Not enough saving, way too much spending. Willingness to go deep into debt, a demand for instant gratification, and the inability to defer consumption. I think these problems are real, and far too common. But I’m not talking about money. I’m talking about social capital.
A lot of young people, eager to carve out a career and life path, burst onto the professional scene looking for favors. Every new person they meet might be able to help them get a gig, a contract, an interview, or a check. I don’t think most realize that approaching people with a, “What can you do for me?” mindset is the fastest way to burn through social currency and end up broke.
Every time we interact cordially with another person, we generate some good will. It’s like putting a deposit into a bank account with their name on it. A simple smile and a handshake is worth a little. A interesting conversation is worth more. Connecting them to an idea or person of value to their goals, offering insightful feedback, or helping them achieve something can be worth quite a bit. Being reliable, and doing these things consistently over time can build up a massive balance. When you consider all the people you know and meet, it’s easy to see how a diverse portfolio of social capital can accumulate. In the long-term, this social capital is more valuable than money, education, or credentials.
I’ve observed a lot of ambitious types meet a new person, and two minutes after shaking their hand, try to withdraw the tiny amount of capital they accumulated. Many try to take out a massive loan without even a down-payment. Every time you ask something of someone, you’re withdrawing some currency. If all you’ve done is say hi and tell them where you work, you’ve deposited the minimum balance to establish an account. When you follow this by immediately asking them to introduce you to someone, or read your manuscript, it’s like setting up a free checking account, dropping five bucks in, then hitting up the ATM for ten grand. When nothing comes out, you shouldn’t be surprised. (The next move should not be to see a loan officer and beg for credit.)
Don’t misunderstand; allowing others to help you can be a way to accumulate social capital. If someone really wants to help you, or if part of their job is to help you, or if they want to offer advice on something they are more experienced in than you, let them. People love to be helpful, and love to offer their opinions. If you think of creating social capital only as you helping others, it may come off as condescending. Often the best way is to ask people about their own life, work, and success. Tell them your dreams and ask them what advice they’d offer, then really listen and try to take something from it. Being an eager and grateful recipient of things that others enjoy giving is one of the best ways to achieve a positive balance in their account.
If you spend social capital before you’ve earned it, you probably will get ahead faster than your peers. If you push and pester every new contact and drop business cards faster than Bernanke prints bank-notes, you will eventually get some interviews and make a little headway. You’ll have the debt-fueled illusion of prosperity. But you’ll owe so much to so many. Your reputation, like a credit score, will scare away the prudent, who are those you’ll most need in the long run. If you tap your Rolodex for social capital for every new pursuit, you’ll have nowhere to go when the really good idea comes along. You’ll be a short term prodigy and a long term failure.
Create a relational reserve. See every person as another place to deposit some social cash, let it earn interest and be accessible when something really worthwhile pops up. Ask yourself what you can do for people. Don’t over-strategize how much help to offer based on how much you might value their help later. It comes off as sketchy, and you’re probably not smart enough to figure out ahead of time who will generate the best return. Keep a diverse portfolio, but deposit more where returns are consistent and solid over time. Think about people that you would be eager to do a favor for, ask yourself what it is about them that earned your willingness, and emulate it.
If you spend your professional life building up social capital by being generally helpful, resourceful, reliable, and likable, you’ll soon have tremendous net worth. That pool of social capital can provide more knowledge, skill, counsel, connection, and even cash than any amount of paper money you could save. There will come a time to withdraw and spend social capital. There may even be a time to borrow some on credit, but you’ll need a good credit score and a down-payment in the very least.
Make it your goal to help people, listen to people, generate goodwill, and deposit a little more each day in your social bank accounts. Someday soon, you’ll be glad you did.