May 2010 Archives

Copyright in fashion

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In a number of earlier postings, I discussed the role of IP in fashion. Here is a new TED talk on from Johanna Blakley, arguing for the open creative system, user-driven and the "culture of copying" now in place in the fashion industry -- and lessons other industries can learn.

For more, see the Ready to Share project at the Annenberg School.

Intangibles and National Security

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This morning, President Obama released a new National Security Strategy. This Congressionally mandated report gives the President an opportunity to articulate his approach to national security. President Bush submitted two reports, in 2002 and 2006, that outlined his view of national security. According to this new report, the Obama approach takes a much broader definition of national security based on 4 major enduring American interests:

• The security of the United States, its citizens, and U.S. allies and partners;
• A strong, innovative, and growing U.S. economy in an open international economic system that promotes opportunity and prosperity;
• Respect for universal values at home and around the world; and
• An international order advanced by U.S. leadership that promotes peace, security, and opportunity through stronger cooperation to meet global challenges.

As one can see from that articulation of American interests, intangibles play a major role. First of all, traditional military strength is more and more based on the application of knowledge, as opposed to simply overwhelming firepower. And as the report notes, security also means the ability to domestic emergencies. That requires the application of intangibles assets such as organizational capital as well as knowledge.

Second, "soft power" elements of American international influence are grounded in the bedrock of our national intangible assets - such as our values and culture.

Third, the report makes the explicit link between domestic economic prosperity and international influence. As the report states, "The foundation of American leadership must be a prosperous American economy."

In that regard, the report articulates an export-led economic strategy:

Save More And Export More: Striking a better balance at home means saving more and spending less, reforming our financial system, and reducing our long-term budget deficit. With those changes, we will see a greater emphasis on exports that we can build, produce, and sell all over the world, with the goal of doubling U.S. exports by 2014. This is ultimately an employment strategy, because higher exports will support millions of well-paying American jobs, including those that service innovative and profitable new technologies. As a part of that effort, we are reforming our export controls consistent with our national security imperatives.

Shift To Greater Domestic Demand Abroad: For the rest of the world, especially in some emerging market and developing countries, a better balance means placing greater emphasis on increasing domestic demand as the leading driver of growth and opening markets. Those countries will be able to import the capital and technologies needed to sustain the remarkable productivity gains already underway. Rebalancing will provide an opportunity for workers and consumers over time to enjoy the higher standards of living made possible by those gains. As balanced growth translates into sustained growth, middle-income, and poor countries, many of which are not yet sufficiently integrated into the global economy, can accelerate the process of convergence of living standards toward richer countries--a process that will become a driver of growth for the global economy for decades to come.

Open Foreign Markets to Our Products and Services: The United States has long had one of the most open markets in the world. We have been a leader in expanding an open trading system. That has underwritten the growth of other developed and emerging markets alike. Openness has also forced our companies and workers to compete and innovate, and at the same time, has offered market access crucial to the success of so many countries around the world. We will maintain our open investment environment, consistent with our national security goals. In this new era, opening markets around the globe will promote global competition and innovation and will be crucial to our prosperity. We will pursue a trade agenda that includes an ambitious and balanced Doha multilateral trade agreement, bilateral and multilateral trade agreements that reflect our values and interests, and engagement with the transpacific partnership countries to shape a regional agreement with high standards.

As we go forward, our trade policy will be an important part of our effort to capitalize on the opportunities presented by globalization, but will also be part of our effort to equip Americans to compete. To make trade agreements work for Americans, we will take steps to restore confidence, with realistic programs to deal with transition costs, and promote innovation, infrastructure, healthcare reform and education. Our agreements will contain achievable enforcement mechanisms to ensure that the gains we negotiate are in fact realized and will be structured to reflect U.S. interests, especially on labor and environment.

In this area, I must say I am somewhat disappointed. A strategy of "rebalancing" and increased exports is correct as far as it goes. We cannot go back to the unsustainable consumer-debt driven economy of the past. But shift demand growth to others is not enough. Sustained prosperity will only come from harnessing the economic transformation.

The National Security Strategy does include the important areas of scientific and technological research and education. It talks about clean energy technologies and industries. And the President emphasized those points yesterday during his visit to Silicon Valley.

That does not, however, add up to an innovation-driven economic strategy. Nor does it fully harness the power of intangible assets and intellectual capital.

So the new National Security Strategy is a step in the right direction -- especially its broad understanding of what constitutes national security and America interests. It given us something to build upon - not the final product.

As I noted in earlier postings, in March OSTP and the NEC published a Request for Information on the commercialization of university research. One of the questions asked concerned alternative financing mechanisms. Below is the statement I submitted in response to that question (also available on line).


To: James Kohlenberger,
Chief of Staff, Office of Science and
Technology Policy.

Diana Farrell,
Deputy Assistant to the President for
Economic Policy, National Economic Council

From: Kenan Jarboe
Athena Alliance

Date: May 26, 2010

On March 25, 2010 the Office of Science and Technology Policy (OSTP) and the National Economic Council (NEC) publishes a Request for Information (RFI) on the Commercialization of University Research. The RFI includes a question about alternative source of private funding to overcome the "valley of death" problem (i.e. financing gap between research and commercialization).

One promising alternative funding source that has emerged over the past few years is intangibles-based financing. Companies have long been able to raise money based on their physical and financial assets. Such assets can be easily bought and sold, borrowed against, and used to back other financial instruments. As such, these assets provide companies with a source of the investment funding needed for the U.S. economy, allowing it to grow and prosper.

In contrast, intangible assets are largely hidden, and therefore unavailable for financing purposes. Investment in the creation of intangible assets in the U.S. is more than $1 trillion annually and the total value of intangibles in the U.S. when measured in 2005 dollars was estimated at $9.2 trillion. A huge opportunity cost is imposed on the U.S. economy when such a large source of potential financing is locked up. Because intangible assets are not generally available as a source of investment and risk capital, innovative companies may face higher capital costs--or even a dearth of capital--to fund new ideas. Unable to use their intangible assets as a financial tool, prospective borrowers face a system that does not understand their true revenue potential and is unable to judge operational risks appropriately. New ideas never gain traction or remain unexplored or undeveloped. Economic potential goes untapped--and therefore wasted.

