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Mind Over Matter: Why Intellectual Capital is the Chief Source of Wealth

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This is an important book on an important topic - the creation of value and wealth by people working together in services relationships. It's hard to tell from the title, but this is, among other things, a one-volume economics education. Baker builds on extensive quotes from a who's who of economic and business literature, including a satiric essay on balance of trade fallacies by Frederic Bastiat, and the full text of a prescient speech Ronald Reagan in Moscow in 1988. The book is written in an approachable first-person style, as befits an author who seems to be a bit of a cult hero in the world of accounting ... yes, accounting!

Don't let the focus on economics and accounting throw you off. This is a business book with an edgy and timely message. Baker provides a harsh critique of current accounting practices as lacking theory, in the sense of ability to explain, predict and prescribe. He describes current accounting practices as the "three blind mice" of the balance sheet, the income statement, and cash flow that can only record value after the fact, and do not properly address the value of intellectual capital. He is also a critic of Sarbanes-Oxley Act of 2002, which he maintains has done more harm than good. He is not alone in this evaluation, (see The Sarbanes-Oxley Debacle: What We've Learned; How to Fix It (Aei Liability Studies) ) but he goes beyond other critics by proposing positive alternatives to costly and restrictive regulations.

This book provides key intellectual underpinning for Baker's longstanding quest to do away with such industrial vestiges as billable hours, timesheets, cost-plus pricing. His VeraSage Institute is a think tank for improving the position and practices of professional service firms. Specifically, Baker and VeraSage focus on knowledge workers in the truest sense of the term as people who "own the means of production, and apply knowledge to knowledge to create value".

Baker maintains that people should not be regarded as an unfortunate cost, but rather seen as volunteers, who can walk away from any employer, simply to invest their personal intellectual capital elsewhere. He sees knowledge as a nonrival asset, meaning that its value to one person is not reduced when it is possessed by others. Perhaps at a later date he will return to an analysis of the comparative value of fresh knowledge that provides advantages vis a vis competitive rivals.

Baker insists that knowledge work must be better monetized, beyond the stultifying practice of simply measuring hours spent on the job. As precedent for alternative monetization, he cites the frequent flyer programs of airlines that constitute a massive alternative currency. "Money is not wealth per se, it is merely how members of a society move it around ... the wealth of nations resides in consumer well-being, not profits." This is focus on well-being is supported by long-wave economic theorist Carlota Perez (see Technological Revolutions and Financial Capital: The Dynamics of Bubbles and Golden Ages ), who believes that the frenzied focus on technology for its own sake is giving way to real wealth creation based on "attention to collective well-being."

Baker points out that entrained thinking can be a barrier to achieving these beneficial effects. He decries the use of military and sports analogies that assume business is a form of warfare. He quotes from Pfeffer and Sutton ( Hard Facts, Dangerous Half-Truths And Total Nonsense: Profiting From Evidence-Based Management ) to stress that a focus on competition over cooperation is a hallmark of the Michael Porter school of strategic thinking. A good antidote to this perspective is to be found in the value net notion of Cinzia Parolini ( The Value Net: A Tool for Competitive Strategy ) that looks at value-creating nodes and relationships that transcend traditional firm and industry boundaries.

This is a timely message for executives, within and beyond the professional services industry. Supporting and capturing the value of creative and problem-solving communities can unleash a new wave of wealth creation, and Ron Baker provides needed guidance for how to achieve this.

I stumbled across a copy of 'Mind over Matter' while studying for my CPA examination in the library. I borrowed it and finished it in one evening. I am a young professional who has been thinking about what he wants to do with his career and hence his future. This book, luckily, does not tell me 'what' my future should be, but instead it made me think about the 'why' of my future direction in life.

A young professional, particularly those who are serious about their careers and self-development, should read this book for many reasons:

1) This book will challenge your current worldview about professional knowledge industry and the role your 'intellectual capital' can enhance your capability as a future leader
2) This book draws from the world's greatest thinkers and economists, combining with the author's proposition, to provide a rich discussion about what it takes to be a first-rate knowledge worker in the 21st century
3) The author's own life story will serve as an inspiration for many young professionals to 'fly higher' and be brave enough to live their dreams and not settling for anything less

I am so grateful to have found this little gem and I hope you will feel the same after reading it. The most amazing about being human is our mind, and this book tells you why our mind needs to be trained to achieve its potentials.