What is ‘Capitalism without Capital’ and why is the CEO of Bombay Stock Exchange recommending it for India

What is ‘Capitalism without Capital’ and why is the CEO of Bombay Stock Exchange recommending it for India
BSE MD and CEO Ashish Chauhan.BCCL
  • Bombay Stock Exchange chief Ashish Chauhan argued that India can catch up with the rest of the world by pivoting well at this point.
  • He argues that India needs to embrace the concept of ‘capitalism without capital’, stating that not a lot of money is needed to create wealth.
  • Noted economists Haskel and Westlake came up with this concept originally, arguing that modern companies are built around the “knowledge economy”, which is the pillar of ‘capitalism without capital’.
The chief of Bombay Stock Exchange, Ashish Chauhan, believes that ‘Capitalism without capital’ will play a key role in wealth creation in the post-COVID world.

“It’s not about how much money you put in, it’s what I call ‘Capitalism without capital’. The modern world is about not putting too much money,” Chauhan told Business Insider in the latest episode of The Big Reset.

Ashish Chauhan is the managing director and the chief executive officer of the Bombay Stock Exchange, the second biggest stock exchange in India.

But what exactly is this concept of ‘Capitalism without capital’?

Economists Jonathan Haskel and Stian Westlake argue that the modern world is built around intangible assets like research and development, knowledge and others more than tangible assets like plant and equipment.


They state that the amount of contribution of intangible assets in a company’s market value is a lot higher today than it was ever before.

Their argument is essentially that the modern world is built around the “knowledge economy” instead of physical assets like factories, plants etc.

In his research into the company’s accounts, economist Charles Hulten found that Microsoft’s plant and equipment amounted to just $3 billion, which was roughly 1% of the company’s market value in the year 2006.

Microsoft founder Bill Gates endorsed Haskel and Westlake’s arguments, and added, “The idea today that anyone would need to be pitched on why software is a legitimate investment seems unimaginable, but a lot has changed since the 1980s. It’s time the way we think about the economy does, too.”

“Mark Zuckerberg didn’t put in $20 billion to create Facebook. He put in $1000 and made it $100 billion, so it’s not about money, it’s about a little bit of money, and a lot of ability to pivot continuously,” Chauhan said.

Why ‘capitalism without capital’ is important for the Indian economy

Essentially, wealth creation is no longer completely tied to capital – intangible assets like knowledge, research and development and data have taken over as the drivers of success in modern companies. The success of companies like Google and Microsoft proves this.

The strain on resources has never been as severe as it is right now. Due to the COVID-19 crisis, India’s GDP is all set to shrink by 3.2% in the year 2020-21, according to the World Bank.

India’s fiscal deficit, which is the difference between the total income and expenditure, could balloon to 7.9% according to a SBI research report.

All in all, India’s financial woes are expected to get worse even as it has announced a ₹20 lakh crore stimulus package.

Chauhan argues that now is the best time for India to catch this bus and ‘run with it’. “India has always been searching for capital. Now, wealth creation will be without capital requirement. With very little capital, you can become billionaires,” Chauhan said.

“My sense is people who are close to consumers will find out about the problem and create some incredible businesses,” said the 27-year old billionaire founder of hotel chain OYO, Ritesh Agarwal.


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