Social as Currency

This post was originally published on LinkedIn on April 26, 2016 When some people hear the name of our fund, Social Starts, they presume we focus on social media or social marketing. It isn't an unreasonable reaction, but it misses something rather fundamental and powerful.

Social, in truth, is anything but superficial or limited. In fact, at its core, Social is power.


Humans interacting with other humans, one on one or in small groups of trust, has always been the single most powerful generator and transference of influence. My mentor Bill Ziff called peer endorsement of products the "strong force" in marketing, referring to the strong force holding nuclei together in physics. All marketing and advertising, by contrast, was the "weak force" in markets. And that strength came decades before social and mobile technology hugely expanded the range over which individuals could project their influence to other individuals.

This power expresses itself today, not just in terms of product recommendations, but in a much deeper way that we feel will have profound impacts on the future -- and which colors strongly our investment approach as a fund.

Today, essentially, all actions of all people can be seen, captured, measured against all other actions, tracked to outcomes, and weighed in terms of their impact on the whole. That means that, today, digital behavior can be expressed as a currency.

Now, human behavior has always been the basis for currency. All the goods and services created and consumed by all the people in the USA produces the Gross National Product and that GNP is a primary driver behind how much currency the US economy can produce. Print more money than the actual currency represented by economic activity, you get inflation. Print too little and the economy slows down.

But now, through the ever deepening power of social/mobile technology, that kind of translation of human interaction into a store of value and mechanism of exchange can be accomplished without the intervention of governments. The community, itself, by dint of how it acts and what it produces generates its own currency.

What does this mean in terms of business and culture in the years ahead?

First, it means that traditional ideas of advertising and marketing are toast. It doesn't make sense to do broadcast messaging, when it is possible to weigh specific actions by specific people in specific frameworks at specific points in time. Only a marketplace, where messages flow at the right price and the right moment to the right person make sense when this much can be known. It will take some time for the natural residual throw-weight of existing approaches to wear away. But, wear away they will.

Even more importantly, the ability to capture and weigh behaviors in social/mobile, means that individual communities can codify their own private currencies and most assuredly will. You can think of this as loyalty points programs on steroids, but it really goes much deeper than that. Governments weren't always the only sources for currency. Money used to be private. And the trend in tech says at least some money, if not most money, may become private again.

Why? Because private digital currency based on real behaviors is more precise than government money; it reflects actual contributions to an economy, not just approximate ones. And, it is borderless. The digital "country" is everyone on Earth at once, which naturally fits with an era of "career freelancing" and meshes-of-skills displacing traditional formal corporations. And, private digital currency, can only be taxed by consent. This could bring fundamental shifts in the relationship between citizens and government and how human affairs are managed planet-wide.

These forceful, inexorable changes in how the world works set off by the way social/mobile technology has changed human behavior, are what we track and invest around at Social Starts.

That -- the fundamental change in everything -- is what Social means for us.