intangible asset

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

"World Economic Forum" Davos, 3D printing, Airbnb, asset light, assortative mating, behavioural economics, carbon footprint, carbon tax, classic study, Clayton Christensen, collapse of Lehman Brothers, creative destruction, crowdsourcing, deep learning, delayed gratification, disruptive innovation, diversification, Downton Abbey, driverless car, Erik Brynjolfsson, falling living standards, financial engineering, 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, risk free rate, Second Machine Age, sharing economy, Sheryl Sandberg, side project, Silicon Valley, smart cities, Stanford marshmallow experiment, Stephen Hawking, Steve Jobs, tacit knowledge, The Future of Employment, uber lyft, warehouse robotics, women in the workforce, young professional

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

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

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

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

23andMe, activist fund / activist shareholder / activist investor, Airbnb, Alan Greenspan, Albert Einstein, Alvin Toffler, Andrei Shleifer, bank run, banking crisis, Bernie Sanders, Big Tech, book value, Brexit referendum, business climate, business process, buy and hold, Capital in the Twenty-First Century by Thomas Piketty, carbon credits, cloud computing, cognitive bias, computer age, congestion pricing, corporate governance, corporate raider, correlation does not imply causation, creative destruction, dark matter, Diane Coyle, Donald Trump, Douglas Engelbart, Douglas Engelbart, driverless car, Edward Glaeser, Elon Musk, endogenous growth, Erik Brynjolfsson, everywhere but in the productivity statistics, Fellow of the Royal Society, financial engineering, financial innovation, full employment, fundamental attribution error, future of work, gentrification, gigafactory, Gini coefficient, Hernando de Soto, hiring and firing, income inequality, index card, indoor plumbing, intangible asset, Internet of things, Jane Jacobs, Jaron Lanier, Jeremy Corbyn, job automation, Kanban, Kenneth Arrow, Kickstarter, knowledge economy, knowledge worker, laissez-faire capitalism, liquidity trap, low interest rates, low skilled workers, Marc Andreessen, Mother of all demos, Network effects, new economy, Ocado, open economy, patent troll, paypal mafia, Peter Thiel, pets.com, place-making, post-industrial society, private spaceflight, Productivity paradox, quantitative hedge fund, rent-seeking, revision control, Richard Florida, ride hailing / ride sharing, Robert Gordon, Robert Solow, 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, sunk-cost fallacy, survivorship bias, tacit knowledge, tech billionaire, The Rise and Fall of American Growth, The Wealth of Nations by Adam Smith, Tim Cook: Apple, total factor productivity, TSMC, Tyler Cowen, Tyler Cowen: Great Stagnation, urban planning, Vanguard fund, walkable city, X Prize, zero-sum game

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.

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Now, perhaps the contestedness of intangible assets that we discussed in chapter 4 encourages firms to spend money asserting or protecting their claims to them. In recent years, an increasing proportion of lobbying in the United States has been carried out by technology firms; typically, these firms are lobbying in relation to valuable intangible assets they own, such as Google’s right to use its valuable data and software in particular ways, or Uber’s and AirBnB’s rights in respect of their valuable networks of drivers and hosts. The rewards for successful lobbying are very high: all these intangible assets are highly scalable and are intrinsic to their owners’ business models.

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But companies that rely on exploiting existing intangible assets may look very different, especially where the intangible assets are organizational structure and processes. These may be much more controlled environments—Amazon’s warehouses rather than its headquarters. Leadership will be increasingly prized, to the extent that it allows firms to coordinate intangible investments in different areas and exploit their synergies. Financial investors who can understand the complexity of intangible-rich firms will also do well. The greater uncertainty of intangible assets and the decreasing usefulness of company accounts put a premium on good equity research and on insight into firm management.

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, asset light, autonomous vehicles, big data - Walmart - Pop Tarts, business intelligence, call centre, Clayton Christensen, cloud computing, commoditize, crowdsourcing, data science, disintermediation, diversification, Douglas Engelbart, Douglas Engelbart, future of work, Google Glasses, Google X / Alphabet X, independent contractor, Infrastructure as a Service, intangible asset, Internet of things, invention of writing, inventory management, iterative process, Jeff Bezos, job satisfaction, John Zimmer (Lyft cofounder), Kevin Kelly, Kickstarter, Larry Ellison, late fees, Lyft, Mark Zuckerberg, Mary Meeker, Oculus Rift, pirate software, ride hailing / ride sharing, Salesforce, self-driving car, sharing economy, Silicon Valley, Silicon Valley startup, six sigma, software as a service, software patent, Steve Jobs, subscription business, systems thinking, 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.

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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.

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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.

Restarting the Future: How to Fix the Intangible Economy by Jonathan Haskel, Stian Westlake

"Friedman doctrine" OR "shareholder theory", activist fund / activist shareholder / activist investor, Andrei Shleifer, Big Tech, Black Lives Matter, book value, Boris Johnson, Brexit referendum, business cycle, business process, call centre, Capital in the Twenty-First Century by Thomas Piketty, central bank independence, Charles Lindbergh, charter city, cloud computing, cognitive bias, cognitive load, congestion charging, coronavirus, corporate governance, COVID-19, creative destruction, cryptocurrency, David Graeber, decarbonisation, Diane Coyle, Dominic Cummings, Donald Shoup, Donald Trump, Douglas Engelbart, Douglas Engelbart, driverless car, Edward Glaeser, equity risk premium, Erik Brynjolfsson, Estimating the Reproducibility of Psychological Science, facts on the ground, financial innovation, Francis Fukuyama: the end of history, future of work, general purpose technology, gentrification, Goodhart's law, green new deal, housing crisis, income inequality, index fund, indoor plumbing, industrial cluster, inflation targeting, intangible asset, interchangeable parts, invisible hand, job-hopping, John Maynard Keynes: Economic Possibilities for our Grandchildren, Joseph Schumpeter, Kenneth Arrow, knowledge economy, knowledge worker, lockdown, low interest rates, low skilled workers, Marc Andreessen, market design, Martin Wolf, megacity, mittelstand, new economy, Occupy movement, oil shock, patent troll, Peter Thiel, Phillips curve, postindustrial economy, pre–internet, price discrimination, quantitative easing, QWERTY keyboard, remote working, rent-seeking, replication crisis, risk/return, Robert Gordon, Robert Metcalfe, Robert Shiller, Ronald Coase, Sam Peltzman, Second Machine Age, secular stagnation, shareholder value, Silicon Valley, six sigma, skeuomorphism, social distancing, superstar cities, the built environment, The Rise and Fall of American Growth, The Spirit Level, The Wealth of Nations by Adam Smith, Thorstein Veblen, total factor productivity, transaction costs, Tyler Cowen, Tyler Cowen: Great Stagnation, Uber for X, urban planning, We wanted flying cars, instead we got 140 characters, work culture , X Prize, Y2K

Drechsel (2021), Greenwald (2019), and Lian and Ma (2021) have highlighted the pervasive use of loan covenants related to earnings. And Lim, Macias, and Moeller (2020) show that after an accounting change that booked intangible assets, borrowing rose; importantly, borrowing rose after the accounting change when identified intangibles assets rose, not all intangible assets. (Assets were identified by a record of the purchase price paid for them and consisted of things like trademarks, domain names, and mineral rights.) An unidentified intangible asset was acquisition goodwill. 9. Lian and Ma 2021. 10. Dell’Ariccia et al. 2017. 11. Kaoru, Daisuke, and Miho 2017. 12. Lim, Macias, and Moeller 2020. 13.

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Equally severe challenges exist not only in the financial markets and banking systems that provide finance to private-sector businesses but also in the monetary policy regimes that underpin them. Most external finance for businesses takes the form of debt. But intangible-intensive businesses are not well suited to debt finance. Intangible assets are difficult to pledge as collateral, and the winner-takes-all nature of intangible assets makes assessing creditworthiness more difficult. These realities weaken central banks’ ability to manage economic cycles by altering interest rates. The solution is institutional change in how we regulate financial institutions, increasing their ability to invest in intangibles-rich businesses, combined with tax and regulatory rules that favour debt over equity.

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Its market capitalisation in 2018 was around $1 trillion. Its tangible assets, mostly buildings, cash, and other savings, were valued at only 9 percent of Apple’s market value.38 A large chunk of the rest of its value resides in intangible assets: things that were costly to acquire, last a long time, and are valuable to the company, but are not physical. Apple’s intangible assets include the knowledge gained from R&D, the design of its products, its widely trusted brands, the valuable and durable relationships with its suppliers (including both its physical supply chain and the developers who support the Apple ecosystem), staffers’ internal firm knowledge and relationships, the software in its operating system, and its vast data resources.

The Finance Book: Understand the Numbers Even if You're Not a Finance Professional by Stuart Warner, Si Hussain

AOL-Time Warner, book value, business intelligence, business process, cloud computing, conceptual framework, corporate governance, Costa Concordia, credit crunch, currency risk, discounted cash flows, double entry bookkeeping, forward guidance, intangible asset, Kickstarter, low interest rates, market bubble, Northern Rock, peer-to-peer lending, price discrimination, Ralph Waldo Emerson, shareholder value, supply-chain management, time value of money

Similarly, where an asset is financed specifically by borrowings then the actual finance cost can be capitalised as part of the cost of the asset rather than expensed. Amortisation Depreciation and amortisation are synonymous concepts. Amortisation is to intangible assets as depreciation is to tangible assets. Tangible means physical in nature whereas intangible assets are non-physical. Examples of intangible assets include patents and licenses (see Chapter 10 Goodwill and other intangibles). Optional detail Indefinite (or infinite) life assets Freehold land is not depreciated. Land is a unique tangible asset that is considered to have an indefinite/infinite life.

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Foreign exchange differences arising on translation are recognised in the income statement. (f) Intangible assets The Group’s only intangible assets relate to software and the costs of its implementation which is measured at cost less accumulated amortisation and accumulated impairment losses. Subsequent expenditure is capitalised only when it increases the future economic benefits embodied in the specific asset to which it relates. All other expenditure is recognised in the income statement as incurred. Amortisation is recognised in the income statement on a straight-line basis over the estimated useful lives of intangible assets from the date that they are available for use.

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We continue to be encouraged by the results of the programme, which is expected to make an annual net contribution of around £6.0 million once all the key functionality is in place, as well as making us more agile in terms of our ability to adopt further change in the future. Within Greggs intangible assets note are software and assets under development. The note shows that during the last two financial years Greggs has invested £9.8 million in software and assets under development. 10. Intangible assets Group and Parent Company Software £’000 Assets under development £’000 Total £’000 Cost Balance at 29 December 2013 1,715 – 1,715 Additions 817 2,992 3,809 Balance at 3 January 2015 2,532 2,992 5,524 Balance at 4 January 2015 2,532 2,992 5,524 Additions – 5,981 5,981 Balance at 2 January 2016 2,532 8,973 11,505 Amortisation Balance at 29 December 2013 703 – 703 Amortisation charge for the year 100 – 100 Balance at 3 January 2015 803 – 803 Balance at 4 January 2015 803 – 803 Amortisation charge for the year 454 – 454 Balance at 2 January 2016 1,257 – 1,257 Carrying amounts At 29 December 2013 1,012 – 1,012 At 3 January 2015 1,729 2,992 4,721 At 4 January 2015 1,729 2,992 4,721 At 2 January 2016 1,275 8,973 10,248 Assets under development relate to software projects arising from the investment in new systems platforms. 2 Cash versus accruals accounting ‘Remember that credit is money.’

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, book value, 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, currency risk, discounted cash flows, diversification, diversified portfolio, dividend-yielding stocks, dogs of the Dow, equity premium, equity risk premium, fear index, financial engineering, fixed income, Glass-Steagall Act, implied volatility, index fund, intangible asset, interest rate swap, inventory management, inverted yield curve, junk bonds, London Interbank Offered Rate, low interest rates, margin call, money market fund, mortgage debt, Myron Scholes, passive investing, performance metric, risk free rate, risk tolerance, risk-adjusted returns, risk/return, shareholder value, Sharpe ratio, short selling, short squeeze, statistical model, time value of money, transaction costs, yield curve, zero-coupon bond

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

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

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

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, behavioural economics, blockchain, book value, business climate, business intelligence, business logic, business process, call centre, carbon credits, chief data officer, Claude Shannon: information theory, commoditize, conceptual framework, crowdsourcing, dark matter, data acquisition, data science, deep learning, digital rights, digital twin, discounted cash flows, disintermediation, diversification, en.wikipedia.org, endowment effect, Erik Brynjolfsson, full employment, hype cycle, informal economy, information security, intangible asset, Internet of things, it's over 9,000, linked data, Lyft, Nash equilibrium, Neil Armstrong, Network effects, new economy, obamacare, performance metric, profit motive, recommendation engine, RFID, Salesforce, semantic web, single source of truth, smart meter, Snapchat, software as a service, source of truth, supply-chain management, tacit knowledge, technological determinism, 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?

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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).”

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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!

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

accelerated depreciation, activist fund / activist shareholder / activist investor, air freight, ASML, barriers to entry, Basel III, Black Monday: stock market crash in 1987, book value, 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, currency risk, discounted cash flows, distributed generation, diversified portfolio, Dutch auction, energy security, equity premium, equity risk premium, financial engineering, fixed income, index fund, intangible asset, iterative process, Long Term Capital Management, low interest rates, market bubble, market friction, Myron Scholes, negative equity, new economy, p-value, performance metric, Ponzi scheme, price anchoring, proprietary trading, purchasing power parity, quantitative easing, risk free rate, risk/return, Robert Shiller, Savings and loan crisis, 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, two and twenty, value at risk, yield curve, zero-coupon bond

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

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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.

