Human and intellectual capital are only valuable when embedded in an enterprise. This point is seemingly obvious but needs to be repeated now because it has some less obvious ramifications.
If I am unemployed, my education and experience are doing me little economic good. But the day I show up on the job, I create a revenue stream for myself. If my employer chose wisely in hiring me, I will subsequently add value to the enterprise as well.
Indeed, the value of a human asset will depend enormously on the nature of the enterprise in which it is embedded. A great quarterback will be more valuable on a good team than on a mediocre one—if only because he will be given more time to throw and because his receivers are more likely to be open.
Furthermore, if he is traded to a contender, he may take that team to the Super Bowl—he is more valuable on the contending team. From a value viewpoint, his present team should value not only his direct services, but also the option of trading him to a competitor, provided that is a realistic business option. In effect, he has no intrinsic value; his value to the Chargers is the difference in their value playing with and without him; his value to the Bills is likewise the difference with and without his services.
If the first number is substantially larger than the second, the Chargers and the Bills have room for a deal that creates additional value for both teams. Of course, his value is zero to an organization that isn’t into football, say a ballet company, which cannot use his talent at all.
Intellectual property is equally situational; a patent will be more valuable embedded in a firm with a position in the market than in a firm without such access.
When the value of an asset is sufficiently situational, there may be important opportunities to create value by framing options.
Specifically, the asset, like the quarterback, may be less valuable in the enterprise in which it is currently embedded than in alternate uses.