeking, reserve currency, reshoring, road to serfdom, Robert Shiller, Robert Shiller, Ronald Coase, Ronald Reagan, school vouchers, secular stagnation, Shenzhen was a fishing village, Silicon Valley, Simon Kuznets, special economic zone, Steve Jobs, The Chicago School, The Wealth of Nations by Adam Smith, Thomas Malthus, too big to fail, total factor productivity, trade liberalization, universal basic income, unorthodox policies, Washington Consensus, We are the 99%, women in the workforce, working-age population

‘Manu-services’ mean that we also underestimate the evolution of companies like Rolls-Royce, who make more money servicing and maintaining their engines than selling the engines themselves and yet continue to be viewed as a manufacturer rather than a supplier of services. It’s not only the output of services that’s intangible; the investment is too. Economists are debating whether better measurement of intangible assets would increase GDP. When research and development (R&D) and other intangible investments were included, US GDP was increased by 3 per cent.10 The OECD estimates that intangible investment, including that in human capital, such as education, and software, is as important as investment in tangible machinery and equipment in the UK.11 Since 2014, investment in private R&D has been included in UK GDP.

Ross, Life of Adam Smith, p. xxxi. 9. Brian R. Mitchell, 1988, Abstract of British Historical Statistics, Cambridge: Cambridge University Press, pp. 869–73. 10. Stephanie H. McCulla, Alyssa E. Holdren and Shelly Smith, 2013, ‘Improved Estimates of the National Income and Product Accounts: Results of the 2013 Comprehensive Revision’, US Bureau of Economic Analysis, Washington, DC 11. OECD, 2013, ‘New Sources of Growth: Intangible Assets’, Paris: OECD; www.oecd.org/sti/inno/46349020.pdf 12. Adam Smith, 1978 [1763], Lectures on Jurisprudence (alternative title for the Lectures on Justice, Police, Revenue and Arms), ed. Ronald E. Meek, David D. Raphael and Peter G. Stein, Oxford: Clarendon Press, p. 499. 13. Smith, Wealth of Nations, bk I, ch. 2, para. 12. 14. Adam Smith, 1759, The Theory of Moral Sentiments, London: A. Millar; Edinburgh: A.

Walker, Vancouver: Fraser Institute ———, 1990, Institutions, Institutional Change and Economic Performance, Cambridge: Cambridge University Press North, Douglass C., Gardner Brown and Dean Lueck, 2015, ‘A Conversation with Douglass North’, Annual Review of Resource Economics, 7, pp. 1–10 OECD, 2012, ‘Income Inequality and Growth: The Role of Taxes and Transfers’, OECD Economics Department Policy Notes, No. 9 ———, 2013, ‘New Sources of Growth: Intangible Assets’, Paris: OECD; www.oecd.org/sti/inno/46349020.pdf ———, 2015, Economic Surveys: United Kingdom, Paris: OECD Ostry, Jonathan D., Andrew Berg and Charalambos G. Tsangarides, 2014, ‘Redistribution, Inequality, and Growth’, International Monetary Fund Staff Discussion Note SDN/14/02; www.imf.org/external/pubs/ft/sdn/2014/sdn1402.pdf Parsons, Talcott, 1931, ‘Wants and Activities in Marshall’, Quarterly Journal of Economics, 46(1), pp. 101–40 Pessoa, João Paulo and John Van Reenen, 2013, ‘Decoupling of Wage Growth and Productivity Growth?


pages: 400 words: 124,678

The Investment Checklist: The Art of In-Depth Research by Michael Shearn

Asian financial crisis, barriers to entry, business cycle, call centre, Clayton Christensen, collective bargaining, commoditize, compound rate of return, Credit Default Swap, estate planning, intangible asset, Jeff Bezos, London Interbank Offered Rate, margin call, Mark Zuckerberg, money market fund, Network effects, pink-collar, risk tolerance, shareholder value, six sigma, Skype, Steve Jobs, supply-chain management, technology bubble, time value of money, transaction costs, urban planning, women in the workforce, young professional

Common Sources of Competitive Advantages To help you identify the sources of competitive advantage, I’ve borrowed several concepts from financial-services company Morningstar, which uses these concepts as the foundation of its stock analysis. Dorsey distills the sources of competitive advantage into four categories (Dorsey combines brand loyalty, patents, and regulatory licenses into one category titled intangible assets) which I have broken down into six categories: 1. Network economics 2. Brand loyalty 3. Patents 4. Regulatory licenses 5. Switching costs 6. Cost advantages stemming from scale, location, or access to a unique asset Let’s take a closer look at each source. Source #1: Network Economics One of the strongest sources of competitive advantage is network economics. If a product or service becomes more valuable if more customers use it, then the business benefits from network economics.

You can calculate ROIC with goodwill, without goodwill, using gross assets, or net assets. You need to adapt the calculation to the type of business you are analyzing. The pros and cons of each method are highlighted below. The Basic Equation Let’s first start with the basic equation for ROIC: Invested capital = total assets − excess cash +/− accumulated amortization and depreciation +/− goodwill or other intangible assets + off-balance sheet items − non-interest bearing current liabilities Calculate the Numerator First, isolate the earnings from the operations of the business by removing interest income, taxes, and interest expense: Remove interest income from cash balances because it is not generated by the core operations of the business. Exclude taxes because you need to isolate the effects of differences in tax rates, tax loss carry-forwards, or any other forms of tax management.

During 2010, Schultz said that his customer-satisfaction scores actually rose, reaching their highest levels ever because, “We reinvested in our people, we reinvested in innovation, and we reinvested in the values of the company.”56 Also, think about this: If the management team is continually announcing cost-cutting programs, this is a sign that they are not focused on continually cutting unnecessary costs. These types of businesses are often serial restructurers as well. For example, during his Hewlett-Packard tenure (2005 to 2010), CEO Mark Hurd took $3.2 billion in restructuring charges and $3.3 billion in write-downs for amortization of intangible assets related to acquisitions. This buy-and-restructure strategy helped HP deliver annual revenue growth of 7.5 percent and 22 percent growth in earnings per share during Hurd’s tenure. However, Hurd was constantly restructuring the workforce by increasing the use of contract manufacturing and other cost-cutting measures. He also acquired companies (such as Electronic Data Systems, 3Com, and Palm) to grow markets in services, networking, and mobile devices—acquisitions that, combined with ongoing restructurings, made “one-time charges” recurring.


pages: 306 words: 78,893

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

"Robert Solow", accounting loophole / creative accounting, affirmative action, Asian financial crisis, barriers to entry, borderless world, Branko Milanovic, Bretton Woods, business cycle, 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, post-work, 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, 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 a fashionable point of view that assumes our ancestors were dolts, as if the wheel and the power loom weren't productive embodiments of knowledge.

.^ 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. It's not hard to figure out what caused the fifteen-year profit boom—a reversal of the forces that produced the sixteen-year bust that preceded it.


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

activist fund / activist shareholder / activist investor, Albert Einstein, Andrei Shleifer, asset allocation, Atul Gawande, backtesting, beat the dealer, Black Swan, business cycle, butter production in bangladesh, buy and hold, 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

All else being equal, a firm with poor prospects is more likely to engage in manipulation. AQI = asset quality index. 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. DEPI = depreciation index.

Table 7.5 shows no consistent winner during economic expansions. 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. For example, during the July 1981 to November 1982 and March 2001 to November 2001 contractions the gross profits yield and BM showed strong outperformance over alternative price ratios, but these same metrics had terrible performance through the December 2007 to June 2009 recession.


pages: 515 words: 126,820

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

Airbnb, altcoin, asset-backed security, autonomous vehicles, barriers to entry, bitcoin, blockchain, Blythe Masters, Bretton Woods, business process, buy and hold, 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, disruptive innovation, distributed ledger, Donald Trump, double entry bookkeeping, Edward Snowden, Elon Musk, Erik Brynjolfsson, Ethereum, 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 intelligence, social software, standardized shipping container, 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, uber lyft, unbanked and underbanked, underbanked, unorthodox policies, wealth creators, X Prize, Y2K, Zipcar

Izabella Kaminska, a Financial Times reporter, believes mandating triple-entry accounting will lead to an increasing number of transactions moving off balance sheets. “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. There will always be areas where we will need competent auditors. But if triple-entry accounting can vastly increase transparency and responsiveness through real-time accruals, verifiable transaction records, and instant audit, then the blockchain could solve many of accounting’s biggest problems.

The industrial-age hierarchy is pretty much intact as the recognizable foundation of capitalism. 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. In fact, as we have pointed out, there is strong evidence of a growing concentration of power and wealth in conglomerates and even monopolies.

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. The blockchain becomes a new utility for individuals to create value and earn income in nontraditional ways.


pages: 307 words: 82,680

A Pelican Introduction: Basic Income by Guy Standing

bank run, basic income, Bernie Sanders, Bertrand Russell: In Praise of Idleness, Black Swan, Boris Johnson, British Empire, centre right, collective bargaining, cryptocurrency, David Graeber, declining real wages, deindustrialization, Donald Trump, Elon Musk, Fellow of the Royal Society, financial intermediation, full employment, future of work, gig economy, Gunnar Myrdal, housing crisis, hydraulic fracturing, income inequality, intangible asset, job automation, job satisfaction, Joi Ito, labour market flexibility, land value tax, libertarian paternalism, low skilled workers, lump of labour, Mark Zuckerberg, Martin Wolf, mass immigration, mass incarceration, moral hazard, Nelson Mandela, offshore financial centre, open economy, Panopticon Jeremy Bentham, Paul Samuelson, plutocrats, Plutocrats, precariat, quantitative easing, randomized controlled trial, rent control, rent-seeking, Sam Altman, self-driving car, shareholder value, sharing economy, Silicon Valley, sovereign wealth fund, Stephen Hawking, The Future of Employment, universal basic income, Wolfgang Streeck, women in the workforce, working poor, Y Combinator, Zipcar

The standard objection to the social dividend rationale for a basic income is that no individual has a right to a share of inherited social wealth because they have done nothing to ‘deserve’ it. In that case, following the same logic, private inheritance should also be abolished. If private inheritance is allowed, then the principle of social inheritance should be too. The Rentier Economy Our inherited wealth does not only consist of land and physical assets, but intangible assets as well, including financial assets and ‘intellectual property’. Intangible assets also generate economic rents derived from natural or contrived scarcity, enabling companies and individuals to gain income simply by virtue of possession. In the case of intellectual property, the state creates and enforces regulations and laws that have generated vast rental incomes from patents, copyrights, brands and the like. Thomas Jefferson, in 1813, described ideas as natural public goods, since communicating an idea to someone else does not deprive the originator of it.


pages: 348 words: 83,490

More Than You Know: Finding Financial Wisdom in Unconventional Places (Updated and Expanded) by Michael J. Mauboussin

Albert Einstein, Andrei Shleifer, Atul Gawande, availability heuristic, beat the dealer, Benoit Mandelbrot, Black Swan, Brownian motion, butter production in bangladesh, buy and hold, capital asset pricing model, Clayton Christensen, clockwork universe, complexity theory, corporate governance, creative destruction, Daniel Kahneman / Amos Tversky, deliberate practice, demographic transition, discounted cash flows, disruptive innovation, diversification, diversified portfolio, dogs of the Dow, Drosophila, Edward Thorp, en.wikipedia.org, equity premium, Eugene Fama: efficient market hypothesis, fixed income, framing effect, functional fixedness, hindsight bias, hiring and firing, Howard Rheingold, index fund, information asymmetry, intangible asset, invisible hand, Isaac Newton, Jeff Bezos, Kenneth Arrow, Laplace demon, Long Term Capital Management, loss aversion, mandelbrot fractal, margin call, market bubble, Menlo Park, mental accounting, Milgram experiment, Murray Gell-Mann, Nash equilibrium, new economy, Paul Samuelson, Pierre-Simon Laplace, quantitative trading / quantitative finance, random walk, Richard Florida, Richard Thaler, Robert Shiller, Robert Shiller, shareholder value, statistical model, Steven Pinker, stocks for the long run, survivorship bias, The Wisdom of Crowds, transaction costs, traveling salesman, value at risk, wealth creators, women in the workforce, zero-sum game

The analysis also points to the appropriate financial tools to assess various businesses. 24 You’ll Meet a Bad Fate If You Extrapolate The Folly of Using Average P/Es For past averages to be meaningful, the data being averaged have to be drawn from the same population. If this is not the case—if the data come from populations that are different—the data are said to be nonstationary. When data are nonstationary, projecting past averages typically produces nonsensical results. —Bradford Cornell, The Equity Risk Premium Intangible assets . . . surpass physical assets in most business enterprises, both in value and contribution to growth, yet they are routinely expensed in the financial reports and hence remain absent from corporate balance sheets. This asymmetric treatment of capitalizing (considering as assets) physical and financial investment while expensing intangibles leads to biased and deficient reporting of firms’ performance and value.

The first, which I call the tangible group, includes Alcoa, Caterpillar, United Technologies, and Wal-Mart. The intangible group comprises Altria, Coca-Cola, Microsoft, and Procter and Gamble. Over the five reported fiscal years that ended with 2006, the tangible group had a cash-flow-to-net-income ratio of 28 percent, versus a 111 percent ratio for the intangible group. There is pervasive evidence that the global economy is moving from a reliance on tangible to intangible assets, including market-to-book ratios, workforce allocation, and the rising significance of education. Further, because intangible-reliant businesses have few assets on their balance sheets, they tend to show high returns on capital. With other factors held constant, higher cash-flow-to-net-income ratios and returns on capital support higher price-earnings ratios.4 The final factor that dictates the price-earnings ratio is the equity-risk premium, or the return that equity investors demand above and beyond a risk-free security.


pages: 301 words: 89,076

The Globotics Upheaval: Globalisation, Robotics and the Future of Work by Richard Baldwin

agricultural Revolution, Airbnb, AltaVista, Amazon Web Services, augmented reality, autonomous vehicles, basic income, business process, business process outsourcing, call centre, Capital in the Twenty-First Century by Thomas Piketty, Cass Sunstein, commoditize, computer vision, Corn Laws, correlation does not imply causation, Credit Default Swap, David Ricardo: comparative advantage, declining real wages, deindustrialization, deskilling, Donald Trump, Douglas Hofstadter, Downton Abbey, Elon Musk, Erik Brynjolfsson, facts on the ground, future of journalism, future of work, George Gilder, Google Glasses, Google Hangouts, hiring and firing, impulse control, income inequality, industrial robot, intangible asset, Internet of things, invisible hand, James Watt: steam engine, Jeff Bezos, job automation, knowledge worker, laissez-faire capitalism, low skilled workers, Machine translation of "The spirit is willing, but the flesh is weak." to Russian and back, manufacturing employment, Mark Zuckerberg, mass immigration, mass incarceration, Metcalfe’s law, new economy, optical character recognition, pattern recognition, Ponzi scheme, post-industrial society, post-work, profit motive, remote working, reshoring, ride hailing / ride sharing, Robert Gordon, Robert Metcalfe, Ronald Reagan, Second Machine Age, self-driving car, side project, Silicon Valley, Skype, Snapchat, social intelligence, sovereign wealth fund, standardized shipping container, statistical model, Stephen Hawking, Steve Jobs, supply-chain management, TaskRabbit, telepresence, telepresence robot, telerobotics, Thomas Malthus, trade liberalization, universal basic income

