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For example, at the end of its 2015 fiscal year, Apple’s balancesheet stated tangible assets of $290 billion as a contribution to its annual revenues, with approximately $141 billion worth of intangible assets — a combination of intellectual capital, brand equity, and (investor and consumer) goodwill.
Similarly, Microsoft paid $26 billion for loss-making LinkedIn in 2016, and Facebook paid $19 billion for WhatsApp in 2014 when it had no revenues or profits. This becomes clear when you look at a company’s two most important financial statements: the balancesheet and the income statement.
By 2016, the rise of smart phones seemed to have made the company less relevant: Its revenues were at almost the same level they had been a full decade earlier. Yet investors can be a powerful strategic resource, providing not only capital but also less-biased insight into the threats and opportunities that a company encounters.
China’s four largest banks have quadrupled the share of foreign assets on their balancesheets since 2007 to $1 trillion—that make gives them larger foreign portfolios than German or Italian banks. In 2005, the United States absorbed 67% of all net global capital flows; by 2016, that share had fallen by half.
Despite these significant labor investments, from 2007 to the end of 2016, Costco’s stock price increased over 200%, far outpacing the overall growth of the S&P 500 (58%) and that of competitors like Walmart (45%) and Target (26%), which is known to pay workers low wages and offer relatively meager employee benefits.
Independently, Michael Porter’s Social Progress Index in 2016 specifically highlighted opportunity in Manizales as significantly higher than both Medellin and Bogota. We taught lending officers how to talk to businesses that were afraid that taking debt onto their balancesheets was riskier than maintaining a flat-growth business.
The strategy works, temporarily putting more cash on the positive side of the balancesheet. This article is adapted from Throwing Rocks at the Google Bus: How Growth Became the Enemy of Prosperity (Portfolio, 2016). Technology may be involved with all this, but pointing to digital things as somehow causative is a mistake.
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