This is an accessible and thoughtful history of the crucial business ideas of the century and the people who created them. For most of industrial history, the answer was physical and financial assets such as machinery. Today, value comes from an intangible but very real asset class, which includes employees, leaders, customers, suppliers, knowledge and relationships. As the authors say, Much of the value being created today falls outside the formal financial reporting systems. Take, for example the growing discrepancy between market value and book value.
Book value reflects a company s tangible assets.
However, many of the companies with the highest market value today have few physical assets and therefore a low book value. For instance, America Online s book value is only 3.3 percent of its market capitalisation. In other words, nearly 97 percent of AOL s value was not to be found on the balance sheet. Clearly then, companies today are creating value through assets that are not measured and captured in balance sheets. Markets nevertheless recognise this value and reward companies with high share prices and therefore high market value.