what you and I didn't realize about "capital"?
I understood “capital” just like you. You and I believe what we hear on tv, movies, books. We hear the word capital and imagine finance and money. Or does your mind wander to capitalism and picture buildings, businesses, and its problems?
So back to the question. What is “capital.” But not the academic definition. How would you explain it to an 8th grader?
Here’s what I realize now.
Let’s try a thought experiment between you and me. Think about what you’re doing right now. Are you at work? Maybe you’re watching something? Shopping? Let’s also assume you enjoy and are happy with it.
Now, what if I ask you to change what you’re doing?
If you shop at a specific store, I’ll ask you to try this new one.
If you’re watching something, I’ll ask you to see this one just released.
If you work, I’ll ask you to join my new company at the same pay.
Would you do it? Why not?
Here’s what I learned after catching up on economics.
People don’t like change. You’re comfortable and YOU alone choose what to do. If I want you to do something “I want,” I need to provide some kind of incentive.
But here’s the thing, it’s not only money, “i.e. financial capital.”
You might choose to do it because they have some senior job title, know high power people, or you’re impressed by their looks, “i.e. social capital.” On the other hand, you might choose to do it because they have a long tradition and are trusted by others, “i.e. trust capital.”
So here’s another way to think of “capital.”
You need "capital" to incentivize people to do different what they would choose on their own.
So what if you want them to work at your business, start a new company, shop at your store, watch your video. We have to spend and exchange the capital we’ve built up, financial, social, or trust, for them to join us. It’s your opportunity to give it away, too, to open doors for others.
Without capital, every person would choose what to do on their own. We would never create and do the things that we can only do as a group.
What about you? Did you realize there’s social and trust capital?