Amid the demand for instant economic news and comment, longer term changes can be ignored. There’s one very important change, which is especially resonant to the Jewish community.
It involves investment. The traditional form of investment was in tangible assets, like buildings, machinery and vehicles. But as our new book, Capitalism Without Capital: The Rise of the Intangible Economy
documents, major developed economies now invest more in intangible assets, like design, branding, R&D, training and software.
Large areas of the economy have been “knowledge” intensive for a long time: advanced aerospace and pharma companies for example. But the importance of intangible assets is growing everywhere. At the gym, you work out on machines in buildings: all very tangible. But if you do an exercise routine to music, very likely it will be from a company that mixes the music, designs the routine, trains the instructors and markets the product all over the world. This is nothing but a bundle of intangible assets.
It’s well-documented that Jews are over-represented in professional occupations. The usual explanation goes back to the Middle Ages. Jews, this story runs, were denied entry into many occupations. But a fascinating book, The Chosen Few: How Education Shaped Jewish History, 70-1492 (The Princeton Economic History of the Western World)
by Maristella Botticini and Zvi Eckstein shows this theory has a fatal flaw. As they document, Jews were disproportionately in professional occupations in the 7th Century, long before the Middle Ages. Why?
They suggest that following the ruling around the middle of the first century by Joshua Ben Gamla that Jewish fathers send their sons to primary school to study Torah, the religion changed from one of temple service and sacrifice to reading and study. What’s more the literacy rules were unique among religions of the time: after Paul’s conversion to Christianity, he abolished the requirement to follow Jewish law, including reading.
Three important developments followed. First, Jews specialised in occupations that used literacy heavily. They moved away from farming towards commerce, trading and money-lending, a move greatly helped by Talmudic law around contracts.
Second, Jews urbanised and moved to cities where they could trade and be in service occupations. Third, many simply stopped being Jewish. The price of books and cost of being away from the land whilst studying were just too high.
This has remarkable resonance with the computerised intangible-intensive economy of today. Routine tasks, like digging a ditch or office paperwork have been largely replaced by machines. The prospects for the poorly educated are dim. But the same machines are great for those doing non-routine tasks: researchers find knowledge more easily; doctors, lawyers and accountants use software to do standardised parts of the job and specialise.
Many of the opportunities in the intangible-intensive economy will be in cities, where creativity and learning is simulated by the interaction with like-minded others.
All these benefits come with costs. When the original injunction came for learning many Jews simply opted out: Botticini and Eckstein suggest the Jewish population declined by two-thirds between 135 CE and 650, many becoming Christians.
In our book, we suggest three groups of winners in the intangible economy. Those creating the very intangible assets that are now becoming so prevalent: the software, the design, the research. Those whose talent works in conjunction with these assets: actors with movie scripts, musicians with music scores, doctors with new scientific knowledge.
Another group of winners will be those who can manage and co-ordinate bundles of intangible assets. After Steve Jobs died Apple did not appoint their best designer or programmer, but their chief operating officer. Tim Cook had set up the Apple supply chain, an amazing co-ordination of production, design and marketing, key to Apple’s success. The skills to do this will require knowledge of technology and accounting, but even more so the ability to organise and inspire. One of the most valuable of future skills will be leadership. Youth movements have been teaching and instilling hadrachah, for decades and many of our community started out as a youth movement madrich. The ancient sages showed great foresight in promoting reading 2,000 years ago: promoting leading now shows the same vision.
Jonathan Haskel is Professor of Economics at Imperial College Business School, Imperial College London. Stian Westlake is a senior fellow at Nesta, the UK’s national foundation for innovation. Capitalism without Capital is published by Princeton University Press.
