Is your network really your net worth?
The data suggests it is true.
Anecdotal evidence suggests that the people or networks you are connected to might strongly determine your level of success in life and business. Metcalfe’s law states that the value of a network is proportional to the square of the number of connected users of the network. If we consider a marketplace like Amazon, its soaring value is linked to both the number of sellers and buyers using its website. Additionally, according to Reed’s Law, the utility of large networks, particularly social networks can scale exponentially with the size of the network. There are many examples that suggest that your network may indeed be your net worth.
Hard work alone is not enough
Hard work on its own is no longer enough to succeed. Most times there are unfair advantages that generate outsize impact for successful individuals and companies. Ash & Hasan in their book The Unfair Advantage argue that MILES (Money, Intelligence & Insight, Location & Luck, Education & Expertise and Status) provide this unfair advantage. This assertion can be tested in the US technology start up scene where the framework can be used to explain the impact of unfair advantages on the success of technology companies such as Stripe and Snapchat. These unfair advantages can be linked to the vast network opportunities enjoyed by the successful founders and their companies.
Does competitive advantages still play a role?
Competitive advantages including technology, access to capital, speed to launching products and transformational products can help a company become successful. However, a truly successful company will need to defend its position to maintain its lead. Network effects provides this defence. As a derivative of Metcalfe’s Law, network effects describes the defensibility created by a company as a result of the number of connected users of its network, platform or product. The biggest valued companies globally today have strong network effects. For example, US technology giants including Facebook, Amazon, Google and Apple have become so big that their CEO’s have recently been in the line of fire for their apparent use of market power to impede competition.
However, the emergence of network effects depends among other things on the speed of the network. Fast networks include social networks while slow networks may include educational networks. For example, the defensibility of a company like Peloton may be unlocked quicker using social media. This will be slower for a company like Lambda whose defensibility is based on educational networks of its student alumni.
Networks are only valuable in technology circles
This is not true. Networks are important even in creative circles. What do artists like Pablo Picasso, Vasily Kandinsky and Fernand Leger have in common? According to an observation by the Museum of Modern Art (MOMA) in 2012, these artists and many other impressive artists did not become famous for the quality of their work. That is ridiculous you may say. The curators of MOMA observed that abstract artists may have influenced one another while organising an exhibition chronicling the origin of abstraction.
They highlighted that the artists became famous through their network of famous friends. The observation was taken further by two academics, Paul Ingram and Mitali Banerjee in a study in 2018. The study examined the role of creativity and social networks in the artists’ rise to fame. They concluded that making friends may have been more important than producing novel art for the successful artists. The size and diversity of the artists’ network of contacts was a better indicator of their fame regardless of the creativity of their art.
Do cities provide value enhancing opportunities?
The quantum of interactions for businesses and individuals varies depending on locality. Does it matter if a business or an organisation is located in the city, sub-urban or rural area? Based on data collected from two European cities, it was observed that the size of cities plays a fundamental role in social and economic life. The study suggests that larger cities may facilitate the diffusion of information and ideas. This is due in part to observed constant clustering. It is possible in large cities to live in groups that are as tightly knit as those in smaller towns. A smaller city may present a constraint in networking options due to proximity. Conversely, a large city provides an opportunity for choosing your own tribe based on shared interests, profession, ethnicity etc.
Can my connections make me famous?
In the future, everyone will be world-famous for 15 minutes — Andy Warhol
The quote was allegedly made by Andy Warhol. However, social media networks have expanded the fame lifespan of people, cities and businesses beyond a mere 15 minutes. Calvin Harris one of the most recognizable DJ’s globally was discovered from solo recordings posted on MySpace. The musicians Justin Bieber, Shawn Mendes and the Weekend to name a few were also discovered on social media. Today, everyday brands can reach virality and a wider audience through social networks like Twitter, Facebook or TikTok. Influencers on these networks can become famous and earn income due to their sizeable audience.
Your Network will get you a good job
The variety of your network can be viewed as capital the same way education is viewed as capital. Research by Bonnie H. Erickson suggest that individual social capital can be converted to organizational social capital. As a result, organisations will hire individuals and mobilise their contacts to achieve organizational goals. This is prevalent in senior management hire. The position and remuneration is intricately linked to consequential relationships and potential clients that the new hire can access. Additionally, with the rise of professional networks like LinkedIn, job seekers, recruiters and potential employers have a wider surface area to create opportunities. Anecdotal evidence also suggest that organisational roles are in many instances filled by employee referrals.
To conclude, the data suggests that your network is indeed your net worth. It also matters if you live in a small city or a big city. The size and diversity of your network of friends is instrumental to your success. The persons you know and meet may even help you get hired for a job or a business opportunity. This implies that you need to find and connect to networks that will help you get the results you desire. The networks can be social, educational, creative, professional or business networks. You are only three and half degrees away from the connections that can get you results. Do not fret. Rather, approach networking with enthusiasm. Live a more fulfilling life and pursue transformational networking today.
