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If someone asks you “How much are you worth?”, what’s your first thought?

“None of your *%@!* business!!” ?

That would be mine too. After all, we tend to keep our private affairs, well, private.

But then your second thought is probably, “Well, now that he comes to mention it, what indeed am I worth?”. You would then mentally tot up your various assets. What’s sitting in your bank accounts, the value of your home, your financial investments, and indeed your outstanding debt – and you would come to a number.

On the other hand, if someone asks you “How much is LinkedIn worth?” well, that’s easy, since according to Microsoft, the answer is $26bn. You answer it from a completely difference reference point.

We value companies based on future earnings potential, and yet, when asked the same question of ourselves, we make the calculation on what we have accumulated in the past – the value of our net assets.

But what if we valued ourselves on our own future earnings potential, just like a business? Would it yield any insight on how we manage ourselves and our careers? Would it allow us to identify what is holding us back and improve our future value?

This article is an attempt to explore and quantify this rather different way of measuring our worth.

Back in 1997, David Bowie famously securitised his future earnings by issuing $55mm in “Bowie bonds”, instantly putting a valuation on 10 years worth of royalty earnings from 25 of his previous albums. The concept of valuing an individual’s worth as a stream of future cash flows is not therefore new. But few of us are rock stars or otherwise able to tap the capital markets to value our future efforts.

While thinking this problem through, it occurred to me that we can borrow a framework from economics to begin to understand how to value ourselves as if we are a business. If you have a passing knowledge of the ‘dismal science’, you will have heard of a Production Possibility Frontier (PPF), essentially a graphical depiction of the efficient combinations of production in a two-good (or service) economic system. Wikipedia has a neat enough definition of a PPF here, and it is usually represented something like the image below:

Broadly speaking, the framework is used to describe the trade-offs associated between the choices of producing a chosen amount of each good or service A or B. It represents an inefficient outcome D (given fixed resources available) and it defines the unachievable outcome C (given those same fixed resources).

So how can we apply this approach to our value own worth? Let’s tinker with the PPF acronym and rename it ‘Personal Present Value’, or PPV.

Our Personal Present Value can simply be thought of as the total income and wealth we might be able to generate in the future, discounted back to a value today.  There are two starting inputs which go into that calculation.

The first input is Knowledge. This is the sum total of our IQ, ideas, academic qualifications, intellect, reasoning, technical skills, business acumen, experience, decision making. These factors are all essentially internal to us, each of us having our own particular combination which defines what we can bring to the party.

Our Knowledge has a market value – low if it is commoditised (taxi driver, nurse, electrician), high if it is rare or unique (brain surgeon, hedge fund trader, Usain Bolt). This endowment of Knowledge is not static. It grows through childhood into adulthood and will typically continue to grow as we approach mastery in our chosen field. In Outliers, Malcolm Gladwell reckons it takes 10,000 hours to become a true master of a skill, so you can judge how far along that road you are today.

This Knowledge is great, but on it’s own it does not translate into significant PPV. If I was blessed with the footballing skills of Lionel Messi, but was marooned on a desert island with no contact with the world for the rest of my days, my PPV, despite my immense talent, would be very limited.

The second input is therefore how we are able to deploy this Knowledge in the world around us: our network of relationships, our resourcefulness, our personal brand, our perception, our relationship skills, our persuasiveness, our emotional intelligence. I call all these factors our Reach.

Our Reach essentially determines how we useful we are at interacting with the external world – our business contacts, relationships and the like. If we have Knowledge but no Reach, that Knowledge is worth little.

Let’s say I have a brilliant idea for a brand new device or app which I’m convinced will revolutionise the gaming business. If I’m not able to convince my bank manager to lend me money to develop it, or to convince someone to go into business with me, or even know who to ask for advice, my idea will go absolutely nowhere. But combine Knowledge with Reach and that starts to be a potent force. I can find someone who will listen to me, introduce me to people who will support me, finance me and help give oxygen to my brainchild.

Going back to Lionel Messi, he has an agent and advisers doing deals all the time to capitalise on his talent and maximise his value. Indeed in 2015 he was the 4th highest earning athlete globally, pulling in $73.8mm. That’s the power of taking immense talent and leveraging it into valuable contracts and endorsements. On the other hand, look what happened to Tiger Woods when news of his extra-marital activities broke back in 2009. Although his skills were undimmed overnight, his Reach certainly took a hit as multiple sponsors decided Tiger didn’t represent their brand values, and dropped him. His PPV dropped with it.

