The View | What Apple and Airbnb have in common – intangible assets that power their profit margins
Richard Wong says ideas and innovation have become a new form of capital that cannot be seen but whose scalability enables companies to increase their bottom lines
Since the 18th century, when the Industrial Revolution started in England, to 1990, business investment centred on the acquisition of real, tangible assets, such as machines, tools, computers or office buildings. But, since then, investment in intangible assets – ideas, designs, research, specific human capital, client networks and the like – has been growing.
This change has far-reaching significance. Not only are the economic properties of the two different, but many statistical metrics do not take intangibles into account. As a result, analysts and policymakers lack the data they need to explain some current aspects of the economy.
Ideas and innovation and how they are organised and encouraged have become the new capital – intangible capital. This shift has arisen primarily due to the information and communications technology revolution, which has accelerated the process of globalisation, enabled nations to export production capacity instead of manufactured goods and facilitated the transmission of ideas across national borders.
What is new about today’s economy is not the role of ideas themselves, but rather that many of our best ideas remain disembodied. The idea is indeed valuable, but it does not take physical form.
This changes almost everything. Apple has created value out of intangible assets — its distinctive ability to combine design and software. It is now the world’s most valuable company, despite owning virtually no physical assets.