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

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, Big Tech, bitcoin, blockchain, book value, business cycle, business process, buy and hold, Cambridge Analytica, carbon tax, Carmen Reinhart, carried interest, central bank independence, commoditize, crack epidemic, cross-subsidies, disruptive innovation, Donald Trump, driverless car, Erik Brynjolfsson, eurozone crisis, financial deregulation, financial innovation, financial intermediation, flag carrier, Ford Model T, gig economy, Glass-Steagall Act, 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, opioid epidemic / opioid crisis, 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, robo advisor, Ronald Reagan, search costs, Second Machine Age, self-driving car, Silicon Valley, Snapchat, spinning jenny, statistical model, Steve Jobs, stock buybacks, 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, vertical integration, Vilfredo Pareto, warehouse automation, 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.

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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.

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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.

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

active measures, Affordable Care Act / Obamacare, Alan Greenspan, barriers to entry, book value, business cycle, business process, buy and hold, carbon tax, 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 engineering, financial innovation, fixed income, geopolitical risk, hydraulic fracturing, index fund, information asymmetry, intangible asset, inventory management, Joseph Schumpeter, junk bonds, 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, Salesforce, shareholder value, Steve Jobs, tacit knowledge, The Great Moderation, value at risk

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

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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.

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

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

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

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.

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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.

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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.

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

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

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.

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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.

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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?

Exponential: How Accelerating Technology Is Leaving Us Behind and What to Do About It by Azeem Azhar

"Friedman doctrine" OR "shareholder theory", "World Economic Forum" Davos, 23andMe, 3D printing, A Declaration of the Independence of Cyberspace, Ada Lovelace, additive manufacturing, air traffic controllers' union, Airbnb, algorithmic management, algorithmic trading, Amazon Mechanical Turk, autonomous vehicles, basic income, Berlin Wall, Bernie Sanders, Big Tech, Bletchley Park, Blitzscaling, Boeing 737 MAX, book value, Boris Johnson, Bretton Woods, carbon footprint, Chris Urmson, Citizen Lab, Clayton Christensen, cloud computing, collective bargaining, computer age, computer vision, contact tracing, contact tracing app, coronavirus, COVID-19, creative destruction, crowdsourcing, cryptocurrency, cuban missile crisis, Daniel Kahneman / Amos Tversky, data science, David Graeber, David Ricardo: comparative advantage, decarbonisation, deep learning, deglobalization, deindustrialization, dematerialisation, Demis Hassabis, Diane Coyle, digital map, digital rights, disinformation, Dissolution of the Soviet Union, Donald Trump, Double Irish / Dutch Sandwich, drone strike, Elon Musk, emotional labour, energy security, Fairchild Semiconductor, fake news, Fall of the Berlin Wall, Firefox, Frederick Winslow Taylor, fulfillment center, future of work, Garrett Hardin, gender pay gap, general purpose technology, Geoffrey Hinton, gig economy, global macro, global pandemic, global supply chain, global value chain, global village, GPT-3, Hans Moravec, happiness index / gross national happiness, hiring and firing, hockey-stick growth, ImageNet competition, income inequality, independent contractor, industrial robot, intangible asset, Jane Jacobs, Jeff Bezos, job automation, John Maynard Keynes: Economic Possibilities for our Grandchildren, John Maynard Keynes: technological unemployment, John Perry Barlow, Just-in-time delivery, Kickstarter, Kiva Systems, knowledge worker, Kodak vs Instagram, Law of Accelerating Returns, lockdown, low skilled workers, lump of labour, Lyft, manufacturing employment, Marc Benioff, Mark Zuckerberg, megacity, Mitch Kapor, Mustafa Suleyman, Network effects, new economy, NSO Group, Ocado, offshore financial centre, OpenAI, PalmPilot, Panopticon Jeremy Bentham, Peter Thiel, Planet Labs, price anchoring, RAND corporation, ransomware, Ray Kurzweil, remote working, RFC: Request For Comment, Richard Florida, ride hailing / ride sharing, Robert Bork, Ronald Coase, Ronald Reagan, Salesforce, Sam Altman, scientific management, Second Machine Age, self-driving car, Shoshana Zuboff, Silicon Valley, Social Responsibility of Business Is to Increase Its Profits, software as a service, Steve Ballmer, Steve Jobs, Stuxnet, subscription business, synthetic biology, tacit knowledge, TaskRabbit, tech worker, The Death and Life of Great American Cities, The Future of Employment, The Nature of the Firm, Thomas Malthus, TikTok, Tragedy of the Commons, Turing machine, Uber and Lyft, Uber for X, uber lyft, universal basic income, uranium enrichment, vertical integration, warehouse automation, winner-take-all economy, workplace surveillance , Yom Kippur War

Compare a taxi platform like Uber to a cab company that owns its own vehicles. Uber’s algorithm – its key intangible asset – is highly scalable, whereas the traditional cab company needs to add a new cab each time it wants to grow. Software businesses all follow that same principle. The upfront cost of the first copy of the software is enormous. However, every subsequent copy is essentially produced for free. If the network effect and the platform are the foundations of the exponential company, then intangible assets are the bricks that make it up. The tendency of intangible assets to help companies scale reaches its zenith when a business is drawing on artificial intelligence.

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The software that runs Google’s search engine, the data that represents the network of friends in Facebook, the designs and brand identity of Apple, the algorithms that recommend your evening’s viewing on Netflix – this is where their true value lies. Economists call these non-physical assets ‘intangible’.22 The speed of the shift to intangible assets has been remarkable. In 1975, about 83 per cent of the market value of companies on the Standard and Poor 500 stock market index comprised tangible assets. Intangible assets accounted for the remaining 17 per cent. By 2015, those proportions had reversed. Only 16 per cent of the S&P 500’s value could be accounted for by tangible assets, and 84 per cent by intangibles.23 This ratio skews even further when you look at the largest firms in the world: the exponential superstars.

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To figure out a firm’s book value you tally up a company’s cash, what it is owed by customers, and its physical assets, and then subtract its liabilities. The stock market valued those firms, at the time, at $3.5 trillion. In other words, traditional assets represented only 6 per cent of what the market thought these companies were worth – their intangible assets were doing the rest of the work.24 The changing relationship between tangible and intangible assets can be seen in the make-up of the goods all around us. Today, the value of a product tends to come from the early stages of its creation (its research and design) and in the later stages (the branding and service). The actual manufacturing process is becoming less and less important.

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

accelerated depreciation, book value, discounted cash flows, fixed income, intangible asset, low interest rates, market bubble, money market fund, principal–agent problem, profit maximization, risk tolerance, stock buybacks, 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.

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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.

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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.

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

2013 Report for America's Infrastructure - American Society of Civil Engineers - 19 March 2013, 3D printing, access to a mobile phone, additive manufacturing, Airbnb, Alan Greenspan, 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, Boston Dynamics, British Empire, business cycle, business intelligence, business process, call centre, carbon tax, Charles Lindbergh, Chuck Templeton: OpenTable:, clean water, combinatorial explosion, computer age, computer vision, congestion charging, congestion pricing, corporate governance, cotton gin, creative destruction, crowdsourcing, data science, David Ricardo: comparative advantage, digital map, driverless car, employer provided health coverage, en.wikipedia.org, Erik Brynjolfsson, factory automation, Fairchild Semiconductor, 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, general purpose technology, global village, GPS: selective availability, Hans Moravec, 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, Jevons paradox, 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, Kiva Systems, 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, One Laptop per Child (OLPC), pattern recognition, Paul Samuelson, payday loans, post-work, power law, price stability, Productivity paradox, profit maximization, Ralph Nader, Ray Kurzweil, recommendation engine, Report Card for America’s Infrastructure, Robert Gordon, Robert Solow, Rodney Brooks, Ronald Reagan, search costs, 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 Cathedral and the Bazaar, the long tail, The Signal and the Noise by Nate Silver, The Wealth of Nations by Adam Smith, total factor productivity, transaction costs, Tyler Cowen, Tyler Cowen: Great Stagnation, Vernor Vinge, warehouse robotics, Watson beat the top human players on Jeopardy!, winner-take-all economy, Y2K

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

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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.

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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.

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

always be closing, Apollo 13, big data - Walmart - Pop Tarts, business intelligence, business logic, business process, call centre, commoditize, data acquisition, digital map, en.wikipedia.org, fulfillment center, global supply chain, Great Leap Forward, 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 future is already here, the long tail, the scientific method, traveling salesman, yield management

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. 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.

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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.

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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.

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

accelerated depreciation, asset allocation, asset-backed security, bank run, barriers to entry, Benchmark Capital, book value, business cycle, capital asset pricing model, collateralized debt obligation, corporate governance, credit crunch, discounted cash flows, diversification, equity risk premium, financial engineering, fixed income, impact investing, intangible asset, junk bonds, London Interbank Offered Rate, performance metric, risk free rate, shareholder value, sovereign wealth fund, stocks for the long run, subprime mortgage crisis, technology bubble, time value of money, transaction costs, yield curve

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

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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.

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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 .

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

8-hour work day, Abraham Maslow, Albert Einstein, barriers to entry, Bernie Madoff, butterfly effect, buy low sell high, California gold rush, Donald Trump, financial independence, gentrification, high net worth, high-speed rail, intangible asset, Kickstarter, low interest rates, Mark Zuckerberg, Maslow's hierarchy, multilevel marketing, negative equity, passive income, payday loans, reality distortion field, 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.

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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.

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

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, data science, digital divide, disintermediation, Dogecoin, Edward Snowden, en.wikipedia.org, Ethereum, ethereum blockchain, fault tolerance, fiat currency, financial innovation, Firefox, friendly AI, Hernando de Soto, information security, intangible asset, Internet Archive, Internet of things, Khan Academy, Kickstarter, Large Hadron Collider, lifelogging, litecoin, Lyft, M-Pesa, microbiome, Neal Stephenson, Network effects, new economy, operational security, peer-to-peer, peer-to-peer lending, peer-to-peer model, personalized medicine, post scarcity, power law, 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, Snow Crash, software as a service, synthetic biology, technological singularity, the long tail, Turing complete, uber lyft, unbanked and underbanked, underbanked, Vitalik Buterin, Wayback Machine, 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).

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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.

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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.

Corporate Finance: Theory and Practice by Pierre Vernimmen, Pascal Quiry, Maurizio Dallocchio, Yann le Fur, Antonio Salvi

"Friedman doctrine" OR "shareholder theory", accelerated depreciation, accounting loophole / creative accounting, active measures, activist fund / activist shareholder / activist investor, AOL-Time Warner, ASML, asset light, bank run, barriers to entry, Basel III, Bear Stearns, Benoit Mandelbrot, bitcoin, Black Swan, Black-Scholes formula, blockchain, book value, business climate, business cycle, buy and hold, buy low sell high, capital asset pricing model, carried interest, collective bargaining, conceptual framework, corporate governance, correlation coefficient, credit crunch, Credit Default Swap, currency risk, delta neutral, dematerialisation, discounted cash flows, discrete time, disintermediation, diversification, diversified portfolio, Dutch auction, electricity market, equity premium, equity risk premium, Eugene Fama: efficient market hypothesis, eurozone crisis, financial engineering, financial innovation, fixed income, Flash crash, foreign exchange controls, German hyperinflation, Glass-Steagall Act, high net worth, impact investing, implied volatility, information asymmetry, intangible asset, interest rate swap, Internet of things, inventory management, invisible hand, joint-stock company, joint-stock limited liability company, junk bonds, Kickstarter, lateral thinking, London Interbank Offered Rate, low interest rates, mandelbrot fractal, margin call, means of production, money market fund, moral hazard, Myron Scholes, new economy, New Journalism, Northern Rock, performance metric, Potemkin village, quantitative trading / quantitative finance, random walk, Right to Buy, risk free rate, risk/return, shareholder value, short selling, Social Responsibility of Business Is to Increase Its Profits, sovereign wealth fund, Steve Jobs, stocks for the long run, supply-chain management, survivorship bias, The Myth of the Rational Market, time value of money, too big to fail, transaction costs, value at risk, vertical integration, volatility arbitrage, volatility smile, yield curve, zero-coupon bond, zero-sum game

Remember that when you revalue inventories, you are decreasing future profits. 3. Intangible assets It might seem paradoxical to value intangible assets, since their liquidation value has, for a long time, been considered to be low. It is now widely acknowledged, however, that the value of a company is partly determined by the real value of its intangible assets, be they brand names, a geographical location or other advantages. The sum-of-the-parts approach makes no sense unless it takes into account the company’s intangible assets. Some noteworthy examples: Brands: particularly hard to value but the importance of brands in valuation is growing.

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When first consolidated, the identifiable assets of the new subsidiary, joint venture or associate are valued at their fair value and are recorded on the group’s balance sheet in these amounts. Intangible assets in particular are valued even if they weren’t recognised on the acquired company’s balance sheet: brands concerned, patents, software, emissions permits or landing rights, customer lists, etc. Accordingly, the equity capital of the newly consolidated company will be revalued. The difference between the price paid by the parent company for its shares in the acquired company and the parent company’s share in the revalued equity of the acquired company is called goodwill. It appears on the asset side of the new group’s balance sheet as intangible assets. This method is known as the purchase method and it gives rise to the purchase price allocation (PPA for friends and family).

