Documenting human capital: The next wave of economic development

In a podcast interview, Mitch Ratcliffe discusses the concept of documenting human capital and what it holds for individual workers with Princeton economist Robert Shiller.

There's a podcast associated with this posting. You can download it here.

You, your children and your children's children are going to be information entrepreneurs. In everything you do. From work to play, at home and on the road, you throw off valuable information and ideas that will soon be recordable and a key component of making a living as well as improving economic efficiency and competitiveness. Human capital, all the intangibles people talk about today, will soon be measured. Life will include all sorts of new decisions.You won't want to share it all, you'll have the opportunity to profit in myriad ways. Life will include all sorts of new decisions.

For now, Google is the only company to have successfully begun to mine the vast reservoir of human capital that exists in people and their actions. Granted, Google's extracting only simple information, such as search queries and behavioral data. It has kept virtually all that value to itself—to the tune of billions of dollarrs a quarter—by convincing people their services are more valuable than our personal intelligence. Google has barely put a gouge in the earth of value that is human capital.

Human capital, all the intangibles people talk about today when they speak of relationship value, the worth of education, social capital, intellectual effort and so much more, will soon be measured. A hundred years ago, no one would have contemplated counting calories or measuring productivity. Brawn, not brains, was thought to be the main driver of economic value. Documented human capital, captured through a variety of systems, including wearable computers and attention monitoring, will transform society as completely as the industrial age, but we're not there yet.

Robert Shiller, an economics professor at Princeton University, provided a thought-provoking look at how economic models could be created on the foundation of better measurement in his book, The New Financial Order. He examines hedging societal risk, such as drastic changes in technology that displace workers, national inequality insurance and intergenerational social security built on the idea of global risk information databases. His ideas show where the path to documenting human capital might lead.

The IT era has only set the stage. I had my a-ha! moment about this after talking with Joseph Hentz, an entrepreneur who co-founded Volitional Partners and Openyear, a project to develop the first versions of documented human intellectual capital. We'd been talking for more than two years and at first I thought they were insightful but crazy.

Hentz said to me recently "Someday, you'll be able to ask questions based on the biofeedback, tone of voices and conversations, and quality of ideas produced, like 'How is the company feeling today?'"

Think about that. The company, whether it is under one roof or distributed across continents, will be as measurable as the human body is today. What did it do today? How is it feeling, and what does feeling best mean (perish the thought the company will run well only if we're all mindlessly happy)? We won't understand what all the measurements tell us, just like we don't fully understand the body—we may only have scratched the surface—nevertheless we will be able to create profoundly interesting financial instruments that hedge risk and profit from each breakthrough.

It is critical, however, that everyone begin to think about the possibilities and implementation, so that the economic opportunities created by measuring human capital are truly bottom-up. Why? Because this is information that comes from within us. We own it and must not begin to live in this new economic order in ignorance or we will be exploited as completely as the environment was by the industrial economy. Companies will participate and profit, but we have to know what we're getting ourselves into, conceiving new forms of contract to govern our interactions. Unlike getting a chip in our necks, this is an opportunity to begin to redefine economic relationships so that make prosperity available to every participant.

Companies hoping to participate in this evolved, human capital-based economies will have to listen to the market first and always. Equitable contracts for sharing ideas, for profit and not, must spring from the community that will live those contracts.

There has been a lot of dialogue about the pressing need for new financial models for funding new companies and research.

Listen to Robert Shiller talk about how a scientist could sell, say 30 percent of his future worth at graduation in exchange for 30 years worth of income to fund his life and research. The amazing thing about documented human capital is that it could provide the unanticipated economic value that can be used to break the logjam that prevents small companies and individuals from undertaking extremely risky potentially highly valuable work. It may not be a problem of connecting funders and startups, rather the barrier may be the lack of a concept of value that must be unleashed.

This human capital debate is deeply connected to the problem of starting new companies and opening the way for individuals to pursue their dreams.

So, I've agreed to conduct a series of interviews with people who have broken ground in human capital, beginning with Robert Shiller. You'll find the podcast of our discussion here.

After you listen, join the discussion in Talkback. This is a phenomenon that will transform life, so let's take charge by participating in a debate about the evolving technologies and economic models that will prevail when we're (not much) older and during our descendants lives.

[Full Disclosure: I have been an advisor to Volitional Partners for about a year and, in my role as the gatherer of stories that enable this discussion, I will benefit financially if the company raises funding and succeeds in launching a service.] 

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