I have to confess that I have been surprised by the depth of the reaction to the latest changes in the GDP calculations which count R&D and creative works as investments with lasting value rather than current expenses that don't last. 

This is something that has been in the works for years. Back in 2006, the NY Times explained that the BEA had begun to experiment with the idea of adding intangibles like R&D to GDP calculations.  And Michael Mandel contributed thoughtfully to the discussion a few years later as the Economics Editor of Business Week. Then it was formally announced as a test in the BEA satellite accounts in 2010. The change is about R&D and creative properties which are actually among the most mainstream and well-understood intangibles. Overall the changes add roughly 3% to GDP which is the equivalent, as Credit Suisse describes it, of adding another New Jersey to the economy. It's significant but not that significant.

So I didn’t expect to have many people notice when they flipped the switch. I was wrong. And I’m happy to be wrong.

The official roll out of the new changes has been covered by the New York TimesBloombergFinancial Times  and McKinsey (here’s my response to their paper) which is more than an intangibles issue has maybe ever gotten. Smarter-Companies bloggers Ken Jarboe, Bill Miller, and Jay Deragon have all added to the conversation.

Is the reaction about these particular changes? I don't think so. I think the reaction is a bell weather of something more. It’s the growing unease with the failure of mainstream information sources (national and business accounting as well as traditional management tools) to keep up with the changes in our economy. I’ve been very pleased with the coverage as writers have acknowledged that this is just the tip of an iceberg of change.

In fact, the intangibles story is actually much, much bigger than this change implies. Spending in the U.S. on intangibles began exceeding spending on tangibles over 20 years ago (see the graph halfway down the page). In financial (rather than national accounting terms), roughly 80% of corporate value today is intangible.

My bottom line? We need to be supportive of the institutionalization of new information and practices. R&D and creative properties are just the beginning. Other kinds of intangibles that should eventually be measured include data, processes, networks. The example I always like to use is Federal Express. Even though it has enormous investments in tangible assets, its core competitive advantage comes from the system it has created for planning, coordinating, tracking and optimizing the movement of packages. This system is a more valuable and longer-lived asset than any of its planes or trucks or sorting equipment. But we are years (probably decades) away from being able to measure this asset in traditional frameworks like GDP or even financial accounting..

But we don’t need economic (or accounting) record-keepers to tell us what we already know: that tangible assets are basically commodities. Intangibles are the source of competitive advantage in today’s world. So if you want to grow your business, improve performance and/or get paid for the intangible value you create, you'll need to get better at measuring and managing intangibles right now. That’s why we have started a movement for ICounting.

ICounting includes open source tools to inventory, illustrate and model the workings of the unique intangibles of an organization. Give them a try. Join the conversation. Change the global conversation. Intangibles aren’t going away and the future of your company and our economies depend on them. Get started by counting all your intangibles now.

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