Capital, Labor or Talent: Which One Are You?

It’s not often that you read an article about labor theory that really clarifies a wider economic issue, but Roger L. Martin’s recent piece in HBR on the NFL’s kneeling issue does just that. Martin argues that the reason the NFL owners have not pushed the players very hard to stop their protests, even though they are employees when all is said and done, is that NFL players are not “labor” in the traditional sense of the word. He notes that in the past few decades society has gone from the two-player model in the economics of production (capital and labor) to a three-player model that now includes capital, labor and talent.

As Martin notes, referring to Reagan’s dismantling of PATCO, the former air traffic controller union in the 1980’s:

While capital had won decisively over labor by the time of the PATCO action, it failed to notice that a new challenger had arisen to take labor’s place as its primary competitor. This force was the uniquely talented individual, without whom business could not operate. The difference between labor and talent is that labor has skills that are largely interchangeable, while talent has unique training and experience and is indispensable.

Beginning in the mid-1970s, talent asserted its rights to both a bigger slice of the economic pie and more control over its joint activities. Whether CEOs, investment managers, actors, musicians, artists, or athletes, talent no longer treated capital with the utmost deference and respect — but rather increasingly went toe to toe with capital with tactics such as strikes and aggressive gain-sharing structures.

Old-fashioned labor organizers might find irony in the Houston Texans players, who have an average annual salary of $3 million, threatening to walk out of their workplace.

In Martin’s view, the NFL owners are not managing a labor crisis but a talent crisis,  which is a very different thing. Moreover, Martin notes, the person who is supposed to represent the owners (i.e., capital) in this crisis is himself a part of the talent class:

I am looking forward to seeing Goodell navigate this crisis. His job as NFL commissioner is to work on behalf of his 32 capitalist owners to keep the player talent in line. But he has much more in common with the players than he does with the owners: He is an extremely highly paid member of the talent class, having reportedly earned $212 million in salary since 2006. As with all modern managerial talent, he gets paid by capital to suppress talent (and labor while he is at it). I wonder if he understands the irony, and how he will navigate the tricky battle lines between his capitalist bosses and his fellow travelers in the talent class. 

The three-part model of economic value creation is spot-on, and one sees it in places like Silicon Valley, Hollywood  and the leading academic institutions especially. In the Valley, rock star programmers can make millions of dollars a year as freelancers, much as the best cinematographers and screenwriters can in Hollywood. You can find the same phenomenon at places like MIT and Stanford, where top faculty talent make multiple-times what their faculty labor colleagues are paid.

In the future, with the rise of the gig economy, we can expect to see the reward differences between talent and labor expand. AI, after all, threatens labor much more than talent. As machines replace labor across wide sectors of the economy, talent will be the only group that will exert leverage over capital. In data science, for example, much work that is done by analysts today will be automated and coded into applications, replacing even today’s hot data science jobs with machines. The designers of those applications, however, i.e., data science talent, will be worth even more than they are today. (After all, the talent class is creating AI, not labor.)

This is the world in which we live today and which will only be more pronounced in the coming decades. The phenomenon impacts all of us to some degree, so the question we must all answer career-wise is to which of those three groups do we belong or want to belong. Our working future depends on getting that answer right.


Read this article on LinkedIn.



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