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The Not Unreasonable Podcast
Intangibility, Economics 2.0 and What Makes A Modern Firm with Arnold Kling
December 10, 2017 David Wright

Hey folks, today we are zooming out to the big picture.

We talk a lot about technological trends (software eating the world, bitcoin, AI) but *organizational* trends aren't given their due. And organizations are evolving, partly (maybe mostly) due to technology but this line of thinking also is also distinct. One example is a recent book called Capitalism without Capital, by Jonathan Haskell and Stian Westlake, which argues that what they call intangible assets are growing in importance.

Intangible assets are ideas, knowledge, aesthetic content, brands, networks and relationships. These sit collectively in the heads of employees of an organization and in some ways sit between theirs heads in that organizations are webs of collaboration. The framework the authors establish is that intangible assets have four qualities: they scale easily, their costs are sunk (you can't sell them!), they are synergistic, in that the combination of these assets supercharge their effect and they create postiive spillovers outside of the firm itself. One observation the authors make is that synergy and scalability means companies use intangible assets to get big. Real big.

Other research supports this by pointing out firm margins are increasing but startup rates have declined! This paints a complicated picture and I wanted to find someone to help me think it through.

My choice was Arnold Kling, who has been an early commenter on these trends, publishing essays in the 90s and early 00s discussing declining variable costs (link) and the intangible economy (link to book). He has an incredibly unique perspective in that he has a mainstream economics education (completing his PhD dissertation at MIT under Nobel Laureate Robert Solow) but also started, grew and sold an Internet business in the 90s (see his story here). Arnold has experienced first hand the research and reality of organizational development and growth and I learned a lot here.

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