Social Capital underpins share values

Fabio Sabatini recommended Social Capital Blog and now I have added it to my blogroll. It is the handy work of Thomas Sander, Executive Director of the Saguaro Seminar at Harvard University’s John F. Kennedy School of Government.

He has a great post up entitled Economy dangling by the thin thread of trust that has some great links to some seminal and more recent contextual pieces on trust, the economy and the banking system.

I hung out because this vid that Thomas includes from “Its a Wonderful Life” kinda says it all …

These are painful times. I don’t know about you, but I find it difficult to focus on emergent value when practical, pressing concerns are breathing down my neck.

I am wondering about the differences and similarities between brands and financial products.

Are there similar factors at work in the debasing of traditional brand value and complex financial products? Aren’t both concepts some sort of derivative?

Will we emerge from this transition recognizing that it is the underlying relationships that contain value yielding assets not commodities like houses or oil or flavored water?

2 Responses to “Social Capital underpins share values”

  1. Douglas Says:

    As an analyst I see the root cause of the current crisis in leverage-based speculation: using borrowed money to buy assets one doesn’t want on the expectation that someone else will pay more for them later.

    This may have an analog in the use of paid celebrities shilling for a product, in that the brand is borrowing social capital to wrap around a product and sell it on to the public.

  2. Michael G. Cayley Says:

    Thanks Doug …

    I see the relationship between the lender and home owner at the bottom of the pile.

    The lender taking on weak relationships, expecting the house (a commodity) to appreciate in value with no accord to the strength of the home owner (the source of value, i.e., the cash stream to service the loan).

    Then instead of fostering the relationship to make the loan an better asset, the banker abstracts it as a derivative product, discounts it and sells it.

    The basic problem starts when you factor people out of the equation.

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