Tuesday, October 23, 2007

What if we measured a community's capitalized income stream?

As I was sitting during our 22nd Caux Round Table Global Dialogue in Seattle last week listening to a discussion of intangible assets as enhancing company value, my thoughts suddenly jumped to a construct of a community – city or nation – as a company.

What occurred to me was a thought form of the community as a system of cooperation to achieve better outcomes in this world for its members. How would we measure the success or failure of such a venture? What would be its bottom-line metrics?

Well, in the first place they would be mostly intangible – quality of life, educational achievement, health – mental as well as physical, culture, morality, happiness, in addition to wealth, infrastructure, rule of law etc.

Then I thought what if we got simple and looked to the income flow of the community – to the entire amount of earnings that flowed to its members in a year. The more income, the higher the capital value of the community. Lower income would result in a lower capital value.

We would need to arrive at a capitalization multiplier to apply to the income stream to establish the capital value number – a million dollars income X 10 would be a capital value of ten million. If the capitalization multiplier were higher, the community would be worth more; if the multiplier were less, the community would be worth less.

So what? I then thought.

Well, if a community has higher income or a higher capitalization multiplier, it could do more – pay more in taxes, buy more goods, spend more on culture, public health, education, obtain a more reliable and fulsome social safety net, build better roads, buy newer, more sustainable technologies, take better care of the environment. In short, with more money, it could provide for more social justice.

And, further, higher value would mean that members of the community would be able to move up Maslow’s scale of needs and motivations from satisfaction of the material to cultivating more abstract concerns for meaning and purpose.

The capitalization multiplier would be some measure of social capital – the risk of loss or harm to the income flow as against the chance of increasing progress and success.

But with respect to both earning income and having a high capitalization multiplier, business would be central to community justice. Business – of all forms – is the primary generator of income for any community.

We might do well, therefore, to value well what business can do for us and so work to minimize its harmful externalities.

Just a thought.


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