The Origin of Wealth
The Origin of Wealth is one of those rare books that feels like a constant mind-expanding and enlightening exercise all the way through it. It is fairly long at over 500 pages and it does get fairly technical in some places, but it is well worth the effort. For those who are intellectually curious and have an interest in how knowledge can be commercialized, it is an essential read.
The short answer to the question, "What is the origin of wealth?" is knowledge. More specifically, according to Beinhocker, "Knowledge ... is information that is useful, that we can do something with, that is fit for some purpose." He makes an important distinction that "Information on its own can be worthless." Further, since "evolution is a knowledge-creation machine," it serves as a very useful model for thinking about the process of knowledge development.
These concepts provide an amazingly powerful foundation for any effort in knowledge management and therefore are especially applicable to the investment industry. For one, they focus critically on the importance of knowledge which suggests that any investment research effort should have a very good roadmap for how knowledge gets created. Far too many do not. In addition, Beinhocker makes clear that knowledge must also be "fit for purpose" in order to create wealth. In this sense, many investment services fail: Too often unique insights are used to extract economic rents rather than to help investors solve problems.
by David Robertson, CFA
The short answer to the question, "What is the origin of wealth?" is knowledge. More specifically, according to Beinhocker, "Knowledge ... is information that is useful, that we can do something with, that is fit for some purpose." He makes an important distinction that "Information on its own can be worthless." Further, since "evolution is a knowledge-creation machine," it serves as a very useful model for thinking about the process of knowledge development.
These concepts provide an amazingly powerful foundation for any effort in knowledge management and therefore are especially applicable to the investment industry. For one, they focus critically on the importance of knowledge which suggests that any investment research effort should have a very good roadmap for how knowledge gets created. Far too many do not. In addition, Beinhocker makes clear that knowledge must also be "fit for purpose" in order to create wealth. In this sense, many investment services fail: Too often unique insights are used to extract economic rents rather than to help investors solve problems.
by David Robertson, CFA
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