Capital Evolution from Private to Public
Social systems, like money, evolve in a similar way to living organisms. Money has changed from Gold to Metal Coins to Paper, Plastic, Electronic, and Crypto. Money is a means of exchange, a store of wealth, and a unit of exchange. It has also evolved into a generator of wealth as Private Capital. Private Capital has resulted in an explosion in wealth but with significant disparities in individual wealth. Having wealth can make the holder wealthier without effort. Public Capital is a variation of Private Capital where all members of the community share in the wealth created from the use of the Capital. Public Capital costs less to operate than Private Wealth so it increases wealth for the same investment.
Today we invest by savers accumulating money and storing it in a bank or superfund. The bank pays interest on the money as the savings are Private Capital owned by the saver. The bank lends the money to a household and charges interest. A $100,000 investment paid for over 20 years with an interest rate of 5% will transfer $195,154 for an asset worth $100,000.
Another way to invest is with interest-free money or Public Capital.
An example of Public Capital is a buyer and seller who wish to transfer a $100,000 asset in 20 yearly lots. Each lot transferred is $5,000 for 20 years. When we move $5,000, we also agree to share $5,000 in asset value ownership. The total amount of money transferred is $100,000. Each year $10,000 in value is transferred, but only $5,000 in cash.
Using Public Capital removes the interest cost and reduces the transfer cost by $95,154, or about the same as the original cost.
A challenge with Public Capital is the shared governance of the Capital. We can reduce the complexity of shared governance by local groups of buyers and investors working together. The buyer governs the asset, and the investors have a small share in all the assets. It allows a local group of buyers and investors to act as a single entity with the associated economies of scale, further reducing the cost of ownership.
Public Capital typically reduces the cost of investing by 100%. The longer the investment lasts, the greater the savings. Most Public Capital investments reduce the cost of goods and services or increase the product's value; hence, Public Capital minimises the cost of ownership and increases productivity.
In contrast, Private Capital seeks higher monetary gains for the same output, which leads to economic inefficiency.
Public Capital is likely the most economically efficient way to invest, where economic efficiency is the most value from an investment for the least amount of money.