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CAPITALS
in the SOCIO-ENVIRO-ECONOMIC SYSTEM
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ALL THE CAPITALS
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SOCIAL
CAPITAL
SOCIO
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ENVIRONMENTAL
CAPITAL
ENVIRO
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ECONOMIC
CAPITAL
ECONOMIC
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Capital is not simply money and finance, it is the source and store of all sorts of resources that are needed for the functioning of everything ... society, the environmental ecosystem and the physical man-made economic system. Each of these segments has a multiplicity of sub-segments.
It is very difficult to define absolute numerical management metrics that are coherent, reasonably simple and useful. TVM addresses this to some extent ... trying to keep the framework simple yet also of maximum utility. To a great extent this has been done by removing money as an element of the measurement framework and having the amount and direction of change to be at the center of progress and performance measurement.
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SOCIAL CAPITAL
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THE STATE OF SOCIETY
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FIVE SEGMENTS OF SOCIAL CAPITAL
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HUMAN CAPITAL
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RELATIONSHIP CAPITAL
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LOCATIONAL CAPITAL
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CULTURAL CAPITAL
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SPIRITUAL CAPITAL
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Individual
The basis for everything important ...
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Family / Community
The family an important part of the social structure
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Place / Community
The place factors into quality of life
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Place / Community
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Place / Community
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- Human Capital ... Reflects quality of life at the individual level
Past: Value emerging from childhood, parenting, education, healthcare, family and friends, experience ...
Present: Current situation, job and earnings, family and friends, housing, health, wealth, etc. ...
Future: How well prepared. Possibilities in the place ... beyond the place. Macroeconomic trends. Leadership behavior.
Relationship Capital ... brings in family, friends, connections
The relationships associated with family, friends and connections magnifies or diminishes human capital.
A good idea that is never shared has no value, but the network effect of many connections may make it valuable.
Locational Capital ... adjusts for the attributes of the place (country, city, etc.)
The place really matters.
Human capital is augmented by a high potential place and is diminished by a low performance place.
A really smart place is not driven by technology but by strategy where the potential of people is well understood and used to good effect.
Cultural Capital ... the things that makes life worth living
The history and traditions
Music and dance
Drama, art, etc.
Spiritual Capital ... Has been important for millenia
The meaning of life ... creation
The worlds great religions: Bhuddism, Christianity, Confucianism, Hinduism, Islam, Judaism.
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PEOPLE ARE THE ACTORS IN THE SYSTEM
It is people (actors with identities) that must be held accountable.
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AS AN INDIVIDUAL
AND/OR AS FAMILY
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AS AN INDIVIDUAL
IN AN ORGANIZATION
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AS AN INDIVIDUAL
MAKING INVESTMENTS
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ENVIRONMENTAL CAPITAL
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NATURE / SOURCE OF ALL VALUE
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SIX SEGMENTS OF NATURAL CAPITAL
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SUN
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LAND
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WATER
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AIR
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MINERALS
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BIODIVERSITY
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ECOSYSTEMS
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SUN
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The sun is the source of all the energy that enables everything on planet earth.
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LAND
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There is a limited amount of land on the planet. Land is one of the key planetary limits. It is vital that land is used in a sustainable manner rather than being degraded in the interest of unsustainable economic performance.
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WATER
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Without water, life as we know it cannot exist. In conventional economics, water is undervalued because for a big part of history it has been abundant and easily accessed. This is changing and water must now be valued more appropriately.
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AIR
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Clean air is good for human health as well as fauna and flora. Many steps have been taken to reduce the problem of air pollution that we can see, but not enough for the air pollution like CO2 that we cannot see, yet still dangerous.
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MINERALS
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Natural resources have helped power the industrial revolution and enabled massive improvements in quality of life, but there are limits because of both depletion and egradation of natural capital. Better use of resources is essential.
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BIODIVERSITY
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Biodiversity is important. Humankind has emerged over millions of years as a result of massive biodiversity and complex evolution. The future of life depends on the continuing health of the biosphere in all its manifestations.
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ECOSYSTEMS
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There is genius in the way ecosystems have evolved over millions of years to stabilize natural systems in a way that has enabled life as we know it. We should be concerned that in the past 200 years this stability is being compromised.
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- Nature is the source of ALL value
- To improve quality of life, nature has been exploited, depleted and degraded.
- Nature is rapidly degrading but ignored in conventional financial and economic analysis.
- This is NOT sustainable.
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THREE MAIN SEGMENTS OF ECONOMIC CAPITAL
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FINANCIAL
Adding to wealth is dominant goal ...
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PHYSICAL
Tangible physical structures ...
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INTANGIBLE
Important elements for quality of life ...
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FINANCIAL CAPITAL
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THE FINANCIAL ECONOMY
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GDP GROWTH
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CORPORATE PROFITS
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CAPITAL MARKETS
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In modern times, the dominant economic metrics have been GDP growth, corporate profit growth and stock market wealth. Management metrics have been aligned to these same goals, and have been very effective. TrueValueMetrics seeks to enhance accountancy to include Social Impact and Environmental Impact.
