In most developed countries, the past decade has undoubtedly been the hardest time to build financial wealth since the Great Depression. Aspiring wealth builders have been hit with a cluster bomb of stagnating economic growth and wages, high unemployment, poor career advancement opportunities, soaring living costs, paltry fixed income investment returns, and increasingly volatile financial markets.
Unfortunately, my research has found that it will become even harder to build financial wealth in the next ten to fifteen years or so because the Global Financial Crisis is far from over despite the desperate efforts of institutions such as the media and government to convince the public otherwise. Rather than encouraging a sustainable economic recovery, central banks have created what I call a “Bubblecovery” or bubble-driven recovery by inflating a series of dangerous, but temporary growth-boosting bubbles around the entire world, from Canada to China to the U.S. stock market. The inevitable ending of this Bubblecovery will finish where the 2008 Crisis left off, causing living standards to plummet even further and depressing the value of common investments for a very long time.
Introducing The Concept of Social Capital
Everything that I have just discussed pertains to difficulties of earning and accumulating capital that is primarily financial in nature, which is due to the fact that these problems stem from a financial crisis. To put it simply, the “Dollars and Cents” paradigm that the middle class relies so heavily upon for its existence is broken and will not be fixed anytime soon.
Thankfully, there is another form of wealth that exists outside of the broken financial paradigm and is therefore relatively insulated from the trends that affect financial markets and economies. This form of wealth is called social capital or capital that is derived from the value of social connections or networks. The concept of social capital takes the adage “it’s not what you know, it’s who you know” a step further by adding “and who knows you.” Social capital includes everything from having a small network of professional contacts to being prominent in a specific industry or geographic region, all the way up to national and international fame. As with financial capital, people can be poor in social capital terms or they can be very wealthy, and everything in between.
Put into basic mathematical terms, an individual’s social capital is measured by the number of people in their social network multiplied by the value of those people’s social capital. Social capital can be derived from having a large network of people who each posses small amounts of social capital or from having a small network of people who each posses a very large amount of social capital. Obviously, the ideal situation is to have a large social network that includes many influential individuals who each posses a significant amount of social capital of their own.
Even though social capital exists outside of the conventional financial paradigm and is difficult to measure in financial terms, it has a very real economic value because it can be converted into financial capital if needed. For example, a job seeker may reach out to their professional network for assistance in finding a better-paying job, while a renowned public figure may monetize their fame by obtaining lucrative book deals and endorsements. The more social capital one has, the more potential financial capital they have.
Why Few People Are Aware Of Social Capital
Even though social capital has genuine economic value, there is very little mainstream awareness and understanding of it for a variety of reasons. One reason is the fact that social capital is a more abstract and intangible form of wealth than money in a bank account or a portfolio of stocks, which are easy to measure in numerical terms. In addition, social capital is a rarer form of wealth than financial capital. In the U.S. alone, for example, there are nearly 10 million millionaires, but nowhere near as many people who are comparably wealthy in social capital terms.
Members of the middle and working classes are conditioned to think of wealth primarily in financial or “Dollars and Cents” terms because they are typically employed by corporations or governments and earn a salary for their labor, but receive very little compensation in the form of social capital and personal brand development. Hiring institutions prefer employing legions of “worker bees” who are reliable, efficient, and cost-effective rather than “stars” who personally possess large amounts of social capital and name recognition and thus have a greater degree of bargaining power and independence. For this reason, one of the keys to escaping the middle class rat race is to become more like a star and less like a worker bee, and building a significant amount of social capital is one way to do this.
Unlike the middle and working classes, members of the upper class are more likely to be aware of and posses a wider array of capital types including financial capital, social capital, political capital, symbolic capital, and cultural capital. The upper class leverages these tangible and intangible forms of capital to generate even more capital with far less emphasis on “trading time for money” as salaried employees do. Like financial capital, social capital can be earned through hard work and ingenuity, though social capital has become easier to earn than financial capital in these tumultuous economic times.
