What do Assets mean in 2018 ?

When we look at company assets, we usually look at it from a scope that’s decades old. In this historic lens – Things and money are the most valued asset’s and people with ideas and its incubation was deemed as an expense. This is exactly the reason why investments in a certain industries like – healthcare, education and immunization are still considered liability assets.  Artificial Intelligence is fast changing how we value assets and quantify it.

Example 1:

RadioShack recent filed for bankruptcy in the supreme court and made approximately 180 Million by selling its physical assets – Real Estate, Inventory and Computers etc. All this seems alright, but what about the two most valuable assets for a company in 2018 ? – Brand & Customer Data.

This instigates a very thought proving question for investors –

How is the value of a company varied by the amount of Information it collects on its customers as it develops new products and more services ?

Should the value of a company have a direct effect on the amount of new information flow into the company ?

Valuating physical assets is probably the easiest job, but in this murky world of “Intangible Assets”, this a question that has plagued analysts for decades. In the age of AI, companies pour more and more money into Customer Databases, CRM and Cloud technologies, another interesting question arises, Should these Tools be valued on the basis of how much it cost to make them or do you come up with a fair value of the increased returns ?

“The calculation of the estimated fair value of these customer-related intangible assets is based on the income approach utilizing a discounted cash flow methodology. Following recognition of the impairment charge, we will amortize the adjusted carrying amount of those assets over their remaining useful life.” – Paypal CFO, John Rainey

Example 2:

Black Rock has most recently announced it would be making a significant technological shift in the company with various investments in Machine Learning Research thereby placing more trust on computers to make decisions rather than people. This a very shock move in the financial industry and shows a significant shift in the financial industry.

More often than not, Companies do not have to tools to see how successful they are in implementing different business models. in 2018, Machine learning is enabling these companies to to compare, analyse and identify the true assets and expenses in different markets. ML has actually helped so many companies realize the value of neglected assets , best example , NVIDIA with GPU’s and the advent of Crytpo mining.

In conclusion, it doesn’t matter how we value investments in the Artificial Intelligence space; It’s time to think along the lines of what giants like – Alphabet, Microsoft and Amazon, there is an urgency in the market to include Machine Learning in the decision making process to regain customer trust and drive value.

Sources :

1. Forbes:https://www.forbes.com/sites/barrylibert/2017/04/28/leaders-need-to-bet-on-ai-to-drive-growth-value/#366ef5406e8f
2. Wall street Journal: https://www.wsj.com/articles/accountings-21st-century-challenge-how-to-value-intangible-assets-1458605126
3. https://www.forbes.com/sites/barrylibert/2016/12/15/machine-learning-will-change-what-we-value/#1b366a0f563a