"Status as a Service (StaaS): The Importance of Social Capital in Social Networks"

"Status as a Service (StaaS): The Importance of Social Capital in Social Networks"

Human beings are naturally drawn to the pursuit of status and social capital. This is a fundamental truth that is often overlooked in the analysis of social networks, despite their immense popularity and growth. While financial capital is easily measured, the value and movement of social capital remains difficult to quantify. However, it is crucial to understanding why social networks succeed or fail. Successful social networks must appeal to users when they have few users, and they must have strong network effects to enter a positive flywheel of growth.

The competition for relative status still motivates humans, and most social media networks generate much more social capital than actual financial capital, especially in their early stages. However, if everyone can achieve a certain type of status, it becomes a participation trophy and loses its value. Therefore, a new Status as a Service (StaaS) business must devise some proof of work that depends on some actual skill to differentiate among users.

Utility and social capital are the two axes that are crucial to understanding social networks. Utility is straightforward and requires little explanation, but social capital is more mysterious since it is tied to status games. Successful social networks bring a massive supply of pre-existing social capital from another status game, such as the fame game, to every table. Therefore, it is easier to accumulate social capital in the early days of a social network.

However, social capital is fragile, and its value depends on coordinated consensus. The stability of a status lattice depends on the composition of the network. Social networks must devote resources to market making between content and the right audience for that content so that users feel sufficient return on their work. Social networks that can generate both social capital and utility are most durable.

In conclusion, social capital is a crucial component of social networks that is often overlooked. Successful social networks must appeal to users when they have few users and have strong network effects. The competition for relative status motivates humans, and a new StaaS business must devise some proof of work that depends on some actual skill to differentiate among users. Social networks must devote resources to market making between content and the right audience for that content so that users feel sufficient return on their work. Ultimately, the holy grail for social networks is to generate so much social capital and utility that it ends up in that desirable upper right quadrant of the 2x2 matrix.