However, in recently years, a niche market of firms specializing in intangibles-based financing is springing up. Intangible assets--specifically, traditional intellectual property (IP) consisting of patents, trademarks, and copyrights--have been used in sale, leasing, equity, equity-debt, debt, and sale-leaseback transactions to finance the next round of innovation. Unlike some of the exotic financial vehicles, these new firms are using traditional financial techniques in new ways to help innovative companies.

Use of IP as collateral on loans dates back quite some time. The first trade secrets case in the United States involved the debt on a bond secured in part by a secret chocolate-making process in 1837. In 1884, Ara Shipman loaned Lewis Waterman $5,000 to start a pen-manufacturing business, secured by Waterman's patent.

Over the past few years we have undertaken a number of studies of intangible asset backed financing. Based on this work, as outlined in the two attached articles, we have come to the following conclusion:
• Intangibles are important assets to be secured in lending and compared with the traditional assets of real estate, accounts receivable, and inventory.
• Intangible assets (IA), as an asset class, provide financial firms with flexibility in structuring deals, allowing for both debt-and-equity vehicles and hybrid models. These vehicles can be adapted to address financing requirements for companies of all sizes and needs.
• IA financing vehicles require flexibility and specialization to account for differing and unique factors inherent in intangible assets.
• A robust market for IAs is necessary to ensure appropriate and accessible liquidation events for financial firms with both debt and equity positions, especially in distressed situations. The recent proliferation of IA licensing and sales, including auctions, has added depth to this market. But with low recovery rates currently standard, greater awareness is needed to ensure that companies' and financial firms' IAs are valued correctly and licensed and sold at prices reflecting high return rates.
• Even financial firms specializing in IAs rightly evaluate investment opportunities within the broader view of the profitability and growth potential of a target business. These holistic due-diligence processes, however, do not discount the independent value of many IA classes.
• Valuation methodologies for IAs are diverse and understandably imprecise; however, conservative loan-to-value ratios, advance rates, and other debt-and-equity protocols allow firms to account for the inherent imprecision of IA valuations.
• The securitization market for intangibles, while currently suffering from the same problems plaguing the overall securitization market, provides additional mechanisms for companies with IA-licensing businesses. These companies can use a debt model to generate cash flow for positive assets or, more likely, use an equity model for precommercial-phase assets.

Turning IP-backed financing from an exotic, one-off transaction into a routine mechanism by which innovative companies can raise funds will require changes in industry standards and government policies, including technology policy. But it also means going well beyond the boundaries of what is normally considered technology policy.

One starting point would be to streamline and standardize the process of using IP as collateral must be. Here, the federal government can be a lead player. The U.S. Small Business Administration (SBA) provides a vital role in financing new and small businesses through loan guarantee programs--such as the 7a Program. SBA recently revised its Standard Operating Procedure (SOP) for the 7a Program to make it clear that loans can be used for the acquisition of intangible assets when buying an ongoing business. However, the rules are unclear as to whether intangible assets can be used as collateral.

Two specific policy changes could help in this regard:

• Development SBA underwriting standards for IP. SBA should work with commercial lenders to develop standards for the use of intangible assets as collateral, similar to existing SBA underwriting standards. Allowing IP to be used as collateral will increase the amount of funds a company, such as one in the high-tech sector, would qualify for.

• Create an IP-backed loan fund. Other nations have developed special programs to encourage IP-based finance. The U.S. should set up similar programs on a pilot basis, ideally run by the SBA to take advantage of its lending expertise. Technical support could be provided by the SBA's Office of Technology, which already coordinates the Small Business Innovation Research (SBIR) program. The SBA technology office also works with the U.S. Commerce Department's National Institute of Standards and Technology (NIST) on its Technology Innovation Program and has a hand in other federal science- and technology-related initiatives. Such a direct lending program would be a step beyond SBA's current loan guarantee programs--direct lending is needed to jumpstart the process. Once the process of utilizing IP as collateral is fully established, the program could be converted to a loan guarantee structure.

In addition, broader policies changes are need to ensure that intangible assets are seen as part of the financial system, thus underpinning their role as a tool for financing innovation. While outside of the immediate scope of this RFI, these other changes include:

• Provide information on intellectual capital and bank lending practices. The U.S. Federal Reserve is seeking to strengthen bank supervision practices through the expansion of stress testing to assess the health of individual institutions. As bank regulators undertake these actions, they should be aware of the role and value of intangible assets. The failure to overtly include intangible assets may have the following consequences:
• Underestimation in the amount of collateral a lending institution has to call on in case of default (and therefore the undervaluation of the underlying loan).
• Miscalculation of a lending institution's ability to recapture collateral if the lending institution is dealing with an asset it does not understand.
• Improperly priced loans due to a failure to assign the correct value to the intangible assets or a tendency to apply exceedingly low loan-to-value ratios that are less a reflection of risk than of the institution's lack of knowledge about the performance of intangible assets.
• Higher capital costs for borrowers, especially those in businesses heavily reliant on knowledge and technology.

Regulatory agencies can take steps to study and collect information on the role of intangibles in the financial system--and to underscore the risks of ignoring them. As they build knowledge in this area, the Federal Reserve and other financial regulatory agencies might consider the following questions:
• To what extent are lending institutions employing intangible asset as collateral, either explicitly or implicitly?
• What provisions are there in bank reporting requirements for intangibles?
• Given that intangible assets can be wrapped up in the catch-all category of a blanket lien on all assets, how can lending institutions determine the value of intangible assets for the purposes of assessing collateral?
• If intangibles are used explicitly as collateral, what underwriting standards are used and what are the specific valuation standards and loan-to-value ratios?

• Promote better understanding of intangibles by commissioning a National Academies' study. Intellectual capital and intangible assets cover a much broader range of categories, including worker skills and knowledge, business methods, organizational structure, and customer relations. There is a need to broaden the understanding of policymakers, business leaders, and the general public on the full scope of intellectual capital and intangible assets and how they function in the marketplace. As proposed at a June 2008 conference sponsored by the Bureau of Economic Analysis and the National Academies, a broad study of intangibles could include the following components:
• A survey of efforts in other countries to advance the understanding of intangibles and their role in corporate performance and economic growth, promote financial investments in intangible assets, and foster the utilization of intangibles
• An inventory of federally owned intangible assets and an exploration of how to exploit them for economic growth
• A list of policy recommendations to accelerate private investment in and management of the types of intangible assets most likely to contribute to growth.

