Capitalism without Capital Quotes

“Scalability becomes supercharged with “network effects.” A network effect exists when assets become more valuable the more of them exist.”
― Jonathan Haskel, Capitalism without Capital: The Rise of the Intangible Economy

“one of the puzzles of urbanization is the increased willingness of people to pay very high rents to live next door to other people paying very high rents (Glaeser 2011).”
― Jonathan Haskel, Capitalism without Capital: The Rise of the Intangible Economy

“A more recent concern relates to “financialization” and associated short-termism. Financialization is the growing importance of norms, metrics, and incentives from the financial sector to the wider economy. Some of the concerns expressed are that, for example, managers are increasingly awarded stock options to align their incentives with those of shareholders; companies are often explicitly managed to increase short-term shareholder value; and financial engineering, such as share buybacks and earnings management, has become a more important part of senior managers’ jobs. The end result is that rather than finance serving business, business serves finance: the tail wags the dog. What John Kay described as “obliquity,” the idea that making money was a consequence of, or a second-order benefit of, serving one’s customers and building good businesses, is driven out (Kay 2010).”
― Jonathan Haskel, Capitalism without Capital: The Rise of the Intangible Economy

“The cultural causes of Brexit and Trump are exacerbated by the economic causes—causes that arise from the emergence of an intangible economy.”
― Jonathan Haskel, Capitalism without Capital: The Rise of the Intangible Economy

“The Republic of Foo, our high-investment, intangible economy of the future, has significantly overhauled its land-use rules, particularly in major cities, making it easier to build housing and workplaces; at the same time, it invests significantly in the kind of infrastructure needed to make cities livable and convivial, in particular, effective transport and civic and cultural amenities, from museums to nightlife. In some cases, this involves rejecting big development plans that destroy existing places. It has faced political costs in making this change, especially from vested interests opposed to new development or gentrification, but the increased economic benefits of vibrant urban centers have provided enough incentive to tip the balance of power in favor of development. The cities of the Kingdom of Bar have chosen one of two unfortunate paths: in some cases, they have privileged continuity over dynamism in its towns—creating places like Oxford in the UK, which are beautiful and full of convivial public spaces, but where it is very hard to build anything, meaning few people can take advantage of the economic potential the place creates. Other cities resemble Houston, Texas, in the 1990s—a low-regulation paradise where an absence of planning laws keeps home and office prices low, but where the lack of walkable centers and convivial places makes it harder for intangibles to multiply. (To Houston’s credit, it has changed for the better in the last twenty years.) The worst of Bar’s cities fail in both regards, underinvesting in urban amenities and making it hard to build. In all three cases, the economic disadvantage of not having vibrant cities that can grow have become larger and larger as the importance of intangibles has increased.”
― Jonathan Haskel, Capitalism without Capital: The Rise of the Intangible Economy

“This vision is very much in line with the views of the economist John Kay in his book Other People’s Money (2015). As he says, stock markets, when first started, were the vehicles for raising finance often for large infrastructure projects (typically railways) from many dispersed shareholders. But markets no longer provide this function. Almost no new projects are financed via the stock market. (Indeed, the observation that few early-state companies come to the stock market for financing rather confirms the hypothesis that stock markets have significant problems dealing with them.) Rather, stock market trading is dominated by large asset managers trading with each other. In Kay’s view, they are searching for returns over and above those available to the market as a whole (searching for “alpha”) by trying to anticipate what others are thinking about the value of assets rather than the value of the underlying assets themselves.”
― Jonathan Haskel, Capitalism without Capital: The Rise of the Intangible Economy

“Now, most tangible investments are manufactured (think of the many factories around the world that churn out everything from vans to machine tools to silicon chips). There is certainly a lot of labor involved in tangible investments (laying cables, shop fitting, the whole construction industry), but manufacturing matters too. Intangible investments, on the other hand, depend much more on labor. Design involves paying designers. R&D involves paying scientists. Software involves paying developers. So over time, we would expect intangible investment spending to gradually rise relative to tangible as Baumol predicted. Some of that rise might be offset by the point, which we look at in detail below, that some intangibles costs are mostly “fixed” or one-off, so this cannot be the whole story, but it is likely to be at least one element of it.”
― Jonathan Haskel, Capitalism without Capital: The Rise of the Intangible Economy

“Now, there is nothing inherently unusual or interesting from an economic point of view about a change in the types of things businesses invest in. Indeed, nothing could be more normal: the capital stock of the economy is always changing. Railways replaced canals, the automobile replaced the horse and cart, computers replaced typewriters, and, at a more granular level, businesses retool and change their mix of investments all the time. Our central argument in this book is that there is something fundamentally different about intangible investment, and that understanding the steady move to intangible investment helps us understand some of the key issues facing us today: innovation and growth, inequality, the role of management, and financial and policy reform.”
― Jonathan Haskel, Capitalism without Capital: The Rise of the Intangible Economy

“What if, by contrast, you are more a user of intangible assets: say, the Amazon warehouse, using the knowledge of the routing algorithm, or Starbucks, using the franchise book? For these firms, the organization and so management would look different. You probably want to have more hierarchies and short-term targets, since you are less worried about information flows form below and more concerned about low performance and stopping influence activities.”
― Jonathan Haskel, Capitalism without Capital: The Rise of the Intangible Economy