Conversely, if I have some Reach but limited Knowledge, I’m not much better than a popular fool. I can charm my bank manager into lending me $100k, but there’s no point as I would have absolutely no idea how to put that money to work. I may be able to persuade someone to hire me, but I would be an absolute flop at any but the most basic job.

Like Knowledge, Reach is not static. It is something that we work at and grow over time. It is how we connect with the world around us, how we advertise our value, how we seek out opportunities and how we negotiate to get a better deal for ourselves.

So now we have a sense that combining Knowledge with Reach starts to answer the question “How much are you worth?” in a much more interesting way.

In the same way that a company is valued based on its Knowledge (products, services, people, skills) and Reach (creditworthiness, contracts, commercial tie-ups, licensing, patents, reputation, brand value), so are you.

And in the same way that any combination of two goods equates to the production possibility frontier in economics, we can say that your Knowledge x Reach equates to your Present Value Frontier (PVF). If you have a lot of K and a little R, the same amount of each, or a little K and a lot of R, they will define your PVF.

So far, so good. But there is a third dimension that needs to be taken into account – Effectiveness.

Look at yourself and ask yourself this question. Given your current endowment of Knowledge and Reach, what are you doing to create the maximum possible PPV? How hard are you working? Are you 100% Effective in the way that you deploy your K and work with your R? In a nutshell, are you working at potential, i.e. on your PVF?

Your Effectiveness determines whether you are able to consistently perform at your PVF, or below it. Are you walking, jogging, or sprinting?

Your Effectiveness is a function of the following factors: health, happiness, self management, competitiveness, personal motivations, ambition, determination, and character. These are all highly specific to you, and all liable to fluctuate, all the time. Very few people are able to work at 100%, day in day out for years on end. But those who strive to be as Effective as possible, every day, will make the most of their K & R.

Think of a car and driver as a system: big engine (Knowledge), great chassis (Reach), but the driver is sick and not able to hit full throttle (Effectiveness). Actual performance will be lower, and car and driver will together not attain full potential. Or think of Usain Bolt. He has the power and technique to win every 100m race he enters (Knowledge), has a worldwide audience of adoring fans, fantastic contracts and a powerful brand (Reach), but if he’s unhappy and has lost his mojo (Effectiveness), he won’t be able to perform at his best, and over time his PPV will start to dip.

I’ve illustrated this interplay of K, R and E in the chart below:

If you have a combination of K1R1 and operating at 100% E, you will be at your PVF. If you have K2R2 and are operating at 100% E, you will also be at your PVF, and this will be the same value.

If you are not being fully Effective at work, and in your professional dealings more generally, you know that you will be operating below your PVF and your worth will be less than it could be. Look around your workplace – you’ll find plenty of examples of people putting the most into their work (and career), and probably many more people who are content to ‘coast’, happy to work below their PVF.

OK, this all makes sense, but what next?

What’s interesting now is therefore to think about how to shift your PVF outwards.

In the economic theory around Production Possibility Frontiers, an outward shift of the frontier is usually caused by a technological change, or a positive supply shock – in other words something that facilitates economic growth. Much the same is true for you.

As I said earlier, your K & R are not static, but can improve according to the amount of time and effort you put into improving them.

Assess yourself honestly. Ask your spouse, partner, closest friends and trusted colleagues to assess you as well. Ask them where your strengths and weaknesses are. You should be able to build up a picture of how well you score in K & R.

Perhaps they are in harmony, relatively balanced. In which case a decision to invest in improving a unit of either is a good decision. But more likely you are imbalanced, strong in K but weak in R, or vice versa. In which case, you will already be able to evaluate the best route to improve your PVF, to shift it outwards and increase your PPV.

If you come up short in the K camp, get yourself onto some training courses, develop your technical skills, read some useful books (I’m always happy to recommend some!). If your R is limited, be purposeful about investing time in your network, meet new people, polish up your personal brand, be enthusiastic, engaging and passionate when you get a chance to impress someone.

By doing this you are investing in yourself, and building your PPV. If you were a listed company, your share price would go up. You won’t have that market-based recognition of your PPV, but doors will open up (they always do) and you will know you are on the right track.