A Sea Change in Value Creation and Capture Capital is not dead, but it’s ailing—a point made forcefully by the 2017 book Capitalism without Capital: The Rise of the Intangible Economy.7 Capital has lost the race for supremacy. The book’s authors argue that this is nothing short of a “quiet revolution.” Today, companies invest more in intangible assets—things like design, branding, patents, R&D, and software—than in traditional, tangible assets—things like machinery, buildings, and computers. Thoughts, not things, if you will. The sea change started in the 1970s. Investment in tangible assets—let’s just call it capital—as a share of the economy peaked around 1979 and has fallen since. Investment in intangible assets—call it “knowledge”—has instead risen steadily. Knowledge overtook capital around 1990. Increasingly, value is created by labor working with knowledge—either knowledge clusters controlled by firms like Google and Apple, or knowledge stuck into people’s heads in the form of education and experience.


pages: 321

Finding Alphas: A Quantitative Approach to Building Trading Strategies by Igor Tulchinsky

algorithmic trading, asset allocation, automated trading system, backtesting, barriers to entry, business cycle, buy and hold, capital asset pricing model, constrained optimization, corporate governance, correlation coefficient, credit crunch, Credit Default Swap, discounted cash flows, discrete time, diversification, diversified portfolio, Eugene Fama: efficient market hypothesis, financial intermediation, Flash crash, implied volatility, index arbitrage, index fund, intangible asset, iterative process, Long Term Capital Management, loss aversion, market design, market microstructure, merger arbitrage, natural language processing, passive investing, pattern recognition, performance metric, popular capitalism, prediction markets, price discovery process, profit motive, quantitative trading / quantitative finance, random walk, Renaissance Technologies, risk tolerance, risk-adjusted returns, risk/return, selection bias, sentiment analysis, shareholder value, Sharpe ratio, short selling, Silicon Valley, speech recognition, statistical arbitrage, statistical model, stochastic process, survivorship bias, systematic trading, text mining, transaction costs, Vanguard fund, yield curve

For US companies, the value of total assets includes the intangible asset known as goodwill, defined as what a company pays for another company above book value. Though goodwill contains items such as branding, investors should generally consider whether to discount the goodwill included in the total assets as a normalizing factor. The following well-known factors constructed from the balance sheet were positively correlated with future returns from 1976 to 1996, as observed by Piotroski (2000): •• Increased liquidity (current assets over current liabilities) •• Improved sales over total assets •• No equity issuance •• Less long-term debt Table 19.1 The balance sheet equation Balance sheet YYYYMMDD Assets Liabilities + Equity Current assets Current liabilities Other assets Long-term debt Intangible assets (goodwill, etc.) Total assets Shareholders’ equity 144 Table 19.2 Finding Alphas The income statement Income statement YYYMMDD Net sales (sales) A Interest income B Cost of goods C Operating expenses D Income taxes E Gross margin A C Income from operations A C D Gross income A B Net income A B C D E THE INCOME STATEMENT The income statement reflects changes in the balance sheet from one time period to the next, as shown in Table 19.2.


pages: 322 words: 84,580

The Economics of Belonging: A Radical Plan to Win Back the Left Behind and Achieve Prosperity for All by Martin Sandbu

"Robert Solow", Airbnb, autonomous vehicles, balance sheet recession, bank run, banking crisis, basic income, Berlin Wall, Bernie Sanders, Boris Johnson, Branko Milanovic, Bretton Woods, business cycle, call centre, capital controls, carbon footprint, Carmen Reinhart, centre right, collective bargaining, debt deflation, deindustrialization, deskilling, Diane Coyle, Donald Trump, Edward Glaeser, eurozone crisis, Fall of the Berlin Wall, financial intermediation, full employment, future of work, gig economy, Gini coefficient, hiring and firing, income inequality, income per capita, industrial robot, intangible asset, job automation, John Maynard Keynes: technological unemployment, Kenneth Rogoff, knowledge economy, knowledge worker, labour market flexibility, liquidity trap, longitudinal study, low skilled workers, manufacturing employment, Martin Wolf, meta analysis, meta-analysis, mini-job, mortgage debt, new economy, offshore financial centre, oil shock, open economy, pattern recognition, pink-collar, precariat, quantitative easing, race to the bottom, Richard Florida, Robert Shiller, Robert Shiller, Ronald Reagan, secular stagnation, social intelligence, TaskRabbit, total factor productivity, universal basic income, very high income, winner-take-all economy, working poor

Profit-maximising banks will pour more lending into sectors or places that already have plenty of it (because that is where asset values are high), and stay away from those in the grip of a credit drought (where they are low).7 Finally, an overgrown financial sector allocates resources to the wrong things. Rather than funding the business activities that promise most productivity growth, it, too, often funds activities that offer physical security for loans—above all, real estate and construction.8 In contrast, the sectors of the future—especially knowledge-intensive ones with only intangible assets—get less funding than they need.9 This is a feature of credit, and above all bank credit, because such loans commonly require the borrower to offer security that the promised payment terms are upheld. Noncredit financing—such as equity or other forms of direct or indirect ownership—does not promise a predefined return that needs to be secured. Instead, investors get a return that depends on the investments’ profitability, as well as retaining a risk of loss if the investment is unsuccessful.

It would, however, have to be updated for the twenty-first century. In line with the policies I proposed for financial reform in chapter 9, such institutions may be chartered with a view to providing noncredit forms of financing. They could also be set up to favour the sort of activities that traditional lending is biased against (see chapter 9), and target, for example, knowledge-intensive start-ups with intangible assets that normal bank lending struggles to use as collateral.32 Another example is to use planning laws to lower business costs—for example, by improving the use of land—or increase population density. The UK think tank the Centre for Cities argues, based on successes in the Netherlands and Germany, that making a region thrive depends on increasing the density of its cities to deepen the available pool of knowledge workers available and “make it easier for people and organisations to share information and come up with new ideas.”33 Fourth, a necessary ingredient for a critical mass of knowledge workers is a critical mass of knowledge-intensive jobs.


pages: 287 words: 44,739

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

business cycle, correlation coefficient, discounted cash flows, double entry bookkeeping, G4S, 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. This is sometimes known as the de minimis level for fixed assets, typically $500 or $1,000. The de minimis rule can become difficult to apply when buying an item like a computer.

This ratio comparing fixed assets with sales indicates how well this happens. 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.


pages: 389 words: 87,758

No Ordinary Disruption: The Four Global Forces Breaking All the Trends by Richard Dobbs, James Manyika

2013 Report for America's Infrastructure - American Society of Civil Engineers - 19 March 2013, access to a mobile phone, additive manufacturing, Airbnb, Amazon Mechanical Turk, American Society of Civil Engineers: Report Card, autonomous vehicles, Bakken shale, barriers to entry, business cycle, business intelligence, Carmen Reinhart, central bank independence, cloud computing, corporate governance, creative destruction, crowdsourcing, demographic dividend, deskilling, disintermediation, disruptive innovation, distributed generation, Erik Brynjolfsson, financial innovation, first square of the chessboard, first square of the chessboard / second half of the chessboard, Gini coefficient, global supply chain, global village, hydraulic fracturing, illegal immigration, income inequality, index fund, industrial robot, intangible asset, Intergovernmental Panel on Climate Change (IPCC), Internet of things, inventory management, job automation, Just-in-time delivery, Kenneth Rogoff, Kickstarter, knowledge worker, labor-force participation, low skilled workers, Lyft, M-Pesa, mass immigration, megacity, mobile money, Mohammed Bouazizi, Network effects, new economy, New Urbanism, oil shale / tar sands, oil shock, old age dependency ratio, openstreetmap, peer-to-peer lending, pension reform, private sector deleveraging, purchasing power parity, quantitative easing, recommendation engine, Report Card for America’s Infrastructure, RFID, ride hailing / ride sharing, Second Machine Age, self-driving car, sharing economy, Silicon Valley, Silicon Valley startup, Skype, smart cities, Snapchat, sovereign wealth fund, spinning jenny, stem cell, Steve Jobs, supply-chain management, TaskRabbit, The Great Moderation, trade route, transaction costs, Travis Kalanick, uber lyft, urban sprawl, Watson beat the top human players on Jeopardy!, working-age population, Zipcar

As much as two-thirds of the value created by new Internet offerings is captured as consumer surplus—in the form of lower prices, improvements in productivity, or greater choices and convenience.40 The disruptive technologies discussed earlier will likely deliver the lion’s share of their value to consumers, even while providing companies with sufficient profit to encourage adoption and production. To illustrate the scale of the opportunity, consider this change: on July 31, 2013, the US Bureau of Economic Analysis released GDP figures that for the first time categorized research and development and software into a new category of “intellectual property products.” We estimate that digital capital is now the source of roughly one-third of total global GDP growth, with intangible assets (think of the value of Google’s search algorithm or Amazon’s recommendation engine) being the main driver.41 For businesses and governments alike, failing to navigate today’s technological tide will mean losing out on a huge economic opportunity as well as increasing vulnerability to potential disruptions. Digitization and technological advances can transform industries in the blink of an eye, as BlackBerry has learned.

Large firms can mobilize cash assets on their balance sheets to provide financing to companies and projects that can unlock new markets, as General Electric has done in Africa. For GE, Africa is one of the most promising growth regions, having produced revenues of $5.2 billion in 2013. GE in 2014 partnered with the Millennium Challenge Corporation to provide $500 million in financing for the Ghana1000 project, a huge, 1-gigawatt power plant the company is helping to build in Western Ghana.47 Beyond tapping tangible assets, companies are able to mine intangible assets—knowledge, competencies, data—that can help them participate in global flows. Some do so for philanthropic purposes. Coca-Cola used its market distribution expertise in sub-Saharan Africa to manage the storage and delivery of AIDS drugs in countries such as Tanzania. “We’re not lending our trucks or our fleet, or our motorcycles,” as Coca-Cola CEO Muhtar Kent put it. “We’re lending our expertise.”48 Trade routes have expanded and trade patterns have become increasingly more complex 1 Migrants data from 2010 used for people flows; 2013 cross-border Internet traffic used for data and communication flows.


pages: 323 words: 90,868

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

"Robert Solow", 3D printing, Airbnb, American energy revolution, assortative mating, autonomous vehicles, Bakken shale, barriers to entry, basic income, Bernie Sanders, BRICs, business cycle, 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, disruptive innovation, 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, 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, post-work, 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 Rise and Fall of American Growth, The Spirit Level, The Wealth of Nations by Adam Smith, trade liberalization, transaction costs, Tyler Cowen: Great Stagnation, Uber and Lyft, Uber for X, uber lyft, very high income, working-age population

Cowen, Tyler, Average is Over: Powering America Beyond the Age of the Great Stagnation (New York, NY: E. P. Dutton & Co Inc., 2013). 24. 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. Net migration, United Nations Population Division, World Population Prospects. 1.

Smith, The Wealth of Nations. 17. Acemoglu, Daron, and Robinson, James A., 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. Lepore, Jill, ‘The Disruption Machine’, New Yorker, 23 June 2014.   6. For more detail on this process, see, for instance: Henderson, Rebecca, and Kaplan, Sarah, ‘Inertia and Incentives: Bridging Organisational Economics and Organisational Theory’, NBER Working Paper 11849, 2005.   7. 


pages: 339 words: 95,270

Trade Wars Are Class Wars: How Rising Inequality Distorts the Global Economy and Threatens International Peace by Matthew C. Klein

Albert Einstein, Asian financial crisis, asset allocation, asset-backed security, Berlin Wall, Bernie Sanders, Branko Milanovic, Bretton Woods, British Empire, business climate, business cycle, capital controls, centre right, collective bargaining, currency manipulation / currency intervention, currency peg, David Ricardo: comparative advantage, deglobalization, deindustrialization, Deng Xiaoping, Donald Trump, Double Irish / Dutch Sandwich, Fall of the Berlin Wall, falling living standards, financial innovation, financial repression, fixed income, full employment, George Akerlof, global supply chain, global value chain, illegal immigration, income inequality, intangible asset, invention of the telegraph, joint-stock company, land reform, Long Term Capital Management, Malcom McLean invented shipping containers, manufacturing employment, Martin Wolf, mass immigration, Mikhail Gorbachev, money market fund, mortgage debt, New Urbanism, offshore financial centre, oil shock, open economy, paradox of thrift, passive income, reserve currency, rising living standards, Robert Shiller, Robert Shiller, Ronald Reagan, savings glut, Scramble for Africa, sovereign wealth fund, The Nature of the Firm, The Wealth of Nations by Adam Smith, Tim Cook: Apple, trade liberalization, Wolfgang Streeck

The reason is that corporate tax burdens vary widely depending on where those profits are officially earned. These variations have been exploited by creative problem-solvers at accountancy firms and within large corporations. People who in previous eras might have written symphonies or designed cathedrals have instead saved companies hundreds of billions of dollars in taxes by shifting trillions of dollars of intangible assets across the world over the past two decades. One consequence is that many companies avoid paying any tax on their foreign sales. Another is that many countries’ trade figures are now unusable. When the U.S. income tax was introduced in 1913, it assessed nothing on money earned abroad. Nobody seemed to mind until the 1950s, when American companies started aggressively relocating parts of their businesses to foreign countries to exploit lower tax rates.

