Has capitalism gone wrong?
Let's start by defining what we mean by capitalism
and in order to do that it's probably best
to take an example. Something like Sainsbury's.
Anyone who's been to Sainsbury's has observed
all the capital of Sainsbury's. You've seen
the vehicles driving around and you've seen
the checkout computers. And if you total the
value of that capital it comes to around $12
billion. Sainsbury's sales are around $30
billion. On the other hand, let's take a company
like Microsoft. If we look for the plant and
the vehicles and the buildings, basically there's
hardly anything. And that value comes to around
$5 billion but Microsoft sales are around
$85 billion. These modern companies seem to
be able to generate three times the amount
of sales on around half the kind of assets.
That's why we call the title of our book,
'Capitalism without Capital'. What we do in
the book is we set out the new forms of intangible
capital, which are increasingly at the backbone
of our economy. That kind of investment comes
from investment in knowledge assets, like
design, like movies, like training, and like
business processes. And here's what we find.
Over time these investments are becoming increasingly
important, so now, for roughly every £1 of
tangible investment there's about £1.10 of intangible investment.
So it's big bananas but what does it all mean? The nature of investment surely changes a lot?
We used to have investment in canals, then we had investment in railways, then in roads, then in airports.
So what does the move to knowledge investment mean and why should we care about it?
Well, the reason we care about it is that the economic properties of knowledge investment are just very different
to those more conventional types of investment.
If Sainsbury's want to supply some more customers,
they've got to build some more buildings and
bring in some more trucks. If Google want
to supply some more customers, they just take
their existing intangible assets, their software,
and they scale it up amongst the new customers.
The scalability of intangibles means that
we would observe an increasingly unequal economy
with the emergence of giant firms able to
service vast numbers of customers with very
few employees. Of course, those firms would
become very desirable places to work as well
and they'd pay very high wages. So the emergence
of inequality is going to be one of the characteristics
of an intangible economy. This is the kind
of economy that we try to document in our
book, 'Capitalism without Capital'.
