WealthManagement Magazine

Collecting Social Capital

"If you don't go to somebody's funeral, they won't come to yours." At least that's what Yogi Berra used to say. Yogi had an uncanny ability to make illogical statements. But his famous nonsequiturs usually contained a form of succinct wisdom.Yogi was talking about social capital. This is a variation on the kind of capital to which we in our industry are most accustomed.According to Robert Putnam,

"If you don't go to somebody's funeral, they won't come to yours." At least that's what Yogi Berra used to say. Yogi had an uncanny ability to make illogical statements. But his famous nonsequiturs usually contained a form of succinct wisdom.

Yogi was talking about social capital. This is a variation on the kind of capital to which we in our industry are most accustomed.

According to Robert Putnam, Harvard professor of public policy, in his book, "Bowling Alone - The Collapse and Revival of American Community," social capital is akin to what "The Bonfire of the Vanities" author Tom Wolfe called the "favor bank."

Putnam cites an explanation by L.J. Hanifan, state supervisor of rural schools in West Virginia in 1916. Hanifan referred to social capital as "those tangible substances [that] count for most in the daily lives of people - namely goodwill, fellowship, sympathy and social intercourse among the individuals and families who make up a social unit.

"The individual is helpless socially. If he comes into contact with his neighbor, and they with other neighbors, there will be an accumulation of social capital, which may immediately satisfy his social needs and which may bear a social potentiality sufficient to the substantial improvement of living conditions in the whole community."

There are also negative aspects of social capital, according to Putnam. Those in a social network, who accept the norm of reciprocity, are generally good to others inside their network. However, those outside a network can suffer negative consequences.

For example, brokers have experienced firsthand how being outside the NYSE, the NASD and the SIA "clubs" has hurt them. The lack of reciprocity among the associations and registered reps has caused a great deal of mistrust between the two factions. Therefore, social capital can be used malevolently just like any other form of capital.

Finally, there are two distinct forms of social capital - "bonding" and "bridging" social capital. Bonding social capital is "good for undergirding specific reciprocity and mobilizing solidarity," according to Putnam.

However, bridging social capital may be more important. Putnam explains: "The `weak' ties that link me to distant acquaintances who move in different circles from mine are actually more valuable than the `strong' ties that link me to relatives and intimate friends whose sociological niche is very like my own."

Bonding social capital is good for getting by, while bridging social capital is crucial for getting ahead.

How does this relate to you? The National Association of Investment Professionals' (NAIP) goal in the coming years is to strengthen members' bonding social capital by improving broker solidarity. In addition, the NAIP intends to help members develop their bridging social capital.

In January, we upgraded our Web site at www.naip.com by opening a members-only area that will eventually house a variety of services that will create both bonding and bridging social capital.

For example, members can use NAIP's link with www.infomarkets.com to connect with other influential circles. Infomarkets is a provider of online systems that allow for the instantaneous and secure exchange of information. These systems enable people with complex questions to purchase answers from experts in an online environment. Infomarkets is a "bridge builder" to investors seeking professional investment advice.

Stay tuned as the NAIP accumulates more social capital for members.

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