Jonathan Haskel and Stian Westlake describe the shift from tangible to intangible assets in the book, Capitalism Without Capital: The Rise of the Intangible Economy (2018). Tangible assets consist mostly of those objects that take up physical space: machines, factories, vehicles, desks, and computers. Intangible assets involve things like patents or procedures. To get a clearer picture, let’s briefly consider the four S’s of intangibles that Haskel and Westlake present.
“It should come as no surprise that things that one can’t touch, like ideas, commercial relationships, and know-how, are fundamentally different from physical things like machines and buildings.” (61) The potential for scalability provides great incentive for considering intangible assets. If you own one truck, you can only get so much use out of it. But if you develop a procedure, you can replicate that procedure many times. Knowledge, procedures, and systems can all be scaled as much as necessary for huge growth.
A concerning aspect of intangibles involves the potential for sunk costs. If someone invests in your company’s fleet of trucks, then those trucks could be taken back and sold, if your business fails. If someone invests in your idea and the business fails, then the cost becomes sunk. The risk of spillovers becomes another concern about intangibles, yet some astute people will know how to work this to their benefit. Thanks to large amounts of money from Beatlemania, the record company EMI began investing in other things, like science and technology. They began research for CT scanners. Then, after laying the groundwork, General Electric and Siemens licensed some of the technologies and took over the market, leaving EMI to vacate the CT scanning business in 1976. So, EMI started the research, but it spilled over and other companies profited from it.
Lastly, intangibles allow an increase in synergies. To illustrate, they use the example of microwave ovens. Toward the end of the Second World War, US defense contractor Raytheon began mass-producing cavity magnetrons, which was an important part of radar defense. Percy Spenser, an engineer with Raytheon “realized that microwaves from the magnetrons could heat food by creating electromagnetic fields in a metal box.” (80) Ultimately, what made the microwave oven possible is “the gradual accumulation ideas and innovations.” (80) Intangible assets can occasionally be applied, as a whole or in part, to another context.
While Haskel and Westlake only briefly mention aesthetic content, it seems clear that aesthetics are intangible assets. Imagine a store that makes you feel good whenever you walk inside it, regardless whether you purchase anything. From the layout to the colors to the sounds, order permeates this space, the parts work together to create an overall positive experience. While not all spaces make everyone feel the same way, it’s clear that this space must have been carefully designed. And this aesthetic design is an intangible asset.
People largely accept that the economy is shifting from tangible to intangible investment. This is demonstrated by the increase in investing in intellectual property, networks, brands, and knowledge. This makes aesthetics all the more important, even though aesthetics still seems secondary. If a product or process is packaged poorly, then people are less likely to care what that it does.
As aesthetics carries wide implications, giving some specific ideas is useful. I briefly mention three ideas here: order, fittingness, and integrity. Since Aristotle, order remains a commonly thought aspect of aesthetics. After attending a chaotic meeting, we might not describe it as ugly. But that’s a legitimate way to think of it. So, if you’re tasked with inventing a new system or procedure, then considering the aesthetic aspect of it involves creating order. Being clear might be the most important trait, but we should want more than that. Imagine a meeting or system that also brings even a small degree of pleasure or joy.
Fittingness means that a new feature or object fits in with what is already present. We’ve all likely experienced a process that felt like it didn’t fit, either within the organization as a whole or within our role in the organization. These can be disruptive in a bad way. The intangible assets and investments in an organization must fit together in some sense, even though some need to be more prominent than others. This flows from the previous notion of order.
The last idea is integrity. Thomas Aquinas listed integrity as one of his three conditions of beauty (along with proportion and radiance). Integrity carries the idea of wholeness or perfection. Since people are finite, perfection remains an ideal to strive toward, which is why we might prefer the notion of wholeness. For Aquinas, a thing has a specific number of parts according to its nature. For current times, we might think of wholeness without these predetermined guidelines. You’ve probably watched a movie or listened to a song, and thought that it was basically good, yet something was missing. Or there was too much of something, even if you weren’t sure what. Wholeness involves creating something that isn’t excessive or deficient. And this includes an organization’s intangible assets.
Although this is cursory, this overview suggests that as intangible assets and investments continue to become more prominent, people think about the aesthetic aspects of these assets. Aesthetics, when just an afterthought, rarely succeeds as well as when people consider aesthetics from the beginning.
The Featured Image comes from this post.