Intangibles and Market Value
Dan Montgomery
I’ve been using a slide in my presentations for several years, based on Baruch Lev’s article entitled “Remarks on the Measurement, Valuation, and Reporting of Intangible Assets” from the Economic Policy Review, Sept 2003. He shows that the percentage of intangible value relative to total market value peaked at 85% in early 2000, but even post crash, in August 2002, remained at 75%. Given the steep decline in the markets, one wonders how much of the decline has come from the intangibles. Has anyone seen or done any research on this? What percentage of market capitalization is based on intangibles now, as opposed to, say two years ago?
Dan
Daniel J Montgomery, CMC
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Joseph Hentz
As a rough approximation,
Market Cap - Book Value = Intangible Value
Thx - Joe
http://www.openyear.org/
Dan Montgomery
Yes, the math is right, but I’m wondering if anyone has actually calculated this out recently.
Thanks,
Dan
Daniel J Montgomery, CMC
Check out my Sustainable Leadership podcasts!
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Verna Allee
Here are two items of note, especially the first one. This article unfortunately is available by subscription only
● In January 2009 Intellectual Asset Magazine reports that corporate intangible values in the US have collapsed over the last 12 to 18 months, from a median of 70% of market capitalization to under 50% now. Intangibles are generally poorly managed.
● In a 2004 Accenture study, executives placed managing intangibles as a top priority (50% put it in the top three) even though they admitted that their management methods for that are poor or non-existent.
Verna
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Dr. Edna Pasher
Isn`t it only natural that in a pessimistic economic climate the estimate for this is declining?
Warmly,
Edna
Here are two items of note, especially the first one. This article unfortunately is available by subscription only
● In January 2009 Intellectual Asset Magazine reports that corporate intangible values in the US have collapsed over the last 12 to 18 months, from a median of 70% of market capitalization to under 50% now. Intangibles are generally poorly managed.
● In a 2004 Accenture study, executives placed managing intangibles as a top priority (50% put it in the top three) even though they admitted that their management methods for that are poor or non-existent.
Verna
Sent: Tuesday, March 17, 2009 6:35 PM
To: Value-N...@googlegroups.com
Subject: Intangibles and Market Value
I’ve been using a slide in my presentations for several years, based on Baruch Lev’s article entitled “Remarks on the Measurement, Valuation, and Reporting of Intangible Assets” from the Economic Policy Review, Sept 2003. He shows that the percentage of intangible value relative to total market value peaked at 85% in early 2000, but even post crash, in August 2002, remained at 75%. Given the steep decline in the markets, one wonders how much of the decline has come from the intangibles. Has anyone seen or done any research on this? What percentage of market capitalization is based on intangibles now, as opposed to, say two years ago?
Dan
Daniel J Montgomery, CMC
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Thomas Mathiasen
Hi Dan
No, I haven´t seen any recent analysis. But you raise a very relevant question that need to be answered. If nothing else, then to keep the status of Intangibles as a value carrier, also in times of crisis.
One effect that I have seen in my business, though, is an increasing interest for strategic IP audit, where a company´s IP portfolio and IP processes are mapped and scored in relation to the business strategy. One result is a clearer picture of the present and future value creation from their IP, as well as a clearer picture of future innovation efforts.
But whether the volatility of intangibles is any different from the volatility of tangibles is a good question. If both decline in value, the share does not have to decline.
Thank you for raising the question, Dan.
Br, Thomas
Thomas Mathiasen
Danish Intellectual Capital Management, DICM
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From: Value-N...@googlegroups.com
[mailto:Value-N...@googlegroups.com] On Behalf Of Dan Montgomery
Sent: 18. marts 2009 02:35
To: Value-N...@googlegroups.com
Subject: Intangibles and Market Value
I’ve been using a slide in my presentations for several years, based on Baruch Lev’s article entitled “Remarks on the Measurement, Valuation, and Reporting of Intangible Assets” from the Economic Policy Review, Sept 2003. He shows that the percentage of intangible value relative to total market value peaked at 85% in early 2000, but even post crash, in August 2002, remained at 75%. Given the steep decline in the markets, one wonders how much of the decline has come from the intangibles. Has anyone seen or done any research on this? What percentage of market capitalization is based on intangibles now, as opposed to, say two years ago?
Mary Adams
in Boston several years ago. This is rather long as a first post but
you have touched on an area about which I am very passionate.
The use of market capitalization minus book value to arrive at an
intangibles valuation was never a scientific exercise. Even so, we all
use it because it is a good shorthand way of pointing to the fact that
corporate value is no longer driven by what a company OWNS (tangible
assets) but, rather, by what it KNOWS (intangible knowledge assets
including people, process, IP and, of course, networks.
Analysts do not arrive at the corporate value by looking at the
intangibles as assets, they arrive at it by making judgments about
future earnings. Over time, there is lots of room to educate analysts
about how to improve their judgments of earnings using analysis of
intangibles.
The state of the art for valuation of intangibles is a discounted cash
flow based on the known and established uses of the intangible. This,
by the way, is the method used to value intangibles acquired in a
merger—and to put them on the balance sheet where they are mixed in
with assets valued at cost. When there is a downturn, these assets get
written down faster than the tangible assets, not because they have
lost more value but because it makes sense in current accounting
paradigms.
The accuracy of valuations will be improved once we have more market
data on individual intangibles transactions (this already exists but
at a low level of activity). But even then, the market will only be
able to value the intangible based on the current understanding of its
value. Paul Romer taught us that knowledge is an infinite asset and,
as such, its value is limited only by the potential use of that
knowledge. But infinite doesn’t mix well with business.
In business, we have to appreciate the infinite value of knowledge but
we have to operate by looking at cost and return. Most companies do
not know how much they spend on intangibles because the “cost” hits
the income statement and is not segregated. I advocate calling this
“intellectual capital expenditure” and tracking it separately.
Here's the logic: If you were going to build a factory, you would want
to know how much it would cost to build, maintain and operate—and then
calculate the potential return. Intangibles should be no different.
Analysis of intangible investments should ask, “What is the cost and
what is the return on this investment?”
Although he has been a great promoter of the field of intangibles,
Baruch Lev has convinced even the accounting regulators that we cannot
use cost because of the infinite nature of intangibles (I had this
confirmed to me just this week). In some ways, he is doing the field a
disservice, making it more complex than it is.
