epic piece from @tdavidson on social capital (w/ bibliography): http://bit.ly/Vm2Q …recommended…and just the beginning!

RT @ethanbauley epic piece from @tdavidson on social capital (w/ bibliography): http://bit.ly/Vm2Q …recommended…and just the beginning!

solid post on social capital http://is.gd/g9lt

RT @ethanbauley: epic piece from @tdavidson on social capital (w/ bibliography): http://bit.ly/Vm2Q …recommended…and just the beginning!

Great article on Social Capital http://tinyurl.com/9p5q8v from a conversation started by @justinkistner and @ethanbauley

Love this: A society of many virtuous but isolated individuals is not necessarily rich in social capital http://is.gd/g9lt via @kristinwolff

RT @golda RT @ethanbauley epic piece from @tdavidson on social capital http://bit.ly/Vm2Q …recommended…and just the beginning!

WOW, great stuff! Holy macaroni.

That said, I'll take another side of my own argument (re: “organizational design failure”)

When you're working for a Known Great Company, individuals can and do appropriate the reputation of the Corporate Brand to increase their own social capital. How do we account for the fact that just the Company's name can enable individual workers (Talent) to access new social capital?

(Even if the company isn't all Gary Hamel'd out like Cisco: http://bit.ly/JBbS )

(“Some guy from McKinsey called!” “Some lady from GE Capital called!”, etc.)

I think that even archaic industrial companies play a huge role in building social capital for Talent and that entrepreneurial Talent leverages this to grow social capital for the firm and the individual.

(And that's been going on for hundreds of years…)

That part is getting confused. In that paragraph, you/we are talking in terms of Firms “spending” and “using” social capital, but I think we're in agreement that it's not really a currency; it's by definition non-proprietary (i.e. it's intrinsically a shared resource). Something weird is going on there, but I can't quite get it at the moment…

At any rate, “Structural Holes” just arrived at my doorstep yesterday. Here's a quick excerpt (which you can read more of using the “Look Inside” Amazon feature):

“[Social capital] is a thing owned jointly by the parties to a relationship. No one player has exclusive ownership rights to social capital. If you or your partner in a relationship withdraws, whatever social capital it contained dissolves. If a firm treats a cluster of customers poorly and they leave, the social capital represented by the firm-cluster relationship is lost. Second, social capital concerns rate of return in the market production equation. Through relations with colleagues, friends, and clients come the opportunities to transform financial and human capital into profit…”

This part is great, too:

“Social capital is as important as competition is imperfect and investment capital is abundant. Under perfect competition, social capital is a constant in the production equation. There is a single rate of return because capital moves freely from low-yield to high-yield investments until rates of return are homogeneous across alternative investments. When competition is imperfect, capital is less mobile and plays a more complex role in the production equation. There are financial, social and legal impediments to moving cash between investments. There are impediments to reallocating human capital, both in terms of changing the people to whom you have a commitment and in terms of replacing them with new people. Rate of return depends on the relations in which capital is invested. Social capital is a critical variable. This is all the more true when financial and human capital are abundant–which in essence reduces the investment term in the production equation to an unproblematic constant”

nee “smart money”

WOW, great stuff! Holy macaroni.

That said, I'll take another side of my own argument (re: “organizational design failure”)

When you're working for a Known Great Company, individuals can and do appropriate the reputation of the Corporate Brand to increase their own social capital. How do we account for the fact that just the Company's name can enable individual workers (Talent) to access new social capital?

(Even if the company isn't all Gary Hamel'd out like Cisco: http://bit.ly/JBbS )

(“Some guy from McKinsey called!” “Some lady from GE Capital called!”, etc.)

I think that even archaic industrial companies play a huge role in building social capital for Talent and that entrepreneurial Talent leverages this to grow social capital for the firm and the individual.

