Professor Jonathan Haskel tells us why he decided to take up the challenge of valuing intangible assets and explores the themes of his celebrated book Capitalism without Capital
As a member of the Bank of England Monetary Policy Committee, Professor Jonathan Haskel continues to be one of the leading minds addressing the UK’s biggest economic challenges. A professor of economics at Imperial College Business School and formerly director of its doctoral programme, Professor Haskel’s career has also seen him serve as a member of the Reporting Panel of the Competition Commission, and the Conference Secretary of the Royal Economic Society (he also served on the organisation’s council from 2011 to 2016). Since 2016, he has been a Non-Executive Director of the UK Statistics Authority.
Central to his work has been demystifying the “intangible economy”. Traditionally, the value of a business has been heavily tied up in physical assets like vehicles, buildings and infrastructure, all of which can be easily included in GDP measurements. However, today’s behemoths, such as Google, Uber and Facebook, own comparatively little, instead investing in abstract investments.
“The economy has become much more intangible, and what firms are investing in nowadays are things you can’t really touch or feel,” Professor Haskel told the Imperial Business Podcast in 2017. “It’s things like branding, writing software, analysing databases, design, and the whole organisational process of the firm itself. This is a challenge for the GDP measurement because [an assessor] just finds it too difficult to measure all that sort of stuff.”
Capitalism without capital
This ever-growing category of asset was the subject of his book, Capitalism without Capital: The Rise of the Intangible Economy, which he co-authored with Stian Westlake. Launched at Imperial College Business School, Capitalism without Capital has received widespread praise: it has been recommended by Bill Gates, and named one of the best books of 2017 by both The Economist and the Financial Times.
The research behind it was also the basis of Professor Haskel’s winning submission to the inaugural Indigo Prize for economics: his team was awarded a share of the £125,000 grand prize for their essay examining how intangible assets could be better measured by GDP.
“Accountants and statisticians find it very difficult to measure these types of intangible investments, but we took the view, when we started this work about 10 years ago, [that] although this would be difficult, we thought we’d have a go,” explained Professor Haskel.
The economy has become much more intangible, and what firms are investing in nowadays are things you can’t really touch or feel
“There are all sorts of difficult challenges out there, and Imperial likes to think it can have a go at difficult things.” With technology-centric companies now dominating business, understanding the intangible economy is of paramount importance to the leaders of both the future and today.
One worrying trend Professor Haskel has identified is that the intangible economy seems to be fostering inequality. Smaller companies are finding it difficult to compete with their larger peers: the latter not only have greater resources to pour into their R&D, but are also able to develop unmatchable synergies across their portfolios of intangible assets. Google Docs might be worth comparatively little on its own, but when combined with the full suite of Google’s apps – like Gmail, Drive and Hangouts – it is worth considerably more. Social division is also increasing, with rural dwellers not seeing the same benefits from the intangible economy as those living in cities. As Professor Haskel wrote for IB Knowledge: “Someone with a Harry Potter-style script isn’t going to bump into computer-generated-effects expert or a talented actor in a small village in the Cotswolds.”
In the wake of the 2008 crash, intangible investment growth in the UK declined, slowing economic activity and stifling productivity. According to Professor Haskel, this has had far-reaching consequences: “It’s dampened the benefits of spillover technologies and knowledge, which in turn has limited how much companies can scale up and expand. And it’s this that has caused our productivity to stagnate.”
He’s now looking at what has happened during the coronavirus pandemic. “The pandemic shows that intangible investment is here to stay. Firms have kept up with their R&D and creative investment. Perhaps the switch towards digital and the need for new technologies might refresh innovation,” he said.
Professor Haskel has been responsible for addressing many of these challenges, particularly through his role with the Bank of England. As an external member of the Monetary Policy Committee (MPC), he holds one of nine votes to decide the future path of UK monetary policy. First appointed in September 2018, he was reappointed to the Committee for another three years in June 2021.
There are all sorts of difficult challenges out there, and Imperial likes to think it can have a go at difficult things
Commenting on this year’s appointments to the MPC, Chancellor of the Exchequer Rishi Sunak said: “I am also delighted to reappoint Professor Jonathan Haskel to the MPC and I am confident his expertise in productivity and innovation will continue to play an important role.”
The Governor of the Bank of England, Andrew Bailey said: “I’m also very pleased that Professor Jonathan Haskel has been reappointed for a second term. His work on monetary policy has been effective and insightful, and the Committee will continue to benefit from his expertise.”
Professor Haskel’s achievements also led to him being made Commander of the British Empire in the Queen’s 2017 Birthday Honours, in recognition of his leadership in public services and agenda-setting research. Professor Haskel said he was delighted to receive the accolade: “The award reflects, I hope, my contributions to helping solve some of the most pressing issues facing today’s economy, including the contribution of science to boosting the UK economy.”