Few discussion topics can more reliably gloss over a listener’s eyes, than the vague, confusing lexicon of modern mainstream finance.
At the same time, many of us have a sense that capital is the fuel upon which the modern economy runs. Money makes the world go round, we learn, and eventually just repeat without thinking too deeply on it. Although less often found in plain sight (or in plain language), we’re aware that the masters of capital exert a substantial influence across our plane(t)s of action.
As such, the purpose of this post is to allow more people to connect the fascinating, mysterious side of capital, with language and concepts that give us greater specificity, simplicity, and agility of meaning. (If you haven’t, feel free to read my last post, “Part I” in my series on capital.)
What is this thing we call ‘capital’, anyways? Is it just financial-jargon for ‘money’? Or is it a more nuanced, multifaceted concept, used to define all manner of important things (like capitol cities; capital letters; financial and social capital; etc)?
Now that we mention it, what is a human supposed to do with capital? Do we just follow the conventional wisdom, the “money specialist” talking heads on CNN or Fox News, and invest in an adult-sounding 401k plan, allocated 60%/40% across mass-market ETFs and corporate bondage? What does that even really mean? Are there other forms of capital (and thus, other forms of investment)?
In “Part II” of my series on the past, present and future of capitalism, I offer a framework that aims to add meaning, depth and functionality to the expansively vague concept of “capital”.
Until we can actually understand, and collectively agree upon, the definition of “capital”, even our most perspicacious discussions about the evils and miracles of capitalism are mere exercises in futility.
Many of us have been led to believe that finance and investing is the most challenging, confounding science; one that should be left only to those who are “properly qualified”.
Our capacity for cognitive dissonance allows us to look past the red flags in this logic. Such as, the fact that the same bankers or masters that caused the Recession, are brazenly still in power and control. Or the fact that the greatest financial con man of our era, Bernie Madoff, was one of the masters of the modern economy, even serving as leader of regulatory authorities and industry-leading bodies (Chairman of the National Association of Securities Dealers (NASD); was the non-executive chairman of NASDAQ; etc) before it became obvious that he was running a massive Ponzi scheme that had lured in some of the world’s savviest investors.
In reality, investing is, in many ways, simply another word for living life. What do we pour our energy into? Most of us pour the majority of our energy into a job, in order to earn money, to survive; and whatever we do from there, is called “investing”. So I just want to make this clear – this thing of ours, “investing”, is something that concerns all of us. Indeed, the very nature of our future, depends on our understanding of, proactive engagement with, and participation in, the many-faced beast known as investing.
Impact: The Counterculture Revolution of Finance
Impact investing is predicated upon the realization that any given financial investment, inevitably generates non-financial results and outcomes (known as “externalities”, in the jargon). In many ways, “impact” as a discipline entered the mainstream collective consciousness via the “triple bottom line” (or “people planet profit”) framework.
In short, this easy-to-grasp framework is based upon examining and evaluating investments and investment outcomes in financial, social and environmental terms (rather than in solely financial terms, as per traditional “business school capitalism”, summed up in the notion of “maximizing shareholder profits”). To be sure, the creation and dissemination of this framework marked a watershed moment in the birth and expansion of the impact investing movement.
I began learning about “impact” circa 2015, at the time when I was becoming disillusioned with my egocentric desire to become richer than my peers, as a means of finding purpose and feeling self-worth. I became fascinated, thanks to many incredible mentors such as Mike Mathieu, Joel Solomon (The Clean Money Revolution), Marjorie Kelly (Owning Our Future), John Perkins (Confessions of an Economic Hit-Man). I began working with a dear friend and colleague, Jenae Poe, who had a proper background in what I soon realized was a thriving ecosystem, the world of impact investing, aka “impact”. She schooled me in the establishment basics, as I traded my knowledge of traditional capitalism in return.
After about a year of working to incorporate this framework into our investment approach – our epic vision for an integrated impact investment company, a financial powerhouse that would rival the Goldman Sachs’ of the world, in terms of power and influence, yet be run with a proper conscience – I felt like there were crucial pieces missing to the existing framework, that were required to truly understand the interplay among the myriad facets of capitalism. After much arguing, I got JP to agree with me that ownership (of financial capital, notably), was a critical component that didn’t neatly fit into the triple bottom line model.
And so, the following framework is the conceptual brainchild of our wild journey down the rabbit hole, in search of meaning, answers and power in the complex world of modern finance. May it serve us as we begin to realize the imperative, of evaluating and understanding the many forms of capital; and the reality that money, is not even close to the most important thing in the world.
1. Material Capital
This is anything that exists in the physical world. Cars, clothing, tools, buildings, are all examples of material capital. Things that are defined today in financial terms – such as the earth (“real estate”) – would fall under the umbrella of Material Capital.
2. Financial Capital
Perhaps the most straightforward, financial capital refers to modern (fiat) money.
3. Social Capital
I like to describe Social Capital as the feminine counterpart to financial capital. While financial capital is all about numbers, logic, and crystal-clear specifics; Social Capital is far more numinous, less tangible, rooted in trust, emotions and relationships. We could say that, someone who had a reputation among his/her community for being generous and compassionate, has cultivated social capital, that (s)he can draw on in the form of favors, support, etc.
4. Experiential Capital
This is the knowledge and wisdom of experience. Many of us realize that, although understanding things conceptually can be helpful, it is not the same as actual, “real-world” experience.
5. Intellectual Capital
Intellectual Capital consists of things we might learn in a classroom, a (text)book, or via word of mouth.
6. Cultural Capital
The word “heritage” speaks to the idea of cultural capital. This includes wisdom, worldviews and understanding, that is specific to, and passed down via, particular cultures. We might also refer to this as, “ancestral capital”. An example of cultural capital, would be traditions passed down from our predecessors.
7. Spiritual Capital
Spiritual Capital consists of anything that speaks to, connects with or facilitates the innate human desire to connect with spirituality. What is the meaning of life? What are the unseen forces that shape our experience on Earth? Spiritual Capital may consist of literature, oral wisdom, ceremonial wisdom; and may have some overlap with cultural capital.
8. Living Capital
Also known as environmental capital, this is a catch-all for anything that is imbued with (or that is a source of) the gift of life. Plants, animals, bacteria, soil, microorganisms; also, the sun, the oceans, the mountains.
9. Political Capital
This is a modern concept, relevant in our world that is largely run by governments and the politicians that lead and operate them. Political capital can be viewed as a form of social capital, specific to the phenomena of modern government. Because the idea of “owning” something, on this planet we were born into, cannot really exist without the context and framework of contemporary government, political capital (like financial capital, thanks to Citizens United, etc), plays an incredibly powerful role in shaping how resources and capital get allocated amongst humanity.
The above framework borrows loosely from a presentation (“The 8 Forms of Capital” by Gregory Landua) that was recently shown to me by a dear friend who is an expert in the permaculture space. (I found it quite strange that, the day after I was shown the video and began writing this post, it was mysteriously deleted from YouTube and the PermacultureVoices website where we’d found it. If anyone manages to find this video, please share and I’ll add a link in the post).