What distinguishes a strong tie from a weak tie?

In analyzing relationships between people: What distinguishes a strong tie from a weak tie?

– Age of the relationship. Have you known the person for a long time?
– Frequency of contact. The amount of time you two spend together.
– Emotional attachment. Do you care about the other person?
– Reciprocity. Do you regularly do random acts of kindness for your tie, and do they regularly do random acts of kindness for you?
– Kinship. Even if you do not see your cousin very often, you still likely have a strong tie to him because of your family bond.

Weak ties are usually only activated for a specific purpose, rather than being part of a multi-layered emotional relationship. The manager of your corporate mail room is likely a weak tie to you. You interact with her because you need something from her; you need your package weighed. You usually do not interact with her except for that purpose.

Although your weak ties can produce great value, it is typically the strong ties that provide you with a sense of companionship, comfort, and security. Stronger does not mean more valuable or “better” . Strong and weak, in this context, simply imply different types of relationships.

We recommend building a portfolio of both strong and weak ties. Strong ties require that you invest significant amounts of time. We recommend making that investment with your family, boss, immediate colleagues, and a few selected other people. That sturdy infrastructure is critical, particularly when you are under stress.

You only have time and attention to handle a few strong ties. According to anthropologist Robin Dunbar , and popularized in Malcolm Gladwell’s The Tipping Point, the human brain is hard-wired to handle a maximum of about 150 active social connections. In addition to the time requirements to maintain those relationships, they occupy space in our mind even when we are not in contact with them. Even with electronic tools, it is extremely difficult to sustain more than about 150 strong ties. Fortunately, electronic tools such as contact managers and online social networks allow us to develop a much larger network of weak ties. They relieve our brains of some of the workload of maintaining all those relationships.

Feedback welcome.

Why networks matter so much: jobs, pay, venture capital, influence

Professor Wayne Baker, in his excellent book Achieving Success Through Social Capital: Tapping the Hidden Resources in Your Personal and Business Networks, lays out the business case for the importance of social networks. He summarizes the empirical evidence demonstrating the many benefits of social capital to individuals and to organizations:

● Getting a job: More people find jobs through personal contacts than by any other means.

● Pay and promotion: People with rich social capital are paid better, promoted faster, and promoted at younger ages.

● Influence and effectiveness: Those who become central in an organization’s networks are more influential and even paid better, compared with those who occupy peripheral network positions.

● Venture capital and financing: 75% of startup-ups and new businesses find and secure financing through the informal investing grapevine: the social networks of capital seekers and investors. Companies that develop personal relationships with their bankers get financing at lower rates, compared with companies that maintain an arms-length relationship.

● Organizational learning-and doing: As much as 80% of learning in the workplace takes place via informal interactions.

● Word-of-mouth marketing: Advertising increases awareness of products and services, but personal referrals and recommendations lead to the actual decisions to purchase them. Any salesperson will testify that the majority of sales come through that salesperson’s network, not unsolicited.

● Strategic alliances: The more strategic alliances a company creates, the more it will create in the future.

● Financial stability: Bankruptcy is less likely for firms with well-connected executives and board members, even controlling for many other explanations.

● Democracy: Harvard political scientist Robert Putnam found in his twenty-five year study of democracy in Italy that those regions with rich social capital enjoy strong economic development and responsive local governments, but regions with poor social capital suffer.

Social software, productivity, and innovation

It’s a frequently-encountered belief in many mainstream businesses that tools like instant messaging and discussion forums, particularly when used for conversations outside the company, are a drain on productivity.

Not so, says John Seely Brown, former director of the Xerox Palo Alto Research Center, in a recent article in the New York Times about technology and worker efficiency:

Mr. Brown also points to the rapid development of what he calls “social software” like instant messaging, Weblogs, wikis (multi-user Weblogs) and peer-to-peer tools – all of which make it easier for workers to communicate and collaborate online, almost instantaneously.

The combined result, Mr. Brown said, is information technology that can amplify social interaction and enhance workers’ understanding of what is happening around them. The benefit, he added, could be to increase their ability to “collectively improvise and innovate.”

That is a key to productivity and peak performance, according to Mr. Brown. Business, he said, is a lot like soccer. In soccer, there are some set plays, but the best teams also display a wealth of effective improvisation based on the players’ deep knowledge of one another. “It’s the same in the best corporations or start-ups,” he said.

Review: Value Investors Club

Founded in 1999 by hedge-fund managers Joel Greenblatt and John Petry of Gotham Capital, Value Investors Club is a highly exclusive club for discussion of value-based investment ideas and of “special situations” (spin-offs and recapitalizations). It currently has 220 members out of a maximum allowed of 250. It is free to join, and the club management even pays a $5,000 reward every week to the member with the top investment idea.