Although the tax law passed at the end of 2017 lowered the effective corporate tax rate below 20 percent and more or less replaced America’s worldwide system of corporate taxation with a territorial system, it did not remove the incentives for profit shifting.28 These profit shifts have also done strange things to the official figures on trade and investment, especially as companies have transferred more and more of the value of what they produce into intangible assets. About 40 percent of all profits earned by multinational corporations outside their home markets are shifted from high-tax jurisdictions, such as China, France, Germany, Japan, and the United States, into low-tax jurisdictions, such as the Cayman Islands, Ireland, and Singapore. Exports from the high-tax countries are artificially depressed, imports are artificially elevated, and profits earned from subsidiaries in corporate tax havens are unreasonably large.29 Consider Apple.


pages: 372 words: 94,153

More From Less: The Surprising Story of How We Learned to Prosper Using Fewer Resources – and What Happens Next by Andrew McAfee

back-to-the-land, Bartolomé de las Casas, Berlin Wall, bitcoin, Branko Milanovic, British Empire, Buckminster Fuller, call centre, carbon footprint, clean water, cleantech, cloud computing, Corn Laws, creative destruction, crony capitalism, David Ricardo: comparative advantage, decarbonisation, dematerialisation, Deng Xiaoping, Donald Trump, Edward Glaeser, en.wikipedia.org, energy transition, Erik Brynjolfsson, failed state, Fall of the Berlin Wall, Haber-Bosch Process, Hans Rosling, humanitarian revolution, hydraulic fracturing, income inequality, indoor plumbing, intangible asset, James Watt: steam engine, Jeff Bezos, job automation, John Snow's cholera map, joint-stock company, Joseph Schumpeter, Khan Academy, Landlord’s Game, Louis Pasteur, Lyft, Marc Andreessen, market fundamentalism, means of production, Mikhail Gorbachev, oil shale / tar sands, Paul Samuelson, peak oil, precision agriculture, profit maximization, profit motive, risk tolerance, road to serfdom, Ronald Coase, Ronald Reagan, Scramble for Africa, Second Machine Age, Silicon Valley, Steve Jobs, Steven Pinker, Stewart Brand, telepresence, The Wealth of Nations by Adam Smith, Thomas Davenport, Thomas Malthus, Thorstein Veblen, total factor productivity, Uber and Lyft, uber lyft, Veblen good, War on Poverty, Whole Earth Catalog, World Values Survey

Many companies are willing to spend money on the new technology, but surprisingly few are ready, willing, or able to make the changes required to fully exploit it. These changes, if and when they’re successfully put into practice, are called intangible assets,II and they’re what allow a company to put new technologies to work, obtain higher productivity, pay more, and gain competitive advantage over rivals in an industry. So a period of broad, deep, and fast tech progress such as we’re experiencing during this Second Machine Age should be expected to generate both superstars and zombies in industries around the world. In an era where few companies succeed at the difficult work of not only acquiring powerful new technologies but also the right intangible assets, the superstars pull ahead. Concentration thus increases. The World’s Wealthiest It’s easy to see how increased industrial concentration of the kind described by Van Reenen would lead to increased concentration in people’s wealth and incomes.


pages: 756 words: 167,393

The Tylenol Mafia by Scott Bartz

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. 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.


pages: 626 words: 167,836

The Technology Trap: Capital, Labor, and Power in the Age of Automation by Carl Benedikt Frey

"Robert Solow", 3D printing, autonomous vehicles, basic income, Bernie Sanders, Branko Milanovic, British Empire, business cycle, business process, call centre, Capital in the Twenty-First Century by Thomas Piketty, Clayton Christensen, collective bargaining, computer age, computer vision, Corn Laws, creative destruction, David Graeber, David Ricardo: comparative advantage, deindustrialization, demographic transition, desegregation, deskilling, Donald Trump, easy for humans, difficult for computers, Edward Glaeser, Elon Musk, Erik Brynjolfsson, everywhere but in the productivity statistics, factory automation, falling living standards, first square of the chessboard / second half of the chessboard, Ford paid five dollars a day, Frank Levy and Richard Murnane: The New Division of Labor, full employment, future of work, game design, Gini coefficient, Hyperloop, income inequality, income per capita, industrial cluster, industrial robot, intangible asset, interchangeable parts, Internet of things, invention of agriculture, invention of movable type, invention of the steam engine, invention of the wheel, Isaac Newton, James Hargreaves, James Watt: steam engine, job automation, job satisfaction, job-hopping, John Maynard Keynes: Economic Possibilities for our Grandchildren, John Maynard Keynes: technological unemployment, Joseph Schumpeter, Kickstarter, knowledge economy, knowledge worker, labor-force participation, labour mobility, Loebner Prize, low skilled workers, Malcom McLean invented shipping containers, manufacturing employment, mass immigration, means of production, Menlo Park, minimum wage unemployment, natural language processing, new economy, New Urbanism, Norbert Wiener, oil shock, On the Economy of Machinery and Manufactures, Pareto efficiency, pattern recognition, pink-collar, Productivity paradox, profit maximization, Renaissance Technologies, rent-seeking, rising living standards, Robert Gordon, robot derives from the Czech word robota Czech, meaning slave, Second Machine Age, secular stagnation, self-driving car, Silicon Valley, Simon Kuznets, social intelligence, speech recognition, spinning jenny, Stephen Hawking, The Future of Employment, The Rise and Fall of American Growth, The Wealth of Nations by Adam Smith, Thomas Malthus, total factor productivity, trade route, Triangle Shirtwaist Factory, Turing test, union organizing, universal basic income, washing machines reduced drudgery, wealth creators, women in the workforce, working poor, zero-sum game

Gilman, 1987, “The Age of Caution: Companies Slow the Move to Automation,” Wall Street Journal, June 12. 67. Quoted in ibid. 68. See, for example, T. F. Bresnahan, E. Brynjolfsson, and L. M. Hitt, 2002, “Information Technology, Workplace Organization, and the Demand for Skilled Labor: Firm-Level Evidence,” Quarterly Journal of Economics 117 (1): 339–76; E. Brynjolfsson, L. M. Hitt, and S. Yang, 2002, “Intangible Assets: Computers and Organizational Capital,” Brookings Papers on Economic Activity 2002 (1): 137–81; E. Brynjolfsson and L. M. Hitt, 2000, “Beyond Computation: Information Technology, Organizational Transformation and Business Performance,” Journal of Economic Perspectives 14 (4): 23–48. 69. M. Hammer, 1990, “Reengineering Work: Don’t Automate, Obliterate,” Harvard Business Review 68 (4): 104–12. 70.

The question of whether the recent productivity slowdown is an artifact of mismeasurement is thus not a question of whether mismeasurement exists but one of whether it has gotten larger in recent years. Economists have shown that the answer is no. While there is surely mismeasurement, it seems to have gotten smaller, not larger. Mismeasurement associated with prices of computer hardware and related services as well as intangible assets (such as patents, trademarks, and advertising expenditures) only make the productivity slowdown worse. The decline in domestic production of computer-related goods and services since the period 1995–2004 means that despite mismeasurement’s having worsened for some digital technologies, the mismeasurement problem was greater then than it is now. Together, these adjustments add 0.5 percentage point to the labor productivity numbers published for 1995–2004, but only 0.2 percentage point for 2004–14 (see D.

A Memoir of Robert Blincoe: An Orphan Boy; Sent From the Workhouse of St. Pancras, London at Seven Years of Age, to Endure the Horrors of a Cotton-Mill. London: J. Doherty. Brynjolfsson, E., and L. M. Hitt. 2000. “Beyond Computation: Information Technology, Organizational Transformation and Business Performance.” Journal of Economic Perspectives 14 (4): 23–48. Brynjolfsson, E., L. M. Hitt, and S. Yang. 2002. “Intangible Assets: Computers and Organizational Capital.” Brookings Papers on Economic Activity 2002 (1): 137–81. Brynjolfsson, E., and A. McAfee. 2014. The Second Machine Age: Work, Progress, and Prosperity in a Time of Brilliant Technologies. New York: W. W. Norton. Brynjolfsson, E., and A. McAfee. 2017. Machine, Platform, Crowd: Harnessing Our Digital Future. New York: W. W. Norton. Brynjolfsson, E., D.


How to Form Your Own California Corporation by Anthony Mancuso

business cycle, 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].

Dated: _______________ ________________________________________ Shareholder Representation Letter www.nolo.com Page 2 of 2 BILL OF SALE FOR ASSETS OF A BUSINESS This is an agreement between: ______________________________________________ ______________________________________________ _____________________________________________, herein called “transferor(s),” and ____________________________________ ______________________________________________________________________ , a California corporation, herein called “the corporation.” 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 ______________________________________________________________________ .


Risk Management in Trading by Davis Edwards

asset allocation, asset-backed security, backtesting, Black-Scholes formula, Brownian motion, business cycle, computerized trading, correlation coefficient, Credit Default Swap, discrete time, diversified portfolio, fixed income, implied volatility, intangible asset, interest rate swap, iterative process, John Meriwether, London Whale, Long Term Capital Management, margin call, Myron Scholes, Nick Leeson, p-value, paper trading, pattern recognition, random walk, risk tolerance, risk/return, selection bias, shareholder value, Sharpe ratio, short selling, statistical arbitrage, statistical model, stochastic process, systematic trading, time value of money, transaction costs, value at risk, Wiener process, zero-coupon bond

Typically, liquid markets have low transaction costs, low volatility, and it is easy to execute a trade at a favorable price. Illiquid Markett. An illiquid market does not allow easy trading. Typically, an illiquid market requires the trader to spend a substantial amount of time finding a trading partner or to take an unfavorable price. REAL ASSETS Real assets include both tangible and intangible assets. Tangible assets are physical assets like physical commodities, buildings, equipment, and land. Intangible assets don’t have physical form but still have value. Some examples of intangible real assets are inventions, works of art, and advertising trademarks. Some of the most commonly traded real assets are petroleum products, metals, and agricultural commodities. These assets are typically highly fungible products with well‐known quality standards that define a particular grade of commodity.


pages: 436 words: 98,538

The Upside of Inequality by Edward Conard

affirmative action, Affordable Care Act / Obamacare, agricultural Revolution, Albert Einstein, assortative mating, bank run, Berlin Wall, business cycle, Capital in the Twenty-First Century by Thomas Piketty, Carmen Reinhart, Climatic Research Unit, cloud computing, corporate governance, creative destruction, Credit Default Swap, crony capitalism, disruptive innovation, diversified portfolio, Donald Trump, en.wikipedia.org, Erik Brynjolfsson, Fall of the Berlin Wall, full employment, future of work, Gini coefficient, illegal immigration, immigration reform, income inequality, informal economy, information asymmetry, intangible asset, Intergovernmental Panel on Climate Change (IPCC), invention of the telephone, invisible hand, Isaac Newton, Jeff Bezos, Joseph Schumpeter, Kenneth Rogoff, Kodak vs Instagram, labor-force participation, liquidity trap, longitudinal study, low skilled workers, manufacturing employment, Mark Zuckerberg, Martin Wolf, mass immigration, means of production, meta analysis, meta-analysis, new economy, offshore financial centre, paradox of thrift, Paul Samuelson, pushing on a string, quantitative easing, randomized controlled trial, risk-adjusted returns, Robert Gordon, Ronald Reagan, Second Machine Age, secular stagnation, selection bias, Silicon Valley, Simon Kuznets, Snapchat, Steve Jobs, survivorship bias, The Rise and Fall of American Growth, total factor productivity, twin studies, Tyler Cowen: Great Stagnation, University of East Anglia, upwardly mobile, War on Poverty, winner-take-all economy, women in the workforce, working poor, working-age population, zero-sum game

According to the study’s estimates, intangible investments rose from about 7 percent of non-farm-business output in the late 1970s to 10 percent in the early 1990s to about 14 percent today. Intangible investments rose dramatically in the 1990s when productivity accelerated (see Figure 1-4, “U.S. Investment in Intangibles as a Percentage of GDP”). Visit bit.ly/2bpMCid for a larger version of this image. Given America’s heavy investment in knowledge-intensive intangible assets, it hardly seems coincidental that total factor productivity—productivity growth from innovation and know-how rather than from greater capital investment or education per worker—surged from a growth rate of 0.5 percent per year from 1974 to 1995 to 1.75 percent a year from 1995 to the economic peak preceding the financial crisis. America’s increased productivity growth relative to other high-wage economies stems from increased investment in intangibles—not magic.

Visit bit.ly/2boCbk4 for a larger version of this image. Nor does innovation create assets that risk-averse savers have typically demanded as collateral, namely assets that are easy to value and sell in the event of a default, such as real estate, inventory, credit card and other accounts receivables, and auto loans. Lenders have been far more reluctant to fund risky venture capital investments or expertise-driven companies with intangible assets—the types of companies that drive growth today—like consulting, accounting, and law firms that are difficult to value and sell. So far we have not seen diversified portfolios of risky hard-to-value venture investments funded with debt. Instead, we have seen an explosion of subprime mortgages in the United States, the construction of empty cities in China, and the funding of never-to-be-paid-back “government-guaranteed” Greek consumption by German-financed debt.


pages: 391 words: 97,018

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

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 cycle, 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. “What about America’s earning power?” he asked.11 Indeed Meeker’s analysis was about as rigorous and as sound as many of her 1990s-vintage reports on dot-com stocks.

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: 1,845 words: 567,850

J.K. Lasser's Your Income Tax 2014 by J. K. Lasser

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

Earnings accumulate tax free; see Chapter 8. Installment sale. 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. Investment in the contract. The total cost investment in an annuity. When annuity payments are made, the portion allocable to the cost investment is tax free; see 7.23 and 7.28.

Generally, the cost of acquiring an asset or of prolonging its life is a capital expenditure that must be amortized over its expected life. 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. If the roof increases the life of the building, its cost is a capital expenditure recovered by depreciation deductions.

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. Basis for depreciation Generally, the basis of the property on which you figure depreciation is its adjusted basis, which usually is its cost.


pages: 139 words: 33,246

Money Moments: Simple Steps to Financial Well-Being by Jason Butler

Albert Einstein, asset allocation, buy and hold, Cass Sunstein, diversified portfolio, estate planning, financial independence, fixed income, happiness index / gross national happiness, index fund, intangible asset, longitudinal study, loss aversion, Lyft, Mark Zuckerberg, mortgage debt, passive income, placebo effect, Richard Thaler, ride hailing / ride sharing, Steve Jobs, time value of money, traffic fines, Travis Kalanick, Uber and Lyft, uber lyft, Vanguard fund, Yogi Berra

‘We’re more interested in the process of guessing and trying to be less wrong,’ says Carl. ‘You might think: I want to go this way, now I want to go this way, and what about this way?’ A person born in the developed world today has a 50% chance of living to 105 and this age has been increasing steady at the rate of two years every decade.42 Increasing longevity means you need to be adaptable, flexible and invest in both intangible assets (health, well-being, skills, education, relationships) and tangible financial assets (savings, investments and property). Financial planning is a process, not a one-time event or static written document and it is the thinking behind the process that is important, particularly in the context of a very long life. Or, as Carl Richards says, ‘The financial plan is dead, long live financial planning!’


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

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. Examples are accounts payable, notes payable, the current portion of long-term debt, and vari­ ous accrued items such as salaries payable and taxes payable.


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

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, buy and hold, 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

On days of slow trading, talk about retailer clothing Next as a bid target resurfaces. It is important to note that M&A does not always produce the expected benefits. 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. There are many methods to apply in accounting for actuarial gains and losses.


pages: 398 words: 105,917

Bean Counters: The Triumph of the Accountants and How They Broke Capitalism by Richard Brooks

accounting loophole / creative accounting, asset-backed security, banking crisis, Big bang: deregulation of the City of London, blockchain, BRICs, British Empire, business process, cloud computing, collapse of Lehman Brothers, collateralized debt obligation, corporate governance, corporate raider, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, David Strachan, Deng Xiaoping, Donald Trump, double entry bookkeeping, Double Irish / Dutch Sandwich, energy security, Etonian, eurozone crisis, financial deregulation, forensic accounting, Frederick Winslow Taylor, G4S, intangible asset, Internet of things, James Watt: steam engine, joint-stock company, joint-stock limited liability company, Joseph Schumpeter, light touch regulation, Long Term Capital Management, low cost airline, new economy, Northern Rock, offshore financial centre, oil shale / tar sands, On the Economy of Machinery and Manufactures, Ponzi scheme, post-oil, principal–agent problem, profit motive, race to the bottom, railway mania, regulatory arbitrage, risk/return, Ronald Reagan, savings glut, short selling, Silicon Valley, South Sea Bubble, statistical model, supply-chain management, The Chicago School, too big to fail, transaction costs, transfer pricing, Upton Sinclair, WikiLeaks

Yet the effect of traditional accounting methods on the combined group’s profits would be to suppress them, making it unattractive to the stock market. This was because Celanese would have to pay more for Celluloid than its assets – such as its debts, stocks, plant and technology rights like patents – were worth in isolation. There was nothing unusual about that in an acquisition. But the extra cost, which double-entry bookkeeping dictated would be treated as acquiring an intangible asset known as ‘goodwill’, would have to be written off over the following years. Predicted future profits would be reduced. Black reasoned that this would not give a fair picture of the combined enterprise. So he formulated a new method of accounting for such a merger, which he called ‘pooling-of-interest’ accounting. If one company bought another with assets of, say, $60m and liabilities of $40m – i.e., net assets of £20m – but paid $50m for the acquisition, it would be paying $30m for goodwill.

