I am a true believer in Capitalism. I don’t think there is anything wrong with it. I do think that we have failed to evolve our own thinking about Capitalism and Capital and how we apply the two. One of Capitalism’s flaws or features, depending on your particular flavor of Capitalism (yes, there are many flavors, I’ve learned) is that free market, or just “The Market”, goes through occasional “adjustments.” The larger of these adjustments manifest themselves as recessions.
As you know, it’s been a rough couple of years. Recessions are rough for the majority of the population. In my relatively short life (38 doesn’t seem as old as it once did), I’ve lived through a number of recessions. From the small regionally specific recessions that cities occasionally go through as industries and people move away, to the current “Great Recession” happening around us as I write this. Living through these cycles I’ve begun to notice some trends.
There’s a problem with the way we think about Capital
We need to broaden our view of capital and focus on the true scarcities that exist. These scarcities are a kind of “soft capital,” better known in the social sciences as Social Capital and Human Capital as opposed to the traditional Financial Capital.
Since I will be referring to these three forms of capital frequently I want to quickly make sure we understand what it is I mean. All of these terms are meant to be viewed at a more macro-economic level, I won’t claim to list all the conceivable types of capital contained within each but I do want to reference the three main forms I see within each.
The way I determined what qualifies as Capital is the very simple idea that if I can own it and invest it in order to create more then it was Capital.
Financial Capital: This is the traditional concept of capital; Assets, Equity and Credit.
Human Capital: These are the outputs of our individual efforts; Labor, Knowledge and Imagination. This last one is the most overlooked aspect of Human Capital but without it the other two are seriously lacking.
Social Capital: This is probably the vaguest of the three but I would argue the most important. We can (and I have) get in many semantic arguments about what all is included in Social Capital but for our purposes I will focus on Trust, Relationships and Engagement.
All Capital comes with associated costs and investments, like interest or emotional investment. Human and Social Capital can require high levels of emotional investment and can be tiring to our minds and bodies. Not all Capital pays off equally. Not all investments, ideas or relationships are equal.
The mother of all constraints on Capital is Time. I have frequently received the argument that Time is a type of Capital. I own it and I can invest my time in something. I don’t agree.
In today’s fast paced World the ultimate constraint is time. There are very few scarcities that exist and “risk” as we talk about it in the business World is never life or death. Modern transportation and the Web has almost completely eliminated distance. I usually value something more if it saves me time not because of the amount of time that was invested in it. A person’s time is valuable to me not because of the amount of time they spent but because of the amount of time they save me.
In order for you to overcome the constraint of time to read this book and (hopefully) recommend it to a friend, the value you receive from has to be greater than the constraint of time. If I don’t overcome that constraint you are likely to quit reading and tell your friends not to waste their time.
Time is not capital because I can’t create more. Time is a constraint; it is the ultimate constraint on all of us. I can reduce the constraint of time by either providing more value for that same amount of time or by taking up less time but I can’t give you more time.
I can give you more attention and I do think attention is a form of social capital that I put under the category of engagement.
I know these may all seem a little vague right now but it was my hope to provide you just enough context before showing you how all of these things work together within the framework of Capitalism.
This is part one of two posts. Please see this post for more context.
Similar Posts:
- Time and Social Capital: The Ultimate Constraint
- An Inquiry into the Nature of Social Media and the Capital of Companies
- Wild Crazy Ideas About the Relationship Between Social Media and Economics
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