(Funding) It Takes Money to Make Money — the Soft Capital Edition
An interesting paradox exists whereas the most impoverished tend to be the most generous with donations of hard capital. Why is that?
This phenomenon is so persistent, it’s almost as if the “poor” are eager to convert hard capital (cash) into alternative expressions of wealth that they value more highly.
In fact, in terms of an “exchange rate,” their propensity to convert hard capital into expressions of soft capital most highly valued within their community only intensifies when the economy gets worse, implying an unexpected inversely proportional relationship.
Counter to intuition, when the economy gets worse, those who are poor become more generous in their gifting of hard capital to their community.
What if there is a perfectly rational reason for this? What if they recognize that the soft capital “purchased“ through generosity is more valuable to them when times get hard? Maybe they know something that we don’t?
For those of us who are forced to “do the impossible“ without sufficient cash, we noticed something that others overlook: there’s something that happens when you run out of money; you get real creative about resources.
You begin to “see“ expressions of wealth that are ordinarily overlooked, and when money runs out, people rediscover sources of wealth that have been in continual use within our communities for millennia.
Ruth and I generally refer to these expressions of wealth as “soft capital,“ and when people recognize the transcendent value of soft capital, they are more likely to “share the wealth” when they experience a cash windfall.
“Experts” tell us that this is unwise. We are scolded, and instructed and how to properly conduct ourselves as aspiring members of the middle class.
But communities described as “poor” recognize that when the money runs out, the only source of equity remaining are expressed in forms of soft capital.
Therefore, they are more generous to and within their communities, because it’s rightfully recognized as an investment.
So far, this discussion has concerned itself with the margin that exist between hard capital, and soft capital, but this phenomenon is not limited to a conversion from hard capital into soft capital, through a gateway of soft capital called “generosity.”
When one visits a community that is truly wealthy, one can expect to be approached by an Abuela, offering food, because she wants to make sure that a visitor to her neighborhood does not go hungry.
I’ll provide a few examples, for its our contention that an investment in the following forms of “keystone capitals” helps deliver tangible benefits almost immediately, even in the absence of “money.”
Further, activists will have structured their community in such a way that it’s better positioned to become anti-fragile, which transcends mere resiliency in the way that it becomes strengthened in a state of duress.
The five keystone capitals:
- Attention capital
- Relationship capital
- Time capital
- Trust capital
- Wisdom capital
Image a single parent who has suffered an unfortunate series of events, and found themselves in a vulnerable position. They need assistance, and because they don’t have money, the very first thing they need is someone’s attention.
It seems obvious, but it’s important to call this out, because many of us take it for granted.
There’s a maxim within the domain of fundraising that goes something like this: “the good news is that they have the money; the bad news is that they intend to spend it elsewhere.” This maxim holds for soft capital as much as hard capital, because attention is a form of currency, more valuable than most people realize.
The trick is getting people to understand why your cause is more important than the one they have already chosen.
There are people who will tell you that they don’t have the time, and yet spend four to five hours a day arguing with strangers online; it’s not that they don’t have the time, and it’s not that they don’t have the attention capital. It’s that they intend to spend it elsewhere.
To break this spell, one might have to invest in the first of our five keystone capitals: relationships.
When one invests in someone else, they are best positioned to build relationship capital, which goes towards a spirit of reciprocity, which is so valuable that it’s worth taking a moment to deliver a definition:
- the practice of exchanging things with others for mutual benefit, especially privileges granted by one country or organization to another.
As my friend John once said, “if you want to be a friend, you need to be a good friend,” which means listening to understand rather than listening to respond, and giving without an accounting of what one might expect to receive in return.
In the context of our example (the need for child care), the process I’ve just described is how parents get to know other parents to determine if they share values and can be trusted to serve as trusted stewards of their children.
Our society says “time is money,” as if to suggest that time’s only value is that which can be expressed in monetary terms.
Not so: the most valuable expressions of time are that cannot be bought and a person would never sell, speaking to a person’s values.
The more a person invests in the quality of relationships with others, the more valuable the time spent and invested with one another.
As Ruth says: trust capital is hard to earn, easy to lose, and impossible to buy. That’s about the best way to describe it, particularly in the context of our example: the need for a parent to seek trusted persons to help watch their children.
It’s not just that you need to find somebody with available attention capital, you need somebody with applicable experience, right?
There are plenty of people who are decent listeners, and there’s certainty people who have plenty of time, but lack the pertinent experience, and therefore the ability to build trust capital.
That brings us to wisdom capital: that transcendent value that can only be learned through (often) bitter experience, by a person well-acquainted with loss, failure, and tragedy, and this typically exists in ample quantity among older members of our society.
Lucky for us, these people are often dismissed and ignored, and therefore in a position to provide transcendent value to those willing to invest their attention to establish a shared relationship, in the spirit of reciprocity. This leads to a shared investment of time, which eventually build in a mutual trust which soon unlocks vast stores of normally-overlooked wisdom capital.
Sure, having money can solve problems, because on is afforded the option to secure assistance in a purely transactional manner, eg: “if you watch my children, I will pay you $15 an hour.”
What we propose is an investment in community, with an explicit emphasis upon the five forms of keystone capitals described previously, one can unlock a quality of experience that boasts a transcendent value which cannot be bought at any price.
And when a community is organized in a manner which explicitly recognizes these five keystone capitals, the community is best-positioned to bootstrap its grassroots fundraising efforts, and best-positioned to turn setbacks into opportunities to grow and expand an anti-fragile model that becomes stronger under increased stress.
Note: the content of this article was described in greater depth in this podcast episode.