Many advisors to affluent families now recognize that financial wealth alone does not lead to flourishing. In the 1990s, James Hughes introduced the concept of qualitative capital to explore the different dimensions of the wealth that truly makes a family flourish. He included five forms of capital that build the family’s complete wealth: spiritual capital, social capital, intellectual capital, human capital, and financial capital.
Hughes illustrates the five capitals using a simple technique. He asks clients to stretch out their palm with the thumb facing up. Here the thumb, representing the financial capital, completely overshadows the other capitals.1
Then, he asks them to turn their hand so the thumb faces down, rooting the financial capital in the ground to support the other capitals. The highest capital is now represented by the pinky finger. It is spiritual capital, which directs the family’s purpose, its all-important “why.” The ring finger represents social capital, or the family’s ability to make decisions and impact society positively. The middle finger represents intellectual capital, or the family’s commitment to learning. Lastly, the index finger represents human capital, or the well-being of family members. A flourishing family integrates and grows all these capitals together.
Hughes’ illustration of the five capitals is a valuable way to understand what makes individuals and families flourish. However, there is a rich tradition of exploring the concept of flourishing, which Hughes draws on. This article delves into those influences and how they can enrich a family’s understanding of true well-being.
Aristotle: Where It All Begins
Aristotle, an ancient Greek philosopher and student of Plato, formed ideas on flourishing that remain relevant for family enterprises. He used the Greek word eudaimonia, often translated as “happiness,” but more accurately meaning “well-being” or “flourishing.” This concept is about more than just feeling happy; it involves living wisely and making good actions a habit. True happiness, according to Aristotle, is an enduring state of living in a way that is best for us and those around us. While Aristotle acknowledged that external things like health, beauty, and possessions play a role in eudaimonia, they are not the most important factors. Instead, the focus should be on developing virtues and living a balanced life.
Human Flourishing
Humans instictively seek flourishing. Whenever we do something, we do it with an aim towards some idea of happiness. The gap between our efforts and the results often comes from our being mistaken about what flourishing truly is or how to attain it.
For Aristotle, everything comes down to the final cause. When you look at a guitar, its defining characteristic is its ability to make music. The “final cause” of a guitar is to make music excellently. Humans have a unique ability for rational thought and ethical behavior. Thus the final cause for humans, and the way to achieve flourishing, is to develop these capacities to their fullest.
This development is what Aristotle refers to as virtue. Virtues are qualities we must habitually practice to flourish, divided into moral virtues (like courage, which is a balance between cowardice and rashness) and intellectual virtues (like wisdom and knowledge). Flourishing also depends on community, as individuals need relationships and social structures in order to practice these vritues as habits. Here is a vision of individuals, families, and societies flourish together, as each supports the well-being of the others.
Spiritual Capital Comes First
“Financial capital is important. But … many readers think that we advocate attention to qualitative capital for the sake of financial capital. The opposite is the truth.” –J. Hughes2
To come back to Hughes’ five capitals for a moment, let’s consider why Hughes states that spiritual capital is the most important. Advisor Richard Orlando does an excellent job of elaborating on this. He draws an analogy between spiritual capital and GPS. It’s a responsive and reactive map–in other words, a guide. The implication is that if the GPS is off, it doesn’t matter how fast your car is…you will end up on the wrong street, town, or even state!
Orlando uses another metaphor of gravity to describe this relationship between the family and its financial wealth.
“All families need to invest in their spiritual capital, wealthy families especially, since wealth accentuates everything and pulls us magnetically toward a greater focus on temporal issues, like gravity pulls material objects toward the center of the Earth. Simply put, an abundance of financial capital can pull us strongly toward the material side of our human nature. This is nothing to be ashamed of, but it is very important that we come to terms with this reality and seek a counter balance. Otherwise, it may unintentionally cause us and our families to make less than ideal decisions that put us out of alignment with our intended legacies—decisions we likely would not have made if we had invested more in our spiritual capital.3”
Spiritual capital represents the self-transcendant purpose of each family member and the family itself. This is something that Victor Frankl identified as the essential component of human flourishing.
