Emotional Capital: The Asset on the Balance Sheet You Can’t Afford to Ignore - Martyn Newman - eqsummit.com

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Emotional Capital: The Asset on the Balance Sheet You Can’t Afford to Ignore – Martyn Newman

The economist, Adam Smith had remarkable insights about empathy: We are naturally influenced by the happiness of others or their misery. These emotions are a form of capital—emotional capital. People will do business for you and will work for you in direct proportion to how much they like you—how you and your business really make them feel.


Smith’s view was that empathy, not only core to the human condition, is also core to why customers buy from a business. Core to why people follow you as a leader, and therefore key to influence and prosperity.

Business has the power to do good. A business can be built on empathic connections and show that it cares about global issues, and cares about what the proceeds do to help others.

  • This care caused the share price of Body Shop to rise when it first hit the market and drop amidst allegations of greenwashing.

The new generation today cares about different things.

  • Customers are willing to buy from organizations they like and perceive are like them and share their values.
  • Employees that want to work for more than a paycheck. They want to know that their work means something.

We are witnessing an entire revolution of our understanding of human nature. Scientist ask, “Where does this empathic drive come from? Is it universal? Do children have a natural empathic drive to help or hinder?”

  • Many experiments indicate that children as young as 6-10 months old have a natural inclination towards helping
  • Research indicates that we apply empathy within a very narrow circle of care—friends and family, or people we perceive to be similar to us Adam Smith saw that in a growing economy the circle of care moves—expands from the family, to the village, clan, tribe, and nation.

Sony’s Loss and Apple’s iPod

Sony’s loss of the music market to Apple’s iPod despite it’s many advantages can be attributed in part to the lack of emotional capital and collaboration within it’s own company. According to the Wall Street Journal, in Sony at that time, rivalries were encouraged and they had a culture of heightened competition. Their engineers were brilliant, but had extreme difficulty understanding each other, liking each other, and trusting each other.

Meanwhile on the other end of the country, Apple’s iPod is a testimony of collaborative engineering, of working together with suppliers to source materials that Apple couldn’t get on its own—an incredible team project. Emotional capital is important because people will work well with each other in equal proportion to how much they like each other, and how much they like each other is in direct proportion to how other people make them feel.

Thus, what we’ve seen in this era is a shift away from industrial capitalism, with its emphasis on the exclusive pursuit of profit maximisation, towards emotional capitalism that includes a new focus on the value of emotional and environmental consciousness —this is a new economy.

The skills to succeed in this new economy are emotionally and socially based and can be developed. People are more motivated by values than money. There comes a point where no amount of money will inspire people to work harder.


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