The popular Social Networking site Facebook, according to co-creator Dustin Moskovitz, was built to “accumulate social capital” (cited in Ricadela, 2007). The idea of social capital has been around since the early part of last century (Hanifan, 1916).  In an Australian government conference on Family Strengths, Stone & Hughes (2000) defined it as “networks of social relations characterised by norms of trust and reciprocity,” and argue that it is “critical for community wellbeing.” Currently Facebook is accumulating the social capital of over 400 million users (Facebook Timeline, 2010). This accumulation of social capital is valued at $35 billion (Byers, 2010). That’s over $8 per user. Social capital has always been a valuable economic resource,  bowling alleys and cafes rely on it. However, there has been the necessity to tie in a product, be it an overpriced drink or the use of a venue. The actual conversations that built social capital remained the private domain of the participants. Facebook sells advertising to those conversations and it is estimated it will make over $1 billion this year doing so (O’Neill, 2010).  In the eighteen months to February 2010 Facebook membership quadrupled from 100 million to 400 million (Facebook Timeline, 2010).  Facebook takes our social capital, the bastion of  trust and reciprocity, and turns it into a commodity to be traded like any other, yet we continue to flock to it. Why are we allowing Facebook to own, market and commodify our social capital?

Robert Putman has extensively examined social capital. In “Making Democracy Work” (1993) he looks at social capital in Italy. He found communities that have traditions of trust and reciprocity were far more prosperous than those with no such traditions. He found this social capital was built through participation with informal civic groups such as soccer clubs and choral societies, and it was cumulative. These accumulations, unlike traditional capital, were public goods unable to be owned by any individual.  In Bowling Alone (2000) he uses the principles he found in Italy to examine social capital in the US throughout the 20^th century. He establishes that social capital had increased until the 1960s and steadily declined for the remainder of the century. The main reason for this seems to be generational differences, best characterised by three changes: an increase in the pressures of time and money, improved mobility creating an urban “sprawl” effect, and an increase in the penetration of mass media devices like the television.

Since Putnam wrote his book there has been an emergence of interactive technologies “designed to enrich user experience” (O’Reilly, 2007) on the Internet. Referred to as Web 2.0, these interactive technologies have led to a meteoric rise in popularity of Social Networking sites like Facebook (Boyd & Ellison, 2007)  which allow users to build social capital in a multitude of ways. On Facebook one keeps a profile page that lists one’s friends and keeps track of many of their interactions (Facebook About, 2010), displaying their social capital. The Internet has created a fundamentally new way of accumulating social capital, and it goes a long way to addressing the generational differences that Putnam claimed to have caused the fall in American social capital (Ellison et al, 2007). No longer do we have to travel long distances or make expensive phone calls to stay in touch, thereby negating much of the effect of the increased pressures of time and money. In fact as the physical distance between us becomes less of a problem, urban sprawl becomes less of a hindrance to increasing social capital. The new interactive and inclusive forms of media on the Internet reduce the power of mass media devices like television, and offer a replacement that actually increases social capital. This is best exemplified by YouTube, the popular video sharing website, which is creating what Wesch (2008) describes as a “seriously playful participatory media culture”. The Internet best increases social capital when it is used to augment real-world communities (Blanchard & Horan, 2000), and according to a Pew Internet and American Life survey it often is (Horrigan, 2001). Facebook seems to be especially potent at increasing social capital, with a study of Facebook use and social capital in a college environment finding that “Internet use alone did not predict social capital accumulation, but intensive use of Facebook did” (Ellison et al, 2007). How does this new form of social capital compare to the traditional form of social capital used in Italy?

In Italy social capital is built through informal civic groups like soccer clubs and choral societies. On the Internet is built through groups of shared interest, but their influence does seem to lead to cumulative levels of trust and reciprocity (Blanchard & Horan, 2000).  There is one key difference between Putnam’s findings and social capital on the Internet though; in Italy, accumulations of social capital are beyond monetary value. They are public goods no individual can own. Contrastingly the accumulation of social capital on the Internet that is Facebook is owned and traded. This fundamental difference means that when examining social capital on the Internet,  Putman’s method of comparing to the traditional social capital of Italy is flawed. To better understand social capital on Facebook, a broader method of analysis is needed.