“So, if you are predominantly a producer of intangible assets (writing software, doing design, producing research) you probably want to build an organization that allows information to flow, help serendipitous interactions, and keeps the key talent. That probably means allowing more autonomy, fewer targets, and more access to the boss, even if that is at the cost of influence activities. This seems to describe the types of autonomous organizations that the earlier writers, like Charles Leadbeater, had in mind. And it also seems to describe the increasing importance of systemic innovators. Such innovators are not inventors of single, isolated inventions. Rather, their role is to coordinate the synergies that successfully bring such an innovation to market.”
― Jonathan Haskel, Capitalism without Capital: The Rise of the Intangible Economy

“As the brilliant economist-educator Russell Roberts points out, chroniclers of the cult of celebrity have an extensive pedigree. Writing in The Theory of Moral Sentiments in 1759, Adam Smith points out, 'We frequently see the respectful attentions of the world more strongly directed towards the rich and the great, than towards the wise and the virtuous.' This perfectly anticipates the modern day cult around Z list celebrities. He argues that a fascination with others who are loved is part of our natural desire to be loved ourselves. So a natural obsession with celebrities is funneled toward managers, regardless of their virtue.”
― Jonathan Haskel, Capitalism without Capital: The Rise of the Intangible Economy

“But increasing the amount of equity finance in an economy is easier said than done: it is a project that would take decades rather than years. Some of the barriers are institutional: outside of the very small world of venture capital (of which more later) and the even smaller and newer field of equity crowdfunding, most businesses do not raise equity, and most financial institutions do not provide it. There are established agencies that can rate the creditworthiness of even quite small businesses, and algorithms to allow banks to quickly and cheaply decide whether to lend to them. Nothing similar exists for equity investment, and the equivalent analytical task (working out a company's likely future value, rather than its likelihood of servicing a fixed debt) is more complex. And cultural factors stand in the ways too: despite a very elegant financial economics theorem that shows that business owners should be indifferent between equity and debt finance, for many small business owners there seems a cognitive and cultural bias against giving away equity.”
― Jonathan Haskel, Capitalism without Capital: The Rise of the Intangible Economy

“The final way to respond to the difficulty of lending against intangibles is the most radical. It is for businesses to change their finance mix: specifically, to rely more on equity and less on debt. Should a business fail, equity owners have no recourse - they get nothing - so can afford to be relatively insouciant about the liquidation value of a business's assets. This makes equity a better way of funding businesses with few tangible assets.”
― Jonathan Haskel, Capitalism without Capital: The Rise of the Intangible Economy

“Indeed, the recurrent critiques of the lack of diversity of Silicon Valley's VC sector and the companies that it backs can be seen as a reflection of the importance of social capital. We might speculate that the reason VC's can seem like a clique is not because they the venture capitalists are unusually bad or cliquish people, but because the underlying model of the VC business thrives on dense social networks which will always tend to gravitate to cliquishness in the absence of the countervailing effort, and perhaps even then.”
― Jonathan Haskel, Capitalism without Capital: The Rise of the Intangible Economy

“While we might expect to see venture capital develop further in an increasingly intangible economy, it is not clear that governments can or should do much more to promote it than they already do. As Josh Lerner showed in The Boulevard of Broken Dreams (2012), once tax breaks or subsidies for venture capital get beyond a certain level, they tend to encourage dumb investments (since the tax gain on its own is enough for the investors to profit); since the entire point of venture capital is smart investment, very large tax breaks are self-defeating. For a country to grow its venture capital sector, time and favorable framework conditions are more important than additional subsidies.”
― Jonathan Haskel, Capitalism without Capital: The Rise of the Intangible Economy

“self-facilitating media node” (as late 1990s knowledge workers were sarcastically described by satirist Charlie Brooker).”
― Jonathan Haskel, Capitalism without Capital: The Rise of the Intangible Economy

“As their expanded name suggests, EMI wasn’t only a record label. In the 1960s the company was as interesting for its electrical activities as for its musical ones. In 1959 it had launched a commercial computer called the EMIDEC 1100; it also made color TV cameras, recording equipment, guided missiles, and kettles. The piles of cash brought in by Beatlemania helped create a culture of investment at EMI. One of the things they invested in was medical equipment research. Godfrey Hounsfield, the researcher behind the EMIDEC, began work on the first commercially viable medical scanner. As the project developed, he was significantly supported by the UK government, which provided over £600,000 of support or £7 million at 2016 prices (Maizlin and Vos 2012). Over four years, he and his team invented and built the first computed tomography scanner (CT or “CAT scanner”—the A stands for “axial”). This was a remarkable feat of science and engineering. For the first time, it allowed doctors to make accurate, 3D representations of patients’ soft tissues. This was a real medical breakthrough, transforming everything from brain surgery to cancer treatment. Hounsfield was piled with honors: he received a Nobel prize and a knighthood and was made a Fellow of the Royal Society. But from a commercial point of view, it was something of a failure for EMI.”
― Jonathan Haskel, Capitalism without Capital: The Rise of the Intangible Economy