Intangible property industry

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The untapped wealth source in Kenya

By Edwin Musonye

Defining wealth materiall remains the proverbial ‘low hanging fruit’ for most lowly developedeconomies . But is Kenya a lowly intellectual country as to fall for the shortcut?

Today there is frantic effort in oil, gas and minerals exploration in Kenya. Tullow Oil and Acacia Mining are companies conspicuously leading the pursuit. In a strong correlation, Agriculture which is the traditional primary economic backbone is being neglected.

It is not difficult to deduct from these concurrencies, including the increasing public sector extravagance -best captured in the carefree spiraling borrowings- that optimism pegged on ‘new money’ that will
soon flow from these (godsend) sources is obvious.

However, appreciation of money (and wealth) comes in three typical levels. The most rudimentary being banknotes and coins and generally referred to as cash. Then, there are the tangible products
and commodities that form the bulk of merchandise in trade. Finally, at the height there are the intangible assets that come as ideas and knowledge; but packaged as Intellectual Property and technology.
Countries, communities and even individuals naturally follow this pattern and hence, those at the bottom of
economic ladder have high gratitude for (cash) donations. Those in the category believe that they have nothing to offer -even when some sit on huge deposits of natural resources or talents. This is simply
picking the ‘self-fallen fruit’

Those in a more advanced level attempt to bring something on the table of trade. This they do through exploiting their nonrenewal natural resources and capabilities – but only to exchange them for (guess what?) good cash!

At most advanced levels things change. Whereas, exploitation of non-renewal natural resources may be pursued, the priority is probably not to exchange for cash but perhaps something noble like finding medication for an ailment. The money is in producing new ideas, processes, designs and systems.

This is not to demonize cash and commodities but to exalt human capitalas the most valuable asset, this is without going into the merits (or demerits) of what caused a downgrading of intangible assets on balance sheets. Human capital is the apex of wealth creation and storage at personal, societal, national and even
international levels.

Intangible Property Industry
The structure of intangible property industry has not been exhaustively defined, but it generally encompasses three branches: the knowledge industry that embraces professional services and
research output; and the creative industry that embraces skills and performances such singing, acting and painting; and soft wealth that is only captured by Genuine Progress Indicator (GPI) embracing
‘humanity as money.’

Practically there is little difference between the knowledge industry and creative industry, other than that, one utilises higher intellectual investment than Intangible property industry By Edwin Musonye
The untapped wealth source in Kenya THE ACCOUNTANT THE ACCOUNTANT JANUARY- FEBRUARY 2020 9
FINANCE AND INVESTMENT the other. However, to produce high value creative output, substantial intellectual input must be invested. To produce an award winning film, a bestselling novel or
world acclaimed songs is not a guesswork venture. Nonetheless, possession of natural talent may support the success.

Some of the common challenges that they both encounter include; they are not easy to price; they are not easy to standardize; they are not easy to cost. Of course, the most challenging intangible property is in the embracing of ‘humanity as money’. This is best witnessed in accidents in which the value of property destroyed -such as the motor vehicle, aeroplane, ship or building involved are regrettably
mourned more than lives or injuries of the human victims.

Another evidence (luckily is dying away) security guards protecting show rooms of luxury cars were based outside in the cold whilst the ‘precious vehicle’ that is nowhere near being a human and
is a (mere) factory-made product ‘slept’ in the warm carpeted glassed room ‘smiling’ at potential buyers. Notably, this applies only in poor countries.

Definitely, the accounting practice and economists suffer a disadvantage in directlycapturing human factor as a standard asset in the accounting books. However, there is allowance to capture (indirectly) the output
based on conventional method as economic rents and goodwill.

This means if an organisation unfortunately lost a staff member through death but still made the same profit as the previous period, the convention will overlook the loss. Even worse, if it posts
better financial performance, it might inadvertently send a ‘good riddance’ message.

Another example is in glorifying higher profit making organisations than larger employers. For instance, Safaricom is renowned for profitability but not for creating employment. In the same vein
nobody cares to congratulate or document those who create most jobs. There was a time when Telkom Kenya held the top employer, but it wasn’t recognised.

Chicken and Egg trap
The excuse given by the ‘poor’ societies for not exploiting intangible assets, and specially valuing humanity as money is that they are not wealthy enough. So, they seek to accumulate banknotes, products
and commodities to sizable amounts as to enable them start cherishing humanity more.

Logically, the reverse provides a more direct route – the elevating of humanity capital above material capital for faster development. In fact the transaction of the transformation is cashless.

However, adopting new economic mindset requires fully understanding its mechanisms. High expertise in establishing and running efficient monetary and fiscalsystems that effectively serves the society.
This is through effective tapping of nontraditional money.

By the country moving into the knowledge-driven economic path, systems will be redesigned to make it possible to not only easily identify productive ideas, but also reward the generators of those
ideas. Furthermore, more resources will be pumped into serious research programs; highest quality education, and harnessing citizens’ talents and wellbeing.

Advantage of harnessing
intangible industry’s wealth Whereas, many developing societies prefer procrastinating jumping into the intangible industry bandwagon, there exist many incentives for promptitude.

  1. As Eliud Kipchoge, (the world legend of Kenyan origin) who recently ran a marathon in under two
    hours noted- no human is limited. Intangible industry is limitless. By empowering the citizenry, we can
    grow the GDP and GDP per capita to unobstructed highs.
  2. The economic growth can take a steeper trajectory. This is because some of the products (output) are
    not physical and need not await factory manufacturing processes. The economy doesn’t have to be
    constrained on Vision 2030’s ten percent procedural growth line.
  3. Under the knowledge economy, less physical and mechanical investment is needed. This means
    only investment in quality space for learning, and discoveries is required.
  4. It uplifts citizens’ dignity by stopping the boosting of its wealth in terms of barrel of oil or ounces gold and diamonds produced to the value of skills of the people. The shift from how people are helpless to how they are resourceful.

This shift in wealth appreciation is mapped on the Scandinavian countries’ success. It dictates being rich is not how much people have, but on the quality of their lives. The critical ideological and functional stance
becomes: Are we going to define cash, or is it cash that is going to define us?

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