Capital vs. Knowledge – Which One Rules?

Capital vs. Knowledge – which one rules? This is a chicken and egg debate which I thought was already settled until a debate began today. Follow below…

Background

This is the article written by Nnamdi. Here is a quote from the article.

Now, there is a debate based on the two on LinkedIn.

Nam: I have to respectfully disagree with my namesake Nnamdi Odumody. Capitalism has always depended on talent as talent has always been one of the distinguishing factors to establishing competitive advantages of nations. As such, the world has always been defined by talentism. Daily, however, talents are becoming easier to define. Which makes the world ever more capitalist because it remains challenging to protect and convert talent to results without capital. For this reason many with and of talents are daily exploited by those with capital. The larger the company the larger the cases. The bigger the country, the more frequent the cases.

Ndubuisi Ekekwe: You are reading it literally Nam. Today, we are in a knowledge economy where knowledge is seen as a factor of production beyond the old ones by classical economists. Capital remains as a factor of production; it will always be. But the reality is that unlike few decades ago, you do not need tons of capital to create value (no one said you do not need any, you still need). So, companies like Uber, Airbnb, Facebook etc even though they need capital are winning by talent (i.e. knowledge).

Check, most of the largest 10 companies in the world, they were built on knowledge, not just capital. Those heavy-asset companies are making way. So, if you want to change the world, while you need capital, the key is talent (knowledge) because capital does not give that old competitive advantage it used to offer. Yes, you need it but you still need knowledge.

Jumia is more valuable than GTBank despite having asset base that is a fraction of GTBank. GTbank is the most valued bank in Nigeria!

Nam: Ndubuisi Ekekwe, Nnamdi made two assertions: 1) talents will become more important than capital, 2) world is shifting from capitalism to talentism. I disagreed with both because both premises and conclusions are flawed.

If what he had said is that it now takes less capital to create more value, I would have agreed.

What is true, and has always been true, is that talent is required to put capital to good use. But both work hand in hand.

All the brands you mentioned required millions and, in all but one case, billions of dollars to be built into multi-billion dollar brands. So while it takes less capital to get started, it takes o’ so much more capital to scale, plateau and sustain. Talents alone cannot do that; nor can capital.

The fact is that talents and capital work hand in hand–always have, always will. Trying to shrink the relationship down to a quote is tough. So, while the story has merit, the quote requires work.

Ndubuisi Ekekwe: Nam – you actually made the point on this line “So while it takes less capital to get started”. In the old industrial economy, you need Capital to begin at huge level and that was a problem. Today, you just need to have an idea, and you can start with very low capital. So, because what can get you on the signpost is not HUGE capital but brilliant idea (powered by subscription cloud), the driver is idea. So, the importance of capital has shifted to idea – that does not mean capital is not important.

Facebook sold 10% to Thiel for $500k. FB was already a business then – he might have started with say $50k. If you want to build a seaport in Nigeria today, you need $1 billion to begin. For that age of seaport, CAPITAL was king since without it, no progress. In our time, capital remains important but is just part of the equation. That “age” is not time but sectoral evolution

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