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There are four types of capital imperative to build a dynasty. These are Human, Intellectual, Social and Financial. These are in order of importance. Notice how social capital comes before financial? This is because social capital is a huge source of opportunities that will lead to staggering increases in financial capital.
In this article, I’ll cover what social capital is, why you want it, and how to attain, maintain and grow it.
Social capital will help you improve upon the other 3, especially Intellectual and Financial. But, if you’re introverted or isolated, it’s going to prove to be fairly difficult to grow, unfortunately.
This is the third piece in the series of types of capital, the former being Human and Intellectual. All of this will make more sense if you go through the must-read mega post of generational wealth as well.
What is Social Capital, Exactly?
Put simply, ‘social capital’ is the bond, connection, relationship, and reputation with other people, institutions, and circles OUTSIDE of the dynasty.
Humans are very social creatures, and we benefit from the social capital we have and create both in mental health and in other areas of our lives.
Social capital has a sub-category of capital called ‘organizational capital’
Firstly, organizational capital entails positions your family members hold in either family-owned businesses or in businesses outside of the family. A family member working as a rental manager for an external firm may hire a family member who has a plumbing business for all repairs.
Uncle Jimmy working in a warehouse as an ops manager may hire some of the high school aged family members to give them part-time work. There are countless other examples, but I think you get the point.
This subcategory also covers connections your family have. These can be contacts a family may have with people in different organizations. Like a mother knowing the purchasing manager for a large factory, which Uncle Jimmy may then be able to supply thanks to this connection.
Bonds include best friends, old buddies, family friends and so on. These are people so close to your family that they practically ARE family, though may not take priority over your children in a burning building.
Families are the original social network. Relationships can also form from mutual friends.
Children of friends of yours can have a good chance of becoming friends with your children. You can’t make old friends overnight so fostering relationships early can make a massive difference in the long term outcome of a family.
Relationships include those with teachers, entrepreneurs, and business owners. Financial benefits may come from these relationships, not by specifically leveraging for financial gain, but for intellectual gain.
Learning things from others is invaluable when it comes to building wealth, and asking people you respect and trust can give amazing insight.
Your families reputation is also incredibly important, if not the most important, and falls under the social capital banner. Others should WANT to know your family and it’s members. It should be a pleasure working with and doing business with your family and it’s members. If your child goes to your college, the effort and impact you made on it should influence their ability to get in, and they should be willing to show a similar effort.
The way you as a Founding Father or Mother, and how your family behaves and carries themselves will impact this reputation. This is an incredibly challenging asset to build, and so easily lost.
This is why it’s important to be the best parent you can be and instill a true sense of values through your family culture to your children at every opportunity.
A family with a great reputation will find it much easier to build and create wealth thanks to said reputation. People like to work with reputable people, and people that are known to follow through, conduct themselves reasonable and sensibly, and people who over deliver.
Why Build Social Capital?
These forms of social capital can be leveraged inside of a family to build more intellectual capital, like with teachers, tutors, and professors, or experts on a subject. Like a son wanting to learn how to cook, so you organize for them to meet with your old high school buddy who has become a high-end chef.
Social capital can also be leveraged in business to get new customers, or in organizations to gain employment and career progression in companies.
Say what you will about nepotism. People despise it when it’s working against them, but when you can intentionally make it work for you with a solid plan, it’s fantastic.
Take for example, the customers I had in my electrical contracting business. They became my friends over time, and this solidifies the social capital and thus kept the financial capital flowing.
As they are my friends, I get to know them and their families, and I always stopped at nothing to make sure their business is running well and I help out in other ways where I can.
I may be driving between two customers, I let the first customer know what area I’m going to, and ask if they have any deliveries going out that way. If it’s on my way, I’ll take it with me. It’s no inconvenience, and they save on delivery, while still being able to charge for it.
The added benefit here is I introduce myself to their customer and mention what I do and leave a card. It’s a good look and a win all around and helps build a reputation for myself and family.
With a strong, positive reputation, your family will find it much easier to conduct business, gain influence and positions inside of organizations as well as progress financially.
Social capital also opens doors to opportunity, in both exclusive clubs, and for interpersonal development like through others WANTING to know you and your family.
Social capital as a whole makes it significantly easier to build financial capital as well as intellectual through leveraging these connections.
It can also help in building human capital…if you know what I mean.