(And that's been going on for hundreds of years…)

That part is getting confused. In that paragraph, you/we are talking in terms of Firms “spending” and “using” social capital, but I think we're in agreement that it's not really a currency; it's by definition non-proprietary (i.e. it's intrinsically a shared resource). Something weird is going on there, but I can't quite get it at the moment…

At any rate, “Structural Holes” just arrived at my doorstep yesterday. Here's a quick excerpt (which you can read more of using the “Look Inside” Amazon feature):

“[Social capital] is a thing owned jointly by the parties to a relationship. No one player has exclusive ownership rights to social capital. If you or your partner in a relationship withdraws, whatever social capital it contained dissolves. If a firm treats a cluster of customers poorly and they leave, the social capital represented by the firm-cluster relationship is lost. Second, social capital concerns rate of return in the market production equation. Through relations with colleagues, friends, and clients come the opportunities to transform financial and human capital into profit…”

This part is great, too:

“Social capital is as important as competition is imperfect and investment capital is abundant. Under perfect competition, social capital is a constant in the production equation. There is a single rate of return because capital moves freely from low-yield to high-yield investments until rates of return are homogeneous across alternative investments. When competition is imperfect, capital is less mobile and plays a more complex role in the production equation. There are financial, social and legal impediments to moving cash between investments. There are impediments to reallocating human capital, both in terms of changing the people to whom you have a commitment and in terms of replacing them with new people. Rate of return depends on the relations in which capital is invested. Social capital is a critical variable. This is all the more true when financial and human capital are abundant–which in essence reduces the investment term in the production equation to an unproblematic constant”

nee “smart money”

Why can't we spend a shared resource?

Even if social capital is created as a shared resource, once we are able to promote the value of the resource to “unaware parties” then we can start using our shared resource outside of the original relationship. However, it is unlikely that we will be able to spend or receive that capital at par, in large part because determining the true value is so hard.

Want an example?
I do a favor for you; you value it and praise me publicly, other people see that praise but think that something more grand happened than what really did, and I “use” your public praise to get a favor from someone else: I'm probably getting more out of the transaction than the third party than they're giving me because they don't understand the true valuation (and what are you getting?)

Why can't we spend a shared resource?

Even if social capital is created as a shared resource, once we are able to promote the value of the resource to “unaware parties” then we can start using our shared resource outside of the original relationship. However, it is unlikely that we will be able to spend or receive that capital at par, in large part because determining the true value is so hard.

Want an example?
I do a favor for you; you value it and praise me publicly, other people see that praise but think that something more grand happened than what really did, and I “use” your public praise to get a favor from someone else: I'm probably getting more out of the transaction than the third party than they're giving me because they don't understand the true valuation (and what are you getting?)

Social capital is ineffable. The results of that capital are measurable.

. . . great post.

Social capital is ineffable. The results of that capital are measurable.

. . . great post.

Great post! And thanks for the links.

I will make a blog post to comment thoroughly but today my hands are full stirring up my personal social capital for votes in Ashoka's Power of Us: Reimagine Media competition: http://www.changemakers.net/en-us/node/14479

Just a couple of points … social capital is not limited to “a relationship between two parties”. For certain purposes Simmelian connections are more valuable http://is.gd/eJwC. I.e. interconnections (strong bonds) between a small group of three or more. That's why the Wizard of Oz is the metaphor that keeps on giving …http://twurl.nl/h7m6d0

I think the most important point in this post is the title. That is the revelation. I do agree that we have reached an inflection point for how value is created and defended that is due to broadband connectivity. Social media are artifacts of these new scaled up forms of social capital that is an important asset. Unlike offline social capital, it is less rampantly subject to rapid devaluation because digital “footprints” are permanent and findable and because social networks can be mobilized to act as a defense system when a public relations momentary crises occur.

Because corporations all have the same motives, i.e., profit and more importantly stable future earnings, I have proposed an approach that will enable us to compare corporate social capital apples to dells. I doubt that the same can be done in a meaningful way for individuals because as you quoted above, individuals all have different motives.

What is Scoble if not a case where corporate social capital has been transferred to an individual? Kudos to Robert for being able to make his own contribution to the pool and to grow/maintain it long after leaving Microsoft.

Love the scratching at productivity failures of traditional corps and the breakthroughs that are possible when identity is not an abstract brand but the authentic personal life of everyone in a corporate ecosystem.

Anywhoo, sorry for the heavy link infested comment.

Great post! And thanks for the links.