The investment perspective was used at a macroeconomic level by
Leonard Nakamura at the Fed in his estimates that the steady state US
investment in intangibles is roughly $5 trillion, which is about one
half of market value. Other data from the OECD shows that U.S.
national investments in intangibles now exceed investments in
tangibles.
So the bottom line on intangibles is that they represent at least (and
probably much more) than half of corporate “assets.” If you want more
on this discussion, use the search term “intangible cost” on my
website: www.i-capitaladvisors.com.
Thanks for the great conversations here.
Mary
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Vicki
follow the great reader comments on defining and measuring intangibles
here http://www.iam-magazine.com/blog/detail.aspx?g=50e187a2-1bf6-42e2-8825-bc8f53410bb2&q=intangibles
Victoria
>
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> 5KViewDownload
Laurence Lock Lee
Sent from my iPhone
I’ve been using a slide in my presentations for several years, based on Baruch Lev’s article entitled “Remarks on the Measurement, Valuation, and Reporting of Intangible Assets” from the Economic Policy Review, Sept 2003. He shows that the percentage of intangible value relative to total market value peaked at 85% in early 2000, but even post crash, in August 2002, remained at 75%. Given the steep decline in the markets, one wonders how much of the decline has come from the intangibles. Has anyone seen or done any research on this? What percentage of market capitalization is based on intangibles now, as opposed to, say two years ago?
Dan
Daniel J Montgomery, CMC
<image001.jpg>
John Maloney
This discussion on "Intangibles and Market Value" is disturbing. There is so
much doublespeak it would make George Orwell blush. What's most infuriating,
is the notion that we 'must know' the magic intangible formula and exact
data like some overweening managerial accountant.
Fact is, we don't know, and that's ok.
What we do know from Verna's reference is that there is a serious and huge
felt need. In 2009 we learned "...intangibles are generally poorly managed"
and in 2004 "...intangible management methods are poor or non-existent."
Easy to conclude establishment progress on intangibles is a bit wanting.
Whether it is deliberate or not remains to be discovered.
But wait a minute, we're 'managers,' we are supposed to know it all!
Few observations...
Remember a few posts ago: "No problem can be solved from the same level of
consciousness that created it." -Einstein
To conflate intangibles and 15th Century accounting would offend even most
proud Venetians and their respectable bookkeeping traditions and practices
still used today.
"The use of market capitalization minus book value to arrive at an
intangibles valuation was never a scientific exercise."
Whew! That's a relief. A Platonic-Aristotelian view of intangibles collapses
under the weight of its own hubris. Intangibles are about becoming, not
being or was. It's the flows and pathways of network intangibles that
generates economic activity - not neat, codified 'trans-actions.' (?)
Understanding intangibles is mostly incompatible with scientific management.
Rather, VNA achieves mastery of intangibles by elaborating and optimizing
intangible flow paths in complex networks.
Alvin and Heidi Toffler forecast in "Revolutionary Wealth" we could/will
double GDP in a generation by focusing on intangibles. It is a conservative
but sensible forecast.
Again, recall the whole premise of the question is about markets. By
definition each of us can only know a fraction about any market, that's one
thing that makes it a market. It is complex, emergent, non-deterministic. If
we have complete, profound knowledge of a market, tangible or intangible, it
simply ceases to be a market. That point is lost on many.
A good example is the sloppy mess created by the bailout fiascos and the
Obama Administration's drunken Keynesianism. Govt can't manage capital.
Sadly, if this continues, it will be four-and-out for BHO, IMHO.
(Makes me long for the days of the savings and loan debacle of the 80s or
accounting scandals like Enron.)
BTW, what about govt intangibles? Each of your US Members of Congress
'earns' $174,000.00 per year, plus lavish, lifetime benefits. In return,
these 'servants' win an 8% approval rating. Hmmmm.
Where is the concept of 'labor' in the intangible discussions? 20yo the UAW
deliberately rejected Lean & TPS -- disciplines that depend heavily on
intangibles. Well, their decision has ruined US auto manufacturing
companies. Same for teachers unions in California. The CA urban high-school
dropout rate is 50%, statewide it's 1 in 4. Ruined by belligerent unions and
greedy bosses.
(Please no thin political recriminations. These are just facts.)
Quite honestly, it is feasible to believe that intangibles have increased in
value as a ratio to fixed assets, since we all know it's people, not
tangibles, that will get us out of the mess we are in...
Economic upheavals, such as the transformation from slave to subject,
subject to citizen, from agrarian to industrial, from industrial to
information... are always bumpy. It's where we are 2-day. Simultaneously,
value networks, VNA and intangibles are ushering in the next great episode
of economic growth. It will be sharper, faster and far more prosperous than
all other great transformations combined!
-j
-----Original Message-----
From: Value-N...@googlegroups.com
[mailto:Value-N...@googlegroups.com] On Behalf Of Mary Adams
Sent: Wednesday, March 18, 2009 4:54 AM
To: Value Networks
Subject: Re: Intangibles and Market Value
tom abeles
I have always wondered about the market cap/asset spread as a measure of the intangible, "knowledge" when that market cap rises with lay-offs; and companies can lay-off knowledge workers and ship that work overseas; or education increases a persons value to a company. What happens when China, just by increasing their number of graduates, on a percentage basis can have a larger knowledge workforce?
Isn't it interesting that markets "work" on imperfect knowledge and yet neo-classical economics assumes perfect knowledge for its models? In other words, there is an advantage in having more perfect knowledge? I guess that is why the AIG exec's cut their deal for a bonus knowing more than the market about the imminent collapse as they planned their bailing so as to be out B4.
Maybe it's not the "intangibles" but rather the networks- who is connected to whom that is the factor and not the genius who can turn coal into diamonds. Maybe it's social networks. Who graduated from where or is the brother of or connected to whom? We are seeing this on Wall Street, mainstreet and Washington. Even the reporters in DC choose what they report under penalty of loosing their "connections". Is the "greed" just a visible manifestation of the illusion?