Social Capital Has Many Benefits Over Financial Capital
While having a certain amount of financial capital is obviously necessary for living a comfortable life, there are numerous benefits that social capital has over its financial counterpart. Thankfully, it is possible to experience the best of both worlds because these forms of capital are not mutually exclusive and because they typically reinforce each other. Just how diversification is beneficial for investment portfolios, it is also beneficial to have a diversified mix of financial capital and social capital.
Here are just a few of the benefits that social capital has over financial capital:
- Its value is less sensitive to fluctuations in the economy and stock market, and it doesn’t require a strong economy to grow.
- Central bank policies, interest rates, and inflation do not affect its value.
- It isn’t taxable. You can earn the equivalent of $500,000 worth of social capital in a single year and never pay a cent of taxes on it (until some of it is converted into financial capital, of course).
- The prestige and respect gained from having social capital can open doors that large amounts of money cannot. For example, being a public figure with a large following would greatly help when applying to top graduate programs, but there is no way to buy the same admission with money. It is also helpful when seeking desirable career opportunities.
- There is much less competition for social capital because most people are too busy competing for conventional financial rewards in the form of jobs, salaries, raises, sales, investment returns, cost savings, etc., which makes those rewards much harder to attain. Competing for money is a mainstream strategy, while working to build social capital is a contrarian strategy.
- The more social capital one has, the more career security they are likely to have.
- Having social capital is helpful when trying to generate publicity for a cause or business venture. It is also helpful when trying to raise capital from investors.
- Social capital doesn’t necessarily require any financial capital to build.
- It has never been easier to accumulate.
Why It Has Never Been Easier To Build Social Capital
As I have stated several times already in this piece, social capital has never been easier to build in human history, while financial capital has never been harder to accumulate since the Great Depression. Though I have explained why financial capital has been so hard to build in the past decade and why I believe it will become even harder, I have not yet explained why social capital has become so much easier to build now.
The answer lies in three Information Age developments that have put the power of mass communications into the hands of ordinary people:
- The internet (since the mid-1990s)
- Blogs (since the early-2000s)
- Social media (since the late-2000s)
Each subsequent development has given ordinary people far more power to communicate on a large scale and build social capital than the prior one. Before the advent of these mediums, only the already wealthy and well-connected had the ability to spread their ideas on a large scale. Now, ordinary people are using these new mediums to broadcast their ideas across the world (often without even leaving their homes) and to actually become wealthy and well-connected themselves.
One notable example of this phenomenon is Justin Bieber, whose career (and financial and social capital windfall) began after he was discovered by talent manager Scooter Braun from YouTube videos of himself singing. There are also scores of other people who may not be household names, but who have nonetheless managed to rise to prominence within their industries or niches thanks to their savvy use of blogs and social media. I attribute a good portion of the growth of my own career in recent years – including the opportunity to write this column – to my social media and web presence that I use for broadcasting my ideas on a large scale.
How To Build Social Capital
There is no single right way to build social capital because every individual’s career, skills, and goals are different, and because there are simply so many unique paths that can be taken to achieve this goal. Entire books can be written on the topic of building and cultivating social capital (and I plan to write additional articles about it), but I have outlined a list of key principles that I believe should form the core of every social capital building plan:
1) Identify and develop a unique niche or expertise
This is undoubtedly the first step that should be taken before moving on to any of the others. If you’re seeking to build a name in an industry or professional endeavor, you need to become the “go-to” source for information on a specific topic that is relevant to people in that industry. If you’re looking to advance in the arts or entertainment industry, your work needs to be unique enough to stand out from the legions of other people who are vying to do the same thing but have a more generic focus. The same approach also applies to entrepreneurs who wish to escape from the shadows of competitors whose product and service offerings have a more generic appeal.
Identifying and developing a unique niche is typically a result of expertise and experience; if you have not yet found your niche, you should first seek to gain mastery of your particular field. Tricks do not work when trying to build social capital. You must offer something of genuine value if you want large numbers of people to become fans of you and your work.
2) Do something spectacular
This is related to the point above. If you want to become influential in your field or business arena, becoming known for an unusual accomplishment will provide a significant credibility boost. Being the first, the only, the best, or most novel in a particular endeavor will set you or your business apart from the crowd. The prestige and honor that results from a notable accomplishment is called symbolic capital, which is another form of intangible capital that is closely related to social capital.