China's intangibles strategy

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Here is an interesting quote from a story in today's Washington Post:

"We've lost a bucketload of money to foreigners because they have brands and we don't," complained Fan Chunyong, the secretary general of the China Industrial Overseas Development and Planning Association. "Our clothes are Italian, French, German, so the profits are all leaving China. . . . We need to create brands, and fast."
By the way, the story is on how the Chinese are "stuck doing the global grunt work in factory cities while designers and engineers overseas reap the profits." I find that spin fascinating -- an example of the "stand-alone-intangibles-will-save-us" trap many fall into. If all the profit is in design and engineering, then why is China running such a large trade surplus? Let me re-iterate a point I've made many times before: intangibles are key. But they key to intangibles is how they are used to increase productivity and innovation across the board- not simply how we sell (license) them to others.

The story also goes on to talk about how China is behind in innovation and the development of internationally recognized brands. That maybe true right now, but don't bet on it in the future. As the above notes, official China is pushing the development of intangibles. That is a development we need to take seriously.

Tracking the recession by industry

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This morning, BEA released industry-specific data on the recession. According to the press release,

Downturns in durable-goods manufacturing and finance and insurance and a continued contraction in construction were the leading contributors to the downturn in U.S. economic growth in 2009, according to preliminary statistics on the breakout of real gross domestic product (GDP) by industry from the Bureau of Economic Analysis. The economic downturn was widespread: 15 of 22 industry groups contributed to the decline in real GDP growth.

• Manufacturing value added--a measure of an industry's contribution to GDP--fell 5.9 percent in 2009, a sharper decline than the 3.6 percent drop in 2008. Durable-goods manufacturing turned down for the first time since 2001, decreasing 7.5 percent after growing 0.3 percent in 2008. Nondurable-goods manufacturing fell 3.8 percent, a slower decline than the 8.2 percent drop in 2008.

• Construction value added fell 9.9 percent in 2009, reflecting declines in residential and nonresidential activity. Construction contracted for the fifth consecutive year.
• Finance and insurance value added dropped 2.7 percent in 2009, after increasing 3.2 percent in 2008.


- - -

Of special interest to me, however, is which industries did not contract in 2009. These include: utilities, information (which covers publishing, software, film and sound recording, broadcast, information and data processing), real estate, professional & technical services, education, health care, accommodation and food services, and government. The data is not yet available at a lower level to be able to, for example, break out software from publishing. But it is clear that at least some intangible-based industries did OK in the recession.

Invest in intangibles

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Here is a tidbit from a new report from the Booz & Company magazine Strategy+Business -- Growth through Focus: A Blueprint for Driving Profitable Expansion (registration required):

Too often, when companies rationalize and focus, they slash expenses across the board. Two areas that take the brunt of cost cutting are people-related expenses (recruitment, training, travel) and brand advertising. However, talent and brands are the two most valuable assets for driving growth. We recommend increasing investments in hiring and developing talent, even ahead of the company's needs. We also recommend increasing investments in building brands.

Amen to that.

But where are the resources for that investment? As the article goes on to say:

The good news is that the growth-through-focus approach yields significant cost savings through elimination of management layers, reduction of overhead, and elimination of marginal businesses. Focus frees up resources that can be used to invest in the future.

It's actually an old strategy -- focus on what you do best (once known as "core competencies"). The new twist on this is the explicit recognition that intangibles should be part of core competencies.

But you knew that.

Organizations and wealth creation

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Uwe E. Reinhardt, a noted economics professor, has posted a series of essays at the Economix blog on wealth creation -- the latest being Who Creates the Wealth in Society? In this essay, he expands upon the basic theme:

It is now well recognized that the wealth of modern societies is dictated not so much by the natural resources at their disposal, but by their human capital -- the knowledge and skill of human beings and their ability to learn and apply new knowledge on their own.

This leads him to the important role of the family - as the original institution for fostering human capital.

I would push this a step further. It is not just human capital -- "knowledge and skill of human beings and their ability to learn." It is the organizations and the other framework conditions that allow for that human capital to be used. As I hinted at in the previous posting, too many organizations focus only on certain parts of their human capital. All parts of facets of an organization's human capital need to be fully engaged. We used to call this the "high road" strategy of high skills and high wages.

But that is not enough, the organizational structures themselves need to promote knowledge creation, sharing and utilization. At one point, we called these high performance work organizations or learning organizations or innovative organizations.

No matter what we call them, the point is the same. The way in which human capital is organized is just as important as the human capital itself.

Reinhardt ends his essay with the following:

Governments everywhere in modern societies provide the legal and much of the physical infrastructure on which private production and commerce thrive. Imagine a world in which private contracts can be adjudicated and enforced only by private thugs rather than in the civil courts.
Just as sports contests could not be fairly conducted without a strict set of rules and referees with power, so private markets could not thrive without regulations and regulators with power. A truly laissez-faire market economy would be apt to be a mess, as what Wall Street made of its own business in recent years reminds us.
. . .
A nation's wealth is truly a joint creation in which individuals, families, business and government all play crucial parts. Finding just that mix of efforts and regulations that will maximize society's well-being is a tricky and never-ending quest.

But governments need to do much more than play the referee. They need to be involved in helping create the intellectual capital that makes the economy work. Part of that is active assistance in fostering the organizational capital needed for the I-Cubed Economy.

In that regard, I have been advocating for changes in public policies to foster greater utilization of intellectual capital (see our Policy Brief Intellectual Capital and Revitalizing Manufacturing). These include:

Expand the Manufacturing Extension Partnership (MEP) to Boost Intellectual Capital. The Administration's budget appropriately calls for doubling the MEP budget, but the scope of this assistance to manufacturers needs to be expanded to include innovation, new product development, and utilization of intellectual capital. Manufacturing companies have a wealth of intellectual capital that they often do not recognize or manage well. MEP services must include intellectual resource management that covers a broad array of assets, beyond help with intellectual property. The program's budget increase should be used to expand services and staffing in areas such as marketing, finance, and business model development, in addition to new product development and process adoption.

Help Entrepreneurs Manage Intellectual Capital. The Administration's A Framework for Revitalizing American Manufacturing specifically cites efforts by the U.S. Small Business Administration (SBA) to provide entrepreneurship training and to foster partnerships with community colleges, universities, and others. It also mentions the U.S. Economic Development Administration (EDA) program of supporting business incubators. But most of these training programs do not explicitly recognize the importance of managing intangible assets and intellectual capital. Programs that support entrepreneurs need to incorporate these topics as part of their activities and impart these essential skills to would-be innovators.

