This anticipated shift of influence is based on many emerging trends, most notably the new reality that knowledge (not money) is the key form of capital now. This is the primary reason why the individual is replacing the corporation as the “primary engine” of value creation in the New Economy: why resource leverage has been shifting from corporate titans to “high-impact entrepreneurs.

The implications are that we will increasingly manage our careers as a “portfolio” of experiences involving different categories of work, as British sociologist Charles Handy has described it. Our portfolios, if we are to live full and rich lives, will include “paid work, gift work, study work or learning, plus…work in the home, cooking, caring and cleaning” (Elephant and the Flea, p. 4).

Peter Drucker is writing about the fact that this new world of work and relationships is opening up to us, and finding us entirely unprepared to deal with it. He says we need to develop new skills and services for self-management, in part so we can better understand ourselves and the questions relating to our life stewardship strategy:

Many people intuitively know the answers to these questions, but because they do not work through them systematically, they often sell themselves short. So we find ourselves in an unprecedented place: The most educated people in history, with a world full of options for meaningful work, and yet unsure of just where we belong (Management Challenges of the 21st Century, p.24).

This post explores the implications of these new realities for all of us, and the ways that business schools might benefit from a strategic initiative that prepares its graduates for the portfolio life.

Considering the Implications
The primary task of the successful independent worker in the future will increasingly shift from the creation of a long-lived organization to the careful investment of personal assets in shorter-lived, value-creating projects. “Rather than being managed by the organization you join, you manage its contribution to your career” (Blur, p. 155). The new paradigm that Handy, Drucker and others envision can be pictured in this way:

To reference Handy’s terms, high-impact humans will have study work involvements through schooling (S1) and continuous learning (L2) experiences incorporated into their ongoing “life portfolio.” They will have paid work assignments with numerous companies during their career (C1, C2). They will create social impact through philanthropic participations (P1) that comprise their gift work.

As part of their economic and philanthropic value creation strategies, they will participate in strategic Board and governance assignments (B1) as part of their overall development and stewardship strategy. In addition, they will have renewed flexibility to focus on their personal activities and relationships, what Handy calls their home work (H).

The Response and Future Role of Business Schools
If the trends are pointing toward the emergence of “portfolio living” on a significant scale, one would expect that the world’s leading business schools are preparing their graduates to be effective (and well supported) in their individual life planning processes. Right?

Wrong. Charles Handy, a founding member of the London Business School, has observed that they are “schools for an old world.” Recounting his own story in The Elephant and the Flea, Handy notes (p. 31):

I write this book…because I believe that the world we are entering is increasingly the world of the individual, of choice and of risk. It won’t always be a comfortable world and the risks are high, but there is now more chance than ever to shape our own lives, to be fully ourselves…

As Handy tells about his course of training, he recalls that “first he had to go to school, to be schooled for what everyone assumed would be life in some sort of organization. That was the way it was then” (p. 31).

However, he suggests, the “new model” business schools will soon offer core (or at least supplemental) training to its students in managing a portfolio life that includes both economic and philanthropic ventures. People will learn to relate to their corporations as part of a constellation of value-creating initiatives, each of which advance their life stewardship agenda. And a new focus will be given to navigating the bridge from success to significance.

No business school has yet established a focused initiative for its graduates in the area of personal life planning and individual agency services. The opportunity is enormous. The business schools that lead the way will offer a lifetime service relationship with their alumni that will dramatically change the value proposition of an elite MBA program. It will be as much or more about the ongoing services relationship they have with their business school as it will be about the degree credentials or what the student learns from the program itself.

The likely model to emerge at leading business schools is the development of an Institute, whereby the participating University engages adjunct faculty to begin the process of defining the tools and resources to aid their graduates in the skills of managing a portfolio life. These will include an “MBA Toolkit” offering that provides ongoing access to key information relating to the graduate’s career advancement, life planning software and seminars, the development of “project syndicates” to assist graduates in unique engagements, the initiation of a learning society (like Ben Franklin’s Junto) that meets together periodically, personal branding services, help in launching philanthropic ventures, and so forth.

Early initiatives in this regard have the added opportunity of developing research on the trends and implications of free agency, and case studies on high-impact humans who highlight different aspects of the rise of the individual person as the primary engine of value creation in the new economy.

