Social Capital: An Accounting View of New Media

What value is measurement of value? What’s really the point of measuring anything? Quick-to-the-chase answer: decision-making. If a measurement can’t help you to decide, it’s probably irrelevant.

We all know that not everything of value can be measured and not everything that can be measured is valuable. Social Capital has value – either positive or negative. Can it be quantified? That’s debatable, but let’s take a look at the value of understanding Capital in the age of mass connection via new media.

COST ACCOUNTING FOR VAGUE QUALITIES

Cost Accountants can be cleaver about capturing the quantification of relatively vague qualities: e.g., how to allocate fixed overhead to the cost of goods sold (there’s latitude in determining methods of allocation).

Of all qualitative objects to measure, social activities and relationships are perhaps the most difficult to quantify in any meaningful way. Nevertheless, they do play a substantial, if not primary, role in the financial capital ecosystem.

We’re not going to muddle with the nuances of Cost or Financial Accounting and how to develop Social Capital Income Statements and Balance Sheets. But we can analogize and correlate segments of financial statements with Social Capital Accounting.

COMPONENTS OF SOCIAL CAPITAL ACCOUNTING

From an accounting perspective, the key components of a business’s financial statements follow this basic flow: Revenues are generated from Assests; Expenses are generated from Liabilities and the realization of asset-use. The net of Revenues and Expenses flows into Equity. And ultimately, it is Equity which is the home of Capital Accumulation (and ultimately of Social Capital).

FINANCIAL EQUITY IS A MANIFESTATION OF SOCIAL RELATIONS
Financial Equity is the result of social relations. How? Let’s breakdown the financial statements into the above components:

  1. Revenues arise out of the social relationships between a business and its customers.
  2. Expenses arise out of the social relationships among a business and its vendors, employees, governmental agencies and other stakeholders. Contracts, laws, regulations, property rights, distribution, production, labor: all processes and products of social relations.
  3. Equity, therefore, represents the manifestation of all social relations among a business and its entire ecosystem.

A business’s’ financial health depends on its mastery of social relations. The very source of currency valuation is social: where else does the price of a good arise? Money – for good or ill – is a social extraction – and monetary value is the basis for all financial accounting. Although excellence in social relations doesn’t guarantee success, poor social relations almost guarantee failure, or at least poor economic health.

CAPITAL IN ALL ITS FORMS

Businesses are wise, then, to pay close attention to social relations. In particular they must posses a profound understanding of the deep and complex interconnections among Financial Capital, Social Relations and Social Capital.

Investing isn’t the goal of a business: it’s a vehicle towards capital accumulation. The pervasive discussions of social media’s business values continue to roll through C-wing – and it’s fundamental that executives have a framework to guide them.

The ROI of social media, therefore, is a measurement that can only have meaning in the context of Capital, especially Social Capital (read Dennis Howlett’s provoking guest post on Chris Brogan – peruse the plush treasury of comments too). It isn’t the number by itself, stupid: it’s the decision.

The proper study of any accounting is Capital in all of its forms. This is harder than it sounds.

You must understand media in all its forms, especially the social kind.

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What Do We Know About Social Software & Social Capital?

Image representing ShareThis as depicted in Cr...

Image via CrunchBase

These are some thoughts and questions that came to my mind after today’s #HCMKTG chat (2pm EDT every Friday). Two observations in particular came to mind:

  1. Subtle changes in social software can greatly impact the community reach and use of platforms (one platform can  morph into another one very quickly);
  2. An exploration and understanding of Social Capital is needed to better appreciate how the evolving web affects our daily lives

I plan to explore #2 in more detail over future posts, but I need to better articulate them. I’m hoping more of you contribute your thoughts and questions so we can extend and develop the conversation. For now, here are some thoughts for the weekend [link if the embed isn’t visible]:

As always, I’m interested in what you think – it’s why I blog really. So join in: either here or on  Twitter (or if you’re really geeky,  FriendFeed :) ).

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The Social Capital Algorithm

What exactly is the economics of social media marketing? What is the cornerstone of the economic principles underlying the nebulous structure of social connectivity? These are big tough questions which deserve far more attention than this post will pay. For now, I’d offer this: Social Capital is the center and circumference of any dynamic web presence and there exists a straightforward process to organically accumulate it.

WHAT IS SOCIAL CAPITAL?

Positive Social Capital includes, but is not limited to: trust, networks, goodwill, strategic alliances, collective perceptions, personal values, beliefs, opinions, judgments, community bonds, meanings, and hopes. A simple definition of Social Capital:

Social Capital is the aggregate value of actions derived from social resources.

Note the keyword in this definition: actions. Without actions, there is no business, no life. Regardless of how to quantify Social Capital, it’s important to understand its qualities. If metrics are important, the measurable variables will reveal themselves. (That accounting lesson is not part of this post.)

So, how do we engender and accumulate Social Capital? Is there an underlying process of social media interactions? Yes.

THE SOCIAL CAPITAL ALGORITHM

When conceiving, planning and correcting your web presence, it’s easy to veer off-track. You must remain faithful to your going concern and keep steady vigil on your vision and goals while working with the relevant strategies and tactics which accomplish them.

Although there is no universal way to “do” social media, there is I believe a simple strategic algorithm that is compatible with all honorable marketing. Here it is:

  1. Invest in Trust
  2. Market hopeful Meanings
  3. Share the Wealth
  4. Repeat daily

That’s it. Nothing complicated. A no-brainer.

BUT: Just because the algorithm is simple, don’t assume that the work is easy. Silly as it seems, constantly and remarkably leading and maintaining a real-time web presence demands a lot of dedicated work.

It’s easy to wreck trust. It’s easy to kill hope. It’s easy to be selfish. It’s easy to slip any day. Creating and leading and interacting and providing value every day are difficult and the work tying it all together can be very hard.

MORE TO COME

I will be discussing Social Capital in upcoming posts because it’s an interesting topic, one central not only to marketing but also to our lives in the 21st Century. Some of what I will discuss will be a review of the subtle complexities and hidden consequences of Financial Capital and how they come to play in Social Capital. Any discussion about ROI is pointless without a solid understanding of capital’s ramifying powers.

For now, think of ways to work these steps into your habits.

Does this ring true for you? Share some of your wealth and invest a little time in the comments.

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