Dr Brainerd Prince
I said to myself, I will not make a reference to the ‘covid condition’ that we are all living under and yet it is impossible not to mention it. One thing the lockdowns and the curfews have given us is time. We are all forced to be at home, and most of our outdoor activities have come to a standstill. This gives us time to dream, to think, to research, and learn new ways to grow ourselves. The last couple of weeks, I have been thinking about the term ‘capital’. I believe that with regard to work, there are primarily two types of people: employee or entrepreneur.I write this for both employees and entrepreneurs as well as for the unemployed, to argue that all of us, not just entrepreneurs, can enrich our lives if we know how to work with capital.
Let us begin by understanding the meaning of the term. Today the term ‘capital’ is largely used purely in an economic sense, but that was not always the case.The term ‘capital’ comes from the Latin capitalis which means ‘of the head’ and thus we get terms such as ‘chief’, ‘head’, ‘principal’, ‘first in importance’ and even ‘first-rate’. A good example, from the fourteenth century onwards is ‘a capital letter’ referring to the ‘upper-case letter’ such as ‘A’ or ‘B’ and it is called capital precisely because it stands at the ‘head’ of a word or sentence. We also have the idea of ‘capital crime’ and ‘capital punishment’ from the sixteenth century which involves the death penalty as it affects the ‘head’ (literally) or ‘life’ of the condemned. Finally,an excellent example from the seventeenth century is the use of the word ‘capital’ in the sense of ‘excellent’ or ‘first rate’ for ships which were ‘powerful enough to be in the line of battle’. These examples reveal that the term ‘capital’ refers to what is first-rate, the head, or the highest – in other sense, the thing with the most or highest potential to create value. In short, we can look at capital as a ‘potential to bring value’
If capital is the ‘potential to bring value’ the nit can be used to make profit. I use the terms ‘profit’, ‘trade’ and ‘value’ like the term ‘capital’ much more broadly than their dominant economic usage. I recently read an article where the term ‘capital’ was shown to be of ten different types. Some of them are social capital, spiritual capital, cultural capital, intellectual capital, human capital, natural capital, sweat capital and even emotional capital.
I would like to share three insights on capital as a potential to bring value, even if you have been an employee all your life. These insights could be for you even if you are just a student on pocket money. It does not matter who you are or how much money you have, but these three insights, properly understood and implemented, might just revolutionize your life.
The first insight is – create capital.Money and wealth can be inherited but capital if seen as the potentiality to multiply value cannot be inherited but needs to be created by everyone for themselves. The greatest capital is our own human capital, our own human potential that can make value. Acquiring skills is an invaluable way to create your personal human capital, as it creates capacities in you to create value. For example, if you are a musician or if music is your passion, then learn music well so that you can be a professional musician who can use music to create value. I must say something about value here. While value can be a contribution to music by composing or performing, value can also be in the use of the skill to serve others, perhaps like performing or teaching musical skills in service to others.Finally, capital is also the potential to create economic value or simply put create profits by using your skills. Every time you upskill yourself think of it as creating capital in yourself which can produce value in all these different ways.
Apart from getting skills, another way to create your capital is by conserving your financial resources through systematic savings. Financial capital truly has the potential to bring value. Remember, it is not the amount but rather the percentage that counts. If your income is one thousand rupees a month, the ability to save four hundred or more rupees a month reveals that you can live lean and save. Of course, I would always push for you to try and save up to even 70-80% of your income. It may seem unrealistic, but trust me, it is not impossible. By teaching yourself to save in this manner, you are building the potential within you to control your expenses and create capital.
As listed above, there are many other capitals as well that can be created. But I will mention just one more, social capital. There is a lot to learn as to how you can create social capital with social media but you can also create social capital through your traditional social networks and relationships. Social capital is the strategic and collaborative use of social relationships in order to create value. When you think of social capital, always think of win-win-win or three wins. Not only must you have a win, the other person too must get a win, and also the project you have collaborated on must have a win. The potential to use your relationships and networks to create value is indeed your social capital.
The second insight I want to put forward is that once you have created capital, you now have the potential to grow by investing your capital. Capital kept under a cover or buried in a pit is as good as having no capital. You have to make your capital work for you. Today, there are several instruments available to invest and grow your money. When you think of investment, you have to think of ROI (return on investment). It is no longer good enough to put your money in a savings account, not even in a Fixed Deposit account as the rates of interest have drastically dropped. There are studies that show that putting money in any kind of savings account actually reduces the value of your capital, when adjusted with inflation.Many of the private banks in the country offer you options for investing in mutual funds through SIPs which are a much better option. You could open a DMAT account and invest in the share market or even invest in gold or other commodities. Investing in land or property too should be kept as a real dream worthy of pursuing. Finally, investing in a business venture has the potential to give high returns. Even if your corpus is not too much, don’t wait, invest whatever little you have saved.
You can also invest your skills to get returns. Whatever skill you are learning, don’t wait to become a grand master. Remember, what you know, you can teach, and the more you teach, the more of an expert you become in your skill, while getting paid for it. I believe everyone going to school should give tuitions to younger kids. You can teach maths, guitar or even a language that you have learnt. Instead of wasting your evenings hanging out, teach or tutor someone and get returns on your human capital.
Finally, invest social capital. This is slightly tricky because you don’t want to ‘use’ people or be ‘inauthentic’ in your relationships and friendships. However, humans are social animals, and it is our networks that play a significant role in taking us to our destinations. The entire philosophy behind Network Marketing is to capitalize on your social relationships. Social relationships can be leveraged, without losing the friendship, in unique ways. Often, you may not be able to see it or explicitly measure the ROI. I have a great friend for over twenty years with whom I share my plans. He is a good soundboard and his responses are invaluable. Cultivate social capital that will give invaluable returns.
The third insight I want to share is that once your capital starts to give returns, you should celebrate your capital. Our investment has borne fruit and empowered us.There are two extreme responses, both to be avoided: On the one hand, there are those who will either save all the profit for a rainy day or plough all of it back in order to grow further profits. While I am all for saving and re-investing profits, I would add that one should not forget to celebrate. A portion of profits should be used for service or giving back to the universe or your community. Even if you are a completely self-made person, we need to be grateful for life, good health, and the hundred other things that were not in our control but went right so that we could create and invest our capital and get a ROI. On the other hand, there are those who will squander all their profits away either on wild celebrations or even philanthropic service. A response to avoid as well.
Truly celebrating one’s capital involves growing the capital even while we enjoy the fruit of the capital – as it empowers us to live and serve better. Here is a challenge – take this Covid lockdown to learn more about creating and investing your capital. The celebrations will indeed soon follow.
