Post #197,045
3/3/05 1:57:45 PM
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Disagreement
I don't believe that building email gateways between the various proprietary networks of Prodigy etc would have been that technically hard to accomplish. It certainly would not have required replacing all of their existing technology.
True, today none of them kept their technologies. But as I understand what happened, the reason was that all of them had to deal with demands to deliver the web in real time - certain a much more demanding infrastructure challenge than email gateways.
But even if we thought that interconnection required rebuilding everything, Metcalfe's Law is still too strong. First of all most businesses run at a profit, and the cost of infrastructure is only one line item on their budgets. Therefore even in the worst case cost scenario, Metcalfe's Law provides enough incentives to justify making the transition because the potential added revenue is equivalent to what they already make.
Furthermore even if businesses cannot see their way to making this choices, the market should swiftly decide. Suppose that one network is 30% larger than another. According to Metcalfe's Law, my value for being on the larger network should be 30% larger than for the other, and so I should have little trouble deciding to switch (even if switching costs are fairly high). Once people start voting with their feet, it doesn't take long to get to a "tipping point" at which the networks merge defacto because everyone switches to the bigger one.
But, I hear you saying, what if I don't want to switch because my friends happen to be on the smaller network? Well then you've demonstrated our fundamental criticism of Metcalfe's Law: not all connections are of equal value. We don't value potential connections to most people very much. We value a small number of them highly. Therefore our value for being a member of a network does not simply scale linearly with the size of the network.
Note that the fact that people should vote with their feet also addresses the AIM situation where the companies making the decision cannot necessarily capture value. Companies make decisions about interoperability and technology. Customers decide where they want to be. The fact that people didn't en masse agree where they wanted to be suggests that network effects aren't as big an incentive as Metcalfe predicts.
And a final point, you're getting hung up on one criticism. Please feel free to leave that saying that you don't agree there, and then proceed to read everything else that's said. There are several lines of argument to similar conclusions, and it may be that you'll find some of them more convincing than others.
Cheers, Ben
I have come to believe that idealism without discipline is a quick road to disaster, while discipline without idealism is pointless. -- Aaron Ward (my brother)
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Post #197,104
3/3/05 8:49:53 PM
3/3/05 9:11:41 PM
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One counter-example, and a possible new POV
We don't value potential connections to most people very much. Ever flown to a convention? Was it in a decent-sized city or not? One thing I have noticed living in Cleveland is the almost complete lack of taxis. Sure you can call one, but unless you are at the airport, or at Tower City during morning or evening rush hour, you are not going to just walk out on the sidewalk and flag one down. When organizations are looking for a location to hold their conventions, the ability of attendees to get around factors in. In Cleveland there isn't enough demand for taxis to support heavy coverage, but without the heavy coverage the convention business won't come here. Chicken, meet egg. Closed networks present a similar issue. People won't join them until there are people in them. That's why first-mover advantage is so important building new networks. Now for why Metcalf's Law has an upper boundary: Network effects only hold up while networks are still islands of incompatibility. When you have to choose between incompatible cell phone networks, you want the larger network. Its size is an asset. But which internet do you want to sign up for? Well, there is only one. In theory that should make it wildly valuable. The barrier to start a "new" internet is huge, because no current users would have an incentive to switch.[1] But lack of alternatives is synonymous with lack of competition. So I think the value curve will rise geometrically in comparison to the alternatives. Once a single network has achieved the defacto merger you describe, the value of the alternatives also drops. Once the value of the alternatives drops, your multiplier is less useful. [edit] How can you talk so much about graphs and not have any? While your "law" may model observed trends more closely than Metcalf's, both the law and the explanation of the reasoning require more mathematical knowledge than most people will probably have. As much as it might feel like "dumbing down" your presentation to the USA Today level, some pretty pictures might make it more concrete for people who can't follow the math. [1] Technology being equal.
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Purveyor of Doc Hope's [link|http://DocHope.com|fresh-baked dog biscuits and pet treats]. [link|http://DocHope.com|http://DocHope.com]
Edited by drewk
March 3, 2005, 09:11:41 PM EST
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Post #197,217
3/4/05 2:48:17 PM
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That's not entirely a counterexample
We were trying to analyze communication networks, not conventions. As you noticed, Cleveland cannot hold large conventions because it doesn't have a fundamental requirement for that (a good taxi supply). If you want to draw analogies, that's something like saying that a network that isn't working can't be used.
As to the upper boundary question, there isn't really one. Even if there is only one game in town, the value of the network affects how much people will be willing to pay for it, and how much usage of the network there will be. In other words even once network effects have forced everyone to one standard, there are consequences of the size of network effects.
On why we don't have graphs, that paper is supposed to be headed for an academic publication. It may not be understandable for most people, but it isn't supposed to be either. (Of course I don't think that most people here quite count as most people...)
Cheers, Ben
I have come to believe that idealism without discipline is a quick road to disaster, while discipline without idealism is pointless. -- Aaron Ward (my brother)
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Post #197,228
3/4/05 3:27:51 PM
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You got the analogy, but missed the point
... that's something like saying that a network that isn't working can't be used. Right. And the proposed network that can't overcome the barrier to entry can't be used, either. That's what I meant in saying a new internet wouldn't get off the ground. If you could promise people $5/month for high-speed access they'd flock to you in droves. But if the only way to make money at that price is to already be the only game in town, you're not going to build it. Even if there is only one game in town, the value of the network affects how much people will be willing to pay for it, and how much usage of the network there will be. You're using "value" for "utility". The "value" of the network is how much people are willing to pay for it. They don't pay because it's valuable. It's valuable because people are willing to pay. I just thought of another thing. In your explanation of why larger networks want smaller networks to pay when they merge, you used Metcalfe's Law to describe the value of the networks. It would make more sense to use Zipf's Law. If the smaller network has all of the top third most-popular nodes, it will probably be more valuable.