How to Build Social Capital
So how do you go about building social capital exactly? Well first and foremost, you should leverage the connections you and your family already have.
Ask friends and family for the opportunity to be introduced to people they know, if you feel it would be beneficial or appropriate.
Clubs are also a great way to expand your network to previously unconnected people. These can be purely social clubs, charity groups or sports clubs. Golf clubs are a perfect example of expanding your network higher and further.
People are Great Conductors
Beyond this, it’s going to be the way you conduct yourself and build your reputation. Just like in business, when you start out, seeking out individual customers is the best way to build your revenue. But as you get bigger, you use this revenue to bring customers to you.
It’s the same with social capital. You invest in the relationships you have, build your reputation and people will seek you out.
Crossing the two worlds. Delivering high-end results and over-delivering for a customer will have them talking about the work you’ve done. And your reputation will grow in the evidence of the quality of the work for all to see.
Don’t Drop the Ball
Losing social capital happens a lot faster than creating it so protecting your family as best you can will be imperative. How you do so, is going to vary from situation to situation. Maybe Uncle Jimmy shouldn’t hire your quick to anger, violent cousin in the warehouse he employs for. A small quibble could have larger effects than it would with a more reasonable, level headed representative of your family.
The morals and work ethic distilled through you into your children will add to your capacity to create social capital, but also opens you to the vulnerability to lose out on social capital as well. We can’t necessarily directly control this, despite how hard we try, so being able to mitigate weaknesses will be important in your pursuit
The Legs of your Family
Looking at some larger families, it’s the social capital that is the legs to their wealth. Sure they have millions, or even billions in some instances, and that definitely helps. But with these social connections, they could lose everything and still have the network they need to build something new. The social capital gives their wealth and the members the ability to go further.
Social capital, therefore, creates opportunities to build streams of financial capital, means to build intellectual capital and opportunities for human capital…if you know what I mean.
Family of Origin is Social Capital
This is a controversial view: if your a founding parent, your Family Of Origin(FOO) comes under social capital, not human. For those that don’t know, your family of origin is that family from which you came. This means your parents, and your siblings, your uncle aunties, grandparents and so on.
When you’re starting a dynasty, it requires a massive reorient in mindset and culture. You must build this from the ground up. You cannot go back and alter an existing culture purely by your influence. Change comes from within, a personal choice, as you have done or are in the process of. It takes study, deep reflection and tough truths to face.
You had no choice in the family you were born into, but you have control over every decision you make for the family you want to build.
For your FOO to go back and change to suit the agenda of building a dynasty means admitting great fault in the way they have lived up to this point. It is considered an insult to their life choices and their parenting decisions – even when it is a well intentioned critique.
Not only is this a high barrier and hurdle to get over, but it also creates a point of contention. Contention that has no place in your dynasty.
The change that it takes to form a dynasty needs to come from within, and that means from you (the Founding Parents) onward. You need to build the culture, virtues and values your children want to live by. Your FOO cannot help you get there, and you can’t live like they did either – they are not the progenitors of your dynasty, you are.
Most parents and siblings will scoff at the idea of your desire to be a great Patriarch or Matriarch, and to create a dynasty. This is strange to me and probably to you as well.
Don’t you want your descendants to build upon what you have taught? To do better than you ever could? To improve with each subsequent generation while still staying tight knit? Isn’t this the entire purpose of a species and a bloodline – to ensure its survival? What better way than providing a framework and resources to ensure that will happen.
To many, forming a dynasty seems impossible because it takes such a mental shift outside of the norm. Outside of what everybody is lead to believe that it seems impossible. But it has been done many timers before, and you can do it too. But like every other dynasty, it starts with the founding parents down.
Every. Single. Time.
Your culture. Your efforts. Your dynasty.
It is for this reason I advocate the your Family Of Origin comes under the social capital banner. To include them in human capital is to invite contention and cultural clashes.
That’s Social Capital
So I hope you learned a lot from this article and you want to focus in on building social capital for yourself and your family. The best place to start is by taking stock of the connections you already have, and then moving on to the connections those connections have and seeing what will be beneficial.
Through doing this, over time, you will build genuine relationships and friendships which will lead to a healthier life both mentally, physically, inter-personally and financially.
Let me know what you’re going to do to build social capital in your family moving forward in the comments below
Next up in this series I’ll be covering family financial capital, so be sure to check that out.
Thanks so much for reading.