The News is Out: We Now Have an Intangible Asset-Based Corporate Economy

By | February 5, 2010

(Ed. Note:  A family emergency has been keeping me away from the office.  The good news is that I have been catching up on my RSS feeds and reading some really interesting stuff, albeit a bit late.  One of these interesting reads is a David Brooks piece dealing with corporate intangible assets.  Since this was published Christmas week, others may have missed it, too.  And, when pundits pick up on what you have been talking about for years, I means that the public is finally “getting” it!)

David Brooks’ Op-Ed in the December 22, 2009 New York Times raises some interesting points about our new intangible economy.  In this piece, entitled “The Protocol Economy,” Brooks recognizes that we have moved from an economy that makes “stuff” –that is, a physical goods economy—to one that deals in “protocols.”  (I think it would be more appropriate to call our evolving intangible economy a “process-oriented economy,” but I will go with Brooks’ characterization for this post.)  The point of Brooks’ piece is to highlight the need of economics to transform its models in order to deal with this new reality.

Brooks’ states:

Protocols are intangible . . . .[A] nation has to have a good operating system:  laws, regulations and property rights.”  He goes on to say, in relation to the high cost of entry and often miniscule cost of copying a product that is the embodiment of an intangible idea, “[y]ou’re only going to invest the money to make that first [product] if you have a temporary monopoly to sell the copies.  So a nation has to find a way to protect property rights while still encouraging the flow of ideas.

As an IP Strategist, I concur wholly with Brooks that laws have to be in place to allow those who invest in the intangible economy to recoup their investment.  However, I believe that Brooks’ argument begs the question of what is needed for this new “protocol economy” because, in my experience, relatively few business professionals even recognize that the rules of economic engagement have changed so markedly in recent years.  Breaking down Brooks’ assertion, he is advocating for detailed rules of the road when most people are still walking on dirt pathways.

Experts today agree that most, if not virtually all for some companies, of corporate value is in the form of intangible assets, which can exist in the form of intellectual property—patents, trade secrets, copyrights, trademarks– or as other, less recognized forms, such as contractual relationships, specialized employee knowledge and others.  These assets do not exist just because experts say they do; rather, they must be identified, captured, protected and leveraged in order for any value embedded in them to be realized.  Or, put another way, intangible assets cannot be measured unless they are managed.

So, while I agree with Brooks that the US and other countries need to focus more on intellectual property protection, I will choose to spend my time trying to demonstrate to people why and how they need to understand where their organization’s value lies and how to successfully capture it.  In other words, experts and pundits can say it is so—I intend to make it so.  Here’s looking forward to the Year of the Intangible Asset!

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