Assetmap Blog Company blog on how social capital is transforming business, culture and social change

Why Social Capital Is The Coming Decade’s Most Important Buzzword

In Silicon Valley, Ron Conway is a legend. The granddaddy of the new class of “super angels,” Conway is a prolific investor who recently increased his clout by partnering with Russia’s Yury Milner to invest in literally every new Y Combinator company. But the reason Conway is one of the most sought after angel investors is not in his cash, but in the power of his network and influence, and his willingness to deploy it on behalf of his companies. Called a “human network router” by Netscape founder and newly minted venture capitalist Marc Andreessen, he reportedly keeps a notebook in which he is constantly jotting down the things his people need. In shot, he is investing his social capital alongside his financial capital.

Conway is not the only person to use his social capital to great effect. You know that person who always seems to find a way into the most premier conferences and elite gatherings? The woman on your team who always knows how to get deals done? Your friend who left her cushy job to be a self-employed consultant who is backlogged with work? That friend who, at the end of every conversation seems to have some introduction for you?

These are all masters of the 21st century’s most important currency: social capital. Deploying our social capital is a process that most of us do day in and day out, yet its something that most of us do and know intuitively, not intentionally. For a new generation of professionals, there is almost nothing as important as knowing how to build, manage, and leverage social capital. Here is your primer.

1. What is Social Capital
Financial capital refers to money and items that can be used to produce goods and services. Social capital refers to the network of relationships which you can deploy to get things done. Importantly, it is not just a measure of quantity or the number of relationships you have, but a measure of density – how thick and meaningful your relationships are – and a measure of deployability – how willing to work on your behalf those relationships are.

People who study social capital have often put it into two different groups. “Bonding Capital” has classically referred to the strength of relationships and willingness to help and share within a community such as a neighborhood or a club, while “Bridging Capital” has referred to the strength of connections between different groups of people. In the connected world of today’s internet, “social capital” tends to refer more generally to the strength and density of your social networks.

2. How do you build it?
Social capital is built over time by investing in relationships with people already in your network and building new relationships with people outside. “Investing in relationships” can mean many things, but at it’s core, harking back to a theme that comes up often on this blog, means finding ways to proactively be helpful for people and meet their needs. It’s worth noting, for example, that Ron Conway is reputed to proactively seek out how he can be helpful, rather than just waiting for people to tell him what they need.

Interestingly, social capital is less like a physical resource that becomes depleted as you use it, and more like a muscle that gets stronger the more you exercise it. If I introduce developer A to company B, and their relationship blooms, my social capital doesn’t decrease for having “used it” to make the connection; it increases for having provided each party with a valuable resource in one another.

Importantly, social capital is not just about the ability to connect to people. This skill is becoming increasingly commodified as new technology makes it easier than ever to visualize our social graph. Social capital is also a measure of the influence and reputation which you can bring to that connection, which has direct implications for the likelihood that the parties you’re connecting will actually invest in the new relationship you’re bridging. In this sense it’s also a measure of your power of self-fulfilling prophecy.

Finally, social capital is not a transaction. It is not something you can buy, and not a system where reciprocity always comes in the form of getting help and resources directly from the people you’ve helped. It is much more karmic, and the more you give, the more you ultimately receive, even if from a totally different person or group.

3. How do you use it?
Quite simply put, you use your social capital to find the things you need, whether it’s a new apartment in the city you’re moving to, a new employee for your startup or, as I learned a little more than a year ago, help funding your rescue dog’s ACL surgery. One of the most important things to realize about social capital is that the fact that you likely don’t know what you’re going to need (and there how you’re going to have to deploy your social capital) suggests that the best general strategy for building and using it is to help a wide array of people with as much vigor as you can muster, rather than assuming you know exactly the few targets that you need to focus on at the exclusion of others.

4. How do you lose it?
Like financial capital, you can lose social capital, although it’s usually a more subtle and long-term process. You can overtax relationships by not understanding how willing to help you or interested in your help certain relationships are. You can certainly misfire and make an introduction that goes so wrong it sours a relationship. But in general, there is an almost 1:1 correlation between the things that make you not a great person in general and the things that diminish your social capital: deceit, inauthenticity, duplicity. These are the things that kill your reputation and credibility and make people not want to go out on a limb for you.

5. Who are examples of people that do it best?
Each of us has a few people we can think of who are constantly making things happen by tapping into their networks. My mind immediately jumps to people like Nicole Patrice Johnson, a tech and social entrepreneurship superconnector extraordinaire, Unreasonable Institute cofounder Teju Ravilochan, and Mike Del Ponte, founder of Sparkseed and now Marketing Manager at BranchOut. These are the type of people who surprise me with new connections constantly. Each industry has certain people – such as Ron Conway mentioned above, or someone like GoodCapital and Hub Bay Area founder Kevin Jones in the social enterprise space – who have a reputation for how effectively they use social capital to help the people they care about (and ultimately, help themselves, as well). What’s an equally or even more interesting question is what are the settings, tools, and convening that do the best job at amplifying and enabling people to build social capital. This is a topic we’ll be exploring much more in the coming weeks and months.

6. Who needs it?
At the end of the day, we all need social capital. We all need networks of trusted relationships that can support us and channel new opportunities to us when we’re down, that can speak on our behalf and get our foot in the door, that can help us more efficiently and effectively navigate our professional lives.

While this sort of behavior is sometimes just lumped together as “networking,” it’s really much more than that. It’s a neverending process of weaving goodwill and willingness to help across your network, and finding ways to bind it ever tighter through your proactive contributions to it. The central activity is not ultimately, to get, but to give. Only in giving more can you assure that when you need something, you’ll be able to find it.

Social capital is not just the coming decade’s most important buzzword. It is one of, if not the most important currency in our highly-networked world. Knowing how to build and use social capital is one of if not the most important skill for modern professionals. Having tools to mange and leverage social capital…well, we’re convinced that they’re the single most important set of tools still waiting to be created. If you agree, sign up for our beta. And even if not, take a little time to read some of the recommended reading below.

7. Further reading
As you’ll notice, most of these titles focus on the community development and civic engagement space. That’s because while business writers have spent the last couple decades peddling tips about handshakes and follow-up emails, these folks have been researching how social capital helps people survive in existential situations. There is a huge amount the business world can learn from them.
“Bowling Alone: The Collapse and Revival of American Community” – Robert Putnam. The book that introduced “social capital” to the masses.
“Building Communities from the Inside Out” – John McKnight and John Kretzmann. The most important handbook for helping communities uncover social capital resources.
“Here Comes Everybody” and “Cognitive Surplus” – Clay Shirky. While not specifically about social capital, these are the stories of how organizing and sharing is changing in the digital age, and are ultimately the story of how the groups for whom we deploy our network of resources and from whom we can tap into a network of resources are changing.

Photo via Wired