After all VNA is a measure of the value of the connectivity which allows the flow of information which like stream diversion, chooses how to route limited resources.
thoughts?
tom
tom abeles
Ken Vanosky
I’m guessing that most of the participants to this conversation are well aware of the two somewhat dated but still relevant books on this subject by Price Waterhouse Coopers personnel (John Wiley & Sons, Inc. publications). The authors point to the earnings reporting driven problems in the capital markets and essentially call for a Value Reporting revolution in accounting. For those that aren’t familiar with the books here are the references:
The Value Reporting Revolution: Moving Beyond the Earnings Game by Robert Eccles, Robert Herz, E. Mary Keegan, and David M. H. Phillips (2001)
Building Public Trust: The Future of Corporate Reporting by Samuel A. DiPiazza Jr. and Robert G. Eccles. (2002)
Cheers,
Ken Vanosky
> </html
Michael Cayley
1. This issue of linking intangibles to corporate value is important. I was hinting at that with my "The new normal" post asking how the ideas behind network management methods can be made accessible so that they will be widely adopted and we will achieve the dramatic doubling of GDP that John has quoted.
2. I feel that market cap minus the value of tangible assets is a good general pointer. It provides some level of insight into the strengths of a company but market cap is subject to overall market context, even more than a prescribed earnings forecast, so the company specific insight needs to be weighed against overall market conditions. Stocks in a segment that were trading at 20x earnings a year ago maybe trading at 5x or 1x earnings now. Does a benchmark against this give us insight that we can act on?
3. My proposed approach to getting to more actionable insight focuses on corporate social capital and more specifically scaled up forms of social capital that have a associated digital artifact (i.e. social media or digital footprint). I did not set out to measure intangible assets specifically. I was trying to carve out social media's piece within the traditional area of Goodwill. I don't think efforts like this date back to the 15th century, but I could be wrong. I actually argue that traditional accounting methods already account for alot of corporate activity. The challenge is to account beyond traditional accounting. I have received some feedback that, the approach would carry a lot of implicit and specific insight into the value of at least a portion of a company's intangible asset base and it would point corporations in the direction of network management methods (from broader adoption of social media, Enterprise 2.0, to very sophisticated methods like value networks. I have asked for feedback on the proposed approach from this group and from many of you individually. The dets are between pages 40 & 50 in my ebook, "Introducing Social Capital Value Add" available here: http://socialcapitalvalueadd.com/share-the-scva-ebook/ more feedback always welcome.
4. SCVA is akin to valuation methods like brand valuation and Economic Value Added. A valuation is a snapshot in time. I think this recognizes that the ultimate outputs of value networks are emergent. It is a snapshot. But it does put the emphasis on trying to estimate the quality of future earnings, not the market cap which is subject to broader market trends. To enable one to track SCVA along with brand, I followed Interbrand's approach of beginning with a six year consensus view of future earnings. You can attack this given volatility but the goal in my mind is to translate the merits of network management methods into terms that CEOs, Boards & investors can act on. We know that Interbrand/Businessweek's list of the most valuable brands is the 3rd most monitored benchmark by CEOs. Brand valuation becomes a hot topic during M&A activity.
5. Of course earnings forecasts fluctuate with market too. But unlike brand valuation, SCVA does not track against particular products/revenue lines. This removes the focus from brand management to managing the network to optimize for value defence & creation. Because SCVA proposes adopting approaches that have been used to quantify social capital and then translating that assessment into a discount rate to be applied to future earnings, the company specific discount rate should provide specific insight into a particular company's strengths of earnings. So for example, Company A & B may have the exact same stock price and earnings, but Company B's SCVA valuation may be higher than A's because it is deriving its value differently. Ultimately SCVA may be interpretted more as risk assessment than a valuation approach.
Now ... I have been interrupted by phone calls & IM messages related to Verna's visit to Toronto today, I forget what I was talking about and I have already written something that is too long for anyone to pay attention to.
Have a great day! BTW, I am not declaring SCVA as the golden grail. I hope that this continues to stimulate this discussion. The more the better. I do hope that we can design a multi-client research & development project to further explore the usefulness of SCVA and in any event, I hope that the need to make the amazing thinking of this group more accessible to management everywhere is recognized as a shared goal.
Cheers,
Michael
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Let`s go back to another definition of Intellectual Capital: Potential for future earnings.
Isn`t it only natural that in a pessimistic economic climate the estimate for this is declining?
Warmly,
Edna
Here are two items of note, especially the first one. This article unfortunately is available by subscription only
● In January 2009 Intellectual Asset Magazine reports that corporate intangible values in the US have collapsed over the last 12 to 18 months, from a median of 70% of market capitalization to under 50% now. Intangibles are generally poorly managed.
● In a 2004 Accenture study, executives placed managing intangibles as a top priority (50% put it in the top three) even though they admitted that their management methods for that are poor or non-existent.
Verna
From: Value-N...@googlegroups.com
[mailto:Value-N...@googlegroups.com] On Behalf Of Dan Montgomery
Sent: Tuesday, March 17, 2009 6:35 PM
To: Value-N...@googlegroups.com
Subject: Intangibles and Market Value
I’ve been using a slide in my presentations for several years, based on Baruch Lev’s article entitled “Remarks on the Measurement, Valuation, and Reporting of Intangible Assets” from the Economic Policy Review, Sept 2003. He shows that the percentage of intangible value relative to total market value peaked at 85% in early 2000, but even post crash, in August 2002, remained at 75%. Given the steep decline in the markets, one wonders how much of the decline has come from the intangibles. Has anyone seen or done any research on this? What percentage of market capitalization is based on intangibles now, as opposed to, say two years ago?
Dan
Daniel J Montgomery, CMC
Check out my Sustainable Leadership podcasts!
www.blogtalkradio.com/sustainableleadership
Blog: www.sustainableleadership.wordpress.com
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David Meggitt
Thank you for this insight into the mindset of the analyst.
The following echoes the quest for numbers by that breed:--
Last November a study by researchers at Newcastle University, UK , was
published under the banner of the accountancy body ACCA as
"Narratives: are they material?"
Answer: For the analyst "No!".
Present at the discussion of the report was the Head of Group Finance
Operations of one of the UK's largest banks.
Responsible for compiling the annual report, it consisted of over 700
pages! with much narrative...dealing with the intangibles.
