TNNWC Publications And Informational Products Division publishes The National Networker (TNNWC) Weekly Newsletter and The BLUE TUESDAY Report especially for entrepreneurs and early-stage venturers; free weekly subscriptions to these informative publications are available online to all entrepreneurial Members of TNNWC.

Membership in TNNWC is free (it's automatic for any subscriber to any TNNWC Publication) and available at our website. When you arrive there, just click on any of the JOIN US or BECOME a MEMBER buttons or links.

Monday, January 07, 2008

The Laws of Relationship Capital

The Fourth Law

By Adam J. Kovitz, CEO, Editor-in-Chief
Adam's Bio Email article RSS feed Share on facebook

As we continue to discuss the ten Laws of Relationship Capital, it is always good to have a quick review. The first two laws (detailed in Part 1 and Part 2) relate to whom and/or what can possess Relationship Capital. The Third (detailed, so far in Part 3) through Sixth Laws focus on the mechanics of Relationship Capital. Both Third and Fourth Laws deal respectively to the famous “Quantity vs. Quality” debate that most networking strategists ponder when debating in which networks to invest their time as well as deploy their marketing strategies.

The Fourth Law

If the Third Law is a statement of the effects and implications of quantity and its effect on Relationship Capital, then (by process of elimination) the Fourth Law does the same for quality:

Relationship Capital Value increases or decreases proportionally as the perceived quality of relationship increases or decreases.

The Fourth Law while simply stated and seemingly intuitive has some major implications.

Relationship Capital Value

The Fourth Law introduces the concept of Relationship Capital Value. The reason for this is that the first three laws discuss Relationship Capital from a capacity standpoint. The Fourth Law implies that due to perceived quality, the value of Relationship Capital Value (measured in “Relationship Points” or RPs, as per RNIA) can fluctuate, much like a company’s stock, over time. Therefore, Relationship Capital can exist in three basic states:

  1. Positive – the perceived relationship by both parties involved is one that is favorable, pleasurable, enhancing, meaningful, useful and/or supports the sustainability and/or survival of the person, product or business unit in question
  2. Negative – the perceived relationship by both parties involved is one that is unfavorable, toxic, diminishing, meaningless, useless and/or leads to eventual destruction of the person, product or business unit in question
  3. Neutral (zero) – the relationship is unknown, unrecognized, brand new, irrelevant, inert, forgotten and/or has no effect whatsoever upon a person, product or business unit. The Fifth Law addresses this state in greater detail.

Perceived Quality

The Effects of Time: Influence and Impact

The Fourth Law also implies the element of time as perceptions regarding specific relationships change based upon actions (or lack thereof). In Newtonian physics, any value measured over time can be researched and used for further analysis to gain a better understanding of the world around us. Much in the way, velocity is the rate of distance traversed over time, influence is the rate at which Relationship Capital changes over time:

In = DRC / Dt

In = Influence (measured in RP/s)
RC = Relationship Capital
t = Time

In the same way that acceleration is the rate of change in velocity over time, relational impact is the rate at which influence changes over time:

Im = DIn / Dt

Im = Impact (measured in RP/s2)
In = Influence
t = Time

Therefore, if we were to graph the Relationship Capital of a person, product or business unit over time, we could look at the rate of change (a steep rise due to the endorsement of a popular figure or a moderate decline due to layoffs) to determine its influence. We could also quantify the level of impact generated (positively or negatively) due to particular events that took place. Imagine doing this for historical figures, identifying areas of psychological trauma, etc. The possibilities are endless when we perform this type of analysis.

Reputational Mass

The longer one’s Relationship Capital remains relatively consistent at a value while the number of connections grows, the more of a reputation (or tendency) it has, and becomes much harder to change due to inertial effects. Last month we stated an equation of the Third Law as:

RC = S(R)

RC = Relationship Capital, and
R = Number of relationships

As we stated, this was inaccurate, and relied on the Fourth Law, but was useful for purposes of illustration. The more accurate statement is:

Rm = S(R)

Rm = Reputational Mass (measured in connections), and
R = Number of relationships

Take, for example, an historical figure like Sir Isaac Newton, with whom we all have a relationship even though he has long gone. Because of his deeds, accomplishments and actions, he has earned a reputation based upon the Relationship Capital profile that he developed over the course of his life. If a new historian suddenly shocked the world with evidence “contrary to popular opinion”, information would be suspect and unlikely to change the value of his Relationship Capital too quickly unless considerably substantiated and widely accepted, which actually did happen (to a much lesser extent) upon the discovery of Einstein’s Theory of Relativity.

Reputational Momentum

As Newton’s First Law states: “Objects at rest, tend to stay at rest and objects in motion tend to stay in motion, unless acted upon by an outside force”, there is a link between Relationship Capital and reputation. If Reputational mass exists, then what happens when we dramatically increase (or decrease) Relationship Capital over a considerably shorter period of time and have a considerable number of relationships? You got it…reputational momentum, which can be calculated as:

Rp = Rm * In

Rp = Reputational momentum (measured in connectionsRP/s)
Rm = Reputational mass
In = Influence

Reputational Force

For Relationship Capital to drastically change amongst all connections there would need to be a considerable amount of reputational force exerted on such a system through action and deed. Again, if one’s network has mass which can build momentum, reputational force must be exerted to positively or negatively influence it or to bring it to rest. Therefore, based upon Newton’s Second Law:

FReputational = Rm * Im

FReputational = Reputational force (measured in connectionsRP/s2)
Rm = Reputational mass
Im = Impact

Over time, reputational force could be quantified and analyzed, based upon individual actions like direct mail, advertising, word-of-mouth, genocide, keeping promises, misdirection, etc. as a means to influence Relationship Capital. Again, the implications are quite substantial. Was this what Isaac Asimov foretold in his groundbreaking Foundation series of books when he introduced the concept of Psychohistory? Time, will indeed tell.

Next month we will be taking a break from the ten Laws of Relationship Capital to indulge in what has become a February tradition at The National Networker as we celebrate our third anniversary; my State of the Industry Address. In March, we will resume with Part 5 and the Fifth Law of Relationship Capital…stay tuned!

The Emergence of the Relationship Economy

Relationship Capital is the cornerstone of the Relationship Economy, which I have defined as “a business and social ecosystem in which one’s interconnectedness and integrity determine wealth, prosperity and success.” I am proud to have contributed discussion of the Ten Laws of Relationships Capital to the upcoming book The Emergence of the Relationship Economy, due out on January 19, 2008 as an eBook and on February 1, 2008 in hardcopy. It is being considered a “must read” for anyone responsible for the strategic direction of their business. If you would like to purchase your own copy of The Emergence of the Relationship Economy, please click here.

Forward/Share This Article With Colleagues And Social Media:

No comments:

Blog Archive

BNI News Feed

The Emergence of The Relationship Economy

The Emergence of The Relationship Economy
The Emergence of the Relationship Economy features TNNWC Founder, Adam J. Kovitz as a contributing author and contains some of his early work on The Laws of Relationship Capital. The book is available in hardcopy and e-book formats. With a forward written by Doc Searls (of Cluetrain Manifesto fame), it is considered a "must read" for anyone responsible for the strategic direction of their business. If you would like to purchase your own copy, please click the image above.


Site Credits:

Featured in Alltop
ALLTOP Business
News Wire. HOT.
Cool Javascript codes for websites  Fabulous Free Calendars

Create FREE graphics at