I have been approached by many brilliant social entrepreneurs in recent weeks. They each have several things in common. Each has an incredibly creative idea and a strong passion linked to a deep seated observation that social currency has value. As nebulous as that may sound, it is very real, specific, and clear in the minds of those who I’ll call, The New Entrepreneur.
Nothing Economic can happen until two or more people get together to build something. Likewise, when two or more people get together to build something, economic things happen. The objective of this post is to demonstrate the 3 underlying actions of a new class of business plans that will become dominant in the next economic paradigm.
Our recipe is simple:
Step one: convert financial currency into social currency
Step two: Create value denominated in social currency
Step three: Convert new social currency back into financial currency – if needed
This simple recipe forms the basis of the business plans for several start-ups including Social Flights and The Social Value Network as well as numerous other projects that we consult to in the US, Greece, Brazil, Australia, China, and Mexico.
So here is how it works
The Old Business Model: Suppose you buy a truck and you use it to haul stuff for your own personal and business interests. After 5 years, you can sell the truck for about 1/2 what you paid for it.
The New Business Model: Suppose that you buy a truck to hauls stuff for your own personal or business interests. Suppose that you also let The Boy Scout troop leader borrow it to pick up christmas trees for sale. Suppose you let the Kiwanis use it to pick up supplies for their annual salmon bake. Suppose you let the YWCA haul donated furniture to their satellite facility. Suppose you help your neighbor use it for a home improvement project. After 5 years, you sell the truck for about 1/2 of what you paid for it.
The difference is that now your community is engaged with your personal interests. You have converted financial capital into social capital and created new value denominated in social currency. One notable example includes Neighborgoods, but there will undoubtedly be thousands of variations of this leveraging every conceivable physical asset.
Now, how do you transform this back social capital into financial capital? Well, that’s what the emerging science of Social Capitalism is all about. Social Profit is like a fungible option with a face value. If structured correctly, an option can have a face value equal to the difference between discount and full price. That face value can be traded like money. When you are engaged in a community, people know who you are, they trust you and they share with you. People are trading options – the right without the obligation to exercise a financial position in the future.
Options have real value as an asset if you have them or as a liability if you don’t
Jay Deragon’s professional career includes providing strategic management consulting practices for Fortune 500 companies as well as local small businesses. He has consulted with numerous industries spanning over 25 years of professional experience globally.