People are Not Assets

People are our firm’s best assets. This is perennial expression lurking within many company holiday speeches and annual reports. Additionally, it has become a most common CEO cliché. However, this idea is simply not true. People are vital, people are important, but they are definitely not assets. I understand the sentiment; nevertheless, the analogy is plain wrong.

What is an asset? By definition, an asset is an economic resource (e.g. a house, a mine, an orchard) that is owned or controlled by an entity (e.g. person, company, institution, or government).

Unless you happen to own a slave labor camp, it is more than likely that the people who work for or with you have a very different status than any asset ever will. They are volunteers. They choose to exchange their minds and hands for wages. This choice is extremely significant for understanding how important the best people at any firm really are! Unlike assets, they can ‘vote with their feet’ and decide to leave for another employer or start their own company at any time.

So, what are people? People are agents! Both individually and collectively, people act, do, and exert mastery over the arts, sciences, and trades.

Although the value of any asset can suddenly rise very quickly, even exponentially for a short time, assets are limited when compared with agents. Why? The price of any asset is dictated by the market. In this way, assets are passive as their value is completely influenced by extrinsic forces…such as cultural norms, fashionable tastes, supply/demand, etc.

Agents are different. Agents change and grow. Human beings are extremely dynamic. Any individual’s potential is intrinsically determined. Assets do not have the capacity to learn, imagine, or create. Every child living today could one day develop new ideas that would revolution a single business, an entire industry, or the world itself. People are not fixed assets, there are free agents.