We need to move ahead with programs like this if we are to truly restore wealth creation in this country.

How often have we heard the cliché, "our people are our most valuable asset"? Of course, those of us who have been studying the knowledge economy have known that for a long time. But too often, we see company executives mouthing the phrase without any real understanding. For them, what they mean is "our highly paid workers, like me, are our most valuable assets." Hence the rationale for CEO compensation scheme, bidding wars for "talent" and "key individual" insurance policies.

A new report should help break that mindset -- Profit at the Bottom of the Ladder: A Summary Report on the Experiences of Companies that Improve Conditions at the Base. The report outlines a number of steps companies can take to increase profitability by investing in line workers. That includes increased attention to workers' health, training, incentives, and engagement. As the report notes, companies need to better understand who is actually performing the work and realize that these workers are key to both the ongoing success of the company and future productivity and efficiency.

One of their conclusion is something I have been advocating for years:

As practices on Wall Street and in firms are being rethought, along with the role of the public sector in rendering the investment process more transparent, one of the areas needing a new approach is the evaluation of and reporting on long term investments in employees. (Emphasis in original).

For a summary of the research, see this recent piece in the New York Times Economix blog -- Finding Profit From Investing in Workers.

Using bank loans to finance innovation

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There is a new paper on the role of bank loans in innovation -- Beg, Borrow, and Deal? Entrepreneurship and Financing in New Firm Innovation by Sheryl Smith of Temple University. Using data from Kauffman Firm Survey (KFS), she looks at the financing of start-up. She also reviews the theoretical literature of why entrepreneurs would choose equity or debt financing and the relationship of that decision to innovation and risk. The findings point to why fostering the opportunity for debt financing may benefit innovation:

With regard to debt financing, the evidence in this paper suggests that information asymmetry combined with technical risk influences the ability to secure bank financing. Banks, unlike providers of equity finance, do not share in a potential upside of a high growth firm. However, there is evidence that as information asymmetry is lessened over subsequent periods, banks are more likely to lend to high tech firms. As the riskiness of a high-tech firms decreases, they are increasingly likely to receive business bank loans over time, suggesting the likelihood of business bank loans targeting the firms, over time, with higher growth potential. This is consistent with the literature on bank lending to new ventures, and in particular the role of monitoring and risk reduction in bank lending to entrepreneurs.

The results of the probit [a statistical technique] estimations in this paper suggest that increasing leverage over time might provide nascent technology entrepreneurs with financial slack that may enable with innovation. This implication bears closer attention in further work. The entrepreneur launching a new technology venture faces significant resource constraints, and the attendant need to secure financing. For firms with adequate financial resources, lower leverage, i.e. debt relative to total debt plus equity, is associated with greater financial slack and enhanced innovation. In this case, lower leverage would be necessary for firms competing significantly on the basis of innovation (O'Brien, 2003). However, when financial resources are highly constrained, as in a new entrepreneurial venture, the relationship between slack and performance is nuanced (George, 2005). While traditionally the finance literature associates increasing leverage with lower innovation, it seems highly plausible that in truly nascent technology firms additional debt relaxes the major capital constraints faced by the entrepreneur.

From a public policy point of view, that conclusion begs the next question: how can we help those nascent technology firms access that debt as appropriate? We have long advocated the use of IP and other intangibles assets as collateral on loans. As noted in an earlier posting, the KFS will be asking more in-depth questions on company borrowing, including whether they are putting up their IP as collateral. That will give us some idea to the extent of the practice. More survey's would also be useful -- specifically of banks and other lenders. And we need to move forward on creating underwriting standards for intangible-backed loans. Smith's research point the way toward understanding the positive role debt financing plays in innovation. We should build upon and expand that work.

I recently ran across an interesting history of nanoelectronics -- aka spintronics. The article (From Lab to iPod: A Story of Discovery and Commercialization in the Post-Cold War Era) by history professor W. Patrick McCray describes how a scientific discovery of giant magnetoresistance (GMR) led to a series of technological advances in electronics. The bases for these advances was the ability to control electrons' spin, not just charge -- hence the term "spintronics." This made possible a number of breakthroughs in memory storage (both in size and in the ability of devices to retain their information without a power source). It also spurred interest in nanotechnology in general.

What is more interesting is McCray's conclusion:

The story of spintronics can also shed light on debates that have reemerged among scholars about some major historiographical questions. One of these concerns the validity of the linear model of research. Presented most famously by Vannevar Bush in his 1945 report, Science: The Endless Frontier, the most basic form of the model supposes a direct path from scientific discovery to application. While historians have examined, refined, and problematized it for decades, this model remains a point of contention and scholarly inquiry.85 To a first order of approximation, the case of spintronics appears to lend credence to the traditional linear model, which posits science as a prime mover for technological applications. As members of the 2007 Nobel committee saw it, an unexpected laboratory discovery inspired IBM's industrial research and successful exploitation of the phenomenon and consequently billions of computers and iPods followed. The full story, of course, was much more complex, revealing the interplay among basic science, instrumentation, federal policy, industrial research, and commercial goals. One cannot help but conclude that the "simple" linear model, when examined closely enough, is anything but.
So even in the cases whether the linear model seems to fit, it doesn't. The case study really points out the role of the ecosystem -- with numerous elements all coming together to make the technology possible.

McCray has written a more recent essay on that topic -- Re-Thinking Innovation. In that essay he notes:

For decades, the predominant model was linear. Based on Science: The Endless Frontier, Vannevar Bush's 1945 social contract for science, the linear model posited that investments in basic science research would produce new technologies and societal benefits--meaning innovation. Rhetorically powerful as well as easy to understand and explain to policymakers, deployment of the linear model ignores the historical contingency of Bush's report, which has, for better or worse, been the touchstone for much U.S. R&D policy.

I would highlight just one other paragraph.

Historically, artistic endeavor, broadly construed, has been a powerful driver of technological innovation. Advances in metalworking and ceramics traditionally originated in the workshops of artisans who produced objects valued more for their aesthetic quality than purely utilitarian ones. The feedback is powerful--in Renaissance Venice, improvements in glassmaking stimulated the production of more capable scientific instruments that played central roles in the Scientific Revolution.
Clearly, the process has always been a lot messier than the linear model posited.

New growth economics book

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I've just finished reading a new book on "new growth economics" -- From Poverty to Prosperity: Intangible Assets, Hidden Liabilities and The Lasting Triumph over Scarcity by Arnold King and Nick Schulz. The first 3 chapters and especially the conversation with Paul Romer make up one of the best explanations of the new economy I've seen.

