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March 31, 2006

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Colin Kingsbury

Jeff,

I'm with you on the "talent more valuable than capital theme," though I'm not sure whether this represents a new truth, or if it's just that the ability of talent to mobilize capital efficiently is approaching or past some inflection point. Certainly you can view the classic battles of Thermopylae, or between Alexander and Darius, through the talent-versus-capital lens.

Digression aside, it would seem to me that in the end this is all going to show up in a company's Return on Invested Capital metric, no? The real challenge is that one can often reliably project a short-term benefit from Capital Plan A while the greater benefit from Talent Plan B needs to be discounted for uncertainty to the point that Plan A looks better. It seems to me that talentism coincides with an appetite for entrepreneurial risk-taking in many ways and this is anathema to most larger, well-established companies.

Heather

You forgot to mention that the person that you referred to here was kidding: "someone told me recently that I often write like I am trying to make other people feel stupid" and also mentioned that they (meaning *I*) had to read slowly to get it all to sink in. You are that smart and your writing style is dense with information. Hopefully you understand that there was teasing involved, even if yuo didn't mention that here. I have to be more careful about what I say to you!

Jeff Hunter

Colin - Either companies are in the business of buying and selling money (in which case they are banks) or they are in the business of returning above the cost of capital to investors. If the second, it is increasingly true that creativity and innovation are the only reliable path to achieving that objective (read: http://blog.360.yahoo.com/blog-aax.YEE5abPBZ0mZz0eiPw--?cq=1&p=40). So, counter intuitively, the only way to make more money in the knowledge game is to put money second to the talent that produces innovation, and the only way to consistently produce that innovation is to invest capital in talent. It doesn't matter how large or small you are. I agree that there is a disconnect between what the Street perceives to be value and what good business managers know to be true. But that will work itself out over time. At least I hope so.

Heather - I got that you were teasing, but I took it seriously, because I don't want to be a pompous ass (which, as you noted in a recent post, can be an occupational hazard). I thought your comment was a useful reminder to "keep it real." Thanks and keep ‘em coming!

Martin Snyder

Jeff I think your comment about the need to support education is the key takeaway. It's not only a critical element to a just and productive society; it’s also the one that seems to have the most potential for improvement.

Our national defense and healthcare are the only other areas of massive investment with similar imperatives, and they seem much less amenable to significantly better results with much less cost, while most of us think that the way we educate people throughout their lives is full of misapplied resources and outmoded methods, assumptions, and expectations.

One thing that I think needs consideration in planning is that numerically, today and into the future, there are still a massive number of needed jobs that don’t require significant innovation and creativity, although they may require learned skills and sweat.

Everything from mechanics, building trades, health technicians, foodservice and agricultural workers, truck drivers, chemical and industrial technicians, etc. What we need to do is to be able to build a sustainable society where those types of jobs can yield a reasonably high quality life; to have healthy families where the generations are not class bound in a calcified structure that only seeks to perpetuate itself.

I’m not talking socialist nonsense- I’m talking about investment and global rules of the game that don’t drive the cost of human life and labor to negative values.

And there will always be serious money to be made for those organizations that do a lot of raw work with marginally more controlled costs or outputs- innovation will be very valuable, as always, at the top, but it’s an iceberg.

Motivating, leading, organizing, and selling will also remain key drivers of wealth creation, especially in relatively static and maturing industries, and education of your own workforce may be a huge part of competitive advantage because the wider society may not be getting it done.

Jeff Hunter

Colin - I should have said "All businesses need to return above the cost of capital in order to return real value to shareholders, and they can either do that by buying and selling money or creating value through innnovation." I was on my way to participate in my children's school play and jumbled through the whole mess (I got to play an old man, which I am pretty sure is type-casting).

Jeff Hunter

Martin -

Great catch. Actually, when you boil it all down, my "Talentism" mission is a personal compulsion to try to remake the American education system. I am going to write a post about this soon, but very much appreciate your great comment.

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