Capital refers to resources available to an individual for the accomplishment of a certain end. It is anything that enables you to get things done. This definition is very instructive in that it means there are as many resources (capital) as there are things to do. Without capital, it will be almost impossible to engage in any productive activity.
Conventionally, capital is grouped into five broad classes: relational, intellectual, financial, emotional and social. Relational capital refers to your ability to get things done by virtue of your relationship with people. These people could be blood relations, friends or acquaintances, bosses, teachers, mentors, etc. If you belong to a royal family, all other things being equal, you will enjoy some privileges that are not commonplace. Those privileges are a form of capital to the extent that they allow you accomplish certain goals. It’s worthwhile to mention the importance of good friends. Someone called friendship the best support system in the world. The buzzword amongst the young and old now is ‘networking’. I remember seeing the quote: “If you are not networking, you will soon stop working.” It may sound fabulous but it has an element of truth.
Intellectual capital is the ability to use one’s mind creatively in the process of task accomplishment. It was once attributed as the key quality for success in life so much so that people underwent tests to determine their intelligence quotient (IQ). The relative importance of IQ waned with the realization that it takes more than being a person of super-intelligence to achieve success. Of more relevance is a person’s ability to work in a team hence the need for emotional intelligence.
Financial capital, popularly termed money, is the most widely acknowledged of all the forms of capital. The reason for this is not far-fetched. Unlike, other capital forms, financial capital is measurable. To a reasonable degree, you can estimate an individual’s net worth (the sum total of the value of his assets less all his liabilities). More importantly, how well you fare in handling the other forms of capital is often reflected in your financial capital. However, as highlighted above, money is not the only form of capital required for goal accomplishment. In fact, an individual’s attainment of the higher life is determined by his ability to solve problems without money.
Emotional capital is the new kid on the block. Its emergence came out of the empirical evidence that many people with high IQs have not succeeded in life. Emotional capital is measured in terms of emotional intelligence: the ability to use, understand and control emotions.
Social capital is more applicable to the larger society. It is the prevalence of conditions that enhance economic growth and development, and peaceful co-existence in the society. One of the best examples of social capital is trust. It has been established that societies that experience sustainable economic growth and development have a higher trust co-efficient compared to underdeveloped societies. It takes a much longer period of time to conclude transactions in low-trust-coefficient societies because of the sheer amount of documentation people need to ensure they are not short-changed. Even when you’ve put all the documentation together, you’re not confident that all is well. Some levels of engagements that would be beneficial to the society may not even be entertained because the trust required for such endeavours is just not there.
The other type of capital, which is most important, is health. Without it, the other capital forms cannot be productively engaged. The maxim “health is wealth” is so true. Unfortunately, some people realize the importance of their health usually when it is too late. They would have pursued the other capital forms to the detriment of their health.
Use of Capital
Based on our definition of capital, it is clear that the essence of capital is to achieve a pre-determined objective. Therefore, capital is not an end in itself. Your good health, for instance, is to enable you engage in a productive venture. If you were to see your health as an end in itself and you decide not to do anything. The result of continuing with that line of thinking is that you will end up not having food to eat, your immune system balks as a result of constant assaults and you end up losing the health you once had.
In the same vein, the existing of social capital in a society is for the people to take advantage of the social capital and engage in the creation and exchange of value (business transactions). Should a critical mass of people refuse to leverage on the prevalent social capital (trust), there may arise a situation where the resulting pockets of poverty will threaten the existing trust as people try to make ends meet through any means. The same argument can be made for all the other forms of capital.
However, a distinction should be made between relational capital and other forms of capital. The appropriate word to use with respect to relational capital is leverage not usage. It’s advisable not to use people. Rather, you leverage on your relationship with people. One of the best examples of relational capital is having good friends. This is my next best capital after my health. I have leveraged on my network of friends to accomplish some incredible things.
Striking a balance
Balance is a key word when it comes to pooling all the forms of capital to accomplish anything of value. It’s unfortunate that some people pursue acquisition of financial capital to the exclusion of other forms of capital. Usually these people get to the pinnacle of financial success only to find out that they have messed up their health, abused their friends, corrupted their minds, damaged their emotions and breached societal trust. This is obviously not the way to live.
The best approach to life is to set S.M.A.R.T goals in all these areas: relational, intellectual, financial, emotional, health and social capital. When you think capital, always think balance.