Oligarchical Capital

Current theory has it that the value of an enterprise can be measured by accounting systems using the six ‘capitals:

1. Financial capital – basically the double entry cash accounting system developed by the Venetians

2. Manufactured capital – the addition of the value of plant and equipment

3. Intellectual capital – patents, brands, copyright – all government mandated monopolies

4. Human capital – the value to a business of it’s highly trained employees

5. Social and relationship capital – a more recent concept that values customer perceptions of a business

6. Natural capital – another recent addition that values the impact of a business on the environment and our limited resources

All of these factors contribute to the ‘value’ of a business. The last three are recent additions, initially added because they represent assets to a business and in some scenarios, a risk to a business. Anything that requires both  investment and risk clearly impacts the value of a business and can therefore be accounted for.

Goodwill is another capital – but it is really just used in accounting systems to round out the errors and explain why the value of a business, in say a sale, is often different to the carrying value.

There is one ‘capital’ missing from this list and that is ‘Oligarchical Capital’. It is where a business invests in creating an unfair advantage by lobbying government to create barriers to competition. This also carries risks to a business since overdoing it makes a business lazy and at risk to obliteration when there is substantial changes in the external environment.