The Wealth of Humans; Review

The Dark Matter

In the 1970s, about 80 percent of the value of a big American company was made of things you could put your hand on, the machines on the floor and the buildings around them. By 2016 the ratio had flipped, and about 80 percent of what the market pays for has no physical form at all. Accountants file the gap under intangibles, and some of them call it dark matter, which is honest, because they can measure its pull without being able to say what it is.

Ryan Avent wrote a book to name it. The Wealth of Humans came out on 20 Sep 16, while Avent was a senior editor and the Free Exchange columnist at The Economist. His answer is that the dark matter is the people, or more exactly the shared understanding, held among the people who do the work, of how the work actually gets done. He calls it social capital. The title plays on Adam Smith two ways, and both readings run through the book. Humans are the real wealth of a modern economy, and humans are also a glut, showing up in numbers the economy no longer needs. Everybody who works for a living stands somewhere between those two readings.

The Thesis

Avent starts with abundance. The digital revolution is a general-purpose technology, the kind that remakes everything it touches the way steam and electricity did, and so far its main product is extra labor. The surplus comes from three directions at once, and the count is his. Automation erases tasks outright, while globalization poured China's workforce into the same pool. The third source is the most productive few, who with better tools now do work that used to take many hands. When anything becomes abundant its price falls, and labor is no exception. The median American household earned less in 2016 than it did in 2007, and less in 2007 than in 1999, sixteen years of work with nothing extra in the paycheck.

Then comes the inversion, and it is the smartest thing in the book. Skeptics point at weak productivity numbers and call the robot story hype. Avent reads the same numbers the other way: when displaced workers flood back into the market at any wage, hiring cheap people beats buying machines. In an essay drawn from the book he put it plainly: "when you have a queue of people ready to work at $11 or $12 an hour, it doesn't make economic sense to invest in that technology." The machine waits as long as people stay cheap, and that is why the charts look slow while the technology moves fast.

Work also hands out more than money. It gives people structure and a place to stand, and when enough people lose that, the argument stops being economic and turns political. Avent finished the manuscript while Brexit and Trump broke over it, and he counted both as symptoms arriving on schedule.

Where It Lands

The social capital chapters are the spine of the book and its best pages. A firm, in Avent's telling, runs on shared judgment, and the real asset is the culture that turns a thousand scattered observations into decisions. Nobody owns that culture, because it lives between people rather than inside any one of them. Avent separates it from human capital using his own resume. If he left The Economist for another paper, his skills would travel with him, and The Economist part would stay at the door, the knowledge of who to ask and how the judgment there actually gets made. On page 119 he writes that "the shared understanding of how the firm does what it does is more valuable than the machines it uses or the patents it holds."

Scale the idea up and it explains countries. Rich nations run on generations of built-up trust and habit, and that is why prosperity cannot be exported. Avent doubts the poor world gets its turn now that automation is closing the export ladder China climbed.

Scale it down and the sting shows up. The workforce builds the asset together on the clock, day after day, while the returns go to shareholders and a narrow ring of insiders. No single worker can bargain over a thing he can neither create nor carry alone, so nobody has to pay him for it. Avent names that plainly, and he deserves credit for it, because most of his profession files the same fact under efficiency and moves on. He called the politics too. He treats prosperity as membership in a club, and once you see it that way the fight becomes who gets in. He predicted the turn toward walls and gates before the votes were counted.

Where It Misses

The remedy retreats from the diagnosis. Avent spends two hundred pages showing who builds the asset and who banks it, and then he reaches for transfer payments. He calls a basic income the logical end point and hesitates over it, because he knows work hands out standing as well as money. The rest of his list is wage subsidies and cheaper housing near the good jobs, and every fix on it leaves the ownership where it sits and mails the workers a check.

Near the start of the book he frames the whole project as building institutions that provide for people whose work is no longer needed to generate growth. Read that twice. The man who proved labor builds the wealth is drafting the paperwork for labor's retirement, and an ownership stake in what the workforce built never makes the page.

The second miss is the aim. His displaced workers drive trucks and pick warehouse orders, the work that models cleanly. His education chapter treats schooling as the only sponge that ever soaked up surplus labor, and he finds the sponge full. Apprenticeship, the oldest working system for passing know-how along on purpose, never appears in the chapter, and the gap hides the strongest counter-example his own theory predicts. There is a whole class of labor that owns its know-how and never joined his queue, and he went looking for it in the productivity statistics while the shops that hold it were hiring the whole time.

The Trades View

Apply his idea to the field and it holds up. Ask what a four-truck shop actually owns, and Avent's definition answers better than the shop's own balance sheet. The shop knows which AHJ wants what and which one only wants it on Tuesdays, and it knows what a detector head really does by year eighteen in a salt-air mechanical room, whatever the cut sheet promised. None of that is written down, and most of it cannot be, and it is why one shop gets the callback while another shop caused it.

The capture Avent maps at the S&P 500 scale runs down here too. The lead-gen platform sells a contractor his own customers back, one click at a time, because the shop's name earned the search and the platform owns the search. The review site is the same arrangement, and the day the shop stops paying, every rating the techs ever earned stays behind, since the reputation was rented all along, and the CRM holds the job history on the same terms. On a federal job the prime keeps the margin while the sub carries the labor and the risk. Each layer harvests value built by people who touch the work. Avent needed no new theory for any of this, his social capital argument covers it, and the only change down here is that the capture runs through a terms of service.

The trade also runs the counter-model his book never checks. An apprenticeship passes the asset along on purpose, one journeyman to one apprentice, on a timeline no project schedule can shorten. The license leaves with the man who earned it, and so do the tools. That ownership is partial and it is under siege, but it is a working share of the reason the glut never formed out here.

A decade of hindsight shows he also aimed at the wrong collar. His automation examples drove trucks and picked orders, and the shock came for language instead. The models that write text arrived before any robot that could do the driving, and the copywriter and the junior analyst met the queue he predicted, while every shop I know is short-handed with the wage still climbing. Avent sees it too. In a 7 Jul 26 post on his own Substack he wrote that the AI buildout is soaking up capital on a scale that ended the stagnation his book chronicled.

For now the leverage his abundant workers lost sits with the field, and his queue mechanism runs in both directions. The machine waits exactly as long as the labor stays cheap, so the day trade wages spike hard enough, the automation math starts working on us too. The book's own lesson says how to hold the position: keep the know-how owned and pass it along deliberately, and read every terms of service for the clause that turns your leverage into somebody else's asset.

Verdict

This is the strongest economics book yet written on the claim this show stands on, and Avent saw the whole arrangement without ever getting to the question of ownership. Read it, then walk your own shop and count what the balance sheet cannot see.