// what do you think?


An Inquiry into the Nature of Social Media and the Capital of Companies

If you’ve been reading this blog for a while you know I’ve been trying to write a book. More for the satisfaction of actually having written a complete thought longer than a blog post. The major premise of the book for the last 3 years (yes it’s taken me that long) has been reapplying the concept for capitalism to softer currencies like trust, knowledge and attention.

I’ve struggled to articulate this concept because I’m not an economist. So I decided to do some reading and went back to the source: Adam Smith and his book Wealth of Nations (Amazon) (Project Gutenberg).  It’s especially interesting to go back and read Wealth of nations when you rethink what Capital is and replace nations for companies.

This is my newest attempt to put some solid thinking behind the concept. Please tell me what you think (especially if you’re an economist).

Capitalism as Adam Smith described it is a simple concept that, like most theories, is not practiced in its purest form. In the simplest terms Capitalism is the act of investing capital in a free market in order to return even more capital. This is the basis of the old adage that you have to spend money to make money.

Capital on the other hand is a much more fluid concept. Even the word capital stems from the same origin as cattle.  Capital used to be (and purists would argue still is) the actual tangible *stuff*.  As kingdoms grew in wealth capital took the shape of valuable and much more portable metals like gold and silver and eventually countries established currencies out of these metals and eventually currencies that represented those metals. In theory a $20 dollar bill is supposed to be backed up by $20 dollars worth of gold (this isn’t even the case anymore). Today currency really represents the overall economic value of your country versus the amount of money that has been printed. I’m not an economist at all but I’ve been told it basically works the same way the stock market does.

So very roughly (and I’m sure several economists will take issue with my sweeping generalizations) Capital has evolved from the actual stuff to something worth the same amount of value to currency produced by kingdoms to currency as a proxy for something of value to currency that is a proxy for the economic value of your country and its ability to continue to produce value.

And in a World where my paycheck is electronically deposited, my bills are paid electronically and I purchase everything on a credit card so I can accumulate airline miles (another form of currency?) I rarely get the satisfaction of carrying around a proxy for supposed capital worth. It’s all just digital.

Capital was always supposed to be based on something that was rare and hard to obtain or something that was in limited supply. Capitalism worked because businessmen could pool their resources to fund a fleet of boats to sail to the furthest reaches of the planet to obtain precious metals, spices or cheap labor (aka slaves). Invested capital created the ability to overcome distance and gain access.

But what happens to capital when reach and access all but ubiquitous? What happens when everything is a commodity? All materials and manufacturing are so affordable that almost anyone in a first world country could access them almost at will? What happens when there are no limited supplies? (Yes I understand that certain materials are hard to obtain but there are plenty of perfectly acceptable substitutes.)

What needs to happen is that we abstract capital even further and focus on the true scarcities that exist. These scarcities are a kind of “soft capital”, for my own purposes I would like to focus on trust and knowledge with the goal of returning innovation.

Photo credit bntr23

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About Tac

Social media anthropologist. Communications strategist. Business model junkie. Chief blogger here at New Comm Biz.

  • http://twitter.com/jelefant jason moriber

    Tac, following your guidelines, would these equations be true?

    Trust + Knowledge = Foundation for Innovation
    Foundation + Accessibility = Innovation
    Innovation/Markets = Potential


  • Jill

    Have you watched Micheal Moore's movie “Capitalism: A love story”. Great movie IMHO.

    Social media is obviously different than the usual definition of Capitalism- in that it's for the masses. I think Jason Moriber's equations are right on. And, we're all willing to pay for accessibility — but not for the information.

  • http://www.newcommbiz.com tacanderson

    I think the missing key ingredient is Collaboration. I may be using Collaboration where you are using Accessibility. In previous posts I included it as another form of capital but I'm not sure if it is. I think collaboration may be a component to the free market. I'm still not totally sure so I'd love your thoughts.

    Here's my other post where I attempted math:
    The Innovation Equation and Social Media Solution

    Where I tested this formula:
    (Knowledge x Collaboration) x Trust = Innovation

  • http://twitter.com/jelefant jason moriber

    Right, my angle is Collaboration requires Accessibility. I have to get there/be there in order to Collaborate (participate). Thinking…

  • Jill

    or perhaps “Time” is “Collaboration”? Hmmm…. you ask hard questions, Tac.

  • http://topsy.com/www.newcommbiz.com/an-inquiry-into-the-nature-of-social-media-and-the-capital-of-companies/?utm_source=pingback&utm_campaign=L2 Tweets that mention An Inquiry into the Nature of Social Media and the Capital of Companies — Topsy.com

    [...] This post was mentioned on Twitter by Tac Anderson, Jill Anderson. Jill Anderson said: Great Discussion going on - An Inquiry into the Nature of Social Media and Capital of Companies - @newcommbiz - http://ht.ly/1Z2z6 [...]

  • Jill

    I think you need to add Time to the equation. I read a great post (but haven't been able to find it today- I'll keep looking) where the writer tells us a story about a company (was it Google?) that would give their staff free time once a week to just brainstorm new ideas - on one condition that after the day was over they would share their ideas with management. And, the best part? A lot of the staff's ideas were actually implemented and turned out to be profitable.

  • http://www.newcommbiz.com tacanderson

    It was most likely talking about Google and their 20% time. Most of
    their current products (like gmail and reader) were started with 20%

    To me Time could be part of the Collaboration investment. I've also
    thought about Time in the specific context of Attention.

    I think there are a lot of “soft capitals” but need to be focused in
    the ones I address.

    More food for thought…

  • Jill

    Thanks for your reply…..I was actually working on one more response before signing off for the night.. I went back to your other post “Social Media Trifecta” and had another thought.

    Quoting you from your “The Social Media Trifecta” - “So I’d like to turn around the ROI question now. How do you measure increased Trust, Knowledge and Innovation? Can it be measured in dollars? Should it be?”

    I believe that Innovation can certainly be measured in dollars. So, I think you need to show that TIME spent building Trust and Knowledge are measurable contributors to INNOVATION. How? I have no idea. I suspect Avinash could come up with something.

    Sweet dreams. I'm going offline. Sorry to post so many times in row.

  • http://twitter.com/jelefant jason moriber

    Time! Now that's the “labor” element (inherent in my accessibility). We can't assume potential collaborators have the time to do so, that's the leverage. Either we create time or offer a magnetism so strong we chip time away from all else (such as all-nighters).

  • http://www.searchengineoptimisation.com Phil

    I will say its all our mindset which will change with time in views of paid accessibility and free information comparasion

  • http://www.newcommbiz.com/social-media-social-capital-and-the-future-of-capitalism/ Social Media, Social Capital and the Future of Capitalism

    [...] my last post I explored the idea of rethinking what is capital. Jill, Jason and I had quite the discussion in the comments that raised more questions than [...]

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