At the Department of Defense, where I started working on these issues, we realized that the value of a heavy armed division is not the tanks but the people who ride them. The consequences are that if you disregard Knowledge Capital because it does not show up in the budget you are likely to make very poor and costly decisions. I have shown in many of my articles that capital is now a small fraction of total inputs to a firm's output and that information is now the dominant input in the economy by far. That is the most significant issue. This really gets down to some fundamental economics.
Capital is accumulated labor.
That is how you justify the price for capital. Well, Knowledge Capital is also accumulated labor. So, this theoretical issue of valuation has far reaching implications for lots of things we do. Knowledge Capital is the value that a customer assigns on top of the cost of sales and cost of capital. It is the surplus value on top of the traditional value.