Things used to be what chief financial officers, merger-and-acquisition strategists, bankers, and fund managers were paid to keep track of: tangible assets that determined a company's value. Those things were, quite literally, things: plant and equipment, factories and machinery, buildings and inventory. They were assets that determined a company's value, assets that could be measured and used to calculate return on investment. Those assets were solid, and so were the financial decisions based on their value.

But in the world of finance today, things aren't what they used to be. In the new economy, the most valuable assets have gone from solid to soft, from tangible to intangible. Instead of plant and equipment, companies today compete on ideas and relationships. Assets come in the form of patents, knowledge, and people. These kinds of assets are soft and squishy, and number crunchers and bean counters hate them. How do you assign a dollar value to an engineer's startup experience? How much is a personal network worth? How do you decide whether to finance a new internal project when its only assets are an idea and a team?

Hard questions about soft assets are driving finance professionals to develop new measurements, new reporting forms, new tools and techniques for an economy based on intangibles.

At Macromedia Inc., for example, a San Francisco - based Web-software company, CFO Betsey Nelson finds herself calculating value based on how close the company can get to its customers. "We're looking at the value over time of a relationship," she says.

At Silicon Valley Bank, in Santa Clara, California, Ken Wilcox leads his loan officers in equating company value with the value of people networks inside and outside the company: "A management team that can change fast is of the greatest importance," says Wilcox, SVB's president, chief operating officer, and chief banking officer.

At Nortel Networks Corp., a Brampton, Ontario - based maker of gear for voice and data networks, Klaus Buechner, the company's mastermind of merger-and-acquisition strategy, assigns a high value to any acquisition that promises to accelerate Nortel's entry into markets for Internet-protocol networks. "The driving motivation in this new dynamic is time to market," Buechner says.

At California Public Employees' Retirement System (CalPERS), in Sacramento, Bob Boldt, who is in charge of investing more than $140 billion in retirement money, finds value in companies that can motivate individuals. "As the external owners of a company, we want to know that the guys who are in there making decisions for us on a day-to-day basis -- the engineers, the managers -- have the same interests as we do," says Boldt.

What emerges from these people's experiences are valuation methods that mix the traditional and the new: cash-flow analysis and scenario analysis, discipline and experimentation. Together, they are setting the standards of soft finance.