I was sitting in a meeting last week, and the conversation turned towards how people around the table were addressing the need to cultivate and grow human capital, in order to foster entrepreneurship. In a separate conversation earlier the same week, I was involved in an interesting debate with another group on how valuable is it or not for a product or a service to have network effects. This made me think about how related these two concepts are, and how we can use knowledge about them to our advantage.
Network effect is the attribute a product or service has by which its value is driven by its level of adoption. A clear and often used example of this is the telephone. There was little use to the first telephone, until a second one was available. Facebook or other such networks become more valuable to you the more people in your social circle use them to connect with you. People make decisions on purchase and adoption of products or services based on the value they perceive from them; compared to everything else they may be able to use their money and time for otherwise. Network effects embedded into a product or service make it more valuable as more people purchase and make use of it.
Human capital is referred to as the knowledge, skills and experiences that make us who we are within the boundaries of our skin. Everybody has human capital. It is what makes us valuable as individuals, and we can increase it if we do the right things. In my opinion human capital is not so much about intelligence, mainly because that is such a subjective and hard thing to measure and compare. The power to adapt accurately and with speed to a changing environment, I believe, is a trait of intelligence. Many of us may know people with highly specialized technical prowess, without the capacity to adapt to a radically new set of life circumstances even if their lives depended on it. Intelligence, by this line of reasoning, requires forethought. The hunter gatherers out on their first trip that witnessed their colleague fall prey to the bear gained forethought. Through experiences like that, they each increased their human capital. They happened to be together to experience it because we are designed and meant to be social, to depend on each other’s skills that we may not have individually for our survival. Because of its very nature, the only way to build our own human capital is by communal interaction and experiences lived with other humans.
And that is why I was in those meetings I mentioned, learning about how you can, as someone who is trying to foster an entrepreneurial community, put in place the right elements that can bring about good interaction between all the would-be-members of that community. The more we stimulate and promote the transfer of knowledge, skills and experiences among the individuals in that network, the greater the value of the network itself becomes, and the more it attracts others to come join, bring in their stock of human capital and partake in the sharing of it, promoting cross cultivation and increasing everybody’s value to the network, and the value of the network itself. More interaction begets more value; more value brings more people, and so on endlessly. Think about that, it is like putting a mirror in front of another mirror. You look inside, and there is no end to how far you can go.