Jump to content

J. Haskel, S. Westlake: "Capitalism without Capital" | Talks at Google


Recommended Posts


Early in the twenty-first century, a quiet revolution occurred. For the first time, the major developed economies began to invest more in intangible assets, like design, branding, R&D, and software, than in tangible assets, like machinery, buildings, and computers. For all sorts of businesses, from tech firms and pharma companies to coffee shops and gyms, the ability to deploy assets that one can neither see nor touch is increasingly the main source of long-term success.


But this is not just a familiar story of the so-called new economy. Capitalism without Capital shows that the growing importance of intangible assets has also played a role in some of the big economic changes of the last decade. The rise of intangible investment is, Jonathan Haskel and Stian Westlake argue, an underappreciated cause of phenomena from economic inequality to stagnating productivity.


Haskel and Westlake bring together a decade of research on how to measure intangible investment and its impact on national accounts, showing the amount different countries invest in intangibles, how this has changed over time, and the latest thinking on how to assess this. They explore the unusual economic characteristics of intangible investment, and discuss how these features make an intangible-rich economy fundamentally different from one based on tangibles.


Capitalism without Capital concludes by presenting three possible scenarios for what the future of an intangible world might be like, and by outlining how managers, investors, and policymakers can exploit the characteristics of an intangible age to grow their businesses, portfolios, and economies.

Link to comment
Share on other sites

  • 1 month later...

This is a good book.


I also recommend The Zero Margin Cost Society by Rifkin, and Who Owns the Future by Lanier. Both these books offer food for thought, although the topic is so inherently uncertain, they may have let their imaginations run away with them, it's still super interesting.


Munger has mentioned how Al Gore's strategy of buying firms with a low carbon footprint has paid off due to the fact that that (perhaps inadvertently) avoids capital intensive firms, and despite his low opinion of Gore in general.


An economist article referenced in the book shows more firms are achieving very high returns on capital:



This enormous profitability boost, which can reasonably be assumed to be a lasting one, due to the natural monopolies many of these (usually tech) companies possess, make the current total valuation of the US stock market seem a lot more reasonable than it would if we looked only at measures such as PE compared over different time periods.






Link to comment
Share on other sites

This goes in the same direction:




The price-to-book ratio has a problem. More and more U.S. companies report negative book value, the result of accounting rules and structural changes in the market. This creates broad confusion and problems for the famous value factor, and indexes or strategies which rely on it as a measure of cheapness. Negative equity companies are often written off as distressed, but after reporting negative equity, most of them survive for years and have, as a group, outperformed the market 57% of the time.1 There are currently 118 companies in the U.S. market with negative equity. These companies have had negative equity for an average of over three and a half years, and 25% have had negative equity for over five years. One example is Domino’s Pizza which has had negative equity since their 2004 IPO but has outperformed the S&P 500 by a cumulative 1,442%.2 McDonalds, H&R Block, Yum Brands, HP, Motorola, Denny’s, AutoZone, and Wayfair are also on the list of those with negative book value.
Link to comment
Share on other sites

Negative equity is probably inversely correlated to stability of earning power, usually from a moat.


But it's dangerous. Your piggy bank is needed for acquisitions or in a major dislocation. The example of dominos pizza is interesting. I am not so sure they have a moat. What will happen when liabilities are more then earning power which declines ?

Link to comment
Share on other sites

  • 4 months later...
  • 3 weeks later...

Create an account or sign in to comment

You need to be a member in order to leave a comment

Create an account

Sign up for a new account in our community. It's easy!

Register a new account

Sign in

Already have an account? Sign in here.

Sign In Now

  • Create New...