Between the 1960s and the 1980s, American writer Alvin Toffler wrote about a “post- industrial future” and the “Information Age.” For the past 40 years, a quiet revolution has been sweeping ahead, carried by a wave of new technology. The bursting of the dot-com bubble in 2000 momentarily reopened the debate on the challenges and risks created by the new economy, but e-business was never really under threat. In this context, several economists, including Carol Corrado and Dan Sichel of the US Federal Reserve Board and Charles Hulten of the University of Maryland, met during the Conference on Research in Income and Wealth to think about how to measure the types of investment that people were making in the new economy.
Investment used to be mainly tangible, something you could touch, such as machinery, buildings, land, commodities, vehicles, industrial and precious metals and minerals to name a few. Over the past few decades, there has been a continuous shift from tangible to intangible investments in knowledge-related products like software, research and development, design, artistic originals, market research, training and new business processes.
The Microsoft Corporation is a case in point. In 2006, it was the world’s top company with a market value of $250 billion. However, its assets reached $70 billion, $60 billion of which consisted of cash and financial instruments. The traditional assets, such as plants and equipment, consisted of just $3 billion.
“Microsoft was a modern-day miracle. This was capitalism without capital,” write authors Jonathan Haskel and Stian Westlake.
Hulten poured over Microsoft’s accounts to explain why its market value was so high when its tangible assets, such as machinery, buildings and land, totaled only one percent of its value. He identified a number of intangible assets, such as Microsoft’s investments in research and development and product design, the value of its brands, its supply chains and internal structures, which did not show on the company balance sheets. This happens because accountants and statisticians tend not to count intangible spending as an investment, but as day-to-day expenses.
Just as the idea of investing in intangibles was attracting growing attention, a crisis in the subprime market began in 2007 in the US and developed into a full-blown international banking crisis followed by a recession. Despite an often-biased debate about the digital economy, intangible investment continued to grow and in some countries.
One of the main reasons behind the inevitable rise of intangible investment is due to the continuous availability of new digital technologies on the market, which encourages businesses to invest in intangibles. “Because many intangibles involve information and communication, they can almost, by definition, be made more efficient with better IT. Think of Uber’s organizational investment in building its vast networks of drivers — it would have been theoretically possible before the invention of computers and smartphones (after all, radio cab networks existed), but the return on the investment was massively increased by smartphones, with their ability to connect people quickly and enable the rating of drivers and the metering of rides,” explain the authors.
Another explanation for the rise in intangible investment is that developed countries’ output has changed, many regions are moving away from manufacturing, investing instead in Information’s Technology.
I found the discussion about intangibles and the rise of inequality particularly engaging. Haskel and Westlake refer to Thomas Piketty’s brilliant analysis of “Capital in the Twenty-First Century,” in which he mentions that in the past decades, the rich have been getting richer and the poor have been getting poorer “and other dimensions of inequality have become more salient: Inequalities between generations, between different places and between elites and those who feel alienated and disrespected by modern society.”
The incomes of the richest one percent have increased sharply in many countries. But the traditional working class in developed countries has not been doing well. The continuous surge of new technologies is causing wages to fall and profits to rise. However, computers are neither replacing the high-paid workers, nor the low-paid. It is the middle-income jobs that are targeted and terminated.
Market reforms in China and India have enabled 2.93 billion workers to enter the global market and this has affected the livelihood of the workers making the same kinds of goods in developed countries. Consequently, the developing world has experienced rising prosperity whereas the working classes in developed countries have either lost their jobs or received lower wages.
Piketty, however, reminds us that that inequality is not only about income but also about wealth. Intangibles have driven property prices up. “In a world where intangibles are becoming more abundant…We would expect businesses and their employees to want to locate in diverse, growing cities where synergies and spillovers abound. One possible result of this would be to encourage people to build more houses and offices in big cities. But, of course, in most cities there are regulatory barriers to building…So instead, the price of housing rises and the wealthy, who are more likely to own this kind of real estate, get wealthier,” write the authors.
Finally, the book details a growing sense that in the US and Europe the population is divided in two halves, which became clearly visible during the US elections, the Brexit referendum and France’s recent presidential election. One half is cosmopolitan, educated and liberal while the other is skeptical of the elites’ opinions. People who do well in an intangible society, according to research psychologists, are more open to new experiences and are better at making connections, moreover, their sense of innovation and creativity interacts with the city’s unique flow of opportunities. An intangible economy thrives in a city where people meet each other and interact. The authors warn us that an effective intangible economy can give rise to forms of inequality, threaten social capital and create powerful firms with a strong interest in protecting their contested intangible assets. However, the countries that find a solution to these problems will open a path toward economic success. Policymakers who implement “strategies that encourage intangible investment are more likely to ensure prosperity than those that go against it,” the authors write in this fascinating book.
Book Review: Why intangible investments are so important today
Book Review: Why intangible investments are so important today
What We Are Reading Today: ‘Planetary Climates’ by Andrew Ingersoll
This concise, sophisticated introduction to planetary climates explains the global physical and chemical processes that determine climate on any planet or major planetary satellite— from Mercury to Neptune and even large moons such as Saturn’s Titan.