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To illustrate the purchase method, let’s analyse now how Holcim accounted for the acquisition of Lafarge in 2015. Prior to the acquisition, Holcim’s balance sheet (in millions of CHF) can be summarised as follows: Intangible assets 6 238 Shareholders’ equity 19 279 Other fixed assets 20 465 Provisions 1 016 Working capital 1 046 Net debt 7 454 While Lafarge’s balance sheet (in millions of EUR) was as follows: Intangible assets 11 412 Shareholders’ equity 17 563 Other fixed assets 15 318 Provisions 674 Working capital 111 Net debt 8 604 Holcim acquired 100% of Lafarge for CHF19 483m paid for in shares (CHF18 590m) and cash (CHF893m).

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

Airbnb, Asian financial crisis, bank run, barriers to entry, Bernie Sanders, Build a better mousetrap, Capital in the Twenty-First Century by Thomas Piketty, carbon tax, 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 engineering, 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, principal–agent problem, regulatory arbitrage, rent control, rent-seeking, ride hailing / ride sharing, Robert Metcalfe, Robert Solow, Ronald Reagan, Savings and loan crisis, Silicon Valley, Silicon Valley ideology, smart cities, software patent, subscription business, tail risk, tech bro, too big to fail, total factor productivity, trade liberalization, tragedy of the anticommons, Tragedy of the Commons, transaction costs, tulip mania, Tyler Cowen, 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.

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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.

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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.

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

accounting loophole / creative accounting, affirmative action, Alan Greenspan, An Inconvenient Truth, bank run, banking crisis, behavioural economics, Berlin Wall, bonus culture, Branko Milanovic, BRICs, business cycle, call centre, carbon tax, Cass Sunstein, central bank independence, classic study, 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, general purpose technology, 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, Paradox of Choice, Pareto efficiency, principal–agent problem, profit motive, purchasing power parity, railway mania, rising living standards, Robert Solow, Ronald Reagan, selective serotonin reuptake inhibitor (SSRI), Silicon Valley, social contagion, South Sea Bubble, Steven Pinker, tacit knowledge, 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, the strength of weak ties, Tragedy of the Commons, transaction costs, transfer pricing, tulip mania, ultimatum game, University of East Anglia, vertical integration, 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.”

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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.

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., 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, Blue Ocean Strategy, book value, Clayton Christensen, commoditize, deal flow, deliberate practice, discounted cash flows, diversification, drop ship, Elon Musk, family office, financial engineering, financial independence, high net worth, intangible asset, inventory management, Jeff Bezos, knowledge worker, Lean Startup, Mark Zuckerberg, meta-analysis, Network effects, new economy, Peter Thiel, risk tolerance, risk/return, rolodex, software as a service, Steve Jobs, subscription business, 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.

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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.

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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.

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

Abraham Maslow, Albert Einstein, asset allocation, Bernie Madoff, book value, 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, John Bogle, laissez-faire capitalism, margin call, means of production, Norman Mailer, oil shock, post-industrial society, price anchoring, price stability, reserve currency, Robert Shiller, the scientific method, Vanguard fund, young professional

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.

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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.

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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.

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, Apollo 11, barriers to entry, Berlin Wall, big data - Walmart - Pop Tarts, Black Swan, book scanning, book value, business intelligence, business process, call centre, cloud computing, computer age, correlation does not imply causation, dark matter, data science, double entry bookkeeping, Eratosthenes, Erik Brynjolfsson, game design, hype cycle, 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, machine readable, machine translation, Marc Benioff, Mark Zuckerberg, Max Levchin, 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, Plato's cave, post-materialism, random walk, recommendation engine, Salesforce, self-driving car, sentiment analysis, Silicon Valley, Silicon Valley startup, smart grid, smart meter, social graph, sparse data, speech recognition, Steve Jobs, Steven Levy, systematic bias, the scientific method, The Signal and the Noise by Nate Silver, The Wealth of Nations by Adam Smith, Thomas Davenport, Turing test, vertical integration, Watson beat the top human players on Jeopardy!

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

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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.

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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, accelerated depreciation, accounting loophole / creative accounting, Airbus A320, Alan Greenspan, AOL-Time Warner, Asian financial crisis, asset allocation, asset-backed security, banking crisis, Bear Stearns, Bernie Madoff, big-box store, Black Monday: stock market crash in 1987, Black-Scholes formula, Boeing 747, book value, break the buck, Brownian motion, business cycle, buy and hold, buy low sell high, California energy crisis, capital asset pricing model, capital controls, Carl Icahn, 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-border payments, cross-subsidies, currency risk, discounted cash flows, disintermediation, diversified portfolio, Dutch auction, equity premium, equity risk premium, eurozone crisis, fear index, financial engineering, 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, James Webb Space Telescope, junk bonds, Kenneth Rogoff, Larry Ellison, law of one price, linear programming, Livingstone, I presume, London Interbank Offered Rate, Long Term Capital Management, loss aversion, Louis Bachelier, low interest rates, market bubble, market friction, money market fund, moral hazard, Myron Scholes, new economy, Nick Leeson, Northern Rock, offshore financial centre, PalmPilot, 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 free rate, risk tolerance, risk/return, Robert Shiller, Scaled Composites, shareholder value, Sharpe ratio, short selling, short squeeze, Silicon Valley, Skype, SpaceShipOne, Steve Jobs, subprime mortgage crisis, sunk-cost fallacy, systematic bias, Tax Reform Act of 1986, 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, vertical integration, yield curve, zero-coupon bond, zero-sum game, Zipcar

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.

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., 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.

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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.

Security Analysis by Benjamin Graham, David Dodd

activist fund / activist shareholder / activist investor, asset-backed security, backtesting, barriers to entry, Bear Stearns, behavioural economics, book value, business cycle, buy and hold, capital asset pricing model, Carl Icahn, carried interest, collateralized debt obligation, collective bargaining, corporate governance, corporate raider, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, currency risk, diversification, diversified portfolio, fear of failure, financial engineering, financial innovation, fixed income, flag carrier, full employment, Greenspan put, index fund, intangible asset, invisible hand, Joseph Schumpeter, junk bonds, land bank, locking in a profit, Long Term Capital Management, low cost airline, low interest rates, Michael Milken, moral hazard, mortgage debt, Myron Scholes, prudent man rule, Right to Buy, risk free rate, risk-adjusted returns, risk/return, secular stagnation, shareholder value, stock buybacks, The Chicago School, the market place, the scientific method, The Wealth of Nations by Adam Smith, transaction costs, two and twenty, 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.

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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).

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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.

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, cross-border payments, Double Irish / Dutch Sandwich, financial deregulation, financial engineering, haute couture, information security, 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, two and twenty

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.

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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.

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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.

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

"Susan Fowler" uber, "World Economic Forum" Davos, accounting loophole / creative accounting, Airbnb, Alan Greenspan, algorithmic bias, algorithmic management, AltaVista, Andy Rubin, autonomous vehicles, banking crisis, barriers to entry, behavioural economics, Bernie Madoff, Bernie Sanders, Big Tech, bitcoin, Black Lives Matter, book scanning, Brewster Kahle, Burning Man, call centre, Cambridge Analytica, cashless society, clean tech, cloud computing, cognitive dissonance, Colonization of Mars, computer age, corporate governance, creative destruction, Credit Default Swap, cryptocurrency, data is the new oil, data science, deal flow, death of newspapers, decentralized internet, Deng Xiaoping, digital divide, digital rights, disinformation, disintermediation, don't be evil, Donald Trump, drone strike, Edward Snowden, Elon Musk, en.wikipedia.org, Erik Brynjolfsson, Etonian, Evgeny Morozov, fake news, Filter Bubble, financial engineering, future of work, Future Shock, game design, gig economy, global supply chain, Gordon Gekko, Great Leap Forward, greed is good, income inequality, independent contractor, informal economy, information asymmetry, intangible asset, Internet Archive, Internet of things, invisible hand, Jaron Lanier, Jeff Bezos, job automation, job satisfaction, junk bonds, Kenneth Rogoff, life extension, light touch regulation, low interest rates, Lyft, Mark Zuckerberg, Marshall McLuhan, Martin Wolf, Menlo Park, military-industrial complex, move fast and break things, Network effects, new economy, offshore financial centre, PageRank, patent troll, Paul Volcker talking about ATMs, 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, Sheryl Sandberg, Shoshana Zuboff, side hustle, Sidewalk Labs, Silicon Valley, Silicon Valley startup, smart cities, Snapchat, SoftBank, South China Sea, sovereign wealth fund, Steve Bannon, Steve Jobs, Steven Levy, stock buybacks, subscription business, supply-chain management, surveillance capitalism, TaskRabbit, tech billionaire, tech worker, TED Talk, Telecommunications Act of 1996, The Chicago School, the long tail, 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, warehouse robotics, WeWork, WikiLeaks, zero-sum game

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.

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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.”

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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.”

The Joys of Compounding: The Passionate Pursuit of Lifelong Learning, Revised and Updated by Gautam Baid

Abraham Maslow, activist fund / activist shareholder / activist investor, Airbnb, Alan Greenspan, Albert Einstein, Alvin Toffler, Andrei Shleifer, asset allocation, Atul Gawande, availability heuristic, backtesting, barriers to entry, beat the dealer, Benoit Mandelbrot, Bernie Madoff, bitcoin, Black Swan, book value, business process, buy and hold, Cal Newport, Cass Sunstein, Checklist Manifesto, Clayton Christensen, cognitive dissonance, collapse of Lehman Brothers, commoditize, corporate governance, correlation does not imply causation, creative destruction, cryptocurrency, Daniel Kahneman / Amos Tversky, deep learning, delayed gratification, deliberate practice, discounted cash flows, disintermediation, disruptive innovation, Dissolution of the Soviet Union, diversification, diversified portfolio, dividend-yielding stocks, do what you love, Dunning–Kruger effect, Edward Thorp, Elon Musk, equity risk premium, Everything should be made as simple as possible, fear index, financial independence, financial innovation, fixed income, follow your passion, framing effect, George Santayana, Hans Rosling, hedonic treadmill, Henry Singleton, hindsight bias, Hyman Minsky, index fund, intangible asset, invention of the wheel, invisible hand, Isaac Newton, it is difficult to get a man to understand something, when his salary depends on his not understanding it, Jeff Bezos, John Bogle, Joseph Schumpeter, junk bonds, Kaizen: continuous improvement, Kickstarter, knowledge economy, Lao Tzu, Long Term Capital Management, loss aversion, Louis Pasteur, low interest rates, Mahatma Gandhi, mandelbrot fractal, margin call, Mark Zuckerberg, Market Wizards by Jack D. Schwager, Masayoshi Son, mental accounting, Milgram experiment, moral hazard, Nate Silver, Network effects, Nicholas Carr, offshore financial centre, oil shock, passive income, passive investing, pattern recognition, Peter Thiel, Ponzi scheme, power law, price anchoring, quantitative trading / quantitative finance, Ralph Waldo Emerson, Ray Kurzweil, Reminiscences of a Stock Operator, reserve currency, Richard Feynman, Richard Thaler, risk free rate, risk-adjusted returns, Robert Shiller, Savings and loan crisis, search costs, shareholder value, six sigma, software as a service, software is eating the world, South Sea Bubble, special economic zone, Stanford marshmallow experiment, Steve Jobs, Steven Levy, Steven Pinker, stocks for the long run, subscription business, sunk-cost fallacy, systems thinking, tail risk, Teledyne, the market place, The Signal and the Noise by Nate Silver, The Wisdom of Crowds, time value of money, transaction costs, tulip mania, Upton Sinclair, Walter Mischel, wealth creators, Yogi Berra, zero-sum game

Only a few rare businesses enjoy excess returns for many years by creating structural competitive advantages or economic moats. An extended period of excess returns increases business value. Competitive advantages stem from various sources, including intangible assets, such as brands, patents, and licenses; switching costs; network effects; or low-cost advantages. Intangible Assets Some brands are ubiquitous and widely trusted. Think Budweiser, Tide, and Maggi. They lower search costs for consumers and offer psychological advantages. They make prospective customers switch from a system 2 type of slow, reasoned, reflective thinking to a system 1 type of fast, automatic, reflexive thinking through mental association and Pavlovian conditioning.

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The higher this ratio is, the better. A company should earn more on its tangible assets (as well as tangible equity and capital employed) than the bank’s fixed deposit rate. Pretax return on tangible equity. The higher the pretax return is, the better. Tangible equity is calculated by subtracting intangible assets and preferred equity from the company’s book value. Be cautious of companies for which the high return on equity figure is being primarily driven by higher leverage. Return on capital employed. The higher this return is, the better. This is calculated as earnings before interest and taxes, divided by capital employed. 4.

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Great businesses are those with an ever-increasing stream of earnings with virtually no major capital requirements. They produce extraordinarily high returns on incremental invested capital. The truly great businesses are literally drowning in cash all the time. They tend to earn infinitely high return on capital as they require little tangible capital to grow and are driven by intangible assets such as a strong brand name with “share of mind,” intellectual property, or proprietary technology. Great businesses typically are characterized by negative working capital, low fixed asset intensity, and real pricing power. Negative working capital means that customers are paying the company cash up front for goods or services that will be delivered at a later date.

