Do you think of “capital” as just money and other financial assets?
Like Pierre Bourdieu and many others, I think there are good reasons to consider a wider use of the term. By viewing capital as a broader concept than just financial capital, I believe an individual can more accurately estimate its total wealth and get a more nuanced perspective on how to increase it. A common way of categorizing capital is to divide it into four different forms. This text covers aspects of the different forms of capital from the individual’s viewpoint.
The article discusses these forms of capital which shape power in society:
- Cultural capital – what you know, your skills, your education
- Social capital – who you know, your relationships, networks
- Symbolic capital – your status, legitimacy, reputation, influence
- Financial capital – money, assets, property
The different forms of capital have their separate pros and cons. For example, while a lot of knowledge still remain valuable, cultural capital is under threat of dilution by increasingly knowledgeable and capable AI. This highlights the benefits of possessing different forms of capital as circumstances change.
Bitcoin changes the power dynamic among the capital forms.
This article focuses on a particular shift in the power dynamic among these forms of capital. A change brought about by the emergence of Bitcoin. Broadly speaking, financial capital has an advantage in that it is more universally useful for its owner. With fairly efficient means of exchange available, you can use your financial capital globally and transact with nearly everyone. People in other parts of the world might not care about you knowledge within a certain topic or about the connections you have within a certain industry. This often makes the use case for the other forms of capital more narrow than for financial capital.
However, financial capital has historically had some disadvantages to the other forms of capital. In this article we will explore how financial capital has traditionally compared to the other forms of capital and how Bitcoin changes that dynamic.
Capital Beyond Seizure
While social and symbolic capital can be damaged, and even destroyed, they are nearly impossible to confiscate. This is because these forms of capital exist in the relation between the owner and other individuals.
A government can imprison you.
A company can silence you.
A mob can try to discredit you.
No one can take over possession of your relationships or reputation.
For cultural capital, such as knowledge, it is the other way round. Confiscation is hard, destruction is even harder. What makes it so resilient is that the capital form is stored within its possessor. When trying to steal the knowledge of an individual, there is always a risk that the owner is giving away incomplete, insufficient or right out faulty information. Complex knowledge also requires the offender to be knowledgeable enough to know whether the all the demanded information has been extracted.
Deliberate destruction of cultural capital often requires erasing the individual’s memory or capacity to act. As mentioned in the beginning, the value of cultural capital also face the risk of rapid dilution with the rise of AI. This risk is important for the individual to consider, but an in-depth discussion of the subject is beyond the scope of this article.
Weaknesses of Financial Capital
Cash, gold, real estate and land are physical types of financial capital. The owners can posses these types of financial capital themselves, which is normally a feature. However, this characteristic also makes it easier for a malicious actor to locate and steal the capital.
The physical properties common among financial capital assets makes the capital form vulnerable to theft.
If someone steals an individuals gold or your cash, they gain the exact same benefit the victim had before it lost possession. For land and real estate, the logic is similar. A state can for example expropriate property and use it for any purpose they would might have in mind. This has historically been a weakness of financial capital, it could always be seized by whoever held physical or institutional power. One can try to hide possessions of cash or gold, but there are multiple ways for someone to find it. In the same way as with knowledge, there is an attack vector through the owner. The asset’s location can be extracted through coercion. In addition, the asset can be searched for directly in the physical environment.
Most financial assets are held for the individual by a centralized entity. There are plenty of risks associated with such setups. In this article, I will just conclude that the individual is not in control of its capital in such cases. It is often convenient to let other entities store one’s capital. However, there are obviously risks associated with such arrangements and they are far too many to be accounted for in this text.
Storing Financial Capital in the Mind-Safe
Bitcoin introduces a property that financial capital has never had before. Bitcoin can exist entirely in human memory. A bitcoin private key can be held only in the mind. Bitcoin the first form of financial capital that can be mentally embodied. Mentally embodied capital is extremely costly to steal. This quality was traditionally held exclusively by cultural capital.
In the same way as the other forms of capital, Bitcoin can of course also be destroyed. The dynamic of trying to destroy someones bitcoin is similar to that of someones knowledge. Though, in the case of bitcoin the capital can be absolutely destroyed, meaning there is no other realistic way for anyone to obtain the capital after it has been destroyed.
In practice, there are certainly attack vectors to bitcoin possessions. Firstly, most bitcoin do not reside only in the mind of their owners but instead physically represented in one way or another. These cases resemble the weakness of gold to some degree, even if it is much easier to hide information than a physical object whose market value is directly correlated to its mass. Secondly, a malicious actor can exert pressure on the individual if they have information about the possession. It is possible to try to confiscate bitcoin by force, and the analogy to knowledge is applicable here as well.
There is some nuance to be added to the knowledge analogy. Once the bitcoin is obtained the attacker is in full control of the capital (leaving a trace on the Bitcoin blockchain) and the victim has none of it left. When stealing knowledge, the perpetrator merely gets a copy (in the best case), while the victim always keep the original.
The mental embodiment of financial capital raises its competitiveness relative to the other forms of capital.
The point here is that the cost of coercion raises dramatically for capital which is mentally embodied. The integration of these properties in the financial form of capital raises its competitiveness relative to the other capital forms. To try to take the bitcoin from someone, you need to attack the individual owning the bitcoin directly. The risks associated with such an attempt are immense.
Resilience from Decentralization
I have previously argued that it is not possible to steal someones social or symbolic capital. These forms of capital are dependent of their original owner. Now I will move on to discuss why these capital forms are also resilient to destruction and in what way bitcoin now resembles this resilience for financial capital.
The distributed nature of capital types such as reputation and relations make them resilient to attacks.
An individual’s reputation is not stored in one place. Neither are its social relations. They exists across the minds of many people. For someone to destroy a persons social or symbolic capital, the attacker must convince an entire network to change its belief about the person. A single target is not enough. This makes one’s symbolic capital resilient against potential attacker.
Bitcoin is similar in that its decentralized design makes it hard to successfully attack the network. Its ledger is distributed across thousands of independent nodes. The rules of the network live in all those nodes and the individuals running them. No single authority can alter the rules. An attacking entity has to overpower the entire network, similar to how one would have to convince multiple people to erase an individuals reputation. Bitcoin’s decentralization is global, therefore it is most likely easier to destroy an arbitrary individuals reputation by attacking its social network than to destroy the value its bitcoin possession by attacking the Bitcoin network.
However, the Bitcoin network’s decentralization obviously does not protect individual possessions from the attack vectors discussed in the previous section. According to the bitcoin protocol rules there is no difference between possessing the private key and possessing the corresponding bitcoin.
Preserving agency
Capital preserves one’s agency over time. Until Bitcoin, financial capital was an Achilles heel of the individual’s operational sovereignty and agency. Now it has closed the gap to the other forms of capital in some regards of attack resilience.
Cultural capital protects one’s cognitive sovereignty.
Social capital protects one’s position.
Symbolic capital protects one’s legitimacy.
Financial capital now protects one’s economic autonomy.