Unfortunately the rest of the book is not as good. It pains me to say it, but the chapter on entrepreneurship descends to a level of gross oversimplification and glorification bordering on psycho-babble. That is a real missed opportunity, because it touches upon and begins to delve into a real issue in innovation: the principal-agent problem. The point is important in their discussion about innovation inside and outside of organizations. As they point out, innovators inside organizations are playing with the company's dime. And the systems inside companies are set up to prevent rogue employees from taking overly risky bets. Thus, there are some real reasons why organizations are resistant to change -- that goes beyond the standard explanation of "cultural resistance." It would have been a major step forward if the authors had explored these issues in greater detail.

I also think that they overplay how the external entrepreneur bears the cost of failure (in contrast to the internal innovator). One of the strengths of the US entrepreneurial system is that the market in the US is relatively tolerant of failure. The key is to fail small and fail quickly. Those types of failures are accepted as part of the learning process. If we had a market system where failure was severely punished, then the innovation ecosystem would be very different.

The chapter on financial intermediation seems thrown in to dealt with a perceived need to say something about the financial meltdown.

The book also has a pretty evident ideological bias -- both anti-"industrial policy" and anti-government -- which is clear in the authors' talk at Cato Institute. It would have been a far more interesting book if they had a more balanced set of interviews of people you have made important contributions -- like Joseph Stiglitz and Paul Krugman among others.

As a result of their ideological bias, they completely dismiss any role of government in fostering the creation of intangible assets and promoting innovation. Instead they repeatedly assert a version of the simplistic "markets good; government bad" rhetoric. That version is based on a good concept -- adaptive or dynamic efficiency (they use the terms "adaptive" and "dynamic" interchangeably). But they seem incapably of accepting that government can play a positive role in promoting adaptive efficiency. Even though one of the interview explicitly talks about the importance of anti-trust regulations, the conclusion is that regulation hurts, everywhere, all the time. Likewise they use broad strokes to deny that governments can be innovative -- pulling out that hoary old chestnut of the Department of Motor Vehicles (again without an apparent understanding of how DMV's have changed in the past decade to utilize information technology).

Again here they miss a wonderful opportunity to explore the pressures that make governments innovative and compare them to markets. In fact, the rhetoric that "of course we all know governments can innovate" is itself a major barrier to innovation. Like the little train that can't, if you are always told you can't innovate, you won't. The discussion of adaptive efficiency could have been an important contribution to the innovation debate. Instead, it was used to assert that government is bad.

Too bad. If they had taken a more open minded approach, this could have been an excellent book. As it is, this is merely a book with some very good parts.

Open innovation and economic development

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Here is an interesting new article published in Economic Development Quarterly (subscription required) - Catching Up: The Role of State Science and Technology Policy in Open Innovation:

This article examines the impact of the emerging model of open innovation on state public policy, particularly the practice of technology-based economic development in weak research and development (R&D) states. Open innovation describes the nascent practice of firms using knowledge created outside their boundaries and also marketing ideas they would not commercialize themselves. Firms engaging in open innovation thrive on knowledge spillovers, and weak R&D regions could benefit from this model through the creation of Marshallian externalities. It is therefore interesting to ask whether weak R&D states take advantage of this model. This case study analysis shows that states involved in the Experimental Program to Stimulate Competitive Research partially support the emerging open innovation paradigm. All states have science and technology strategies and actively support and invest in their higher education infrastructure. They show variation in their support for university-industry partnerships, entrepreneurship, capital access, commercialization, and technology transfer. None of the states, however, uses the open innovation framework explicitly.
That conclusion -- the open innovation framework is not explicitly incorporated into economic development activities -- should not, unfortunately, surprise anyone. Just one more example where our public policy has not caught up with the shift to the I-Cubed Economy.

(Thanks to Innovation Daily for a heads up on this article).

Design your own -- the shirt on your back

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One of the changes happening in manufacturing is the shift to what used to be called mass customization. Sunday's New York Times had an article Putting Customers in Charge of Designing Shirts describing one example. In this example, however, it appears that the production is still labor intensive using low cost labor. Essentially it is the internet version of the old-time famous Hong Kong suit (for those who aren't old enough to remember - visitors to Hong Kong would buy tailors suits at every trip because of the low costs -- my versions come from Singapore). But as the story notes, there is a growing trend to "co-creation" -- where customers customize (see earlier posting).

Combining co-creation technologies with advanced manufacturing capabilities will change the nature of the production of goods and services. As I've said before, the key phrase in manufacturing has moved beyond "just-in-time" (inventory management aimed at low cost through efficiency) to "just-for-me."

The confusing status of small business lending

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Today's Wall Street Journal has a story on the small business credit crunch - Bailout Missed Main Street, New Report Says:

Government funding to U.S. banks has done little to ease the credit crunch for small businesses--and the situation doesn't seem to be improving, according to a new report.
The value of large banks' loans to small businesses shrank 9% between 2008 and 2009, more than double the 4.1% drop for overall lending, said a report released Thursday by the Congressional Oversight Panel, a group set up to oversee funds allocated by the federal government's Troubled Asset Relief Program.

However, here is what the Economist's story today (Jobs and businesses: The perils of being small) says on using TARP funds for small business:

The fund may, however, turn out to be unnecessary. In the past month there have been signs that things are starting to turn round. Commercial and industrial loans by banks shrank by 24% between October 2008 and March, but have levelled off since then, and Fed surveys have found that for the first time since 2007 banks are easing standards for business loans.

So - is the glass half full or half empty?

In any case, we need some alternative mechanisms to fund innovation in small and medium size businesses. That is why I continue to advocate for the use of intangible assets as collateral for business loans (see our reports and articles
"Intangible Assets in Capital Markets", "Intangible Assets: Innovative Financing for Innovation" and Maximizing Intellectual Property and Intangible Assets: Case Studies in Intangible Asset Finance).

As we noted before, this is not some exotic new financial vehicles but a use of traditional financial techniques in new ways. The Senate is now debating a financial reform bill. As I noted over a year ago, we must proactively deal with the issue of intangible assets. Intangibles are a major part of the wealth and the wealth generating capacities of companies and nations. To continue a financial system that simply ignores them is bordering on folly.

