While doing research on succession candidate development, I came across the work of Theodore Schultz. He won the Nobel Prize in Economics in 1979. He argued that the most undervalued form of capital was human, an idea that was essential for my research. The shocking part to me was that it was a relatively new theory for a time that I view as not that long ago. Perhaps because it was the year that I was born (and I don't feel THAT old)!
There was another layer of connection, Schultz was raised in the Dakotas, where I also have roots in the region. My family’s farm still operates in Abercrombie, North Dakota, a small town near the Minnesota border with a population of just over 250. For full transparency, I was born and raised in Southern California and only visit during family reunions.
The Missing Metric
During the mid-20th century, the field of economics was obsessed with the physical assets of an organization. It sought to understand how machines, factories and infrastructure contributed to economic success. People were just labor input variables on a spreadsheet. It was in that context that Schultz considered if we were missing the most important asset an organization has.
He called it human capital the skills, knowledge, health, and capacities that people accumulate. It wasn’t an abstract idea. Schultz had seen firsthand how education transformed the productivity of farmers. It wasn’t technology or weather or subsidies but Knowledge.
From Farm Fields to Nobel Gold
Schultz's path to the Nobel Prize didn’t follow the traditional path. He started with agriculture, not exactly the sexiest topic at UChicago. He sought to understand why some farmers thrive while others don’t, even when facing similar conditions. But his observation and question were straight forward and applicable across industries.
He discovered the answer wasn’t better weather. It was better decisions made by people who had access to better education and information. Schultz saw that better choices require capability. And capability, unlike natural resources, can be grown.
The Economic Case for Investing in People
He was among the first to view education and training not as charity or luxury but as capital. At a time when many saw learning as a moral cause or a perk to boost employee happiness and retention, Schultz reframed it as a strategic investment essential to organizational performance and national growth.
By putting numbers to what others treated as a moral issue, he made a powerful, data-driven case for education not just as a value, but as a growth strategy.
Why It Still Matters (and Why We Still Miss It)
Fast forward to today, and Schultz’s legacy is everywhere and in some cases... nowhere.
We live in a world of talent wars yet treat education budgets as line items to cut. We talk about “upskilling” and “learning agility,” but invest more in software than in human beings. Schultz’s core idea that people are capital is more relevant than ever.
Perhaps it’s because human capital is harder to measure than steel output. Maybe it’s because investing in people doesn’t show up immediately on quarterly reports. Or maybe, as Adam Grant might put it, we’ve confused efficiency with effectiveness, optimizing for what’s easy to count instead of what truly compounds.
And Schultz words can remind us “Human capital is the one form of capital that appreciates with use. Ignore it, and you stunt not just people — but progress.”
Conclusion
Schultz’s legacy risks being forgotten if we don’t take the time to study the history behind it.
Today, many of us (me included) take it as a given that investing in people is simply the "right" thing to do. But when the reason behind that belief becomes vague or sentimental, it can easily be co-opted or watered down.
Back in 1979, Schultz made a bold and unconventional argument: that education and training weren’t just moral or social goods, but economic imperatives. That year might not feel so distant, yet even now, the connection between employee development and organizational performance remains under-explored in many business conversations. His work wasn’t about farmers, really. It was about all of us. About what happens when we stop treating people as costs and start seeing them as investments
We still have important work to do in fully understanding and acting on the true impact of investing in people.