8 Forms of Capital
The Eight Forms of Capital is a framework developed out of work with communities and businesses around the world who struggle to account for non-financial forms of capital and make decisions that generate value in multiple ways for multiple stakeholders. The Eight Forms of Capital framework points to nurture capital as the base of value generation for most companies nurture capital refers to the quality of Social, Cultural, Experiential, Living, and Spiritual Capital. When value is generated through extractive practices, such as mining, predatory economic ventures, or non-organic agriculture, the base of value that allows for robust and sustained economic functions degrades at a rate equal to the rate of extraction. For financial capital profit to be generated and reinvested in the future, an enterprise must actively and continually care for the multiple interconnected forms of capital that form the fertile soil out of which the enterprises grow.
community trust, social connections
Trust, political connections, ability to call in favors, and the ability to build coalitions of mutual support are all key elements of Social Capital. Social Capital can be passed along through trusted colleagues and transferred by association or “halo effect” to brands and projects by association with trusted names. Social Capital begins to degrade rapidly when lack of integrity and confusion are the dominant traits of a relationship, and conversely Social Capital is grown by integrity, altruistic behavior, and clear relationships marked with accountability and mutual-respect. For businesses, growing Social Capital in the global south means strong stances against the ubiquitous reality of colonial and postcolonial economic and political patterns, by supporting social-health and wellbeing, fairness, justice, and equity for all stakeholders who inhabit areas that have been subject to years and often centuries of disrespectful, oppressive relationships. To re-grow trust requires careful attention, and is not colored by blame or fault, but responsibility and accountability.
water, soil, forests
Living Capital represents the health of the ecology of a person, a place, and a planet. Water, air, soil, and biodiversity are all key elements of a living ecosystem. Living Capital is often degraded in order to generate Financial Capital, but when cared for it can provide an enormous amount of resilience and abundance. Many permaculture and regenerative agriculture techniques work to grow Living Capital in order to grow the amount of Living Wealth that can be harvested and exchanged or complexed into other forms of capital. Unlike Financial Capital, Living Capital can only be grown in quantity and quality through nurturing the living system, not fragmenting, measuring, and exchanging that system. Wholeness instead of dissection is key to understanding and cultivating this form of value essential to the functioning of an agricultural venture, and indeed the healthy existence of humans on the planet.
infrastructure, equipment, raw materials
Material Capital is the physical infrastructure, built environment, tools, technology, as well as materia prima such as timber, minerals, and oil that can be converted into lumber, alloys and metals, plastics, fuel etc. Material Capital is often extracted from Living Capital, and more often than not, done so in a way that degrades the health of the Living System that is have been harvested from. Material Capital, unlike Living Capital, does not regrow without human intervention. Whereas Living Capital regenerates on its own (although Living Capital regeneration CAN be vastly accelerated by appropriate human intervention), Material Capital necessitates maintenance, and re-investment. For many agricultural ventures, the Material Capital needed to improve the Living Capital foundation, is minimal, whereas the Material Capital base needed to actively extract and mine Living Capital in industrial agriculture solutions is very large and often costs are high with high ongoing maintenance. Material Capital that is in a healthy relationship with the other forms of capital and reinforces holistic health and enhanced regeneration of the other seven forms of capital usually follows closely the principles of Appropriate Technology.
meaning, connectedness, presence
Spiritual Capital is a form of value often left completely out of conventional discussions about business, wealth, and even community. At the same time it is a large part of the human experience. A substantial majority of humans are religious, and even avowed scientific materialists and atheists such as Carl Sagan acknowledge the importance of meaning derived from being connected to something larger than the self or society. It is our belief that the meaning of Spiritual Capital and decisions made about this important form of value must be regenerated by an individual or community in order to ensure that the unique connection between self-society-spirit is being stewarded and not imposed. While some religions and spiritualities such as Hinduism and Buddhism maintain active personal accounting systems such as karma. As author Martín Prechtel notes, the cultural tradition of the Tz’utujil Maya of Lake Atitlan, Guatemala, acknowledges a spiritual debt to the world for the existence of humans, and organize cultural activity around servicing that debt with song, ritual, and festival. The importance of including an unmeasurable and completely qualitative form of capital in this framework cannot be underestimated.
information, models, frameworks
While Experiential Capital is embodied skills that are sometimes hard to even articulate, let alone exchange directly, Intellectual Capital is the Intellectual Property, Frameworks, Models, Maps, and other distilled pieces of knowledge that can be exchanged and built upon through the exchange. The value of discerning between these two forms of capital is enormous because of the academic propensity to belittle and ignore Experiential Capital at the expense of true wisdom. Intellectual Capital takes the form of frameworks like the Eight Forms of Capital, design methodologies like Permaculture, and in the case of conventional approaches to business, is the bulk of what an MBA program shares with a student.
knowhow and embodied wisdom
Experiential Capital is the enormous value of know-how. An embodied experience that allows mistakes to be avoided, Experiential Capital can be distilled and articulated into Intellectual Capital, but cannot be exchanged directly, only grown through direct experience. These experiences can be designed for faster learning curves, but not replaced. The Experiential Capital of a local community, a business, or a partner in a project is the enormous value that allows a venture to avoid the common mistakes along a learning curve as well as innovate from a place of understanding the dynamic and complex context an enterprise is operating within.
story, myth, music, art
Cultural Capital is the beautiful fabric of story, art, music, culinary tradition, and myth that form the visible design of the invisible warp and weft of human culture. This enormous value is often times extracted and exchanged for Financial Capital, degrading the core health and value of the culture itself, which then leads to a decrease in health over time that impacts the multi-capital abundance available for exchange as a base of business. Cultural Capital, similar to Living Capital must be nurtured and should be exchanged conscientious of the impact on the culture.
money, stocks, bonds
Financial Capital is the easiest form of value to quantify and exchange. It is comprised of monetary instruments such as stocks, bonds, national currency. In short: money. Financial Capital is the liquidity needed to run a business. Financial Capital is like water: it is necessary, and a drought creates a slowdown of all growth. On the other hand, when Financial Capital is concentrated and moves fast, it degrades the other forms of capital just as water running quickly down a hill causes erosion and degrades the ecosystem’s ability to regenerate.