The Value Investors Club (“VIC”) is a unique example of an online community with extremely high quality content and an intensely engaged audience. It also helps the participants to make money—sometimes in the millions of dollars. It is the online equivalent of an exclusive dinner with Warren Buffett, George Soros, and other sophisticated investors.

The requirements for entry are twofold: first, write an “A+” description of an investment idea, in keeping with the site’s Buffett/Graham investment style. VIC is primarily interested in opportunities based on value (underpricing) or special situations (i.e., unusual events such as spin-offs). VIC receives about 100 member applications per month, of which only about 1 in 15 are accepted. Second, assuming you are accepted, you must provide between two and six investment ideas per year. The reason for the six-idea maximum is that VIC only wants your very best investment ideas.

The site is sponsored by Joel Greenblatt and John Petry of Gotham Capital, a respected hedge fund which returned 50% per year during the 10 years that it managed outside capital. Joel Greenblatt teaches securities analysis at Columbia University’s Graduate School of Business. He also wrote the 1997 book, You Can Be A Stock Market Genius.

As a result of this quality backing, the site’s members are approximately 50% professional investors and 50% amateurs. This is a much higher ratio of serious professional investors than you will find on Yahoo Groups, Motley Fool, or almost any other investing discussion site. The Albourne Village (village.albourne.com) is one of the few other online communities where serious institutional investors congregate.

VIC’s members are extremely well-behaved, because the community is so tight and because members get enough value from participation that they do not want to publicly do something foolish. John Petry says that since the site launched, he has had to edit very few messages for rudeness or other inappropriate behavior. He also ejects about 20% of the participants each year, almost always for failure to contribute good ideas. Each idea contributed by participants is rated by the community on a numerical scale.

Anyone can view the site’s past discussions, with a two-month lag on the presentation of data. The real-time discussion, ideas, and commentary are only available to the members.

Most unusual about the site is the way that information flow is centralized in Greenblatt and Petry. All participants use screen names, which are usually pseudonyms unconnected to their real names. Only Greenblatt and Petry know people’s real names, contact details, and firm. Participants have no ability to private-message one another. Therefore, there is no real way in which participants can attempt to recruit other participants to their firms, or even simply to set up an in-person meeting. Instead, they must return to VIC to benefit from participation in this highly exclusive community.

Greenblatt and Petry have a very reasonable argument for this unusual centralization of information: they built and manage the community for free, and want to retain the intellectual capital in the community.

Gotham has spent an enormous amount of time over the last four years and well over a million dollars to develop and run VIC; the weekly prizes alone cost them $260,000/year. However, both Gotham and its participants get more than enough value from the site that it is profitable for the firm to run.

Common Objections to Online Networking

Many people complain that they want to network, they need to network—but they simply do not have the time, the knowledge, the money, or the personality. We address below some of these common objections:

A. I have no time!
We sympathize with this complaint. We would all like to network more, but of course we all have obligations to family and work that keep us from attending every party and participating in every online forum that we find interesting!

The primary remedy for this problem is effective time management. Imagine you were on the bus and saw someone throwing a dollar bill out the window once a minute. You would never do such a crazy thing, correct? However, that is exactly what you are doing if you are wasting time. If you do not relate to the degree of importance of even a single second, we suggest that you ask an Olympic sprinter about the value of even a hundredth of a second.

In the Seven Habits of Highly Effective People, Stephen Covey wrote about the difficulty of doing Type II activities, which which he defined as those activities which are important but not urgent. Networking is like exercising or doing your taxes; you can delay and procrastinate and postpone and reschedule, but in the long run the task must be done. The longer you wait, the more difficult the action becomes. As your waistline becomes flabbier, your Rolodex will grow skinnier.

B. I don’t know how to use the computer!
For 80% of our readers, this is a non-issue. You are already familiar with all of the terms and procedures in this book; nothing that we discuss here requires a particularly high level of computer literacy.

For the 20% of our readers who do not feel comfortable with our computers, we refer you to Carol Teten, who is rapidly approaching senior citizen status. Carol is one of the world’s leading experts in historical dance. A few years ago, she decided that she wanted to become computer literate. She hired a teenager in her neighborhood to tutor her for $10 per hour. With hard work and his help, she rapidly progressed from a computerphobe to woman who spends hours on the web running her successful and profitable online business, DanceTimePublications.com. We assure you that if someone with the handicap of little computer experience can reach that level of proficiency, then all of our readers can do the same.

C. I don’t have the money!
One of the biggest advantages of online business networking is that it can be exceptionally cheap. You can rapidly become a highly visible online networker for under $20/month by following the tips and principles we advocate at TheVirtualHandshake.com.

D. Not sufficiently extroverted
Many people are hesitant to become aggressive offline networkers because they complain that they are not extroverted enough. However, part of the beauty of online networking is that it is very easy for people who are nervous around crowds, or not particularly articulate, to become highly effective networkers.