Although the climates of other worlds are extremely diverse, the chemical and physical processes that shape their dynamics are the same.
As this book makes clear, the better we can understand how various planetary climates formed and evolved, the better we can understand Earth’s climate history and future.
What We Are Reading Today: ‘Dragonflies of North America’
- “Dragonflies of North America” is the ultimate guide to these extraordinary insects
Author: ED LAM
Dragonflies are large and beautiful insects, diverse in color and pattern. This premier field guide provides all the information you need to identify every male and female dragonfly found in North America, whether in the field, in the hand, or under the microscope.
The extensive illustrations are the heart of the book. Close-up color portraits of each species, often several times life size, show the best possible specimens for close examination.
“Dragonflies of North America” is the ultimate guide to these extraordinary insects.
What We Are Reading Today: The Wind-Up Bird Chronicle
- Murakami’s prose, understated yet richly evocative, guides readers through a narrative that oscillates between the real and the surreal
Japanese novelist Haruki Murakami’s “The Wind-Up Bird Chronicle” is an intricate, mesmerizing novel that weaves together the ordinary and the surreal, creating a tapestry of existential questions, hidden truths and unexpected journeys.
First published in 1994, the novel is often regarded as one of Murakami’s masterpieces, encapsulating his signature blend of magical realism, psychological depth, and cultural introspection.
At its heart is Toru Okada, an unassuming and somewhat disaffected man whose mundane life takes a sudden and dramatic turn when his wife, Kumiko, disappears. What begins as a straightforward search evolves into a labyrinthine journey, leading Toru to confront not only the mystery of Kumiko’s absence but also the darker forces of history, memory, and his own psyche.
Along the way, he encounters an eclectic cast of characters, each with their own enigmatic role to play in the unfolding story.
Murakami’s prose, understated yet richly evocative, guides readers through a narrative that oscillates between the real and the surreal. The novel’s structure mirrors this duality, as Toru navigates his increasingly strange reality while descending into dreamlike underworlds, mysterious wells, and symbolic landscapes.
These moments are imbued with Murakami’s distinctive sense of unease, where the boundaries of the tangible and intangible blur, leaving the reader questioning the nature of reality itself.
One of the novel’s great strengths is its ability to juxtapose the deeply personal with the historically and culturally significant.
While Toru’s story is intimate and introspective, it is interwoven with threads of Japanese history, particularly the atrocities of the Second World War. These historical narratives, told through the recollections of various characters, deepen the novel’s scope, turning it into a meditation on the lingering wounds of the past and their impact on the present.
“The Wind-Up Bird Chronicle” also delves into themes of connection and alienation, power and vulnerability, and the search for meaning in a world that often feels inexplicable. Toru’s journey is not just a physical quest but a spiritual and emotional odyssey, forcing him to confront the unseen forces that shape his life and the lives of those around him.
Murakami’s use of symbolism and recurring motifs — cats, wells, and the titular wind-up bird — adds layers of mystery and interpretive richness to the novel. These elements, coupled with the novel’s nonlinear structure and surreal interludes, create a reading experience that is both immersive and disorienting, drawing readers into a world that is as unsettling as it is beautiful.
For longtime fans of Murakami, “The Wind-Up Bird Chronicle” is quintessential, showcasing the author’s ability to blend the banal with the extraordinary. For new readers, it offers an expansive introduction to his universe, though its complexity may require patience and reflection.
Ultimately, “The Wind-Up Bird Chronicle” is a profound exploration of the human condition — its mysteries, its contradictions, and its quiet beauty. It is a novel that refuses to offer easy answers, instead inviting readers to embrace its ambiguities and immerse themselves in its layered, dreamlike world. Murakami has crafted a story that is as haunting as it is enlightening, leaving an indelible mark on those who dare to journey into its depths.
What We Are Reading Today: ‘Galápagos’
Authors: John Kricher and Kevin Loughlin
Galápagos is a comprehensive, up-to-date, and profusely illustrated natural history of this spectacular archipelago.
Offering much more information than identification guides, the book provides detailed accounts and more than 650 color photographs of the islands’ habitats, marine life, reptiles, birds, mammals, and plants, making the book a virtual nature tour of Galápagos.
Galápagos experts John Kricher and Kevin Loughlin have thoroughly revised the original text, bringing all the taxonomy up to date and adding a wealth of new information.
What We Are Reading Today: ‘A Well-Ordered Thing’ by Michael D. Gordon
Dmitrii Mendeleev (1834–1907) is a name we recognize, but perhaps only as the creator of the periodic table of elements.
Generally, little else has been known about him. “A Well-Ordered Thing” is an authoritative biography of Mendeleev that draws a multifaceted portrait of his life for the first time.
As Michael Gordin reveals, Mendeleev was not only a luminary in the history of science, he was also an astonishingly wide-ranging political and cultural figure.