By Chris Rabb
Republished courtesy of The European Business Review
Invisible capital is the toolkit of our skills, knowledge, networks, experiences and other resources, along with the set of assets we were born with.
Invisible capital is the toolkit of our skills, knowledge, networks, experiences and other resources, along with the set of assets we were born with: our race and gender, our family’s wealth and status, the type of community in which we were raised, and the education we had as children.
Some of these assets are ﬁxed—we cannot change who our parents are. Others are in our power to acquire or modify. What makes them “invisible” is that our society rarely acknowledges that entrepreneurial opportunities—and thus entrepreneurial outcomes— are greatly inﬂuenced by these assets.
You can predict which entrepreneurs will succeed with a fairly high degree of probability if you know some basic facts about them. And on the surface, race, gender, and the educational attainment and/or household income of their families seem like pretty obvious factors. It’s simply easier for some people to succeed. The playing ﬁeld is not level.
If you want to become an entrepreneur, or help other entrepreneurs succeed, you have to be familiar with the terrain of the playing ﬁeld because it is neither smooth nor level. Additionally, you have to understand the rules of the game. Those rules are not written anywhere. A rulebook has yet to be written by the institutions’ most vocal and inﬂuential regarding the cause of entrepreneurship.
To understand the lay of the land and be able to effectively navigate the often hidden obstacles on a playing ﬁeld, you have to learn how the unseen forces that shape entrepreneurial opportunity work, in ways that even the “winners” in business may not fully appreciate.
Platforms to access versus proxies for success
When we limit “success” to such things as occupational prestige, higher education, income, and so on, too often we discount the impact of strong networks and other forms of access that correlate to increased upward mobility for successive generations. As the saying goes, “It’s not what you know, it’s who you know!” Of course, this expression is overly simplistic—and good connections alone rarely are enough for prolonged success in any ﬁeld.
The truth is that there is a range of invisible factors that give some an unequal advantage on the entrepreneurial playing ﬁeld. Successful entrepreneurs in the U.S., the data show, have a toolkit that tends to be more broadly valued in some communities than others, but the all-important mix of these assets is the invisible capital (or lack thereof) that helps or hinders entrepreneurial viability.
“Invisible capital is not a proxy for racism, sexism, classism, xenophobia, or heterosexism. Invisible capital is also no substitute for the entrepreneurial trinity of hard work, ingenuity, and positive attitude. But these qualities are often prerequisites rather than predictors of sustained viability in business.”
Let me be clear: invisible capital is not a proxy for racism, sexism, classism, xenophobia, or heterosexism. People who are on the receiving end of one or more of these “isms” are not powerless, nor are they devoid of invisible capital. Indeed, they have the capacity to build invisible capital strategically despite the clear social liabilities they may bear through no fault of their own. Invisible capital is also no substitute for the entrepreneurial trinity of hard work, ingenuity, and positive attitude. But these qualities are often prerequisites rather than predictors of sustained viability in business.
Invisible capital is not simply how big your Rolodex is or how many times you’ve traveled abroad. It is not just knowing that EBITDA stands for earnings before interest, tax, depreciation and amortization, knowing how to dress when meeting a loan ofﬁcer, what degrees you’ve earned, or the level of your digital literacy.
It is all of those things and more.
Invisible capital revealed
Anyone can acquire invisible capital. Depending on the entrepreneurial opportunity, which aspects of invisible capital you need and in what proportion may change dramatically. If Woody Allen is right and just showing up is indeed 90 percent of success, then some portion of that must be attributed to the invisible capital that informs us where, when, how, and why we must show up in the ﬁrst place.
Without equality of opportunity, we don’t know what (or who) represents “the best”. We can only safely know what the best is based on the rickety system we have inherited—along with those rare but highly visible exceptions society uses to validate the rule.
To fully acknowledge the importance of invisible capital in expanding opportunity for entrepreneurs, it’s vital to understand more about the different types of capital that constitute invisible capital.
At ﬁrst glance, capital is just a synonym for money. But it’s not.
Read more here.