Mike Gotta’s Brief History of Social Networks & Network Analysis

Social Capital Value Add is designed to link the work of the leaders Mike covers to value based management.

Thanks Mike! Great work! Hey everyone please follow the link and Digg It!

See “Brief history of social networks and network analysis” by Mike Gotta.

http://mikeg.typepad.com/perceptions/2008/04/analysis-of-soc.html

The money quote,

“It should be noted that many social network stories we read about today give the impression that they reflect recent developments arising from consumer sites or from technology vendors. In some instances, certain topics are even hailed as original thought (e.g., the social graph). I think it is important, and respectful, that we understand (and learn from) historical precedents in the field of social network analysis. Much of the ideas and concepts presented today can trace their lineage back to the remarkable work and accomplishments of earlier researchers.”

http://mikeg.typepad.com/perceptions/2008/04/analysis-of-soc.html

Mix in Marshall McLuhan, “Understanding Media: The Extension of Man”, Nan Lin’s network theory of social capital (to distinguish “assets or resources”, like say SOCIAL MEDIA, from social networks and Value Based Management and you are headin’ down the highway of Social Capital Value Add.

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Mark Zuckerburg: looting block party or catering service?

Nic Hodges has a thoughtful post up down under.  Thanks to John Maloney for flagging it.  Nic says,

“If Mark Zuckerberg turned up to your neighbourhood and started throwing you crazy block parties, while at the same time mining your backyard for gold, wouldn’t you want a cut of that gold?”

I agree with and have explored many of the same concepts Nic touches upon in his post. 

I agree that social networks are not owned.  But social network software services like Facebook are privately owned so there is a transaction: service for terms of service.  A problem can emerge when companies like Google and Facebook and others are becoming so entrenched in social networks and our old watchdogs like government and journalists are not motivated or equipped to help us bring the implications into focus.

I believe that the most important thing that we can do to cope with these potential problems is to establish the link between social capital and corporate valuation, to motivate corporate competition, bring into light the true sources of value and make them accountable to investors, markets and users/consumers.  Then the regulators and press gallery will be all over it.

Social networks can not be owned.  Agreed.  That is why I think it is very useful to distinguish social capital from social networks.  I think social capital, i.e. the resources that are embedded in social networks are intrinsicly individual assets.  (Note: the corporation is a form of individual).

By investing in a connection with you, I get flow of information, the exertion of influence, certifications of individual social credentials and reinforcement of individual identity and recognition.  Hey! Smells like social media to me.  That is why I think of social media as a new, scaled up form of social capital that has emerged since 2004 when broadband overtook slow connectivity in the USA.

Aggregation of individual returns result in collective assets and properties such as trust, norms, reputation, authority, sanctions, culture, network structure (open, closed, density, clustering, diameter, average path lengths, degree distribution, bridges, weak ties, betweenness and other forms of centrality, etc.) and location (structural holes, structural constraints, etc.), which are extrinsic variables that contribute to the formation, access and use of social capital. 

This is the stuff that we need to zero in on developing, measuring and valuing at this point – not just page views, unique visitors, CPMs which are all broadcast paradigm metrics.

P.S. I love Michael’s comment over on Nic’s post, “We are all becoming Paris Hilton”. 

Check out Lin, Nan, “Building a Network Theory of Social Capital” ©1999 INSA, Connections 22(1):28-51, see pp.28-31 for compact history of social capital.
 
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Ontario Government Please Invest in Global Links

I am not a doctor, but I play one on T.V.

That sort of covers my depth of analysis here. I am not an expert on how to make the VC ecosystem better, but about three months ago I had lunch with someone who is and we talked about the Ontario government’s approach.

A comment on a post over at http://www.startupnorth.com has turned into a post here because it is a good follow up to MESH, unMESH. Jonas’ points and Mark McQueen’s post both do a good job at covering the shortcomings of the Ontatrio government’s plan to resuscitate the local venture capital industry.

What’s that they say about doing the same thing over and over and expecting different results? Basically, this plan reinvests in the same players and doesn’t dedicate cash to domestic seed/venture startups.

I do not think that there is a shortage of entrepreneurial talent and energy. As some have pointed out, government regulation/programs/tax breaks are actually pretty good in Ontario. And while it is nice to see the Ontario government stepping in to address the VC crisis in this province, few authentic capitalists would argue that it is government’s job to be a venture capital market maker. Just get out of the way.

And if you are going to prime the pump with some cash, try to stimulate some competition and establish high value links to global VC markets instead of reinforcing the tightly bound social network that can sometimes stifle innovation (as I wrote about in the MESH, unMESH).

Here’s what I remember from that lunch. The nachos were good. Israel seemed to have come up with the model worth emulating and Peru has emulated it with some success.

In those cases, the government provided enough funds to convince top tier US venture firms to open a local office (with Americans contributing some matching funds). Typically a VC partner with a winning record opened the office. The startups received the value add of that experience, the experience of successful partners in the US and most importantly, a bridge into the US market for follow on rounds and marketing.

These foreign VC offices also eventually spun off talented VC partners into stand alone local firms and encouraged globally successful nationals to repatriate.

The effect was the development of a layer of global class venture capital partners and returns on investment that obliged institutional investors to open the flow of cash to the asset class. Ah-ha!

It is tough to message this kind strategy politically though. Who is going to lobby for and sing the praises for this kind of approach? Cash starved entrepeneurs who are too busy trying to get their idea off the ground? The TD Bank who just got a juicy management contract as a reward for sitting on the venture capital sidelines for years? The local VC firms who are the only game in town? Hmm … maybe this is a job for David Crow??

ONTARIO GOVERNMENT FUNDS U.S. VC FIRM TO COMPETE LOCALLY … not a very catch Globe & Mail headline if you are the Premier but it is probably the best job creation strategy possible.

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