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Learn the key ideas of the book by Stian Westlake , Jonathan Haskel

Capitalism Without Capital

Intangible investments and economic development

Since the early 2000s, economists around the world have begun to study and define a kind of investment that is significant because of its size and macroeconomic impact: intangible investments. The Internet and the spread of computers have been the driving force behind the change from a tangible to an intangible economy, a phenomenon that already existed in the last years of the 20th century. However, not only software and research are encompassed in this sphere: training, business process re-engineering, marketing, and design are now converging to form a complex and varied mosaic that needs to be understood and measured. In Capitalism without Capital we will discover that intangible investments are different from tangible ones because of four fundamental characteristics: they generate side effects, they are submerged, they are scalable and create synergies. Measuring and defining them now is fundamental to truly understand the economic development of our time.

 Capitalism Without Capital
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How value calculations change

For centuries, to determine the value of a property, a company or a farm, we have been counting physical objects, especially durable assets. The nature of value has changed over time from counting animals and fields to counting machinery and buildings, and finally computers. The idea that it is tangible assets that justify an investment has been around  for a long time, and it is only recently that investments in intangible assets have begun to prevail.

This has led to profound changes, as intangible investments are different from tangible ones: firstly, they are very difficult to account for and, secondly, they change the economic structure. This happens mainly because they cause spillovers, i.e. advantages for parties other than those who made the investment. An economy rich in intangible resources behaves differently from one based mainly on tangible resources because it generates synergies, widespread innovation, and well-being.

When they talk about changes in the nature of investments, the authors do not mean that today we invest in robots or microchips, but that investment in ideas, aesthetics, brands, and relationships has increased exponentially. One of the clearest examples comes from a fairly physical world, that of gyms. Les Mills, an Olympic champion in weightlifting, opened a successful gym in Auckland, but it was his son who turned it into a million-dollar business by inventing "BodyPump": a weight-training program based on choreographies that are constantly being updated. "BodyPump" has quickly become a valuable product: to offer the program you need to be certified as a trainer, and your gym must buy it as if it were just another machine. Today, it exists in more than ten thousand gyms in about fifty different countries.


The key ideas of " Capitalism Without Capital"

How value calculations change
The growth of intangible investments
What favors intangible investments
How intangible investments are measured
The Four S's of Intangibles
The other side of the coin: the consequences of intangible investments
Banking: lending in the world of intangibles
Use and limitations of venture capital
Take-home message

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