I will make a blog post to comment thoroughly but today my hands are full stirring up my personal social capital for votes in Ashoka's Power of Us: Reimagine Media competition: http://www.changemakers.net/en-us/node/14479

Just a couple of points … social capital is not limited to “a relationship between two parties”. For certain purposes Simmelian connections are more valuable http://is.gd/eJwC. I.e. interconnections (strong bonds) between a small group of three or more. That's why the Wizard of Oz is the metaphor that keeps on giving …http://twurl.nl/h7m6d0

I think the most important point in this post is the title. That is the revelation. I do agree that we have reached an inflection point for how value is created and defended that is due to broadband connectivity. Social media are artifacts of these new scaled up forms of social capital that is an important asset. Unlike offline social capital, it is less rampantly subject to rapid devaluation because digital “footprints” are permanent and findable and because social networks can be mobilized to act as a defense system when a public relations momentary crises occur.

Because corporations all have the same motives, i.e., profit and more importantly stable future earnings, I have proposed an approach that will enable us to compare corporate social capital apples to dells. I doubt that the same can be done in a meaningful way for individuals because as you quoted above, individuals all have different motives.

What is Scoble if not a case where corporate social capital has been transferred to an individual? Kudos to Robert for being able to make his own contribution to the pool and to grow/maintain it long after leaving Microsoft.

Love the scratching at productivity failures of traditional corps and the breakthroughs that are possible when identity is not an abstract brand but the authentic personal life of everyone in a corporate ecosystem.

Anywhoo, sorry for the heavy link infested comment.

Great point that social capital is created in relationships in groups, not just between two parties: a complete oversight on my part.

(and quoting a book is so amazingly cool, the links are golden)

I'm looking forward to digging into how online and offline social capital are created, stored and exchanged; while the artifacts of social capital may be easier to see online than offline, I'm not sure they are more permanent or meaningful. In fact online social capital may be more ephemeral due to the fractured, short-term nature of many interactions on the web. But we can only reach that understanding to digging into how our online actions create social capital and what each of the metrics that we create really mean about the relationships they create.

Your work on SCVA gave me the foundation to think about how to value social capital: I'm looking forward to continuing the discussion…

Great point that social capital is created in relationships in groups, not just between two parties: a complete oversight on my part.

(and quoting a book is so amazingly cool, the links are golden)

I'm looking forward to digging into how online and offline social capital are created, stored and exchanged; while the artifacts of social capital may be easier to see online than offline, I'm not sure they are more permanent or meaningful. In fact online social capital may be more ephemeral due to the fractured, short-term nature of many interactions on the web. But we can only reach that understanding to digging into how our online actions create social capital and what each of the metrics that we create really mean about the relationships they create.

Your work on SCVA gave me the foundation to think about how to value social capital: I'm looking forward to continuing the discussion…

RT @Armano: solid post on social capital http://is.gd/g9lt

@lotay what do you think about this? http://is.gd/g9lt @armano posted this link on social capital. What’s your feedback on it?

solid post on social capital http://is.gd/g9lt (via @Armano)

An inherent problem with the concept of social capital is that it imposes a logical system on a highly emotional reality. I believe there are a number of strategies that will be more useful to companies and individuals looking to leverage social networks and social media before anything resembling social capital becomes a universally accepted structure (rewarding natural brand alignment, for example.)
Perhaps “social influence” is a more current problem for which solutions are being created (Mr. Tweet is a fun example.) In this line of thinking, the group can have an increased collective value. For example, a design company made up of three rock star designers has greater social influence than any single member of the company.

An inherent problem with the concept of social capital is that it imposes a logical system on a highly emotional reality. I believe there are a number of strategies that will be more useful to companies and individuals looking to leverage social networks and social media before anything resembling social capital becomes a universally accepted structure (rewarding natural brand alignment, for example.)

Perhaps “social influence” is a more current problem for which solutions are being created (Mr. Tweet is a fun example.) In this line of thinking, the group can have an increased collective value. For example, a design company made up of three rock star designers has greater social influence than any single member of the company.

Perhaps: but developing a framework that people can use to understand, value and exchange social capital is a tremendous opportunity.

The true spoils in a market accrue to the market-makers.

Perhaps: but developing a framework that people can use to understand, value and exchange social capital is a tremendous opportunity.

