In 1995, both China and India, began investing in the development of the most powerful economic forces in history.  According to current IMF projections posted on Wikipedia, five short years from now, by 2017 the GDP for the world’s third largest economy, India,  will double; and the GDP for the second largest, China, will pass the United States as the world economic leader.  While this may seem extraordinary to some, it is not to those who study history.  In fact, it is the essence of what the United States did to come out of the Great Depression, win the Second World War and help rebuild the world economy following the war.  From the insights of famed author Malcolm Gladwell, we even know how to do it.  If we look close and we can begin to see a recurring cultural pattern – currently India and China have higher rates of capitalization on human potential than the United States.  That is a fancy way of saying they are developing their people.  It turns out, from small business to large nation, developing human capabilities is a must for entrepreneurial cultures, regardless of size.  However, if the culture has transitioned from entrepreneurial to bureaucratic, developing human capabilities is an economic burden on society.  True entrepreneurial cultures profit by adding value, bureaucratic cultures profit by cutting cost.  The powerful economic leverage of a capable value adding workforce is data that is often over looked by the bureaucracy of economic leaders.   Throughout history, economic leaders at the top do not focus on what is needed to get to the top or stay on top, they focus on the rewards from being on top.

There is another economic twist in the dichotomy of these two culture types.  For the sake of simplification, let’s convert our model of an economy from currency to calories.  Now let’s assume the average person needs 2,000 calories to survive each day.  If the average person only needs to work two hours a day produces 2,000 calories, as long as they remain able, they will survive without a problem.  However, if they wish to raise a family, they will need to produce extra calories for those who cannot produce their own calories.  So, a family of two parents and two children will need to produce 8,000 calories per day.  Some families will have more children and some may have none.  By pooling their capabilities, families discover that working together in teams they can produce 15,000 calories per worker.  So, in the name of survival, families join together to form social groups called clans.  It is safe to say the total economic output of any clan will be based on the number of able individuals that have developed the capabilities to produce calories and the capabilities to work in teams.  Individuals not capable of producing enough calories on their own are welcome to consume some of the excess calories produced.  As technology is introduced, we begin to see the power of tools (technology to enhance the human efforts) and machines (technology that replaces humans).  With tools, individuals can increase results by another 2,000 calories and teams increase their results by 5,000 calories.  A machine that consumes 2,000 calories and will produce 20,000 calories can be built to replace two productive individuals who will join the ranks of the unemployed population that draws on the excess calories produced by the clan.  As we add more and more machines, we send more people to live off the excess calories.  Humans are able to renew themselves developing and improving capabilities with new knowledge, skill and experience; machines are not.   Over time, as the machines age, they consume more and more calories, while producing less and less.

Today, in the United States, our cultural constraints limit our capitalization of human potential.  We manage our affairs by the subjective rules of accounting.  Therefore, we would rather invest in machines than in humans.  So we create social and economic constraints to education, training and opportunities to gain experience.  By restricting the development of individuals, we limit our collective their ability to contribute to the growth of the greater economy.  Because individuals with potential are not developed, they fail to become an economic benefit to the clan and are by default, condemned to be an economic burden to the clan.  For example, in the United States, women comprise more than 50% of the population and their contribution to the economy is hidden.  They represent the largest segment of the acting voting population, yet, they represent a small percentage of our government representation and our business management.  Yet, in a time of critical need, during World War II, it was a workforce of women that filled the economic void created when 16 million men left the workforce to fight in a two front war. 

As a fledgling nation we benefited from two very powerful forces, the new ideas generated by a vast cultural melting pot of immigrants and the growing development system of human potential.  As a culture, we are cutting off the flow both of those forces and becoming a closed culture.  If we are successful in converting to a closed system, cultural and economic entropy will continue.  The only way to reverse the process is to believe in collective development of human potential and economic capabilities.