By the mid 1990s, retailers like Gap and Nike, as well as major food and drinks companies, began selling to customers around the world from the Netherlands and other tax-efficient locations. Pharmaceutical companies such as Pfizer and GlaxoSmithKline made sure that rights to blockbuster drugs were held in fiscally friendly locations: Singapore, Switzerland, Puerto Rico. A new form of competition opened up among countries bidding to host the valuable financial capital and intangible assets that companies could now locate anywhere in the world. In return for small local contributions, these territories would enable the world’s largest companies to avoid far larger amounts of tax in the countries where they really did business. The bean counters would show them how to do it. Ireland had been offering tax breaks in an attempt to attract industry into its troubled economy, mainly from the UK, since the 1950s.


Not for Bread Alone: A Business Ethos, a Management Ethic by 松下幸之助

fear of failure, intangible asset

Management 147 NOT FOR BREAD ALONE must make efforts to shape a company that can accommodate and benefIt from a growing union. To me, the union and the management are the two wheels of a wagon that hold up the company. If one wheel expands more than the other, the wagon will tilt. Only when both wheels are balanced can we move forward smoothly, together. 148 14. Pricetag on the Intangible IT is much more diffIcult to assign a value to a hidden, intangible asset than it is to a clearly defmed, visible object, but it can be just as important. In business, managerial ability cannot be seen, but clearly it is worth a great deal more when it is strong than when it is weak, when it fosters growth in the company and higher standards of employee welfare. Superior management ultimately works to benefIt society as a whole, which gives it a very high value indeed.


J.K. Lasser's Your Income Tax 2016: For Preparing Your 2015 Tax Return by J. K. Lasser Institute

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

A formal arrangement with the IRS to pay taxes over time; see 45.6. Installment sale. 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. Investment in the contract. The total cost investment in an annuity. When annuity payments are made, the portion allocable to the cost investment is tax free; see 7.23 and 7.28.

Generally, the cost of acquiring an asset or of prolonging its life is a capital expenditure that must be amortized over its expected life. 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. If the roof increases the life of the building, its cost is a capital expenditure recovered by depreciation deductions.

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. Basis for depreciation. Generally, the basis of the property on which you figure depreciation is its adjusted basis, which usually is its cost.


pages: 670 words: 194,502

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

3Com Palm IPO, accounting loophole / creative accounting, air freight, Andrei Shleifer, asset allocation, business cycle, buy and hold, buy low sell high, capital asset pricing model, corporate governance, corporate raider, Daniel Kahneman / Amos Tversky, diversified portfolio, dogs of the Dow, Eugene Fama: efficient market hypothesis, Everybody Ought to Be Rich, 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, stocks for the long run, survivorship bias, the market place, the rule of 72, transaction costs, tulip mania, VA Linux, Vanguard fund, Y2K, Yogi Berra

Like castles, some companies can easily be stormed by marauding competitors, while others are almost impregnable. 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. By looking back at the income statements, you can see whether revenues and net earnings have grown smoothly and steadily over the previous 10 years.

Instead, calculate a stock’s price/earnings ratio yourself, using Graham’s formula of current price divided by average earnings over the past three years.3 As of early 2003, how many stocks in the Standard & Poor’s 500 index were valued at no more than 15 times their average earnings of 2000 through 2002? 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. All told, 273 companies (or 55% of the index) have price-to-book ratios of less than 2.5.

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. A company must now typically earn about 10 per cent on its common equity to have it sell in the average market at full book value.


pages: 2,045 words: 566,714

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

Affordable Care Act / Obamacare, airline deregulation, asset allocation, business cycle, 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

Earnings accumulate tax free; see Chapter 8. Installment sale. 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. Investment in the contract. The total cost investment in an annuity. When annuity payments are made, the portion allocable to the cost investment is tax free; see 7.23 and 7.28.

Generally, the cost of acquiring an asset or of prolonging its life is a capital expenditure that must be amortized over its expected life. 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. If the roof increases the life of the building, its cost is a capital expenditure recovered by depreciation deductions.

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. Basis for depreciation. Generally, the basis of the property on which you figure depreciation is its adjusted basis, which usually is its cost.


pages: 120 words: 39,637

The Little Book That Still Beats the Market by Joel Greenblatt

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

Net working capital was used because a company has to fund its receivables and inventory (excess cash not needed to conduct the business was excluded from this calculation) but does not have to lay out money for its payables, as these are effectively an interest-free loan (short-term interest-bearing debt was excluded from current liabilities for this calculation). 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.


pages: 482 words: 125,973

Competition Demystified by Bruce C. Greenwald

additive manufacturing, airline deregulation, AltaVista, asset allocation, barriers to entry, business cycle, creative destruction, cross-subsidies, deindustrialization, discounted cash flows, diversified portfolio, Everything should be made as simple as possible, fault tolerance, intangible asset, John Nash: game theory, Nash equilibrium, Network effects, new economy, oil shock, packet switching, pets.com, price discrimination, price stability, selective serotonin reuptake inhibitor (SSRI), shareholder value, Silicon Valley, six sigma, Steve Jobs, transaction costs, yield management, zero-sum game

The problem lay on virtually every line of Cisco’s income statement, but the main culprits were research and development. TABLE 7.4 Cisco’s increased costs as a percentage of sales, 1996–2000 Cost of sales Total Change 1996–2000 Cost of goods sold 1.2% Research and development 4.5% Sales and marketing 3.1% General and administrative –0.6% Amortization of goodwill and purchased intangible assets 1.5% In-process research and development 7.3% Total 17.0% CHANGING CLASS Cisco did not one day decide that it should spend more on research and development because it had all these talented engineers and wanted to keep them busy. Beneath the decline in margins lay a major change in the nature of Cisco’s business. From inception, it had dominated the market for networking systems within the enterprise.

There may be private market transactions, in which a sophisticated buyer purchases intangibles for cash, that can be helpful in determining the reproduction value. For example, when a record company buys an independent label with its stable of recording artists, or when a major drug company buys a start-up firm with a promising product, or when a cable company buys a local cable system with its customer contracts, a reproduction value has been put on these intangible assets. Calculating the reproduction value of the assets of a firm in a viable business, just like establishing the liquidation value, does not require projections into the future. The necessary information is all currently available. Also, in working down the balance sheet, the estimates of value move from the most certain (cash and marketable securities) to the least certain (the intangibles).


pages: 316 words: 117,228

The Code of Capital: How the Law Creates Wealth and Inequality by Katharina Pistor

"Robert Solow", Andrei Shleifer, Asian financial crisis, asset-backed security, barriers to entry, Bernie Madoff, bilateral investment treaty, bitcoin, blockchain, Bretton Woods, business cycle, business process, Capital in the Twenty-First Century by Thomas Piketty, Carmen Reinhart, central bank independence, collateralized debt obligation, colonial rule, conceptual framework, Corn Laws, corporate governance, creative destruction, Credit Default Swap, credit default swaps / collateralized debt obligations, cryptocurrency, Donald Trump, double helix, Edward Glaeser, Ethereum, ethereum blockchain, facts on the ground, financial innovation, financial intermediation, fixed income, Francis Fukuyama: the end of history, full employment, global reserve currency, Hernando de Soto, income inequality, intangible asset, investor state dispute settlement, invisible hand, joint-stock company, joint-stock limited liability company, Joseph Schumpeter, Kenneth Rogoff, land reform, land tenure, London Interbank Offered Rate, Long Term Capital Management, means of production, money market fund, moral hazard, offshore financial centre, phenotype, Ponzi scheme, price mechanism, price stability, profit maximization, railway mania, regulatory arbitrage, reserve currency, Ronald Coase, Satoshi Nakamoto, secular stagnation, self-driving car, shareholder value, Silicon Valley, smart contracts, software patent, sovereign wealth fund, The Nature of the Firm, The Wealth of Nations by Adam Smith, Thorstein Veblen, time value of money, too big to fail, trade route, transaction costs, Wolfgang Streeck

Anyone can assert physical control over physical assets and claim that it has always been hers; but it takes vigilance and resources to protect assets in this fashion. If these costs can be socialized by delegating the protection of legal rights to a state, asset holders save huge costs. More important, they can use their assets in ways that simply would not be available otherwise. They can own assets without exercising physical control over them. They can even own intangibles, assets that cannot be touched and exist only in legal code, and move assets into legal shells where they are protected from their own creditors, pledge and even repledge them without leaving more than a paper trail. They can do all of this only with the help of law that is backed by state power. Private and public power are often juxtaposed and depicted as engaged in ongoing bargaining with each other for favors.

As quoted in Carol Corrado, Charles Hulton, and Daniel Sichel, “Intangible Capital and U.S. Economic Growth,” The Review of Income and Wealth 55, no. 3 (2009):661–686, p. 661. 31. The saying is attributed in slight variations to different authors, including Peter Ducker (a business economist), Peason (a mathematical statistician), or Thomas Monson. 32. Corrado et al., “Intangible Capital,” p. 683. Leonard I. Nakamura, “Intangible Assets and National Income Accounting,” Review of Income and Wealth 56, no. S1 (2010):S135–S155. For a summary of this literature, see also Saskia Clausen and Stefan Hirth, “Measuring the Value of Intangibles,” Journal of Corporate Finance 40 (2016):110–127. 33. Haskel and Westlake, Capitalism without Capital, figures 2.1 and 2.2, pp. 24–25. 34. Ibid., chap. 5, p. 91. 35. Pagano, “The Crisis of Intellectual Monopoly Capitalism,” p. 1419.


pages: 460 words: 131,579

Masters of Management: How the Business Gurus and Their Ideas Have Changed the World—for Better and for Worse by Adrian Wooldridge

affirmative action, barriers to entry, Black Swan, blood diamonds, borderless world, business climate, business cycle, business intelligence, business process, carbon footprint, Cass Sunstein, Clayton Christensen, cloud computing, collaborative consumption, collapse of Lehman Brothers, collateralized debt obligation, commoditize, corporate governance, corporate social responsibility, creative destruction, credit crunch, crowdsourcing, David Brooks, David Ricardo: comparative advantage, disintermediation, disruptive innovation, don't be evil, Donald Trump, Edward Glaeser, Exxon Valdez, financial deregulation, Frederick Winslow Taylor, future of work, George Gilder, global supply chain, industrial cluster, intangible asset, job satisfaction, job-hopping, joint-stock company, Joseph Schumpeter, Just-in-time delivery, Kickstarter, knowledge economy, knowledge worker, lake wobegon effect, Long Term Capital Management, low skilled workers, Mark Zuckerberg, McMansion, means of production, Menlo Park, mobile money, Naomi Klein, Netflix Prize, Network effects, new economy, Nick Leeson, Norman Macrae, patent troll, Ponzi scheme, popular capitalism, post-industrial society, profit motive, purchasing power parity, Ralph Nader, recommendation engine, Richard Florida, Richard Thaler, risk tolerance, Ronald Reagan, science of happiness, shareholder value, Silicon Valley, Silicon Valley startup, Skype, Social Responsibility of Business Is to Increase Its Profits, Steve Jobs, Steven Levy, supply-chain management, technoutopianism, The Wealth of Nations by Adam Smith, Thomas Davenport, Tony Hsieh, too big to fail, wealth creators, women in the workforce, young professional, Zipcar

And look at the market for engineers in the rich world: companies cannot find any of these among the crowds of media studies graduates. The recession may have complicated the picture somewhat, but the war for talent continues to rage. The global economy is becoming ever more brain-intensive. Baruch Lev, of New York University, argues that “intangible assets”—ranging from a skilled workforce to patents to know-how—account for more than half of the market capitalization of America’s public companies.6 Accenture, a management consultancy, calculates that intangible assets have shot up from 20 percent of the value of companies in the S&P 500 in 1980 to about 70 percent today. McKinsey has divided American jobs into three categories: “transformational” (extracting raw materials or converting them into finished goods), “transactional” (interactions that can easily be scripted or automated), and “tacit” (complex interactions requiring a high level of judgment).


pages: 204 words: 53,261

The Tyranny of Metrics by Jerry Z. Muller

Affordable Care Act / Obamacare, Atul Gawande, Cass Sunstein, Checklist Manifesto, Chelsea Manning, collapse of Lehman Brothers, corporate governance, Credit Default Swap, crowdsourcing, delayed gratification, deskilling, Edward Snowden, Erik Brynjolfsson, Frederick Winslow Taylor, George Akerlof, Hyman Minsky, intangible asset, Jean Tirole, job satisfaction, joint-stock company, joint-stock limited liability company, Moneyball by Michael Lewis explains big data, performance metric, price mechanism, RAND corporation, school choice, Second Machine Age, selection bias, Steven Levy, total factor productivity, transaction costs, WikiLeaks

Or the money-managers who buy shares of well-performing stocks and sell shares of underperforming stocks in time for listing in quarterly reports, disguising the fact that they bought the high-performing stocks at high prices and that their poorly-performing stocks may have turned around had they held onto them—known in the trade as “window dressing.”24 A focus on measurable performance indicators can lead managers to neglect tasks for which no clear measures of performance are available, as the organizational scholars Nelson Repenning and Rebecca Henderson have recently noted.25 Unable to count intangible assets such as reputation, employee satisfaction, motivation, loyalty, trust, and cooperation, those enamored of performance metrics squeeze assets in the short term at the expense of long-term consequences. For all these reasons, reliance upon measurable metrics is conducive to short-termism, a besetting malady of contemporary American corporations. OTHER DYSFUNCTIONS When rewards such as pay, bonuses, and promotions are tied to meeting budget targets, there is yet another danger: distorting the information system of the organization.


pages: 660 words: 141,595

Data Science for Business: What You Need to Know About Data Mining and Data-Analytic Thinking by Foster Provost, Tom Fawcett

Albert Einstein, Amazon Mechanical Turk, big data - Walmart - Pop Tarts, bioinformatics, business process, call centre, chief data officer, Claude Shannon: information theory, computer vision, conceptual framework, correlation does not imply causation, crowdsourcing, data acquisition, David Brooks, en.wikipedia.org, Erik Brynjolfsson, Gini coefficient, information retrieval, intangible asset, iterative process, Johann Wolfgang von Goethe, Louis Pasteur, Menlo Park, Nate Silver, Netflix Prize, new economy, p-value, pattern recognition, placebo effect, price discrimination, recommendation engine, Ronald Coase, selection bias, Silicon Valley, Skype, speech recognition, Steve Jobs, supply-chain management, text mining, The Signal and the Noise by Nate Silver, Thomas Bayes, transaction costs, WikiLeaks

The effectiveness of a predictive modeling solution may depend critically on the problem engineering, the attributes created, the combining of different models, and so on. It often is not clear to a competitor how performance is achieved in practice. Even if our algorithms are published in detail, many implementation details may be critical to get a solution that works in the lab to work in production. Furthermore, success may be based on intangible assets such as a company culture that is particularly suitable to the deployment of data science solutions. For example, a culture that embraces business experimentation and the (rigorous) supporting of claims with data will naturally be an easier place for data science solutions to succeed. Alternatively, if developers are encouraged to understand data science, they are less likely to screw up an otherwise top-quality solution.

