Bestselling Books on Intangible Assets

Democratic Capitalism

Former CEO of ADT Ray Carey notes in his new book Democratic Capitalism that despite the evidence of the practical effectiveness of democratic capitalism, companies implementing such a strategy have proved the exception to the rule. The dominant business culture has instead trended towards what Carey calls 'ultra-capitalism,' the modern system of finance-driven capitalism that Carey believes places too great of an emphasis on speculation, individual greed and excess. This has led to a disconnect between ownership and control, a widening gap between the super-rich and the common working person, a shifting of the tax burden from capital to labor, and a deterioration of regulatory safeguards to protect workers and their companies.

In Carey's view, the lack of a strategic focus on integrating workers into the capital structure of the company makes it increasingly difficult to provide them with access to the wealth-creating power of private enterprise.

Carey believes that a "synergistic coupling of democracy and capitalism" offers a superior vision of global commerce that will more effectively spread the economic benefits of the free enterprise system by ensuring more workers have direct access, through ownership, to the wealth-creating capacity of the corporation. His vision of democratic capitalism advocates a systemic application of ideas involving broad-based ownership, profit sharing, and employee involvement.

More info on the book Democratic Capitalism plus ordering information can be found at http://www.democratic-capitalism.com.

Intellectual capital should get priority over terrorism

Over time, terrorism is less a threat to the U.S. than the possibility that creative and talented people will stop wanting to live within its borders.
Now that's what I call a quote on Intellectual Capital.
You can find it in an interesting article by Richard Florida in this month's Harvard Business Review (October 2004).
According to Florida, the strength of the American economy does not rest on its manufacturing industries, its natural resources, or the size of its market. It turns on one factor: the country's openness to new ideas, which has allowed it to attract the brightest minds from around the world and harness their creative energies.

But Florida is afraid the United States is on the verge of losing this Intellectual Capital competitive edge. As the nation tightens its borders to students and scientists and subjects federal research funding to ideological and religious litmus tests, many other countries are stepping in to lure that creative capital away. Ireland, Canada, Australia, New Zealand, Denmark, and others are spending more on research and development and shoring up their universities in an effort to attract the world's best, including Americans.

Florida motivates his fears by arguing that:

1. far from leading the world, the United States doesn't even rank in the top ten in the percentage of its workforce engaged in creative occupations.
2. the baby boomers will soon retire.
3. data is showing large drops in foreign student applications to U.S. universities and in the number of visas issued to knowledge workers, along with concomitant increases in immigration in other countries, suggest that the erosion of talent from the United States will only intensify.

I don't know about you, but I'm not too sure the US is actually in danger of losing it's extremely strong IC 'competitive edge'. I believe the US actually have a near-monopoly position in many crucial knowledge-intensive industries such as software, computers, bio industry, pharmaceuticals, defense and what have you.

And although as a percentage of the total of working people the number of creative jobs may not be the highest in the world, in absolute terms it still is!

And besides, some competition in these important industries of the future is healthy and in the interest of the whole world, including the US. Surely Florida wouldn't want the US to be open only to it's own ideas?

Why EU looses its best brains to US

Today's WSJ reports that according to a European Commission survey, more than 70% of EU-born recipients of U.S.-doctorates between 1991 and 2000 planned to stay in the US. Alltogether some 100.000 European-born researchers currently work in the USA.
The EC fears that by the end of 2010, Europe's knowledge economy will have a shortage of 700.000 scientists and engineers.
Why do so many researchers prefere the US above Europe in seeking career opportunities? Among the reasons given why U.S. universities and company research labs are so attractive are the following:

1. High quality of teaching and research (due to big budgets)
2. Allow for more freedom, less bureaucracy
3. More succesful in turning scientific discoveries into economically viable projects
4. Americans are culturally more embracing towards new technologies
5. Higher Salaries
6. Lower Taxes

I'd think turning these things around should have top priority of European Governments.

Baruch Lev on Intangibles in Harvard BR

In an interesting HBR article (June 2004), Lev concludes that both investors and managers are underestimating the value of R&D and other intangibles investments.
As a result, managers shift resources from R towards I and corporations, being undervalued, face higher cost of capital then necessary.

Five reasons are given for the undervaluation of intangibles:
1. the information about the investment in intangibles and about their returns is hard to get at (requires better valuation methods)
2. providing this information is not (yet) obliged by GAAP and other accounting systems (requires change by accounting bodies),
3. intangibles viewed as assets rather then as costs (requires a change of mindset),
4. disclosing of intangibles value may be used by competitors (find the optimal amount and timing to disclose information to prevent loosing competitive edge)
5. possible litigation exposure (in case of missed future forecasted value)

I wonder if these 5 reasons cover all factors involved in this undervaluation?