By analysing the social capital at use in Silicon Valley, the area in California responsible for so much technical innovation including the majority of Web 2.0 technologies, Cohen & Fields (1998) found an alternative analysis of social capital, suggesting social capital is a representation of the policies of government and institutions involved.  Due to the international and cutting-edge nature of Internet technologies, government influence is diminished, and can best be seen by how it influences the policies of the other institutions involved. To better understand the nature of social capital at work on Facebook then, it would be prudent to analyse the nature of social capital at work in the institutions involved in its creation and development.

The most fundamental of institutions involved is the community of Silicon Valley, in the southern part of San Francisco’s bay area,  home to some of the world’s best research institutions and largest technical and Internet companies, including Facebook and owners of YouTube, Google Inc. The nature of work in Silicon Valley is fundamentally different. Himanen (2001) establishes a new work ethic on display in this area, which he dubs the Hacker Ethic. The engineers of Silicon Valley he argues, do not work for six days so they can enjoy themselves on the seventh as is espoused by the prevailing Protestant work ethic, instead they work to enjoy themselves. This has led to a situation where job security is not very important, the average time spent with an employer is only a few years and workers instead value being involved in cutting edge projects; a move from job orientation to project orientation. Cohen & Fields (1998) suggest that although there is an important social capital used in Silicon Valley, it does not rely on civic engagement and social responsibility. By contrast, the social capital that defines success in Silicon Valley is shown through relationship with three important groups: the venture capitalists that bankroll the various business ventures, the head hunter firms that search out the talent acquisitions for the business’ of Silicon Valley, and the legal fraternity who specialise in the unique challenges of the area. Cohen & Fields (1998) demonstrate that social capital in Silicon Valley is intrinsically linked with creating economic currency, and has very little interest in moral norms. This is best seen by looking at the beginnings of one of Web 2.0s most successful companies, YouTube.

YouTube was started in 2005 by three former PayPal employees, it was bankrolled by venture capitalist firm Sequoia Capital for an initial investment of US$3.5 million and a second investment a year later of US$8 million (Green, 2006). It was sold in October 2006 to Google Inc for US$1.6 billion. It made the investors US$516 million (AFP, 2010), over 4,000% per annum. At the time of sale, YouTube had not generated any monetary profit. What it had generated, was a tremendous amount of social capital which was accumulating at an astonishing rate; in mid 2006, unique visitors to the site grew 75% in a single week (Bausch & Han, 2006). What the Google acquisition essentially did was transfer this social capital directly into economic capital, without any of the manipulation of market conditions usually necessary. No advertising, no selling of supporting product, just the direct sale of social capital.  In a current copyright lawsuit against the founders of YouTube and Google, Viacom are arguing that  YouTube was set up to become an acquisition target by “any means necessary” (AFP, 2010). This included encouraging the illegal broadcast of copyrighted materials to generate traffic. Without going into the details of the suit, which has become a litany of “legal shenanigans” (Sondoval, 2010), one can imagine how the social framework of Silicon Valley may have set up YouTube to be an acquisition target. The venture capitalists supply the funds for the startup, and despite a meteoric rise in popularity are unable to extract a profit. They consult the legal fraternity who recommend not attempting to acquire funds through advertising or other methods, rather allow the current copyright infringements to continue and use the fact that the company makes no money as a deterrent to legal proceedings. In the meantime YouTube continues its growth, all the while being watched by Google’s head hunters. They recommend that not only is YouTube worth the 600 to 700 million Google has valued its social capital at, but the strong foothold YouTube has acquired in what is sure to be an influential part of Web 2.0 is worth a 1 billion dollar premium (Parfeni, 2009). It is this type of social capital, more concerned with economic performance than norms of trust and reciprocity that is at work behind the scenes of venture capitalist firms like Facebook.

