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Why do companies continue to undervalue people? The world is awash in capital. Nearly $30 trillion has been dumped into the global markets by central bankers all around the world since 2008. Yet while there's plenty of cash out there in the financial system, the real economic recovery is still pretty lacklustre. And that's in part due to a lack of top tier human capital.
As any first year MBA student knows, executives are supposed to treat corporate capital as an asset and labour as a cost on the balance sheet. But in order for the economy to grow, education and skills have to keep pace with technology, or productivity suffers, which is exactly what we're seeing today in rich countries. They're having lower productivity and slower growth.
The human resources company Manpower has actually reported recently that 40% of global companies have a talent shortage. And part of the problem is that companies aren't investing in their talent pool as they might. Workers, and the knowledge that workers hold, is too often treated as dispensable. So nurturing human capital and then harvesting its riches in the form of intellectual property is really a hallmark of today's most successful businesses.
It's no longer the most capital intensive companies, but those like Apple or Google with the most IP, that take the gross profit share. McKinsey research shows that 10% of corporations take 80% of all the profits. So why them? Because they have higher levels of digital information flows, patents, and R&D spending. Knowledge, not cash, is the new capital.