Fortunately, following a question from me (with an angle on the
tangible / intangible issue) he did confirm that it was read and
appreciated by employees!
I suspect the analysts know what they can rely on, although an
education of interpreting intangibles would be helpful.
One approach to sensemaking from the mass of published data has been
refined by a colleague who, based on research for "Tomorrow's Company"
conducted by the UK RSA has developed the following proprietary
approach featuring Business Sustainability Review........
Business Sustainability Review (BSR) assesses a company’s long-term
business growth potential following the principles of Sustensis’
Symbiosa Business Sustainability (SBS) approach. Any company or any
investor interested in assessing long-term prospects of the business
(e.g. as part of any M&A due diligence) will find this service of
great value. The service also delivers benefits for companies wishing
to assess their priorities for a major business transition.
The purpose of this review is to analyze the coherence of the
company’s growth components and the consistency of the implementation
of its objectives in the context of long-term strategy. This is the
easiest way to dramatically increase the company’s effectiveness
because business coherence reduces waste and any savings are added
straight to the bottom line. The review consists of workshops,
interviews and three surveys containing 116 purely non-financial
criteria:
1. Balanced Growth Assessment – what is the growth potential and how
well it is balanced, covering:
Strategy and Values (Strategic objectives, strategy clarity, Corporate
Governance policies)
Leadership (Management style, financial rewards, participation and co-
operation)
Management of business growth (The clarity and managerial skills)
Human Capital Management (Organisation, job structure, competencies,
rules and resources)
Relationship Management (Relationships with shareholders and other
stakeholders)
2. Business Longevity Assessment reviews opportunities and risks for
business growth, providing an overall investment risk, important for
institutional investors.
3. Relative Ethical Assessment assesses how ethical is the company’s
business and hence its Reputational Risk – a key factor in customer
retention.
refer : http://www.sustensis.co.uk/page7.html
One outcome i the compilation of tables with companies ranked against
each other.
Sustensis is fully aware of and endorses the role of value networks
whilst giving priority to promoting services such as the one
highlighted.
Although unique at the time of its introduction, emulators are
emerging which will tend to emphasise the relevance of intangibles in
assessing long term growth potential with less risk.
David Meggitt
John Maloney
Hi –
“who is connected to whom that is the factor and not the genius who can turn coal into diamonds. Maybe it's social networks. Who graduated from where or is the brother of or connected to whom? “
Bunko artist Bernie Madoff operated by developing the confidence intangible through an affinity network. It is called a ‘long con’ or large and lengthy intangible confidence (con) game development to swindle people. His affinity network could be characterized by homophily. http://en.wikipedia.org/wiki/Homophily Being ‘out’ of the scam was as important as being ‘in.’ So the answer is yes, but of course networks and intangibles have a dark side too…
… markets "work" on imperfect knowledge…”
The root of a lot of the problems is current business school curricula. They teach ‘maximization’ of gain and ‘minimization’ of loss. This is patently unsustainable. Ask any hunter or fisherman what sustains them. It is not the one they kill or catch today, but the ones that get away (loss), so as to furnish a meal or catch another day (gain). Thriving ecosystems could be seen as badly inefficient, since each inhabitants seems to optimize, to be interdependent, to have living behaviors in a certain value network equilibrium, not to be maximized. Maximal inhabitants like sanctimonious govt officials and hedge fund reprobates eventually choke off and kill all the surrounding organisms. No matter, b-schools drill the zero-sum-game into the heads of slobbering acolytes churning out greedy automata with impunity.
-j
From: Value-N...@googlegroups.com [mailto:Value-N...@googlegroups.com] On Behalf Of tom abeles
Sent: Thursday, March 19, 2009 10:02 AM
To: value-n...@googlegroups.com
> </html
David Meggitt
the Madoff network for what it turned out to be created the analysis
tool that is now freely available and well publicised.
It is called Exchange Analysis, part of the VNA toolkit, and can be
found on the How-To Guides and Tools tab of www.value-networks.com
It provides a powerful set of questions to probe the aspects of
network behaviour.
People may find it convenient to regroup the questions and issue them
to participants who wish to probe the efficacy of any group work.
Look to the file on this forum here:- http://tinyurl.com/dlajgb for an
example of this which I now use.
I am coming to the view that next year, if not earlier, it could be
construed as being professionally negligent for not using this
approach to explore the cost / benefit / risk attached to critical
sets of activities in corporate affairs.
David Meggitt
VNA: Value networks and analysis
On Mar 19, 11:47 pm, "John Maloney" <jheuris...@gmail.com> wrote:
> Hi -
> "who is connected to whom that is the factor and not the genius who can turn
> coal into diamonds. Maybe it's social networks. Who graduated from where or
> is the brother of or connected to whom? "
>
> Bunko artist Bernie Madoff operated by developing the confidence intangible
> through an affinity network. It is called a 'long con' or large and lengthy
> intangible confidence (con) game development to swindle people. His affinity
>
> . markets "work" on imperfect knowledge."
Mary Adams
PWC UK maintains a great site on corporate reporting:
http://www.corporatereporting.com/index.html
And one of the authors of Value Revolution, David Phillips, writes the
Corporate Reporting blog: http://pwc.blogs.com/corporatereporting/
Another interesting book to consider is The New Capitalists: How
Citizen Investors are Reshaping the Corporate Agenda by Stephen Davis,
Jon Lukomnik and David Pitt-Watson.
I personally have come to the conclusion that saying that intangibles
were never meant to be valued monetarily is a cop out. It is true
that, because knowledge is an infinite economic good, the old models
will never apply. But if I am in business, I have to be able to
connect intangibles with my ability to earn a profit. Ignoring the
question won't help. And it keeps the serious consideration of
intangibles out of the mainstream.
David Meggitt
People tend to forget, even yet, that a key property of the subject of
this forum is that for the first time it is possible to see how the
flow of intangibles interacts with the flow of tangibles that do have
a monetary value.
And to represent that in the same model/ visualisation / whatever.
With that simple but extraordinarily insightful revelation it is
possible, through appropriate analysis, to examine how intangibles can
be converted into deliverables of monetary value. It even extends that
to perceived value.
So, far from a cop out, you now have a process for achieving what you
have always wanted!