Ofcourse, there is one more important social group at work in Silicon Valley: the engineers that build the sites and develop the technologies that make all this possible.  Working under Himanen’s Hacker Ethic (2001), where work had become less job-based and more project based, these workers were among the first to build social capital online. They were drawn to one of the earliest online virtual communities, the Whole Earth ‘Lectronic Link (WELL)  because it “offered access to information and expertise that could be transformed into income elsewhere.” (Turner, 2005). The WELL was the legacy of the Whole Earth Catalogue, set up to allow the various communes of 1960s America access to a shared knowledge pool (Turner, 2005). Social capital was on display throughout the WELL. It attracted experts from a multitude of areas and users of the WELL could consult these experts, using their advice in day-to-day life. Turner (2005) observed two forms of value accumulated on the WELL: performance value and reputation value. Performance value, he contends, was inherent in the offerings made to the WELL, which became performances used for the entertainment of fellow users. Reputation value was awarded for sustained contribution. Contributors were often extended invites to join real-world projects as reward for the value they had accumulated, although these contributions were not given to be rewarded, but rather as gifts to the community. One can see that a strong social capital was built up on the WELL. Not one that was motivated by economic reward as is Cohen & Fields’ (1998) social capital of Silicon Valley, but motivated by ideas of trust and reciprocity like Putnam’s (1993) social capital. Contrasting the altruistic motivations of WELL users is the fact that the virtual community has been seen as a “very promising business model” since the mid 1990s (Leimeister & Kremar, 2004). Whilst this business model definition of virtual communities is very limiting, it is important to note that the sale of YouTube and success of Facebook are the culmination of a long held belief that social capital is far more commodifiable on the Internet.  This lead to users of the WELL feeling that the community was cheapened by being a commodity. As one WELL user put it: “I have seen so many people spill their guts on-line, and I did so myself until, at last, I began to see that I had commodified myself… I created my interior thoughts as a means of production for the corporation that owned the board I was posting to, and that commodity was being sold to other commodity/consumer entities as entertainment” (Hermosillio, C, as quoted in Turner, 2005 p.508). Users of the WELL were forced to come to terms with this commodification of their social capital because the WELL supported the project orientated work environment they found themselves in. In the same way users of Facebook are forced to come to terms with the commodification of their social capital by Facebook, because Facebook supports the current political and economic environment they find themselves in.

Jagannathan (2009) suggests we are witnessing the emergence of a new economic vision dubbed “socio-capitalism”, which “seeks to combine the best ideals of socialism while mitigating the worst features of capitalism.” He contends three seminal events: “the fall of the Berlin Wall, the rise of China and the collapse of western financial institutions” have given rise to this new economic vision. The fall of the Berlin Wall highlighted “systemic inefficiencies” of the Soviet socialist system, and the collapse of western financial institutions highlighted the inefficiencies of the Western capitalist system. The rise of China as an economic super power demonstrates the power of combining socialist and capitalist ideas. This change in economic vision is demonstrated by the American government’s decision to bailout the collapsed financial institutions; described as “socialism with capitalist characteristics.” A fourth seminal event could be added to Jogannathan’s list; the rise of interactive media. Contrasting mass media devices like TV, which Putnam (2000) contends are partially responsible for the decline of social capital in America, the interactive media of Web 2.0 tends to increase social capital. The sale of YouTube, a company that had never made any money, for $1.6 billion, demonstrates social capitalism at work as potently as the government bailout of financial institutions. In fact, the trading and valuating of social interactions that goes on in Silicon Valley could be described as the capitalising of socialist characteristics.

In an era of socio-capitalism, social capital is the new form of currency. In order to prosper in this new era methods are needed to overcome the generational differences that lead to a decline in social capital throughout the late 20th century. Social networks like Facebook give us these methods, but at a price: that of turning the social capital itself into a commodity; valued, traded and marketed by Silicon Valley venture capitalists. Judging by the continued meteoric rise of Facebook, it is a price we are willing to pay.

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Commodifying Community by Stevie Marshall is licensed under a Creative Commons Attribution 2.5 Australia License