Acquire capital between your ears

Many years ago I was lamenting to a mentor about how stingy our workplace was at paying for training and personal development. I was implying that I would not get the knowledge I desired. As all good mentors do, I was given a shift in perspective — “What’s the alternative? No personal development? Just pay for it, it’s an investment.”

The next day I signed up for an 8-week course that cost me $450.

Ramit Sethi shares a similar philosophy:

“If you’re “thinking about” buying a book, just buy it. Don’t waste 5 seconds debating. Even 1 idea makes it worth it.”

The philosophy is — acquire capital between your ears — at all costs. Because, this capital, for the most part, cannot be taken away. Physical capital, on the other hand, can be.

Thomas Sowell makes this distinction in his most recent book Discrimination and Disparities:

“Physical wealth can be confiscated and redistributed in a variety of ways, but human capital cannot be, since it is inside the heads of other people.”

This philosophy is deeply rooted in our human origins. Hunter-gatherers were constantly on the move and therefore could not carry physical capital but were very good negotiators, hunters, gatherers, fighters, and dancers.

And, before hunter-gatherers, the world was home to five other human species according to Yuval Harari in Sapiens. In fact, the longest living species was Homo erectus, which survived for close to 2 million years.

Yuval Harari says that the reason Homo sapiens is currently the lone surviving species was a result of our mental abilities:

If all that counted were raw physical abilities, Sapiens would have found themselves on a middle rung of the ladder. But their mental and social skills placed them at the top.

He goes on to predict the fate of everyone within our species:

It is therefore only natural that the chain of power within the species will also be determined by mental and social abilities more than by brute force.

Said another way — the capital between our ears is a necessity.

The introduction of physical capital

After hunter-gatherers, agricultural societies had emerged but they remained in constant conflict with their neighbors. Therefore, physical capital like the prestigious palaces of 20th century B.C. Ancient Greece and the agricultural settlements of the dark age were short-lived.

Alternatively, human capital like the warriors of 15th century B.C. Mycenae, the Phoenician alphabet, writing, religion, and nomadic pastoralism sustained the conflict.

Physical capital, like the fortress walls in 4th century B.C., can give us a delusion of physical safety, but this shifted after Alexander the Great’s terror:

In 332 B.C., Alexander employed the assault machines and catapults developed by his father to breach the walls of Tyre’s formidable offshore fortress after a long siege. The capture of Tyre revealed that walled city-states were no longer impregnable to siege warfare. (Thomas R. Martin, Ancient Greece)

When your walls are taken away, what remains?

Over the next millennium, many people had to answer this question. Thomas Sowell tells story after story about groups of people who had their physical capital taken away:

1. [15th century] The Jews expelled from Spain in the late fifteenth century, and forced to leave their physical wealth behind, but rose again to prosperity in the Netherlands, contributing in the process to the economy of the Netherlands.
2. [16–17th century] Huguenot refugees, fleeing France in the sixteenth and seventeenth centuries, made Switzerland the leading watch-making country in the world.
3. [1940s] Expelling the vast majority of Germans from Czechoslovakia at the end of World War II left the Sudetenland region where they had been concentrated still economically stricken, decades later.
4. [1960s] Refugees who fled Cuba after the Communist takeover in the mid-twentieth century arrived in the United States destitute and survived by taking low-level, poorly paid jobs. But, in later years, the total revenue of Cuban-owned businesses in the United States exceeded the total revenue of the nation of Cuba.
5. [1970s] The collapse of Uganda’s economy after Asians were expelled in the 1970s and the economic rise of the Asian refugees in Britain, where many of them fled.
6. [1990s] The contrast between the fate of China and the fate of the “overseas Chinese” was demonstrated when, as late as 1994, the 57 million “overseas Chinese” produced as much wealth as the billion people living in China.

Even today, physical capital can be taken away from us quickly. The crisis of 2008 saw a 380% increase in home foreclosures. And, the “unprecedentedness” of 2020 has seen physical capital becoming obsolete as companies go remote. Ownership of bars and restaurants has declined by over 70%.

These are just two examples within the last 12 years.

And, as researchers reflected on that 2008 crisis, they said there were 4,750 “excess suicide deaths” in the US. Their primary risk factors? Job loss, home foreclosures, and debt. They then point out that suicides were four times higher in men than in women. The reason? Men feel greater pressure and shame when faced with financial failure. Aka — the loss of physical capital.

But, the problem isn’t physical capital, it’s having our identity wrapped up in this physical capital. This is because physical things are ephemeral and when our identity is tied to something that won’t last, we will inevitably lose our identity and experience a sort of death. (This even extends to the metaphysical)

Nothing will make this point more clear than the story of Thomas Edison’s business burning down:

On Dec. 10, 1914, a massive explosion erupted. Ten buildings in legendary inventor Thomas Edison’s plant were engulfed in flames. According to Edison’s son Charles, Edison calmly walked over to him as he watched the fire destroy his dad’s work. In a childlike voice, Edison told his 24-year-old son, “Go get your mother and all her friends. They’ll never see a fire like this again.” When Charles objected, Edison said, “It’s all right. We’ve just got rid of a lot of rubbish.” Later, at the scene of the blaze, Edison said, “Although I am over 67 years old, I’ll start all over again tomorrow.”

Edison said he will start again tomorrow, of course, because the fire didn’t burn the capital between his ears.

There’s a line from a Coen brother’s movie, O Brother, Where Art Thou?, that my wife and I enjoy:

“You ain’t no kind of man, if you ain’t got land.”

The character, Delmar O’Donnell, fantasizes about buying land with his share of the money.

His desire to own land is an age-old desire, and rightfully so, but it hasn’t always been this way. In early societies, the land wasn’t viewed as something to be owned. People saw land as a responsibility to those who came before and those who would come after. Rather than “ownership”, they thought of themselves as being owned by the land.

This is the type of relationship we need with our physical capital — a temporary responsibility instead of it being intertwined with our identity. That way, when it inevitability goes away, we’ll still have what can’t be taken away — the capital between our ears.