Capitalism Without Capital Book Summary By Jonathan Haskel and Stian Westlake

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Capitalism Without Capital is a groundbreaking book by Jonathan Haskel and Stian Westlake.

It looks at the fascinating world of the intangible economy, one in which businesses invest more in software and intellectual property than in physical machinery or factories.

This is an important milestone for our economy, with massive implications for public policy, business operations and economic growth.

The authors explore this concept in-depth, examining its origins, effects, and potential future direction.

They use case studies from around the world to illustrate their argument that intangible investments are likely to remain essential for driving modern economies forward, even as our traditional understanding of capital shifts towards digitalization.

If you're looking for an engaging read that covers both theory and practice of this momentous trend, Capitalism Without Capital should be your go-to!

Capitalism Without Capital Book

Book Name: Capitalism Without Capital (The Rise of the Intangible Economy)

Author(s): Jonathan Haskel and Stian Westlake

Rating: 4.6/5

Reading Time: 26 Minutes

Categories: Economics

Author Bio

"Capitalism Without Capital" is written by Jonathan Haskel and Stian Westlake, two renowned economic professionals.

Haskel is an economics professor at London's Imperial College Business School and a member of the Monetary Policy Committee at the Bank of England, while Westlake was once the director of NESTA, a science-and-innovation think tank, and currently serves as advisor to the UK government's minister for universities, science, research and innovation.

This book provides an in-depth exploration into economic activity that exists without physical capital - something that has become increasingly relevant in today's digital economy.

Exploring The Impact And Future Of The Intangible Economy

Intangible Economy

Our economy is going through a transformation and it’s becoming increasingly evident that the traditional models no longer apply.

Gone are the days when companies relied solely on physical goods such as cars and cows.

Today, tech giants like Microsoft, Apple, Google and Starbucks have begun to realize the true potential of intangible assets such as software, research capabilities, organisational development and brand visibility.

These changes have had major implications – from faster scaling opportunities to increased risks for investors and easier exploitation by competitors.

As we delve deeper into understanding this intangible economy, it’s easy to see how new investment patterns have started to emerge.

The nature of our economy is indeed changing, with intangible investments steadily gaining prominence.

Governments must also play their part in ensuring there aren’t any unforeseen issues with low investment due to this new wave of innovation.

Ultimately, its key to recognize that intangible investments are here to stay so now more than ever we need to be aware of their effects on our economic climate.

Exploring The Rise Of Intangible Assets In The Global Economy

It’s clear that our global economy is undergoing an important shift.

It’s transitioning away from being focused on physical assets to relying more and more on intangible assets.

This means that businesses are not just investing in tangible things like buildings and machines, but also intangible ones like software, brand and intellectual property.

We can see this shift best exemplified in the success of companies such as Microsoft.

When the company became the most valuable company in the world with a market valuation of $250 billion back in 2006, its traditional physical assets only amounted to $3 billion – just 1% of its overall value!

This tells us that it was not traditional capital that made Microsoft so successful at that time, but rather, it was their intangible assets such as software, brand and intellectual property that allowed them to quickly expand their supply-chain organization and get products to market faster than ever before.

Today, as businesses become increasingly reliant on intangible assets rather than physical ones – thanks to technological advancements like barcodes and computerized stock counts – it’s clear that the focus of our economy is shifting from physical capital to non-physical capital.

This change presents both opportunities and challenges for businesses around the world.

Thus understanding how to manage those intangibles effectively is becoming more and more important for modern companies if they want to remain competitive in a global market place.

What Makes An Intangible Economy Different? The Rise Of Investment In Intangibles And The Implications For Businesses And Economies

It’s clear that the trend toward an intangible economy is dominating, as business investments shift from tangible to intangible assets.

In the United States, for example, investment in intangibles overtook investment in physical assets in the mid-1990s and similarly, it was the late 1990s in the UK.

However, not all European countries are showing this same trend — some have yet to overtake their tangible assets with intangible ones.

Despite this unevenness, there’s no denying that key intangibles such as software and research and development have become huge contributors to GDP across developed economies — even becoming part of official statistics since 1999 for the US.

As investors continue to recognize the immense value of these intangibles and funnel more money into them, different investments behaviors characterizing a modern intangible economy will start to surface.

Intangible Assets: The Key To Unlocking Rapid Growth And Industry Dominance

Rapid Growth

Intangible assets can be used to increase a businesses growth exponentially.

Not having physical limits, these intangibles are highly scalable, allowing them to spread across multiple, worldwide outlets with minimal effort.

This scalability is what has enabled companies such as Starbucks and Google to become the corporate giants of today.

The operating manual used by Starbucks when preparing and delivering beverages allows customers to experience the same quality throughout all of its locations around the world – this unified customer service is a valuable asset and an example of how intangibles can be used for increased scalability.

Furthermore, downloadable tech products are often housed on unlimited servers, allowing them to expand into multitudes of potential users at no additional cost – something that couldn’t happen with tangible assets or resources.

The scalability of intangible investments leads us to a point where businesses can become incredibly large in a very short amount of time due to their ability to borrow against those investments with virtually no risk or extra effort.

As such we should expect to see more examples in the near future of companies achieving greater success through the use of their intangibles rather than their tangibles.

The Risks Of Investing In Intangible Assets: The Sunk Costs Of Business Failure

Investing in intangible assets can be a risky venture, given that the costs involved are largely sunk costs.

This means that if a business or investor fails to achieve their desired outcome, these costs cannot be recovered and thus can have a major impact on the bottom line.

This has implications for financing intangibles-heavy businesses, as lenders are typically hesitant to lend against such assets due to their inability to be seized or sold easily.

