So if your website is getting 10,000 more unique users a month more than a rival – the gap between you and them in terms of
potential
value created is 10,000squared (100m!). 10,000 more nodes on a network – even linking from one toone - is way more valuable than 10,000 passive viewers of a broadcast(assuming you’ve gone to the trouble of doing more digitally than simplyreplicating the broadcast model…).Metcalfe’s N squared value is why the growth of networks used for one-to-onecommunication (eg phone services, email, IM) follows the pattern it does. Simply,new users will almost always join the larger network because they will reason itoffers more value to them. Frankly – it usually does. A tipping point is reached.Floodgates open.If/when Skype (or one of its many rivals) assumes dominance over our mobileidentities as defined by our ‘number’… god help the operators.Metcalfe’s Law charts an impressive and rapid rate of growth of utility. But eventhis - according to Reed – is a gross underestimation.What Metcalfe’s Law fails to take account of is that each of the nodes on thenetwork can choose to form groups of their own, of what ever size or complexitythey choose, with near neighbours or distant, initially unrelated, nodes. They canchoose small groups, large groups, be part of multiple groups, uber and sub-groups etc etc etc.
Wild growth
Add up all of the two-person, three-person, four-person etc groups and the utilityis 2 to the power of N. And this represents astonishing, wild growth potential.Dr Reed quotes the example of the minister who was offered what ever he choseas a reward from his king. He asked for two copper coins on the first square of achess board, four on the next, eight on the third and so on, following theprogression of 2 to the power of n.The King thought he’d got off lightly… until when they reached the 13
th
squarethe number of copper coins had reached 8192. And if he’d had a big enoughabacus he’d have discovered that by the 64
th
square he’d be handing over somewhere in the region of 18 quintillion copper coins – a number rather higher than there are grains of sand in the world.He didn’t bother. He beheaded the smart arse instead. Not something we can dowith our rivals…
Counter-intuitive?
There are those who argue that Reed’s Law is counter-intuitive. Bob Briscoe,Andrew Odlyzko, and Benjamin Tilly among them:
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