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Social Networks and Social Capital

As Facebook prepares for its IPO, The Wall Street Journal has published an incredibly relevant article titled “No More Résumés, Say Some Firms.”

The article suggests that the traditional process of seeking employment or demonstrating your work history and capabilities, (a.k.a. the résumé), is becoming far less relevant. Now anyone who cares about your work experience or professional accomplishments, can simply Google your name and find out for themselves.

The first example mentioned in the article sets the tone:

Union Square Ventures recently posted an opening for an investment analyst. Instead of asking for résumés, the New York venture-capital firm—which has invested in Twitter, Foursquare, Zynga and other technology companies—asked applicants to send links representing their 'Web presence,' such as a Twitter account or Tumblr blog.  Applicants also had to submit short videos demonstrating their interest in the position.

The rapid growth of social networking sites such as Facebook and LinkedIn (LNKD) is related to a broader social and economic trend that impacts individuals as they manage an asset that is of great importance to them over much of their lives: their social capital.

In fact, I agree with the definition of social capital that I recently found on Wikipedia:

…social capital is anything that facilitates individual or collective action, generated by networks of relationships.

It would be hard to come up with a better definition of social networks. Facebook and LinkedIn allow individuals to create a virtual presence that represents them and to create a series of explicit relationships—friends, likes, alumni groups, past employers, (etc., etc.). In a broader sense, however, the entire web is a social network that is unified by the search engines such as Google and Yahoo!

When you go to the web and search on someone’s name, you may find a LinkedIn entry, a Facebook page, a blog, and a personal website along with that individual’s past employers, awards or groups with which they have been involved. The Google rank for websites on any search is determined by a number of variables including the network of links between sites. The collective result of groups, blogs, and social networks with which you interact on the web can have a major impact on the value of your personal social capital. For example, when you are looking for a doctor or choosing a hospital, you can search at a site such as Healthgrades. If you did an internet search on a doctor and discovered that she was a frequently cited author, you might be more likely to select that doctor for care.

The web itself is a giant social capital engine, for better or for worse.

Companies like LinkedIn and Facebook provide platforms that allow individuals and companies to build an online presence via their internal templates, but this must be understood in the broader context of the web. When you apply for a job for example, a potential employer will probably Google your name and you will be judged by the aggregate of the web presence that you have created over time. The Wall Street Journal article quotes employers and suggests that your web presence provides a far more useful and complete picture of who you are and what you can do compared to a traditional paper résumé.

The implications for individuals and companies are clear: There is substantial value in proactively developing and managing a virtual presence. The increasing impact of the web in determining the value of an individual’s or firm’s social capital is an unavoidable trend. Most professionals will do well to develop and manage an online presence in the same way that they maintain a resume.

These days, your web presence is a vastly richer resource for someone seeking to understand what you can do than a few typed pages on a résumé.


The views set forth in this blog are the opinions of the author alone and may not represent the views of any firm or entity with whom he is affiliated. The data, information, and content on this blog are for information, education, and non-commercial purposes only. The information on this blog does not involve the rendering of personalized investment advice and is limited to the dissemination of opinions on investing. No reader should construe these opinions as an offer of advisory services.


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