Technology is making the myriad forms of Capital more fungible, resulting in new arbitrage opportunities for individuals and organizations. I’m referring to types of Capital such as Financial, Physical (equipment), Natural (land / ecology based), Social (reputation, guanxi), Intellectual (processes, data, relationships, inside firms) and Human (skill / talent). This essay will explore how they’re becoming more fungible (with themselves and each other) and what that might mean for society. I will stick primarily to Financial, Social, and Human capital and mostly from an individual’s point of view (rather than a corporation).
###Financial Capital It is easy to view technology’s impact on Financial Capital. Platforms like Paypal and Venmo enable easier transfers of money between individuals. Online brokerages allow customers to easily buy and sell equity, debt, currencies, commodities, and complex derivatives. Tools like Excel allow analysts to try to better understand those financial instruments. Recently, we’ve seen new types of Financial Capital - the crypto-currencies (Bitcoin, Dogecoin, etc) and the next generation of these currencies will enable sophisticated contracts. All these technologies reduce friction for transferring and converting different forms of Financial Capital.
Money is almost always the Capital most fungible. Technology has only made this easier. The most trivial example is Financial Capital -> Physical Capital; sites like Craigslist and Amazon have made it cheaper and more efficient to purchase goods. Paid online courses and training programs allow conversion from Financial -> Human Capital. Buying advertising, Twitter followers, or Facebook likes individuals and corporations can amass a large audience - a form of Social Capital; they can also attempt to buy reputation through Astroturfing. I’m sure we’ll see lots more on this front, but I think it’s the least interesting of the Capitals.
###Social Capital Technology has made a significant impact on social capital, allowing for easier accumulation of it and increasing its leverage. For the sake of this post, I’ll break out social capital into two groups: that from relationships and that from reputation. The two are closely entwined.
Relationship based Social Capital refers to the value an individual has access to by being embedded in a (real world) social network; one can convert it to other types of Capital by calling in favors and by having access to information.
Online social networks have augmented our social graphs, allowing us to blow past Dunbar’s Number; users can maintain much larger social networks than before, even if most of the connections are weak ties. Weak ties with remote acquaintances used to fade away; now, Facebook and LinkedIn keep them on the periphery, popping into the News Feed during major life events. When an individual calls on their social network for support, they reach even the weakest ties and the odds of success are greatly improved.
The internet has also changed the shape of social graphs by enabling online relationships to flourish that aren’t tied to real world affiliations. Near infinite online communities (Forums, sub-reddits, etc) allow for stronger ties to be established with likeminded individuals around the world. One-to-many platforms, like Twitter or blogging, allow the articulate to amass large audiences. Often, one’s success in these communities is tied more closely with one’s abilities - much more meritocratic than real world networks.
Reputation based Social Capital is linked closely with that derived from relationships but is worth discussing separately. The internet enables talented creators to gain massive audiences; amazing content frequently goes viral, with no help (or hinderance) from traditional tastemakers. This happens in arenas of mass appeal, like YouTube and Reddit, but also on a long tail niche sites. Brilliant programmers can find a large audience on GitHub, designers on Dribbble. Sometimes the audiences are potential customers, other times they are collaborators or influential peers.
Technology is making it easier to accumulate Social Capital through relationships and reputation; it’s also making it more fungible. Content creators can convert their cachet to cash through crowdfunding platforms like Kickstarter, or new sites such as Subbable, Tugboat and Patreon. Experts who have proven themselves on GitHub or StackOverflow can monetize their reputation through lucrative consulting gigs and are constantly swatting away full-time job offers. Popular bloggers can earn money through advertising or affiliate marketing.
###Human Capital Technology has made it significantly easier to attain human capital - new skills and abilities. Massively Open Online Courses (MOOCs) like Coursera and Udacity offer college level classes for free; iTunes University has done the same for years. There are online tutorials for pretty much anything and related forums to ask for help.
As one accumulates Human Capital, it’s easy to convert it to other forms. A talented coder can contribute to open source projects on GitHub and gain Social Capital, then they can show off their portfolio and get a great job. Talented musicians can build a following on SoundCloud and then sell them their new album.
###Capital Arbitrage As technology increases the fungibility of Capitals, there will be plenty of arbitrage opportunities. These will be emergent patterns of capital transactions that allow for relatively quick accumulation by scrappy individuals. Here is an example pattern:
- Notice a demand for data scientists
- Take free online courses in statistics, databases, etc (+ human capital)
- Create an interesting data science project and share it online (+ social capital)
- Leverage any gained reputation into a new job or gig (+ financial capital)
In the near future, I envision these patterns appearing, only to be quickly swarmed by arbitrageurs until the opportunity diminishes. Ultimately, it might put an end to most structural unemployment.
###Capital Accumulation & Social Mobility Today, as in the past, the various Capitals sustain positive feedback loops which result in the concentration of that Capital. Individuals with great Financial Capital can access better investment opportunities, Social Capital travels through scale-free networks - popularity begets more popularity, and those with the most Human Capital get the best opportunities for coaching and honing their craft. Technology hasn’t changed these patterns; it likely accelerates them.
Despite increasing overall Capital inequality, technology is allowing for easier development of Social and Human capital (as shown above) and much higher mobility. The increased mobility, however, is restricted to those with high innate talent or the time to cultivate it and the available time and energy to build an audience and reputation.
###Time as Capital & Basic Income While not typically discussed as Capital, time might be Capital’s most important form. Time was implicit in many of the above transactions - days spent on a free online course, minutes spent crafting a witty tweet, months spent reinforcing ties through Facebook comments. Technology allows us to use our time more efficiently (when it isn’t presenting us with endless distractions). An ultimate goal of much Capital accumulation is also time - leisure time.
While the trends mentioned today are leading to a more meritocratic, socially mobile world, true meritocracy can’t exist without equal opportunity. Time is fundamental to acquiring the other Capitals; today’s economy often forces the worst off to work multiple jobs to meet their basic needs; depriving them of the time necessary to develop their human and social capital. This is one of the main reasons I’m in favor of policies similar to Basic Income, which would free up time that can be invested in education and skill building.
###Final Thoughts I’ve talked about the different types of Capital and how technology is making them more fungible and easier to accumulate. There is a chance for this greater liquidity to increase social mobility and enhance quality of life but only if we, as a society, strive for equality of access.
I also think there are tremendous startup opportunities in making it even easier for individuals and companies engage with the Capitals; these startups will create new tools, marketplaces, and platforms to exchange and acquire the Capital. If you’re looking for startup ideas, focus on where the Capital flows least efficiently - I am.