Incidentally. my own past experience of developmental economics and
investment planning for infrastructures that are appropriate for
mankind also looks at cost / benefit, where benefit is not necessarily
a financial measure.
This can be applied to different types of projects. For example, a
recent assignment was looking at the costs and benefits of an
extensive information system. We knew the costs of people partaking in
it and the outputs sought through numerous reports, serving different
constituencies. Optimising the whole and eliminating zero - sum
manifestations can lead to substantial cost reduction for the same or
enhanced benefits. The ROI follows from the cost of implementation.
There is also the fact, unstated so far, that financial information
used by analysts is historical and even then open to interpretation to
say the least.
David Meggitt
John Maloney
Thanks for your message, references and links.
" intangibles were never meant to be valued monetarily is a cop out."
Hunh? How did you ever get this impression?
" Ignoring the question won't help. And it keeps the serious consideration
of intangibles out of the mainstream."
Wow! That is so far from this discourse, not sure where it is coming from!
Most people here are committed to achieving mastery of intangibles. Baruch
Lev is in the NYC cluster and appears and interacts with us. We have been
conducting action/research clusters on intangibles for over a decade. All
are absolutely committed to the comprehensive understanding, visualization,
optimization and monetization of intangibles.
Because of all this background research and years of effort and passion, we
have come to learn that intangibles require hands-on work with analytical
tools built specifically for the activity like value network analysis.
What people are reacting to is the grave problem we have been having for a
decade -- blowhards that have zero experience working with network
intangibles and expecting, all the same, to fit them into neat little GAAP
rules or some unifying theory of managerial accounting. In a word,
forgettaboutit!
Mary, there are no vicarious intangibles; but value networks are empathetic.
In other words, 'you need to experience it to believe it.' Until people sit
down, using comprehensive methods like value networks, in context, they will
never arrive at any degree of mastery of intangibles.
There are legions of gurus that have come along for decades and applied
their little craft to intangibles in highly specific, hi-context settings
and been successful. Problem is, it won't scale. We can listen to wooly
professors and read lofty papers all-the-day-long with no results. You don't
read book on the history of flight then go fly a plane -- you get out there
and FLY THE PLANE!
The genius of VNA is that it is scalable, self-service, context-independent,
fast and easy to adopt. It gives immediate and very satisfying results for
identifying, visualizing, optimizing and monetizing broad networks of
intangibles and tangibles. VNA is the grail of intangibles by making them
negotiable and fungible. For intangibles, VNA is sympathetic and
polysynthetic using affixes and systems to achieve stunning outcomes. These
key properties have been absent from all intangible methods until now...
-j
-----Original Message-----
From: Value-N...@googlegroups.com
[mailto:Value-N...@googlegroups.com] On Behalf Of Mary Adams
Sent: Friday, March 20, 2009 4:36 AM
To: Value Networks
Subject: Re: Intangibles and Market Value
Charles Ehin
----- Original Message -----From: John MaloneySent: Thursday, March 19, 2009 5:47 PMSubject: RE: Intangibles and Market Value
Hi -
"who is connected to whom that is the factor and not the genius who can turn coal into diamonds. Maybe it's social networks. Who graduated from where or is the brother of or connected to whom? "
Bunko artist Bernie Madoff operated by developing the confidence intangible through an affinity network. It is called a 'long con' or large and lengthy intangible confidence (con) game development to swindle people. His affinity network could be characterized by homophily. http://en.wikipedia.org/wiki/Homophily Being 'out' of the scam was as important as being 'in.' So the answer is yes, but of course networks and intangibles have a dark side too.
. markets "work" on imperfect knowledge."
The root of a lot of the problems is current business school curricula. They teach 'maximization' of gain and 'minimization' of loss. This is patently unsustainable. Ask any hunter or fisherman what sustains them. It is not the one they kill or catch today, but the ones that get away (loss), so as to furnish a meal or catch another day (gain). Thriving ecosystems could be seen as badly inefficient, since each inhabitants seems to optimize, to be interdependent, to have living behaviors in a certain value network equilibrium, not to be maximized. Maximal inhabitants like sanctimonious govt officials and hedge fund reprobates eventually choke off and kill all the surrounding organisms. No matter, b-schools drill the zero-sum-game into the heads of slobbering acolytes churning out greedy automata with impunity.
Laurence Lock Lee
Good point Tom. In my research http://www.optimice.com.au/documents/CorporateSocialCapitalandFirmPerformance.pdf I hypothesised that “connections” were a key intangible impacting on firm performance and built a market centrality measure into my model for “Corporate Social Capital”. However there were other intangible attributes in the model which included human capital, internal capital, absorptive capacity and financial soundness. My findings were that indeed market centrality does have an impact (but not universally). Human capital and financial soundness were the most predictive of firm performance.
Btw …. We are currently building a site from our work around visual markets http://www.visualmarkets.com.au/ . Not much there at the moment but this will fill up over the next couple of months as we build the report. We are concentrating on the Australian ICT market initially (driven purely by commercial needs) but intend to expand this over time to other areas of opportunity.
rgds
Laurence Lock Lee PhD
Partner, Optimice Pty Ltd
Ph: +61 (0)407001628
Blog: http://governanceandnetworks.blogspot.com/
Learn to network, then network to learn
> </html
Benoit Couture
John,
David answered to Mary that: |
|
"Incidentally. my own past experience of developmental economics and investment planning for infrastructures that are appropriate for mankind also looks at cost / benefit, where benefit is not necessarily a financial measure."
|
You say that VNA is for the intangibles' monetary measurements.
Which is is?
Is VNA's meaning of intangibles confined to the business' view of it? or are we accepting intangibles to encompass the whole scope of life's value, as in home life, cultural, social, and political management of economics?
Thanks for the clarification. Benoit Couture
|
|
|
Benoit Couture
I view intangibles as the source and the aim of that which can be calculated monetarily,from investment to profit or to bankrupcy.
Intangibles are the energy that drives us from creativity and relationships to development and sustainabilty.
Intangibles provide the motivation to move from thinking to acting to persevering and to succeed or they can go the other way around, leading entire populations into conflicts against each other.
