A revolution has occurred. Those with a view of major developed economies over the last roughly twenty years say it happened “quietly,” as the businesses of these economies began investing more in intangible assets—such as design, branding, research and development, and software—than in tangible assets, like machinery, buildings, and computers. 

A recent book on the subject, “Capitalism without Capital: The Rise of the Intangible Economy,” by Jonathan Haskel, a professor of economics at Imperial College Business School, and Stian Westlake, a senior fellow at Nesta, the UK’s national foundation for innovation, explores the so-called revolution and its effects, both now and in the future.

According to Princeton University Press’s synopsis of the book, “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.”

Martin Wolf, in his Financial Times article, “The Challenges of a Disembodied Economy,” believes that one of the more compelling examples from “Capitalism without Capital” is Apple. “The world’s most valuable company owns virtually no physical assets. It is its intangible assets—integration of design and software into a brand—that create value,” he writes.

Wolf continued, “What is new about today’s economy? It is not the role of ideas themselves. The technologies we take for granted — the wheel, fired pottery, the plough or the steam engine — were once brilliant new ideas. What is new about today’s economy is that many of our best ideas remain disembodied. The idea is indeed valuable, but it does not take physical form. This changes almost everything.”

However, these changes are not all for the positive. “Capitalism without Capital” lays out a decade’s worth of research on intangible asset investment, how it is measured and assessed over time and separate economies, and the keys that make it different from the effects of tangible asset investment.

Due to these differences, measuring this has become an important intellectual activity. According to Wolf’s article, investment in intangible assets is currently greater than investment in tangible assets in the U.S., UK, and Sweden, but not in Germany, Italy or Spain. Further, understanding the differences in asset allocation could explain some modern economic phenomena, such as economic inequality to stagnating productivity.

It has also increased focus and conflict over intellectual property rights, described as “inherently arbitrary and economically costly,” and raised questions about the mobility of intangible assets, “which makes them hard to tax.” 

There’s no cause for concern about the future, however, as “Capitalism without Capital” offers a few insights and predictions of what a future, “intangible” world would entail and how business leaders, investors, as well as policymakers can navigate the landscape to help drive and grow their businesses.

One thing that is becoming more and more tangible, however, is 3D printing. As Associate Editor Leah Pickett writes in this month’s test and inspection article, “Despite regulatory challenges, many U.S.-based companies and research labs are forging ahead with hybrid materials for 3D printed medical implants that could revolutionize healthcare.”

Read more of Leah’s article, “3D Printing Speeds Development of New Materials for Medical Devices,” and everything else we have to offer in this month’s Quality.

Enjoy and thanks for reading!