Social Capital

Class Exercise: The Open Source Movement

Consider the GNU/Linux movement as an example of cooperative, collective action How and why did it arise? That too in a high-tech, high-rewards environment. What are the motivations of its participants? What factors affect its success or failure? What are its implications for economic markets? Can such virtual communities be successful and create social capital? Are there limits to what such communities can do?

Humans and Society

Meditation 17 Nuc lento sonitu dicunt, morieris. Now this bell tolling softly for another, says to me, Thou must die. ...No man is an island, entire of itself; every man is a piece of the continent, a part of the main. If a clod be washed away by the sea, Europe is the less, as well as if a promontory were, as well as if a manor of thy friend's or of thine own were. Any man's death diminishes me, because I am involved in mankind; and therefore never send to know for whom the bell tolls; it tolls for thee...
John Donne, Devotions Upon Emergent Occasions 1624

Quotes for Thought

Margaret Thatcher: Theres no such thing as society Albert Hirschman: the ideological justification of the pursuit of individual interest and personal satisfaction undermines the essential elements of community and public life, such as cooperation, concern for the welfare of others, and voluntary contribution of ones own personal resources to help create benefits for the community. Hannah Arendt: Being fully human involves three types of human action: family life, work, and viva activa or public life, in which we collectively create civil spheres.

The Market vs The Polis: Deborah Stone

Critique of The Rationality Project Standard economic analysis of people and society too limiting and misleading People are not just self-interest maximizing individuals, aiming for efficiency all the time People do not interact with other people in market contexts alone People are part of communities Therefore, they are living and acting in a Polis (Aristotles democratic city-state)

Community & Public Interest

Membership of community is primary political issue Membership in a community defines social, economic and political rights; And responsibilities Communities have a collective will Public interest:
Individual interests held in common Goals on which there is consensus Things good for community as community Defining public interest is often loaded with conflict

Influence
People in society do not think & act like atoms; they are subject to influence and persuasion They care about what others think and do Our thoughts and actions are affected by education, persuasion, socialization Influence collective behavior; bandwagon effects, fads, panics Influence can morph into coercion People find it hard to dissent from mainstream

Cooperation
In polis, cooperation as key as competition

Politics involves seeking allies and building coalitions to compete with opponents
Any time you go beyond two people

Cooperation is essential to power

Nazi orders executed by cooperative prisoners

Compare Markets: cooperation is negative

Collusion, oligarchy, price-fixing, insider trading In polis, cooperation is positive, & is the norm

Groups
Groups and organizations are the building blocks of the polis
People belong to groups, even if not explicitly Policy making also involves how groups are formed and re-formed to achieve public goals Groups are important because decisions in the polis are collective Peoples actions are affected by roles, procedures, and audiences of group & organizational settings

Information
In a rational world, information is complete, perfect and available to everyone In the polis, information is Interpretive
Therefore politics all about controlling interpretation

Incomplete
Full context of Advani speech on Jinnah in Pakistan

Strategically withheld or manipulated

Therefore, Freedom of Information Bills

Media, not necessarily helpful, due to its biases

Passion
In market, economic resources governed by laws of matter; resources are finite, scarce, consumed In polis, laws of passion operate
Behave more like emotions than matter Passion feeds on itself Compassion, patriotism, solidarity grow with use Whole is greater than sum of its parts Things can mean many things at once Can turn negative as well?

THE MYTH OF INDIVIDUALISM: Wayne E. Baker

The cultural belief that everyone succeeds or fails on the basis of individual efforts and abilities. This fiction is that society consists of a set of independent individuals, each of whom acts to achieve goals that are independently arrived at, and that the functioning of the social system consists of the combination of these actions of independent individuals.

Networks are the Reality

Success is social: It depends on our relationships with others. All the ingredients of success that we customarily think of as individual natural talent, intelligence, education, effort, and luckare intricately intertwined with networks.

