Final answer:
The uniqueness of IT assets in comparison to tangible assets like buildings lies in their lower observability, greater malleability, and network effects. While tangible assets offer moderate returns and liquidity, IT assets contribute to productivity but may require significant all-or-nothing investments.
Step-by-step explanation:
In considering the uniqueness of IT assets such as hardware and software compared to physical assets like buildings and factories, the instructor argues that IT assets feature lower observability, greater (potential) malleability, and network effects that can create potential lock-ins. Unlike tangible assets where the value is often linked to the physical material, the value of IT assets largely stems from the technology and ideas they embody.
Investing in tangible assets can provide a moderate rate of return and moderate risk, with nonfinancial benefits including use and enjoyment of the asset, such as living in a house you own. However, these kinds of assets typically have low liquidity due to the time and energy required to convert them into cash.
Physical capital, which includes plant, equipment, and infrastructure, can increase productivity either by increasing the quantity of capital or by improving the quality of capital. Similarly, IT assets can enhance productivity through technological advancements. However, IT investments can be high-stakes with significant upfront costs, unlike investments in physical capital that can often be scaled incrementally.