Capital markets, when they work well, allocate society's productive resources to the firms that can most efficiently generate wealth. But, without the means of differentiating between genuinely innovative companies and the also-rans, markets tend to go a little haywire. Capital gets wasted on poorly run businesses, good companies are starved of the funds they need to grow, economic growth slows and living standards fall. The obvious solution to the problem would be to just change the rules about what companies must disclose so investors are better informed about intangibles. A task force of 42 finance experts convened by the Brookings Institution, recently released a report recommending just that.
Most managers have no idea about the value of their own companies' intangible assets.
There are good reasons why executives don't have this information. First, it's costly to gather, and second, there is no widely accepted, verifiable system for measuring the value of intangibles. Brookings proposes that the federal government fund the establishment of an intangibles data bank to enable researchers to collaborate with corporations to construct reliable and commonly accepted new standards we can use to assess the value of new economy businesses. Though government has a role here, the crucial missing link is leadership and cooperation from within the business community. Evidence from Denmark and Sweden, where dozens of large technology and services companies regularly produce intangibles reports based on common standards, suggests that a concerted effort among senior executives in related industries can produce the quantitative, standardized metrics needed for tracking the role of intangibles in wealth production.