According to a LinkedIn study conducted in 2016, close to 85% of positions are acquired via connections. This data demonstrates an important point, who you are acquainted with is just as significant as what knowledge you possess in our world with interconnected societies. This is where the term “Friendship Economy” is relevant – an unseen market where connections have the potential to be transformed into monetary opportunities.
Social Capital is the unrecognized force of economic advancement that is utilized by everyone, from venture capitalists in Silicon Valley to gig workers advertising their services on Instagram. But how do friendships turn into formal income sources, and is there any ethical concern regarding the monetizing of relationships?
This is the article that addresses these questions regarding why human relationships are being commercialized.
Trust – The Building Blocks Behind Social Capital
Social capital is made up of bonds, trust, networks, and collective actions and was originally termed by Robert Putnam. Its forms include the following:
Separately, these forms of capital can be categorized as:
- Bonding: emotional and strongly fostering relations such as family and friends.
- Bridging: loose ties with the aim of gaining new information. Examples include acquaintances and colleagues.
- Linking: connections with individuals in authoritative positions for example policymakers and mentors.
As Putnam mentions in his work, Bowling Alone, ‘social capital makes us smarter, healthier, safer, richer, and even better able to govern a just and stable democracy’. For example, a Harvard research study uncovered that persons possessing ample social capital are 50 % more likely to keep their jobs and 60% more likely to receive promotions.
Historical Context From Merchant Guilds To Microfinance
Economies were powered by social capital long before the existence of LinkedIn. Trade guilds from the medieval times governed quality and prices based on trust. Similarly, huiguan or community associations were formed by Chinese immigrants in the 19th century to combine resources for business purposes.
The 1970s saw economist Muhammad Yunus use societal collateral in his Grameen Bank, where group accountability was fostered over financial collateral. This allowed millions to escape poverty. These examples indicate a pattern: trust networks lower risks and transaction expenses while boosting economic strength.
Mechanisms of Conversion – How Relationships Become Revenue
There are four main ways in which social capital translates into monetary value:
- Trust, The New Currency: Social trust reduces costs in business dealings. eBay’s initial growth was based on this very principle.
- Referral Networks: Based on a report for Glassdoor, over 30% of employment opportunities are filled based on employee recommendations, which reduce the recruitment expenses for businesses by $7,500 for each hire.
- How Information Flows: The casual acquaintances one makes are always helpful in the job search and market leveraging in the newest ways according to Mark Granovetter’s theory on the Strength of Weak Ties.
- How Resources Are Pooled: Friends sharing campaigns on social networks leads to platforms such as Kickstarter in achieving 90% success rate at crowdfunding.
The Technology Side – Increasing Social Capital On The Internet
The use of digital platforms increases social capital tremendously:
- LinkedIn: Job offers increase 8 times if there are over 500 connections.
- Instagram Influencers: By gaining the trust of followers, top creators have the potential to earn $1 million per post.
- Cryptocurrency Communities: Millions are raised through decentralized trust in DAOs (Decentralized Autonomous Organizations) like ConstitutionDAO.
However, this form of specialization may create echo chambers with little access to diverse networks. A study conducted by MIT showed that the algorithm “People You May Know” offered by LinkedIn serves to strengthen monotony and its users may exclude minority groups.
Conclusion
The friendship economy exposes a paradox, while social capital propels progress, its unequal diversity magnifies divides. As we navigate this terrain, we must ask: can one benefit from relationships without exploitation? The response is found in the notion of intentionality. In a genuine Friendship Economy, what will the true wealth that one nurtures represent?
