The Strength of Weak Ties

I have been thinking a lot about how to understand poverty from the point of view of the properties of the social network. In this context, I thought I would share with you a very important paper by sociologist Mark Granovetter written in 1973 called ‘The Strength of Weak Ties’ which he has more recently revisited in a new paper called ‘The Strength of Weak Ties: A Network Theory Revisited’. Here is an excerpt:

.....individuals with few weak ties will be deprived of information from distant parts of the social system and will be confined to the provincial news and views of their close friends. This deprivation will not only insulate them from the latest ideas and fashions but may put them in a disadvantaged position in the labor market, where advancement can depend, as I have documented elsewhere (1974), on knowing about appropriate job openings at just the right time. Furthermore, such individuals may be difficult to organize or integrate into political movements of any kind, since membership in movements or goal-oriented organizations typically results from being recruited by friends. While members of one or two cliques may be efficiently recruited, the problem is that, without weak ties, any momentum generated in this way does not spread beyond the clique. As a result, most of the population will be untouched. The macroscopic side of this communications argument is that social systems lacking in weak ties will be fragmented and incoherent. New ideas will spread slowly, scientific endeavors will be handicapped, and subgroups separated by race, ethnicity, geography, or other characteristics will have difficulty reaching a modus Vivendi.

I share this because villages, which are typically poor by nature, are generally insular, tending to rely much more on strong ties with very few weak ties outside their village. Given this, one strategy Madura takes as an organization is to bring in products, services and events that foster ties across villages and to the urban economy. This may all sound like common sense but what is surprising, if you get into the models and workings of networks, is just how profound the consequences of a few weak ties can be. (I've spent the last five years thinking about this mostly in the context of the brain and it is interesting to note that the cerebral cortex, the outer layer of the brain where all the high level thinking gets done, is characterized largely by weak connections).

Microfinance, money flow and social impact

The traditional thinking in microfinance is that it is a way to help people extricate themselves from the clutches of local moneylenders who charge exorbitant interest rates. As microfinance institutions, we believe, that by charging less we are doing great social service. Typically, when academics study the impact of microfinance, they look at people who have received microfinance compared to people who haven’t in order to see who is better off across various dimensions. Evidence suggests that even if individual borrowers are not actually making profits that exceed the interest charges, they might do better on other dimensions that relate to patterns of consumptions. Access to a lump sum of money at once, for instance, allows borrowers to afford goods and services they would otherwise not be able to that give them a better quality of life. However, if we really want to understand the social impact, looking at how some individuals compare to others is not sufficient. Rather we need to understand the flow of money more systemically. Here’s why:

In my view the goal is to seed systemic change. Which means the system as a whole should thrive and not just select individuals within it. If we take a village that has its own local economic ecosystem along with some bilateral trade links to the outside world and try to unravel the impact of a loan, it is not so simple. As a microfinance institution we lend urban acquired money into the village, but then we take back more than we lend in the form of interest. The money we take back goes back to the village in part as salaries to the people we employ there. The rest goes to other stuff in urban areas, maybe out to shareholders who will spend part of it in another country (like me for example - most of my money seems to go to Lufthansa). The local moneylender, on the other hand, may charge a higher interest rate, but being local will probably spend most of that income in the village supporting the overall village economy. So potentially, local lending at higher rates could be more beneficial to the village if the money is in turn spent in the village, compared to lower rates where the money leaves the village. So the impact of microfinance on the village has a lot to do with the dynamics of money flow and not just what happens to the borrower who took the loan. (See also my related post, ’Where does the money go’).

Connected we succeed, divided we default

At Madura Microfinance, one of our primary assumptions is that women who are more informed and better connected will be more successful and make more productive use of loans. So, much of our efforts are aimed at increasing networks and access to information among our members. A PhD Student from Oxford, Sangamitra Ramachander, recently studied our women’s borrower groups to see what kind of factors predicted whether a group went successfully on to the next higher level loan or would default. This is still a work in progress but there are some very interesting results. Here is one odd one that stood out to me. She found that women that travelled more frequently to neighbouring villages (but surprisingly not the nearest towns) were several times more likely to be successful rather than default. It’s not clear whether this factor is causal or the outcome of their success but it’s something worth exploring further. Possibly, women who travel more to neighbouring villages are more informed about local markets and better connected within them?

Driving socioeconomic change by making women more dependent

Yes, I meant to type dependent. Here’s why.

One of the great drivers of mankind’s progress has been our ability to specialize in our knowledge and functions, organize as groups or entities that share knowledge and create amazing things that no individual could do on his or her own. Done well, the outcomes of organizations are far greater than the sum of its parts. The most awesome things that mankind has created – jet planes, space stations, the power grid, they are all borne of interconnected, highly dependent networks of people. Our (Madura’s) women micro-entrepreneurs are the antithesis of this dependence. They are highly unspecialized and operate independently (women, only because that’s who we serve, but this applies to men too). These micro-entrepreneurs strategize, produce, market, manage accounts and do everything on their own. This means that they rarely have the opportunity to benefit from the knowledge of others and rarely have the opportunity to gain deep functional expertise as they are so busy doing a little of everything. That’s a huge limitation on what they are able to achieve. It is remarkable how few of our women borrowers think to band together and create something bigger than any one of them could do alone and I often wonder why this is. Most of the women I have talked to who have grouped in twos or threes have only done so in order to pool their loans to afford an asset, not for aspirational reasons. I’ve been thinking about what drives organization in society and not coming up with a satisfying hypothesis yet. If we could figure this out, it could be very powerful. Ideas folks?

