Both are what are called “intangible assets,” productive inputs which are difficult to measure and to capture but increasingly important in creating economic value. While the critical role of intangible assets is increasingly recognised by investors in their market valuation of companies and by companies themselves (which seek to develop specific tools to develop and preserve these assets), accountants and economists still have serious troubles with the definitions and recognition of intangible assets. Thus, a company such IBM which earns on the average $1 billion a year from its IP licensing shows only $15 to 20 million of IP-related intangibles on its balance sheet. Neither do Goldman Sachs or General Electric, firms whose ability to nurture talent is legendary, carry any talent-related intangible assets in their accounts.
At least, IP is well-defined in legal terms and organised into categories (patents, copyrights, licences, etc), for which explicitly codified business practices have been established. Talent is a very broad term, which covers not only substantive and highly visible skills: creative arts ability, sporting prowess and scientific intuition, but also a less visible but crucial capability to discover and leverage those skills. The war for talent rages as much, if not more, for the latter as for the former. And the business talent is more difficult to identify and to define. Its attributes are more diffuse and their effect and impact are not as immediately apparent as
Both intellectual property and talent are highly valuable (the Economist calls talent “the most valuable commodity” and many analysts use the same word to describe IP). However, their value is derived not so much from their scarcity as from their extremely uneven distribution: they are highly concentrated in few businesses and few locations. This concentration, built on social clustering and network effects, is difficult to replicate.
Intellectual
property and talent are closely related but asymmetrical: all intellectual
property is generated by talent but not all talent creates IP. Intellectual property can be seen as encapsulation
of talent, a way of making it better defined and more easily transferable. IP,
through its restrictions and sharing of ownership, also provides means of
control over talent. It may be for this reason that areas where IP is
important, such as science and engineering, have been less subject to the explosion
of remuneration and capricious behaviour of its prima donnas than areas, such
as sport or
On the other hand, it is apparent that the dynamics of the “talent war” are invading and perturbing the well-defined world of IP: prestigious faculties may not resemble as yet leading sport franchises but the trend is there. At the same time, managers of sport and creative areas are exploring how to use IP, in its various forms, to better leverage and protect their business.
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