Financial Capital versus Human Capital
Posted by kboon on April 5, 2010 under General | 
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Recently I had the opportunity to see Kevin O’Leary. Kevin is a venture capitalist and one of stars of the CBC show the Dragons Den. He also is a star of a new show in the US called Shark Tank.
O’Leary gave the audience a snapshot of his world view, based on his experience in the world of venture capital investing, his global travels and his personal perspective of life.
His predictions for North America and Europe were pretty bleak.
Is our Purpose in Life to Work 18 Hours a Day?
He told the story of an Engineer, living in Cairo who works 18 hours a day, sleeps by his desk and earns $32,000 per year. He said workers in the developing world (like this engineer) are hungry for change and are willing to go to great lengths to create wealth and improve their lives.
He described the staggering economic growth rates and small debt loads in countries like China and India, comparing them to the mediocre growth rates and soaring debt loads of the US, Canada and Europe. He said, the most recent recession that devastated most of the developed world, was just a small blip on China’s radar.
Globalization is the New Reality
His message was not really news. We all know that globalization has taken hold. The developing world is taking off. Developed economies (especially the US) are burdened by heavy debt and are losing their power and influence. Competion, on a global scale is intense. Over the coming decades, the dynamics of our global economy will play out in such a way that the share of power will shift.
Most of O’Leary’s observations are ideas that I agree with.
Can we Really Compete by Working Harder?
What I disagree with are some of his proposed solutions and his thoughts on financial capital being the main mantra of business. He said we need to work harder than ever before and take a competitive mindset. He told the audience that if you are an entrepreneur and not prepared to sacrifice everything (and for O’Leary that includes friends and family) then be prepared to fail. Although he had a lot of fans cheering his message, you could feel a relative silence from the audience; a general feeling of apprehension. His message to me felt cold and out of touch.
He went on to predict the decline of the middle classes in Canada and throughout the developed world over the coming decades.
My question:
Does Kevin O’Leary have a real handle on todays business reality?
Is it true, our world is in decline?
Could it be there is something else emerging?
Financial Capital versus Human Capital?
O’Leary says, capital always pursues the highest return with the lowest risk. If you look at the realities of the corporate world this true. Corporations have moved manufacturing and services facilities to the developing world to find greater efficiency and improve profitablity. Hence we are seeing the challenges of plant closures and downsizing that has plagued North America.
The primary focus for corporations is on financial capital. This philosophy goes all the way back to the industrial revolution where the needs of money and profit are placed above people and the human element.
Small Business and the Importance of Human Capital
As a small business owner I see something else emerging. There is becoming a greater focus on human capital. A growing number of people are taking the entrepreneurial leap, realizing that corporate profit taking and cost cutting does not have their best interests in mind.
You can’t plan your future or a retirement plan when your job is at risk.
There is an empowerment taking place where entrepreneurs and small business owners are harnessing technology, and looking for ways to provide a better lifestyle and greater financial security.
Most traditional businesses are focused entirely on profits and have the competitive pressures to keep costs low. However there are a growing number of companies who have set an equal priority on the human element, building organizations that provide empowering job opportunities for employees. This is an important shift for companies and I predict that more will want to make this change over the coming decades.
The reason being, if you want to keep jobs in your country and compete with China and India, then competition on price no longer works. The focus for a business needs to be about something else.
How important is human capital in your business or career?
