Practical analysis for investment professionals
10 May 2012

Using Social Network Effects to Enrich Yourself Like Facebook Does

Posted In: Future States

With its widely anticipated initial public offering, Facebook is seeking a market value of as much as $100 billion. If successful, the IPO would yield the company a higher price-to-earnings multiple than virtually every other company in the Standard & Poor’s 500 index. So why such investor enthusiasm for a company with fewer than 2,500 employees worldwide? According to Brian Uzzi, professor of leadership at Northwestern University, the answer comes down to the emerging science of networks. In a session at the 65th CFA Institute Annual Conference in Chicago, Uzzi dissected the network effect: he explained how personal networks can be not only key assets for investment professionals but also a source of collective intelligence about financial markets, which, if properly harnessed, can help money managers make better investment decisions.

Uzzi began his talk by differentiating between two types — one akin to a modern-day Paul Revere, and one more like William Dawes. Revere, of course, was the American patriot who traveled from Boston, Massachusetts, by horseback on April 18, 1775, to alert colonists that the British were coming. His message spread far and wide, and Revere is credited with helping to raise the Continental Army that ultimately defeated British forces. His role in the American Revolution is memorialized in a Henry Longfellow poem titled “Paul Revere’s Ride.”

Read more on the Annual Conference blog →

About the Author(s)
Len Costa

Len Costa was head of communications and content strategy at CFA Institute, where he oversaw global social media, mobile products, and digital content strategy. He previously served as director of interactive media at the Institute for Private Investors (IPI), a peer networking organization for ultra-high-net-worth families and their advisers. Costa also wrote a private wealth column for the Financial Times and, prior to joining IPI, he held senior editorial positions at Institutional Investor and Worth magazines. His writing has also appeared in Forbes, Fortune, Slate, and The New York Times. Costa holds a BA from the University of Virginia, a diploma in French language from the Université de Paris, and a master’s degree in international affairs from Columbia University.

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