., Ranking Instead of Classifying–Ranking Instead of Classifying climatology, Evaluation, Baseline Performance, and Implications for Investments in Data clipping dendrograms, Hierarchical Clustering cloud labor, Final Example: From Crowd-Sourcing to Cloud-Sourcing clumps of instances, Example: Overfitting Linear Functions cluster centers, Nearest Neighbors Revisited: Clustering Around Centroids cluster distortion, Nearest Neighbors Revisited: Clustering Around Centroids clustering, From Business Problems to Data Mining Tasks, Clustering–* Using Supervised Learning to Generate Cluster Descriptions, Representing and Mining Text algorithm, Nearest Neighbors Revisited: Clustering Around Centroids business news stories example, Example: Clustering Business News Stories–The news story clusters centroid-based, Example: Clustering Business News Stories creating, Hierarchical Clustering data preparation for, Data preparation–Data preparation hierarchical, Hierarchical Clustering–Hierarchical Clustering indicating, Hierarchical Clustering interpreting results of, Understanding the Results of Clustering–Understanding the Results of Clustering nearest neighbors and, Nearest Neighbors Revisited: Clustering Around Centroids–Nearest Neighbors Revisited: Clustering Around Centroids profiling and, Profiling: Finding Typical Behavior soft, Profiling: Finding Typical Behavior supervised learning and, * Using Supervised Learning to Generate Cluster Descriptions–* Using Supervised Learning to Generate Cluster Descriptions whiskey example, Example: Whiskey Analytics Revisited–Hierarchical Clustering clusters, Similarity, Neighbors, and Clusters, Understanding the Results of Clustering co-occurrence grouping, From Business Problems to Data Mining Tasks–From Business Problems to Data Mining Tasks, Co-occurrences and Associations: Finding Items That Go Together–Associations Among Facebook Likes beer and lottery example, Example: Beer and Lottery Tickets–Example: Beer and Lottery Tickets eWatch/eBracelet example, Co-occurrences and Associations: Finding Items That Go Together–Co-occurrences and Associations: Finding Items That Go Together market basket analysis, Associations Among Facebook Likes–Associations Among Facebook Likes surprisingness, Measuring Surprise: Lift and Leverage–Measuring Surprise: Lift and Leverage Coelho, Paul, Example: Evidence Lifts from Facebook “Likes” cognition, Machine Learning and Data Mining Coltrane, John, Example: Jazz Musicians combining functions, Nearest Neighbors for Predictive Modeling, * Combining Functions: Calculating Scores from Neighbors–* Combining Functions: Calculating Scores from Neighbors common tasks, From Business Problems to Data Mining Tasks–From Business Problems to Data Mining Tasks, From Business Problems to Data Mining Tasks communication, between scientists and business people, Superior Data Science Management, The Fundamental Concepts of Data Science company culture, as intangible asset, Unique Intangible Collateral Assets comparisons, multiple, * Avoiding Overfitting for Parameter Optimization–* Avoiding Overfitting for Parameter Optimization complex functions, Overfitting in Mathematical Functions, Example: Overfitting Linear Functions complexity, Learning Curves complexity control, Overfitting Avoidance and Complexity Control–* Avoiding Overfitting for Parameter Optimization, * Avoiding Overfitting for Parameter Optimization ensemble method and, Bias, Variance, and Ensemble Methods nearest-neighbor reasoning and, Geometric Interpretation, Overfitting, and Complexity Control–Geometric Interpretation, Overfitting, and Complexity Control complications, Selecting Informative Attributes comprehensibility, of models, Evaluation computing errors, Regression via Mathematical Functions computing likelihood, * Logistic Regression: Some Technical Details conditional independence and Bayes’ Rule, Bayes’ Rule unconditional vs., Conditional Independence and Naive Bayes conditional probability, Combining Evidence Probabilistically conditioning bar, Combining Evidence Probabilistically confidence, in association mining, Co-occurrences and Associations: Finding Items That Go Together confusion matrix and points in ROC space, ROC Graphs and Curves evaluating models with, The Confusion Matrix–The Confusion Matrix expected value corresponding to, Profit Curves produced by classifiers, Ranking Instead of Classifying–Ranking Instead of Classifying true positive and false negative rates for, ROC Graphs and Curves constraints budget, Profit Curves workforce, Profit Curves consumer movie-viewing preferences example, Data Reduction, Latent Information, and Movie Recommendation consumer voice, From Big Data 1.0 to Big Data 2.0 consumers, describing, Example: Targeting Online Consumers With Advertisements–Example: Targeting Online Consumers With Advertisements content pieces, online consumer targeting based on, Example: Targeting Online Consumers With Advertisements context, importance of, Why Text Is Difficult control group, evaluating data models with, Flaws in the Big Red Proposal converting data, Data Preparation cookies, browser, Example: Targeting Online Consumers With Advertisements corpus, Representation correlations, From Business Problems to Data Mining Tasks, Statistics causation vs., The news story clusters general-purpose meaning, Statistics specific technical meaning, Statistics cosine distance, * Other Distance Functions, * Other Distance Functions cosine similarity, * Other Distance Functions Cosine Similarity function, Example: Jazz Musicians cost matrix, Profit Curves cost-benefit matrix, Costs and benefits, Costs and benefits, Costs and benefits costs and underlying profit calculation, ROC Graphs and Curves estimating, Costs and benefits in budgeting, Ranking Instead of Classifying of data, Data Understanding counterfactual analysis, From Business Problems to Data Mining Tasks Cray Computer Corporation, The Data credit-card transactions, Data Understanding, Profiling: Finding Typical Behavior creditworthiness model, as example of selection bias, A Brief Digression on Selection Bias CRISP cycle, Implications for Managing the Data Science Team approaches and, Implications for Managing the Data Science Team strategy and, Implications for Managing the Data Science Team CRISP-DM, Data Mining and Data Science, Revisited, The Data Mining Process Cross Industry Standard Process for Data Mining (CRISP), Data Mining and Data Science, Revisited, The Data Mining Process–Deployment, The Data Mining Process business understanding, Business Understanding–Business Understanding data preparation, Data Preparation–Data Preparation data understanding, Data Understanding–Data Understanding deployment, Deployment–Deployment evaluation, Evaluation–Evaluation modeling, Modeling software development cycle vs., Implications for Managing the Data Science Team–Implications for Managing the Data Science Team cross-validation, From Holdout Evaluation to Cross-Validation, Summary beginning, From Holdout Evaluation to Cross-Validation datasets and, From Holdout Evaluation to Cross-Validation nested, A General Method for Avoiding Overfitting overfitting and, From Holdout Evaluation to Cross-Validation–From Holdout Evaluation to Cross-Validation cumulative response curves, Cumulative Response and Lift Curves–Cumulative Response and Lift Curves curse of dimensionality, Dimensionality and domain knowledge customer churn example analytic engineering example, Our Churn Example Revisited with Even More Sophistication–From an Expected Value Decomposition to a Data Science Solution and data firm maturity, A Firm’s Data Science Maturity customer churn, predicting, Example: Predicting Customer Churn with cross-validation, The Churn Dataset Revisited–The Churn Dataset Revisited with tree induction, Example: Addressing the Churn Problem with Tree Induction–Example: Addressing the Churn Problem with Tree Induction customer retention, Example: Predicting Customer Churn customers, characterizing, Answering Business Questions with These Techniques D data as a strategic asset, Data and Data Science Capability as a Strategic Asset converting, Data Preparation cost, Data Understanding holdout, Holdout Data and Fitting Graphs investment in, From an Expected Value Decomposition to a Data Science Solution labeled, Models, Induction, and Prediction objective truth vs., What Data Can’t Do: Humans in the Loop, Revisited obtaining, From an Expected Value Decomposition to a Data Science Solution training, Introduction to Predictive Modeling: From Correlation to Supervised Segmentation, Models, Induction, and Prediction data analysis, Example: Predicting Customer Churn, From Business Problems to Data Mining Tasks data exploration, Stepping Back: Solving a Business Problem Versus Data Exploration–Stepping Back: Solving a Business Problem Versus Data Exploration data landscape, Hierarchical Clustering data mining, Business Problems and Data Science Solutions–Summary and Bayes’ Rule, Applying Bayes’ Rule to Data Science applying, Answering Business Questions with These Techniques–Answering Business Questions with These Techniques, Supervised Segmentation as strategic component, Data-Analytic Thinking CRISP codification of, The Data Mining Process–Deployment data science and, The Ubiquity of Data Opportunities, Data Mining and Data Science, Revisited–Data Mining and Data Science, Revisited domain knowledge and, Dimensionality and domain knowledge early stages, Supervised Versus Unsupervised Methods fundamental ideas, Supervised Segmentation with Tree-Structured Models implementing techniques, Data Processing and “Big Data” important distinctions, Data Mining and Its Results matching analytic techniques to problems, Other Analytics Techniques and Technologies–Answering Business Questions with These Techniques process of, The Data Mining Process–Deployment results of, Data Mining and Its Results–Data Mining and Its Results, Deployment skills, Implications for Managing the Data Science Team software development cycle vs., Implications for Managing the Data Science Team–Implications for Managing the Data Science Team stages, Data Mining and Data Science, Revisited structuring projects, Business Problems and Data Science Solutions supervised vs. unsupervised methods of, Supervised Versus Unsupervised Methods–Supervised Versus Unsupervised Methods systems, Deployment tasks, fitting business problems to, From Business Problems to Data Mining Tasks–From Business Problems to Data Mining Tasks, From Business Problems to Data Mining Tasks techniques, Deployment Data Mining (field), Machine Learning and Data Mining data mining algorithms, From Business Problems to Data Mining Tasks data mining proposal example, Example Data Mining Proposal–Flaws in the Big Red Proposal data preparation, Data Preparation, Representing and Mining Text data preprocessing, Data Preprocessing–Data Preprocessing data processing technologies, Data Processing and “Big Data” data processing, data science vs., Data Processing and “Big Data”–Data Processing and “Big Data” data reduction, From Business Problems to Data Mining Tasks–From Business Problems to Data Mining Tasks, Data Reduction, Latent Information, and Movie Recommendation–Data Reduction, Latent Information, and Movie Recommendation data requirements, Data Preparation data science, Introduction: Data-Analytic Thinking–Summary, Data Science and Business Strategy–A Firm’s Data Science Maturity, Conclusion–Final Words and adding value to applications, Decision Analytic Thinking I: What Is a Good Model?


pages: 554 words: 158,687

Profiting Without Producing: How Finance Exploits Us All by Costas Lapavitsas

"Robert Solow", Andrei Shleifer, asset-backed security, bank run, banking crisis, Basel III, borderless world, Branko Milanovic, Bretton Woods, business cycle, capital controls, Carmen Reinhart, central bank independence, collapse of Lehman Brothers, computer age, conceptual framework, corporate governance, credit crunch, Credit Default Swap, David Graeber, David Ricardo: comparative advantage, disintermediation, diversified portfolio, Erik Brynjolfsson, eurozone crisis, everywhere but in the productivity statistics, financial deregulation, financial independence, financial innovation, financial intermediation, financial repression, Flash crash, full employment, global value chain, global village, High speed trading, Hyman Minsky, income inequality, inflation targeting, informal economy, information asymmetry, intangible asset, job satisfaction, joint-stock company, Joseph Schumpeter, Kenneth Rogoff, liberal capitalism, London Interbank Offered Rate, low skilled workers, M-Pesa, market bubble, means of production, money market fund, moral hazard, mortgage debt, Network effects, new economy, oil shock, open economy, pensions crisis, price stability, Productivity paradox, profit maximization, purchasing power parity, quantitative easing, quantitative trading / quantitative finance, race to the bottom, regulatory arbitrage, reserve currency, Robert Shiller, Robert Shiller, savings glut, Scramble for Africa, secular stagnation, shareholder value, Simon Kuznets, special drawing rights, Thales of Miletus, The Chicago School, The Great Moderation, the payments system, The Wealth of Nations by Adam Smith, Tobin tax, too big to fail, total factor productivity, trade liberalization, transaction costs, union organizing, value at risk, Washington Consensus, zero-sum game

For a global perspective on the interaction between part-time employment and women’s entry into the labour force, see Guy Standing, ‘Global Feminization Through Flexible Labor’, World Development 17:7, 1989; and Guy Standing, ‘Global Feminization Through Flexible Labor: A Theme Revisited’, World Development 27:3, 1999. 7 There is sizeable mainstream literature arguing that new technology has altered the nature of work by adding intangible organizational assets to the production process; see Erik Brynjolfsson and Lorin Hitt, ‘Beyond Computation’, Journal of Economic Perspectives 14:4, 2000; Brynjolfsson and Hitt, ‘Computing Productivity’, MIT-Sloan Working Paper 4210–01, 2003; Brynjolfsson, Hitt, and Shinkyu Yang, ‘Intangible Assets’, Brookings Papers on Economic Activity: Macroeconomics, vol. 1, 2002; Timothy Bresnahan, Brynjolfsson, and Hitt, ‘Information Technology, Workplace Organization, and the Demand for Skilled Labor: Firm-Level Evidence’, Quarterly Journal of Economics 117:1, 2002; Marshall Van Alstyne and Brynjolfsson, ‘Global Village or Cyber-Balkans’, Management Science, 2004. Others have examined the change in the skill composition implied by new technologies, including in banking; see David Autor, Frank Levy, and Richard Murnane, ‘The Skill Content of Recent Technological Innovation’, Quarterly Journal of Economics, 118:4, 2003.

