The Changing Economies

globe-3898319_1920Have you noticed how fast the world is changing? More machines are produced and taking jobs while people are becoming more creative and working on their improvement. The phones are replacing your partners as more people are living virtual lives forgetting that real life is out there.

Investors are currently investing more in intangible assets such as investment in Artificial intelligence, R&D etc as this intangible economy is obviously on the rise.

According to Haskel and Westlake in their book ‘Capitalism without capital’, they explained with various examples how the old models that govern the economy need to adapt itself to embrace the fast evolving economy of intangible assets that is taking over the global economy.

Bill Gates gave his reviews on the book, outlining four justification Haskel and Westlake made of why intangible investments conduct itself differently from tangible assets:

  1. It is a sunk cost- investment goes if it does not turn out well, there are no physical assets to regain your capital.
  2. It generates spillovers that your competitors can take advantage and utilize.
  3. It is more scalable than a physical asset. After the first investment expenses, replication can be made without spending a dine.
  4. The possibility of having valuable synergies with other intangible assets as in the example of the iPod which combines Apple’s MP3 protocol, miniaturized hard disk design, licensing agreements, design skills together with record labels.

Looking towards the African continent with her increasing youth population, the rate of AI companies are seriously on the rise as most tech giants are investing to boost their businesses. The AI companies in other continents are not left out as there are synergies created which can lead to improved productivity for various companies and enterprises.

Below are two reviews on the book by Bill Gates and George Molloan, Wall Street Journal.

Reviews

“The portion of the world’s economy that doesn’t fit the old model just keeps getting larger. That has major implications for everything from tax law to economic policy to which cities thrive and which cities fall behind, but in general, the rules that govern the economy haven’t kept up. This is one of the biggest trends in the global economy that isn’t getting enough attention. If you want to understand why this matters, the brilliant new book Capitalism Without Capital by Jonathan Haskel and Stian Westlake is about a good an explanation as I’ve seen.”–Bill Gates
The historical view of ‘capital as something tangible persists and limits our thinking,’ the authors argue. To be sure, exactly which intangible assets qualify as capital can be debated endlessly. In Capitalism Without Capital, [they] choose a broad definition and explore its implications. In so doing, they provide insights into some puzzling questions . . . [and] make a good case that we don’t know as much as we think because some of our tools for measuring economic performance are out of date.”–George Molloan, Wall Street Journal

 

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