Even more worrying is that the predominance of such investments could lead to greater crashes when bubbles burst.

If tangible assets like property can suffer from sudden drops in value, then intangible investments may be completely worthless when markets crash, as there are no secondary markets for them.

This could make financial crashes even worse than they would otherwise be, leading investors and businesses to think twice before investing heavily in intangibles.

Spillover effects, where businesses benefit from the ideas of other businesses, are becoming increasingly common in the modern intangible economy.

Companies understandably invest in their intangibles – like concepts and ideas – but these assets can easily be commandeered by competitors.

This means that your competitors can gain access to the fruits of your labor, without you ever realizing it.

A great example is when Apple released the first iPhone, plenty of other smartphone companies began to imitate its design and software supply chain technology in their own devices.

The success of the iPhone benefited Apple tremendously, but also had a spillover effect on other phone manufacturers who were savvy enough to keep up with the competition.

At a lower level, spillovers can occur when good employees leave one knowledge-based company and go to work for another, allowing them to take their experience and training with them.

Water tight legal frameworks are required in order to protect intellectual property rights and ensure that fear of such spillovers doesn’t stop companies from investing in intangibles.

Furthermore, businesses must quickly identify and exploit their competitors’ spillovers in order to remain competitive in this space as well as capitalize on any synergies available.

Synergy And Innovation: How Combining Ideas Can Lead To Revolutionary Developments


In an intangible economy, powerful synergies can be created when ideas fuse together.

For example, Raytheon, a US defense contractor, harnessed the power of microwaves to heat food and developed the first microwaves in the 1940s.

But it wasn’t until Raytheon acquired Amana, a white goods manufacturer in the 1960s and fused them both together using their respective expertise that the microwave oven really took off.

Similarly, Uber is a great example of an idea that fused two existing things – taxis with smartphone software – creating an entirely new service, where drivers are connected to customers and payments are processed quickly.

The importance of ideational synergy has clear implications for policy makers as it suggests that encouraging businesses to nurture innovation and find novel opportunities is key to establishing productive national economies.

This is best exemplified by Silicon Valley which has become known as a hub of creativity and new ideas due to its high concentration of businesses dedicated to research and development.

The Intangible Economy And Rising Income And Wealth Inequality

Economic inequality is becoming increasingly widespread in today’s global economy, with a significant number of people leading lives of economic insecurity while tech billionaires and investors reap the rewards of globalism.

Understandably, this has seen the rise of populist politics in many countries.

The growth of the intangible economy has been a major factor contributing to this inequality.

Intangible businesses generate high-paying jobs that require strong cognitive and noncognitive skills.

Also, because intangible businesses are usually scalable, they can usually offer higher salaries than other types of businesses.

This means Google can afford to pay its product managers much better than what a traditional manufacturer would pay its factory managers.

Apart from income inequality, there has also been a rise in wealth inequality due to increasing asset values among the rich compared with those of poorer people.

Rising property values have played an important part here; people living near clusters of intangible-intensive businesses have seen their property values go up significantly – for example, San Francisco saw an increase of almost 150 percent between 1980 and 2015 – while Detroit’s real estate prices declined during that same period due to its reliance on automobile industry.

It Takes Proactive Steps To Foster Adaptation To The Intangible Economy


The rise of the intangible economy requires new ways of thinking about both education and finance.

Many argue that, as we move away from a factory-based economic model, young people should learn coding or other skills necessary to prepare them for tomorrow’s workforce.

However, adult education provides more immediate opportunities, and governments need to nurture this sector so that it can grow and become just as important as traditional schools and universities.

On the financial side, banks are often unwilling to make loans in the intangible economy because it is difficult to value these assets or recover capital if things go wrong.

But economies have already started looking at solutions such as subsidizing bank loans against intellectual property, increasing the availability of these resources and giving start-ups the support they need to innovate.

Overall, investing in these areas now will help ensure that our economies remain competitive into the future.

Governments Should Invest In Research And Development To Mitigate The Risk Of Underinvestment In The Intangible Economy

Public investment in research and development is proving to be increasingly beneficial in an intangible economy.

This is backed up by the fact that figures from both sides of the political spectrum support greater public investment in this area, while studies have demonstrated its efficacy.

For instance, research conducted by one author showed that increased UK government investment in university research led to a 20% increase in national productivity with a three-year delay.

The idea of governments investing more heavily into R&D does come with risks.

If spillovers between different companies cannot be contained, businesses may not have confidence that they can reap the return on their investments, leading to underinvestment and consequences for job creation, wages and economic growth.

Even if dominant tech firms step into fill some portion of the gap, since these companies are big enough to reap some benefits for themselves too, it’s unlikely that they’ll provide enough funding to make up for the shortfall.

Therefore governments should scale up their investments in research and development to ensure adequate levels of funding are maintained – which could soon offer increasing long-term benefits given that we’ve now entered an intangible economy where traditional tangible models may no longer apply.

Wrap Up

Capitalism Without Capital is an eye-opening book about the increasing importance of intangible assets.

It delves into how different this type of investment is in comparison to tangible investments and why it should be taken seriously.

The book summarizes that the economies that will succeed in an intangible-rich world are those that maximize synergies, innovation and maintain a healthy flow of investment.

To sum it up, authors Jonathan Haskel and Stian Westlake focus on developing a better understanding of the shift to intangibles, and how to obtain the best possible outcome from it.

Arturo Miller

Hi, I am Arturo Miller, the Chief Editor of this blog. I'm a passionate reader, learner and blogger. Motivated by the desire to help others reach their fullest potential, I draw from my own experiences and insights to curate blogs.

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