Companies that produce experiences or provide services such as robo-advisory and mobile payments — the so-called disruptors — are part of everyday life. What are these companies and how should they be valued?
SINGAPORE (Oct 15): In August, Bill Gates, founder of Microsoft Corp, drew attention to the importance of intangible assets in his blog, gatesnotes, after reading the book Capitalism without Capital, the Rise of the Intangible Economy by Jonathan Haskel and Stian Westlake. The authors point out that major developed economies and their corporates are investing more in intangible assets — such as design, branding, R&D and software — than in tangible assets, such as machinery, buildings and computers. Think Facebook and Google parent Alphabet.
As Gate explains, “Microsoft might spend a lot of money to develop the first unit of a new program, but every unit after that is virtually free to produce.” Software is an intangible asset, unlike property, plant and equipment.