VeraSage

Human Capital (Not Cattle)

Ron Baker - 04/04/2006

In the knowledge society, the most probable assumption for organizations—and certainly the assumption on which they have to conduct their affairs—is that they need knowledge workers far more than knowledge workers need them.
—Peter Drucker

The term human capital was first used by Nobel Price—winning economist Theodore W. Schultz in a 1961 article in American Economic Review. His basic thesis was that investments in human capital should be accounted for in the same manner as investments in plant and machinery.

The obvious challenge is that investments in tangible, physical assets can be counted and comprehended, but those in people cannot. It is as if accountants would value the average human being at $50 since that is the approximate worth of our various chemical components. Human capital is like the dark matter of the cosmos, we know it’s out there but we can’t measure it.