My Amazon Review of Jonathan Haskell's and Stian Westlake's "Capitalism Without Capital: The Rise of the Intangible Economy"

UK economics professor Jonathan Haskell and UK consultant Stian Westlake have written an important book on the ever growing importance of intangible assets in the modern economy. Unfortunately the book is too long and it would have better been written as a long magazine article. Nevertheless they succeed in pointing out that the values of firms are now largely dependent upon intangible capital and that society at large is increasingly being ordered around it. In very simplified terms the mode of production has shifted from hardware to software and we witness that every day with our use of Google, Facebook, Amazon, Netflix, and yes Starbucks. Why Starbucks? In the case of Starbucks it is the managerial software behind their organizational instructions that makes each coffee shop run.

Unlike tangible capital, intangibles are readily scalable, offer huge spillover effects and generally work synergistically with other intangibles. However in order to create intangible capital the sunk costs are unusually high and risky which makes debt finance difficult to obtain. A bank will lend on a machine, but not on in process software code.

This book should be read in conjunction with Baruch Lev and Feng Gu’s “The End of Accounting” where they establish new rules for dealing with intangible capital.( https://shulmaven.blogspot.com/2016/07/my-amazon-review-of-baruch-lev-and-feng_19.html)    In the case of the public sector, national GDP accounting has introduced intellectual capital as a form of investment. That category includes such things as computer software, research and development and filmed entertainment, for example.

On the societal level the growth of intangible capital tend to exacerbate income inequality. Success no longer flows to the tinkerers and mechanics of the 19^th century but rather to the degreed knowledge workers of the 21^st century. I would note one small error in the book. The authors called Robert Reich a future Treasury Secretary when, in fact, he was future Labor Secretary. All told Haskell and Westlake have given us a good overview as to how modern economies are being transformed.

The full Amazon URL appears at: https://www.amazon.com/review/R3JEO64PYDQCJS/ref=pe_1098610_137716200_cm_rv_eml_rv0_rv