Getting a Job
Getting a job is one of the best-known uses of networks. The vast majority of people dont find jobs through advertisements, headhunters, electronic bulletin boards (like monster.com), or other formal methods. These methods work, of course, and you should never neglect them. But more people find jobs through personal contacts than by any other means. (The reverse is also true: most employers find good people by tapping networks of personal contacts. In fact, some companies institute organized programs to encourage workers to refer their contacts to the company

Venture Capital
Seventy-five percent of start-ups and new businesses find and secure financing through the informal investing grapevinethe social networks of capital seekers and investors. Capital seekers and providers find each other via friends, colleagues, acquaintances, and well-connected business associates such as attorneys, insurance agents, and accountants. This informal capital market is estimated to be so large that the amount of capital it provides is much greater than the financing supplied via the professional venture capital market.

High Finance
Social networks play a major role in decisions to purchase the stock of giant companies, too, such as those traded on the New York Stock Exchange. Polls of investors reveal that most institutional and individual investors decide to buy based on information from a friend or business associate, or because they know someone who bought the stock. Contrary to popular wisdom, few investors make decisions using such impersonal techniques as sophisticated technical analysis of a companys fundamentals.

Connectedness Enhances Health and Longevity!

To gain the benefits of connection, it didnt matter what kind of connection a person had. For example, you could live alone, but have frequent contact with friends or relatives, and be protected. Or you could belong to various voluntary organizations, but not participate in any religious activity, and still be protected. Or your connection could come from church and family, but not from any volunteer organization, and you would still be protected. The key to gaining the benefits of connection was to have several kinds of connection, but the kinds could vary from person to person

Paradoxically
Better networks improve wealth, health, and happiness. Individuals and organizations reap the benefits of better networks. Thats good news. The even better news is that all of us can learn how to build better networks. But theres a catch. If we create networks with the sole intention of getting something, we wont succeed. We cant pursue the benefits of networks; the benefits ensue from investments in meaningful activities and relationships.

Bourdieu: Social Class Matters

Social networks, can produce or reproduce inequality. Upper layers of society have higher levels of social capital, especially through associational networks (formal social capital) Countries with high levels of inequality magnified these differences between classes, giving the upper classes further advantages (The CAT and IIM are open, competitive ways of joining upper class networks!)

In terms the TV generation can grasp

http://www.youtube.com/watch?v=1t PQ-xOLSSE

SOCIAL CAPITAL AND NATIONS

Institution Building in Iraq

Robert Putnam:
The US approach to reconstructing Iraq is fundamentally flawed. You can hand out largessebuild bridges, roads and schoolsbut you cannot build democracy easily by imposing it from above. For democracy to flourish, people need to feel that they have been involved in creating it. You need to create Social Capital. Without social capital, societies fall apart, even if the roads are smooth and the trains run on time.

 Social capital theory suggests that ordinary Iraqis need to feel not only that they are the ones making decisions but that they are the ones who actually carry them out. Unfortunately, the US has centralized decision making. US should have waited for the Iraqi people to rebuild connections among themselves and to then make decisions about what they want and whereshould have waited for social capital to arise organically, through legitimate democratic processes. Sadly for Iraq, though external agents have a tough time helping social capital grow, they can cause social capital to decline. Both Saddam Hussein's divisive rule and the chaos following the U.S. invasion have increased the distrust ordinary Iraqis have for one another, lowering social capital.

Putnam on Social Capital

Social capital refers to:
how responsible people in a community feel for each other. how closely people in the community are interconnected. People tend to obey the rules not because they are worried about cops but because they have obligations to other people. "In the U.S., tax compliance is powerfully predicted by the level of social capital in a community. Levels of social capital predict everything from the quality of schools and local government, to the risk a country will go down in corruption or blow up in civil war.

Summarizing Social Capital Deborah Stone

Relations of influence and loyalty, norms of altruism and participation, and a past tradition of organized cooperative efforts constitute a form of capital. Communities are best able to overcome the barriers to collective action when they have a large stockpile of these attitudes, norms and existing groups. A widespread sense of trust comes from shared experiences with other members of the community and encourages people to participate in collective efforts.


