Reimagining the Economy – The Alchemy of Real Capital: Financial Capital
We’re not heading toward a recession or a depression in the traditional sense. We didn’t have an imbalance in the economy that imploded like we did in 2001 or 2008. This time it’s different, it’s much more instrumental than that. Covid-19, or the perception of it, will affect a communal shift in how we interact, create and exchange energy with each other, nature, and ourselves. We’re in the process of redefining our entire operating system: our economy – whether you realize it or not. Our priorities as a society are shifting at an exponential rate.
So what is the “economy” and what is fundamentally changing within it? Or, better yet, what do we want to change?
The Old Economy
The economy is a culmination of different forms of capital. People often simplify the economy down to one aspect: the exchange of financial capital (“money”). But money is really the alchemy between different forms of real capital. “Real” capital is tangible and meaningful – it is the aspects of society we would need regardless of financial capital’s existence. Financial capital is simply a mechanism between real capitals – it is a means of exchange, a bartering tool – and we assign it value every day, all day. We give it meaning just by using it: spending it on, and investing it in, “real” forms of capital. Real capital is the underlying foundation of what our economy truly is.
I’ve outlined here 7 different forms of real capital. The way in which these different forms of capital coexist is what is really changing. Understanding how they have traditionally interacted over the last century and having the foresight to predict how they will interact after the dust settles will be one of our greatest allies. But the real trick is being a cause and affecting how these capitals interact moving forward during this time of malleability.
How we spend and invest financial capital dictates our economic structure and, therefore, the world – you cannot get away from capitalism. Our need for a collective mental system that dictates exchange will remain in place – it’s too ingrained in who we are as a global culture to be eliminated. There’s even a form of capital for this, it’s called “institutionalized capital” which can be defined as “embodied cultural capital that is the knowledge consciously acquired and passively inherited by socialization to culture and tradition.” This institutionalized capital is enveloped within these capitalistic structures. As a society, we need to address these forms of capital, understand them and how we affect them so we can use them at a higher level of conscious awareness in order to create intrinsic value for everyone. And right now, more than ever, we have the ability to affect this change.
When we implement new systems, we implement them at the level of consciousness we exist at during that particular moment in time. Take oil for example – oil’s broad application is not because it’s the only thing to make plastics from, burn for electricity or propel our vehicles through space; oil met us at a time where our consciousness could understand how best to leverage it as a resource.
If we were to reimagine how to make plastics now, we would likely employ a highly sustainable commodity like hemp – and we would do the same for energy creation and transportation. The only thing stopping us is our attachment to the financial capital these archaic forms of real capital generate.
So let’s stop for a second. Look around. And consider now as the time to reimagine and align our implementation and use of real capital with our current level of conscious awareness.
The New Economy
Though we’ve only been quarantined a couple of weeks, we can already start to imagine a society that exists as an effect of the havoc this virus has already caused to our normal operating system. Companies that never thought they’d be able to function with remotely working employees have now implemented a foundation for it and will likely engender a totally different working culture because of it. Industries that were previously robust feel seemingly insignificant in relation to the environment at hand, and industries otherwise forgotten about are already starting to emerge as leaders.
The things that really matter will stay in place – we’re already seeing this now. The government may have labeled them as “essential services” or we may be seeking out ways to consume/use/acquire other services or products that we actually need. The cream is, most certainly, rising to the top.
What do we want to build from the ashes? We’re seeing institutions fall to their knees. Now is the time to reimagine the enterprises that should take their place. This doesn’t mean we wipe the slate clean and start from scratch – we actually have a really beautiful economic structure for many different industries. But we do need to take note of how these enterprises operate and affect the world – how are they governed, how do they impact the environment and their local communities, and do they have a healthy working culture for employees? Etc..
The data has been staring us in the face for years and yet it seems few people are actually aware of the truth: the more conscious an institution, the more profitable they are. It’s not that hard to imagine – if you create a better working environment for your employee, they are more creative and productive. The less you pollute the environment, the less fines and regulatory issues you run into. The more you consider all stakeholders, the better your product or service becomes. The better you pay your employees, the better the lifestyle they can provide for their families and the more they can focus on their tasks rather than paying their bills.
Since 1990, the Socially Responsible Index (MSCI KLD 400, ticker: DSI) has returned an average annual return of 10.46% compared with the S&P 500’s 9.93% – an annualized outperformance of 5.3%. And we’ve seen an exponential increase in performance as companies have focused their energy on being more conscious. This is not a coincidence.
How We Make the Shift
Conscious effort. If you’re in a leadership position and part of a corporation that is falling apart: be a voice! Speak up and take control. We need conscious business leaders now more than ever. There’s literally no better time to restructure your business than when it’s all crumbling. Think of it as a large-scale renovation. The house has already been torn down, what improvements do you want to make when rebuilding?
Vote with your consumer and investment dollars. Most of us are familiar with voting with our discretionary consumer dollars and the effects it can have – now, more than ever, we need to employ these practices. Stop buying from companies that are takers and start buying from those who are givers.
MOVE YOUR MONEY into socially conscious investments. This is the biggest and, I believe, most powerful thing we can do. It’s time we all vote with our dollars and invest with our conscience.
The systemic shifts we desire within our economy and society are often expected to manifest through those we put into political power. However, politicians spend more than 80% of their time fundraising so they can stay relevant and advertise to the people. This results in a politically biased system that favors the largest political donors: corporations.
If we as investors move our financial capital and invest it into socially conscious companies we’ll create a more responsible, sustainable and value driven capitalist society. It’s as simple as shifting “supply and demand” – by taking away the demand for unconscious companies, supply becomes abundant and values drop. While creating a demand for conscious companies the supply will drop and prices will flourish – incentivizing all companies to move toward responsible, sustainable and conscious stewardship in order to re-capture shareholders and drive share prices higher. In effect, as investors, we create competition for corporations to be more conscious.
By utilizing these modalities to affect change in corporate America – corporations would engender leaders who reflect these beliefs and actions as well. These corporations would also make their political donations in a more responsible and conscious manner. Not only are we then effecting Corporate-America, but also the politics of America itself.
Financial Capital, the Alchemy of Real Capital
The implementation and use of real capital can therefore be influenced by our personal declaration of our financial capital – not just being used to transmute one form of real capital to another – by literally alchemizing our beliefs and consciousness through our actions and affecting a reality where we create intrinsic value for everyone.
Covid-19 has presented us the opportunity to make this change. Through shifting our focus to a conscious economy, based upon the way in which we spend and invest our money.
What is a “conscious company?”
Author: Mark Sauer
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