Bryant, John, ‘A Model of Reserves, Bank Runs, and Deposit Insurance’, Journal of Banking and Finance 4, 1980, pp. 335–44. Brynjolfsson, Erik, and Lorin Hitt, ‘Beyond Computation: Information Technology, Organizational Transformation and Business Performance’, Journal of Economic Perspectives 14:4, 2000, pp. 23–48. Brynjolfsson, Erik, and Lorin Hitt, ‘Computing Productivity: Firm-Level Evidence’, MIT-Sloan Working Paper 4210–01, 2003. Brynjolfsson, Erik, Lorin Hitt, and Shinkyu Yang, ‘Intangible Assets: Computers and Organizational Capital’, Brookings Papers on Economic Activity: Macroeconomics, vol. 1, 2002, pp. 137–99. Buiter, Willem, and Anne Sibert, ‘The Central Bank as the Market-Maker of Last Resort: From Lender of Last Resort to Market-Maker of Last Resort’, in The First Global Financial Crisis of the 21st Century, ed. Andrew Felton and Carmen Reinhart, London: Center for Economic Policy Research (CERP), 2007; available at VoxEU.org.


pages: 353 words: 355

The Long Boom: A Vision for the Coming Age of Prosperity by Peter Schwartz, Peter Leyden, Joel Hyatt

American ideology, Asian financial crisis, Berlin Wall, centre right, computer age, crony capitalism, cross-subsidies, Deng Xiaoping, Dissolution of the Soviet Union, European colonialism, Fall of the Berlin Wall, financial innovation, hydrogen economy, industrial cluster, informal economy, intangible asset, Just-in-time delivery, knowledge economy, knowledge worker, life extension, market bubble, mass immigration, megacity, Mikhail Gorbachev, Nelson Mandela, new economy, oil shock, open borders, Productivity paradox, QR code, Ronald Reagan, shareholder value, Silicon Valley, Steve Jobs, the scientific method, upwardly mobile, Washington Consensus, Y2K

They have had successive generations of people experienced in making markets work and connecting capital to worthy companies. On the other hand, many Indian graduate students learned socialist economics at the London School of Economics and came home to take prominent positions in their overly bureaucratic government. They kept applying these socialist principles long after they were discredited around the globe. India also has picked up an intangible asset virtually by osmosis. Part of the British colonial legacy was that English became the national language uniting the diverse Indian peoples, who also speak a wealth of local languages. True, English was imposed on the Indians, but as alien as the language was, it proved so useful that the Indians themselves retained it as their national language long after the British left. To this day, the affairs of state and key media are all in English.


pages: 330 words: 59,335

The Outsiders: Eight Unconventional CEOs and Their Radically Rational Blueprint for Success by William Thorndike

Albert Einstein, Atul Gawande, Berlin Wall, Checklist Manifesto, choice architecture, Claude Shannon: information theory, collapse of Lehman Brothers, compound rate of return, corporate governance, discounted cash flows, diversified portfolio, Donald Trump, Fall of the Berlin Wall, Gordon Gekko, intangible asset, Isaac Newton, Louis Pasteur, Mark Zuckerberg, NetJets, Norman Mailer, oil shock, pattern recognition, Ralph Waldo Emerson, Richard Feynman, shared worldview, shareholder value, six sigma, Steve Jobs, Thomas Kuhn: the structure of scientific revolutions

The deal as negotiated by Smith was both compelling (an attractive price of five times cash flow) and very large, equaling over 20 percent of the company’s enterprise value (EV) at the time. Smith leveraged his real estate expertise to creatively finance the purchase via a sale/leaseback of ABC’s manufacturing facilities (he is still justifiably proud of this coup). Smith had grown up in the bricks-and-mortar world of movie theaters, and ABC was his first exposure to the value of businesses with intangible assets, like beverage brands. Smith grew to love the beverage business, which was an oligopoly with very high returns on capital and attractive long-term growth trends. He particularly liked the dynamics within the Pepsi bottler universe, which was fragmented and had many second- and third-generation owners who were potential sellers (unlike the Coke system, which was dominated by a smaller number of large independents).


pages: 197 words: 59,946

The Thank You Economy by Gary Vaynerchuk

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. In the future, the companies with tremendous “relationship capital” will be the ones to succeed.


pages: 241 words: 63,981

Dirty Secrets How Tax Havens Destroy the Economy by Richard Murphy

banking crisis, barriers to entry, Bernie Sanders, centre right, corporate governance, Donald Trump, Double Irish / Dutch Sandwich, en.wikipedia.org, high net worth, income inequality, intangible asset, light touch regulation, moral hazard, Occupy movement, offshore financial centre, race to the bottom, Social Responsibility of Business Is to Increase Its Profits, The Wealth of Nations by Adam Smith, transfer pricing, Washington Consensus

The decisions on where, and in what, the funds are ‘invested’ will, in all likelihood, be made by fund managers or share owners who are themselves almost certainly located ‘elsewhere’. The tax haven is thus, once again, only a conduit – or, as Ronen Palan calls it, a ‘booking location’. Other than cash and shares, the most common assets recorded as held in tax havens are property, in the form of the title to land and buildings; shares in private companies; and other tangible assets, such as art, yachts and the like as well as intangible assets such as patents and copyrights. In each case, it is very unlikely that the assets recorded as being owned in the tax haven will have ever had anything to do with it, or will ever (even in the case of some yachts) have been near it. All that the tax haven does is provide an opportunity to record the legal ownership of these assets. Yet again, the tax haven is a mere conduit at best – or, at worst, a front or sham.


pages: 295 words: 66,824

A Mathematician Plays the Stock Market by John Allen Paulos

Benoit Mandelbrot, Black-Scholes formula, Brownian motion, business climate, business cycle, butter production in bangladesh, butterfly effect, capital asset pricing model, correlation coefficient, correlation does not imply causation, Daniel Kahneman / Amos Tversky, diversified portfolio, dogs of the Dow, 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, stocks for the long run, survivorship bias, transaction costs, ultimatum game, Vanguard fund, Yogi Berra

This strategy, again similar to one promoted by the Motley Fool, became popular in the late ’80s and early ’90s and did result in greater gains than those achieved by, say, the broad-gauged S&P 500 average. 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.


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

asset allocation, backtesting, buy and hold, 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, stocks for the long run, survivorship bias, the rule of 72, the scientific method, time value of money, transaction costs, Vanguard fund, Yogi Berra, zero-coupon bond

A low-beta stock or fund may be less risky, but it may also be highly risky with a low correlation with the market. See capital asset pricing model. 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. This theory contains a large number of unrealistic assumptions and has been shown to be inconsistent with empirical data (i.e., in the real world it turns out that high-beta stocks do not have higher returns than low-beta stocks).


pages: 232 words: 70,361

The Triumph of Injustice: How the Rich Dodge Taxes and How to Make Them Pay by Emmanuel Saez, Gabriel Zucman

activist fund / activist shareholder / activist investor, Affordable Care Act / Obamacare, Berlin Wall, business cycle, Cass Sunstein, collective bargaining, corporate governance, Donald Trump, financial deregulation, income inequality, income per capita, informal economy, intangible asset, Jeff Bezos, labor-force participation, Lyft, Mark Zuckerberg, market fundamentalism, Mont Pelerin Society, mortgage debt, mortgage tax deduction, new economy, offshore financial centre, oil shock, patent troll, profit maximization, purchasing power parity, race to the bottom, rent-seeking, ride hailing / ride sharing, Ronald Reagan, shareholder value, Silicon Valley, single-payer health, Skype, Steve Jobs, The Wealth of Nations by Adam Smith, transfer pricing, trickle-down economics, uber lyft, very high income, We are the 99%

Wearden and Elliott (2018). 16. On the notion of commercialization of state sovereignty, see Palan (2002). 17. Tørsløv, Wier, and Zucman (2018). Chapter 5: SPIRAL 1. The income earned by self-employed workers is mixed in the sense that it conceptually corresponds to both a payment for their work (time spent curing patients or performing legal services) and their capital (medical devices, intangible assets such as the brand value of a law firm). Attributing 70% of self-employment income to labor is somewhat arbitrary, but because most workers are salaried individuals (not self-employed), varying this assumption is largely immaterial. 2. In public financial statements, total labor costs are not reported separately (they are lumped with other costs under “costs of goods sold”). However, we know that Apple had approximately 132,000 full-time equivalent employees in 2018, and thanks to a new rule implemented by the Securities and Exchange Commission in 2018 compelling companies to disclose the ratio of the CEO’s to median employee pay, we know that the median Apple employee was paid $55,000 (excluding fringe benefits such as health insurance).


pages: 281 words: 71,242

World Without Mind: The Existential Threat of Big Tech by Franklin Foer

artificial general intelligence, back-to-the-land, Berlin Wall, big data - Walmart - Pop Tarts, big-box store, Buckminster Fuller, citizen journalism, Colonization of Mars, computer age, creative destruction, crowdsourcing, data is the new oil, don't be evil, Donald Trump, Double Irish / Dutch Sandwich, Douglas Engelbart, Edward Snowden, Electric Kool-Aid Acid Test, Elon Musk, Fall of the Berlin Wall, Filter Bubble, global village, Google Glasses, Haight Ashbury, hive mind, income inequality, intangible asset, Jeff Bezos, job automation, John Markoff, Kevin Kelly, knowledge economy, Law of Accelerating Returns, Marc Andreessen, Mark Zuckerberg, Marshall McLuhan, means of production, move fast and break things, move fast and break things, new economy, New Journalism, Norbert Wiener, offshore financial centre, PageRank, Peace of Westphalia, Peter Thiel, planetary scale, Ray Kurzweil, self-driving car, Silicon Valley, Singularitarianism, software is eating the world, Steve Jobs, Steven Levy, Stewart Brand, strong AI, supply-chain management, the medium is the message, the scientific method, The Wealth of Nations by Adam Smith, The Wisdom of Crowds, Thomas L Friedman, Thorstein Veblen, Upton Sinclair, Vernor Vinge, Whole Earth Catalog, yellow journalism

Avoiding tax is an overriding corporate obsession—“employing every trick in the book, and inventing many new ones” in Stone’s words. To outmaneuver the IRS and European collectors, Amazon hatched Project Goldcrest. The code name referenced the national bird of Luxembourg. In 2003, the company sought out a deal with the Grand Duchy. As a reward for building a headquarters there, it would pay hardly any tax. Once Amazon set up shop in Luxembourg, it transferred a vast swath of its intangible assets there—vital software, trademarks, and other shards of intellectual property. Truly, these assets exist in no particular country—does one-click shopping really have a physical location?—but they have a basis in contracts, and those contracts are the basis for taxation. Amazon devised a labyrinthine corporate structure, a dizzying network of subsidiaries and holding companies. As Amazon relocated, it drastically understated the value of the assets it shifted to Luxembourg.


pages: 322 words: 77,341

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

asset-backed security, bank run, banking crisis, Berlin Wall, Bernie Madoff, Big bang: deregulation of the City of London, Black-Scholes formula, Blythe Masters, 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, hedonic treadmill, 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, Kickstarter, 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: 209 words: 80,086

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

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, disruptive innovation, 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, 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, shared worldview, 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

The role of management is to ensure a return on investments made by the owners of the company. 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

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

(For example, many of the innovative elements of Virgin’s operations have originated from staff Just what is a brand? 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. How on earth did we arrive at this spot today where the power and potential of a brand can either make or break a business?


pages: 244 words: 79,044

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

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, NetJets, new economy, Ponzi scheme, post-work, 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. Since index products have experienced massive growth over the past decade there are now literally thousands of ETFs and index funds available in a vast smorgasbord of investment opportunity.


pages: 253 words: 79,214

The Money Machine: How the City Works by Philip Coggan

activist fund / activist shareholder / activist investor, algorithmic trading, asset-backed security, Bernie Madoff, Big bang: deregulation of the City of London, bonus culture, Bretton Woods, call centre, capital controls, carried interest, central bank independence, collateralized debt obligation, creative destruction, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, disintermediation, diversification, diversified portfolio, Edward Lloyd's coffeehouse, endowment effect, financial deregulation, financial independence, floating exchange rates, Hyman Minsky, index fund, intangible asset, interest rate swap, Isaac Newton, joint-stock company, labour market flexibility, large denomination, London Interbank Offered Rate, Long Term Capital Management, merger arbitrage, money market fund, moral hazard, mortgage debt, negative equity, Nick Leeson, Northern Rock, pattern recognition, purchasing power parity, quantitative easing, reserve currency, Right to Buy, Ronald Reagan, shareholder value, South Sea Bubble, sovereign wealth fund, technology bubble, time value of money, too big to fail, tulip mania, Washington Consensus, yield curve, zero-coupon bond

In the financial markets they are used by those concerned about movements in interest rates, currencies and stock indices GEARING The ratio between a company’s debt and equity. See also leverage GILTS Bonds issued by the UK government GOLDEN HELLO Payment made to an employee of a rival firm to entice him or her to transfer. One of a whole range of City perks, including golden handcuffs and golden parachutes GOODWILL An accounting term which describes the intangible assets of a company (e.g. brand names, the skill of the staff) GOWER REPORT Produced in 1984, its recommendations were the basis of the new regulatory structure in the City GROSS YIELD TO REDEMPTION The return which an investor will receive on a bond, allowing for both interest and capital growth, as a percentage of the bond’s price HEDGE FUNDS Private investment vehicles that use borrowed money and shorting (see below) in order to earn returns in both bull and bear markets HEDGING The process whereby an institution buys or sells a financial instrument in order to offset the risk that the price of another financial instrument will rise or fall IDB Inter-dealer broker.


pages: 269 words: 77,876

Brilliant, Crazy, Cocky: How the Top 1% of Entrepreneurs Profit From Global Chaos by Sarah Lacy

Asian financial crisis, barriers to entry, BRICs, clean water, cleantech, cloud computing, Deng Xiaoping, Donald Trump, Elon Musk, fear of failure, Firefox, income per capita, intangible asset, Jeff Bezos, knowledge economy, knowledge worker, M-Pesa, Mahatma Gandhi, Marc Andreessen, Mark Zuckerberg, McMansion, megacity, Network effects, paypal mafia, QWERTY keyboard, risk tolerance, Skype, social web, Steve Jobs, Tony Hsieh, urban planning, web application, women in the workforce, working-age population, zero-sum game

Look at Barnes & Noble: The company had never produced a tech product in its life. When it decided to make an eBook reader, it came to Shenzhen, found a fixer and a factory, and within nine months they had something very close to what it took Sony years to develop. In Silicon Val ey, the network is what makes the ecosystem so powerful, especial y as the region grew to rely on companies with intangible assets like software and the Web. There’s a misconception in much of the emerging world that it’s easy to start a company in Silicon Val ey, that venture capital seems to fal from the sky. But—for al the talk of the Val ey being a meritocracy—if you don’t know anyone, raising money can take as long and be as frustrating as it is anywhere. VCs insist that you be introduced to them by someone they know for one simple reason: they know a lot of people, and if you can’t find a single one of them to vouch for you, you’re not going to be a very aggressive CEO.


pages: 273 words: 87,159

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

"Robert Solow", 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, business cycle, 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, longitudinal study, 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

Stolberg and Fandos 2016; Fandos 2016b. 21. DeLong and Summers 2012; Authers 2015; Surowiecki 2016; Eavis 2015. 22. 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. Borrowers are largely individuals, and lenders in our advanced economy are largely financial institutions.


pages: 310 words: 85,995

The Future of Capitalism: Facing the New Anxieties by Paul Collier

"Robert Solow", accounting loophole / creative accounting, Airbnb, assortative mating, bank run, Berlin Wall, Bernie Sanders, bitcoin, Bob Geldof, bonus culture, business cycle, call centre, central bank independence, centre right, Commodity Super-Cycle, computerized trading, corporate governance, creative destruction, cuban missile crisis, David Brooks, delayed gratification, deskilling, Donald Trump, eurozone crisis, financial deregulation, full employment, George Akerlof, Goldman Sachs: Vampire Squid, greed is good, income inequality, industrial cluster, information asymmetry, intangible asset, Jean Tirole, job satisfaction, Joseph Schumpeter, knowledge economy, late capitalism, loss aversion, Mark Zuckerberg, minimum wage unemployment, moral hazard, negative equity, New Urbanism, Northern Rock, offshore financial centre, out of africa, Peace of Westphalia, principal–agent problem, race to the bottom, rent control, rent-seeking, rising living standards, Robert Shiller, Robert Shiller, Ronald Reagan, shareholder value, Silicon Valley, Silicon Valley ideology, sovereign wealth fund, The Wealth of Nations by Adam Smith, theory of mind, too big to fail, trade liberalization, urban planning, web of trust, zero-sum game

Sometimes it is possible to detach the service from the network: train companies can compete on a shared rail network; electricity generators can compete on a shared grid. But the network itself is a natural monopoly. The emergence of the e-economy has created new network industries that can extend to global monopoly. These firms need very little capital as conventionally defined – the tangible assets of equipment and buildings. Their value is an intangible asset: their networks.8 Unlike tangible assets, these are very difficult for competitors to replicate; and, being immaterial, they have no fixed location subject to public policy. Facebook, Google, Amazon, eBay and Uber are all examples of networks that tend towards natural global monopoly in their particular niches. As unregulated, privately owned natural monopolies, they are highly dangerous. The same process is underway less dramatically in many other sectors of the economy.


