Your Human Capital
I’m taking a course during my morning workout from University of Chicago on Human Capital. It has me thinking about appreciation and
depreciation rates, rental income and how different organizations view human capital.
Two hundred years ago America was populated with millions of farms. Farms had all kinds of capital: land, equipment, horses and/or machinery, and human capital. The value of the human capital was based on physical strength and endurance. Farmer Smith’s efforts were significantly overcome by elements largely out of his control: wind, rain, pests, frost, etc. The income of the farm was increased by the increase of the crops, subject to the forces of nature. The Farmer Smith’s physical strength was his human capital… and that depreciated based on age and health factors.
Today, many young workers have invested in a college degree. Their physical strength is worth less, but their human capital is worth more. Their knowledge adds value, however, knowledge depreciates as well. A computer programmer that only knows how to program in 8088 Assembly language has allowed his knowledge to depreciate in value because the market has moved on.
We are in more control of our human capital than Farmer Smith was. We can take courses, we can read white papers, we can take consulting positions that increase our capacity… but many people don’t. Why not? This is a terrible waste of potential. Does cost keep us from taking courses? It shouldn’t in today’s world. The courses I’m taking are from Standford (technology entrepreneurship) , Oxford (critical reasoning), Yale (game theory) and Chicago (human capital). Please consider: are you allowing your human capital to depreciate? If so, here’s a starting point… and take notes, it will help your human capital appreciate.