Indiscriminate discarding of knowledge as an enterprise asset, whether in the form of accumulated employee training or junking of legacy software, has its origins in ideas proposed over a century ago about the value of capital find the accumulated value of an investment labor. These theories claim that only capital assets increase the productivity of labor.

Consequently, the productivity of an enterprise is measured only in terms of the productivity of its capital, such as return-on-assets or return-on-investment. The providers of capital are then entitled to the surplus, called profit or rent. If knowledge happens to be necessary for labor to make better uses of capital, that becomes the justification for a higher wage rate for labor. By this reasoning, those performing the actual labor are not entitled to collect rent from the knowledge they have accumulated. Labor can receive only fair compensation for the time worked. The most they are allowed to claim is to be awarded premium wages and a bonus here or there.

The above reasoning is not only misleading, but also results in judging the value of employees on the basis of their wages, rather than how fast they accumulate useful knowledge. The productivity of labor is not only a matter of wages. Productivity comes from knowledge capital aggregated in the employee’s head in the form of useful training and company-relevant experience. The individual’s point of view Let me illustrate this by an example.