Fall: The Mysterious Life and Death of Robert Maxwell, Britain's Most Notorious Media Baron by John Preston

accounting loophole / creative accounting, Albert Einstein, Berlin Wall, computer age, Desert Island Discs, Donald Trump, Fall of the Berlin Wall, G4S, global village, intangible asset, invention of the wheel, Jeffrey Epstein, Mikhail Gorbachev, Neil Kinnock, Nelson Mandela, Ronald Reagan, Seymour Hersh, the market place

MCC’s shares, the column concluded, were basically worthless. Far from being in profit, the company was running at a considerable loss. The moment he read this, Maxwell sprang into action, complaining the article was ‘irresponsible and impermissible’. For a start, it made no mention of MCC’s numerous ‘intangible assets’. As their name suggests, intangible assets – things like brand value or intellectual property – have no physical substance. Although you may not be able to see or feel them, they can greatly affect a company’s fortunes. But, because of their nature, putting a value on intangibles is a notoriously subjective business.

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Scott Fitzgerald, The Great Gatsby Contents Cover Title Page Dedication Epigraph List of Plates Preface: The King of New York 1.The Salt Mine 2.Out of the Darkness 3.An Adventurer of Great Style 4.Difficulties With Pork 5.Mortality 6.Down on the Bottom 7.The Man Who Gets Things Done 8.Roast Beef and Yorkshire Pudding 9.Robert Maxwell’s Code of Conduct 10.The Lights Go Out 11.The Grasshopper Returns 12.Strife 13.Written in the Stars 14.Madness 15.In the Lair of the Black Bear 16.An Enormous Spread 17.A Very Happy Person 18.Battle Rejoined 19.Homecomings 20.The Party of the Decade 21.Listening In 22.A Glorious New Dawn 23.Crossing the Line 24.Obsessed 25.Three Departures 26.What Have I Done to Deserve That? 27.Intangible Assets 28.Légumes du Maurier 29.Selling the Crown Jewels 30.Don’t You Worry About a Thing 31.Hurricane Bob 32.A Long Way Down 33.Lost 34.Found 35.The First Autopsy 36.A Hero of Our Time 37.The Second Autopsy 38.The Four Horsemen 39.Everything Must Go 40.The March of Time 41.Curtain Call 42.A True Scotsman Acknowledgements A Note on Sources Index Photo Section About the Author Copyright About the Publisher List of Plates here Maxwell being presented with the Military Cross by Field-Marshal Montgomery in March 1945.

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This time Maxwell told her to meet him in Lesbos – a day’s sail away. Off she went once more, but he never showed up there either. For a fourth time she tried. He would definitely be waiting for her in Ephesus on the Turkish coast, Maxwell said. The yacht duly set sail. He never appeared. 27. Intangible Assets Maxwell Communications Press Information. 4 June 1990. MAXWELL INSTITUTE TO BOOST PEACE The Gorbachev–Maxwell Institute of Technology was launched in America yesterday by Soviet President Mikhail Gorbachev. The Institute of Global Technology will be an international centre for American, Soviet and European scientists and engineers to conduct research into problems ranging from food and health to global warming and communication.

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

Abraham Maslow, 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, driverless car, 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, general purpose technology, 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, machine translation, minimum wage unemployment, patent troll, pattern recognition, Paul Samuelson, Ray Kurzweil, rising living standards, Robert Gordon, Robert Solow, self-driving car, shareholder value, Skype, the long tail, too big to fail, Turing test, Tyler Cowen, 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.

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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.

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

book value, business logic, buy and hold, compensation consultant, compound rate of return, corporate governance, Dissolution of the Soviet Union, diversified portfolio, dividend-yielding stocks, fixed income, George Santayana, Henry Singleton, index fund, intangible asset, invisible hand, junk bonds, large denomination, low cost airline, Michael Milken, oil shock, passive investing, price stability, Ronald Reagan, stock buybacks, Tax Reform Act of 1986, Teledyne, the market place, transaction costs, Yogi Berra, zero-coupon bond

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

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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.

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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.

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

"World Economic Forum" Davos, additive manufacturing, AOL-Time Warner, 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, disinformation, disintermediation, disruptive innovation, don't be evil, Evgeny Morozov, 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, Lewis Mumford, liberation theology, Martin Wolf, mega-rich, megacity, military-industrial complex, Naomi Klein, Nate Silver, new economy, Northern Rock, Occupy movement, open borders, open economy, Peace of Westphalia, plutocrats, price mechanism, price stability, private military company, profit maximization, prosperity theology / prosperity gospel / gospel of success, radical decentralization, Ronald Coase, Ronald Reagan, seminal paper, Silicon Valley, Skype, Steve Jobs, The Nature of the Firm, Thomas Malthus, too big to fail, trade route, transaction costs, Twitter Arab Spring, vertical integration, 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.

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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.

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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.

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, clean tech, 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, Marc Benioff, Maui Hawaii, medical residency, Network effects, old-boy network, packet switching, pattern recognition, peer-to-peer, pre–internet, profit motive, recommendation engine, Ronald Coase, Salesforce, shareholder value, Silicon Valley, Skype, smart transportation, software as a service, supply-chain management, tacit knowledge, The Nature of the Firm, the new new thing, the strength of weak ties, too big to fail, trade liberalization, transaction costs, TSMC, Yochai Benkler

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.

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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.

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

3D printing, Airbnb, anti-communist, barriers to entry, behavioural economics, bitcoin, blockchain, carbon footprint, cloud computing, conceptual framework, crowdsourcing, cryptocurrency, Donald Trump, Eben Moglen, Edward Snowden, en.wikipedia.org, endowment effect, Firefox, Free Software Foundation, general purpose technology, gentrification, George Akerlof, Hush-A-Phone, independent contractor, information asymmetry, intangible asset, Internet Archive, Internet of things, Isaac Newton, it's over 9,000, loss aversion, Marc Andreessen, means of production, minimum wage unemployment, new economy, Open Library, Paradox of Choice, 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 long tail, The Market for Lemons, Tony Fadell, transaction costs, winner-take-all economy

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.

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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.

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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.

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, book value, business cycle, business logic, capital asset pricing model, corporate raider, creative destruction, Daniel Kahneman / Amos Tversky, discounted cash flows, diversified portfolio, Eugene Fama: efficient market hypothesis, Fairchild Semiconductor, financial engineering, fixed income, index fund, intangible asset, junk bonds, Long Term Capital Management, naked short selling, new economy, place-making, price mechanism, quantitative trading / quantitative finance, Richard Thaler, risk free rate, search costs, 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

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.

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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.

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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.

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, behavioural economics, Capital in the Twenty-First Century by Thomas Piketty, commoditize, confounding variable, driverless car, financial independence, full employment, guns versus butter model, happiness index / gross national happiness, industrial robot, intangible asset, invisible hand, Jeff Bezos, job automation, job satisfaction, John Markoff, Kevin Kelly, laissez-faire capitalism, late capitalism, longitudinal study, market clearing, means of production, military-industrial complex, new economy, obamacare, off grid, off-the-grid, plutocrats, precariat, printed gun, 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, warehouse robotics, 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.

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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. Most of eBay’s value lies in its nonphysical assets, in particular, its goodwill. eBay is, by far, the largest online auction site. It seems that no one knows for sure how many online markets there are, in part because the basic software to coordinate buying and selling is fairly easy to set up.

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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, Alan Greenspan, AOL-Time Warner, asset allocation, Bear Stearns, Berlin Wall, book value, business cycle, buttonwood tree, buy and hold, Carl Icahn, corporate governance, corporate raider, currency risk, disintermediation, diversification, diversified portfolio, Donald Trump, estate planning, financial engineering, fixed income, index fund, intangible asset, interest rate swap, John Bogle, junk bonds, Larry Ellison, margin call, Mary Meeker, money market fund, Myron Scholes, new economy, payment for order flow, 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, tech worker, 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.

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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. 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.

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

accounting loophole / creative accounting, asset allocation, book value, 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.

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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.

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(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?

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, clean tech, compound rate of return, credit crunch, currency risk, diversification, diversified portfolio, equity premium, equity risk premium, estate planning, fixed income, high net worth, implied volatility, index fund, intangible asset, invisible hand, John Bogle, Kenneth Rogoff, low interest rates, market bubble, money market fund, passive investing, pattern recognition, prediction markets, risk tolerance, risk/return, 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?

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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.’

Information: A Very Short Introduction by Luciano Floridi

agricultural Revolution, Albert Einstein, bioinformatics, Bletchley Park, carbon footprint, Claude Shannon: information theory, Computing Machinery and Intelligence, conceptual framework, digital divide, disinformation, double helix, Douglas Engelbart, Douglas Engelbart, George Akerlof, Gordon Gekko, Gregor Mendel, industrial robot, information asymmetry, intangible asset, Internet of things, invention of writing, John Nash: game theory, John von Neumann, Laplace demon, machine translation, 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.

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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).

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

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

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

The Power Law: Venture Capital and the Making of the New Future by Sebastian Mallaby

"Susan Fowler" uber, 23andMe, 90 percent rule, Adam Neumann (WeWork), adjacent possible, Airbnb, Apple II, barriers to entry, Ben Horowitz, Benchmark Capital, Big Tech, bike sharing, Black Lives Matter, Blitzscaling, Bob Noyce, book value, business process, charter city, Chuck Templeton: OpenTable:, Clayton Christensen, clean tech, cloud computing, cognitive bias, collapse of Lehman Brothers, Colonization of Mars, computer vision, coronavirus, corporate governance, COVID-19, cryptocurrency, deal flow, Didi Chuxing, digital map, discounted cash flows, disruptive innovation, Donald Trump, Douglas Engelbart, driverless car, Dutch auction, Dynabook, Elon Musk, Fairchild Semiconductor, fake news, family office, financial engineering, future of work, game design, George Gilder, Greyball, guns versus butter model, Hacker Ethic, Henry Singleton, hiring and firing, Hyperloop, income inequality, industrial cluster, intangible asset, iterative process, Jeff Bezos, John Markoff, junk bonds, Kickstarter, knowledge economy, lateral thinking, liberal capitalism, Louis Pasteur, low interest rates, Lyft, Marc Andreessen, Mark Zuckerberg, market bubble, Marshall McLuhan, Mary Meeker, Masayoshi Son, Max Levchin, Metcalfe’s law, Michael Milken, microdosing, military-industrial complex, Mitch Kapor, mortgage debt, move fast and break things, Network effects, oil shock, PalmPilot, pattern recognition, Paul Graham, paypal mafia, Peter Thiel, plant based meat, plutocrats, power law, pre–internet, price mechanism, price stability, proprietary trading, prudent man rule, quantitative easing, radical decentralization, Recombinant DNA, remote working, ride hailing / ride sharing, risk tolerance, risk/return, Robert Metcalfe, ROLM, rolodex, Ronald Coase, Salesforce, Sam Altman, Sand Hill Road, self-driving car, shareholder value, side project, Silicon Valley, Silicon Valley startup, Skype, smart grid, SoftBank, software is eating the world, sovereign wealth fund, Startup school, Steve Jobs, Steve Wozniak, Steven Levy, super pumped, superconnector, survivorship bias, tech worker, Teledyne, the long tail, the new new thing, the strength of weak ties, TikTok, Travis Kalanick, two and twenty, Uber and Lyft, Uber for X, uber lyft, urban decay, UUNET, vertical integration, Vilfredo Pareto, Vision Fund, wealth creators, WeWork, William Shockley: the traitorous eight, Y Combinator, Zenefits

Now much corporate investment is intangible: capital goes into R&D, design, market research, business processes, and software.[38] The new intangible investments fall squarely in the sweet spot of VCs: in explaining venture capital back in 1962, Rock said he was financing “intellectual book value.” In contrast, intangible assets pose challenges to other sorts of financiers. Banks and bond investors try to protect themselves from losses by securing “collateral”—claims on a borrower’s assets that can be seized and sold if the borrower defaults. But intangible assets exhibit sunkenness: once the investment is made, there is no physical object that can be hawked to recoup capital.[39] Likewise, traditional equity investors evaluate companies partly by tallying their physical assets, which are clearly reported in financial statements. But intangible assets are harder to measure. They elude standard accounting rules and their value is opaque: to evaluate a software development project, for example, you have to be close to the technology.

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They elude standard accounting rules and their value is opaque: to evaluate a software development project, for example, you have to be close to the technology. Hands-on venture capitalists are better equipped to allocate capital in this bewildering world: a world in which tangibles are displaced by intangibles. Because venture capital is particularly well suited to financing intangible assets, it is no surprise that it has spread geographically. Silicon Valley is still the center of the industry: Within the United States, the Valley is home to two-thirds of U.S. venture partners, and California’s share of U.S. venture fundraising jumped from 44 percent to 62 percent between 2004 and 2019.[40] At the same time, however, California-based investors are increasingly willing to back companies in other states, and the explosion of flows into VC funds has left plenty of money to find its way to partnerships outside the Valley.

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The global embrace of venture capital confirms what has been argued here: the attractions of the industry far outweigh its alleged shortcomings. As individuals, VCs do exhibit skill. As a group, they finance the most dynamic companies, generate disproportionate wealth and R&D, and knit together the fertile networks that drive the knowledge economy. In the future, as intangible assets increasingly eclipse tangible ones, venture capitalists’ hands-on style will contribute even more to our prosperity. Of course, there are myriad social problems that the venture industry won’t fix, and some it may exacerbate—inequality, for example.[45] But the right response to inequality is not to doubt venture capital’s importance or throw sand in its gears.

