4 thoughts on “Metcalfe’s Law, Meet Market Reality”

  1. Work the numbers here. If a network triples in size, it becomes 9 times as valuable, the square. But if it grows slowly compared to the existing size, it increases in value at essentially twice the number of nodes added (1% increase in size means 2.01% increase in value), which is multiplicative. Not so great, but hey, each addition adds twice its cost, so the whole gains twice the value added. More important, each 1% addition is 101 times as valuable FROM ITS OWN PERSPECTIVE than if it were to be created as a separate network instead. So the economic incentive to join the network is larger for a large slowly growing network than a small quickly growing one, unless one presumes that the small one will eventually outgrow the large one. Which is to say the attraction to join should continue to increase, not decrease, when growth becomes less extreme.

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