Intellectual Capital -- Where Can You Spend It?

Article excerpt

You might have trouble buying a No. 1 Sonic cheeseburger with a unit of intellectual capital. Dollars and cents, debits and credits, assets and liabilities, we have no problem understanding these terms. Intellectual capital is a more difficult concept.

However, whether we fully understand or appreciate the term, our investing behavior says we have embraced it with gusto. The evidence is in the growth of the stock market over the last eight years. What do you think of when you hear or see the term intellectual capital? Some might picture a fuzzy haired, wild-eyed scientist with test tube in hand spouting obscure formulas. Others might think of an engineer with obligatory white short-sleeved shirt and black tie, pocket protector loaded with pens and pencils.

None of these would be wrong, but it is much more than a stereotype -- much more. We don't invest billions of dollars in stereotypes.

Two well-respected technology licensing professionals, Patrick Sullivan and James O'Shaughnessy, define intellectual capital as "the sum of a firm's ideas, inventions, technologies, general knowledge, computer programs, designs, data skills, processes, creativity and publications." Whew! That's a lot of stuff.

If you stop and think about it, you probably have intellectual capital throughout your organization. They say intellectual capital consists of two major categories, human capital and intellectual assets. Human capital we understand -- that's us! We are the source of imagination, ideas, creativity, skills and so on. Intellectual assets require a little more explanation -- so hang in here with me.

Intellectual assets are created when people commit to media any knowledge, know-how, or learning. It is the "codified knowledge" of human capital. It consists of plans, procedures, memos, sketches, drawings and blueprints, computer programs etc. Some of these are captured in print media and others electronically. …