My mother knew well the value of social capital, although she probably never heard the term. In the Soviet Union where she lived and where I grew up one couldn't survive without it. She traded social capital on a daily basis. It meant that despite being a widow with very little money, despite not having a high position or a membership in the "privileged" class (the Communist Party), she was able to provide a relatively good life for her family. We never worried about having enough food, my sister and I always wore fashionable (by Soviet standards, at least) clothes, took music and dance classes, went to good schools, spent summers by the seashore, went to the symphony, and otherwise took advantage of a lifestyle that seemed much beyond our means. How was my mother able to provide all these things? She certainly couldn't afford them on her pitiful wages as a physician in a government-run clinic in Odessa, Ukraine. Social capital–networks of relationships with friends and acquaintances — is what accounted for her ability to provide for a relatively comfortable, albeit not luxurious, lifestyle.
While there was no meat to be found in any store in the city, my mother got it regularly (along with other provisions) through the director of a supermarket, who was also a husband of a close colleague. I got into music school in exchange for my mother treating the director of the school. We could get Western medicines because my mother was friendly with the head of a large local pharmacy. Our apartment was always filled with people who my mother was counseling, diagnosing, treating, and prescribing medicines for. No money was ever exchanged. Ever mindful of Stalin's purges and his fabricated case against Jewish doctors' alleged conspiracy to poison Soviet leadership, she was too afraid to have an underground private medical practice or take money for her services. "With my luck, I would be the first to be caught," she always said. The people who could be regularly found in our home or whose homes she visited dispensing medical services were her substitutes for money. They and many other "connections" she built over a lifetime were her doors to resources — from tangible commodities such as food, medicines, and clothes, to information, services, and emotional support.
Our story was not unique. All around us, amid empty stores, low salaries, dismal productivity numbers, and fraying infrastructure, people seemed to live normal "middle class" lives. An economist would have a hard time explaining how this was possible by looking at economic statistics or by walking around the stores and markets in Russia in the 1960's and 70's. Visitors to the Soviet Union, in fact, were always amazed at the gap between what they saw in state stores–shelves empty or filled with things no one wanted–and what they saw in people's homes–nice furnishings and tables filled with food.
What bridged the gap was the informal economy, an economy driven by social rather than financial capital. This economy was deeply rooted in the myriad relationships people like my mother used to acquire goods, services, information, education, and many other things. They did not do this consciously–no one was teaching them how to grow their network or increase their following the way many social marketers are eager to teach us today, they just did this to survive. The web of social relationships was an invisible fabric that permeated the economic life and made that particular society work.
Social capital has served a critical role in the economic life of the Soviet Union and continues to do so in many poorer countries today. Teodor Shanin, an eminent sociologist, has invented a field of study called "peasantology," which looks at how people survive in informal economies. Shanin argues that peasants inhabit an economic structure entirely different from either capitalism or socialism. The key element of the peasant economic structure is the existence of dense and vibrant social and family networks that provide members access to necessary resources. Researchers observed the phenomenon first in Africa years ago where they could not find any economic explanation for how the majority of the population survived. They didn't own land. They didn't seem to have any assets.
Marxist and market economists had always dismissed such activity as marginal. However, as Shanin argues, one is hard pressed to see something as marginal when half of mankind lives like this. In fact, social capital also plays an important role in developed economies, as many researchers such as Manuel Castells and Robert Putnam, among others, have shown. However, far too often we have pushed social capital and notions of non-monetary currencies out of our economic thinking and economic interactions. One can in fact view the whole history of economic development as a long path of taking local, familiar, personal, and social out of economic relationships and replacing them with professional, impersonal, and highly institutionalized economic interactions centered on exchanging one form of capital–money. It is hard to argue that this has brought great efficiency to our economic life and has resulted in spectacular growth rates in societies that have followed the path. In the process, we have built organizations and regulatory frameworks that allowed us to scale what previously were familiar, often familial, economic relationships to include anonymous strangers, thus allowing for aggregation of resources across geographies and social boundaries. Organizations we created and that dominate our economic landscape today, with a limited liability corporation as its crowning glory, have been great innovations in their time and enablers of much of our prosperity. They massively increased the scale of economic interactions and at the same time became institutional proxies for the kind of trust we previously reserved for our neighbors and family.
We have become successful at the art of operating at scales massively beyond the local village and beyond the boundaries of social relations. We know how to organize people and resources for the ultimate goal of maximizing monetary returns. Along the way, we developed a host of management theories and practices that have become bibles to generations of working men and women. And the corporate culture we created spread well beyond the business realm. As Doug Rushkoff points out in "Life Inc.," corporatism or corporate way of thinking has permeated our culture, language, philanthropic organizations, schools, and media. It is how we've come to think about getting things done. We almost cannot conceive of a world without hierarchical organizational charts, mission statements, departments, and clear sets of corporate rules and incentives.
All of this is about to change. Computing and communications technologies are not only linking us into a one global village, one global brain, they are also adding a new layer of sociality to our interactions and are making it possible for us to engage in new kinds of transactions with each other outside of existing organizational boundaries. They are making it possible for us to gain access and build trust that we previously outsourced to organizations. They are also taking anonymity out of many economic transactions. We can gain new levels of knowledge about strangers by following their Twitter streams, looking up their friends on Facebook, checking their reputations as buyers and sellers on E-Bay, measuring their contributions to Wikipedia, watching their Youtube videos. We can lend our money directly to people and projects we find appealing on Kiva.org rather than entrust the money to banks to invest anonymously and without any say from us. Even public relations is changing from relying on official public releases to increasingly whispering to the right people in one's social network (as an example see this recent article in the NYT). We are bringing a whole new level of sociality, familiarity, and connectedness to our economic interactions. In a word, we are socialstructing our organizations, i.e. reorganizing them around social connections rather than against them.
But social connections we organize around are different from face-to-face relationships our ancestors grew up with. We are witnessing a rise in what I call information-driven sociality — sociality that derives from our ability to get direct access to strangers and remove their anonymity by giving us access to information trails they leave behind, thus providing us with knowledge about many aspects of their selves–interests, reputations, online contributions, musical tastes, even buying preferences. In the process, the raison d'etre for many types of organizations we created over the past few centuries — organizations needed for aggregating resources and enabling transactions between anonymous strangers — is disappearing. Amplified with the collective intelligence, access, and resources embedded in social connections with multitudes of others, we are now increasingly able to achieve the kind of scale and reach previously achievable only by large organizations.
Driven by information-driven sociality, the next decade will usher in a whole new array of organizational models, new forms of currencies, and new sets of work practices. At the same time we will need to create new regulatory frameworks suited for organizational forms based on principles of social connectivity and familiarity. Remember the old adage of "Keep social out, don't bring it into the workplace?" The new adage is "Social is business, bring it in."