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

23andMe, 3D printing, Airbnb, Amazon Mechanical Turk, Amazon Web Services, augmented reality, autonomous vehicles, Baxter: Rethink Robotics, Ben Horowitz, 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, disruptive innovation, distributed ledger, Edward Snowden, Elon Musk, en.wikipedia.org, Ethereum, ethereum blockchain, 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, Joi Ito, Kevin Kelly, Kickstarter, knowledge worker, Kodak vs Instagram, Law of Accelerating Returns, Lean Startup, life extension, lifelogging, loose coupling, loss aversion, low earth orbit, Lyft, Marc Andreessen, Mark Zuckerberg, market design, means of production, minimum viable product, natural language processing, Netflix Prize, NetJets, Network effects, new economy, Oculus Rift, offshore financial centre, PageRank, pattern recognition, Paul Graham, paypal mafia, 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, Travis Kalanick, Tyler Cowen: Great Stagnation, uber lyft, urban planning, WikiLeaks, winner-take-all economy, X Prize, Y Combinator, zero-sum game

In a fast-scaling organization, culture—along with the MTP and Social Technologies—is the glue that keeps a team together through the quantum leaps of an ExO’s growth. 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. Establishing a corporate culture starts with learning how to effectively track, manage and reward performance.


pages: 327 words: 84,627

The Green New Deal: Why the Fossil Fuel Civilization Will Collapse by 2028, and the Bold Economic Plan to Save Life on Earth by Jeremy Rifkin

1919 Motor Transport Corps convoy, 2013 Report for America's Infrastructure - American Society of Civil Engineers - 19 March 2013, American Society of Civil Engineers: Report Card, autonomous vehicles, Bernie Sanders, blockchain, borderless world, business cycle, business process, carbon footprint, collective bargaining, corporate governance, corporate social responsibility, creative destruction, decarbonisation, en.wikipedia.org, energy transition, failed state, ghettoisation, hydrogen economy, information asymmetry, intangible asset, Intergovernmental Panel on Climate Change (IPCC), Internet of things, invisible hand, Joseph Schumpeter, means of production, megacity, Network effects, new economy, off grid, oil shale / tar sands, peak oil, planetary scale, renewable energy credits, Ronald Reagan, shareholder value, sharing economy, Silicon Valley, Skype, smart cities, smart grid, sovereign wealth fund, Steven Levy, the built environment, The Wealth of Nations by Adam Smith, Tim Cook: Apple, trade route, union organizing, urban planning, women in the workforce, zero-sum game

At the press conference announcing the new partnership between Sidewalk Labs and Toronto, Schmidt thanked Canada for allowing Google in, saying that his company’s long-held dream had come true: for “someone to give us a city and put us in charge.”32 Writing in the Globe and Mail a year later, Jim Balsillie, the former chairman and co-CEO of Research In Motion, a company that commercializes intellectual property in more than 150 countries, summed up the significance of this first trial run in creating a privatized smart city that so excited Schmidt. Balsillie pointed out that “‘smart cities’ are the new battlefront for big tech because they serve as the most promising hotbed for additional intangible assets that hold the next trillion dollars to add to their market capitalizations.” The real commercial value, according to Balsillie, is that “‘smart cities’ rely on IP and data to make the vast array of city sensors more functionally valuable, and when under the control of private interests, an enormous new profit pool.”33 In the year since the official announcement, it has become even clearer that Sidewalk Labs wants Toronto’s blessing, but it does not relish the city’s active involvement and oversight in the build-out and management of the smart neighborhood on the waterfront.


The Making of a World City: London 1991 to 2021 by Greg Clark

Basel III, Berlin Wall, Big bang: deregulation of the City of London, Boris Johnson, British Empire, business climate, business cycle, capital controls, carbon footprint, congestion charging, corporate governance, cross-subsidies, deindustrialization, Dissolution of the Soviet Union, East Village, Fall of the Berlin Wall, financial innovation, financial intermediation, global value chain, haute cuisine, housing crisis, industrial cluster, intangible asset, Kickstarter, knowledge economy, knowledge worker, labour market flexibility, low skilled workers, manufacturing employment, Masdar, mass immigration, megacity, New Urbanism, offshore financial centre, Pearl River Delta, place-making, rent control, Robert Gordon, Silicon Valley, smart cities, sovereign wealth fund, trickle-down economics, urban planning, urban renewal, working poor

It was heavily involved in the successful Leadership, governance and policy 63 Agencies 1991 2002 Campaigns Figure 5.4: 2013 Creation of the GLA Promotional agencies and campaigns in London since 1991 bid to host the NFL’s first ever regular season game held outside the Americas at Wembley Stadium. Initially, these agencies encountered some difficulties communicating a coordinated message. The period up to 2009 only made limited use of the city’s intangible assets, from its history, to architecture and culture (see Figure 5.4). London’s susceptibility to reputational damage at the height of the financial crisis triggered a new effort to create an integrated brand message under a coalition of agencies (Sherwood, 2009b). As a result, the Promote London Council was created in 2009 as part of the new Mayor’s Economic Development Strategy, in order to properly assemble key representatives of London’s promotional agencies and business groups and create a more joined-up approach.


pages: 606 words: 87,358

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

"Robert Solow", 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, Kickstarter, 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

Maximizing the value that is added by a nation’s productive resources now involves deploying some of the resources abroad in global value chains. 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.


pages: 400 words: 88,647

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

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, disruptive innovation, Elon Musk, financial exclusion, financial innovation, global supply chain, IKEA effect, income inequality, industrial robot, intangible asset, Internet of things, job satisfaction, Khan Academy, Kickstarter, late fees, Lean Startup, low cost airline, 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, 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, standardized shipping container, Steve Jobs, supply-chain management, TaskRabbit, The Fortune at the Bottom of the Pyramid, The Nature of the Firm, transaction costs, Travis Kalanick, 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. It is time companies recognised that what matters is not how great their ideas are, but how quickly they can execute them.


pages: 327 words: 90,542

The Age of Stagnation: Why Perpetual Growth Is Unattainable and the Global Economy Is in Peril by Satyajit Das

"Robert Solow", 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 cycle, 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, disruptive innovation, 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, 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, uber lyft, 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

While the overall quality of its educational systems is far from exceptional, elite US universities are among the best in the world. The labor market is flexible, albeit at a high human cost. 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. America's ability to tolerate failure is crucial.


pages: 345 words: 87,745

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

asset allocation, backtesting, Bernie Madoff, buy and hold, 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

beta A measure of the magnitude of a portfolio’s past share-price fluctuations in relation to the ups and downs of the overall market (or an appropriate market index). 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. 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: 382 words: 92,138

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

"Robert Solow", Apple II, banking crisis, barriers to entry, Bretton Woods, business cycle, 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, Kickstarter, 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: 295 words: 90,821

Fully Grown: Why a Stagnant Economy Is a Sign of Success by Dietrich Vollrath

"Robert Solow", active measures, additive manufacturing, American Legislative Exchange Council, barriers to entry, business cycle, Capital in the Twenty-First Century by Thomas Piketty, central bank independence, creative destruction, Deng Xiaoping, endogenous growth, falling living standards, hiring and firing, income inequality, intangible asset, John Maynard Keynes: Economic Possibilities for our Grandchildren, Joseph Schumpeter, labor-force participation, light touch regulation, low skilled workers, manufacturing employment, old age dependency ratio, patent troll, Peter Thiel, profit maximization, rising living standards, Robert Gordon, Second Machine Age, secular stagnation, self-driving car, Silicon Valley, The Rise and Fall of American Growth, total factor productivity, women in the workforce, working-age population

Nonresidential structures—things like factories, strip malls, and office buildings—were about one-third of the total capital stock in 2009. Figure 3.6. Physical capital, by type Note: Data is from the Bureau of Economic Analysis. Each series is indexed to the total capital stock in 2009. “Residential structures” are homes. “Firm structures” are commercial real estate, including manufacturing plants, warehouses, and office buildings. “Intellectual property” includes intangible assets such as software. “Equipment” includes goods used in production such as computers, industrial machinery, and business vehicles. Equipment is the kind of thing you would normally think of as capital: bulldozers and drill presses and computers. But this stock is small compared to the structures such items are housed in. The last category, intellectual property, is something not typically associated with the capital stock.


Deep Value by Tobias E. Carlisle

activist fund / activist shareholder / activist investor, Andrei Shleifer, availability heuristic, backtesting, business cycle, buy and hold, corporate governance, corporate raider, creative destruction, Daniel Kahneman / Amos Tversky, discounted cash flows, fixed income, intangible asset, joint-stock company, margin call, passive investing, principal–agent problem, Richard Thaler, riskless arbitrage, Robert Shiller, Robert Shiller, Rory Sutherland, shareholder value, Sharpe ratio, South Sea Bubble, statistical model, The Myth of the Rational Market, The Wealth of Nations by Adam Smith, Tim Cook: Apple

This means that all true liabilities shown on the books must be deducted at their face amount. The value to be ascribed to the assets however, will vary according to their character. Graham determined the net current asset value by calculating the company’s current assets, and then deducting from that calculation all liabilities, both current and long term. Long-term asset values—for example, intangible assets and fixed assets like plants—were totally excluded from the calculation. In ordinary times, and for the vast majority of companies, the net current asset value calculated after conducting such an examination was negative, indicating a surplus of liabilities over current assets. For a small number of stocks, however, the net current asset value would be positive, indicating a surplus of cash, receivables, and inventory over all liabilities.


pages: 411 words: 95,852

Britain Etc by Mark Easton

agricultural Revolution, Albert Einstein, Boris Johnson, 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

Just as James Watt was critical in developing the technology for Britain’s success in the industrial revolution, another Briton, Tim Berners-Lee is credited with the invention that is transforming the global economy today. The World Wide Web has powered a new period of globalisation. 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. It is reckoned that within a few years, selling know-how will generate more than half of total GDP and account for half of total employment in advanced industrial economies like Britain.


pages: 348 words: 97,277

The Truth Machine: The Blockchain and the Future of Everything by Paul Vigna, Michael J. Casey

3D printing, additive manufacturing, Airbnb, altcoin, Amazon Web Services, barriers to entry, basic income, Berlin Wall, Bernie Madoff, bitcoin, blockchain, blood diamonds, Blythe Masters, business process, buy and hold, carbon footprint, cashless society, cloud computing, computer age, computerized trading, conceptual framework, Credit Default Swap, crowdsourcing, cryptocurrency, cyber-physical system, dematerialisation, disintermediation, distributed ledger, Donald Trump, double entry bookkeeping, Edward Snowden, Elon Musk, Ethereum, ethereum blockchain, failed state, fault tolerance, fiat currency, financial innovation, financial intermediation, global supply chain, Hernando de Soto, hive mind, informal economy, intangible asset, Internet of things, Joi Ito, Kickstarter, linked data, litecoin, longitudinal study, Lyft, M-Pesa, Marc Andreessen, market clearing, mobile money, money: store of value / unit of account / medium of exchange, Network effects, off grid, pets.com, prediction markets, pre–internet, price mechanism, profit maximization, profit motive, ransomware, rent-seeking, RFID, ride hailing / ride sharing, Ross Ulbricht, Satoshi Nakamoto, self-driving car, sharing economy, Silicon Valley, smart contracts, smart meter, Snapchat, social web, software is eating the world, supply-chain management, Ted Nelson, the market place, too big to fail, trade route, transaction costs, Travis Kalanick, Turing complete, Uber and Lyft, uber lyft, unbanked and underbanked, underbanked, universal basic income, web of trust, zero-sum game

We’d need that program to be able to tell us, for example, how many Basic Attention Tokens it would take to buy the rights to a third of a Jackson Pollock painting. It would be a world of digital barter, a world without money as we know it. As far-fetched as it seems, some are already setting out to build this alternative world. In their vision, all of our physical assets—our cars, boats, houses—as well as intangible assets such as brands, can be represented as secure digital assets on an immutable blockchain and traded directly with other such assets, with their prices set by a matrix of billions of buyers and sellers. It’s an idea that has long interested Zurich-based financial technology inventor Richard Olsen, and we quoted his thoughts in the final pages of The Age of Cryptocurrency. Around the time of the book’s publication, Olsen set out to make his dream a reality.


All About Asset Allocation, Second Edition by Richard Ferri

activist fund / activist shareholder / activist investor, asset allocation, asset-backed security, barriers to entry, Bernie Madoff, buy and hold, 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, stocks for the long run, survivorship bias, too big to fail, transaction costs, Vanguard fund, yield curve

Bid-Ask Spread The difference between what a buyer is willing to bid (pay) for a security and the seller’s asking (offer) price. 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: 831 words: 98,409

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

activist fund / activist shareholder / activist investor, assortative mating, bank run, barriers to entry, Bernie Sanders, Black Swan, Blythe Masters, 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, longitudinal study, 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, social intelligence, sovereign wealth fund, Stephen Hawking, Steve Jobs, The Future of Employment, The Predators' Ball, The Rise and Fall of American Growth, too big to fail, women in the workforce, young professional

FRIENDS WITH BENEFITS: CAPITAL NETWORKS = NETWORK CAPITAL Today more than ever, power is defined by who is the most connected and knows how to best use those connections. 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. “Relational capital” creates “network capital,” which increases the “return on relationships.”


pages: 417 words: 97,577

The Myth of Capitalism: Monopolies and the Death of Competition by Jonathan Tepper

Affordable Care Act / Obamacare, air freight, Airbnb, airline deregulation, bank run, barriers to entry, Berlin Wall, Bernie Sanders, big-box store, Bob Noyce, business cycle, Capital in the Twenty-First Century by Thomas Piketty, citizen journalism, Clayton Christensen, collapse of Lehman Brothers, collective bargaining, computer age, corporate raider, creative destruction, Credit Default Swap, crony capitalism, diversification, don't be evil, Donald Trump, Double Irish / Dutch Sandwich, Edward Snowden, Elon Musk, en.wikipedia.org, eurozone crisis, Fall of the Berlin Wall, family office, financial innovation, full employment, German hyperinflation, gig economy, Gini coefficient, Goldman Sachs: Vampire Squid, Google bus, Google Chrome, Gordon Gekko, income inequality, index fund, Innovator's Dilemma, intangible asset, invisible hand, Jeff Bezos, John Nash: game theory, John von Neumann, Joseph Schumpeter, Kenneth Rogoff, late capitalism, London Interbank Offered Rate, low skilled workers, Mark Zuckerberg, Martin Wolf, means of production, merger arbitrage, Metcalfe's law, multi-sided market, mutually assured destruction, Nash equilibrium, Network effects, new economy, Northern Rock, offshore financial centre, passive investing, patent troll, Peter Thiel, plutocrats, Plutocrats, prediction markets, prisoner's dilemma, race to the bottom, rent-seeking, road to serfdom, Robert Bork, Ronald Reagan, Sam Peltzman, secular stagnation, shareholder value, Silicon Valley, Skype, Snapchat, Social Responsibility of Business Is to Increase Its Profits, Steve Jobs, The Chicago School, The Wealth of Nations by Adam Smith, Thomas Kuhn: the structure of scientific revolutions, too big to fail, undersea cable, Vanguard fund, very high income, wikimedia commons, William Shockley: the traitorous eight, zero-sum game

Libraries of books at business schools are devoted to explaining different kinds of moats. Investors search for companies that achieve such scale that they become the “Low-Cost Producer.” Investors try to find firms with “High Switching Costs” that lock clients into a relationship. They try to find businesses with “Network Effects” where you win by being the only system people can use to call or pay each other, for example. They also look for industries with “Intangible Assets” such as patents that keep your competitors out by law. In the medical industry, in particular, patents allow companies to charge astronomic prices because, by law, no other companies can compete with them while they hold a patent. Company CEOs and investors are all behaving in a perfectly rational way when they buy competitors and find ways to monopolize their industries. They are reducing the threat of established rivals as well as the threat of new entrants.


