Maximizing Your Physical, Intellectual, & Social Capital | AWM Insights #165
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Episode Summary
Understanding the different types of Human Capital is critical to building multi-generational wealth. The three main types are Physical, Intellectual, and Social Capital. Each plays a role in building wealth and leading a more flourishing life.
Your Physical Capital is your strength, your natural talents, and your ability to stay healthy. All of which are big drivers of wealth for many of our clients. Investing in it – optimizing strength & conditioning, eating well, getting enough sleep, etc. – will pay dividends.
For founders of companies, Intellectual Capital is typically their main driver of growth. Athletes can also use this to be a smarter player. Intellectual Capital is not just your academic accomplishments, rather it’s the accumulation of life experiences, formal and informal education included, and self-reflection that typically advance this form of Human Capital.
Social Capital can stand on its own or be a very strong complement to both Physical and Intellectual Capital. It is not just expanding your community and network for your benefit. While that’s important, Social Capital can also be giving back to your community or causes you care about.
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Episode Highlights:
0:00 Intro
0:35 Money is a tool to use in order to accomplish your priorities
1:16 What is Intellectual Capital, and how do people use it?
3:21 Social Capital, not just networking
4:32 Yes, you should invest in your Physical Capital!
5:15 Invest in all aspects of your Human Capital
6:05 Think about diversification and the evolution of each over time
7:43 Text us!
+ Read the Transcript
Brandon Averill (00:01): All right, everybody. Welcome back to another episode of AWM Insights, Brandon and Justin here. We're going to continue this series really talking about the multi-generational wealth formula. For clients listening, you've certainly heard us talk around this. You've heard us talk about multi-generational quite a bit. And from last week's episode, there is a formula that a very high level that I think explains the broad strokes for everybody. And so that's what we're going to break down over the next couple of weeks because at the end of the day, we all know this. We use this phrase a lot, is that money is just a tool. It's a tool to help us to accomplish our priorities. And a lot of times our priorities have this circular effect where if we take care of our human capital and filter it all the way down the formula, we end up with this income that we get to reinvest. We get to reinvest into investments, we get to reinvest back into our human capital, et cetera.
(00:57): But we're going to start at the very top here and just talk about the three different components as we see it to human capital. Some of you are going to be more familiar with than others, but we're all in a process of developing all three constantly. And so those three are really physical, intellectual, social. And because we rely on our intellectual capital the most, I'd love to hear from you, Justin, just to talk a little bit about, especially in our client's shoes, how do they think about intellectual capital? What is intellectual capital? And maybe touch on that a bit.
Justin Dyer (01:31): The first thing I would say to this answer, and really the formula broadly speaking, is any given individual is probably at a different point or maximizing or optimizing, however you want to think about it, different aspects of this formula at any given time. That's no different when it comes to human capital. So physical capital, a lot of our professional athlete clients are really optimizing that when they're actively playing. A lot of our founders, entrepreneur clients are really maximizing or optimizing the intellectual capital, taking ideas, taking their education or their life experience, whatever it may be. All these things that develop who you are as an individual, really the mental strength, let's say, that you may have, and putting that into the ground, so to speak, and turning that into something of value. Generally speaking, if you're starting a company, there's a financial end game here, but really it is harnessing all of that life experience, both formal education, informal education.
(02:36): It's not necessarily making a judgment on any type of education, right? You're just taking all of this experience that feeds into who you are from an intellectual standpoint and turning it into a bigger, better idea than it is I guess on its own, right? The whole sum of the parts equals is more than each individual part by itself. And then that really bleeds into all these other pieces. You can use your intellectual capital to influence your social capital. You can use your intellectual capital to influence your physical capital, really understanding the body. You can use your intellectual capital to understand business better and all that, but it's a really, really critical component. It almost bleeds through all of these different things in social capital probably more so than any.
Brandon Averill (03:23): Yeah, and I think that's an interesting thing to touch on is the social capital aspect. So I think in the traditional business sense, people think about this as building your social network. How do you develop relationships that may be able to benefit you from an earnings standpoint, whether you're a founder and you're going to raise money for your company or you're going to sell a product, et cetera. Or if you're an athlete and you're going to use this social capital to find investment opportunities, for instance, that may end up benefiting you. But there's also this tool aspect, right? It doesn't always have to be, as you alluded to, a pure money decision. It could be, you know what? I'm going to use my social capital to accomplish my priority of giving back. So we have a client, I was on a call this morning that is doing a charity event in Milwaukee, and they're going to use their social capital, his platform, to be able to draw these people in to benefit the Ronald McDonald Foundation, and what a great use of social capital to be able to achieve a priority for this family.
Justin Dyer (04:24): That's huge.
Brandon Averill (04:26): So I think thinking about the social capital, you can certainly start to optimize those things. And then the physical capital. Most of our clients that are listening are athletes, and this is something we talk a lot about. I think this gets lost in the multi-generational wealth formula for non-traditional or people that don't work in this space. Because when we hear a training expense or we hear paying for a nutritionist or we hear hiring a private chef, what we hear is reinvestment or reinvestment in your physical capital and probably the greatest opportunity for outsized returns, whereas most unfortunately, people hear those as expenses.
(05:10): And that's where this beauty of this formula comes in, is if you take care of the entire wealth formula, you get this opportunity to reinvest. And that's something that we really advocate for clients listening. Know that we advocate for reinvestment in your physical capital. We advocate for reinvestment in your intellectual capital. If you're learning new things, if you have to pay for education, if you have to take a trip, you're an athlete and you want to learn about venture and you have to book the flight to get to Silicon Valley, that's a great expense to start to learn more and more about it.
Justin Dyer (05:43): And one thing I'd say across all of these, you have to right size them at the right stage of your life. Don't just go as a rookie, go buy a personal chef. Chances are you can't afford it necessarily. So you have to do what you can can within your means within a well-structured plan, right? Going back to that aspect, right? You don't want to just put all your money into one aspect. You want to diversify it. You want to really be thoughtful in reinvesting in this whole virtuous cycle that we've hit on here. You want to be thoughtful and right size everything accordingly.
Brandon Averill (06:17): Yeah, I think that's the beautiful thing is that throughout the course of your life, you're also going to have over weightings to these different types of capital. Early on when you're able-bodied and you can play your talent and earn the physical capital, there's probably no greater return as a professional athlete, but there will become a day, we all know this. At least our clients are smart enough to not say like, oh, I'm going to put my head in the sand and wait. No, there's got to be some dripping of intellectual and social capital throughout your career so that when you get to that end, even if you have a hall of fame career, you earn hundreds of millions of dollars, you still have life after the sport. So working on that intellectual and social capital will become just so important as the tool to create a wealthy, flourishing family that we so often talk about.
(07:08): Hopefully this was helpful, just kind of a high level at the very top, what is the human capital piece of this? How do we think about capital? And hopefully it gets the juices flowing a little bit. Physical capital for you athletes front of mind, but how could you maybe increase that intellectual or social side a little bit? You don't need to go all in, but you definitely need to start thinking a little bit about it. And then for our founders, we all know this. Physical capital, pretty darn important. Often overlooked. Yeah, maybe this is a little shake up and maybe I'm just speaking to myself, but that you need to worry about that a little bit as well. So hopefully this is helpful. Very start of this series. We'd love to hear questions from you, shoot us a text. 714-504-7689 goes right to my phone. But until next time, own your wealth, make an impact, and always be a pro.