The motivation to seek self-transcendence involves the pursuit of meaning beyond oneself, guided by an objective standard of values. Frankl’s meaning-mindset entails believing in inherent meaning in life and using intellect to make responsible choices. This mindset, consistent with Aristotle’s practical wisdom, helps individuals prioritize and act according to their higher purpose, ultimately integrating virtues into their lives.4
The Role of Wealth in Flourishing
Remember Hughes’ image of financial capital as the thumb, supporting the family, but on the bottom of list of importance? This is rooted in Aristotle’s ideas on the proper role of financial wealth. Aristotle argues that wealth, while necessary, should not be pursued as an end in itself but rather as a means to support a virtuous and flourishing life.
Aristotle distinguishes between “household management” (oikonomia) and “money-making” (chrematiske). Household management involves acquiring and using wealth for necessary and meaningful purposes, aligning with the family’s and community’s needs. In contrast, money-making for its own sake leads to endless accumulation without purpose, which Aristotle criticizes as detrimental to genuine well-being.
Ultimately, the proper use of wealth, according to Aristotle, involves the virtue of liberality—giving and spending wisely to support the family’s and society’s flourishing. This requires practical wisdom to make decisions that align with the higher purpose of wealth.
Positive Psychology: An Empirical Approach to Flourishing
Another field that has grown out of the long tradition of examining eudaimonia is positive psychology. Positive psychology echoes many of Aristotle’s principles for happiness and backs them up with empirical evidence. Particularly, the work of Dr. Martin Seligman has further advanced the study of well-being. In his 2011 book Flourish: A Visionary New Understanding of Happiness and Well-being, Seligman develops the latest iteration of his theory with the acronym PERMA (positive emotion, engagement, meaning, positive relationships, and accomplishment).
Positive Emotion (P) Positive emotions include joy, gratitude, serenity, interest, hope, and other positive emotions. These contribute to overall well-being by enhancing resilience grounded optimism.
Engagement (E) Deep engagement in activities just within our ability often brings us to a state of “flow.” Complete immersion and focus in these meaningful activities leads to high levels of satisfaction and a sense of fulfillment.
Relationships (R) Positive relationships are supportive, loving, and meaningful. Strong relationships provide emotional support, increase feelings of belonging, and contribute to overall wellbeing.
Meaning (M) Meaning involves having a sense of direction in life. It is about belonging to and serving a cause bigger than oneself. A meaningful life is one where individuals feel their existence has purpose and value.
Accomplishment (A) Accomplishment refers to the pursuit and achievement of goals, which can bring a sense of pride and fulfillment. It involves striving for success and mastery, contributing to a person’s confidence and overall sense of competence.
The adoption of Aristotelian principles into the 21st century offers a promising framework for understanding and guiding flourishing for family enterprises.
Practical Ways to Build Flourishing
To conclude, here are some practical ways for individual family members to improve their ability to flourish. For the family as a whole to flourish, it not only requires the individual family members to experience wellbeing, but also develop governance and education structures that support and advance the wellbeing of the family members and the community. Often families bring in advisors to assist in this endeavor.
1. Develop Good Habits
Exercise regularly
Eat healthily
Get enough sleep
2. Cultivate Virtues
Practice kindness
Show gratitude
Be honest
3. Engage in Lifelong Learning
Read regularly
Take courses or workshops
Stay curious
4. Build Strong Relationships
Spend time with loved ones
Join community groups
Be a good listener
5. Practice Mindfulness
Meditate
Reflect on your day
Set meaningful goals
6. Contribute to Society
Volunteer
Be environmentally conscious
Engage in civic activities
7. Pursue Meaningful Work
Find your passion
Seek work-life balance
Strive for excellence
Footnotes
- Hughes, J. Rediscovering the Meaning of Wealth as Wellbeing. FOXCast, June 2023. ↩︎
- James E. Hughes, Susan E. Massenzio and Keith Whitaker, Complete Family Wealth (Hoboken, New
Jersey: 2018), Xv. ↩︎ - Richard Orlando, Legacy: The Hidden Keys to Optimizing Your Family Wealth Decisions, (Legacy Capitals Press, 2017), 30. ↩︎
- Wong, P. T. P., & Reilly, T. (2017, August 15). Frankl’s self-transcendence model and virtue ethics — Part 1 of 2. The Virtue Blog. Retrieved from https://thevirtueblog.com/2017/08/15/frankls-self-transcendence-model-and-virtue-ethics-part-1-of-2/ (Funded by the John Templeton Foundation) ↩︎