3) Go public with your ideas
Once you have achieved mastery in your field and have identified a niche to focus on, it is time to expose your ideas or work to the world. While there are countless ways to go about this, and they vary widely depending on your goals, the best way to start is by building a website or a blog where you can publish your work and introduce yourself to potential fans. If your work lends itself better to being published in video or audio format instead of text, you should upload videos to YouTube and similar services and embed them into your website. You should regularly produce new content to keep your existing fans interested in your work and coming back, in addition to attracting new fans.
After setting up a website or a blog, the next step is to establish a social media presence. Start by opening a Twitter account and public Facebook page, and then other niche social media services that may be relevant to your work (Instagram, Pinterest, etc.). As with your traditional blog or website, you should actively publish content (including commentary/brief posts, links to your blog posts, and relevant news articles) on your social media accounts to attract potential followers and keep existing followers interested. See my Twitter account and Facebook page for examples.
In addition to having a website and social media presence, I recommend submitting articles or other work that you have produced to relevant newspapers, magazines, websites, and professional journals that accept submissions from readers. Having a regular column (even if you write for free) in the aforementioned mediums is even better and can become a reality when you have built up enough social capital in the form of social media followers, website traffic, and credibility.
4) Build a following
This step is a continuation of the step above. When trying to build social capital, your goal should be to have as many fans and as much name recognition as possible, both online and offline. Thanks to the advent of blogs and social media, the most effective approach to attaining this goal is to build a significant online following first, and then use it as a platform to build an offline or “real world” following later on.
The two primary components of an online following are:
1)A blog, website, or YouTube channel’s web traffic or viewership
2)Followers on social media sites such as Twitter, Facebook, LinkedIn, Google+, etc.
The most reliable plan for building web traffic and a social media following is to consistently produce quality, unique content that people in your field or niche are interested in. Quality content includes full-length articles or blog posts, videos, as well as social media-specific content such as short Facebook posts and tweets on Twitter. In time, this content will rank in Google and other major search engines, which will draw a steady stream of web traffic to your website. In addition, quality content will be shared in a viral manner by your readers on social media sites, which will attract even more traffic to your site.
You should include links to your social media accounts in all content that you produce so that readers or viewers are able to follow you and receive all of your updates and future content. The more social media followers you have, the more potential readers you will have for content that you publish in the future, which will ultimately help to attract even more social media followers.
You can also gain a significant number of social media followers simply by operating within the world of social media itself. To do this, you should produce content that is tailored specifically for the social media platform of your choosing in addition to actively networking and engaging with other social media users in your niche, some of whom will choose to follow you.
Twitter is particularly well-suited to this type of strategy because it allows you to easily search for and communicate with other users who have similar interests. For example: you can find other people on Twitter (including competitors) who have a large following within the same niche as you, view their list of followers, and follow those followers. Some of your competitors’ followers are likely to follow you back if they are interested in what you tweet. In time, it is possible to build a critical mass of devoted Twitter followers who tell their followers and friends to follow you in turn, which will help your following to grow via the snowball effect.
5) Show some personality
When it comes to your public presence, showing a little bit of personality goes a long way. Even if you specialize in a serious, dry, or professional topic, adding a human touch to your work will help you to stand apart from the crowd and allow your followers to connect with you on a more personal level. Don’t be afraid to sprinkle your work with some humor, personal anecdotes, and even show your eccentric side.
6) Get the media involved
After successfully following the steps listed above, you should have a solid body of work published and a healthy online following, which will help to boost your visibility and influence within your niche or industry. At this point, journalists may be interested in publishing stories about your work or even using you as an expert source for stories that are related to your area of expertise (in careers where this is applicable, of course). Being quoted and profiled in the media is an excellent way to build credibility and greater awareness of your work, which will also manifest itself in the form of more traffic to your website and new social media followers.
Rather than waiting for journalists to discover you, social media allows you to accelerate the process by finding them first. Twitter and LinkedIn are the primary social media platforms used by journalists, so this is where you should focus your search efforts. You can easily identify the journalists who cover news that is related to your niche by searching for relevant articles in Google or other search engines and taking note of their names.