Intangibles can be qualified by witnessing the quality of that which can be quantified, but we cannot account for them monetarily, for when we try, it becomes like if we tried to catch the wind and to bottle it up. |
|
You wrote:
" It is true that, because knowledge is an infinite economic good, the old models will never apply." |
I see an ingrained mix up here caused by hurry and the tyranny of urgency. From "the old models" the sentence jumps to "will never apply". It is written from the past to the future, skipping the present.
Economic is the word used to describe the framework of healthy intangibles that are produced by the activities of cultural, social and political activities.
Somehow, in the transition from the sovereignty of monarchy to the sovereignty of democracy and of the Rule of Law and in the evolution of time since, the business sector has captured the word economic and made it its own private affair, at the expense of all else.
We now see the results in terms of the motivation deficiencies to health, education and the spread of all inequalities that elevate the insecurity of violence, erupting with many new forms and faces, rising along with new business models that break away from the old, without any regard for the cutivation of its own history.
Cat Stephens sings with protest: "Work hard boy, you'll find, one day you'll have a job like mine, job like mine. For I know for sure that nobody should be that poor!"
The apreciation of the present instead of a constant promise for a better future that keeps everyone stressed out, is one fabric of the old that must go, but through renewal into improved conditions, not from breaking away as we've seen accelarating since 2nd world war.
Breaking away kills the motivation to do the tedious and necessary work.
Instead of breaking away from old models, we need to move on the path of their renewal. Sure, old models have to vanish, but we need to let them vanish like humus that feeds the renewal of nature through the seasons.
To me, healthy home life is the source of healthy intangibles, be it for cultural, social, economic and/or political activities, because it is living and relating is shaped.
The revolution that VNA offers, is not to destroy home life, but to rather allow for its healthy and continuous renewal.
In that sense, the history of humanity can be viewed and tapped into personally, adjusted to communally and adapted globally to the idea that we are on a universal quest for "Home".
Cheers,
Benoit Couture
Edmonto, Canada
|
|
|
tom abeles
I was intrigued by Verna Allee's paper on Value Network Analysis in 9(1) issue of J Intellectual Capital. She gives an example of converting a person's expertise into a marketable product as creating intellectual capital- monetizing an intangible. We see this with folks who have taken highly quant theory such as complex dynamics and mapping it with human resource management and a number of similar management tools, adding "value" or legitimizing what had been on the edge. One might sense that VNA is similar, monetizing social network analysis into the corporate world? But what seems important is that these intangibles lack credibility if they can't be monitized. The problem is that there is not necessarily a readily available conversion formula like trying to put a value on a tree sitting in the middle of a development or assessing a person's property in order to compensate them for a loss or for a condemnation sale. And that is why Lev has problems with his accounting approach. It is like asking someone to turn lead into gold because the King demands it be done.
I find it interesting that there is an attempt to claim that it is "intangibles" which drive the business or new product development. That is avoiding the issue of personal talent in science, poetry or sports. it's a way to avoid the idea that some folks a plain smarter or can hit a ball so well that they get a 25 million dollar 5 year contract. Talking about intangibles is the same as trying to avoid dealing with human potentials in order to redefine it as a marketable product. On the other hand, there is the standard deal where a person is promoted to their level of incompetency, often putting them in a node where they can exercise considerable control for good or evil or incompetently cause a crash of the system. There must be some excellent examples of people building routes around toxic nodes.
cheers
tom
tom abeles
From: lloc...@optimice.com.au
Get quick access to your favorite MSN content with Internet Explorer 8. Download FREE now!
Mary Adams
personal talent:
The field of intellectual capital recognizes three kinds of capital:
human, relationship and structural. Human capital includes all the
talents and competencies that people bring to an organization.
Relationship includes all the networks and structural capital is the
knowledge that remains in a company--much of it in processes (which
are can also be analyzed as networks). But the point is that this
perspective does give value and attention to the role of people in an
organization. Everyone has their own definition of intangibles. But
using the IC definition points us in the right direction.
Mary
verna...@valuenetworks.com
people have been trying to solve the question. Trying to put a value
on intangibles is a "static" view of intangibles as a kind of "stock"
that just sits there in the warehouse. to me the interesting question
is the "dynamic" quesiton of how intangibles convert into tangible
value. No, this is not the mad pursuit of the magic formula, but
rather a question of how we can understand value as an emergent
property of a system, that system being a set of relationships and
interactions that utilize availble resources.
>
> - Show quoted text -
verna...@valuenetworks.com
effective action, resource utlization and outcomes in any purposeful
organization or network. Some value networks are focused only on
economic outcomes, some only on social outcomes and others on both.
(The default analysis catetories of VNA include impact on an industry,
society and the environment and apply to any value network).
The difficulty in business and economic modeling in the first place is
that "business" and "society" (and "environment" for that matter) have
been treated as if they are somehow separate concerns and not elements
of one system. We have all forgotten that economics is supposed to be
a "social science." We treat is as if it is an exact science and it is
not.
We will know we are finally making real economic progress when
distinctions between "for profit," "not-for-profit," "business" and
"society" are no longer useful distinctions within economics. Trying
to separate business in general and society is about as helpful as
separating the nervous system from the circulatory system in a human
body. You might be able to do it in theory but not in real life. Or to
go back to Russ Ackoff - cutting a cow in two does not give us two
cows - it makes a mess. Real systems can't be cut into parts and we
have somehow treated economics as if it can be separated from society
and the natural environment. Fortunately there are a few brave (and
frequently mocked) souls suggesting alternative ways to do business
and economic modeling.
Verna
On Mar 20, 12:26 pm, Benoit Couture <benoit...@yahoo.com> wrote:
> John,
>
> David answered to Mary that:
>
> "Incidentally. my own past experience of developmental economics and investment planning for infrastructures that are appropriate for mankind also looks at cost / benefit, where benefit is not necessarily a financial measure."
>
> You say that VNA is for the intangibles' monetary measurements.
>
> Which is is?
>
> Is VNA's meaning of intangibles confined to the business' view of it? or are we accepting intangibles to encompass the whole scope of life's value, as in home life, cultural, social, and political management of economics?
>
> Thanks for the clarification.
>
> Benoit Couture
>
>
Graham Douglas
Happily, the number of "brave souls" is growing as can be seen, for example,
at Corporation 20/20
http://www.corporation2020.org/ .
Best wishes to all the brave souls in this VNA group.
