Financial capital has more than tripled in the past three decades and now stands at roughly ten times global GDP. As capital has grown more plentiful, its cost has plummeted. For many large companies, the after-tax cost of borrowing is close to the cost of inflation, meaning that real borrowing costs hover near zero.
The skillful allocation of capital is no longer a source of sustained competitive advantage. The assets that are in short supply at most companies [even though the managers and executives may not yet be aware of this as yet] are the SKILLS and CAPABILITIES required to translate good growth ideas into successful new products, services, and businesses—and the traditional financially driven approach to strategic investment has only compounded this paucity.
“How did it get so late so soon? It’s night before its afternoon. December is here before it’s June. My goodness; how the time has flown!” —Dr. Seuss