Cisco has fashioned this maxim into religion in terms of IT, but as IT goes, so goes the rest of the [business] world.
Taylor has spent a lot of time analyzing how venture capital and new business financing (esp. in tech) is changing/has changed. It used to be that cash was a huge differentiator and a huge scarcity. Financial capital had to be invested to buy expensive capital assets.
But going forward, most of the assets that are really valuable aren’t physical/financial/intellectual*. They’re new assets, capitalized on new things. I’d argue that a lot of it is based on social capital (or maybe for some, “human network capital” is a little easier way to think about it). So, social capital = relationships with people that can help you and that you can help (“resources”).
Case in point: Fred Wilson. Fred is a VC who invests in technology companies. He spends most of his time blogging and Twittering and meeting more people. He does that because he knows that personal connections and being plugging into the human network (lol) is comparatively more valuable than the actual checks he writes (or rather: the connections make the checks much more valuable).
Getting back to my point: it’s likely that, relative to financial capital, connections to nodes on the relevant [human] business networks will become comparatively much more valuable. Startups can create a lot of value with little financial capital, but they need to quickly and easily access social capital at partners, suppliers, complementors, competitors, and of course customers to win.
Financial capital quite simply does not buy that**. Fred has taken this all to the next level by adding access to a truly insane business network to the checks he writes. That’s a helluva complement strategy.
I’d hasten to add that the “financial capital doesn’t buy that” maxim also applies to the “PR vs. Media Buying” struggle. Even though the media buyers control most of the financial capital, there’s even more value in knowing how to access (or create) social capital. PR wins because it understands this (at least comparatively); it’s in the DNA; it’s communications and diplomacy for your value net. Sometimes it’s good to purchase buyable media, but most important media (communications among people with no outstanding commercial motivation) just can’t be bought. Using cash to interact in this environment is like trying to drive across town with a tank full of Kool Aid.
So what do we do with this knowledge? A quick and obvious example of a node that exploits these trends is Y Combinator. YC is 1) launching a large volume of new companies; every new company brings along relationships that other YC companies can access 2) emphasizing collaboration among their portfolio companies, so that their social capital is exposed to other people that can use it, and 3) exposing their principal’s network to portfolio companies (of course all financiers do this, but because of the sheer volume of companies YC is dealing with, Paul Graham et al drive even more value for their pre-existing network).
The more techniques we can design to make accessible social capital (or “human network capital”…how ironic is it that I just appropriated inert, interstitial advertising for this punchline?) the better off we’ll all be. I’d say that LinkedIn has done an incredible job paving the way for this, but I’m sure there’s a variation on that service, targeted to people with more risk/more incentive/more need (i.e. new businesses) that would be helpful. I think geo-specific networking is really helpful, too. LinkedIn and Meetup and Facebook and Twitter are great platforms for this kind of work, but I’d like to see someone build something on top of those services to make connections even easier to make.
[[[* financial/physical/intellectual assets are still really valuable, but that’s mostly at a scale that is basically unfathomable]]]
[[[** it buys it from some kinds of partners, like risk averse buyers who judge stability by measuring financial capital…but we all just learned that these measures don’t tell the whole story, didn’t we? ;-) ]]]
UPDATE
http://www.lalawag.com just launched today. Just Another Blog…or a potent tool for unlocking social capital stores? Only time will tell.
