Who truly creates wealth? What is wealth in today's world? What does wealth mean? Three simple questions yet complex in practice.
In today's ecosystem, everything you stand for, do produce, or even your wealth has a meaning—a value to add—.
Wealth, the value of all assets owned net of all liabilities owed at a point in time, can be generated by everyone, yet that is not what most are led to believe.
If we wander down memory lane, we will find that he questions the stories we are being told about in Plato's Republic. We can apply this thinking to our analysis of who the wealth creators are in modern-day capitalism.
We regularly consume stories that describe which activities are productive instead of unproductive and thus where value creation comes from. Plato's thinking provides us with the opportunity to question the effect these stories are having on the ability of the few to extract more from the economy than others in the name of wealth creation. Why? Because he sees storytellers as rulers.
The truth is that value is everywhere.
Value used to be, and should still be, at the core of economic thinking.
All the products we buy use the concept of value to position themselves in the market. Mariana Mazzucato urges the world to rethink capitalism to save our economy from the next inevitable crisis and foster long-term economic growth. Mariana argues that we will need to reconsider the role of public policy and the importance of the public sector. Scrutinize how we reward extractors and creators and reshape how we measure value in our society.
Mazzucato sees that the foggy notions of value lead to confusion between rents and profits and distortion of the measurements of growth and GDP.
Public Innovation suffers, and inequality rises.
Hence claiming the need to bring value theory back to economics and public debates about economics and economy. Because in these debates, two terms are not very clear:
Value extraction is the appropriation of gains vastly out of proportion to the economic contribution.
Value production is the creation of "new" goods or services instead of extraction, which rather moves existing goods and services around.
The increase of financialized companies blurs the line even further and causes the change we see in business. "That alone is a huge problem," specifically in pharmaceuticals," said Mazzucato.
Yet, value extractors are rewarded more highly today.
This is where the concept of stories comes in; audiences consume narratives from various companies driven solely to maximize shareholder value. This leads to outcomes like ridiculously high prices of medicines justified through big pharma's story of value pricing.
And so, to steer "real growth" in advanced economies, there is a need to replace the existing false narrative with a new one to get rid of the misconceptions.
All this will inevitably lead to a more sustainable economic system.
Mazzucato references the government loan that Tesla took ($465 million guaranteed loans along with the $5 billion that Musk received) as an example of our problems. The loan was a U.S. taxpayer guaranteed loan, highlighting the reality that the story of the "self-made man" who drives Innovation is little more than just a story.
Nonetheless, those companies know how to create social discourse, get the audience to be as empathic as possible with their stories then dominate the market share. Storytelling and a compelling narrative alongside actual value creation is vital—the winning hand in the game of business—.
Whether you work for non-profits, sports and recreation, health and wellness, or as an entrepreneur; how you narrate the story of your product is how the customers view it—it affects the sales and your wealth—. With CINTA & Co. you will discover a winning business model narrative. The right tools will be delivered to you with a simple click. Subscribe to get our free content and be the first to hear about our updates!
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