Sunday, October 18, 2009

Affinity Capital

A key concept in the 2.0 Economy is affinity capital. Deeper levels of information about every economic transaction are starting to be available such that individuals, businesses and communities can be very specific in directing and democratizing their capital. In many cases, products can be chosen that are organic, recyclable, fair trade, made from sustainable materials and made by companies with fair labor practices or whatever affinities or attributes the buyer cares about.

Affinity-directed capital can influence both cash inflows and outflows. Affinity inflows are the money earned. Earners can now be more selective by checking Corporate Social Responsibility reports if thinking of working for large companies, by being entrepreneurs and contractors, finding projects on website marketplaces like TopCoder (software programming), oDesk (professional services) and 99 designs (graphic design) or by having clients seek them directly through their web activities and content. A taxonomy of affinity capital marketplace links is available here.

Affinity capital influences capital outflows too: investing, donating and purchasing. In investing, socially-responsible investing (SRI) mutual funds have been available for several years, and now peer-to-peer lending and social venture capital platforms allow investors to direct capital into these asset classes too. Philanthropy is merging with investing in cases like Kiva where investors find a lower or blended financial return is acceptable when social outcomes can also be achieved. The SocialCapitalMarkets conference has continued to draw several hundred worldwide social entrepreneurs to talk about how to bring social change with economic transactions at their annual September conference in San Francisco. The organization also sponsors The Hub, twelve worldwide physical spaces for social capital markets collaboration.

Affinity purchasing, voting with dollars based on product attributes, is another way of democratizing capital as consumers and businesses check websites like ClimateCooler, the Fair Trade Federation and others to see how socially and environmentally friendly products are before buying or purchasing directly from green product websites like GreenHome or other affinity-based marketplaces.

Socially-responsible and environmentally-friendly are some of the biggest affinity attributes but the key point is that deep attribute knowledge means that capital can be directed granularly to ANY affinity attribute.

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