Knowledge Is Capital

image: nationalgeographic.com

If you look around you, everything you see is the product of knowledge. Someone thought of it and made it. Increasingly, knowledge is a more powerful capital than money itself. With knowledge you can create amazing ideas and products that people will gladly give you their money for a piece of. 

One of the big differences between the poor countries and the rich countries is the level of knowledge the rich countries acquire and make use of compared to the poor countries. The amazing part is that, oftentimes, the rich country has more data (and fact-based knowledge) on the poor countries than the poor countries have on themselves. And the difference in the standard of living between a developing country and a developed country is mostly attributed to an economic factor called Total Factor Productivity (TFP). It is the knowledge edge that enabled a country like Japan, that has very little natural resources, to be over 6 times richer than Nigeria. 

More importantly, the world is changing in ways that make knowledge more important that wealth/money. In business, knowledge is now the new capital. Money has become a raw material, a tool you can always buy in the financial market. There are now lots of investment houses and venture capitalists who will throw money your way if you can come up with a great business. If you have a huge wealth of practically proven knowledge. In fact, the fastest way to lose your wealth nowadays is to not add to your knowledge. You will fall for an unsound financial advice. You will also find it very hard to grow your wealth.

If you take the world's richest men, the one thing they all have in common is a knowledge so sound that they borrow money to implement the ideas it produces. They take huge risks and bet millions of dollars on their knowledge based ideas. They are the best example of how knowledge is capital.