Investing
the changing corporation, ownership, purpose and intangible capital
Under radical uncertainty, where the future cannot be calculated, firms succeed by building capabilities others cannot easily copy, and unusual combinations of them. Established leaders fall when rivals meet customer needs better, not when they run short of resources.
In knowledge-based businesses, the critical productive capacity lives in people's skills and heads rather than in machines the company owns. Workers increasingly take the plant home with them each night, so owning the means of production stops being a meaningful source of control.
Kay argues that the buildings, computers and equipment a modern company needs are mostly fungible: they can be rented or bought from anyone. Because they confer no special advantage, controlling them no longer explains which firms win.
Kay argues that finance has become something a business buys from a specialist supplier, like electricity or legal advice. That supplier has little say over how the businesses it funds actually operate, which reverses the old picture of owners commanding firms.
Old capitalists ran businesses because they owned them. Kay argues that today's professional managers are rich because they hold authority inside large organisations, not powerful because they are rich.
"Capital" is used loosely for both the productive tools of a business and financial claims on it. Mixing the two hides the fact that tradable securities can float free of the real assets they supposedly represent.
Business has changed, but the words we use to describe it, like capitalist, owner and capital, still come from the age of mills and assembly lines. Reasoning with outdated vocabulary leads people to misread how modern firms work and who holds power in them.
Kay argues that running a firm chiefly to maximise returns to shareholders misreads how good companies actually create value. He argues the pursuit of shareholder value destroyed some of the leading companies of the twentieth century.
People consume more than ever from big companies while trusting those companies less. Firms that make life-saving products can still lose public trust, and widening pay gaps between executives and staff erode their legitimacy.
Major advances, like powered flight, come from knowledge built up across many people and turned into shared, collective intelligence rather than from lone genius. That is why business is fundamentally social, and why firms are best seen as groups of people cooperating.