The Creation & Destruction of Social Value

by Dan Robles on 05/08/2010

wharfpk2There are two sides to the Social Value Equation – the creation of social value and the destruction of social value.  There are countless examples where innovation destroys the value of prior technologies.  There are also many instances where “progress”, perhaps in the form of a freeway or public structure, divides a community where strong social bonds once acted.

In the presentations that I give, I often cite the value of a bridge over a waterway.  The bridge may cost 50 million dollars to build and maintain, but it increases human productivity by 50 billion in the life span of the bridge.  We often cite a factor of 1:1000 for the valuation of the dollar to social currency.

Contrary to that,  Jane Jacobs (renowned urban theorist and community activist) may argue, the bridge (and roadway) may divide a community or neighborhood.  Where the community may once have been scaled for foot traffic, the new boundary may require a car to circumvent.  The new road may divert old commercial traffic in many ways that are bad for a community.   In such a case, the social capital destroyed by the bridge is in fact the dominant financial outcome.

So here I am, I just destroyed my own best analogy to demonstrate a point. Without vetting the complete transaction in the form of social currency, net “progress” of any kind is as easy to leverage backwards as well as forward at a rate of 1000:1.

Communities that seek to stop a disruptive development program will often organize to protest urban development decisions.  Unfortunately, they are usually up against a calculation of economic impact that is dominated by dollar denominated currency. Without a “Social Currency” of their own, quantified and convertible to dollars, communities are doomed.  Law suits will play out in the same manner where damages are non-quantifiable, and therefore non-existent.

Jane Jacobs also writes that a community that can place a value on their social currency – although I do not think she explicitly called it that – and can act to preserve value or increase value by their actions.  Many communities from Greenwich Village to Boston have thrived under a social currency diverting projects away from sensitive communities.  The Big Dig went underground in Boston much like the The viaduct replacement project will do the same Seattle.  Granted, the Seattle project mainly preserves water and mountain views for million dollar condos, this concept, in fact, would be more critical to poorer communities than wealthy ones.

Obviously there is no way to impede progress.  All innovations destroy prior value in the  creation of greater value.  The danger is when Wall Street priorities can dominate Social Priorities.  Capitalism, for all the greatness it creates, is amoral.  Capitalism is committed to dollar currency, and devoid of social obligation except to the degree that obligation is profitable – that is where social currency converts to capital currency.

Through the magic of the fractional reserve system, Banks create money backed by debt vs. deposits at a factor of 1:1000.  Therefore, the convertibility of social currency with a capital currency at a similar factor of 1000:1 is essentially the only effective way to convert Social Priorities into Wall Street Priorities

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