The true spoils in a market accrue to the market-makers.

I forgot to say that you wrote a great post. Excellent references and clearly stated concepts.

I forgot to say that you wrote a great post. Excellent references and clearly stated concepts.

“Clearly stated” isn't a compliment I hear often

“Clearly stated” isn't a compliment I hear often

Isn't “social influence” really a part of social capital?

Social capital is not a “universally accepted structure”: in fact, I would say it's largely misunderstood. Instead of focusing on how social capital is a great thing, the real value is in determining what social capital really means and how it impacts our lives. I think it's a better topic to address in a post rather than a one-line note in a comment, but I doubt we understand how our online actions create social capital that can be exchanged in the offline world. What is the exchange rate between “writing a blog post” and “helping someone move”?

The real question, as we've discussed, is whether our current cultural values (the “emotional reality”) will ever allow us to create a logical, transparent market structure. Maybe over time our culture will shift, but regardless, the fact is that our lives create artifacts and relationships that have value. The digital world has added a wide range of new artifacts and relationships to the analog world, and we're only at the earliest stages of understanding how it all meshes together.

Isn't “social influence” really a part of social capital?

Social capital is not a “universally accepted structure”: in fact, I would say it's largely misunderstood. Instead of focusing on how social capital is a great thing, the real value is in determining what social capital really means and how it impacts our lives. I think it's a better topic to address in a post rather than a one-line note in a comment, but I doubt we understand how our online actions create social capital that can be exchanged in the offline world. What is the exchange rate between “writing a blog post” and “helping someone move”?

The real question, as we've discussed, is whether our current cultural values (the “emotional reality”) will ever allow us to create a logical, transparent market structure. Maybe over time our culture will shift, but regardless, the fact is that our lives create artifacts and relationships that have value. The digital world has added a wide range of new artifacts and relationships to the analog world, and we're only at the earliest stages of understanding how it all meshes together.

Can social capital be distinguished from trust?

Can social capital be distinguished from trust?

I'm not the expert, but trust is merely one component of social capital…

I'm not the expert, but trust is merely one component of social capital…

Good points. It could be that social capital is only something that will be measurable in hindsight by analyzing interactions/events in the past. That could still be useful.

Your friend examples are great. They illuminate a myriad of reasons why “social capital” is perhaps doomed. Say you want to exchange giving me a ride to the airport for giving your friend a ride to the airport. It's not simply a matter of our relationship, but also how I feel, emotionally and logically, about your friend. Additionally, I might be having a horrible day or be too busy to go at the needed time. Now, this changes completely depending on who the friend is and many other conscious and even subconscious factors for all humans involved in the interaction and involved with those involved in the interaction (another friend of mine may be telling me not to drive with your friend!)

If social capital behaves in no way similar to any useful form of capital, why is important to make it work? Superimposing strict logic over sub-conscious, emotional decisions is a job better suited to neural science and psychology, or even science fiction writers! Is social capital going to be managed by artificially intelligent bots? Will nano robots measure our hormones and nerves to predict what social interactions we're likely to perform creating a map for social capital?

Yes, social influence would definitely be a part of social capital, but it's much more useful. Your number of friends/followers/etc means that you have a preset, known reach for messaging. The number of times you are quoted/retweeted/hyperlinked shows that your ideas are valuable in some fashion. These are the kind of elements that can be useful in marketing, business, and social status. But, I can't trade you my audience for ad dollars unless your marketing message is valuable to my audience, and that illuminates just one of the many flaws of social capital.

Good points. It could be that social capital is only something that will be measurable in hindsight by analyzing interactions/events in the past. That could still be useful.

Your friend examples are great. They illuminate a myriad of reasons why “social capital” is perhaps doomed. Say you want to exchange giving me a ride to the airport for giving your friend a ride to the airport. It's not simply a matter of our relationship, but also how I feel, emotionally and logically, about your friend. Additionally, I might be having a horrible day or be too busy to go at the needed time. Now, this changes completely depending on who the friend is and many other conscious and even subconscious factors for all humans involved in the interaction and involved with those involved in the interaction (another friend of mine may be telling me not to drive with your friend!)

