I want to begin today with a warning our
communities are under threat from roving
mobs of Connor’s pushing their wares on
the Goa Bowl the desperate in the
impulsive and I know a few that are safe
from their ploy and there’s a couple of
deviants that are particularly
concerning to me my daughter’s you see
they are members of a cabal that
permeates the fabric of America Girl
Scouts USA every January they comb the
neighborhood and stake out the
department stores pushing a product that
while delicious is devoid of any
nutritional value and when I was a
single man I used to buy one or two
boxes and then I had two Girl Scouts of
my own and a network of friends
daughters pushing cookies like a street
corner drug dealer and I found that that
number increased exponentially
you see Girl Scouts USA has developed
cookie sales as a fundraiser but also as
an opportunity to develop leadership
skills and to learn about economics and
there’s some lessons about economics
that we can learn from them you see
sociologists would describe this ability
of Girl Scouts to sell cookies to their
network as social capital and just like
other forms of capital such as physical
capital use in production our financial
capital used to buy supplies social
capital has an advantage and economic
advantage for those that hold it now the
conventional wisdom is that the secret
to economic success is rooted in who you
know and history is filled with examples
where this is true you might think about
Harry Truman getting elected because of
Tom Pendergast in the Kansas City
Democratic machine or Henry Luce the
founder of Time magazine whose wealth
came at the hands of Nettie McCormick a
member of the Chicago
social elite but there is increasing
evidence that it’s not who you know that
matters it’s how many people you know in
other words economic success comes not
from knowing one person really well but
from having a large and diverse social
network so you might think about the
Girl Scouts if a Girl Scout knows one
person she sells a couple of boxes of
cookies if a Girl Scout knows dozens of
people the number of cookies that she
can sell increases dramatically now this
is not a radically new idea we have
known for a long time that there is a
connection between relationships and
economic outcomes but what I would argue
for you today is that the economic
advantage of relationships isn’t only
for individuals but that there is an
economic advantage of relationship for
communities a group of scholars
including myself and Craig Abu Sean and
Barry Rubin Indiana University looked at
job creation and per capita income in
the largest 50 metropolitan communities
in the United States and what we found
was that those communities that were
most socially integrated in other words
those communities where individuals were
connected to each other in frequent and
diverse ways produced jobs at a much
greater rate than those communities
where people were less socially
integrated and not only that but of the
24 common predictors of economic growth
that we considered social capital was
the second biggest predictor now don’t
get me wrong education matters education
matters more than anything but social
capital predicted job creation more than
every other indicator including the
level of manufacturing in the community
and the number of professionals in the
community so you might think about it
this way if I live in a community and
everybody that I know works at the same
Bank there is very little economic
benefit for the community sure the bank
is unlikely to lose my business
but I offer very little to them in terms
of meaningful referrals by contrast if
I’m part of a large and diverse social
network that gives me access to
knowledge and resources for my economic
betterment and I bring those connections
and I bring those benefits back to my
community to help everyone so how is it
that social capital leads to economic
growth social capital helps communities
economies grow in two ways by lowering
the cost of doing business and by
magnifying the economic impact so first
transaction costs transaction costs
refer to those costs associated with
doing business the cost of finding
customers the cost of gaining knowledge
and expertise the cost of entering into
agreements to deliver goods and services
social capital lowers these costs so if
I am part of a large and diverse social
network people know about the goods and
services that I provide I have access to
knowledge and resources through my
community and because I’m a trusted
member of the community there’s less
need to hire lawyers to enter into
formal agreements social capital saves
communities money now you may know that
there are some parents who sell cookies
for their daughters you are out there
you know who you are parents who work
for large organizations sell more
cookies than parents that work for small
organizations because they have access
to a wider range of customers likewise
if I play on an intramural soccer team
or I’m part of a prayer group that
creates economic opportunities for my
daughters to help their troop to the
economic impact of these transactions
each of these relationship facilitated
transactions has an economic multiplier
so when my daughter’s sell their cookies
that money goes to their
and their troop uses the money to have a
pizza party or to go camping that money
pays the salaries of those people that
work at the campground or sell pizza and
they use that money to go see a baseball
game and the owner of the baseball team
upgrades the facility creating
construction jobs and so on and so on
when people are socially integrated into
their communities that gives them an
incentive to spend their money and to
spend their money locally in a way that
magnifies the economic advantage for the
communities in which they live there are
a lot of different approaches to
economic developments communities build
stadiums to create construction jobs and
to attract tourism a lot of towns have
invested heavily in fostering
entrepreneurship and building a creative
economy I once it had to had the
director of economic development for a
major aviation community tell me
