Building Social and Financial Capital


There has never been a better time in history to build social capital. In fact, our culture is obsessed with social interaction via the internet, blogging, and the ever-changing landscape of social media. One wonders if the social capital being created nowadays is as strong as the more traditional face-to-face ways of building one’s network of connections? In The Founder’s Dilemma, Noam Wasserman states that when it comes to social capital “youth is often at a disadvantage” (47). He believes that young entrepreneurs lack the lifetime of experience that helps to accumulate the “durable network of social and professional relationships through which founders can identify and access resources” (47). I am inclined to believe social capital is more readily accessible to youth and experienced professionals alike because of the internet resources available. However, I am not convinced that the type of capital created through social media is as influential as the connections made through a robust career as a professional, the lifetime of bonding and bridging that occurs when meeting, greeting, and building personal and professional relationships.

Financial capital is another type of capital where Wasserman believes youth is at a disadvantage. He points out that many entrepreneurs will build a nest-egg while employed in order to fund their startup. He states that “the size of this cushion can largely determine the amount of time the founder is able to give to the startup, the amount of stress and urgency he or she feels to become cash-flow positive, and the decisions he or she makes to build the startup” (48). I imagine I would not be far from the truth if I stated that while social capital is easier than ever to obtain, financial capital has become significantly harder to access since the financial crisis in 2008.

The good news, according to Jesse Colombo, contributor to Forbes article It’s Never Been Easier to Build This Little-Know Type of Wealth, social capital is more valuable than financial capital. Financial capital thinks in terms of dollars and cents. It is very concrete. Social capital has many fluid characteristics. Colombo lists many of these traits including how social capital is less sensitive to economic fluctuations, is not taxable or affected by inflation, does not accrue interest, and it is not as competitive because most people are working to increase their financial capital. Colombo also adds that greater social capital is associated with additional job security, more prestige, and helpful in generating publicity and attaining financial capital.

“Even though social capital exists outside of the conventional financial paradigm and is difficult to measure in financial terms, it has very real economic value because it can be converted into financial capital if needed.”
-Jesse Colombo It’s Never Been Easier to Build This Kind of Little-Known Type of Wealth

So, if an entrepreneur is low on both financial and social capital, where should they begin to accumulate wealth? Since social capital can be leveraged to create financial capital, then building connections is a smart place to start. Of course employing internet resources is an immediate way to create connections, but if one is looking for capital that is a little less tenuous than social media contacts, an effective way to build social capital is through the arts.

“Cultural endeavors offer social capital effects both direct and indirect, immediate and long lasting. The arts provide a powerful way to transcend the cultural and demographic boundaries that divide us and to find deeper spiritual connections with those like us. To use our phrasing, the arts create both ‘bridging’ and ‘bonding’ social capital.
-Better Together: The Arts and Social Capital

Involving oneself in the arts is a fantastic way to meet a budding IT tech, a investment lawyer, and a retired business person all in one setting. As the Better Together article states, the arts are both bridging and bonding. Choral societies bring together people who love to sing. Jazz jams bring together lovers of improvisation. Art galleries bring people together through a love of color and cultural history. Theaters bring actors and audience together through literature. Art has no age limit, no status boundaries, and no minimum requirements for intelligence or abilities. Connections made through the arts are more likely to be stronger and more long lasting because the connection has a personal touch through the love of the art form (bonding), and creates relationships between people who might otherwise never have met (bridging). These well founded connections can then be utilized to access funding, while also adding to each person’s community wealth.

Returning to Wasserman, “research has shown that people who accumulate more social capital before founding are able to attract more human capital (such as cofounders) and financial capital (such as seed capital) with which to launch the startup, and to do so more quickly” (48). In conclusion, building social capital can be exceptionally rewarding in terms of building financial capital to start a business. Utilizing all the resources available for increasing social capital, including the internet and community involvement, can significantly benefit the success of a startup and the people involved in the founding. Investing in social capital through the interaction in the arts is particularly potent way to make strong, worthwhile connections.

