Take Facebook, for example. Facebook’s market cap is $444 billion, but its book value (value of its tangible assets) is only $66 billion. For a conventional company, the $378 billion difference between these numbers represents the market’s expectation of future earnings potential.
However, since Facebook doesn’t put data on its balance sheet, just how much of this $378 billion represents the value of its data and how much is the expectation of future earnings is anyone’s guess.
If we can’t answer this question, therefore, then our ability to judge the value of companies like Facebook is in jeopardy, making it impossible to either invest in or manage them rationally.