Asset-value

Despite having many co-authors, this book is a coherent collection of original works. It contains a careful selection of topics and a deliberate flow of ideas. In addition to sections devoted to major institutional players like banks, insurers, pension plans and government sponsored enterprises, the relationship between ALM and corporate finance, the role of equity analysts, money managers and hedge funds in ALM, and other important topics are covered.

The book has an ambitious and multi-faceted focus: It not only addresses the scope and functions of intangible assets, but it also discusses related topics such as accounting for intangibles; the implications of intangibles for internal and external reporting; and the foundations of a new management system. The book is carefully investigated, well-written and nicely structured. Several interviews with leading specialists such as Leif Edvinsson (a pioneer in the area of Intellectual Capital management), Baruch Lev (an expert on intangibles accounting) and David Norton (co-creator of the Balanced Scorecard concept) provide also a helpful bridge between the practice and theory of managing intangible assets.

I strongly recommend this book if you want to have a better understanding of the comprehensive role and implications of a company's intangible assets. It is also a helpful resource for students and professionals in the areas of strategic management, financial performance management and strategic accounting. It will challenge and help you to discover new ways to create business value.

Here are several important questions which many organizations are now struggling to answer:

1. How can the value of growth from our new products and innovations be compared to the value of existing business?

2. Is there any rationale behind our valuations based on Internet growth expectations? Is there a way to identify and track the changing value of growth?

3. What's the value of our intellectual property? What is the value of our business models built around selling of ideas?

4. Are we prepared to tell a convincing, indeed compelling "story" about our growth opportunities that supports the value of our growth? Can we provide credible numbers with that "story"?

Amram addresses all of these and many others in 15 chapters which are organized as follows: "One Map of Value" (Chapter 1) and "The Look and Feel of Growth Opportunities" (Chapter 2), followed by three Parts and an Epilogue: Expanding the Toolkit (e.g. "Discounted Cash Flow," Chapter 3), Valuing Growth (e.g. "Growth Value Benchmarks from Venture Capital," Chapter 8), Across the Sweep of Value (e.g. "Creating the Credible Growth Engine," Chapter 13), and then her Epilogue in which she focuses on "Leading Growth" in Chapter 14 and "Marking a Spot on the Face of Value" in Chapter 15. Readers will be especially grateful for a substantial Appendix which consists of nine "Tables" for growth option lookup and estimating volatility, followed by a highly informative Glossary. I provide all this information to help the reader of this review get a more specific sense of what Amram offers in this book. Amram demonstrates exceptional writing when presenting her material.

All organizations embark on a new "journey" at the beginning of their fiscal year and must make hundreds (thousands?) of decisions with regard to the allocation of their resources. Many of those decisions have profoundly serious implications...both positive and negative. Whether or not an organization survives may perhaps depend on some of those decisions. I recommend in the strongest terms possible that Martha Amram's book be read and then re-read by every decision-maker, regardless of the size or nature of her or his organization. Obviously it cannot ensure a successful "journey" but it can certainly help to improve the odds.

Those who share my high regard for this book are urged to read Heidi Mason and Tim Rohner's The Venture Imperative.

Few variables are more likely to dictate short- and long-term commercial success than a firm's ability to convert intellectual assets into intellectual property (IP). The smaller the firm, the bigger the need, and the need only grows.
Most companies are careful to avoid IP infringement and are eager to sue direct competitors who do not. Many firms also educate key employees on their roles in perfecting and protecting intangible assets. Fewer give full attention to IP and antecedents that might nevertheless be regarded as assets. For example, those who would not hesitate to monitor and sue infringing competitors may not monitor non-competitors as potential licensees.
To extract the most from intellectual assets, many factors, e.g., legal, technical marketing and sales, must be weighed. Edison in the Boardroom offers important advice to help firms take steps to meet that need. Despite its reference to "assets" in the subtitle, however, most of this book focuses more narrowly - on IP, and on patents specifically.
Davis and Harrison, said to bring "a quarter century of IP consulting accomplishments between them," document that some companies have long engaged in trying to optimize the value of their intellectual assets. The authors also assign companies to a five-level hierarchy based on a range of IP-management strategies. A goldmining metaphor is usefully advanced at one point to describe those levels as: defensive (staking claims), panning (cost control), mining (deeper profit seeking), processing (integration), and sculpting. The heart of the book consists of five chapters that discuss these levels seriatim and offers a host of useful ideas and anecdotes.
The book is generally well-structured. For example, early in each of the five core chapters is a description of what "companies are trying to accomplish" at the corresponding level of IP-management sophistication. At the defensive level, of course, companies have processes for seeking, maintaining and enforcing IP. Yet, in the discussion of second-level companies, said to seek to reduce costs by exercising judgment about what is brought into and kept in their patent portfolios, it becomes clear how much various levels overlap. The first two topics may usefully be segregated for purposes of discussion, but it is hard to imagine any company that can afford, literally, to pursue protection without attempting to balance portfolio goals against concomitant costs. Indeed, one thesis of the second chapter is that no firm can seek the strongest protection for everything of potential patentability, much less seek it in every possible country.
The third chapter diverges considerably. Companies featured there are said to seek, e.g., to extract portfolio value as quickly and cheaply as possible. Several have gone well beyond suing competitors or easily discovered, non-competing infringers. The most aggressive of such firms regard IP departments as profit centers and actively solicit licensees. Their success is sometimes remarkable. As the authors point out, "Worldwide revenues from patent licensing have grown from $15 billion in 1990 to over $100 billion in 2000." Echoing the central theme of another recent book, Davis and Harrison also point out that, "Some experts estimate that companies are sitting on $1 trillion per year in unexploited licensing fees."
Fourth- and fifth-level firms are difficult to distinguish from ones discussed earlier - or from each other. For example, level-four companies are said to seek to integrate "IP awareness and operations throughout all functions of the company." That seems necessary, too, for allegedly less capable compatriots. Further, when level-five firms are described as embedding intellectual assets and their management into the company culture, it is difficult to find divergence.
The last are said to have as additional objectives: (1) staking a claim on the future and (2) encouraging "disruptive technologies." Still, these could easily been collapsed into "Get a Crystal Ball!" Heuristics for meeting them non-serendipitiously are weak.
Consider, for example, the mouse and graphic interface as commercialized on Macintosh computers. Steve Jobs is said to have derived both from the Alto computer developed by Xerox's Palo Alto Research Center. While Jobs became a billionaire, "Xerox completely failed to get into the personal computer business, missing one of the biggest business opportunities in history." To avoid repeating such mistakes, Davis and Harrison suggest that companies should "identify ways the corporation can benefit from [ideas outside their business capacity] before moving on." They, not surprisingly, can offer little guidance.
One IP attorney recently stressed the need for his colleagues better to understand the identification, protection and use of intellectual capital "effectively to address strategic corporate objectives." Those for whom this is novel terrrain will find Edison in the Boardroom helpful.
Also, senior IP counsel better acquainted with the topic may find the book useful. Some will face difficulty in convincing those at the same level or higher in the corporate hierarchy of its importance. To the extent that their advocacy of the critical role to be played by IP counsel is perceived as serving selfish aims, the book should help allay suspicions.
For these and other attorneys, the value of Edison in the Boardroom could easily, and vastly, exceed its modest price.

