Can Social Technology Replace Capitalism with “Talentism”?

Klaus Schwab is quoted in Forbes as saying that “capital is being superseded by creativity and the ability to innovate….If talent is becoming the decisive competitive factor, we can be confident in stating that capitalism is being replaced by ‘talentism.'”

Economists have learned a lot in the past 20 years about the role that institutions—rules, norms, and values—play in shaping human interaction both inside organizations and in society at large. The culture we live in and create with others shapes what we can do and become together. Understanding “social technologies” is thus essential in unleashing the potential of human beings. (Paul Romer’s TED talk on Charter Cities proposes one way to create competition in social technologies.)  But we should not be quick to dismiss the necessity of capital accumulation and capitalists as part of this social technology fabric.

It doesn’t matter how talented you are or how good an idea you have, you need complementary capital goods to produce your innovation. Just imagine Steve Jobs and the Pixar team on a desert island: lots of talent, no capital. What can they produce? Zip.

Capital accumulation and investment are necessary for new ideas to make a difference. Yes, things don’t just happen in economies because of stuff, people have to creatively respond to their surroundings, and, therefore, social technology has immense potential for improving human well-being. But the importance of entrepreneurship doesn’t imply the insignificance of mundane factors such as the tools and food we need to go about the business of creativity. It’s precisely the capital structure we now possess—including computers, the internet, phone lines, factories, roads—that enables individual creativity to a much greater degree than ever before.  And it is capitalism that has created more “careers open to talent” than any other system (feudal, mercantilist, or state socialist).

Capitalists and capital markets tend to channel capital to individuals whose projects will improve our lives. The merit of capitalism as an economic system is precisely that it tends to generate and mobilize capital needed for human beings to creativity solve our problems.