If social capital behaves in no way similar to any useful form of capital, why is important to make it work? Superimposing strict logic over sub-conscious, emotional decisions is a job better suited to neural science and psychology, or even science fiction writers! Is social capital going to be managed by artificially intelligent bots? Will nano robots measure our hormones and nerves to predict what social interactions we're likely to perform creating a map for social capital?

Yes, social influence would definitely be a part of social capital, but it's much more useful. Your number of friends/followers/etc means that you have a preset, known reach for messaging. The number of times you are quoted/retweeted/hyperlinked shows that your ideas are valuable in some fashion. These are the kind of elements that can be useful in marketing, business, and social status. But, I can't trade you my audience for ad dollars unless your marketing message is valuable to my audience, and that illuminates just one of the many flaws of social capital.

Thanks for posting this. It's great. Agree with prior comment that the headline is truly the news. Surprised Robert Putnam didn't come up. But I thought this bit from Infed.org might help (the conclusion here http://snurl.com/acyz7 is also very good):

[The notion of social capital has been around for decades (see the article on social capital elsewhere on these pages for a fuller treatment). It is with the work of Jane Jacobs (1961), Pierre Bourdieu (1983), James S. Coleman (1988) and Robert D. Putnam (1993; 2000) that it has come into prominence. This is how Putnam (2000: 19) introduces the idea:

Whereas physical capital refers to physical objects and human capital refers to the properties of individuals, social capital refers to connections among individuals – social networks and the norms of reciprocity and trustworthiness that arise from them. In that sense social capital is closely related to what some have called “civic virtue.” The difference is that “social capital” calls attention to the fact that civic virtue is most powerful when embedded in a sense network of reciprocal social relations. A society of many virtuous but isolated individuals is not necessarily rich in social capital.]

Putnam also written papers (including applied work for the OECD) on the measurement of social capital. What's so interesting is that they barely predated the web (or at least web2.0), which seems to me where the study of networks took over (Benkler, etc.).

Networks (particularly the valuing and analyzing of them as assets) IS the evolution of the efforts to measure, uncover, make visible social capital – we've just now got the tools to do it at any scale or with any kind of methodological rigor. What's interesting to me is how both individuals, firms, AND PLACES can trade on it, but the more they do, the more gets created – it's not finite (so is yours worth more when there is more around you rather than less? (flipping the law of scarcity here).

For another body of work that might be of interest (re: freemium or share economy), see Sean Safford – Why the Garden Club Couldn't Save Youngstown here http://snurl.com/aczxu (you can also find several free versions of his argument in the form of papers).

Thanks again for stirring this up. And now, back to my billable work…

Thanks for posting this. It's great. Agree with prior comment that the headline is truly the news. Surprised Robert Putnam didn't come up. But I thought this bit from Infed.org might help (the conclusion here http://snurl.com/acyz7 is also very good):

[The notion of social capital has been around for decades (see the article on social capital elsewhere on these pages for a fuller treatment). It is with the work of Jane Jacobs (1961), Pierre Bourdieu (1983), James S. Coleman (1988) and Robert D. Putnam (1993; 2000) that it has come into prominence. This is how Putnam (2000: 19) introduces the idea:

Whereas physical capital refers to physical objects and human capital refers to the properties of individuals, social capital refers to connections among individuals – social networks and the norms of reciprocity and trustworthiness that arise from them. In that sense social capital is closely related to what some have called “civic virtue.” The difference is that “social capital” calls attention to the fact that civic virtue is most powerful when embedded in a sense network of reciprocal social relations. A society of many virtuous but isolated individuals is not necessarily rich in social capital.]

Putnam also written papers (including applied work for the OECD) on the measurement of social capital. What's so interesting is that they barely predated the web (or at least web2.0), which seems to me where the study of networks took over (Benkler, etc.).

Networks (particularly the valuing and analyzing of them as assets) IS the evolution of the efforts to measure, uncover, make visible social capital – we've just now got the tools to do it at any scale or with any kind of methodological rigor. What's interesting to me is how both individuals, firms, AND PLACES can trade on it, but the more they do, the more gets created – it's not finite (so is yours worth more when there is more around you rather than less? (flipping the law of scarcity here).