They quote examples at different levels of their framework and look at companies who are suceeding at managing and valuing their IP effectively. This is a skill which can only be more and more wanted in the future.

The most interesting takeaway is that most companies are very bad in this field, and there are very few success stories.

Everything I needed for the project was in the book, however one thing surprised and disappointed me: the organization. I simply don't see much of a logical flow in the chapter structure, so I think it would be more difficult to someone who wasn't already familiar with the basic structure of the valuation process. Why is market efficiency jammed between unrelated chapters? Why is the discussion and examples of the pro-forma capitalization of R&D split between distant chapters? Throughout a single project, one would have to keep the book marked in several diffent places, not neccessarily in the order that one would have to deal with the questions if one were doing a valuation. The result is that this book is less easy to use as a practical guidebook than it could be, and will keep one busy in the index looking for where subjects are addressed.

This is nit-picking however. Professor Damodoran is to be congratulated for producing such a high quality and comprehensive text on valuation.

But since I can buy as many books as I want, it would be more important to tell what this book does not do. First, it's always important to get a second opinion. In this case, it would be something other than DCF. Currently, DCF and relative valuation (such as PE and PV) are the dominent valuation methods used in the U.S. And yes, they are both covered in-depth by this book, in addition to the Economic Value Addded method which is gaining momentum in recent years. But this book essentially dismisses the income statements in favor of cash flows statements for valuing securities, preferring DCF to relative valuation. This is certainly understandable in lights of recent manipulation of GAAP income by offenders like Enron, WorldCom and Tyco. But I believe it's important for investors to hear the voice for income statements valuation method. For that investors should get James English's Applied Equity Analysis - another must-have - as a second valuation reference book. Secondly, this book uses CAPM model for finding the discount rate. Again, it is true that CAPM is the most widely used model in the U.S., but I came to a conclusion, after reading close to a hundred critically acclaimed articles published in the last fifty years as part of my MBA requirements, that factor models provide better tracking of stock prices than CAPM does. Unfortunately, there is no good book available. For institutional investors, they can have models from BARRA and Wilshire, etc, but individual investors would have to construct their own, probably (like me) using the Fama-French three-factor model. Description of their model is available mostly from theirs and other published papers. Data are available from Kenneth French's own website at Dartmouth. Now since you read all the way through my review, here is your reward: go to Damodaran's website and download the manuscript of this book for free if you are really frugal.

Leif Edvinsson, the world's first corporate director of IC at Skandia, now associate professor of IC at the University of Lund

A took kit the "Value Explorer" guides the reader through the practical applications of the method. I would like to say, that my experience on the model ICBS (Intellectual Capital Benchmarking System), that follows a similar way, guarantees the effectiveness of this new alternative approach. Weightless Wealth is a well-written book, easy to read, enjoyable and engaging from start to finish.

toolkit, the Value Explorer, is described in the last part of the book and guides the reader through their suggested process. Their linkage of competencies to financial results and the future earning power of the company is new and provides an alternative perspective for managers faced with critical strategic decisions. This is of special importance in a world in which the value of businesses by traditional means has become very difficult. Weightless Wealth is a well-written book, easy to read and engaging from start to finish.

Yes, it is organized more as two books in one, and often the best statement of the concept is at the end, rather than the beginning of the chapter. But it is well written (has great quotations) a fast read for the complexity of thought and experience it contains. Worth the time.

I highly recommend this for any parent, teacher, or anyone that works with youth on a regular basis.