Executive Summary

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Social Media is Creating a Revolutionary Force of Highly Connected and Empowered Stakeholders. Social media is empowering the former silent majority to: 1) influence, expose, and disseminate their views; and 2) self-organize and join forces on a common cause.

Empowered Stakeholders Will Start Destroying Traditional Exploitive Economic Moats. The newly empowered base of consumers, employees, suppliers, citizens, and communities will soon start to take revenge and destroy the following traditional economic moats of companies that have profited at their expense: 1) Low-Cost Producer; 2) High Switching Costs; 3) Intangible Assets; and 4) Network Effect.

The Social Revolution Will Lead to a Structural Shift in Companies’ Underlying Risk and Growth Profiles. The Social Revolution will create a high level of fragility for companies who derive their competitive advantage through exploiting their stakeholders, leading to a higher than expected risk profile and lower than expected growth profile.

Negative Social Capital Needs to Be Factored Into the Valuation Equation. The current financial and valuation framework is misleading as it does not take into account the impact of a company’s Negative Social Capital on its future risk profile nor its growth prospects.

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