It is probably too late for this legislation to included the steps I recommended last year. But maybe they should at least included something -- like a study or report -- on the potential for using intangibles as collateral for small business loans. Such a study would be useful not only to open up the opportunities, but also to alert us to any dangers. After all, shouldn't the ultimate goal of the legislation be to prevent future problems? And it would help fill up the rest of that half full/half empty glass.

Guide to 21st century business - new book

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Mary Adams and Michael Oleksak have just published their new book
Intangible Capital: Putting Knowledge to Work in the 21st Century Organization. This is an important new contribution.

As I said in my review of the book:

Intangible Capital is a breakthrough book. Adams and Oleksak have managed the near impossible: to make the complex topic of intangible assets understandable and meaningful to businessmen, policymakers and the general public. I consider this a guidebook to the economy of the 21st Century.

Buy it; read it; give it as gifts.

PS - if you want a taste of the book, read Adams' latest blog posting on Your invisible, intangible production facility.

New data on start-ups and IP


As I've noted before, one of the best sources of data on new start-ups is the Kauffman Foundation's Firm Survey, which is tracking 5000 companies that began operations in 2004. The Kauffman Foundation has just published its An Overview of the Kauffman Firm Survey: Results from the 2004-2008 Data.

I won't go into all the findings, but one especially interesting point jumps out:

intellectual property ownership by new firms is rare in their first year of operations. Only 2.2 percent of new firms have patents; only 8.7 percent of new firms have copyrights; and only 13.5 percent of new firms have trademarks. Therefore, when discussing new firms, uses of these data should assume that intellectual property ownership is the exception rather than the rule.
. . .
Operating in a high-tech industry is not a synonym for intellectual property ownership. While new firms in high-tech industries are more likely than new firms in low-tech industries to have patents, copyrights, and trademarks, the vast majority of high-tech firms do not own intellectual property.

I think a closer look at the data may be in order. It could be that companies don't formalize their IP until after a couple of years of activity. But this finding is contrary to the standard notion of a high-tech start up as someone trying to commercialize their intellectual property. If start up high-tech firms don't own IP, what exactly are they selling?

By the way, the Survey is adding questions on intangible assets (see earlier posting) - including on the use intellectual property as loan collateral. Given that so few companies in the survey have IP, it will interesting to see if that IP gets used in the financing process.

March trade in intangibles

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March's trade data once again showed an increase in our deficit -- rising to $40.4 billion from February's revised monthly deficit of $39.4 billion. Exports rose $4.6 billion in March after a weak showing in February. But imports rose by $5.6 billion. The problem was a jump in oil imports; the non-petroleum trade deficit actually improved (see chart below). As the New York Times noted, "the rise in exports reflected increased sales of American farm products and a wide range of heavy machinery from electric generators to earth-moving equipment." Still, as the Wall Street Journal remarked, "Trade, which was one of the few strengths in the economy during the recent recession, has become a drag on the recovery as imports have outpaced exports."

Our trade in intangibles improved slightly. The change was mostly due to a reversal of last month's small spike in outgoing royalty payments (imports). Incoming royalty payments (exports) increased slightly in March. Exports of private services increased faster than imports.

Our deficit in Advanced Technology Products worsened in March. While exports grew at a healthy rate, imports surged. Import growth was especially strong in information and communications technologies and aerospace. The last monthly surplus in Advanced Technology Products was in June 2002 and the last sustained series of monthly surpluses were in the first half of 2001.

Intangibles trade-Mar10.gif Intangibles and goods-Mar10.gif Oil good intangibles-Mar10.gif
Note: we define trade in intangibles as the sum of "royalties and license fees" and "other private services". The BEA/Census Bureau definitions of those categories are as follows: Royalties and License Fees - Transactions with foreign residents involving intangible assets and proprietary rights, such as the use of patents, techniques, processes, formulas, designs, know-how, trademarks, copyrights, franchises, and manufacturing rights. The term "royalties" generally refers to payments for the utilization of copyrights or trademarks, and the term "license fees" generally refers to payments for the use of patents or industrial processes. Other Private Services - Transactions with affiliated foreigners, for which no identification by type is available, and of transactions with unaffiliated foreigners. (The term "affiliated" refers to a direct investment relationship, which exists when a U.S. person has ownership or control, directly or indirectly, of 10 percent or more of a foreign business enterprise's voting securities or the equivalent, or when a foreign person has a similar interest in a U.S. enterprise.) Transactions with unaffiliated foreigners consist of education services; financial services (includes commissions and other transactions fees associated with the purchase and sale of securities and noninterest income of banks, and excludes investment income); insurance services; telecommunications services (includes transmission services and value-added services); and business, professional, and technical services. Included in the last group are advertising services; computer and data processing services; database and other information services; research, development, and testing services; management, consulting, and public relations services; legal services; construction, engineering, architectural, and mining services; industrial engineering services; installation, maintenance, and repair of equipment; and other services, including medical services and film and tape rentals.

More on fast growth companies

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Apropos my earlier posting, here is a story from Saturday's Telegraph on how fast-growth entrepreneurial companies could help drive UK recovery:
In a report out today from the Ernst & Young ITEM Club - Entrepreneurs: powering job creation in the UK - fast-growth companies are shown to have created 1.3m jobs in the last economic upturn between 2005 and 2008.
Studies by Nesta have already shown that while start-ups and micro enterprises are vital, representing 88pc of all UK enterprises, they contributed less than 20pc of the additional employment.
By far the biggest contributors to UK employment were fast-growth mid-size firms with more than 250 employees.
Academic studies, until recently, have concluded that start-up enterprises are the key promoters of the radical innovation that can underpin fast growth.
The Office of National Statistics' new Business Structure Database supports the long-standing evidence that entrepreneurship is crucial to the promotion of new technology, investment, job creation and production growth.
All the evidence above shows that it is wrong to assume that the entrepreneurship and innovation that characterises a fast-growth company only exists at the smaller end of the market.
ITEM says that the most economically significant high-growth companies have typically been in business for several years and reached an intermediate size range from 250 to over 1,000 employees.

Focus on firm growth

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In yesterday's posting, I mentioned that I preferred an economic development strategy focused on "grow-your-own" -- which usually, but not exclusively, means a focus on entrepreneurship. Over at Macroblog from the Atlanta Fed, John Robertson, vice president in the Atlanta research department has an interesting posting on entrepreneurship that highlights the national importance of this strategy - The Young and the Restless. In provides a good summary of some of the latest research on firm size and firm age -- including a chart on net job growth of small versus large firms. This reinforces the standard conclusion that small business is what drives job creation.

