Four asset classes for the growth of true wealth

Charles W. Collier, in Wealth in Families, expands on the theme urged by James E. Hughes, Jr. to which I’ve alluded in the past–the idea that, as Collier quotes Hughes (perhaps from a personal interview; I have been unable to find these exact words in either of Hughes’ books themselves): “A family’s duty is to work to preserve the family’s principal wealth-generating assets: its human and intellectual capital. The family leadership and governance structure should provide an environment that values and enhances each family member’s ability to pursue their individual life calling.”

As I have meditated on Hughes’ comments and, more recently, on what Collier says, I have realized, on the one hand, that they call our attention to things most of us ignore to our peril. On the other, I have realized that there are several other asset classes that they don’t really address.

I would like to call your attention to four such non-financial, wealth-generating asset classes. What follows, then, combines a bit of Hughes, a bit of Collier, and serious dollop of John Holzmann as well.

Before we begin defining the unique characteristics of different forms of non-financial capital, perhaps it would be helpful to remind ourselves of the definition of the word capital itself. It seems to me that the sense we are looking for (among over a dozen!) has to do with “a store of useful assets or advantages” (Merriam-Webster’s Online Dictionary ³capital-1e). Merriam-Webster’s includes these examples for use of the word with this meaning: “wasted their political capital on an unpopular cause” and “wrote from the capital of his emotionally desolate boyhood.”

So what kinds of “stores of useful assets or advantages” might a family possess in the form of its persons–its “human capital,” or in the form of its members’ minds–its “intellectual capital”?

With the help of Hughes and Collier, I would like to suggest a family’s human capital includes everything that its members bring to the family enterprise themselves. This would include such things as their talents; their skills; their knowledge; their physical capabilities; their individual and corporate (shared) beliefs and aspirations; their habitual ways of doing and ways of viewing things; individual members’ personalities; . . . and more.

Collier suggests, “Most importantly,” human capital refers to family members’ beliefs and definitions of “who they [believe they] are called to be and what they [believe they] are called to do.”

Personally, I am tempted to stop at this point in order to encourage you to meditate on the full significance of what I have just written. There is a lot in there!

But I would like to push on in order to list a broader set of non-financial assets our families possess. Then I promise to return to the subject of human capital at a later date.

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I think what I’ve just written about human capital demonstrates that it is a superset of many other forms of capital. And one such form is what Hughes calls “intellectual capital.” So let me attempt to unpack that term.

Intellectual capital, of course, includes every form of knowledge. But what other assets or advantages might reside within family members’ minds besides information or conceptual knowledge, alone?

Here are some of the things I have thought of: memories of significant events or experiences; deep, committed values–the things family members are willing to give toward and/or, even, sacrifice for; individuals’ natural learning styles or methodologies and habitual or preferred ways of thinking (for example, I tend to think analogically; some people, when confronted with a difficult issue, respond first from their emotions; others think in terms of justice; some people see mathematical relationships; etc.); members’ conative strengths or styles (see a popular article, some more academic papers, or watch a few videos on the subject); and more.

As you look around at the members of your family, what unique intellectual capital do you think they bring to your family’s table?

Now, Hughes only speaks of human and intellectual capital. Collier, however, mentions social capital as well. He suggests social capital has to do with “civic engagement,” “an individual’s connections with his or her communities”–by which, in the five lines he devotes to the subject, he sounds as if he is talking about one’s ties to and involvement in community and governmental agencies. And, as we see with all the lobbyists who seek to influence government policies, there is real and true value in having political connections like these.^{1 2} If we were to leave our definition of social capital here, however, I think we would be missing a lot.

From my perspective, I believe social capital has to do with personal aptitudes for social interaction (“introversion” v. “extroversion”); actual communicative aptitudes and skills (our abilities and inclinations to communicate effectively, to barter, negotiate, confront, listen, speak or write); cross-cultural experience, comfort, sensitivities and skills (our skills, abilities and aptitudes to interact across cultural barriers); the relations and interrelations a family’s members enjoy: the people we know; the resources–knowledge, skills, access to other people, influence, and so forth–that these people make available to us; the social structures at our disposal–everything from the structures available to us as a result of living in the societies in which we find ourselves (Americans, for instance, enjoy tremendous benefits because of the character and quality of the educational, financial, governmental and other such structures that surround us on all sides), to the formal and informal structure we enjoy among ourselves as a family. (For those of us whose families have no formally-adopted structures, perhaps we could think of the “structure of the family” as its members’ characteristic methods of interacting and/or characteristic methods of “dealing with things” as a family. You know: When the family faces a crisis, which brother or sister takes the lead? Who does the communicating? Who brings the food? And so forth. We all have our roles, whether formally stated or informally “just done”). . . .

No one I’ve read who speaks of non-financial assets in estate planning addresses spiritual capital. But if Christians truly believe in “riches of grace” (Ephesians 2:7; 5:27; etc.) or “riches of [or in] glory” (Romans 9:23; Philippians 4:19; etc.), then it seems we ought to think of and speak about and account for our families’ spiritual capital as well.

And so what might this include?

How about if we talk about the riches we have in Christ? The power of Christ at work within us? The host of heaven at our side? The freedom we enjoy as servants of God? The love of Christ that is at work within us? [Or are these things all merely "pretty words" that don't really mean anything?] . . . How about our faith (defined as “the assurance of things hoped for, the conviction of things not seen”–Hebrews 11:1)? Our confidence (or lack thereof) in God? Our spiritual convictions, disciplines, and practices (everything from praise, worship and singing . . . to prayer and Bible study . . . to communion or eucharist . . . to fasting, tithing and/or Sabbath-keeping)?

–Which of these things do you view as assets? And which are liabilities in your family’s non-financial balance sheet?

It seems to me there must be many other forms of non-financial capital we ought to consider, but these four–the human, intellectual, social and spiritual came to mind as deserving fundamental consideration.

¹ I was unaware: the concept of social capital is actually well-established. You can read an insightful article about the concept on Wikipedia.

² E. G. “Jay” Link also speaks of social capital (Getting to the Heart of the Matter, pp. 22-30). Link, however, speaks of “social capital” in a wholly financial sense. He uses the word simply to distinguish that portion of one’s financial wealth that will be spent for the broader good of society as a whole as opposed, simply, to advancing one’s personal interests. One can invest one’s “social capital,” Link says, either through voluntary charitable contributions or via involuntary estate taxes at one’s death. –Clearly, a helpful idea, but rather different from the primary thrust of our discussion here!

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