June 25, 2020
By: Tony Salvador, Head of Research, SecondMuse
Let’s say you need a barn. Not very long ago, that wasn’t at all an uncommon thing. Barns are known to fall down over time. And since we were nearly all farmers, we needed a lot of barns. Today, of course, you could find a contractor and hire a crew of masons, carpenters, plumbers, electricians, etc. Or, if you are Amish – even today – you would have a “barn raising.” Friends and community members would all get together and build you a barn. They would do this, of course, because you would be there for any of them in those extraordinary moments when help is needed. Being part of the community, relying on each other and recognizing your humanity in them and theirs in you – these are a kind of asset, a kind of reserve both for organizing a barn raising in normal times or being helped in hard times. This asset is called “social capital.”
Social capital is what makes towns and cities into communities and neighborhoods. Social capital is when an accountant helps a hardware store organize their finances and when the store proprietor fixes the local diner’s faucet. Social capital binds us together in non-familial, non-compensatory exchange. Social capital – what we do for each other and who we do it for – lets us see us, stronger, more resilient, together.
Indeed, communities, neighborhoods, and countries with ample social capital manage challenges far more adeptly and resiliently than otherwise similar places without a store of social capital. But you can’t just go down to the bank and withdraw a pile of social capital in small bills. Amassing social capital takes time.
In our communities and neighborhoods, we build, maintain and extend social capital in a variety of ways – and very effectively through small businesses. Small and medium businesses, operating locally, offer a platform for building social capital. Every business person needs help sometimes. A small business means you have a way of engaging in the community through a product or service. People know you, get to know your character, the character of your business. Small business owners participate in their community through civic organizations, schools, churches, or even just together to promote their own businesses. And everyone needs a “barn” from time to time, where people help each other out.
This is the stuff we can see – people helping each other out. But lift the lid, and there’s a bunch of invisible things we don’t usually think of. Businesses have a “stake” in the community. They weather challenges and retain employees longer; they contribute to a broader middle class (and less poverty and inequality); more of their dollars stay in the community; and they pay their taxes a) in their communities and b) to a comparable extent greater than big businesses.
Moreover, small businesses build human capacity – people running businesses not only know “their job” such as contracting or plumbing or coding or designing. They also know how to run a business – how to start, build, extend and at times, wind down their business. All of these things are “social acts” – they don’t happen in a vacuum – they happen in our society; they are a part of our society. Finally, small business owners know what it means to make decisions and take (reasonable and reasoned) risk. There’s little else as American as taking risk for progress. And social capital is the foundation upon which people can take risks. We know, for example, that the vast majority of entrepreneurs are people who have a backup (e.g., their parents) and a backup to the backup (e.g., their friends) if their venture doesn’t work out. If you don’t have a safety net, it’s hard to risk everything. Social capital is the asset that enables growth and progress.
Very often, we think about the “billion-dollar exit.” And for sure, these are awesome events – large businesses, lots of jobs, lots of cash. Our friends at Zebras Unite work with non-traditional entrepreneurs – and they note that many of their companies, while certainly motivated by profit, aren’t motivated purely to become the billion-dollar exit. They’re also deeply motivated by how they and their businesses contribute to their community. At SecondMuse we think about and work to enable the emergence of whole ecosystems of local businesses. Independent of each other businesswise, but relying on each other by catalyzing and nurturing the growth of social capital, supporting each other as they can, banking social capital – one fixed faucet, one accounting lesson and one free ice cream at a time.
And then, when the hard times inevitably arrive – when there’s a fire, a heart attack, you need a barn, or a pandemic – there’s a better chance they’ll get through it together, humanely and with dignity and humanity.