Human Capital:Our Most Valuable Asset

It is with great dismay we watch one of the Wall Street giants take a tumble today.  In just over a year Bear Stearns Cos. went from a market capitalization valued at $25 billion down to its fire sale value of $1.4 billion.  What is even more disconcerting is that 7000 of its employees will be searching for new jobs according to the WSJ.  Despite the massive loss of financial capital the more pressing concern for these former employees is what to do in the short-term. 

In Charles Wheelan’s book, Naked Economics, he defines human capital as, “…the sum total of skills embodied within an individual: education, intelligence, charisma, creativity, work experience, entrepreneurial vigor, and even the ability to throw a baseball fast.”  Well, there probably will not be any Bear Stearns employees fighting for a position in the baseball draft but this disruption will release an enormous amount of human capital.  There will be tough times for many in the coming months but ultimately this is a group of people who will rally back and use this experience to their benefit as well as ours.  It is the most painful but necessary part of what Joseph Schumpeter described as creative destruction.  Out with the old and in with the new as some would say. 

While we have gotten use to to layoffs and mass reductions in the workforce as a blue collar phenomenon the 21st century has demonstrated a predilection for those of the white collar type.  At the level of the individual there are very few people who ever considered losing their job as a good thing regardless of their job description.  My heart goes out to these fine people.  Some may have been directly involved in the practices that led to the downfall of Bear Stearns but most were not.  All is not lost though as they still possess their most valuable asset: human capital.

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