Graham
GRAHAM DOUGLAS FOUNDER, INTEGRATIVE FEDERATION Achieving Sustainable
Development http://www.integrative-thinking.com integ...@optusnet.com.au
Topic Editor, Sustainable Development, Encyclopedia of Earth
http://www.eoearth.org/
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17:58:00
Verna Allee
speakers, Raj Thermotheram are both participants in the Global Finance
Initiative of iScale (formerly GAN-Net) where colleague Oliver Schwabe and I
have been supporting the exploration of the global finance system with
network analysis. There is an entirely different and emergent global finance
system that only receives a fraction of the attention of the traditional
finance system. It is very interesting how when old systems seriously begin
to break that much more energy is spent on trying to devise "fixes" than to
explore "alternatives." VNA and SNA reveal some fascinating patterns. The
initial report on this hopefully will be published by June on the iScale
website as well as ValueNetworks.com.
Verna
----
Benoit Couture
Verna,
I really apreciate you're taking the time to answer my lack of knowledge as you did. As I mentioned several times, I write as an outsider of the business community, observing the world from my position of stay-at-home dad, hoping to contribute a kitchen table angle to the development of vale-networks toward a better present for all.
Your response allows me to hope that the western world leadership will soon be positioned to see the end of the global crisis, with the view that the sane economy of capitalism is in fact a compatible basis to eliminate most of the current divides between Commonwealth and Communism, getting ready to engage along with the socialists societies on an honest and peaceful partnership.
|
|
Dr. Edna Pasher
"It is very interesting how when old systems seriously begin to break that much more energy is spent on trying to devise "fixes" than to explore "alternatives."
Edna
Yes, Good group Corporation 20/20. Founder Allen White and one of the June
speakers, Raj Thermotheram are both participants in the Global Finance
Initiative of iScale (formerly GAN-Net) where colleague Oliver Schwabe and I
have been supporting the exploration of the global finance system with
network analysis. There is an entirely different and emergent global finance
system that only receives a fraction of the attention of the traditional
finance system. It is very interesting how when old systems seriously begin
to break that much more energy is spent on trying to devise "fixes" than to
explore "alternatives." VNA and SNA reveal some fascinating patterns. The
initial report on this hopefully will be published by June on the iScale
website as well as ValueNetworks.com.
Verna
From: Value-N...@googlegroups.com
[mailto:Value-N...@googlegroups.com] On Behalf Of Graham Douglas
Sent: Sunday, March 22, 2009 2:30 PM
To: Value-N...@googlegroups.com
Happily, the number of "brave souls" is growing as can be seen, for example,
at Corporation 20/20 http://www.corporation2020.org/ .
Best wishes to all the brave souls in this VNA group.
Graham
GRAHAM DOUGLAS FOUNDER, INTEGRATIVE FEDERATION Achieving Sustainable
Development http://www.integrative-thinking.com integ...@optusnet.com.au
Topic Editor, Sustainable Development, Encyclopedia of Earth
http://www.eoearth.org/
----- Original Message -----
From: <verna...@valuenetworks.com>
To: "Value Networks" <Value-N...@googlegroups.com>
Sent: Monday, March 23, 2009 6:30 AM
>
John Maloney
Organizational narcissism and management arrogance can be even much worse
and harmful…
_____
Here is how friend of ValueNetworks.com Shoshana Zuboff describes failed
change in Business Week this week in, ‘The GM Solution: Life Boats, Not Life
Support.’
“And in 2007, with over a million unsold cars in inventory, Mark LaNeve, GM’
s head of North American Sales and Marketing, protested the need for change.
“It’s not like we have some crisis,” he told the Wall Street Journal in its
Feb. 9, 2007 edition.”
“None of this is exactly "rational" behavior, but it tracks with what
institutional economists have observed: The more a practice is
institutionalized (history, legitimacy, interdependence, codification), the
more it is taken for granted, the greater the energy that goes into
maintaining it, and the more relentless the resistance to change. In 2006,
GM's CEO Rick Wagoner responded to the call for "new blood" in GM's
leadership with this screed in Newsweek: "These are sophisticated problems
with historical tails that run back 80, 90 years. The chance of someone
coming in and understanding our business…is absolutely microscopic."
http://valuenetworks.com/public/item/218470
_____
-j
Charles Ehin
distinctions between "for profit," "not-for-profit," "business" and
"society" are no longer useful distinctions within economics. Trying
to separate business in general and society is about as helpful as
separating the nervous system from the circulatory system in a human
body."
----- Original Message -----To: Value Networks
Matt Moore
Verna,
> Global Finance
> Initiative of iScale (formerly GAN-Net)
Is any of this looking at:
- The black & gray economies
- Barter
- Microfinance & P2P lending
Cheers,
Matt
Verna Allee
http://www.scalingimpact.net/?p=highimpact#gfi
One of the interesting patterns emerging in this work is that there are
almost two completely different finance systems. One of course is
traditional finance, which network analysis shows as a very well connected
network of institutions. The other system centers on sustainable investment,
micro lending, alternative financing, socially responsible investment and
centers around a number of non government and banking institutions. At the
moment there does not appear to be much connectivity between the two. It
will be really interesting to see what emerges in the next five years. Of
course there are a lot of people focused on the traditional network and
scrambling for "fixes" while in the background is another economic network
quietly going about its business and still largely flying under the radar.
Cheers,
-----Original Message-----
From: Value-N...@googlegroups.com
[mailto:Value-N...@googlegroups.com] On Behalf Of Matt Moore
Sent: Monday, March 23, 2009 7:23 PM
To: Value-N...@googlegroups.com
Subject: RE: Intangibles and Market Value
Mary Adams
I share your vision of the possibilities (and even inevitability) of
sweeping changes in the world economy.
But when I used the phrase cop out, it reflected my daily work with
managers and workers that are caught in the middle of this shift. The
knowledge economy is already here. The dynamics of business are
changing. Yet to get financing, to win investors, to recruit business
partners, keep their businesses going, and support their families,
most businesspeople have no choice but to work within the system that
exists today. What’s your advice to them?
