The Social Network

My mind briefly drifted from the conversation.

I was transported to the early years of my career at J.P. Morgan. We were expanding the bank’s traditional business of managing money for the IBMs and Rockefellers to third-party financial advisors.

It was a whole new market. We needed to get people to know us, and trust us. We needed to create familiarity. And tell stories.

Fortunately, most people had at least heard of our founder John Pierpont (J.P.) Morgan from American history. His life story was chronicled in the 1990 book “The House of Morgan.” I peppered my prospective advisor presentations with the financier’s stories.

One quote always stood out.

“The first thing is character…before money or anything else. Money cannot buy it…”
–J.P. Morgan (source)

Maybe the quote resonated because early in my career I didn’t have money. But I was trustworthy, diligent and generous. Had he met me, I believe the American financier would have found me of strong character and a suitable business partner.

I wonder how FICO would have characterized me. Did I even have a FICO credit score at that time?

As my career, credit history and FICO score grew, so grew my financial capital. With education and job experience, I grew my human capital.

But isn’t there more to a person than their finances or resume? Perhaps that’s what J.P. Morgan was getting at.

For example, I care a lot about my reputation; my circle of friends, bosses and colleagues only includes those who I believe have strong character. And because I love “connecting-the-dots,” I’m always connecting within the circle–people, ideas and organizations.

It’s proven pretty valuable. Today, there’s a more common phrase for it– social capital.

With the rise of social networks and big data, we can measure social capital like never before. It’s quantifying the qualitative. “J.P. Morgan would love this,” I thought.

And then I went back to conversing with my friends.

“Have you heard of Klout?” asked Maggie.

“Sure,” answered my friend Chris. “Klout’s idea of measuring social capital was part of the inspiration to my founding kountable.”

We were halfway around the world, enjoying a sunset beer and peanuts on the lanai of our boutique hotel in Kigali, Rwanda. The evening prior, we were among 400 Rwandan entrepreneurs, business leaders and government officials who packed a ballroom at the Serena Hotel in Kigali for kountable’s Silicon Valley-style launch party.

It was a fitting launch, as kountable is a San Francisco-based technology company. They use the measurement of social capital for economic and social good.

Rwanda is among the most business-friendly countries in Africa. I saw the country’s commitment to efficiency and solid infrastructure with my own eyes.

What I could not readily see was that access to capital could be a headwind. Say an entrepreneur was successful in winning a tender (RFP), offering to supply materials to a government or corporate entity for a stated price.

A bank might be unwilling or unable to finance the entrepreneur in the required time. Alternative financing sources offered quick funds, but with staggering interest rates that could make the business deal unprofitable.

Could the business worthiness of entrepreneurs be assessed more efficiently, and transactions financed more cheaply?

This was Chis’ question. Believing the answer “yes,” he founded kountable.

Kountable’s technology measures an entrepreneur’s business worthiness based on social capital. The entrepreneur uploads his cell phone records and links his social networks to kountable’s technology platform. Thousands of data points are run through an algorithm to generate a kScore™. As a final step, kountable collects the details of the entrepreneur’s intended trade. And in 5-10 days, the trade request is analyzed and decided upon.

While in Kigali, I met many of the kountable entrepreneurs. A medical supply company financed trades to bring 24 neonatal intensive care units to 11 Rwandan locations. An importer of plaster financed trades with a Korean company to make chalk, which was purchased by the Ministry of Education for Rwandan schools.

Allowing worthy entrepreneurs to obtain financing could transform small businesses and ultimately the welfare of Rwanda.

Developing economies like Rwanda seem the perfect place to apply the measurement of social capital to business. An American entrepreneur enthusiastically uploading his cell phone records is about as likely as FICO switching their traditional credit assessment metrics. But why wouldn’t FICO consider using social data in the future, once correlations and data relevance is more firmly established?

Chris, Maggie and I went back to our conversation about Klout. We struggled to understand what a person actually did with their Klout score.

“The funny thing,” said Chris, “was that I received an email today, the morning after our launch party, alerting me that my Klout score had suddenly skyrocketed.”

We chuckled at the irony. A higher Klout score was certainly not something Chris could take to the bank.

In full disclosure, I am an investor in Kountable, LLC and the Kountable Delphi Trade Fund, L.P.

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