Venture capitalist and LinkedIn cofounder Reid Hoffman has a question he likes to ask people when he first meets them: “Who’s in your tribe?” The question essentially translates to, “What types of people make up your network?”

A new profile of Hoffman in the New Yorker outlines the entrepreneur’s vision of a future where a question like “Who’s in your tribe?” seems not wonky, but matter of course. Hoffman pictures an economic shift characterized by a migration from emphasis on “The Organization” to reliance on “The Network.”

The idea that the economy might one day pivot on connections among people and among companies has powerful implications for how people find work and how (and whether) companies operate. Here are a few examples from the profile.

Networks will support companies.

When PayPal ran into problems operating in Japan in 2002, Hoffman - one of the company’s early board members - tapped into his network. He contacted an influential friend in Japan, who ultimately helped break down barriers so the company could avoid having to incorporate as a bank in the country. In a way, that’s a minor example of how Hoffman has used networking to the advantage of PayPal. He also mobilized users of the payments system to respond en masse to legislative actions that might have hampered the company’s growth. This technique has since become a staple of Silicon Valley businesses working against the grain of regulation.

Networks will hamper companies.

Loyal user networks, especially on social sites that rely on user profiles, mean it’s harder for customers to switch from one service to another as new companies emerge. A strong network is resistant to competition. In short, “The Network” translates into virtual monopolies such as Amazon (retail), Facebook (social networking), Google (search), and LinkedIn (business networking.) Hoffman's PayPal cofounder, Peter Thiel, believes monopolies are the ultimate expression of capitalism. As the New Yorker frames Thiel’s theory: “Once a company becomes successful, it should try to establish a monopoly position, so that it can charge the kind of prices and make the kind of profits that are available only to companies without meaningful competitors.”

Networks will leave some people out.

Hoffman thinks societies will ultimately need to reorient themselves to better serve entrepreneurs, because existing companies will not be able to create all the jobs that will be needed in the future. He believes that facilitating networks will support the kind of business and job creation that is necessary. But networking is just as inclined to exclude people as it is gather them together. A partner of Hoffman’s at Greylock told the New Yorker he was not confident the middle class will benefit from networking. “Clearly, wealth is becoming more concentrated, and the network takes a larger and larger share,” said John Lilly. What that means in his mind is that the middle class that was built up over the 20th century is going to be hollowed out. “I don’t see where the middle class is going to come from. You’ll start seeing more conversation about a guaranteed income.”

Published on: Oct 7, 2015