Norms of reciprocity, of give and take and responsibility for the well-being of others, encourage civic engagement as well. And lastly, if a community has a dense network of voluntary associations, these serve as channels of participation for the collective good, so that a history of civic engagement builds on itself. All of these factors create social capital, which, like physical assets or material wealth, can be used to harness individual energies for the common good.

Social Capital Works Through Multiple Channels

a. Information flows (e.g. learning about jobs, about election candidates, exchanging ideas, etc.) depend on social capital b. Reciprocity norms (mutual aid) rely on social networks. Bonding networks that connect folks who are similar sustain particularized (in-group) reciprocity strong ties and emotional support. Bridging networks that connect individuals who are diverse sustain generalized reciprocity weak ties. c. Collective action depends upon social networks (e.g., role of the black church in the civic rights movement) d. Broader identities & solidarity are encouraged by social networks that help translate an "I" into a We" mindset.

Some Intellectual History

From David Halperns Social Capital

Durkheim (1893)
A nation can be maintained only if, between the state and the individual, there is interposed a whole series of secondary groups near enough to the individuals to attract them strongly in their sphere of action and drag them, in this way, into the general torrent of civic life Societies with high levels of social cohesion and solidarity have less suicide than those with social dislocation and loose social bonds. Society can support individuals through mutual moral support, which instead of throwing the individual on his own resources, leads him to share in the collective energy and supports his own when exhausted

Bourdieu
Social capital is the sum of the resources, actual or virtual, that accrue to an individual or a group by virtue of possessing a durable network of more or less institutionalised relationships of mutual acquaintance and recognition. Acknowledging that capital can take a variety of forms is indispensable to explain the structure and dynamics of differentiated societies Capital: economic, cultural, and social

Coleman
Like other forms of capital, social capital is productive, making possible the achievement of certain ends that in its absence would not be possible

Social Capital and Democracy

Democracy requires organized competition for power. Civility (mutual respect) required for democracy is learnt in associational networks. (Walzer) Association leads to trust, which in turn aids cooperation. A strong active civil society is also needed to make democracy work (need to allow for civilized dissent and plurality of views).

Insights
Stocks of social capital, such as trust, norms, and networks, tend to be selfreinforcing and cumulative. Successful collaboration in one endeavour builds connections and trust social assets that facilitate future collaboration in other, unrelated tasks. As with conventional capital, those who have social capital tend to accumulate more.

Caveat: -ve Aspects of Social Capital

Social capital can lead to exclusive in-groups
Racist and casteist exclusion Old boys clubs and glass ceilings

Family values & social norms can hinder growth

Womens participation in society and work may be blocked by tradition, norms, religion. Free speech and creativity may be curbed by the pressure to conform.

Social capital can be built using hatred, where a community is united by demonizing the other. Can lead to horrible effects.
Holocaust & Hitler; the banality of evil.

How Putnam Rediscovered Social Capital

"You tell me how many choral societies there are in an Italian region, and I will tell you plus or minus three days how long it will take you to get your health bills reimbursed by its regional government." (Robert Putnam, Interview, 1995)

What Makes Some Regions More Economically Vibrant than Others?

What makes regional governments in Northern Italy more effective than others in the South? Answer: Not budgets or policy frameworks Key factor: Vibrancy of associational life and the level of trust between strangers High social capital: participation in horizontal associations (e.g., choral society); high trust Low social capital: vertical or hierarchical social organization dominant; power & patronage; high distrust; reliance on family

So, for Putnam, Social Capital

Has Three Components
Moral obligations and norms (cooperation) Social values (especially generalized trust) Social networks (esp. voluntary associations)

If a region has a well-functioning economic system and a high level of political integration, these are the result of the regions successful accumulation of social capital

Fukuyama: Implications for Countries Economic Evolution

Most economic activity is carried out by organizations that require a high degree of social cooperation. The ability to form organizations depends on institutions like property rights, contracts, and a system of commercial law. It also requires a high degree of trust in strangers. US, Germany and Japan have high associational activity, hence high social cooperation and trust Thus they are characterized by corporate forms of businessideal for modern business success Taiwan, Italy and Francecountries with low social trusthave more family firms Countries with very low levels of social trust and ineffective institutions, like Russia, do not nurture free market capitalism

How to Nurture Social Capital?

