Wealth = Quality x Quantity

‘The production of wealth,’ as 19th century philosopher John Stuart Mill observed, ‘has its necessary conditions’. New research by Juno Partners, summarised in this series of articles, reveals that for companies, the two necessary conditions can succinctly be described as ‘quality’ and ‘quantity’.

Most senior managers today would agree that the job of a corporation is to create wealth. In our capitalist, democratic society, we create different institutions for different purposes. We create charities to fund good causes, governments to set and enforce laws and businesses to create wealth.

When they focus on the creation of sustained gains in wealth, businesses provide the lifeblood of our economy. When businesses forget about wealth creation or the importance of the long term, the economy and all our institutions suffer.

For senior executives therefore, and directors in particular, few things could be more important to understand than the ‘necessary conditions’ for the production of wealth.

In this series of articles, we’ll share the findings of our research into wealth creation in Australian equity capital markets and layout a clear framework that describes the necessary conditions for the production of wealth.

In the first article, we’ll look at the basis of our research and present the findings of our research which highlights the importance of quality and quantity.

The second article looks at the importance of investor expectations to wealth creation.

The third article then returns to the themes of quality and quantity, examining the link between wealth created and Economic Profitability.

The forth article discusses the hazardous impact that competition can have on wealth.

Key takeaway
The production of wealth has its necessary conditions. Boards and senior managers play a critical role in guiding that production, but only if they understand the importance of quality and quantity and ensure every aspect of their business is managed with them in mind.

A pdf version of this series is available here:

Juno Partners Wealth = Quality x Quantity 2012