We’re all tech corporations now

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Good morning.

If you wish to choose one statistic that signifies how a lot enterprise has modified within the final half century, I’d select this one: intangible property as a share of complete property. It reveals the rise of issues like patents, software program, information, model, and the decline of onerous property like land, buildings, tools, stock. Ben Carlson cites a model of that information in his essay for our new Quarterly Funding Information, noting that amongst S&P 500 corporations, intangible property have gone from 17% of complete property in 1975 to 90% final 12 months. Beautiful.

Carlson makes use of the information to clarify craziness within the inventory market. It’s rather a lot tougher to worth an organization primarily based on intangibles than one with onerous property. However the implications go a lot additional. Take into account:

—Corporations can scale a lot sooner after they aren’t depending on onerous property. Consider how a lot simpler it’s for Facebook so as to add 100 million new customers than for Exxon to seek out one million new barrels of oil.

—Profitable corporations have much less want for funding {dollars} than they used to—which explains why Apple is sitting on practically $200 billion in money that it hasn’t discovered a use for . . . and why the economic system at massive is awash in unused financial savings.

—Pricing is tougher, as a result of the price on the margin is usually near zero.

—Disruption is simpler—as a result of it solely takes creativeness to enhance on another person’s mental property.

—Expertise guidelines, as a result of intangibles are solely nearly as good because the individuals who consistently refresh them.

I may go on. The purpose is that we are typically guided by concepts and theories devised to clarify an economic system that not exists. Most of what I used to be taught in graduate college concerning pricing, income, antitrust coverage, fiscal coverage, and a lot extra, not holds. And the definitive textbook for the brand new economic system—in addition to the definitive guidebook for presidency and enterprise leaders working in that economic system—has but to be written. We want a brand new Samuelson.

Different tales in our Quarterly Funding Information embrace Anne Sraders’ choose of eight tech shares to purchase this 12 months, Jen Wieczner’s take a look at nice tech shares that get missed, Bernhard Warner’s piece on why the tech commerce hasn’t topped out but, Lance Lambert’s data-driven rating of the highest 10 new tech meccas within the U.S., Robert Hackett’s tackle why you must add Bitcoin to your portfolio, and Jeff Roberts’ skeptical story on the SPAC craze. You possibly can entry your entire package deal here . . . if you’re a Fortune subscriber. In the event you aren’t, now’s a superb time to enroll!

Extra information under.

Alan Murray
@alansmurray

[email protected]