7 thoughts on “Building Social and Financial Capital

  1. Hi Joy-
    Thank you for sharing! I agree that people now are more connected than ever and driven by social media. I personally attribute this to the growing number of startup and success of young individuals. I am fascinated by the new Generation Z’s who are all about social capital and connection but in a different way than myself as a millennial. Individual are able to grow businesses because of their ability to harness social power and development through social networking. I am excited to see how the work of business will continue to grow with the integration of social platforms.


  2. Hi Joy-

    I love how you were able to connect what Wasserman was stating about how it is really hard to obtain financial capital for a start-up business. I myself have ran into this issue for launching my Sugar Genius Bakery. The time constraints of going to school full-time and working, I am left with how do I find the time to invest into my business. I think it was great that you followed up with the article “It’s Never Been Easier to Build This Little-Know Type of Wealth”, because it points out the importance of social capital. Networking is essential to any start-up business there are so many people that may believe in your business and want to help support you by introducing you to the right people or investing financially into the business. Thank you for sharing. This was truly insightful and encouraging.


  3. Joe,
    I really enjoyed reading your blog. You make several valid arguments for why social capital can be more valuable to a startup entrepreneur. I agree with what you say about on-line networks not being as valuable as face-to-face; however, it’s also a way to expand/leverage your social capital, which you also point out. It’s interesting to think about how social capital can be stronger than financial capital due to changes in the economy, less competition etc. I hadn’t really thought about this as a benefit. Great blog! Thanks for sharing. Jill


  4. Joy,

    I enjoyed reading your post and agree with you in so many ways. I, too, a not convinced that younger entrepreneurs are at a disadvantage because they’ve not lived long enough to develop strong social capital – all age groups can reap the benefits of digital connections. One can quickly start to build social capital via digital venues, but, like you, I social media should be used more to supplement the face-to-face connections we make beyond the web. Further, it is true that younger entrepreneurs lack the ‘career years’ needed to develop non-virtual social capital. But, we also know that the social capital we develop over many years of working can also work against us. For example, we may feel too connected (for whatever reasons) to our careers to pursue taking on what may appear to be risky entrepreneurial ventures.

    I really love, love your idea of building social capital through the arts…everyone benefits by doing so! That’s a very creative suggestion, for several reasons. First, you encounter so many different types of people and diversity enriches all of us. Second, off-the-bat, folks have something in common with each other – the arts – making it so much easier to strike up conversations with new folks. Third, the arts are slowly being forgotten or too easily dismissed in many areas of our lives (e.g., secondary schools). The arts are expressions of individuality as well as our cultures. And it’s through the arts that we learn about ourselves and others.

    Kudos to you for doing such a nice job crafting your idea!


  5. Joy,
    Great job! I agree social capital is way more valuable than financial capital! You can use your network to help fund and bring in money for your start up.

    I love the idea of using the arts to help your social capital. That’s a great idea! Or even the symphony! Art shows, comic-cons, etc!



  6. Hi Joy,
    Social capital is a valuable asset to all companies as stated by Wasserman. However, I must disagree with the statement regarding age being a disadvantage for the younger generation. It’s important to understand that the younger generation has a few advantages that the older generations may not have. For example, the younger generation has been born into the technological world and that does not simply encompass social media. Many of the younger people, under 30, know how to use technology to their advantage. Another reason is that some younger individuals do not have children or families to have to worry about and they can utilize time after work for building face-to-face contacts and build relationships with the right people. Personally, I have built some of the best social capital through my current position that will help me with their political positions, educational and professional experience, and financially as well. It really depends more on the person and their values and goals rather than the age of the individual.


  7. Beautiful blog! I like how you bridged and bonded relationships through art to gain social and financial capital. My mother is part of a quilting group and once I complete my degree I hope to join her an learn more about quilting. I love drawing and making things with my hands. Even though it is a hobby there is room for me to start thinking about other business ventures.


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