In the most recent episode of the podcast The Economics of Everyday Things, the economics of college fraternities are examined. Some of the findings have a wider application to those of us in the professional services world, in my view.
Joining a fraternity in college can lead to significantly higher incomes later in life, according to Stephen J. Schmidt, the Kenneth B. Sharpe Professor of Economics at Union College. In a 2018 paper, Schmidt and his colleagues explored the economic and academic consequences of the Greek system, revealing that fraternity members earn about 36% more than their non-fraternity counterparts despite having lower GPAs.
This statistic highlights an essential element of success: social capital. Building relationships and cultivating a strong network are pivotal, not just in college but throughout one's professional career. As Schmidt explains, fraternity life develops "soft skills" such as teamwork and leadership, and provides access to an extensive network that can offer career opportunities and support.
If you weren't in a fraternity or sorority (or didn't go to college at all), the point is 𝙉𝙊𝙏 that you are predestined to a path of lower income than you would otherwise enjoy.
What this example highlights, more broadly, is the value of building relationships and your social capital. It's true wherever you find yourself in your career journey, and most certainly if you're a solo or small firm professional services provider.
As a services provider, you invariably find yourself making choices on a daily basis. How much of your time is devoted to relationship building and deepening the value of your network? How much time is spent on everything else?
While it's clearly vital that you deliver high-quality work for clients, the sustainability and ultimately profitability of your practice are tied much closer to the quality of your social capital than you might want to believe or even be aware of. Your business might have a "4.0 GPA." You might be the absolute best in your chosen field in terms of the quality of your work.
But in the absence of a high-quality network and deep relationships, you will not allow for the growth and profitability you might otherwise enjoy.
You can find this podcast episode on your favorite podcast app. By the way, a fun fact from the episode: the insurance premiums for fraternities are in the same risk class as toxic waste dumps. Imagine that!
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