To see the power of intangible assets, try reframing a problem and asking how the hidden value can be unlocked. It will be there, but it just needs to be seen – because it might just change the world.
A normal valuation of a company looks at all its assets and liabilities to create a single dollar figure. An intangible asset valuation will include all the valuable assets that aren’t easily seen from the outside (or inside), things like data, relationships, IP, copyright, etc.
But do you know what an intangible asset valuation doesn’t care much about? Cash.
Sure, cash is included in that final dollar figure. But cash only represents potential value, not actual value. Cash is a bit like oil. Sitting under the ground, oil is useless. It’s only when oil is pumped into a car or a factory by humans that it turns into an asset. Until then, oil only has potential value. Cash is the same.
For this reason, the EverEdge team often shakes their heads in astonishment when companies and governments throw cash at problems, hoping to solve them. Cash can’t fix anything unless it can be coupled with intangible assets, like intellectual property, human networks, insightful data and other critical pieces of good business.
Put it this way, if the problem is that you don’t have enough money, you don’t really have a problem. Why? Because it’s always possible to find more money. There are billions of dollars in undeployed capital sloshing around the world today waiting for someone to persuade it to flow in their direction. The money wants to be spent on an asset. It doesn’t want to sit in a bank.
Money is never the real problem. The root of every problem is a lack of the right intangible assets or a way to use them. The answer is finding a way to unlock the intangible assets in a way that will; convince the people with the money to write you a cheque.
Now, let’s take this principle and apply it to the concept of foreign aid.
The history of foreign aid is the story of throwing cash at a problem, not sending intangible assets to people in need. That’s why nothing ever seems to change in the countries on the receiving end. Estimates suggest that the continent of Africa alone has taken $US2.6 trillion in aid since 1960, but almost all the countries still struggle to stand on their own.
To put this amount into perspective, post-WWII Europe received about $US90 billion (measured in today’s money) in reconstruction aid under the Marshall Plan.
The thing is, the Marshall Plan wasn’t simply a cash injection. It also involved the delivery of intellectual property, expertise and often the outright transfer of copyright. The cash helped facilitate reconstruction, sure, but it was the intangible assets that truly allowed Europe to recover after the devastation of the war.
In other words, the third world doesn’t need more money. We are happy to give them all the funding they want. What the people in these countries need is ideas, training and cheap access to intangible assets. They don’t need second-hand T-shirts. They need to be taught how to create clothing factories and grow their own cotton.
Intangible assets can solve much more than just poverty. For example, the most polluted places in the world tend to be those that receive a lot of foreign aid. It’s not an exaggeration to say that pollution is the result of too much funding and not enough intangible assets.
If you travel through Africa, you’ll notice plastic and glass bottles everywhere. Why do the people in those countries use so many bottles? Is it laziness? No.
Africans prefer to drink from bottles simply because their city water systems are so unsanitary. It really is safer to drink Coke than to have a glass of tap water since everyone knows that soft drinks are made in a factory. The intangible assets owned by Coke guarantee that all its drinks are sanitary. People in the third world know this.
In other words, fixing the pollution doesn’t require more money. The city water systems in each town simply need upgrading. This will take a little bit of cash, sure. But what African cities really need is the transfer of IP to show people how to create sanitary water systems.
They need intangible assets.
After all, don’t they say teaching a man to fish will feed him for life? Why are we still handing out fish rather than offering fishing lessons or showing them how to make better rods?
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