incentives and subsidies are all that
matters what I love about relationship
facilitated economic development is that
it’s cheap it’s easy and it has positive
benefits for everybody in the community
so how do we do this how do we go about
using relationships to foster the
economy first begin with mapping your
community look for linking connections
relationships and networks that are more
highly integrated produce economic
outcomes better than networks that are
disjointed from each other in order to
maximize the economic effect people’s
networks need to be connected so if we
go back to this relay this map that we
saw earlier if we take one person out of
this map our once cohesive network
separates into two disjointed networks
with half of the professional and
geographic coverage of the first network
we need to be intentional about bringing
people together there was a study that
they a report that came out not too long
ago from the Center for representative
democracy
about the characteristics of the most
effective politicians they and
identified intelligence honesty systems
thinking resourcefulness I would add
that our politicians need to be like
Yenta in Fiddler on the Roof
they need to be matchmakers they need to
make connections between people who are
otherwise not connected seconds we need
to ask ourselves the question who do we
bring to the table
during some of my early research on
economic development I came across the
cake a case of the Church of God of
Christ in Wichita Kansas the city of
Wichita had been approached by the
Church of God of Christ because the city
had a 50,000 square foot department
store that had been given to the city it
had been abandoned and the city had no
idea what to do with it the church came
to the city and said we have an idea we
want to take this store and break it up
into mini stores and use them to
incubate entrepreneurship so here you
have the example of a city that had a
resource that they didn’t know what to
do it and by involving people that’s
outside of the usual suspects outside of
the major employers outside of the
Chamber of Commerce outside of the
United Way a church by involving them in
the planning process they were able to
realize an economic outcome that they
wouldn’t have otherwise attained third
support civil society 40% of Americans
go to church regularly seventy-five
percent of families with school-age
children are somehow involved in youth
sports half half of women over the age
of 25 who describe themselves as regular
readers are members of a book club these
are untapped
economic development resources by
supporting these organizations as an
opportunity to bring people together we
create economic opportunity for everyone
but civil society needs our help they
need financial support from individuals
and corporations but more importantly
they need our time and they need our
dedication
there is no silver bullet for economic
development but building relationships
is a good first step
so go out meet your neighbor volunteer
buy some cookies let’s get our economy
going thank you
[Applause]
[Music]
communities are under threat from roving
mobs of Connor’s pushing their wares on
the Goa Bowl the desperate in the
impulsive and I know a few that are safe
from their ploy and there’s a couple of
deviants that are particularly
concerning to me my daughter’s you see
they are members of a cabal that
permeates the fabric of America Girl
Scouts USA every January they comb the
neighborhood and stake out the
department stores pushing a product that
while delicious is devoid of any
nutritional value and when I was a
single man I used to buy one or two
boxes and then I had two Girl Scouts of
my own and a network of friends
daughters pushing cookies like a street
corner drug dealer and I found that that
number increased exponentially
you see Girl Scouts USA has developed
cookie sales as a fundraiser but also as
an opportunity to develop leadership
skills and to learn about economics and
there’s some lessons about economics
that we can learn from them you see
sociologists would describe this ability
of Girl Scouts to sell cookies to their
network as social capital and just like
other forms of capital such as physical
capital use in production our financial
capital used to buy supplies social
capital has an advantage and economic
advantage for those that hold it now the
conventional wisdom is that the secret
to economic success is rooted in who you
know and history is filled with examples
where this is true you might think about
Harry Truman getting elected because of
Tom Pendergast in the Kansas City
Democratic machine or Henry Luce the
founder of Time magazine whose wealth
came at the hands of Nettie McCormick a
member of the Chicago
social elite but there is increasing
evidence that it’s not who you know that
matters it’s how many people you know in
other words economic success comes not
from knowing one person really well but
from having a large and diverse social
network so you might think about the
Girl Scouts if a Girl Scout knows one
person she sells a couple of boxes of
cookies if a Girl Scout knows dozens of
people the number of cookies that she
can sell increases dramatically now this
is not a radically new idea we have
known for a long time that there is a
connection between relationships and
economic outcomes but what I would argue
for you today is that the economic
advantage of relationships isn’t only
for individuals but that there is an
economic advantage of relationship for
communities a group of scholars
including myself and Craig Abu Sean and
Barry Rubin Indiana University looked at
job creation and per capita income in
the largest 50 metropolitan communities
in the United States and what we found
was that those communities that were
most socially integrated in other words
those communities where individuals were
connected to each other in frequent and
diverse ways produced jobs at a much
greater rate than those communities
where people were less socially
integrated and not only that but of the
24 common predictors of economic growth
that we considered social capital was
the second biggest predictor now don’t
get me wrong education matters education