Start with children! http://www.youtube.com/watch?v=5 exvfbnFMUg

Hows America Doing In Terms Of Social Capital?

De Tocquevilles Travels in early USA

Alexis De Tocqueville: French visitor to USA in 1876 Americans are forever forming associations of all sorts Involvement in public affairs brings the individual out of social isolation, redirecting his personal interest into causes for the general good. It leads the individual to become involved in creating social capital. Social capital, a participatory culture, and a belief in equality makes American democracy work Opposite of civic participation is the pursuit of private financial interests. Argues that immersing oneself in commercial markets diminishes the individuals role as a "citizen".

Putnams Findings:
Americans vote less and participate in civic affairs less Volunteering: womens groups, Scouts, Red Cross, down Family also on the decline Countertrends Church membership up Membership in Tertiary organizations up (cheque book membership; no interaction with other members) Professionalization of the third sector NGOs Support group membership up Other findings: Trust Trust in people down Trust in government down

Causes
Movement of women into the workforce
Less volunteering

Mobility and migration

People less rooted

Demographic transformations and effect of changes in economic organization

Supermarkets, Internet shopping dont enable meaningful relationships

Technological transformation of leisure

People spending time in front of the TV rather than hanging out with neighbours

Implications and Prescriptions

Putnam: warns that Americas stock of social capital the very fabric of our connections with each other, has plummeted, impoverishing our lives and communities. This is worrisome. He quotes many studies (e.g., North vs South Italy) that show a correlation between high levels of civic culture, comfortable lifestyles and positive economic outcomes. He claims that the interactions which create social capital are most likely to occur in egalitarian communities where people voluntarily contribute time and effort and receive positive reinforcement. If peoples interactions in society are declining, & they are bowling alone, bad for American democracy

Post 9/11
Social Capital grew in the USA
This is a pattern among countries at warwars strengthen feeling of solidarity and community bonding Among young from 8 to 35 percent

Peoples interest in public affairs grew Increase in confidence in government

From 44 to 51 percent in re federal govt Trust increased 19 percent in local govt Trust increased 14 percent in police

But!

Trust in Arabs & immigrants fell by 11 percent

The Internet and Social Capital

The Internet & Social Capital

The Internet transforms social capital
Facilitates spatially dispersed communities of shared interest

The Internet diminishes social capital

Draws people away from family, friends Reduces involvement in local community

The Internet supplements social capital

Another means of communication Increases existing social contact

Internet Helps Enhance Social Capital

People more isolated, but developing strong virtual networks Internet can restore community by providing a meeting space for people with common interests and overcoming limitations of space and time Online communities can provide for more open, democratic discourse and mobilize collective action Online relationships can continue offline Online interaction fills gaps between offline meetings and allows information sharing

And Internet Hinders Social Capital?

The Internet may be diverting people from true community because online interactions are inherently inferior to face-to-face and even phone interactions Internet accelerating move from allencompassing, socially controlling communities to individualized, fragmented personal communities When Internet engages people in asocial activities, more than TV, its immersiveness can turn people away from community, organizational and political involvement, and domestic life

Facebook and Maintained Capital

Social networking sites like Facebook are enhancing the ability of people to stay in touch with communities to which they previously belonged This helps maintain stocks of social capital built over time, but affected by physical mobility and migration

Social Capitals Implications for India

Ashutosh Varshney on Communal Violence and Social Capital

Studies pairs of similar Indian cities (minority %) One set has communal riots; other does not. Why?
Ahmedabad vs Surat; Hyderabad vs Lucknow

Key are Intercommunal Interactions & Networks Intercommunal Interaction:

Quotidian or everyday interaction, e.g., shops Associational interaction, e.g., civic networks

Associational Interaction Key to Defusing Tension

Integrated civic groups quash rumors & prevent riots Can construct politically: Gandhi, Congress big tent

Social Capital at the Grassroots

Railway Porters in Dadar
Drawn mainly from certain villages in Maharashtra Entry into profession mainly on kinship links Create rules and norms of cooperation Create cooperative society for social & financial support, especially for emergencies Draw on village as insurance & medical support

Social capital larger in villages?