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

buy low sell high, content marketing, deal flow, Donald Trump, drop ship, frictionless, frictionless market, intangible asset, medical malpractice, Michael Milken, passive income, Ralph Waldo Emerson, Skype, software as a service

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

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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.

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, behavioural economics, Bernie Sanders, bike sharing, Black Lives Matter, Black Swan, business climate, business cycle, circulation of elites, classic study, clean water, David Graeber, declining real wages, deindustrialization, desegregation, digital divide, Donald Trump, driverless car, drone strike, East Village, Elon Musk, Ferguson, Missouri, Francis Fukuyama: the end of history, gentrification, gig economy, Google Glasses, Hyman Minsky, Hyperloop, income inequality, intangible asset, Internet of things, inventory management, knowledge worker, labor-force participation, low interest rates, low skilled workers, Marc Andreessen, Mark Zuckerberg, medical residency, meta-analysis, obamacare, offshore financial centre, Paradox of Choice, Paul Samuelson, Peter Thiel, public intellectual, 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, Tyler Cowen: Great Stagnation, upwardly mobile, Vilfredo Pareto, working-age population, World Values Survey

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

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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.

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

"Friedman doctrine" OR "shareholder theory", "World Economic Forum" Davos, 1960s counterculture, Abraham Maslow, Airbnb, behavioural economics, business intelligence, business logic, corporate governance, data science, dematerialisation, experimental subject, Exxon Valdez, Frederick Winslow Taylor, Gini coefficient, income inequality, intangible asset, invisible hand, joint-stock company, Leo Hollis, lifelogging, market bubble, mental accounting, military-industrial complex, nudge unit, Panopticon Jeremy Bentham, Philip Mirowski, power law, profit maximization, randomized controlled trial, Richard Thaler, road to serfdom, Ronald Coase, Ronald Reagan, science of happiness, scientific management, 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 contagion, social intelligence, Social Responsibility of Business Is to Increase Its Profits, Steve Jobs, TED Talk, The Chicago School, The Spirit Level, theory of mind, urban planning, Vilfredo Pareto, W. E. B. Du Bois, you are the product

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.

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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.

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., 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.

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

Affordable Care Act / Obamacare, Alan Greenspan, asset-backed security, bank run, banking crisis, Basel III, Bear Stearns, behavioural economics, Bernie Madoff, Big bang: deregulation of the City of London, bitcoin, Black Monday: stock market crash in 1987, Black Swan, Bonfire of the Vanities, bonus culture, book value, Bretton Woods, buy and hold, call centre, capital asset pricing model, Capital in the Twenty-First Century by Thomas Piketty, cognitive dissonance, Cornelius Vanderbilt, corporate governance, Credit Default Swap, cross-subsidies, currency risk, dematerialisation, disinformation, disruptive innovation, diversification, diversified portfolio, Edward Lloyd's coffeehouse, Elon Musk, Eugene Fama: efficient market hypothesis, eurozone crisis, financial engineering, financial innovation, financial intermediation, financial thriller, fixed income, Flash crash, forward guidance, Fractional reserve banking, full employment, George Akerlof, German hyperinflation, Glass-Steagall Act, Goldman Sachs: Vampire Squid, Greenspan put, Growth in a Time of Debt, Ida Tarbell, 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, it is difficult to get a man to understand something, when his salary depends on his not understanding it, James Carville said: "I would like to be reincarnated as the bond market. You can intimidate everybody.", Jim Simons, John Meriwether, junk bonds, light touch regulation, London Whale, Long Term Capital Management, loose coupling, low cost airline, M-Pesa, market design, Mary Meeker, megaproject, Michael Milken, millennium bug, mittelstand, Money creation, 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, Paul Volcker talking about ATMs, peer-to-peer lending, performance metric, Peter Thiel, Piper Alpha, Ponzi scheme, price mechanism, proprietary trading, purchasing power parity, quantitative easing, quantitative trading / quantitative finance, railway mania, Ralph Waldo Emerson, random walk, reality distortion field, regulatory arbitrage, Renaissance Technologies, rent control, risk free rate, risk tolerance, road to serfdom, Robert Shiller, Ronald Reagan, Schrödinger's Cat, seminal paper, 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, vertical integration, 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.

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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.

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

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

Alan Greenspan, Albert Einstein, Asian financial crisis, Barry Marshall: ulcers, behavioural economics, Berlin Wall, Big bang: deregulation of the City of London, Bletchley Park, business cycle, California gold rush, Charles Babbage, 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, Dr. Strangelove, Dutch auction, Edward Lloyd's coffeehouse, electricity market, equity premium, equity risk premium, Ernest Rutherford, European colonialism, experimental economics, Exxon Valdez, failed state, Fairchild Semiconductor, financial innovation, flying shuttle, Ford Model T, Francis Fukuyama: the end of history, George Akerlof, George Gilder, Goodhart's law, Great Leap Forward, greed is good, Gunnar Myrdal, haute couture, Helicobacter pylori, 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, junk bonds, Kenneth Arrow, Kevin Kelly, knowledge economy, Larry Ellison, light touch regulation, Long Term Capital Management, loss aversion, Mahatma Gandhi, market bubble, market clearing, market fundamentalism, means of production, Menlo Park, Michael Milken, 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, Phillips curve, popular electronics, price discrimination, price mechanism, prisoner's dilemma, profit maximization, proprietary trading, purchasing power parity, QWERTY keyboard, Ralph Nader, RAND corporation, random walk, rent-seeking, Right to Buy, risk tolerance, road to serfdom, Robert Solow, Ronald Coase, Ronald Reagan, Savings and loan crisis, second-price auction, shareholder value, Silicon Valley, Simon Kuznets, South Sea Bubble, Steve Jobs, Stuart Kauffman, 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, work culture , 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.

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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.

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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.

Green Swans: The Coming Boom in Regenerative Capitalism by John Elkington

"Friedman doctrine" OR "shareholder theory", "World Economic Forum" Davos, agricultural Revolution, Anthropocene, anti-fragile, Any sufficiently advanced technology is indistinguishable from magic, autonomous vehicles, Berlin Wall, bitcoin, Black Swan, blockchain, Boeing 737 MAX, Boeing 747, Buckminster Fuller, business cycle, Cambridge Analytica, carbon footprint, carbon tax, circular economy, Clayton Christensen, clean water, cloud computing, corporate governance, corporate social responsibility, correlation does not imply causation, creative destruction, CRISPR, crowdsourcing, David Attenborough, deglobalization, degrowth, discounted cash flows, distributed ledger, do well by doing good, Donald Trump, double entry bookkeeping, drone strike, Elon Musk, en.wikipedia.org, energy transition, Extinction Rebellion, Future Shock, Gail Bradbrook, Geoffrey West, Santa Fe Institute, George Akerlof, global supply chain, Google X / Alphabet X, green new deal, green transition, Greta Thunberg, Hans Rosling, hype cycle, impact investing, intangible asset, Internet of things, invention of the wheel, invisible hand, Iridium satellite, Jeff Bezos, John Elkington, Jony Ive, Joseph Schumpeter, junk bonds, Kevin Kelly, Kickstarter, M-Pesa, Marc Benioff, Mark Zuckerberg, Martin Wolf, microplastics / micro fibres, more computing power than Apollo, move fast and break things, Naomi Klein, Nelson Mandela, new economy, Nikolai Kondratiev, ocean acidification, oil shale / tar sands, oil shock, opioid epidemic / opioid crisis, placebo effect, Planet Labs, planetary scale, plant based meat, plutocrats, Ponzi scheme, radical decentralization, Ralph Nader, reality distortion field, Recombinant DNA, Rubik’s Cube, Salesforce, self-driving car, shareholder value, sharing economy, Sheryl Sandberg, Silicon Valley, smart cities, smart grid, sovereign wealth fund, space junk, Steven Pinker, Stewart Brand, supply-chain management, synthetic biology, systems thinking, The future is already here, The Wealth of Nations by Adam Smith, Thomas Kuhn: the structure of scientific revolutions, Tim Cook: Apple, urban planning, Whole Earth Catalog

THE OLD STORY Intriguingly, the online Lexicon, at least when consulted, failed to offer an entry for the term. Instead, having defined an asset as “something belonging to an individual or a business that has value or the power to earn money,” it went on to distinguish between tangible assets, “that have physical form, such as plant and equipment,” and intangible assets, which “have no physical form but are considered valuable resources of the business, e.g. patents, trademarks, goodwill, brand names, licenses, franchises, etc.” It did, however, mention wasting assets, “such as property or a business, that is losing money over time,” and toxic assets, “the value of which has fallen significantly and may fall further, especially as the market for them has frozen.

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But the future of capitalism has more to do with money than with technology, regulation, or standards—even if all three are crucially important. And my concern about the limitations of CSR, shared value, and even current conceptions of the circular economy stems from the respective movements’ absolute, and sometimes insufficiently critical, reliance on current forms of capitalism. True, we can expect the accelerating shift to intangible assets and investments to accelerate the transition to lower resource input economic models, but this alone is very unlikely to save us.81 So, alongside initiatives designed to redirect investment and, even more fundamentally, to reinvent economics, we need to dedicate a growing effort to exploring how business leaders, entrepreneurs, investors, city mayors, policy makers, and politicians can co-evolve what we might call the “Tomorrow’s Capitalism Roadshow.”

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See also change process stages; Future-Fit change approach; technology allowing to flourish, 166 Anthropocenic route, taking, 230–234 antibiotics through lens of, 108 assets with characteristics of, 73 be a leader, not an algorithm, 223–230 Black Swans starting off as, 182 business models with characteristics of, 53 calories through lens of, 102 capitalism with characteristics of, 202–208 carbon economy through lens of, 111 defined, 9, 22, 167 democracy with characteristics of, 208–213 different thinking, need for, 23–27 early sharing of content about, 199–201 exponential leaders, 236–242 future, differing views of, 190–193 global grand challenges approach, 186–187 governance with characteristics of, 71 gradual, then sudden evolution of, 76 growth with characteristics of, 57–58 historical, 43 impact with characteristics of, 64 liability with characteristics of, 68 losing control, risk of, 193–197 materiality with characteristics of, 69–70 overview, 1–3, 22–23, 219–223 as parallel reality with Black Swans, 9–10 plastics through lens of, 97 profitability with characteristics of, 55 purpose with characteristics of, 50 push and pull in evolution of, 189–190 recent examples, 42 reinventing everything, 197–199 space junk through eyes of, 116 spotting, 254–256 sustainability with characteristics of, 213–218 systemic change overview, 201–202 three horizons, two scenarios, 2000-2100, 38–39 and triple bottom line concept, 12–13 U-bend, unclogging, 234–236 value with characteristics of, 61 Green Swans (film), 9–10, 248 Green Transition Scoreboard, 233 growth, 47, 55–58 The Guardian (newspaper), 96 H Haan, Nick, 200, 222 Hamid, Mohsin, 109, 110 Harvard Business Review (HBR), 32, 155–158 Haut, Sonja, 253 Hawken, Paul, 141, 142, 232 Hemingway, Ernest, 79 Hichens, Robert, 198–199 Hill-Landolt, Julian, 229–230 Hippocratic Oath, 108 Hoffman, Donald, 27 Hofstetter, Dominic, 220 Holocene epoch, 86 Honda, 135 horseshoe crabs, 231–232 How Adam Smith Can Change Your Life (Roberts), 80 The Human Planet (Lewis and Maslin), 29 Humanitarians, exponential leaders as, 238 humor, 120–121 Hunter, Sarah, 240 Hurd, Nick, 212–213 Hutton, Will, 196 Hwang Sang-ki, 126 Hyatt, John Wesley, 94 hydropower, 201 Hype Cycle, Gartner, 173–175 I Ibbitson, John, 222–223 Ignatius, Adi, 155–156 illusion of control, 44 impact, 47, 61–64, 256 impact investing, 63, 64 Impossible Foods, 233 incremental change, 34, 35f, 57, 233–234 India, 82 Indonesia, 220–221 industrial revolutions, 175–176 industry federations and associations, 132 inflated expectations, in Gartner Hype Cycle, 174 influencing activities, 145–146 information, role in economy, 190, 192 Innovation Trigger stage, Gartner Hype Cycle, 174 innovations, in three horizons framework, 38–39 Innovators, exponential leaders as, 238 Institute for Energy Economics and Financial Analysis, 242 Institute for Transformative Technologies (ITT), 184–185 insulin, 156–157 insurance industry, 136–137 intangible assets, 72 integrated business models, 52 Interface, 142 intergenerational transfer of wealth, 201 International Accounting Standards Board, 58 International Finance Corporation, 119 international OTA, need for, 183, 185 International Renewable Energy Agency (IRENA), 133 International Space Station (ISS), 111 internet, 173, 175, 192 Internet of Things (IoT), 177 investors/investing, 63, 64, 162, 205–208, 242–244 invisible hand, 18, 25, 85 Ipsos, 219 Israel, 171 Ive, Jony, 213–214 Iversen, Torben, 212 ivory, 93 J Jackson, Clive, 245–246 Jackson, Tim, 56 Jakarta, Indonesia, 220–221 Japan, 135 Johnson, Nicholas, 113 Johnson & Johnson, 13 Johnson County, Indiana, 126–127 joint and several liability, 66 Jørgensen, Lars Fruergaard, 158–159 journalists, 227 JPMorgan, 142–143 Just, Inc., 233 JWT, 140–141 K Kahneman, Daniel, 204 Kaiser Permanente, 255 Kelly, Kevin, 36 Kelly, Marjorie, 205 Kendall, Geoff, 159–164 Kerr, Andrew, 201 Kessler, Donald, 112 Kingston, Phil, 189 Klee, Louis, 109 Klimenko, Svetlana, 207–208 Kondratiev, Nikolai, 203 Kramer, Mark, 59 Kuhn, Thomas, 41, 121–122, 123, 191, 230 L Langer, Ellen, 44 Lawrence Berkeley National Lab, 184–185 Layton, David, 190–191 leaded gasoline, 172 leaders, 223–230, 236–242.