matters more than anything but social
capital predicted job creation more than
every other indicator including the
level of manufacturing in the community
and the number of professionals in the
community so you might think about it
this way if I live in a community and
everybody that I know works at the same
Bank there is very little economic
benefit for the community sure the bank
is unlikely to lose my business
but I offer very little to them in terms
of meaningful referrals by contrast if
I’m part of a large and diverse social
network that gives me access to
knowledge and resources for my economic
betterment and I bring those connections
and I bring those benefits back to my
community to help everyone so how is it
that social capital leads to economic
growth social capital helps communities
economies grow in two ways by lowering
the cost of doing business and by
magnifying the economic impact so first
transaction costs transaction costs
refer to those costs associated with
doing business the cost of finding
customers the cost of gaining knowledge
and expertise the cost of entering into
agreements to deliver goods and services
social capital lowers these costs so if
I am part of a large and diverse social
network people know about the goods and
services that I provide I have access to
knowledge and resources through my
community and because I’m a trusted
member of the community there’s less
need to hire lawyers to enter into
formal agreements social capital saves
communities money now you may know that
there are some parents who sell cookies
for their daughters you are out there
you know who you are parents who work
for large organizations sell more
cookies than parents that work for small
organizations because they have access
to a wider range of customers likewise
if I play on an intramural soccer team
or I’m part of a prayer group that
creates economic opportunities for my
daughters to help their troop to the
economic impact of these transactions
each of these relationship facilitated
transactions has an economic multiplier
so when my daughter’s sell their cookies
that money goes to their
and their troop uses the money to have a
pizza party or to go camping that money
pays the salaries of those people that
work at the campground or sell pizza and
they use that money to go see a baseball
game and the owner of the baseball team
upgrades the facility creating
construction jobs and so on and so on
when people are socially integrated into
their communities that gives them an
incentive to spend their money and to
spend their money locally in a way that
magnifies the economic advantage for the
communities in which they live there are
a lot of different approaches to
economic developments communities build
stadiums to create construction jobs and
to attract tourism a lot of towns have
invested heavily in fostering
entrepreneurship and building a creative
economy I once it had to had the
director of economic development for a
major aviation community tell me
incentives and subsidies are all that
matters what I love about relationship
facilitated economic development is that
it’s cheap it’s easy and it has positive
benefits for everybody in the community
so how do we do this how do we go about
using relationships to foster the
economy first begin with mapping your
community look for linking connections
relationships and networks that are more
highly integrated produce economic
outcomes better than networks that are
disjointed from each other in order to
maximize the economic effect people’s
networks need to be connected so if we
go back to this relay this map that we
saw earlier if we take one person out of
this map our once cohesive network
separates into two disjointed networks
with half of the professional and
geographic coverage of the first network
we need to be intentional about bringing
people together there was a study that
they a report that came out not too long
ago from the Center for representative
democracy
about the characteristics of the most
effective politicians they and
identified intelligence honesty systems
thinking resourcefulness I would add
that our politicians need to be like
Yenta in Fiddler on the Roof
they need to be matchmakers they need to
make connections between people who are
otherwise not connected seconds we need
to ask ourselves the question who do we
bring to the table
during some of my early research on
economic development I came across the
cake a case of the Church of God of
Christ in Wichita Kansas the city of
Wichita had been approached by the
Church of God of Christ because the city
had a 50,000 square foot department
store that had been given to the city it
had been abandoned and the city had no
idea what to do with it the church came
to the city and said we have an idea we
want to take this store and break it up
into mini stores and use them to
incubate entrepreneurship so here you
have the example of a city that had a
resource that they didn’t know what to
do it and by involving people that’s
outside of the usual suspects outside of
the major employers outside of the
Chamber of Commerce outside of the
United Way a church by involving them in
the planning process they were able to
realize an economic outcome that they
wouldn’t have otherwise attained third
support civil society 40% of Americans
go to church regularly seventy-five
percent of families with school-age
children are somehow involved in youth
sports half half of women over the age
of 25 who describe themselves as regular
readers are members of a book club these
are untapped
economic development resources by
supporting these organizations as an
opportunity to bring people together we
create economic opportunity for everyone
but civil society needs our help they
need financial support from individuals
and corporations but more importantly
they need our time and they need our
dedication
there is no silver bullet for economic
development but building relationships
is a good first step
so go out meet your neighbor volunteer
buy some cookies let’s get our economy
going thank you
[Applause]
[Music]
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