Familial networks act as support system Can be conservative; against change or risk taking

Social Capital in the Slums

Slum Clearance Policy Involves Relocation
When slum populations are displaced, social networks are ruptured. Social networks are linked to group identity, safety, solidarity, livelihood and survival and formed on the basis of caste, religion, neighbourhood and livelihood.
We always lived with our people, people that belonged to our caste, religion, region, it was almost like living with a joint family. Now it has changed after coming here. We are so many of us living together that belong to different castes, religion, region and even slums. (Focus group participant at a rehabilitation site).

So Social Capital, Good or Bad?

Positive impacts of social networks in slums:
Social safety nets of urban poor. Gives sense of belonging in a hostile city where many are migrants. Social networks amongst women influences work, activities, community and political participation. Helps dwellers better negotiate with local authorities.

Negative impacts:
Social networks remain influenced by caste, religion, language and space (proximity dictates membership). Networks are often small, fragmented and lead to exclusion: hard to enter as an outsider.

Social Capital and Merit

Indias urban middle classes have extensive social networks These confer an economic advantage over others Their less able children are still able to find good jobs whereas less well connected working class children must rely on their abilities to help them stand out and succeed Background and Social Class matter not just Merit

Social Capital Implications for Business

Coase, the Firm, & Social Capital

Economic advantages in bringing together group of people with complementary skills and division of labourCoase: The Theory of the Firm Minimizes transaction costs, contracts, bargaining Firm as an example of bonding social capital. Individuals develop shared norms (corporate culture, mission). Sanctions ensure conformance Links b/w firms & trading partners also important

Building Silicon Valley

Bonding inside firms and bridging across firms facilitates economic growth, e.g., Silicon Valley May need an existing network of expertise, e.g., a university, as a base (Cambridge, UK Science Park) Tacit knowledge exchange, Co-opetition Route 128, near Boston, failed to let go of traditional norms of hierarchy, secrecy, selfsufficiency, territoriality, compared to Silicon Valley Policy Implication: Invest not just in science & technology, invest also in social capital formation in these sectors

Social Capital in Business

In the business context, social capital refers to the relationships that make businesses work effectively Social capital may be under threat because of:
Volatility and virtuality Inadequacy of managers in understanding and promoting social capital

Building Social Capital

Making Connections
A real commitment to retention Promoting from within Giving people time and space to bond in person Facilitate personal conversations Fostering durable networks

Building Social Capital

Enabling Trust
Trust thrives where managers give employees no reason to distrust
Transparency Confidence in rule of law

Show trust trust begets trust

Trust employees judgement

Send clear signals that employees are valued Reward trust

Building Social Capital

Fostering Cooperation
Give people a common sense of purpose Reward cooperation with incentives Establish rules for cooperation Hire for cooperation

1. Lead with credibility & caring 2. Invest in frontline leadership 3. Hire & train for relational competence 4. Use conflicts to build relationships 5. Bridge the work/family divide

6. Create boundary spanners 7. Measure performance broadly 8. Keep jobs flexible at the boundaries 9. Make unions your partners 10. Build relationships with suppliers

Relational Coordination

Southwest Airlines

Shared goals, knowledge, mutual respect Frequent, timely, problem-solving communication

Quality Performance

Efficiency Performance
Source: Gittell, 2004

Celebrating a Culture of Caring at Southwest Airlines

http://www.youtube.com/watch?v=V OkwtB5SLVY

END