Nobel Laureate Gary Becker passed away in May. In case you are not familiar with his work, he pioneered the field of human capital economics, or the attempt to systematically evaluate and quantify the collective skills, knowledge, and other intangible assets of individuals that can be used to create economic value for themselves, their employers, or their community.
When I was in business school at the University of Chicago, I was allowed the chance to take Becker’s PhD-level “Human Capital Economics” class. Week after week, he blanketed the ceiling-high chalkboards with calculus formulas and complex mathematical proofs that reduced some of the finest human qualities and experiences to a series of equations. For my final paper for the class, I partnered with a classmate and wrote about “slave labor” positions in consulting firms and investment banks for recent MBA graduates.
What we found at the time is that if you reduced salary to an implicit hourly wage, immediately after graduating from business school, consultants and bankers actually make less money per hour than do their general manager counterparts. This is true if compensation only includes cash payments, but we all earn another very important form of compensation at work: knowledge.
We amass two kinds of knowledge or human capital on the job: specific and general.
- Specific human capital really pertains only to the company at hand—how to use the billing system, where the copy machine is, even the political chains of command and communication. These skills cease to be relevant as soon as the employee leaves the firm.
- General human capital, on the other hand, is much more broadly applicable and therefore extends beyond one’s current employer. Critical thinking skills, Excel modeling, PowerPoint storyboarding, and effective meeting management are just a few examples of this kind of knowledge.
SOME JOBS OFFER GREAT OPPORTUNITIES TO DEVELOP CORE SKILLS
Not surprisingly, the data my classmate and I collected revealed that consultants and bankers make a portion of their “earnings” in the form of general human capital. Those jobs offer a tremendous opportunity to develop core leadership, management, critical thinking, and communication skills that can later be applied to different problems and roles, thereby increasing one’s potential for success and earnings in the future.
There is an obvious and important lesson here: Early in your career especially, make sure you are getting “paid” in general human capital. It is more valuable than cash in the beginning because it increases your potential over the course of your life. When evaluating short-term employment options—internships or full-time positions—you will no doubt compare opportunities in terms of the financial compensation they offer. Not to diminish the importance of cash, but don’t neglect your knowledge paycheck.
Once you have secured your next job, even if you must master a significant amount of specific knowledge, be sure you are thinking generally and strategically about what you are learning. Are you learning how to learn? Are you learning how what you know maps to the rest of the world? To different problems? To different industries? Are you getting better at communication, networking, and relationship management? Ensure that you are growing in general ways every day. Be general human capital greedy.
Angela Guido runs Career Protocol, the web’s most refreshing destination for no-nonsense career advice and awesome professional development coaching. She’s helped thousands of MBAs get into dream schools and dream jobs while staying true to themselves. Want to turn your career from meh to HOLY COW AMAZING?!!! Angela has an MBA from Booth and extensive post-MBA experience at the Boston Consulting Group.
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