Being cool is for kids, but Social Capital is for the in-crowd—the LinkedIn crowd, that is.
Those with a Parallax View know that one of the major shifts in the way we work, live and communicate is driven by the network. That is the platform.
We live in a world of networks. Our brain is a network, and so we can all relate to how the internet works. After the hundredth or so invitation to join LinkedIn, I became curious about this company and the phenomena of relationships on the web. The quality of the relationship is the difference between success and failure. So what is a better candidate for The Interview than LinkedIn.
Talking to the founders was the way to go, and Konstantin Guericke, as VP of Marketing and one of the founders, is the spokes person for the founders.
Ann:
How did you think about starting this company…where was the passion? This is a great idea. Did you all start out talking at Starbucks over coffee?
Konstantin: I don’t know if it makes such an interesting story. LinkedIn is an evolutionary story…it was not a light bulb. But each of us was talking about this for a long time. The catalyst became that working in many start-ups and struggling with the issue of ‘Where do my clients come from?” That doesn’t make for exciting writing. But Reid Hoffman knew us all and got us together.
Ann:
Well, the need for good relationships and knowing the right people is a key in business.
Konstantin: And most of the modes of meeting people are highly inefficient. You can go to an event and walk around and you don’t meet a hundred people. And they are not sustaining.
So if you think about this inefficiency and also think about how you get your clients, people will tell you “I was introduced through a network.” There was a chain of introductions, with only one or two degree of separations. But it takes awhile. And for the job seeker or sales person, that’s a lot of hard work to get one person to use their network to help. And most of the people they want are in the second degree. One person tells another. There is a huge second degree of people. And how do you peer into that opportunity?
Ann:
Then this replaces lunch!
Konstantin: Yes, you know at lunch that you really don’t get to talk about this. People are not really walking around showing their network. And you never really get to talk about the whole network. Also, there are issues around cultures—in the US we are more a meritocracy vs. oversees, social status means more. So we wanted to be able to capture these elements as well. Who introduced you means more.
Ann:
We are hoping the reference reduces the risk. People trust because they were introduced through a trusted source.
Konstantin: Ann, look at the process of selecting a resource. I was looking in the Yellow Pages Society of America, and they have the statistics of what people use the yellow pages for. The highest category was looking for lawyers. And you don’t want to use the yellow pages to select a good lawyer!
So the value of the source is critical.
Ann:
So, here the web becomes the fundamental platform to build connections, relationships. So you have scale.
Konstantin: Yes, the numbers are obvious… and how you get to the second degree. Though you don’t have too many in your direct network, you have several hundred in your 1st degree. But by the time you get to your 2nd, there might be ten thousand.
Also, you go to events, and you walk about, but you really don’t get to talk to a hundred people. The expense is high and the context on why you talked to that person fades.
Ann:
Speaking of numbers, how do you make your money?
Konstantin: Individual membership is free. It is use of the network where we make money.
Ann:
Like Esther Dyson…I saw here in my 2nd degree network! (laughter!!!)
Konstantin: Yes, she uses LinkedIn to managing her list of events and work contacts.
Ann:
So, on to trust. This trust issue is key and security. Can I trust the web to manage my reputation, my data, and secure my network, and only show it to the people I want? I noticed that one of your founders is Duncan Work, previous founder of Net Deva. But on to this concept of more effective relationships development.
Obviously, there is another dynamic at work here. Many people feel way more comfortable on the web… chatting, writing blogs, and meeting people. And, as you have pointed out, face to face meetings like events are not necessarily an effective way to meet people and establish trust.
Konstantin: Yes, at events you may make informal contacts, but not deep relationships. Conversely, calling people wears out your social network.
Ann:
But what is the difference between an online rolodex verses a real network? How do you design that into the product, so that it is not a rolodex? And then how do you make money on a relationship verses a rolodex. Because it seems to me that your value is the trust and reference vs. lists.
Konstantin: Why not just put the names out there and let people contact them based on their interest? The issue with that is that many people don’t want to be contacted without an intermediary… so many don’t have the time. And those people are already overwhelmed with requests from other channels. They will just leave the network if it just brings them more. Since they are already getting more emails, they are being put in the situation where they are getting more unwanted emails.
This is the old mode. There are links, but no responsibility for those links. Part of this network is taking responsibility for the links… connections—responsibilities—a willingness to introduce on a case by case basis. This is a two way responsibility. So, as the sender, we might ‘like you’ but the other party might not want to be ‘liked’. This is a critical point: This is your social capital –your network and its value, but also your reputation with the others in your network. How do you value their time and values?
We have this self correcting mechanism. If the person doing the introduction does not understand the value of this social capital. The other person can say no. I don’t want to be connected to that person. But being linked in is about wanting to be connected, so most people are interested in getting an introduction. The testing of these happens over time, since you may organize your relationships, but the links may not be tested for awhile.
Ann:
So how does it work for people who are at the epicenter of desire—analysts, VCs, hiring managers, etc?
Konstantin: These were test cases for us, if we could make LinkedIn work for them, it could work for everybody. VCs are a good example. Venture Capitalists do depend on deal flow, so at some level they do want introductions. But, they get lots of business plans over the web and most don’t get read. The ones that do, usually come from people they know.
Here is an area where social capital is clear. You probably can’t get ‘in’ without it. And later, if this turns into a deal, your social capital and the introducer grows.
Ann:
So, back to how you make money…
Konstantin: Groups and organizations, and directories… think about the challenges of opt in and updating the opting. So many links to maintain… people get weary of the constant registrations. There is a series of business—job search, business search, your organization, Ann,—managing your network of people you want to research. A lot of organizations and people like the potential that this presents to them.
Ann:
And about 4 million people think so!