Social capital…there’s so much to say!
What do I focus on?
Where do I begin?
I think I know…
Let’s talk about strong versus weak ties when building social capital. Sure, being in your industry for a long enough time to develop knowledge and contacts may be a good thing, but you need to understand the difference between a strong and a weak tie to determine the value of both. When building social capital with strong ties, there is only so much help that can be donated because they only know so much. Much like you, you only “know what you know” and not what you don’t. When you keep a strong tie, though, there is a strong relationship built and you can TRUST this connection. When building social capital with weak ties, there is more knowledge out there to obtain. These ties may not be as trustworthy, at first, but eventually you can develop some weak ties into strong ties.
The strength of weak ties is that these ties have knowledge that you and your strong ties don’t have. From a strictly informational standpoint, weak ties are more important to have than strong ties when building social capital. An entrepreneur doesn’t need to have tons of work connections from a past job to gain weak ties because these are ties they never had in the first place. These weak ties can also be turned into a trusting relationship, which can benefit both parties financially and educationally.
Then strength in strong ties is trust. In business, your reputation means more to the people you do business with than your net worth or last quarters numbers. When it comes to making decisions, it’s usually one person (or a small group of people) trying to build a relationship with another person (or group of people). Decisions that make sense can go south if there is no solid connection made between these folks.
Each of these types of social capital can lead to financial capital. If you think of the TV show, Shark Tank, this is a perfect example of weak ties at work. The people that pitch their ideas have no idea how the investor will behave one they partner, but a connection is built where one person has the knowledge of the market and the other has the knowledge of connections. When they agree on a deal, the knowledge is shared through weak ties and a business can grow rapidly. As they begin to work together, a strong tie is formed and all the knowledge the other party had is now learned and there is no new information to share. But now this is a strong tie and trust is formed between the two parties which leads to sustainability in the company because each party knows what to expect from the other. Long story short (and I’m fantastic at making a short story long…so relish this one!), in my personal opinion, weak ties lead to faster growth and strong ties lead to sustainability.
Financial capital is less important to me, but may be more important to others. I think the necessity for financial capital lies in the industry the entrepreneur wishes to enter. No company can grow without money, that is a given, but you don’t always need an investor. For example, I could start my business (slowly) with my own money if I am running my business correctly. I could start by buying and selling one car at a time until I could afford two cars. Then sell two cars at a time until I can afford to sell three cars…and the cycle continues. Depending on how I run my business and how the market responds to my efforts, I could grow my company with my very own money and investing profits back into the company. I believe it is possible to continue to work (to get that steady income) while building a business. It will take MUCH longer to be your own boss, but it is possible. While money is important, what that money buys you, in reality, is time. I think there should be a form of capital called “time capital.”
Time capital would be the time that you gain to grow your business. If you could make $50K per year, but only work 24 hours a week, your time capital would increase significantly! Time is finite, there is only so much you can have, but having more outside of a 40 hour work-week would certainly help the planning and growth of your new venture.