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

"World Economic Forum" Davos, 3D printing, Airbnb, Alan Greenspan, Albert Einstein, Amazon Mechanical Turk, anti-fragile, 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, Big Tech, 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, commons-based peer production, credit crunch, crony capitalism, cross-border payments, 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, Evgeny Morozov, falling living standards, financial deregulation, financial innovation, Firefox, first-past-the-post, future of work, Garrett Hardin, gentrification, gig economy, Goldman Sachs: Vampire Squid, Greenspan put, Growth in a Time of Debt, housing crisis, income inequality, independent contractor, information retrieval, intangible asset, invention of the steam engine, investor state dispute settlement, it's over 9,000, James Watt: steam engine, Jeremy Corbyn, job automation, John Maynard Keynes: technological unemployment, labour market flexibility, light touch regulation, Long Term Capital Management, low interest rates, lump of labour, Lyft, manufacturing employment, Mark Zuckerberg, market clearing, Martin Wolf, means of production, megaproject, mini-job, Money creation, 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, Phillips curve, 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, SoftBank, 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, Tragedy of the Commons, Travis Kalanick, Uber and Lyft, Uber for X, uber lyft, Y Combinator, zero-sum game, Zipcar

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

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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.

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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.

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

"World Economic Forum" Davos, accelerated depreciation, Airbnb, Alan Greenspan, balance sheet recession, bank run, banking crisis, barriers to entry, Basel III, basic income, behavioural economics, benefit corporation, Berlin Wall, bilateral investment treaty, business cycle, business process, Capital in the Twenty-First Century by Thomas Piketty, carbon tax, 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 engineering, financial intermediation, Francis Fukuyama: the end of history, full employment, gender pay gap, George Akerlof, gig economy, Gini coefficient, Glass-Steagall Act, hiring and firing, housing crisis, Hyman Minsky, income inequality, independent contractor, inflation targeting, informal economy, information asymmetry, intangible asset, investor state dispute settlement, invisible hand, Isaac Newton, labor-force participation, liberal capitalism, low interest rates, low skilled workers, market fundamentalism, mini-job, moral hazard, non-tariff barriers, offshore financial centre, open economy, Paris climate accords, patent troll, pension reform, price mechanism, price stability, proprietary trading, purchasing power parity, quantitative easing, race to the bottom, regulatory arbitrage, rent-seeking, 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, vertical integration, zero-sum game

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.

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.§ 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.

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

3D printing, additive manufacturing, Asian financial crisis, augmented reality, bank run, banking crisis, basic income, Bear Stearns, Ben Bernanke: helicopter money, Berlin Wall, Bernie Sanders, Big bang: deregulation of the City of London, bike sharing, 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, export processing zone, Fall of the Berlin Wall, fear of failure, financial deregulation, financial engineering, financial innovation, Financial Instability Hypothesis, fixed income, forward guidance, full employment, general purpose technology, Gini coefficient, Glass-Steagall Act, global supply chain, Great Leap Forward, 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 interest rates, low-wage service sector, manufacturing employment, market bubble, means of production, middle-income trap, mittelstand, Money creation, 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 Solow, Ronald Coase, Ronald Reagan, school vouchers, secular stagnation, Shenzhen was a fishing village, Silicon Valley, Simon Kuznets, special economic zone, Steve Jobs, technological determinism, 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.

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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?

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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.  

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

3D printing, additive manufacturing, Asian financial crisis, augmented reality, bank run, banking crisis, basic income, Bear Stearns, Ben Bernanke: helicopter money, Berlin Wall, Bernie Sanders, Big bang: deregulation of the City of London, bike sharing, 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, export processing zone, Fall of the Berlin Wall, fear of failure, financial deregulation, financial engineering, financial innovation, Financial Instability Hypothesis, fixed income, forward guidance, full employment, general purpose technology, Gini coefficient, Glass-Steagall Act, global supply chain, Great Leap Forward, 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 interest rates, manufacturing employment, market bubble, means of production, middle-income trap, mittelstand, Money creation, 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 Solow, Ronald Coase, Ronald Reagan, school vouchers, secular stagnation, Shenzhen was a fishing village, Silicon Valley, Simon Kuznets, special economic zone, Steve Jobs, technological determinism, 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.

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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.

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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?

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

accelerated depreciation, AOL-Time Warner, Asian financial crisis, barriers to entry, Bear Stearns, book value, business cycle, call centre, Carl Icahn, Clayton Christensen, collective bargaining, commoditize, compensation consultant, compound rate of return, Credit Default Swap, currency risk, do what you love, electricity market, estate planning, financial engineering, Henry Singleton, intangible asset, Jeff Bezos, Larry Ellison, London Interbank Offered Rate, margin call, Mark Zuckerberg, money market fund, Network effects, PalmPilot, pink-collar, risk tolerance, shareholder value, six sigma, Skype, Steve Jobs, stock buybacks, subscription business, supply-chain management, technology bubble, Teledyne, 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.

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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.

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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.

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, Alan Greenspan, Albert Einstein, Andrei Shleifer, asset allocation, Atul Gawande, backtesting, beat the dealer, Black Swan, book value, 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, financial engineering, forensic accounting, Henry Singleton, hindsight bias, intangible asset, Jim Simons, Louis Bachelier, p-value, passive investing, performance metric, quantitative hedge fund, random walk, Richard Thaler, risk free rate, risk-adjusted returns, Robert Shiller, shareholder value, Sharpe ratio, short selling, statistical model, stock buybacks, survivorship bias, systematic trading, Teledyne, The Myth of the Rational Market, time value of money, transaction costs

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

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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.

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

"World Economic Forum" Davos, accounting loophole / creative accounting, affirmative action, Alan Greenspan, AOL-Time Warner, Asian financial crisis, barriers to entry, Benchmark Capital, book value, borderless world, Branko Milanovic, Bretton Woods, business cycle, California energy crisis, capital controls, corporate governance, corporate raider, correlation coefficient, credit crunch, deindustrialization, dematerialisation, deskilling, digital divide, electricity market, emotional labour, ending welfare as we know it, feminist movement, fulfillment center, full employment, gender pay gap, George Gilder, glass ceiling, Glass-Steagall Act, Gordon Gekko, government statistician, 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, Larry Ellison, liquidationism / Banker’s doctrine / the Treasury view, low interest rates, manufacturing employment, Mary Meeker, means of production, Michael Milken, minimum wage unemployment, Naomi Klein, new economy, occupational segregation, PalmPilot, pets.com, post-work, profit maximization, purchasing power parity, race to the bottom, Ralph Nader, rewilding, Robert Gordon, Robert Shiller, Robert Solow, rolling blackouts, Ronald Reagan, shareholder value, Silicon Valley, Simon Kuznets, statistical model, stock buybacks, structural adjustment programs, tech worker, 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, warehouse automation, 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.

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.^ 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.

How Boards Work: And How They Can Work Better in a Chaotic World by Dambisa Moyo

"Friedman doctrine" OR "shareholder theory", activist fund / activist shareholder / activist investor, Airbnb, algorithmic trading, Amazon Web Services, AOL-Time Warner, asset allocation, barriers to entry, Ben Horowitz, Big Tech, bitcoin, Black Lives Matter, blockchain, Boeing 737 MAX, Bretton Woods, business cycle, business process, buy and hold, call centre, capital controls, carbon footprint, collapse of Lehman Brothers, coronavirus, corporate governance, corporate social responsibility, COVID-19, creative destruction, cryptocurrency, deglobalization, don't be evil, Donald Trump, fake news, financial engineering, gender pay gap, geopolitical risk, George Floyd, gig economy, glass ceiling, global pandemic, global supply chain, hiring and firing, income inequality, index fund, intangible asset, Intergovernmental Panel on Climate Change (IPCC), Jeff Bezos, knowledge economy, labor-force participation, long term incentive plan, low interest rates, Lyft, money: store of value / unit of account / medium of exchange, multilevel marketing, Network effects, new economy, old-boy network, Pareto efficiency, passive investing, Pershing Square Capital Management, proprietary trading, remote working, Ronald Coase, Savings and loan crisis, search costs, shareholder value, Shoshana Zuboff, Silicon Valley, social distancing, Social Responsibility of Business Is to Increase Its Profits, SoftBank, sovereign wealth fund, surveillance capitalism, The Nature of the Firm, Tim Cook: Apple, too big to fail, trade route, Travis Kalanick, uber lyft, Vanguard fund, Washington Consensus, WeWork, women in the workforce, work culture

Specifically, State Street Global Advisors published a letter to board members entitled “Aligning Corporate Culture with Long-Term Strategy,” stating, “This year we will be focusing on corporate culture as one of the many, growing intangible value drivers that affect a company’s ability to execute its long-term strategy.” The global accounting firm EY recently found that “intangible assets” such as culture make up, on average, 52 percent of an organization’s market value (and in some sectors as much as 90 percent). Researchers have documented that, in the United States and UK, value is driven more by intangible, rather than tangible, assets—further underscoring the importance of corporate culture.

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This is unfolding alongside a number of other employment trends that corporate boards should be attuned to, including the development of the information gig economy, the trend of working beyond traditional retirement age, and changes in workplace behavior and dress. Securing top talent is becoming tougher in part because of greater competition for fewer high-quality candidates and rising barriers to immigration. But, perhaps more crucially, it is also becoming harder at precisely the moment when the knowledge economy is taking off. Investment in intangible assets—for example, R&D, strong brands, and intellectual property—has doubled as a share of trade in recent years, from 5.5 percent to 13.1 percent. A 2019 McKinsey report underscored this point, explaining that “value creation is shifting to upstream activities, such as R&D and design, and to downstream activities, such as distribution, marketing, and after-sales services.”

Cogs and Monsters: What Economics Is, and What It Should Be by Diane Coyle

3D printing, additive manufacturing, Airbnb, Al Roth, Alan Greenspan, algorithmic management, Amazon Web Services, autonomous vehicles, banking crisis, barriers to entry, behavioural economics, Big bang: deregulation of the City of London, biodiversity loss, bitcoin, Black Lives Matter, Boston Dynamics, Bretton Woods, Brexit referendum, business cycle, call centre, Carmen Reinhart, central bank independence, choice architecture, Chuck Templeton: OpenTable:, cloud computing, complexity theory, computer age, conceptual framework, congestion charging, constrained optimization, coronavirus, COVID-19, creative destruction, credit crunch, data science, DeepMind, deglobalization, deindustrialization, Diane Coyle, discounted cash flows, disintermediation, Donald Trump, Edward Glaeser, en.wikipedia.org, endogenous growth, endowment effect, Erik Brynjolfsson, eurozone crisis, everywhere but in the productivity statistics, Evgeny Morozov, experimental subject, financial deregulation, financial innovation, financial intermediation, Flash crash, framing effect, general purpose technology, George Akerlof, global supply chain, Goodhart's law, Google bus, haute cuisine, High speed trading, hockey-stick growth, Ida Tarbell, information asymmetry, intangible asset, Internet of things, invisible hand, Jaron Lanier, Jean Tirole, job automation, Joseph Schumpeter, Kenneth Arrow, Kenneth Rogoff, knowledge economy, knowledge worker, Les Trente Glorieuses, libertarian paternalism, linear programming, lockdown, Long Term Capital Management, loss aversion, low earth orbit, lump of labour, machine readable, market bubble, market design, Menlo Park, millennium bug, Modern Monetary Theory, Mont Pelerin Society, multi-sided market, Myron Scholes, Nash equilibrium, Nate Silver, Network effects, Occupy movement, Pareto efficiency, payday loans, payment for order flow, Phillips curve, post-industrial society, price mechanism, Productivity paradox, quantitative easing, randomized controlled trial, rent control, rent-seeking, ride hailing / ride sharing, road to serfdom, Robert Gordon, Robert Shiller, Robert Solow, Robinhood: mobile stock trading app, Ronald Coase, Ronald Reagan, San Francisco homelessness, savings glut, school vouchers, sharing economy, Silicon Valley, software is eating the world, spectrum auction, statistical model, Steven Pinker, tacit knowledge, The Chicago School, The Future of Employment, The Great Moderation, the map is not the territory, The Rise and Fall of American Growth, the scientific method, The Signal and the Noise by Nate Silver, the strength of weak ties, The Wealth of Nations by Adam Smith, total factor productivity, transaction costs, Uber for X, urban planning, winner-take-all economy, Winter of Discontent, women in the workforce, Y2K

Starting with manufacturing, progressing to tradable services, multinationals outsourced low-value activities—often to low-income countries—and retained the high-value intangible activities within their corporate walls. At the same time, the corporate boundaries crossed national boundaries while intangible assets were easily shifted to low-tax territories. The driver has been the rapidly declining cost of transmitting information and performing computations. Richard Baldwin (2006) has traced the effects on the international structure of production, describing the ‘unbundling’ of different stages in the value chain into differently located links, and particularly the separation of ideas from manufacture.