The Physics of Friendship: Do we make friendships no differently than a bunch of particles bouncing around?

Here's an interesting article that I came across that surveyed 90,000 high school students to reconstruct friendship networks and then created a model of the results using knowledge of how particles in physical systems collide and interact. Haven't read the article in depth so I'm not really doing much of a job in terms of useful commentary on its merits. Just pointing it out. (The lead author on the paper though is Marta Gonzales who worked with Albert Laszlo Barabasi who wrote Linked that I posted on earlier).

The Physics of Friendship (This is an easy to read writeup on the actual paper)
By comparing people to mobile particles randomly bouncing off each other, scientists have developed a new model for social networks. The model fits with empirical data to naturally reproduce the community structure, clustering and evolution of general acquaintances and even sexual contacts.

The paper is also an example of how you can use surveys to reconstruct networks and dynamics, relevant to my previous post 'Where does the money go?' and the discussion around it. It would be interesting to see how such social networks in small villages differ from those in large cities particularly with respect to trade (as opposed to friendships). Could be quite telling about how our microentrepreneurs do business since how they bump into each other would be totally different from the way we technology enabled urban folk do.

Where does the money go?

Was chatting recently with Sitabhra Sinha from the Institute of Mathematical Sciences in Chennai, India about some ideas to study the network structure and dynamics of money and information flow in rural Tamil Nadu and he passed along a bunch of papers to me. One of them was Patterns of dominant flows in the world trade web by Serrano, Boguñá and Vespignani. This mix of people from Europe and the U.S. took international trade data and reconstructed the trade network to look at imbalances between countries. They then asked where one dollar generated in any given country ends up being ‘absorbed’ or accumulated in the world. They called this the ‘dollar game’. For big consumer nations like the U.S. no surprise that a big chunk ends up in Japan and China. Where the money ends up accumulating is not completely informative about which country is better off though, since this doesn’t tell you anything about who can generate more currency to begin with. However, it did get me thinking about what it would look like to reconstruct this for rural and urban India and track where our microfinance loan money is ‘absorbed’. My guess is that the rural borrowers are net consumers and much of it ends up in Chennai or Mumbai or someplace like that rather than actually staying in the rural areas. If anyone has data to the contrary (or supporting my guess), I would love to hear about it.

Why 'physics'?

Yesterday I was talking with some of my Board members and they asked ‘so what do you really mean by the physics of poverty?’ Why ‘physics’? So I thought I would do a summary post on what I mean by this.

Over the last century we have picked apart nature, broken it down into its smallest parts and found that everything is made of the same stuff. The same fundamental particles. How can a small bunch of particles give rise to all the richness of our world? These still not fully understood fundamental particles associate to form atoms which associate to form molecules which associate to form cells which associate to form organisms which associate to form societies. And on every level they produce a myriad of outcomes in matter, cells and organisms. As we are now beginning to understand, it is the nature and structure of the interaction and association that defines what it will be, not so much the intrinsic nature of the interacting element itself. So when we consider what properties we might want from a system, be it matter or society, what we need to understand is how the elements of the system interact, the structure of their connectivity and consequently how energy flows in the system. Some physicists have known this a long time, taking this approach to understanding nature under the various names of condensed matter physics, statistical mechanics and non linear dynamics.

Consider this example – like most atoms, the carbon atom does not like to be alone. It will seek out associations with other atoms. Just carbon alone, when the pressure and heat are high, will hold tightly to four others, sharing its electrons fully in covalent bonds in a rigid lattice structure that is so constrained that it is unable to interact with new forces and energies that impinge upon it. Light energy hits against the electrons and slows down but the electrons cannot absorb its energy and the light eventually bounces out. The electrons cannot travel through the system because they are locked into rigid relationships with one another that prevent them from free movement. This is a diamond, constructed under pressure, constrained, rigid and impervious. But under normal conditions of temperature and pressure the carbon atoms are more free, they don’t form as many covalent bonds, preferring along some dimensions to associate with one another in a less constrained way and are thus able to take light’s energy and make it their own, their electrons when pushed can travel through the system in a flow of electrical energy. This is graphite, free, energy rich and malleable. So whether you end up with diamond or graphite, depends not on its elements, since its elements are the same, but on the nature and structure of their associations and the freedom with which they can interact with external forces.

As we go up the hierarchy from atoms to humans, although the possible ways to interact become increasingly numerous, one can still understand the system from the point of view of the nature of associations, how it is connected and how energy flows through it. In human networks, money is a proxy for energy on some level, so is information. So why physics? Because physics is not constrained to understanding one system alone but an attempt to understand systems at all levels and the common principles that define them. It represents an understanding of complex systems on many levels that can inform our understanding of ourselves as a deeply interconnected system.