But that is not the whole story. As he notes in his conclusion:
Perhaps the focus on the number of new firms is misguided. What really matters might be who these new firms are--not how many there are. Research by Dane Stangler suggests that, at any point in time, a relative handful of high-performing companies account for a large share of job creation and innovation. This conclusion suggests that a key to long-term economic growth may lie in ensuring that the economic environment is conducive to the ongoing creation of these types of high-growth performers.
Exactly! There is growing interest in what used to be called "gazelles" - those companies that grow rapidly. To me, to focus of attention should be not just (or even necessarily) on firm creation, but on firm growth.

In that regard, let be second Robertson recommendation of Dane Stangler report High-Growth Firms and the Future of the American Economy from the Kauffman Foundation. According to that study, the top 1% (as measured by employment growth) of all companies of all size account for about 40% of the new jobs and the gazelles (fast-growing young firms which make up less than 1% of all companies) generate roughly 10 percent of new jobs.

So, from a policy perspective it is not enough to worry about the supply of new firms (start-ups and classical entrepreneurship). We need to also find ways to help a greater number of those start ups turn into successful rapid-growth companies. Let me suggest that we really haven't figured out that policy agenda -- but that attention to and better management of intangible assets will be part of the solution.

State assistance to business

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Here is a juxtaposition of news stories that came across my computer screen this morning:
   The Wall Street Journal - States Move to Cut Incentives to Businesses
   Forbes - States That Truly Bet On Small Business

This isn't such a big paradox, however. The Journal article is on how budget problems are forcing states to cut back on tax breaks to lure companies into the state -- and includes tax breaks for film and TV productions. The Forbes piece (and its "in-depth" slide show) talks about the multitude of grants, loans and even equity capital programs. The focus is on innovation, entrepreneurship, technology-based development and start-up activities -- like Ohio's Third Frontier program (see earlier posting), the Pennsylvania Ben Franklin Partners, the Texas Emerging Technology Fund, Maryland's TEDCO, etc.

The difference in these types of programs is night and day. One is the traditional recruitment strategy -- "smokestack chasing" updated to the I-Cubed Economy. While incentives for factories are still part of this strategy, states use the same tools to go after R&D facilities, headquarters (ala the recent fight between VA, MD and DC over Northup Grumman) and film shoots. The other focuses on a "grow-your-own" strategy.

I have always favored the grow-your-own strategy over smokestack chasing. I understand that company recruitment has its place in the overall economic development program. But I agree with the critics -- as the Journal story notes:
William Fox, a professor of economics at the University of Tennessee who specializes in state tax policies, says few tax credits have any real bearing on where companies locate or how they spend and hire. "Taxes matter, but not very much," he says.
Worse than that, if the main reason why the company came was because of the tax break, it is quite possible that they will either want more when the break expire or head off to find a better deal.

In contrast, companies that are home grown tend to stay. Yes, some leave - and as they grow they open facilities in other locations. But they seem to be much more locally rooted ("sticky") that those recruited from the outside. In addition, the types of programs the grow-your-own strategy uses -- technology development and commercialization help, marketing assistance, capital for new product development -- are all tools that can help promote the recruitment of companies. Many companies what to be in an innovation ecosystem that will support their growth. Programs to help create that eco-system and nurture the small start-ups that make up much of that ecosystem help make the area attractive to large companies as well.

So my advice to the states is this: cut back on the tax breaks that don't really help and put the money into start-up programs that do. In the long run, your economy will be stronger.

April employment

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For the second month in a row, the news from the BLS on employment was basically good news. Employment increased by 290,000. Economist has expected job growth of 180,000 (according to the Dow Jones Newswire survey) or 190,000 (according to the New York Times). As important, March's figure was revised substantially upward to 230,000 (from the 162,000 reported last month). The piece of not-so-good news was that the unemployment rate increased to 9.9%. However, that was due to an increase in the number of people looking for jobs -- a sign of economic optimism.

That does not, however, explain the rise in involuntary underemployment. The number of people who could only find part time work was essentially the same as last month. The people working part time because of slack work, however, increased. Apparently companies are still cutting back in some areas. Slack work as historically been a coincident indicator -- so the increase in recent months is troubling.
Involuntaryunderemployed-0410.gif Interestingly the number of voluntary part time workers continues to decline. As I discussed in an earlier posting, the number of people working part time for non-economic reasons had been essentially stable for almost 30 years. In March of 2007 it started to decline -- a decline that continued last month. I speculated before that this might be a labor market crowd out effect -- with those seeking part-time jobs for non-economic reasons (such as collage students) being pushed out of the labor force by those who can only get part-time jobs. But that is pure speculation and does not necessarily fit with the fact that the number of people who could only find part-time work was the same as last month. If there was crowding out, that number should have increased. Someone needs to look at this more closely.


Green is good, but not enough

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The Commerce Department's Economic and Statistics Administration has issued a new report on Measuring the Green Economy. The report is a careful attempt to define activities -- in construction, services and goods production. The analysis finds that in 2007 most of the economic activity and jobs in the "green" economy was in services: 1.8 million jobs under the broad definition of the sector. Construction (green buildings) accounts for about 300,000 jobs using a broad definition. For green manufacturing, the number is smaller: 240,000 under the broad definition. As the report states:
To put the number of green jobs in perspective, the 2.4 million jobs involved in producing green products (using our broad definition) is equivalent to 15 months of job growth at the average monthly rate that occurred during the expansion from 2003 to 2007. The green economy is in a position to grow quickly, but the relatively small size of the green economy also suggests that a majority of the jobs that will be created during this recovery may come from the production of products and services outside of the green economy.
So, according to this analysis, green is not enough.

Let me take a slightly different view of this. The real economy boost might not be the production of green goods and services, but how they are used in the rest of the economy. Think of green as an input rather than an output. Utilization of green technologies and techniques can spur productivity in other "non-green" sectors. The point is not to expand the "green" sector (noun) but to "green" all parts of the economy (verb).

By the way, the same is true intangibles. Readers of this blog will note that I have often tried to dismiss the idea that we can simply be an "intangible-producing" economy. Intangibles are inputs. The key to future economic prosperity is how we utilize the intangibles as fuel for the economic machinery (to use industrial age imagery).

So it is not just green -- or intangibles -- but how they drive the rest of the economy.

