his was the startling assertion of Clark Eustace of Mantos Consulting, chair of the European High Level Expert Group on the Intangible Economy, in his introduction to the IST 2000 workshop on intangibles.
The growing importance of knowledge and information as productive assets raises many new issues. Increasingly, value is added by the way individuals use their personal knowledge. Much more sophisticated ways of managing people are necessary, with knock-on effects from education and recruitment to employment law. There are also effects on disciplines such as accountancy, because market competition demands the reliable valuation of companies, which today implies that the value of their knowledge is accurately quantified.
Conventional rules for valuing physical assets, and more recently brand names, fail to explain the difference between an enterprise's balance sheet and the value of its shares. So-called 'market-to-book ratios' of more than 5:1 are no longer unusual. In such cases, company reports therefore only deal with one-fifth of the enterprise's value.
The assets that power economic growth have to an alarming degree escaped the mechanisms intended to control them. Much of the United States' recent economic growth is attributable to investment in intangibles, for example, while Europe has allowed itself to fall behind. To understand such differences in performance between sectors and countries, getting to grips with intangibles will be essential.
- R. Mackay,
European Commission, Information Society DG
Information society technologies: new methods of work and electronic commerce directorate, electronic commerce unit
Tl. +32 2 296 8128
Fx. +32 2 296 8365
For HLEG report and further information see: