Creating Wealth With The 8 Forms Of Capital

resilience

• n. The ability to recover quickly from illness, change, or misfortune; buoyancy.
• n. The property of a material that enables it to resume its original shape or position after being bent, stretched, or compressed; elasticity.
• n. The act of resiling, leaping, or springing back; the act of rebounding.

Resilience within any system demands there be multiple elements serving every critical function within that system. Each element must also perform multiple functions (some of which support other elements and their functions). In this way a web of mutually supporting connections between elements and functions is created and the larger system (ecosystem, business, village etc.) grows more resilient.

Why Resilience? Why Now?

Amidst uncertainty and disruption, a resilient system will continue to perform its essential functions – indeed it may even grow stronger, moving into the realm of anti-fragile. Resilient systems enable the weathering of storms (literal and metaphorical, natural and man-made) without suffering tremendous setbacks (decreased standard of living, ecological destruction, emotional and psychological breakdown etc).

This article examines resilience as it pertains to the creation, preservation and application of wealth for the purposes of living a high quality of life aligned with the permaculture ethics of 1) care for the Earth, 2) care for people, and 3) reinvestment of surplus back towards ethics #1 and #2. 

What Is Wealth?

For the purposes of this article, I will define wealth as having access to required forms of capital when needed on the path to realizing one’s purpose. Wealth is an essential leg on the stool of a regenerative life well-lived. For more on this, read The 4 Freedoms: Principles Of Regenerative Lifestyle Design.

The concept of resilient wealth is best illustrated and understood using the 8 Forms Of Capital, a model originally developed by Ethan Roland of Appleseed Permaculture, as the foundation for creating, preserving and applying wealth in ways that enhance resilience. The 8 Forms in their original concept are illustrated below, followed by Toby Hemenway’s summarized descriptions of each from his book The Permaculture City.

• Material Capital – the raw and processed non-living resources, such as rock, lumber, buildings, tools, fuel, and so forth, as well as stored up goods that our activities generate.
• Intellectual Capital – what we know and have learned; the stored knowledge and ideas that are available to us.
• Experiential Capital – “street smarts” or the “school of hard knocks”, this is the difference between what a novice and a master knows. This is Grandma’s biscuit recipe, for which there is no recipe, only the feel of the dough in the hands.
• Cultural Capital – the shared art, music, myths, stories, ideas, and worldviews of a community; collectively held as a holistic sum of individual beliefs, thoughts and actions.
• Social Capital – the goodwill from others that your service to your community creates, the favors you owe and are owed, and the connections and network that you have.
• Natural Capital – plants, animals, soil, and the collective properties of ecosystems, such as purifying and circulating water and storing nutrients.
• Spiritual Capital – our capacity to live into the fullest, most authentic expression of ourselves, and our ability to connect with and receive guidance from something greater than ourselves.
• Financial Capital – the money, currency and other financial assets we have acquired.

The 8 Forms Of Capital can be further refined into a Resilient Wealth Embryo (looks very much like a ‘nest-egg’ interestingly enough), with Cultural Capital as a “super-petal” that contains Social, Spiritual, and Natural Capital, and Wisdom as a super-petal that contains Intellectual and Experiential Capital. The master resource, Time, exists at the center of the center of all forms of capital – how we choose to spend our time (finite life energy) will determine the web of relationships between the different forms of capital in our lives. These modifications are illustrated in the image below, and the explanations of these super-petals and our reasoning for adding them follow.

Cultural Capital

Note that the three primary forms of capital to coalesce to create cultural capital are very much aligned with the permaculture ethics:

• Social Capital – Care For People.
  • How the people within any given culture relate to and interact with one another has tremendous bearing on the cultural capital of that place. Commonly held morals, principles and ethics of behavior are what people will default back to during times of distress.
• Natural Capital – Care For The Earth.
  • Cultures that have an ethic of ecological stewardship deeply embedded in their stories, rituals, traditions and celebrations understand embody the concept of the “ecological umbilical” and have an intact connection with their place. No sustainable culture defiles its own home.
• Spiritual Capital – Reinvestment of surplus to caring for people and earth.
  • We are borrowing the earth from our children’s children. The degree to which a society collectively limits gratification of its wants today so that future generations may have and experience what is available now (and potentially more) correlates tightly with its connection to the sacred and something larger than itself.

A culture that is strong in cultural capital is one that successfully transmits its values intact across generations. Those values remain intact because they have been demonstrated to work. This is the essence of what I call the 7th Generation Principle:

For more on designing 7th generation systems, read the 7th Generation Design Principle – Designing Ecosystems For Continuity Across Generations.

Wisdom

Others have proposed Wisdom Capital as an amalgamation of Intellectual and Experiential Capital – we appreciate this and also feel it is helpful to maintain the distinctions between Intellectual and Experiential Capital as they are each unique from one another. Wisdom is  that “other” intangible thing that can only come from the development of both Intellectual and Experiential Capital over time – each tempered by the other. For this reason we simply call it Wisdom and leave the capital out of it.

Time

At the center of the various forms of capital is the one unifying non-renewable resource that we all draw from constantly – time. Time is spent no matter what one does or doesn’t do. The creation, preservation and application of all the various forms of capital all take time. Time, therefore, acts as a very useful, some might say unyielding, metric for gauging the effectiveness of one’s efforts in creating, preserving and applying wealth to realizing one’s purpose.

Flow Between Forms Of Capital Is The Key!

Resilient wealth is created by the transmuting and combining the various forms of capital. Having a large stock of any particular type of capital without being able to shift it into another form of capital as required by circumstances substantially diminishes its value. It is in the exchange of value that wealth is created.

Resilient wealth is created when multiple forms of capital are amalgamated in ways that take care of the Earth, take care of people, and provide a surplus to reinvest. This is flow between forms, and the concept is well illustrated with a sourdough bread analogy.

A Pile Of Flour Does Not A Loaf Of Bread Make

Any form of capital by itself is a raw form of energy, like a single ingredient in a bread recipe.

Resilient wealth is created by combining different forms of capital in the right ratios at the right time in the right order so that they are mutually supportive and create a yield aligned with service to Earth, people and future life on this planet. 

Let us take a loaf of sourdough bread as an example. The baked loaf is the wealth – the yield that will fill a belly and nourish a body.  The flour, water, salt (all Material Capital), starter (Natural/Living Capital), time (the Master Resource), and skill (Intellectual and Experiential Capital) – not to mention the oven and all baking accoutrement (more Material Capital) – are the various forms of capital that create wealth only when carefully combined in a highly intentional way to become something of value. 

Predominance Of Financial Capital

The currently dominant paradigm is that Wealth = Having Money.

Is it true that simply having money makes one wealthy?

As mentioned earlier, simply having a large stock of one form of capital does not create wealth. Wealth is an intangible and transitory thing – it is the place and time where our basic survival needs are met, we are healthy in body, mind and spirit, our relationships are strong and meaningful and we have access to what we need in order to fulfill our life’s purpose. This state cannot be objectively tallied so easily as dollars in a bank account.

Despite this, financial capital (a tertiary form of wealth) does dominate our modern world, even though it is the least stable, most unreliable, and often most scarce form of capital (at least in the currently dominant debt-based fiat currency system of today). 

NOTE: It is not our intent to bash money, its existence, or those who feel money is important. Money is important! It is neither good nor bad – it is a uniquely human creation that will always arise when you have a large enough group of humans living together. Financial capital does have an essential role in creating a healthy, diverse wealth portfolio. It helps to buffer against material shortages and can be applied to empower businesses and other activities that improve our lives and deserve our support, not to mention being a highly liquid conduit for converting one type of capital into another – very helpful and of great benefit to all when applied ethically.

It is the bloated importance that financial capital has taken on in our modern lives that squeezes out many of the other forms of capital and leads to increasingly brittle (non-resilient) individuals, households, communities and countries with which we take issue.

Money itself is not evil. Modern money (currency really, but that’s for another post) finds itself deformed, misaligned and out of balance with care for the Earth, care for people and reinvestment of surplus towards those two ends.

Creating Resilient Wealth With The 8 Forms Of Capital

For those of us who have put most of our energy, historically, into earning and accumulating financial capital how do we transition into developing a truly diverse and resilient wealth portfolio that puts financial capital in right relationship with the other forms?  

We can start by implementing strategies that reduce the requirement for financial capital in daily life.

We can then begin investing financial surplus into the other seven forms of capital, in so doing freeing ourselves from the earn-to-consume treadmill. 

The beauty of this approach is that many of the strategies recommended for reducing the requirement for financial capital in daily life simultaneously build other forms of capital.  Function stacking – a good sign that we’re moving in the right direction!

Below is a list of some of the highest leverage ways (among countless others) to reduce the need for financial capital and invest in or create the other forms of capital, presented in approximate order of effectiveness (your mileage may vary) at reducing requirement for financial capital:

• Downsize – If you live in a large house, move into a smaller one – they’re cheaper to buy/rent, fill, and maintain (reducing mortgage/property taxes/maintenance costs/rent), you’ll use less energy (and thus reduce money requirements for utilities), own less unnecessary stuff (empty right angle corners beg to be filled), and have more space outside to enjoy/implement strategies discussed below.
• Shared Housing Arrangements – Invite another person/family or your own family members with shared values to co-own your current larger home with you (huge savings all around, including shared energy input into building/growing/maintaining). Converting a large home into a duplex (or triplex?) is a way to compromise with sharing in a home but still having some personal space beyond a bedroom. This may also make it feasible to buy a home rather than rent. [This strategy simultaneously presents an opportunity to build natural capital, material capital, and social capital]
• Learn New Habits – Change habits surrounding energy use. Start a game with your family to develop a habit of turning lights off when not in use.  Close the doors and windows when it’s hot, open them when it’s cool. Wash clothes with cold water.
• Sun-Dry Your Clothes – Install a clothes-line or rack, and build the habit of doing laundry/drying clothes while the sun shines – it’s free!
• Install a Greywater System – Redirect your laundry and shower water from the sewer (“away”) to food-growing systems in your landscape – reducing your sewer, irrigation, and grocery bills. You’re already paying for the water once – don’t pay for it twice, and also pay to get rid of it! [also builds natural, experiential, intellectual, and spiritual capital – gardening and being outside is good for the soul]
• Capture and Infiltrate Rainwater – Repattern your landscape to slow the rainwater that lands on it or comes off of your roof, spread it out, and sink it near food-growing systems – as opposed to running off into the street and ultimately a storm drain. Doing so will further reduce your irrigation needs and grocery bill. [also builds natural, experiential, intellectual, and spiritual capital]
• Invest in Efficiency Upgrades – For the energy and water use that remains (probably far less than there was, if you moved into a smaller home or invited others to share in yours, and changed energy use habits), invest in efficiency upgrades. Learn about passive solar design, and implement those strategies where you can. Add insulation. Seal up your building envelope. Put low-flow water fixtures on your sink and shower, and replace your older, 3.5 gallon-per-flush toilet with a low-flow model (maybe even build a compost toilet and cycle your waste back into your landscape as free fertilizer!) Replace the following on a “procurement strategy” as they burn out/fail: incandescent and fluorescent lights with LEDs, refrigerator w/ energy-star rated (or better yet, replace vertical fridge/freezer with a chest fridge and chest freezer, which are far more energy efficient – you can convert a chest freezer to a chest refrigerator using one of these). [builds material capital]
• Install Renewable Energy Systems – Only after you’ve reduced your electrical energy usage using the above strategies (or estimated what your electrical energy usage will be once you’re implemented them), install an appropriately sized solar, wind, or micro-hydro system (depending on the context of your site) to cover your baseline usage. After you’ve implemented the above strategies, your electrical energy usage will likely be 50-85% lower than it initially was, so you won’t need much of a system. [builds material capital]
• Turn Common Household Waste Streams Into Valuable Soil Fertility Amendments And Grow More And Better Food Right At Home – Redirect your food and green waste away from the trash and back into your landscape by converting it into valuable soil amendments, using vermicomposting, bokashi, compost tea, thermophilic composting, biochar, and other DIY soil fertility methods.
• Pedal Power – Get a bike, and use it for some of your errands/work commuting/school drop offs/etc. [also builds natural capital – muscles!]
• Grow Your Own – Grow a garden, plant fruit trees, learn about backyard livestock and get some. [builds natural, experiential, intellectual, and spiritual capital]
• Learn Practical Skills – fixing your bike, your car, your home, growing and processing food, etc. [builds intellectual, experiential, material, and natural capital]
• Meet Your Neighbors – and build relationships with them!  Start trading child and/or animal care, garden surplus, ferments, etc. Work together to play to each others’ strengths – if you have great climate for avocados, but don’t have the chill hours for stonefruit – and your neighbor down the hill has a great climate for stonefruit but too low of temperatures for avocados, don’t grow stonefruit – plan together, and trade! [builds social, cultural capital]
• Buy Local – For the food you’re not growing/raising, pay a little bit extra to your local farmer doing things in an ecologically-sound way (join a PMA Food Club!), to support them so you have established nearby farms that are improving your environment and relationships with those folks running them. [builds natural, social, cultural capital]

These are but a few suggestions that can help create the breathing room needed to make the leap off the highly financialized earn-to-consume treadmill. The added benefit of doing all of these things is that they result in greater personal, community, cultural, and environmental health, for only a small sacrifice in luxury – or perhaps no sacrifice at all. 

The time has come time to align the creation, preservation and application of wealth with human thriving. We can diversify our portfolios in order to create true resilience for ourselves as individuals and local communities. Doing so will ensure that when the next crisis occurs – whether it be a global pandemic, a natural disaster, political upheaval, or the next 4th Turning – we can thrive and continue to steward this planet for those that will inherit it after we are gone.