Benoit Couture
Verna, Matt and all,
I've been sending some our conversation to a colleague of networking who specialises in Community Currencies. He recently gave a lecture that fits like a glove into where we are now touching. Before the crisis, this might have not gotten too many people's attention but now, see what you think:
|
Verna Allee
I am going to take a guess because I am too pushed to view the video, but people who speak of Community Currencies or Alternative Currencies are definitely part of the picture of the second financial system. The alternative currency people are most familiar with is airline miles. There are many other types of credits and exchange units that people use to support efforts in social good such as caring for the elderly.
Do bear in mind thought that alternative currencies is still a monetary system in the sense that it reduces unlike goods and services to a common unit of measure. In true barter there is no common unit of measure thus every exchange is unique. VNA is closer to barter because I firmly believe that intangibles cannot be reduced to a common unit of measure. It is a huge trap that many in the intangibles field have fallen into.
Verna
From: Value-N...@googlegroups.com
[mailto:Value-N...@googlegroups.com] On Behalf Of Benoit Couture
Sent: Tuesday, March 24, 2009 6:40 AM
To: Value-N...@googlegroups.com
Subject: RE: Intangibles and Market Value
|
Verna, Matt and all, |
Verna Allee
recruit investors and partners - use the intangibles story to show how you
are building the strategic capability to create even greater future success.
We got an important backer for ValueNetworks.com in large part by showing
them a value network map of the relationships and value flows that we are
activating.
When you do an ROI for a project show the impact on intangibles as well as
the financial impact. I don't know how many customers have said to me "I
wish we had done VNA before we made our outsourcing decisions." Outsourcing
is a decision that can make perfect sense on the financial side but can have
a huge negative (and sometimes positive) impact on intangibles. When
outsourcing a key knowledge based resource it is more than just outsourcing
a few phone calls. You also are geographically moving the value network that
supports it.
Sent: Tuesday, March 24, 2009 4:35 AM
To: Value Networks
Subject: Re: Intangibles and Market Value
Jeff Lindsay
John Maloney said:
"The genius of VNA is that it is scalable, self-service, context-independent, fast and easy to adopt. It gives immediate and very satisfying results for identifying, visualizing, optimizing and monetizing broad networks of intangibles and tangibles. VNA is the grail of intangibles by making them negotiable and fungible. For intangibles, VNA is sympathetic and polysynthetic using affixes and systems to achieve stunning outcomes. These key properties have been absent from all intangible methods until now…"
Beautifully stated! I hope we'll see that quote on the home page of some of the VNA sites.
Jeff Lindsay
Director of Solution Development
Innovation Edge
1526 South Commercial Street, Suite#200
Neenah, WI 54956
jlin...@innovationedge.com
www.innovationedge.com
http://www.linkedin.com/in/jefflindsay
920-967-0466 (office)
920-428-1878 (cell)
Coming soon: Conquering Innovation Fatigue by Jeff Lindsay, Cheryl Perkins, and Mukund Karanjikar (John Wiley & Sons, 2009).
This e-mail may contain information that is privileged, confidential, proprietary and / or exempt from disclosure under applicable law. If the reader of the message is not the intended recipient, you are hereby notified that any dissemination, distribution, or copy of this message is strictly prohibited. If you have received this message in error, please inform us promptly by reply e-mail, then delete the e-mail and destroy any printed copy. Thank you.
-----Original Message-----
From: Value-N...@googlegroups.com [mailto:Value-N...@googlegroups.com] On Behalf Of John Maloney
Sent: Friday, March 20, 2009 10:39 AM
To: Value-N...@googlegroups.com
Subject: RE: Intangibles and Market Value
Laurence Lock Lee
It's funny how we always see ROI requirements for outsourcing
initiatives, which one can nearly always come up with if we neglect
the "intangible costs" in the equation. Then the outsourcing goes
ahead and invariably falls short of expectations, we never see ROIs
published. We did a VNA on an IT outsourcing and found 18 of the top
20 most valued flows were intangibles and therefore not explcitely
addressed in the original business case!
Rgds
LLL
Sent from my iPhone
Benoit Couture
Yes you are right on. He adresses the points you make in the second paragraph by taking describing it as a matter of "learning about governance".
But he also mentions institutions like co-ops and Credit Unions which occupy significants volumes of financial activities.
Here's the list of examples with links that he offers:
Volunteering Volunteer Centre Edinburgh http://www.volunteeredinburgh.org.uk/
Time Bank
Volunteering statistics http://www.timebank.org.uk/mediacentre/research.php http://www.statistics.gov.uk/CCI/nugget.asp?ID=1008&Pos=1&ColRank=2&Rank=208
Indicators Who's Counting? Film by Marilyn Waring, New Zealand http://www3.nfb.ca/collection/films/fiche/?id=32736
Quality of Life indicators http://www.calvert-henderson.com/
Social enterprise Social Enterprise Coalition http://www.socialenterprise.org.uk/
Cooperatives International Cooperative Alliance
Fair trade Fair Trade Foundation
Micro-finance Micro-finance gateway http://www.microfinancegateway.org/
Credit unions World Council of Credit Unions
Ethical investment Ethical investment association http://www.ethicalinvestment.org.uk/
Community currencies Worldwide database of complementary currencies http://www.complementarycurrency.org/ccDatabase/les_public.htm
Time Banking UK
LETSLink UK
Value for People http://www.valueforpeople.co.uk Benoit |
|
To: Value-N...@googlegroups.com |
|
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jheuristic
Linked below are some others. They are very instructive, pithy and
germane. If you would like to make (or find) an addition, please add
to the blog comments.
http://valuenetworks.com/public/item/229322
-j
On Mar 24, 1:11 pm, "Jeff Lindsay" <jlind...@innovationedge.com>
wrote:
>
> "The genius of VNA is that it is scalable, self-service,
> context-independent, fast and easy to adopt. It gives immediate and very
> satisfying results for identifying, visualizing, optimizing and
> monetizing broad networks of intangibles and tangibles. VNA is the grail
> of intangibles by making them negotiable and fungible. For intangibles,
> VNA is sympathetic and polysynthetic using affixes and systems to
> achieve stunning outcomes. These key properties have been absent from
> Beautifully stated! I hope we'll see that quote on the home page of some
> of the VNA sites.
>
> Jeff Lindsay
> Director of Solution Development
> Innovation Edge
> 1526 South Commercial Street, Suite#200
> Neenah, WI 54956