“Those who understand compound interest are destined to collect it. Those who don’t are doomed to pay it.” —Unknown
We know that capital often has the ability to give us the freedom to focus on what’s most important—our families, our communities, and our own well-being. Having very little capital or large amounts of debt can prevent us from devoting our time to what’s most important to us.
But there’s more than just financial capital to consider.
…the core idea of social capital theory is that social networks have value. Just as a screwdriver (physical capital) or a college education (human capital) can increase productivity (both individual and collective), so too social contacts affect the productivity of individuals and groups.
Whereas physical capital refers to physical objects and human capital refers to properties of individuals, social capital refers to connections among individuals—social networks and the norms of reciprocity and trustworthiness that arise from them.
Social capital can help us find friendship, a new job, a spouse, and even deep meaning in our lives. Social capital, in short, can make us happier, healthier, and (financially) wealthier. But, as Putnam points out, the benefits are not constrained to the individual. They spill over into our communities. Not only can your expanded social network help find you new friends and opportunities, but you can also find your expanded network new friends and opportunities to pursue. Social capital has the potential to make everyone better off.
Unfortunately, there exists more kinds of debt than just financial debt. There’s also diversity debt.
Entrepreneur Susan Wu writes:
Like financial debt and technical debt, diversity debt is a trade-off, and one that is sometimes in a company’s best interest. Especially in fast-moving startups, debt can be used for leverage: Get what you want now, and pay it off later. Businesses can handle a certain amount of financial debt if it allows for quick capital, and a certain amount of technical debt if it allows for a faster product release.
The most common way that startups go into diversity debt is at the very start: when they decide on their first 10 hires. Nearly all startups choose to opt for speed, believing that hiring from existing friends-of-friends networks will be more effective than working hard to recruit candidates with a range of race, gender, and socioeconomic backgrounds. (Hiring the people who are easiest to find will almost always mean hiring people like you. In terms of race, for example, white people’s social networks are on average 91 percent white, according to a PRRI study, and 75 percent of white people only know white people.)
(Read Susan’s full post here. It’s brilliant.)
We sometimes obsess over financial capital and financial debt—and it can be reasonable to do so. But we must consider how to maximize all kinds of capital and minimize all kinds of debt to live meaningful lives and be a part of sustainable organizations.
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