One Figment at a Time – From “Training as Investment Rationale”

In this post I am raising a few interesting questions (for which I seek answers from all you guys) to establish characteristic similarity between the tangible and human assets.

The intent is to get intelligent clues for getting closer to developing the framework of my proposed model.

I am trying to draw an exact parallel between the physical (plant & machinery) assets and human assets as both generate “economic output” and on that parameter qualify to be called as ASSET.

Let us first understand the characteristics of tangible assets-

1. They have fixed economic life so these assets depreciate at a certain rate.
2. They need scheduled maintenance to produce an optimum level of output.
3. They can be upgraded to produce a better economic output (either in terms of quantity, quality or mix)

Now, let us compare human assets with respect to above three characteristics.

• Do human asset depreciate?
• Do they need schedule maintenance?
• Can they be upgraded?

As per my understanding “human asset” can be equated to “human competency” which can be broadly classified into two categories- physical competency and mental competency. Now both these competencies are related of development of “mind” and “body”. Human output for a variety of economic output (for any output ranging from knowledge to labour or a certain mixture thereof. Say development of software to development of a building) is dependent on mix of suitable physical and mental competencies.

Aging is pretty much a human concept. Physical and mental competencies wither with time.

So, can we say that since human competencies wither with time and therefore human asset demonstrate depreciation characteristic similar to tangible assets?

Though economic lives of human competencies vary for individuals it can be argued that economic life and depreciation rate for tangible assets also vary with quality of tangible asset. Therefore we can infer that differential depreciation rates are applicable both for humans as well as for plant & machinery. Normally for tangible assets there is a certain fixed depreciation rate for each asset class which is based on average useful life of such assets (say 15% per annum for automobile). Similar averages can be worked out for different competency types in case human asset.

So, first characteristic-depreciation- seems to be common for both tangible and human asset. With this I feel couple of steps closer to the model framework. But, these are my tentative thoughts and they and are not conclusive unless rubbed against diverse and deep intellect. Let’s create the spark. See you soon with thoughts on 2nd and 3rd characteristics.

(Ankit Jain is Head – HR & Strategy at G-Cube)