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Richard Veryard

Mike's first point cen be generalized to cover any process innovation that is focused on efficiency. But one company's cost reduction may be another company's loss of revenue. So the aggregate effect of local innovation might be global stagnation.

I interpret Mike's second point as suggesting a partial decoupling of the traditional tight coupling between innovation and capital. That is indeed a radical idea, with some perhaps uncomfortable implications.

Mike nevens

Let me offer two poential additonal explanations. Managers in many sectors continue to udnerstaimate the prodcutivity benefits they are (finally) gaining from IT investments. The benefits took loner to arrive than hoped and are non linear becaure cahnges across the organization are multiplicative not addative. This applies to capital efficiencies as well as cost reductions. So, the cash flow is greater than projected. Second, many new business innovations are "capital light". Idea driven or intellectual property based innovations don;t require the same level of capital investment as previous innovations. It would be valuable to have osmepone grind throught the numbers and see how much of the "excess returns" to investors are accoutned for by these two effects. These are good not worrying signs for the future of the economy.

Richard Veryard

Big companies returning capital to their shareholders? Perhaps this reflects a shifting balance of effective innovation towards smaller companies, and a faster corporate lifecycle. How would an unbundling of investment and innovation look from an Edge perspective?

Adam Marsh

Another explanation in a recent BusinessWeek article is that buybacks are just covering for options, and so actually in many cases don't change the outstanding shares much: article here.

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