Once you assemble a list of key journalists in your niche, you should search for them on Twitter and LinkedIn and follow them. Next, send a brief message to them in which you introduce yourself and invite them to see your work. I do not recommend trying to pitch stories to them at this point, but simply establishing a professional connection and building rapport. Some of these journalists may be interested in your work and will follow you back on LinkedIn and Twitter, which will allow them to subscribe to the content that you post on these platforms.
It doesn’t hurt to take an interest in the content that they post by retweeting them on Twitter, posting their work for your own followers, and giving them constructive feedback. Once journalists become familiar with your work, some may reach out to you with requests for interviews or commentary for stories that they are writing. Eventually, other journalists will see you quoted or profiled in their competitors’ articles, which may encourage them to contact you as well.
7) Network with other influencers
By this point, you are likely to be an influential “opinion leader” who is frequently quoted in the media, which will encourage other influential people in your industry to consider you as one of their peers. It is prudent to build positive relationships with as many influencers in your industry as possible, even if they are your competitors. After all, today’s competitor may be tomorrow’s partner. You should reach out to these influencers (LinkedIn, Twitter, and email are helpful for this) to introduce yourself and your work, which will help to put you on their radar. The more influencers you have in your professional network, the more social capital you have.
8) Make a real world impact
Even though you may have started your social capital building strategy primarily on the internet, there is no reason why it needs to be, or should be, limited to the internet. You should make a conscious effort to meet your followers and fellow influencers in person, have a presence at industry events, and make an impact in the “real” world, not just the virtual world.
9) Keep scaling up
As I’ve mentioned earlier, social capital opens doors that even financial capital cannot. As you continue to accumulate social capital throughout your lifetime, you can take advantage of increasingly better and more prestigious opportunities, which will help to create a virtuous cycle in which even better opportunities present themselves.
10) Stay consistent
Social capital is just like financial capital in that it benefits from compounding growth over time. The earlier you start building both social and financial capital, the more you will have later on, but the key is to maintain a consistent effort to continue growing these forms of capital over your lifetime.
11) Put your social capital to work
Once you amass a healthy amount of social capital, you can start putting it to work to accomplish your goals. Of course, the execution of this step varies widely depending on your niche and original purpose for building social capital.
Here are some examples of how people can use social capital to achieve their goals, including building financial capital:
- Activists can use it to raise awareness for causes that they believe in
- Researchers and academics can use it to promote their research
- Authors can use it to land book deals and generate interest in their books
- Journalists, writers and bloggers can use it to promote their stories and articles
- Politicians can use it in their election campaigns and to promote their causes
- Inventors and startup founders can use it to find investors, customers, and potential buyers
- Prospective students can use it to increase their chances of attending a desirable school
- Small business owners, brokers, sales representatives, consultants, and self-employed professionals can use it to gain more customers/clients and boost their professional reputation
- Artists, actors, musicians, and other creative professionals can use it to create widespread awareness of their work and to procure contracts, art commissions, record deals, etc.
- Hobbyists can use it to turn their hobby into a profitable business
- Aspiring religious leaders, pundits, commentators, and motivational speakers can use it to launch viable careers
- Skilled employees and executives can use it increase their visibility within their industry, which could lead to promotions and better job security
- Job seekers can reach out to their network for help in finding a job
- Professional investors, venture capitalists, and financial analysts can use it to raise capital and promote investment theses
While certain jobs (such as police officers or retail store associates) may not lend themselves quite as well to social capital building strategies as others, the list above does cover a very large range of common careers, plus these strategies can be used by people who are looking to start new careers or businesses that may be better suited for these strategies. In addition, people whose primary careers may not be well-suited for social capital building strategies can still use these principles to launch profitable side businesses or careers in their spare time. If you’re willing to get creative and work hard to build social capital, there is almost no limit to what can be achieved.
Despite writing over 4,000 words, I realize that I have only scratched the surface about the topic of social capital and how it can be used beneficially. The purpose of this initial piece is to introduce the concept of social capital, explain why it has become easier to build than financial capital, and show some examples of how it can be generated and put to use. In the near future, I plan to write additional guides that delve deeper into actionable social capital building strategies and tactics.