Thursday, December 16, 2010

Value creation is the FORCE driving all economic activities

Human behavior is motivated by the intrinsic urge to create value for oneself and others. From our most ambitious plans to mundane daily activities, we are guided by this hidden, yet most powerful urge. The basis of human survival, improving livelihoods and growing wealth is to create value and exchange it for something of comparable value or for money, which is the storage of value. In fact, this behavior is so innate that even other species, those who lived in groups, behave. Imagine an army of ants and swamp of bees, where each member plays a specific role to create value for the whole and to be taken care of in return.


Since our most primitive days as a species, our primary activities of hunting, gathering, farming, building shelters, seeking safety and nurturing families are all value motivated. We source for and grow food that is necessary to nourish our bodies and build communities for safety and for better economic efficiency from division of labor and economies of scale. For survival and success, in the long run, we need to create more value than what we consume. Else, we will be in debt of others.

Value is created everywhere and all the time, whether money is exchanged for not. We exchange value for stronger relationships with people we are related to and trade value for money with others. Money is not what makes the world go around. Value is. Money is the distorted, and often missing shadow of value. Alvin Toffler, in his Revolutionary Wealth book, termed this "missing shadow" as prosumption, where the producer and consumer are the same. On a wider scope, it also means that value is massively created and exchanged without money changing hands, usually in a inter-dependent group setting such as family or community. Because value is intangible and difficult to measure, money is often chosen as the proxy. That has obscured its importance as a underlying motivator for human and economic behaviour.

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