I’ve been exploring several business opportunities recently, so I’ve been thinking a lot about capital. If we want to do X it will take $1500 of capital. If we want to do Y it will take $4000 of capital. Our options in business greatly depend on the amount of capital we control. Capital represents the ability to do something. Better yet, it creates an option for you to choose a particular path. Without enough capital, that particular path is not available to you.
When it comes to our personal performance, capital is an important concept. True, we don’t usually call it capital, but if you think in terms of that which gives you options, it functions in the same way. You have to build up a reserve of capital in order to accomplish anything significant. As individuals, our capital may be skill, intelligence, our network of contacts, education, or relationships.
The options from which we can choose are very much dependent on the amount of capital we have acquired. For example, I do not have enough skill capital to sail around the world. I do have enough to sail across a small lake with the wind at my back.
Your personal capital is something you have to intentionally develop. You can increase your skill and intelligence by reading, studying, taking courses, etc. You can increase your relationships by investing time in them. You can increase your network of contacts by reaching out to people and staying in contact with past acquaintances.
All of these activities are things that will increase the capital you have available to yourself. The more capital you have available the more opportunities you will have to choose from.
Originally published February 18, 2007.