For another body of work that might be of interest (re: freemium or share economy), see Sean Safford – Why the Garden Club Couldn't Save Youngstown here http://snurl.com/aczxu (you can also find several free versions of his argument in the form of papers).

Thanks again for stirring this up. And now, back to my billable work…

[...] in one place Pixlematrix Design interactive design Free Press reform media transform democracy Unstructured Ventures social capital isn’t new but everything about it is http://www.imdb.com/ Movie [...]

Thanks for calling me out for neglecting Putnam; it was partly an oversight, but honestly I wanted to focus more on applying the idea rather than recapping all the past research into social capital. That's why I didn't recap all the different definitions of social capital or dig into the great research by Lin and Burt.

The real opportunity is thinking how to apply the market mechanisms we use for other forms of capital to social capital. I would argue we are still at the very early stages in developing any methodologies to value social capital; and once we have a value, what do we do with it?

One of the broader failures of our current economic “troubles” is an over-reliance on formulas, rigid valuation methodologies and the false sense of precision that they introduce into our decision-making. I'm hoping we don't create the same misguided sense in our attempts to value and exchange social capital. It's far-fetched, but I wonder if we could ever see a “credit crunch” in social capital?

—

I'm guessing the snurl Infed.org link meant to point to this: http://www.infed.org/biblio/social_capital.htm

Thanks for calling me out for neglecting Putnam; it was partly an oversight, but honestly I wanted to focus more on applying the idea rather than recapping all the past research into social capital. That's why I didn't recap all the different definitions of social capital or dig into the great research by Lin and Burt.

The real opportunity is thinking how to apply the market mechanisms we use for other forms of capital to social capital. I would argue we are still at the very early stages in developing any methodologies to value social capital; and once we have a value, what do we do with it?

One of the broader failures of our current economic “troubles” is an over-reliance on formulas, rigid valuation methodologies and the false sense of precision that they introduce into our decision-making. I'm hoping we don't create the same misguided sense in our attempts to value and exchange social capital. It's far-fetched, but I wonder if we could ever see a “credit crunch” in social capital?

—

I'm guessing the snurl Infed.org link meant to point to this: http://www.infed.org/biblio/social_capital.htm

RT @kyrareed Great article on Social Capital http://tinyurl.com/9p5q8v from a conversation started by @justinkistner and @ethanbauley

[...] to get the biggest friend list on the block. I have spoke with numerous people who feel their social capital is built around how many people exist within their network. They take some type of pride in the [...]

We of course, do spend shared resources all the time. Like when a polluter dumps waste into a river. Sadly, they are spending your right to common assets.

We of course, do spend shared resources all the time. Like when a polluter dumps waste into a river. Sadly, they are spending your right to common assets.

I like Lin's definition better because it breaks out the intrinsic (individual assets) and extrinsic (collective assets) because it enables us to root the idea of social capital in traditional economics. I.e. investments in social capital are made by self interested individuals.

I like Lin's definition better because it breaks out the intrinsic (individual assets) and extrinsic (collective assets) because it enables us to root the idea of social capital in traditional economics. I.e. investments in social capital are made by self interested individuals.

…highlighting my need to dig back into economic theory

…highlighting my need to dig back into economic theory

We of course, do spend shared resources all the time. Like when a polluter dumps waste into a river. Sadly, they are spending your right to common assets.

I like Lin’s definition better because it breaks out the intrinsic (individual assets) and extrinsic (collective assets) because it enables us to root the idea of social capital in traditional economics. I.e. investments in social capital are made by self interested individuals.

…highlighting my need to dig back into economic theory

[...] the concept of social capital isn’t new at all. Taylor Davidson from Unstructured Ventures chews on that last piece for a [...]

[...] Me, Social capital isn’t new, but everything about it is. [...]

[...] … to power our personal “freemium” life models… … by enabling us to create and “exchange” social capital… … and lower our inter-personal transaction costs… … and create cheaper [...]

[...] More thoughts on the nature and use of social capital: [...]

[...] on social capital and organizational design… Learning how to design organizations that reduce (or even eliminate) the “deadweight [...]

[...] a comment » Taylor Davidson revives the discussion (also carried on recently over at Orgs and Markets) over whether social capital is really [...]

[...] To build individual status and social capital, [...]