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The costs of information and communication also reshape organisations’ internal structures. Better access to information makes it more efficient for important decisions to be delegated while cheaper communication may mean it is easier to refer up for decisions (Bloom et al. 2014). In practice, the decentralisation effect has dominated. Multinationals retain intangible assets at the centre of production networks or—as it is often described—as the dominant member of a production ecosystem. The transformation of production goes beyond conventional outsourcing, and the delayering of corporate hierarchies, however. The scope for reorganising production by combining inputs internal to the firm—capital assets, direct employees, intangibles—with external ones such as cloud computing (Coyle and Nguyen 2019) or a contingent workforce (Boeri et al. 2020) is immense.

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

"World Economic Forum" Davos, Airbnb, altcoin, Alvin Toffler, asset-backed security, autonomous vehicles, barriers to entry, behavioural economics, bitcoin, Bitcoin Ponzi scheme, blockchain, Blythe Masters, Bretton Woods, business logic, business process, buy and hold, Capital in the Twenty-First Century by Thomas Piketty, carbon credits, carbon footprint, clean water, cloud computing, cognitive dissonance, commoditize, commons-based peer production, corporate governance, corporate social responsibility, creative destruction, Credit Default Swap, crowdsourcing, cryptocurrency, currency risk, decentralized internet, digital capitalism, disintermediation, disruptive innovation, distributed ledger, do well by doing good, Donald Trump, double entry bookkeeping, driverless car, 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, Future Shock, Galaxy Zoo, general purpose technology, George Gilder, glass ceiling, Google bus, GPS: selective availability, Hacker News, Hernando de Soto, Higgs boson, holacracy, income inequality, independent contractor, informal economy, information asymmetry, information security, 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, Neal Stephenson, 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, radical decentralization, ransomware, Ray Kurzweil, renewable energy credits, rent-seeking, ride hailing / ride sharing, Ronald Coase, Ronald Reagan, Salesforce, Satoshi Nakamoto, search costs, Second Machine Age, seigniorage, self-driving car, sharing economy, Silicon Valley, Skype, smart contracts, smart grid, Snow Crash, social graph, social intelligence, social software, standardized shipping container, Stephen Hawking, Steve Jobs, Steve Wozniak, Stewart Brand, supply-chain management, systems thinking, TaskRabbit, TED Talk, The Fortune at the Bottom of the Pyramid, The Nature of the Firm, The Soul of a New Machine, The Wisdom of Crowds, transaction costs, Turing complete, Turing test, Tyler Cowen, Uber and Lyft, uber lyft, unbanked and underbanked, underbanked, unorthodox policies, vertical integration, Vitalik Buterin, wealth creators, X Prize, Y2K, Yochai Benkler, Zipcar

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

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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.

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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.

A Pelican Introduction: Basic Income by Guy Standing

"World Economic Forum" Davos, anti-fragile, bank run, basic income, behavioural economics, Bernie Sanders, Bertrand Russell: In Praise of Idleness, Black Lives Matter, Black Swan, Boris Johnson, British Empire, carbon tax, centre right, collective bargaining, cryptocurrency, David Graeber, declining real wages, degrowth, 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, independent contractor, intangible asset, Jeremy Corbyn, job automation, job satisfaction, Joi Ito, labour market flexibility, land value tax, libertarian paternalism, low skilled workers, lump of labour, Marc Benioff, Mark Zuckerberg, Martin Wolf, mass immigration, mass incarceration, moral hazard, Nelson Mandela, nudge theory, offshore financial centre, open economy, Panopticon Jeremy Bentham, Paul Samuelson, plutocrats, precariat, quantitative easing, randomized controlled trial, rent control, rent-seeking, Salesforce, 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

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.

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

Alan Greenspan, Albert Einstein, Andrei Shleifer, Atul Gawande, availability heuristic, beat the dealer, behavioural economics, 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, equity risk 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, John Bogle, 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, Performance of Mutual Funds in the Period, Pierre-Simon Laplace, power law, quantitative trading / quantitative finance, random walk, Reminiscences of a Stock Operator, Richard Florida, Richard Thaler, Robert Shiller, shareholder value, statistical model, Steven Pinker, stocks for the long run, Stuart Kauffman, survivorship bias, systems thinking, 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.

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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.

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

agricultural Revolution, Airbnb, AlphaGo, AltaVista, Amazon Web Services, Apollo 11, augmented reality, autonomous vehicles, basic income, Big Tech, bread and circuses, 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, data science, David Ricardo: comparative advantage, declining real wages, deep learning, DeepMind, deindustrialization, deskilling, Donald Trump, Douglas Hofstadter, Downton Abbey, Elon Musk, Erik Brynjolfsson, facts on the ground, Fairchild Semiconductor, future of journalism, future of work, George Gilder, Google Glasses, Google Hangouts, Hans Moravec, hiring and firing, hype cycle, impulse control, income inequality, industrial robot, intangible asset, Internet of things, invisible hand, James Watt: steam engine, Jeff Bezos, job automation, Kevin Roose, knowledge worker, laissez-faire capitalism, Les Trente Glorieuses, low skilled workers, machine translation, 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, mirror neurons, 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, robotic process automation, Ronald Reagan, Salesforce, San Francisco homelessness, 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, systems thinking, TaskRabbit, telepresence, telepresence robot, telerobotics, Thomas Malthus, trade liberalization, universal basic income, warehouse automation

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.

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

air traffic controllers' union, Airbnb, Alan Greenspan, autonomous vehicles, balance sheet recession, bank run, banking crisis, basic income, Berlin Wall, Bernie Sanders, Big Tech, Boris Johnson, Branko Milanovic, Bretton Woods, business cycle, call centre, capital controls, carbon footprint, carbon tax, Carmen Reinhart, centre right, collective bargaining, company town, debt deflation, deindustrialization, deskilling, Diane Coyle, Donald Trump, Edward Glaeser, eurozone crisis, Fall of the Berlin Wall, financial engineering, financial intermediation, full employment, future of work, gig economy, Gini coefficient, green new deal, 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 interest rates, low skilled workers, manufacturing employment, Martin Wolf, meta-analysis, mini-job, Money creation, mortgage debt, new economy, offshore financial centre, oil shock, open economy, pattern recognition, pink-collar, precariat, public intellectual, quantitative easing, race to the bottom, Richard Florida, Robert Shiller, Robert Solow, 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.

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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.

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

algorithmic trading, asset allocation, automated trading system, backpropagation, backtesting, barriers to entry, behavioural economics, book value, business cycle, buy and hold, capital asset pricing model, constrained optimization, corporate governance, correlation coefficient, credit crunch, Credit Default Swap, currency risk, data science, deep learning, discounted cash flows, discrete time, diversification, diversified portfolio, Eugene Fama: efficient market hypothesis, financial engineering, financial intermediation, Flash crash, Geoffrey Hinton, implied volatility, index arbitrage, index fund, intangible asset, iterative process, Long Term Capital Management, loss aversion, low interest rates, machine readable, market design, market microstructure, merger arbitrage, natural language processing, passive investing, pattern recognition, performance metric, Performance of Mutual Funds in the Period, popular capitalism, prediction markets, price discovery process, profit motive, proprietary trading, quantitative trading / quantitative finance, random walk, Reminiscences of a Stock Operator, Renaissance Technologies, risk free rate, 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 bias, systematic trading, text mining, transaction costs, Vanguard fund, yield curve

By comparing snapshots, investors can find changes that could cause a repricing of the company’s outstanding equity. Total assets are typically used as a normalizing factor to make the values of other factors comparable among different companies or to compare snapshots of the same company at different times. 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.)

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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.

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, asset light, autonomous vehicles, Bakken shale, barriers to entry, business cycle, business intelligence, carbon tax, Carmen Reinhart, central bank independence, circular economy, cloud computing, corporate governance, creative destruction, crowdsourcing, data science, demographic dividend, deskilling, digital capitalism, disintermediation, disruptive innovation, distributed generation, driverless car, 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, high-speed rail, 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 interest rates, low skilled workers, Lyft, M-Pesa, machine readable, mass immigration, megacity, megaproject, mobile money, Mohammed Bouazizi, Network effects, new economy, New Urbanism, ocean acidification, oil shale / tar sands, oil shock, old age dependency ratio, openstreetmap, peer-to-peer lending, pension reform, pension time bomb, private sector deleveraging, purchasing power parity, quantitative easing, recommendation engine, Report Card for America’s Infrastructure, RFID, ride hailing / ride sharing, Salesforce, 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, subscription business, supply-chain management, synthetic biology, 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

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.

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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.

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

3D printing, Airbnb, American energy revolution, assortative mating, autonomous vehicles, Bakken shale, barriers to entry, basic income, Bernie Sanders, Big Tech, BRICs, business cycle, call centre, Capital in the Twenty-First Century by Thomas Piketty, Clayton Christensen, cloud computing, collective bargaining, computer age, creative destruction, currency risk, dark matter, David Ricardo: comparative advantage, deindustrialization, dematerialisation, Deng Xiaoping, deskilling, disruptive innovation, Dissolution of the Soviet Union, Donald Trump, Downton Abbey, driverless car, Edward Glaeser, Erik Brynjolfsson, eurozone crisis, everywhere but in the productivity statistics, falling living standards, financial engineering, 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, general purpose technology, gig economy, global supply chain, global value chain, heat death of the universe, hydraulic fracturing, income inequality, independent contractor, indoor plumbing, industrial robot, intangible asset, interchangeable parts, Internet of things, inventory management, invisible hand, James Watt: steam engine, Jeff Bezos, Jeremy Corbyn, John Maynard Keynes: Economic Possibilities for our Grandchildren, Joseph-Marie Jacquard, knowledge economy, low interest rates, low skilled workers, lump of labour, Lyft, machine translation, 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, Robert Solow, 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, tacit knowledge, TaskRabbit, tech billionaire, 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, Tyler Cowen: Great Stagnation, Uber and Lyft, Uber for X, uber lyft, very high income, warehouse robotics, working-age population

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

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., 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. 

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

book value, business cycle, correlation coefficient, discounted cash flows, double entry bookkeeping, G4S, Herman Kahn, intangible asset, iterative process, low interest rates, price elasticity of demand, purchasing power parity, RAND corporation, risk free rate, 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.

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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.

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, Blitzscaling, Branko Milanovic, British Empire, Buckminster Fuller, call centre, carbon credits, carbon footprint, carbon tax, Charles Babbage, clean tech, clean water, cloud computing, congestion pricing, Corn Laws, creative destruction, crony capitalism, data science, David Ricardo: comparative advantage, decarbonisation, DeepMind, degrowth, dematerialisation, Demis Hassabis, Deng Xiaoping, do well by doing good, Donald Trump, Edward Glaeser, en.wikipedia.org, energy transition, Erik Brynjolfsson, failed state, fake news, Fall of the Berlin Wall, Garrett Hardin, Great Leap Forward, 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, Marc Benioff, market fundamentalism, means of production, Michael Shellenberger, Mikhail Gorbachev, ocean acidification, oil shale / tar sands, opioid epidemic / opioid crisis, Paul Samuelson, peak oil, precision agriculture, price elasticity of demand, profit maximization, profit motive, risk tolerance, road to serfdom, Ronald Coase, Ronald Reagan, Salesforce, Scramble for Africa, Second Machine Age, Silicon Valley, Steve Jobs, Steven Pinker, Stewart Brand, Ted Nordhaus, TED Talk, telepresence, The Wealth of Nations by Adam Smith, Thomas Davenport, Thomas Malthus, Thorstein Veblen, total factor productivity, Tragedy of the Commons, Uber and Lyft, uber lyft, Veblen good, War on Poverty, We are as Gods, Whole Earth Catalog, World Values Survey

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.

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

Alan Greenspan, 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, Great Leap Forward, high-speed rail, illegal immigration, income inequality, intangible asset, invention of the telegraph, joint-stock company, land reform, Long Term Capital Management, low interest rates, Malcom McLean invented shipping containers, manufacturing employment, Martin Wolf, mass immigration, Mikhail Gorbachev, Money creation, money market fund, mortgage debt, New Urbanism, Nixon triggered the end of the Bretton Woods system, offshore financial centre, oil shock, open economy, paradox of thrift, passive income, reserve currency, rising living standards, Robert Shiller, Ronald Reagan, savings glut, Scramble for Africa, sovereign wealth fund, stock buybacks, subprime mortgage crisis, The Nature of the Firm, The Wealth of Nations by Adam Smith, Tim Cook: Apple, trade liberalization, Wolfgang Streeck

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.

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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.

The Tylenol Mafia by Scott Bartz

AOL-Time Warner, Donald Trump, en.wikipedia.org, independent contractor, intangible asset, inventory management, Just-in-time delivery, life extension, Oklahoma City bombing, 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.