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)

bank run, banking crisis, banks create money, Basel III, Bretton Woods, business cycle, 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

Conversely, during asset price downturns the exact opposite occurs – falling prices lead to higher leverage ratios, and as the bank is targeting a specific level of leverage they start selling off assets. 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. However, financial crises and their accompanying recessions/depressions require government interventions of a different order of magnitude than the standard boom-bust cycle.


pages: 385 words: 111,807

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

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, Nelson Mandela, 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. This means that the host economy is effectively subsidizing TNCs.


pages: 378 words: 110,518

Postcapitalism: A Guide to Our Future by Paul Mason

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 cycle, 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, Kickstarter, knowledge economy, knowledge worker, late capitalism, low skilled workers, market clearing, means of production, Metcalfe's law, microservices, 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, WikiLeaks, 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. An airliner looks like old technology. But from the atomic structure of the fan blades, to the compressed design cycle, to the stream of data it is firing back to its fleet HQ, it is ‘alive’ with information.


pages: 341 words: 116,854

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

Anton Chekhov, Broken windows theory, Buckminster Fuller, Charles Lindbergh, 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

AI winter, algorithmic trading, asset allocation, banking crisis, barriers to entry, Big bang: deregulation of the City of London, business cycle, butter production in bangladesh, butterfly effect, buttonwood tree, buy and hold, 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, 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, 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

Not only would it directly address the crux of the problem, but it is actually the best way to save the good current banks. 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. Given this, these new banks could easily attract private capital and deposits extending their lending capacity well beyond $7 trillion.


pages: 298 words: 43,745

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

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, longitudinal study, 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

The etymological origin of the word comes from the branding of cattle and initially referred to the act of naming a product or service. 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]. Searchers also have different perceptions of each search engine’s performance and distinct responses to each engine [9].


pages: 349 words: 114,038

Culture & Empire: Digital Revolution by Pieter Hintjens

4chan, airport security, AltaVista, 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, MITM: man-in-the-middle, mutually assured destruction, Naomi Klein, national security letter, Nelson Mandela, 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 Stallman, Ross Ulbricht, 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, twin studies, union organizing, wealth creators, web application, WikiLeaks, Y2K, zero day, Zipf's Law

These digital authorities define their own property laws, and enforce them without negotiation, and are thus analogous to a State. 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. When I scored Wikipedia in “Spheres of Light”, it hit 96%. Wikipedia is not perfect, though it comes close.


The Global Money Markets by Frank J. Fabozzi, Steven V. Mann, Moorad Choudhry

asset allocation, asset-backed security, bank run, Bretton Woods, buy and hold, collateralized debt obligation, credit crunch, discounted cash flows, discrete time, disintermediation, fixed income, high net worth, intangible asset, interest rate derivative, interest rate swap, large denomination, locking in a profit, London Interbank Offered Rate, Long Term Capital Management, margin call, market fundamentalism, money market fund, moral hazard, mortgage debt, paper trading, Right to Buy, short selling, stocks for the long run, time value of money, value at risk, Y2K, yield curve, zero-coupon bond, zero-sum game

This is the risk that, given that a guarantee against loss is available, a firm ceases to act prudently and enters into high-risk transactions, in the expectation that it can always call on the authorities should its risk strategy land it in financial trouble. 6 304 THE GLOBAL MONEY MARKETS EXHIBIT 14.2 European Union Regulatory Capital Rules Limits Capital type Tier 1 • No limit to Tier 1 • “Esoteric” instruments such as trust-preferred securities are restricted to 15% of total Tier 1 • Equity share capital, including share premium account • Retained profits • Non-cumulative preference shares and other hybrid capital securities • Bank holding’s of its own Tier 1 instruments • Goodwill and other intangible assets • Current year unpublished losses Tier 2 • Total Tier 2 may not exceed 100% of Tier 1 • Perpetual subordinated, loss-absorbing debt • Cumulative preference shares • General reserves • Revaluation reserves • Holdings of other banks’ own fund instruments in excess of 10% of the value of own capital • Holding of more than 10% of another credit institution’s own funds • Specified investments in non-consolidated subsidiaries • Qualified investments, defined as a holding of more 10% of a company Upper Tier 2 Deductions Lower • Cannot exceed 50% of • Fixed maturity subordiTier 2 Tier 1 nated debt • Amount qualifying as • Perpetual subordinated capital amortizes on a non-loss absorbing debt straight-line basis in the last five years Tier 3 • Minimum 28.5% of • Trading book profits • Trading book losses capital covering market • Short-term subordinated risk must be Tier 1 debt with a minimum • Tier 3 capital can only maturity of two years, cover market risk on plus a feature enabling trading books.


pages: 960 words: 125,049

Mastering Ethereum: Building Smart Contracts and DApps by Andreas M. Antonopoulos, Gavin Wood Ph. D.

Amazon Web Services, bitcoin, blockchain, continuous integration, cryptocurrency, Debian, domain-specific language, don't repeat yourself, Edward Snowden, en.wikipedia.org, Ethereum, ethereum blockchain, fault tolerance, fiat currency, Firefox, Google Chrome, intangible asset, Internet of things, litecoin, move fast and break things, move fast and break things, node package manager, peer-to-peer, Ponzi scheme, prediction markets, pull request, QR code, Ruby on Rails, Satoshi Nakamoto, sealed-bid auction, sharing economy, side project, smart contracts, transaction costs, Turing complete, Turing machine, Vickrey auction, web application, WebSocket

As the following list shows, currency is just the first “app”: Currency A token can serve as a form of currency, with a value determined through private trade. Resource A token can represent a resource earned or produced in a sharing economy or resource-sharing environment; for example, a storage or CPU token representing resources that can be shared over a network. Asset A token can represent ownership of an intrinsic or extrinsic, tangible or intangible asset; for example, gold, real estate, a car, oil, energy, MMOG items, etc. Access A token can represent access rights and grant access to a digital or physical property, such as a discussion forum, an exclusive website, a hotel room, or a rental car. Equity A token can represent shareholder equity in a digital organization (e.g., a DAO) or legal entity (e.g., a corporation). Voting A token can represent voting rights in a digital or legal system.


pages: 476 words: 125,219

Digital Disconnect: How Capitalism Is Turning the Internet Against Democracy by Robert W. McChesney

2013 Report for America's Infrastructure - American Society of Civil Engineers - 19 March 2013, access to a mobile phone, Albert Einstein, American Legislative Exchange Council, American Society of Civil Engineers: Report Card, Automated Insights, barriers to entry, Berlin Wall, business cycle, Cass Sunstein, citizen journalism, cloud computing, collaborative consumption, collective bargaining, creative destruction, crony capitalism, David Brooks, death of newspapers, declining real wages, Double Irish / Dutch Sandwich, Erik Brynjolfsson, failed state, Filter Bubble, full employment, future of journalism, George Gilder, Gini coefficient, Google Earth, income inequality, informal economy, intangible asset, invention of agriculture, invisible hand, Jaron Lanier, Jeff Bezos, jimmy wales, John Markoff, John Maynard Keynes: Economic Possibilities for our Grandchildren, Joseph Schumpeter, Julian Assange, Kickstarter, Mark Zuckerberg, Marshall McLuhan, means of production, Metcalfe’s law, mutually assured destruction, national security letter, Nelson Mandela, Network effects, new economy, New Journalism, Nicholas Carr, Occupy movement, offshore financial centre, patent troll, Peter Thiel, plutocrats, Plutocrats, post scarcity, price mechanism, profit maximization, profit motive, QWERTY keyboard, Ralph Nader, Richard Stallman, road to serfdom, Robert Metcalfe, Saturday Night Live, sentiment analysis, Silicon Valley, single-payer health, Skype, spectrum auction, Steve Jobs, Steve Wozniak, Steven Levy, Steven Pinker, Stewart Brand, Telecommunications Act of 1996, the medium is the message, The Spirit Level, The Structural Transformation of the Public Sphere, The Wealth of Nations by Adam Smith, Thorstein Veblen, too big to fail, transfer pricing, Upton Sinclair, WikiLeaks, winner-take-all economy, yellow journalism

Therefore, the prospects for achieving the sort of economic growth traditionally associated with a healthy capitalist economy appear unlikely going forward. See Robert J. Gordon, “Is U.S. Economic Growth Over? Faltering Innovation Confronts the Six Headwinds,” Working Paper #18315, National Bureau of Economic Research, Aug. 2012, nber.org/papers/w18315. 16. Compustat North America, Fundamentals Annual; Wharton Research Data Services (WRDS), University of Pennsylvania (retrieved June 4, 2012). 17. Andrew J. Sherman, Harvesting Intangible Assets (New York: Amacom, 2012), xi. 18. Peter H. Diamandis and Steven Kotler, Abundance: The Future Is Better Than You Think (New York: The Free Press, 2012), 9. 19. Erik Brynjolfsson and Andrew McAfee, Race Against the Machine (Lexington, MA: Digital Frontier Press, 2011), 76. 20. Jeremy Rifkin was on to this at the beginning of the digital era. See Jeremy Rifkin, The End of Work: The Decline of the Global Labor Force and the Dawn of the Post-Market Era (New York: G.P.


pages: 399 words: 122,688

Shoe Dog by Phil Knight

banking crisis, corporate raider, fear of failure, fixed income, index card, intangible asset, Menlo Park, Silicon Valley

Blue Ribbon, I said, would probably morph over the years into a generalized sporting goods company. We’d probably have offices on the West Coast. And one day, maybe, in Japan. “Farfetched,” I wrote. “But it seems worth shooting for.” This last line was wholly truthful. It was worth shooting for. If Blue Ribbon went bust, I’d have no money, and I’d be crushed. But I’d also have some valuable wisdom, which I could apply to the next business. Wisdom seemed an intangible asset, but an asset all the same, one that justified the risk. Starting my own business was the only thing that made life’s other risks—marriage, Vegas, alligator wrestling—seem like sure things. But my hope was that when I failed, if I failed, I’d fail quickly, so I’d have enough time, enough years, to implement all the hard-won lessons. I wasn’t much for setting goals, but this goal kept flashing through my mind every day, until it became my internal chant: Fail fast.


pages: 992 words: 292,389

Conspiracy of Fools: A True Story by Kurt Eichenwald

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.


Adam Smith: Father of Economics by Jesse Norman

"Robert Solow", active measures, Andrei Shleifer, balance sheet recession, bank run, banking crisis, Basel III, Berlin Wall, Black Swan, Branko Milanovic, Bretton Woods, British Empire, Broken windows theory, business cycle, business process, Capital in the Twenty-First Century by Thomas Piketty, Carmen Reinhart, centre right, cognitive dissonance, collateralized debt obligation, colonial exploitation, Corn Laws, Credit Default Swap, credit default swaps / collateralized debt obligations, crony capitalism, David Brooks, David Ricardo: comparative advantage, deindustrialization, Eugene Fama: efficient market hypothesis, experimental economics, Fall of the Berlin Wall, Fellow of the Royal Society, financial intermediation, frictionless, frictionless market, future of work, George Akerlof, Hyman Minsky, income inequality, incomplete markets, information asymmetry, intangible asset, invention of the telescope, invisible hand, Isaac Newton, Jean Tirole, John Nash: game theory, joint-stock company, Joseph Schumpeter, Kenneth Arrow, Kenneth Rogoff, lateral thinking, loss aversion, market bubble, market fundamentalism, Martin Wolf, means of production, money market fund, Mont Pelerin Society, moral hazard, moral panic, Naomi Klein, negative equity, Network effects, new economy, non-tariff barriers, Northern Rock, Pareto efficiency, Paul Samuelson, Peter Thiel, Philip Mirowski, price mechanism, principal–agent problem, profit maximization, purchasing power parity, random walk, rent-seeking, Richard Thaler, Robert Shiller, Robert Shiller, Ronald Coase, scientific worldview, seigniorage, Socratic dialogue, South Sea Bubble, special economic zone, speech recognition, Steven Pinker, The Chicago School, The Myth of the Rational Market, The Nature of the Firm, The Rise and Fall of American Growth, The Wealth of Nations by Adam Smith, The Wisdom of Crowds, theory of mind, Thomas Malthus, Thorstein Veblen, time value of money, transaction costs, transfer pricing, Veblen good, Vilfredo Pareto, Washington Consensus, working poor, zero-sum game

For the Obama White House’s critique of market power, see ‘Benefits of Competition and Indicators of Market Power’, US Council of Economic Advisers Issue Brief, May 2016; Jan de Loecker and Jan Eeckhout, ‘The Rise of Market Power and the Macroeconomic Implications’, NBER Working Paper 23687, August 2017. On the erosion of real wages and the loss of trust within firms, see Robert Solow, ‘The Future of Work: Why Wages Aren’t Keeping Up’, Pacific Standard, 11 August 2015 Scalability of technology platforms: this is just one aspect of the economic effects of investment in intangible assets, which now outstrips investment in tangible assets in the US and UK. For a pioneering analysis see Jonathan Haskel and Stian Westlake, Capitalism without Capital: The Rise of the Intangible Economy, Princeton University Press 2017 ‘Competition is for losers’: Peter Thiel, Wall Street Journal, 12 September 2014 Effects of information and choice overload, especially on the poor: see Sendhil Mullainathan and Eldar Shafir, Scarcity: The True Cost of Not Having Enough, Allen Lane 2013 Consumer detriment from UK retail electricity market: UK Competition and Markets Authority, Energy Market Investigation: Final Report, 24 June 2016 Volkswagen scandal: see Frank Dohmen and Dieter Hawranek, ‘Collusion between Germany’s Biggest Carmakers’, Der Spiegel, 27 July 2017, and Jack Ewing, Faster, Higher, Farther: The Inside Story of the Volkswagen Scandal, Bantam Press 2017 Limits of competition policy: recent arguments, and disparate US and EU views, are explored by John Vickers in ‘Competition Policy and Property Rights’, Economic Journal, 120.544, 2010 Hidden costs of price comparison websites: see e.g.


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

Airbnb, altcoin, bank run, banking crisis, bitcoin, blockchain, Bretton Woods, buy and hold, 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, 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, Joi Ito, 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, Nelson Mandela, 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, Ross Ulbricht, 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, uber lyft, underbanked