Network versus Human Capital

Chris Dillow's post explaining what Tony Blair brings to Zurich Insurance is very interesting. Essentially, Chris accepted the argument Bryan Appleyard made that it wasn't Blair's, rather dubious, experience with climate change policy. He set out how what Blair really brought was 'network capital'.

The colloquial term Chris uses for this contribution is 'contacts'. I'm not so sure that captures what Blair brings to Zurich. Phone numbers aren't hard to get hold of and despite Blair's clearly fine networking skills I doubt he has a personal relationship with a significant number of people that Zurich would want to influence. I think that Blair's reputation is likely to be the major source of his network capital.

Even people who do not know him personally will want to be a part of the Blair 'club' (not everyone, but enough important people to justify his salary). As one of the longest serving Prime Ministers, Quartet envoy to the Middle East and now director at J P Morgan Blair is a big deal. People don't need to have a personal relationship with him already. They'll want to form one because it will make them feel honoured, respected or otherwise special to have an undeniably big cheese like Blair getting in touch.

Reputation isn't always so thoroughly divorced from skill. Plenty of people have a reputation for possessing a certain useful human capital. However, reputations do have a life of their own and, particularly among the big cheeses, have value beyond the immediate profession or environment in which they were initially earned. As such, while reputation can be a signal for real human capital I think that it is, more broadly, a part of network capital.

Chris's post discusses how valuable and important network capital can become. This set me to thinking about my own situation - at the dawn of my career as Blair's enters its twilight. My real wealth at the moment is almost entirely tied up in expected future earnings. They are likely to be larger than my earnings right now and will take place over more years. Any change in the size of the roughly 40 years of future earnings that I can reasonably expect in the years to come is likely to swamp the financial returns to my job right now.

Now, I am certainly improving my human capital; I'm learning a lot. However, it seems quite plausible that my gain in reputation and contacts is worth more than this. That when a report of mine does well it boosts the value of my reputation and contacts by more than the experience of preparing the report boosts the value of my human capital.

I'm not sure if my understanding of all the various concepts is sound. Still, the ideas underlying it all are interesting.