Read the full Wikipedia definition…

The emerging recognition of new forms of “capital” has largely been an effort to account for the huge growth of intangible value recognized in many businesses. Karl-Erik Sveiby, a leader in the new field of knowledge management, describes the phenomenon by reference to computer-chip maker Intel. In 1999, Intel had an actual tangible market value of around $17 billion. Its market value, however, was nearer $93 billion. Accountants can only capture this discrepancy in value as “goodwill,” but what exactly is this goodwill and how can it be managed?

We believe that use of the term capital to try to describe the intangible value uncaptured by traditional accounting practices leads us further from understanding how value is actually created.

In The Mystery of Capital, Hernando de Soto points out the importance of distinguishing between capital and the assets that underlie the value creation process. De Soto traces the concept of capital and reminds us that it connotes the creation of surplus value from an asset: that is, value that exceeds the face value of the base asset. For example, your home represents a fixed asset of a certain value. This value only becomes capitalized when you use the value of your home to finance additional production, such as by increasing the value of your home by an addition or using the value of your home as collateral to finance the launch of a new business.

This means that on their own, accumulated assets are not the same thing as capital. De Soto tells us that “capital is not the accumulated stock of assets but the potential it holds to deploy new production.” Capital, in other words, is an abstract concept for value-creating potential, and according to de Soto this concept must be given fixed, tangible form to be useful. Today, we consume money for capital, but money is only one of many vehicles for the transfer of value.

What we need to recover is an understanding of how the value-creating potential of assets (the proper definition of capital) can be applied so as to enable surplus value creation. De Soto reminds us that value creation is a human process. He likens it to the process an engineer uses to capture potential energy from a lake by building a dam to harness the kinetic energy of falling water, then translating it to electrical energy that can be widely distributed far from the geographic location of the lake. The addition of value did not exist in the dormant waters of the lake, but was created only when a man-made process extrinsic to the lake activated the potential energy of the water.

Capital, like energy, is also a dormant value. Bringing it to life requires us to go beyond looking at our assets as they are to actively thinking about them as they could be. It requires a process for fixing an asset’s economic potential into a form that can be used to initiate additional production (Hernando de Soto in The Mystery of Capital).

We believe that what holds for corporate capitalism will also apply to free agent capitalism. The opportunity is to help highly motivated and skilled entrepreneurs go beyond looking at their personal assets to thinking about them as they could be.

Sveiby suggests that there are essentially three kinds of intangible assets that help comprise the “goodwill” found in so many companies today: individual competence, external structure, and internal structure.

We believe that individuals possess these same types of intangible assets and that by identifying these assets, the entrepreneur can begin to think more strategically and more creatively about how they are used.

Work today, Pink suggests, “is not just about making money. It’s also about making meaning.” The emerging free agent work ethic described by Pink reflects the growing value we place on four key conditions: freedom, authenticity, accountability, and self-defined success.

With the growth of the free agent ethic, the world of the “Organization Man” -who gave his loyalty to one company in exchange for a lifetime’s security- has been turned on its head. The Free Agent economy differs from the Organization Man economy in two fundamental ways. First, as power has shifted from organizations to individuals, talent has replaced capital as the economy’s most important resource-and a new talent market has emerged to organize, price, and allocate it. Second instead of being humdrum and personality-free, work has become more emotionally complex (Daniel Pink in Free Agent Nation).

Management expert Peter Drucker has called attention to the need for individuals to develop skills of self-management. But what does this mean? Drucker recognizes that the new world of work and relationships that is opening up to us requires us not only to understand our business but also to better understand ourselves.

Do I work well with people or am I a loner?
What are my values?
What am I committed to?
Where do I belong?
What is my contribution?

Many people intuitively know the answers to these questions, but because they do not work through them systematically, they often sell themselves short. So we find ourselves in an unprecedented place: The most educated people in history, with a world full of options for meaningful work, and yet unsure of just where we belong (Peter Drucker in Management Challenges of the 21st Century).

The growing need for self-management fundamentally requires us to understand the nature of value and how we create it. Only when we know what we value are we free to pursue it. Only when we know how we create value are we able to work in the way best suited to our unique nature. Only when we define what success means to us can we establish systems of personal accountability for our performance.