Thursday, November 08, 2007

Capital vs. Talent:Capital Is Plentiful, Talent Scarce

I came across an interesting 2005 New Yorker article titled "Net Worth," here are some excerpts:

In the traditional struggle between capital and labor, more often than not capital has won, because the real source of value for most companies has historically been the hard assets that they owned and controlled. Toyota owes its success to its machines, assembly lines, and system of production. For Wal-Mart, it’s primarily store location, technological efficiency, and product selection. For Coca-Cola, it’s carbonated beverages and exceptional distribution. Workers for these companies are, for the most part, interchangeable, so their bargaining power is limited.

But in a host of industries—most notably in what we now call the knowledge economy—the arrangement is different. In Hollywood, in Silicon Valley, on Wall Street, and in professional sports, hard assets matter far less than people. The employees—the so-called knowledge workers—make the difference between success and failure.

Capital is plentiful; it is skilled people who are scarce. The salient struggle is no longer capital versus labor but, capital versus talent. The upshot is that in many knowledge businesses the employees often do better than the shareholders.

Talented workers were always in demand, but only recently did they recognize how much they could get for their services. Things may be getting harder for traditional labor—real wages for most workers actually fell last year (2004)—but they’re getting better for the talent.

Bottom Line: The "capital vs. talent" argument could actually help explain: a) rising CEO pay, b) rising income inequality, and c) the decline of manufacturing wages and the power of unions, etc.

4 Comments:

At 11/08/2007 11:56 AM, Anonymous Anonymous said...

I don't think "so-called knowledge workers" really means what this writer thinks it means when he applies it to professional sports players. That may be a quibble, but there is a difference between people who use their minds and people who have near-unique physical talents.

skh.pcola

 
At 11/08/2007 3:03 PM, Anonymous Anonymous said...

Tell me again about the talented Stan O'Neal and why he is worth $161.5 million in go away money.

He wrecked Merrill beyond what is visible in the eight billion dollar (and rising) financial loss. Did anyone notice the significance of Merrill going outside to find a replacement? That simple fact shows how O'Neal wrecked the management of Merrill and destroyed anyone he saw as a rival.

 
At 11/08/2007 6:33 PM, Anonymous Anonymous said...

As above the same goes for Citgo. Knowledge does not trump common sense

 
At 11/11/2007 8:59 PM, Blogger David said...

"the real source of value for most companies has historically been the hard assets that they owned and controlled. Toyota owes its success to its machines, assembly lines, and system of production"...what does he think the Toyota "system of production" actually IS? It is knowlege, based on the insights of many individuals within the company. There are plenty of other companies with capital equal to or exceeding Toyota who have not been able to match it in manufacturing capability.

 

Post a Comment

Links to this post:

Create a Link

<< Home