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What is social capital?

What is social capital?

Not too long ago, Sue asked a question about a term we use a lot, and it was a surprise to me.

"So, just what do you really mean by social capital?"

It was surprising because I assumed everyone was familiar with the term. It was a question that forced me to realize that while I had defined it in my head, I never spent time sharing that meaning with anyone else. I just assumed people thought the same way. Since it is so central to Dorothy's Power Foods business model, it would probably be a good idea to talk about it. 😬

Before we dive into that, let's create a working definition of "capital." It is:
"Anything that can be used for productive purposes by an entity or individual."
So capital is something that can be applied or leveraged to get an outcome of some kind. There are eight forms of capital:

  1. Financial (economic)
  2. Material (physical assets)
  3. Living (natural resources)
  4. Relational (people)
  5. Intellectual (IP)
  6. Experiential (Application)
  7. Spiritual (belief), and
  8. Cultural (meaning)

The form of capital I identify above as "relational" is what most people refer to as "social" capital, relating it to the strength of relationships between people. But I believe this is too limiting and inaccurately represents the true meaning of social capital. It makes it one form of capital among many when I think it is actually the outcome of the interaction of all other forms of capital noted above. It's the result, not part of the equation.
The term has been around for a long time, and it's hard to find a definition that satisfies everyone. The best one I've found is this:

"Social Capital is the links, shared values and understandings in society that enable individuals and groups to trust each other and so work together."

"Links, shared values, and understandings" exist not only among people but across people, entities, and things. This all-encompassing view of social capital best explains how people and groups apply these different resources to live and work with each other. It thus elevates social capital to the outcome of all other forms of capital.

So how do we measure the strength of social capital, this combination and interaction of other forms? The measure, or currency, of social capital, is trust. This is so essential because if we think about the objective of any business, it reveals that thinking of success in terms of profit (financial capital) is too limiting. Instead, profit is simply one part of an overall equation. If we think about maximizing social capital (trust) as our primary objective, we begin to operate an organization very differently. It becomes an optimization model rather than a profit maximization model, seeking to achieve the highest level of social capital through many influences. This means profit may not be maximized but is instead optimized to build trust.

This is how we view running Dorothy's Power Foods. It is not "how can we do things that make as much profit as possible?" but instead "how do we do things that create the greatest trust, knowing that a certain level of profit is required to run the business." It is not foolishness or naivete; it is what we believe will create a sustainable entity. It leads us to these principles:

  • We seek to establish effective workflow, minimize our expenses, and run the company as efficiently as possible. 
  • We don't price products based on what the market will bear, but rather earn a fair profit. 
  • We don't manipulate people into buying more, but rather suggest what they actually need. 
  • We seek to be solid, contributing members of our community, not to exploit those relationships but rather to make our community a better place to live for all of us. 
  • We will only deliver to local communities close to where we live, rather than wasting resources and contributing to landfills by shipping our products all over the country.

We get it. This may not be realistic. The company may not succeed using this kind of business model. Believe us, these are risks of which we are painfully aware. But we decided we'd rather approach it this way and fail than compromise and contribute to the systems creating so much waste, conflict, and disparity in this world. 

So that's what we mean by "social capital." I hope it makes sense.

I think Dorothy would approve. 

Kent

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