What does it mean to be rich in a world where a little money can buy you more than ever? Tens of thousands of songs whenever and wherever you want, $10 a month. On-demand, chauffeur-driven rides around New York, $10 a pop. International video calls and messaging, completely free.

What does it mean to be rich in a world where a lot of money can buy you less than ever? $1 million might have bought you a comfortable $80,000 a year retirement back in 2008. Today, it would take around $1.5 million to guarantee the same real income.

What does it mean to be rich in a world where the things you can touch have less market value than those you cannot? The book value of traditional companies Exxon, Chevron, and AT&T combined is worth just a third of the market value of relative newcomers Apple, Alphabet (Google), and Microsoft. Walmart’s book value is more than five times that of Amazon’s, yet the company is worth more than $100 billion less.

The economics of wealth are changing fast and it matters for you, your company, and your country.

Lots of money buys less than ever…

The plunge in interest rates since the 2008-09 financial crisis has led to a once-in-a-generation drop in the power of what ‘lots of money’ can do. 

For individuals, assets that buy long-term security – real estate, inflation-linked annuities, and the share prices of trusted brands – have inflated sharply. In UBS’ last annual study of global real estate, house prices were found to be overvalued in 12 out of 15 surveyed cities. Interest rates on annuities have plunged alongside the yields on long-dated government debt – a 65 year old male in the US now needs to save one and a half times as much as in 2008 to guarantee the same real income. And the price, relative to earnings, of consumer staples companies is close to a ten year high.

For countries, too, the cost of security and stability has risen. Global flows of capital and interlinked markets mean that almost unimaginable sums of money can seem to evaporate very fast – China burned through $800 billion of its reserves earlier this year as global investors feared a slowdown in the country. Even a trillion might not buy you security any more.

…and physical assets are getting less solid

Physical assets face an identity crisis similar to that of financial assets.

Through much of history, wealth has been synonymous with the ownership of impressive physical assets. “Wealthy” and “landowner” roll off the tongue almost as one. The biggest companies in the world through much of the 19th and 20th Centuries had been those with massive infrastructure (Standard Oil), huge commodity reserves (Exxon, Saudi Aramco), or masses of physical capital equipment (GM, Ford). Countries fought wars over ownership of deep harbours, fertile land, or access to scarce resources.

But the “Uberization” of the modern world means that increasingly large tracts of physical infrastructure and real estate are at growing risk of obsolescence.

Does it make sense to have a ‘car in every garage’ if UberPool and driverless cars become part of day-to-day life? Do dense city office blocks linked by complex and expensive mass transit systems make sense in a world increasingly connected by high-speed broadband? What becomes of the huge investments in commodity extraction if renewable energy becomes more efficient or electric cars become more widespread?

In today’s world, bricks, mortar, and steel might not be quite as solid as they look.

Do we need it?

A given large sum of money might be less useful than before, and ownership of physical capital more uncertain. But they might also be less necessary too.

Your smartphone is loaded with applications that provide access to services that previously would have taken capital investment – Kindle your bookcase, Spotify your CD collection, Netflix your DVDs, Google Maps your satnav, or perhaps even Uber your car too.

And companies are needing to invest less in physical equipment thanks to the development of cloud computing, software-as-a-service, and the sharing economy. Uber is the world’s largest transportation company, yet owns no cars. Alibaba is one of the biggest retailers, but has no stock. And Airbnb owns no real estate.


Instead, companies are growing increasingly reliant on their users to create their products.

The value of human skill

So while physical and financial capital are getting less important, human capital is getting much more so.

Extreme automation and connectivity are expanding the range of jobs it is possible to automate. But they are also increasing the value that can accrue to workers who successfully harness the power of new technologies: at the time of its sale to Facebook, WhatsApp had an enterprise value per person of $400 million.

The rewards for relative skill are rising.

In a fast-evolving world, individuals will need to consider the value of education and re-training carefully, even if it might be financially costly.

And maintaining good physical and mental health, while already important today, might become even more of a necessity in a future of longer working lives.

Meanwhile, countries will increasingly find their success to be determined by their ability to develop, attract, and retain a highly skilled labor force.


Sustainability – environmental, reputational, and mental – is an important form of wealth

The decline in importance of physical and financial wealth also raises important questions about corporate and national sustainability. Human capital is inherently more fickle than physical capital. The ‘gigging economy’ – the ability for individuals to hold down multiple jobs – will make the labour market increasingly resemble the consumer goods market

Companies and countries will soon need to think as carefully about the welfare of their staff and citizens as they do today about their customers. Price will of course be important in the battle for talent, but companies will also need to increasingly turn to their brand and quality of their platforms to attract the best talent to drive their growth.

Meanwhile, countries that have so far chosen to expend their environmental wealth in favour of financial wealth might soon suffer if pollution drives skilled labor away. Already 70% of wealthy Chinese émigrés cited the quality of the environment and healthcare as important factors in their decision to emigrate, according to a survey by Shenzen-based New Fortune magazine reported by Shanghai Daily.

A new approach to wealth

Together, the demise in importance of financial and physical wealth and increase in value of human capital and sustainable practice suggest the need for a new approach to understanding our wealth, at an individual, corporate, and national level.

Questions of wealth may no longer be adequately answered through a hard look at cash, GDP, or book value.


It might just be time for the environment, health, education, reputation, and brand to play a much larger role.

Download the UBS whitepaper ‘Does wealth make us rich anymore’

by Mark Haefele and Kiran Ganesh