Human capital
Successful families watch their financial capital closely. They rarely watch the asset that decides whether it survives. Human capital is the most important thing a family owns, and the one it is least likely to develop.
Ask a wealthy family about its assets and you will get a clear answer: the business, the portfolio, the property, the trusts. Ask about its human capital and you will usually get a pause. The phrase is not quite familiar, and the thing it points to is not quite measured. This is strange, because human capital is the asset on which all the others depend.
Human capital is the combined character, judgement, emotional maturity, relationships and shared culture of a family's people. It cannot be valued, hedged or put in a trust. But it is the thing that decides whether the things that can be valued will still exist in a generation's time.
A family with strong human capital can lose money and recover. A family with weak human capital can have a fortune and lose it. The money, in the end, is only as durable as the people holding it.
A family with strong human capital can lose money and recover. A family with weak human capital can have a fortune and lose it.
Human capital is overlooked for understandable reasons. It does not appear on a balance sheet, so it is not discussed in the meetings where families review their wealth. It is hard to measure, so it slips off the agenda. And developing it is slow, unglamorous work, with none of the satisfaction of a good return.
There is also a deeper reason. Families are not used to thinking of themselves as something that must be actively developed. They focus on what they have. They spend little time on who they are. Yet who they are is precisely what they will hand on.
Strong human capital is recognisable, even if it is not quantifiable. Families who have it tend to show:
These are the qualities described in the generativity framework, and they are the substance of real human capital development.
Like any asset, human capital can depreciate. Conflict that is never repaired erodes it. Secrecy erodes it. A next generation left unprepared erodes it. Left untended, it declines quietly, and the decline only becomes visible when a crisis exposes it.
Unlike financial capital, though, human capital cannot simply be invested in once and left. It has to be developed, deliberately, in each person, in every generation. That is the work of developing the next generation, and of building, year by year, the kind of family that can carry what it has been given.
If your family has not yet looked honestly at its human capital, begin a conversation.
The combined character, judgement, emotional maturity, relationships and shared culture of its members. It is the asset that holds every other asset together.
It does not appear on a balance sheet, and families are not used to treating their own people as an asset that must be actively developed.
Not in the same way. It must be developed person by person and generation by generation, through emotional growth, judgement, relationships and shared purpose.
Human capital is the quiet determinant of whether a family endures. The first conversation is private.
Arrange a confidential conversation