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

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

3D printing, AlphaGo, Alvin Toffler, autonomous vehicles, basic income, Bernie Sanders, Branko Milanovic, British Empire, business cycle, business process, call centre, Cambridge Analytica, Capital in the Twenty-First Century by Thomas Piketty, Charles Babbage, Clayton Christensen, collective bargaining, computer age, computer vision, Corn Laws, Cornelius Vanderbilt, creative destruction, data science, David Graeber, David Ricardo: comparative advantage, deep learning, DeepMind, deindustrialization, demographic transition, desegregation, deskilling, Donald Trump, driverless car, easy for humans, difficult for computers, Edward Glaeser, Elon Musk, Erik Brynjolfsson, everywhere but in the productivity statistics, factory automation, Fairchild Semiconductor, falling living standards, first square of the chessboard / second half of the chessboard, Ford Model T, Ford paid five dollars a day, Frank Levy and Richard Murnane: The New Division of Labor, full employment, future of work, game design, general purpose technology, Gini coefficient, Great Leap Forward, Hans Moravec, high-speed rail, Hyperloop, income inequality, income per capita, independent contractor, 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, Jeremy Corbyn, job automation, job satisfaction, job-hopping, John Maynard Keynes: Economic Possibilities for our Grandchildren, John Maynard Keynes: technological unemployment, Joseph Schumpeter, Kickstarter, Kiva Systems, knowledge economy, knowledge worker, labor-force participation, labour mobility, Lewis Mumford, Loebner Prize, low skilled workers, machine translation, Malcom McLean invented shipping containers, manufacturing employment, mass immigration, means of production, Menlo Park, minimum wage unemployment, natural language processing, new economy, New Urbanism, Nick Bostrom, Norbert Wiener, nowcasting, oil shock, On the Economy of Machinery and Manufactures, OpenAI, opioid epidemic / opioid crisis, Pareto efficiency, pattern recognition, pink-collar, Productivity paradox, profit maximization, Renaissance Technologies, rent-seeking, rising living standards, Robert Gordon, Robert Solow, robot derives from the Czech word robota Czech, meaning slave, safety bicycle, Second Machine Age, secular stagnation, self-driving car, seminal paper, Silicon Valley, Simon Kuznets, social intelligence, sparse data, speech recognition, spinning jenny, Stephen Hawking, tacit knowledge, 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, warehouse automation, washing machines reduced drudgery, wealth creators, women in the workforce, working poor, zero-sum game

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.

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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.

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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.

The Founders: The Story of Paypal and the Entrepreneurs Who Shaped Silicon Valley by Jimmy Soni

activist fund / activist shareholder / activist investor, Ada Lovelace, AltaVista, Apple Newton, barriers to entry, Big Tech, bitcoin, Blitzscaling, book value, business logic, butterfly effect, call centre, Carl Icahn, Claude Shannon: information theory, cloud computing, Colonization of Mars, Computing Machinery and Intelligence, corporate governance, COVID-19, crack epidemic, cryptocurrency, currency manipulation / currency intervention, digital map, disinformation, disintermediation, drop ship, dumpster diving, Elon Musk, Fairchild Semiconductor, fear of failure, fixed income, General Magic , general-purpose programming language, Glass-Steagall Act, global macro, global pandemic, income inequality, index card, index fund, information security, intangible asset, Internet Archive, iterative process, Jeff Bezos, Jeff Hawkins, John Markoff, Kwajalein Atoll, Lyft, Marc Andreessen, Mark Zuckerberg, Mary Meeker, Max Levchin, Menlo Park, Metcalfe’s law, mobile money, money market fund, multilevel marketing, mutually assured destruction, natural language processing, Network effects, off-the-grid, optical character recognition, PalmPilot, pattern recognition, paypal mafia, Peter Thiel, pets.com, Potemkin village, public intellectual, publish or perish, Richard Feynman, road to serfdom, Robert Metcalfe, Robert X Cringely, rolodex, Sand Hill Road, Satoshi Nakamoto, seigniorage, shareholder value, side hustle, Silicon Valley, Silicon Valley startup, slashdot, SoftBank, software as a service, Startup school, Steve Ballmer, Steve Jobs, Steve Jurvetson, Steve Wozniak, technoutopianism, the payments system, transaction costs, Turing test, uber lyft, Vanguard fund, winner-take-all economy, Y Combinator, Y2K

“PayPal going public is what allowed me to have the capital to start SpaceX, because I could sell stock or borrow against the stock,” Musk said. “Before that, I didn’t really have meaningful cash.” I. “Goodwill” in accounting refers to the attempt to quantify intangible assets—brand value, training, loyal employees, and the like. They matter especially in the context of a financial transaction—like the merger of Confinity and X.com—when those intangible assets must be priced for accounting purposes. In 2001, companies were required to “amortize” those costs over a period, which reduced profitability. 22 AND ALL I GOT WAS A T-SHIRT In the IPO aftermath, PayPal’s employees undertook a new ritual: checking PYPL’s stock price.

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“What do you want”… “driving him”: Author interview with Chris Payne, September 13, 2019. “Imagine you could”… “Yahoo goes by”: Author interview with Ed Ho, August 8, 2019. “the coolest URL” Author interview with Elon Musk, January 19, 2019. They sold X.com: The details of the transaction are included in PayPal’s S-1 filing, under a section regarding Goodwill and Other Intangible Assets. “In May 1999, the Company acquired the X.com domain name in exchange for 1,500,000 shares of the Company’s Series A mandatorily redeemable convertible preferred stock at an aggregate value of $0.5 million,” https://www.sec.gov/Archives/edgar/data/1103415/000091205. “Under the looming”: Email from Dave Weinstein to author on August 9, 2019, containing “The Early History of X.com” as a Word document.

The Upside of Inequality by Edward Conard

affirmative action, Affordable Care Act / Obamacare, agricultural Revolution, Alan Greenspan, Albert Einstein, assortative mating, bank run, Berlin Wall, book value, 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, Larry Ellison, liquidity trap, longitudinal study, low interest rates, low skilled workers, manufacturing employment, Mark Zuckerberg, Martin Wolf, mass immigration, means of production, 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, 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.

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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.

Risk Management in Trading by Davis Edwards

Abraham Maslow, asset allocation, asset-backed security, backtesting, Bear Stearns, Black-Scholes formula, Brownian motion, business cycle, computerized trading, correlation coefficient, Credit Default Swap, discrete time, diversified portfolio, financial engineering, fixed income, Glass-Steagall Act, global macro, implied volatility, intangible asset, interest rate swap, iterative process, John Meriwether, junk bonds, London Whale, Long Term Capital Management, low interest rates, margin call, Myron Scholes, Nick Leeson, p-value, paper trading, pattern recognition, proprietary trading, random walk, risk free rate, 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

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.

How to Form Your Own California Corporation by Anthony Mancuso

book value, business cycle, corporate governance, corporate raider, distributed generation, estate planning, independent contractor, 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].

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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 ______________________________________________________________________ .

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

"World Economic Forum" Davos, 2013 Report for America's Infrastructure - American Society of Civil Engineers - 19 March 2013, Affordable Care Act / Obamacare, Airbnb, Alan Greenspan, American Society of Civil Engineers: Report Card, asset-backed security, Bakken shale, banking crisis, Bear Stearns, BRICs, British Empire, business cycle, business process, business process outsourcing, call centre, carbon tax, Carmen Reinhart, clean water, collapse of Lehman Brothers, collateralized debt obligation, commoditize, congestion pricing, creative destruction, credit crunch, currency manipulation / currency intervention, demand response, Donald Trump, financial engineering, Frederick Winslow Taylor, high net worth, high-speed rail, 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 interest rates, low skilled workers, man camp, Mark Zuckerberg, Martin Wolf, Mary Meeker, Maui Hawaii, McMansion, money market fund, mortgage debt, Network effects, new economy, obamacare, oil shale / tar sands, oil shock, peak oil, plutocrats, price stability, quantitative easing, race to the bottom, reserve currency, reshoring, Richard Florida, rising living standards, risk tolerance, risk/return, scientific management, 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.

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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!

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

Albert Einstein, asset allocation, behavioural economics, buy and hold, Cass Sunstein, Cornelius Vanderbilt, diversified portfolio, estate planning, financial independence, fixed income, happiness index / gross national happiness, index fund, intangible asset, John Bogle, longitudinal study, loss aversion, Lyft, Mark Zuckerberg, mortgage debt, Mr. Money Mustache, 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

‘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.

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

accelerated depreciation, Affordable Care Act / Obamacare, airline deregulation, asset allocation, book value, business cycle, collective bargaining, distributed generation, employer provided health coverage, estate planning, Home mortgage interest deduction, independent contractor, 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

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.

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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.

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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.

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

accelerated depreciation, book value, 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.

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

"World Economic Forum" Davos, accounting loophole / creative accounting, Alan Greenspan, asset-backed security, banking crisis, Bear Stearns, Big bang: deregulation of the City of London, blockchain, BRICs, British Empire, business process, Charles Babbage, 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, financial engineering, Ford Model T, forensic accounting, Frederick Winslow Taylor, G4S, Glass-Steagall Act, high-speed rail, information security, intangible asset, Internet of things, James Watt: steam engine, Jeremy Corbyn, joint-stock company, joint-stock limited liability company, Joseph Schumpeter, junk bonds, 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 and loan crisis, savings glut, scientific management, 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

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.

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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.

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, Bear Stearns, Big bang: deregulation of the City of London, buy and hold, capital asset pricing model, central bank independence, corporate governance, Credit Default Swap, currency risk, dematerialisation, discounted cash flows, diversified portfolio, double entry bookkeeping, Edward Lloyd's coffeehouse, Elliott wave, equity risk premium, Exxon Valdez, foreign exchange controls, forensic accounting, Glass-Steagall Act, global reserve currency, high net worth, index fund, inflation targeting, information security, intangible asset, interest rate derivative, interest rate swap, inverted yield curve, John Meriwether, junk bonds, London Interbank Offered Rate, Long Term Capital Management, low interest rates, margin call, market fundamentalism, Nick Leeson, North Sea oil, Northern Rock, pension reform, Piper Alpha, price stability, proprietary trading, purchasing power parity, Real Time Gross Settlement, reserve currency, Right to Buy, risk free rate, shareholder value, short selling, The Wealth of Nations by Adam Smith, transaction costs, value at risk, yield curve, zero-coupon bond

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

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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.

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

fear of failure, intangible asset, Kōnosuke Matsushita

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.

Personal Kanban: Mapping Work, Navigating Life by Jim Benson, Tonianne Demaria Barry

Abraham Maslow, Albert Einstein, Asperger Syndrome, Bluma Zeigarnik, corporate governance, Howard Rheingold, intangible asset, job satisfaction, Kaizen: continuous improvement, Kanban, Ken Thompson, pattern recognition, performance metric, The Wisdom of Crowds, urban planning, Yogi Berra

She juggles two jobs, each located on opposite ends of her city. She’s studying for her financial advisor certification. She’s training for a triathlon. She wants to write a book. She’s thinking about opening her own business, perhaps getting another degree. The list goes on. As a mathematician and an expert in intangible assets, Jessica understands she has so much on her plate that busting her WIP limit is almost guaranteed, and money is just one asset to focus on out of many. One Sunday over brunch, we mapped out her Personal Kanban. We discussed what she enjoyed, what she valued, what her aspirations were. Within minutes of what would become a three hour conversation, it became apparent that Jessica was not simply goal-oriented, she was a goal-collector.

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

accelerated depreciation, Affordable Care Act / Obamacare, airline deregulation, asset allocation, book value, business cycle, collective bargaining, distributed generation, employer provided health coverage, estate planning, Home mortgage interest deduction, independent contractor, 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 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.

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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.

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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.

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

3Com Palm IPO, accounting loophole / creative accounting, air freight, Alan Greenspan, Andrei Shleifer, AOL-Time Warner, asset allocation, book value, 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, John Bogle, junk bonds, Long Term Capital Management, low interest rates, market bubble, merger arbitrage, Michael Milken, money market fund, new economy, passive investing, price stability, Ralph Waldo Emerson, Richard Thaler, risk tolerance, Robert Shiller, Ronald Reagan, shareholder value, sharing economy, short selling, Silicon Valley, South Sea Bubble, Steve Jobs, stock buybacks, 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

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.

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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.

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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.

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

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

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

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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.

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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.

The Little Book That Still Beats the Market by Joel Greenblatt

backtesting, book value, General Magic , index fund, intangible asset, random walk, survivorship bias, transaction costs

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

Competition Demystified by Bruce C. Greenwald

additive manufacturing, airline deregulation, AltaVista, AOL-Time Warner, asset allocation, barriers to entry, book value, business cycle, creative destruction, cross-subsidies, deindustrialization, discounted cash flows, diversified portfolio, Do you want to sell sugared water for the rest of your life?, 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, PalmPilot, Pepsi Challenge, pets.com, price discrimination, price stability, revenue passenger mile, search costs, selective serotonin reuptake inhibitor (SSRI), shareholder value, Silicon Valley, six sigma, Steve Jobs, transaction costs, vertical integration, warehouse automation, 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.

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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).

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

Andrei Shleifer, Asian financial crisis, asset-backed security, barriers to entry, Bear Stearns, Bernie Madoff, Big Tech, 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, digital rights, Donald Trump, double helix, driverless car, 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, Gregor Mendel, Hernando de Soto, income inequality, initial coin offering, 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, power law, price mechanism, price stability, profit maximization, railway mania, regulatory arbitrage, reserve currency, Robert Solow, Ronald Coase, Satoshi Nakamoto, secular stagnation, self-driving car, seminal paper, 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, Tragedy of the Commons, transaction costs, Wolfgang Streeck

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.

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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.