Companies that get it

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It often seems that the second biggest lie in business is the statement "employees are our most important asset." Executive say that repeatedly and then slash payrolls to cut costs. But according to a story in today's Wall Street Journal (Recalculating the Cost of Big Layoffs), more companies are walking the walk, not just talking the talk. The story points to a case in point:
Early in the past decade, when its sales fell 11% in two years, Honeywell International Inc. laid off 31,000 employees, one-fourth of its work force, canceled plans for new products and scaled back its global-expansion goals. Those actions "decimated our industrial base," Honeywell Chief Executive David Cote recently told the company's shareholders.
During the recent recession, Honeywell took a different tack. The company's sales fell 15% last year, and its profits shrank 23%, but the diversified manufacturer used furloughs and benefit cuts to limit layoffs to 6,000 employees, about 5% of its work force.
At the same time, Honeywell introduced 600 new products, including advanced industrial controls and fuel-efficient auto turbochargers.
Now, with the economy seemingly on the mend, Honeywell is reaping the benefits of its choice.
Last month, the company, which is based in Morristown, N.J., reported a 3% increase in first-quarter revenue and boosted its forecasts of sales and profit for the rest of the year.
The story goes on to describe research showing that "companies that take a limited and more-targeted approach to layoffs tend to do better in economic recoveries than those that slash employment sharply and across the board."

As the story notes, this doesn't mean companies don't reduce payroll. The key is strategic moves to improve performance, not across the board reductions designed to cut costs. So maybe some companies actually get it.

Ohio's Third Frontier program - voters approve

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Yesterday was election day in a number of states -- mostly primaries. But in Ohio, there was a ballot issue to continue funding of the Third Frontier program. According to their website:
The Ohio Third Frontier represents an unprecedented and bipartisan commitment to expand Ohio's technological strengths and promote commercialization that leads to economic prosperity throughout Ohio. Designed to build world-class research programs, nurture early-stage companies, and foster technology development that makes existing industries more productive, Ohio Third Frontier creates opportunity through innovation.
The program was up for renewed funding and this morning's Cleveland Plain Dealer reports the $700 million renewal was winning by 61% with 85 percent of precincts reporting. As the story notes, the proposal had no organized opposition. However, the supporters were taking no chances and formed a group United for Jobs and Ohio's Future to push for a Yes vote. The list of supporters is impressive -- not only does it include business, labor and academic organizations, it can boast of support from both the Ohio Republican and Democratic Parties.

That support is especially impressive given the breath of the Third Frontier's programs - which go beyond funding basic research. One of my favorites is the Innovation Ohio Loan Fund:
The Innovation Ohio Loan Fund (IOLF) was created to assist existing Ohio companies develop next-generation products and services within certain Targeted Industry Sectors by financing the acquisition, construction, and related costs of technology, facilities, and equipment. Ohio's manufacturing sector is a key target of this program. The IOLF addresses an identified need in the capital-funding continuum, the IOLF is intended to supply capital to Ohio companies having difficulty securing funds from conventional sources due to technical and commercial risk factors associated with the development of a new product or service. The IOLF can finance up to 75 percent of a project's allowable costs to a maximum of $2 million and a minimum of $500,000.
This is not a research program, this is commercialization -- as the chart below from their website shows:

Bottom line: the states get this -- it is all about economic development. But, for some reason ideas that everyone accepts on the state level to help create jobs and spur innovation often get bogged down in ideological debates when they get to Washington. Maybe the voters and politicians of Ohio have helped breakthrough that barrier.
In an earlier posting, I described the National Economic Council's announcement Request for Information on Commercialization of University Research. Now comes word that the comment period has been extended until May 26, 2010 at 11:59 P.M. Eastern Time.

A tale of two Virginias on science policy

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The Commonwealth of Virginia has one of the more active technology-based economic development (TBED) programs. The Center for Innovative Technologies was an early leader in TBED. Universities, such as the University of Virginia, Virginia Tech and George Mason University, have been at the forefront of this activity.

But now, Virginia is caught up in a scientific and political controversy over climate change research. The new Virginia Attorney General Ken Cuccinelli has started a broad fraud investigation of Dr. Michael Mann -- now at Penn State but formerly an employee at the University of Virginia. As such, Dr. Mann is subject to the Virginia Fraud Against Taxpayers Act of 2002. The fraud that the AG Cuccinelli is investigating is Dr. Mann's climate change findings. (See stories on FoxNews, USA Today and the Washington Post).

Regardless of what you think about climate change and the merits of the investigation, the mixed signal it sends is interesting. How many scientists might now do a double take on coming a Virginia school? Do you really want take the chance that your research might be subject to what some see as a politically-based investigation? And if the theories are right about top-notch research universities being a driver of technological innovation, what does that do to Virginia's TBED strategy?

As this controversy plays itself out, it will be interesting to see what collateral damage is cause to the Commonwealth's ability to attract scientific talent. Just as reputation matters for companies, it also matters for state and localities in this globally mobile scientific marketplace.

Ranking brands and valuing intangibles

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Over at the blog IP Finance, Neil Wilkof asks the question What Should We Do With Brand Rankings?. In this case, he looks at the process of brand valuation and rankings for the BrandZ rankings recently published in the Financial Times and see a black box.
I also fully appreciate that it [BrandZ] might want to keep some of its methodology and data confidential. Still, there is this lingering concern that, without the ability to reasonably evaluate the process of fact-gathering and the empirical robustness of the valuation models, there is a threat that the ultimate branding metrics may have a bit of misplaced quantitative certitude about them.
The same seems true with all other valuations of intangibles. As I have noted a before, intangible valuation needs to go beyond the black box and at least create some standards. The IRS Intangible Property Valuation Guidelines requires that its valuators prepare a written report that "should effectively communicate the methodology and reasoning, as well as identify the supporting documentation." As the guidelines note:
1. The primary objective of a valuation report is to provide convincing and compelling support for the conclusions reached.
2. Valuation reports should contain all the information necessary to allow a clear understanding of the valuation analyses and demonstrate how the conclusions were reached.
These guidelines seem to go beyond the I mentioned in a earlier posting. in that they describe very specific issue to be considered when using a valuation method and require the justification of the method used. Use of a similar set of questions would go far to resolving the valuation black box problem -- at least in many cases. Because of the their nature, valuation of intangibles will always be somewhat of an art as well as a science. But increased transparency in the valuation process will increase understanding, and ultimately acceptability, of these important assets.
    Note: the views expressed here are solely those of the author and do not necessarily represent those of Athena Alliance.

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