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MONEY METRICS SUGGEST GOOD PROGRESS AND PERFORMANCE
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STOCKS UP
Stock market has been spectacular
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PRODUCTIVITY UP
... although US wages flatlining!
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GDP growing / GPI flat
While US GDP is up, progress (GPI) is flat
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PHYSICAL CAPITAL
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THE PHYSICAL (REAL) ECONOMY
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BUILDINGS
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INFRASTRUCTURE
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PROCESSES
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EQUIPMENT
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TECHNOLOGY
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INVENTORY
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- Modern engineering and technology is deployed and exploited to improve profit performance.
- Rather little technology is deployed to make society and the world a better place.
- The modern 'real' economy is pretty amazing, but not so much in the news (Western news, that is).
- Many of the more amazing things are going on in the Middle East (e.g. Dubai) and Far East (China).
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BUILDINGS
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COMMERCIAL
FARMLAND
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HOTEL
APARTMENTS
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ROW HOUSES
SUBURBAN
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Buildings represent a big part of the physical economy, and are a big part of life. They have a long life and require a substantial amount of materials to build. They are where people live their lives. Buildings have impact on the environment during construction and again during their life because of operational energy use.
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INFRASTRUCTURE
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BRIDGES
ROAD
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RAIL
PORTS
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WATER
TELECOM
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Infrastructure makes a big difference to a place. The lack of infrastructure is one of the root causes of poverty in a place. Infrastructure has substantial cost to build, but long life means that infrastructure benefits accrue over a long time. The question of pubic or private ownership of infrastructure is an important ongoing debate.
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MINING AND MANUFACTURING PROCESSES
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MINING I
MINING II
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IRON & STEEL
CONCRETE
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PETROCHEMICALS
PULP & PAPER
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Processes make products which are needed to satisfy the needs of people ... but the social and environmental efficiency of processes is not accounted for effectively. Business understands the profit performance of processes, but without better metrics, social and environmental improvement get ignored.
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MACHINERY, EQUIPMENT & VEHICLES
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SHIPS
AIRCRAFT
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BUSES
AUTOMATION
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MINING
OIL & GAS
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The performance of machinery, equipment and vehicles has progressed enormously over the last century. Human brawn is no longer an important part of the production process, rather it is the machine that gets the work done. In the future is is not only going to be the brawn of the machine but also the brain of the machine. The challenge is to make this a benefit to society, the environment and the economy.
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DIGITAL SYSTEMS AND PROCESSES
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COMMUNICATIONS
LOGISTICS
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DATA
AI
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ROBOTICS
E-COMMERCE
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The impact of migration from analog systems and processes to digital technology has been massive. Some people and organizations have been the beneficiaries of the changes while many have been losers and left behind. Most management metrics and protocols remain suited to the analog world rather than the newly dominant digital environment.
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INVENTORY
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SHIPPING
TRUCKING
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FULFILLMENT
WAREHOUSE
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RETAIL
JUST-IN-TIME
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Working capital is a vital component in the economy enabling the efficient function of essential organizations. Technology has enabled substantial improvement in the operation of the supply chain and indeed has made possible global logistics that have become a key part of cost reduction in the modern global economy.
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INTANGIBLE CAPITAL
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THE INTANGIBLE ECONOMY
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Some of the things that make life worth living
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KNOWLEDGE CAPITAL
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INSTITUTIONAL CAPITAL
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CULTURAL CAPITAL
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KNOWLEDGE
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EDUCATION
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GOVERNMENT
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SECURITY
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CULTURE
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RELIGION
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KNOWLEDGE CAPITAL
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EDUCATION / RESEARCH / TECHNOLOGY
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KNOWLEDGE
Albert Einstein
EDUCATION
Cambridge
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BIO-TECH
Genetic code / DNA
AUTOMATION
Auto Assembly
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DIGITAL TECH
Quantum Computing
AEROSPACE
Space Shuttle
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It is human imagination that makes knowledge possible. Humankind now has more easy access to knowledge than at any time in history in all sorts of fields. This knowledge has the potential for both good and bad ... nuclear power or nuclear bombs ... digital distribution of news or dangerous misinformation ... cures for disease or biological warfare ... and so on. There are huge possibilities if well used.
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INSTITUTIONAL CAPITAL
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GOVERNANCE / RULE OF LAW / ORGANIZATIONS
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Legislation
Companies
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Police
Courts
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Military
Accounting
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The challenge of ordering society in an effective way has been in play for a very long time, and getting this right continues to be a subject of great debate. What is clear is that when the enabling environment of governance, rule of law and organizations becomes dysfunctional, quality of life rapidly degenerates and the system won't work.
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CULTURAL CAPITAL
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MUSIC and ARTS / RECREATION / RELIGION
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Music
Drama
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Opera
Dance
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Religion
History
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Cultural capital comprises all sorts of activities that give pleasure and make life worth living. They nourish the soul. Culture is not a core part of conventional economic and financial analysis, but it should be because it is such an important component of quality of life. To have a sustainable world there is a need for less materialism, and more cultural activity.
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