Everybody is a capitalist

When Adam Smith wrote the Wealth of Nations in 1776, the industrial revolution had just started. He described a world where butcher, baker and brewer were the engines of production. Individuals were in control of their destiny to a large extent as they had liberated themselves from the feudal control over their livelihood, and have not yet experienced the concentration of means of production at the height of the industrial revolution.

Of course this where Karl Marx comes in. In 1867 Das Kapital is published and it describes a much different world where the worker is back to serf-status and the industrialist controls all the means of production.

Our world today is a mixture of both realities, but as we move more and more to become knowledge societies (at least in the west), workers have again a lot of control over the means of production.

In other words workers are becoming capitalists; in a much deeper way than them having an investment in a fund or a house.

Workers are capitalists because they own the most valuable asset in the modern economy: their talent, ideas, and drive to create.

The employee/firm relation is an arrangement that has worked well in the past, as workers rent their talent for a fixed price. The outcome is that workers do not share in the upside of venture success but are protected from the downside.

A new arrangement is growing stronger with time and that is the consultant/firm relation where the rent is for very short periods of time, thus allowing the firm to get the appropriate talent required at the right time.

The drawback of the consultant/firm relation is that the worker is basically at the opposite end of the firm, basically his interests are to charge the highest price for the least work, and to expand his tenure as much as possible. The firm of course has the opposite interest.

We feel that the worker should look at his talent-capital like a capitalist. He should rent some to provide a security net that allows him to operate without major harm to himself and his family. He should also invest some in higher risk ventures where he is joining in the upside and downside.

The new advances in technology and the demand for knowledge workers creates a new environment where it is possible for workers to invest their talent at a lesser risk than previously:

• They can join multiple ventures and thus mitigate his risk
• They can select from a large variety of ventures to choose the ones they believe in and that have the appropriate risk level
• They can combine a full-time or part-time paid work with talent-investment
• The modern knowledge workers are much more savvy than before and are capable of making smart risk decisions

In summary, even if we want to have to keep our day jobs in many cases, we should all invest a portion of our talent capital like capitalists and not like 19th century miners.