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Purveyor of Doc Hope's [link|http://DocHope.com|fresh-baked dog biscuits and pet treats]. [link|http://DocHope.com|http://DocHope.com]
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Post #197,437
3/7/05 4:06:43 AM
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Chicken and egg on value
You're using "value" for "utility". The "value" of the network is how much people are willing to pay for it. They don't pay because it's valuable. It's valuable because people are willing to pay.
Whenever two parties enter into a reasoned voluntary trade, it is because each values what they are getting more than what they are giving up. To the network owner, the value of the network is what you're being paid. To the network user, the value of the network is what you'd have been willing to pay if you were forced. Those two numbers tend to be different, often substantially so. Vendors would like the gap to be small, and customers want it large.
Metcalfe's Law is about the value that customers perceive, not what vendors get.
In general in a competitive market, the gap tends to be fairly large (in fact economics says that the price should be the marginal cost of the last provider). In a monopoly the gap tends to be much smaller. If Metcalfe's Law holds, then a vendor should be able to dominate a market, and then proceed to jack up prices substantially, trusting to network effects to keep competitors from getting established. So the market should tend towards a monopoly that eventually becomes very profitable.
This plan doesn't seem to work as well in practice as Metcalfe's Law would predict.
As for your comment about where we should use Zipf's law vs Metcalfe's, we didn't use either. We used our own n log(n) law instead. As for whether to use a variation, while it is possible that the smaller network has all of the value, it is highly unlikely in practice. If you disagree, I'd be interested in hearing about specific examples.
Cheers, Ben
I have come to believe that idealism without discipline is a quick road to disaster, while discipline without idealism is pointless. -- Aaron Ward (my brother)
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Post #197,218
3/4/05 2:48:53 PM
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OK, I finished reading
I still think that the n^2 rule stands, but we have to define "value". "Value" for whom? As I said before, in the network business, the people paying for the merge and the people reaping benefits are different people. So, the n^2 rule holds for the nodes of network, but it does not work for the network infrastructure owners. I wonder if thew genesis of your n log(n) should be considered. In other words, it may be that the n^2 "ideal" of users is tempered something far less than n^2 of the providers.
--
And what are we doing when the two most powerful nations on earth -- America and Israel -- stomp on the elementary rights of human beings?
-- letter to the editor from W. Ostermeier, Liechtenstein
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Post #197,221
3/4/05 2:52:36 PM
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If n^2 holds for users...
then if one network is, say, 30% larger than another, people should find it fairly easy to decide to switch in droves.
In the real world this doesn't seem to happen.
Why not?
Cheers, Ben
I have come to believe that idealism without discipline is a quick road to disaster, while discipline without idealism is pointless. -- Aaron Ward (my brother)
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Post #197,232
3/4/05 3:37:26 PM
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Switching is not same as joining
60% gain may not justify the switch if it's costly for the user. In any case, there has to be a reason for _the_particular_user_ to switch. We're entering into micro-level here, and formulae do not apply.
However, when I consider joining a new network, the one larger by 30% wins hands down, all other things being equal.
--
And what are we doing when the two most powerful nations on earth -- America and Israel -- stomp on the elementary rights of human beings?
-- letter to the editor from W. Ostermeier, Liechtenstein
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Post #197,438
3/7/05 4:21:04 AM
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Larger by 30% wins?
Suppose that you're comparing company A, much smaller but has very good penetration in your area, with company B, new to your area but much larger (their home base is, say, Japan). Which do you prefer? Odds are that you prefer A, because most of the people that you care about are going to be on that network. Despite company B having more people, you're not going to experience more value there. If you think carefully about that hypothetical, the heart of our criticism of Metcalfe's law is right there. Incidentally I think that the following paragraph is key: Metcalfe's Law is intuitively appealing, since our personal estimate of the size of a network is based on uptake of that network among friends and family. Our derived value also varies directly with the metric. We therefore see a linear relationship between the perceived size and value of that network. Of course this intuition leads us astray because we do not percieve the vast majority of the network, and therefore have bad intuition of what its true size is. Cheers, Ben
I have come to believe that idealism without discipline is a quick road to disaster, while discipline without idealism is pointless. -- Aaron Ward (my brother)
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Post #197,458
3/7/05 9:26:01 AM
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I guess I should re-read
I have to agree with you that when we say "size of network" we mean, most of the time, "number of people I want to connect to on network". But that would simply lead to change of "n" in "n^2". I'll have to re-read for comprehension :) and figure out how you get from the "the heart of our criticism" to n log n.
--
And what are we doing when the two most powerful nations on earth -- America and Israel -- stomp on the elementary rights of human beings?
-- letter to the editor from W. Ostermeier, Liechtenstein
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Post #197,475
3/7/05 11:23:39 AM
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Read section 4
We present several arguments suggesting n log(n). The one that you want is in section 4.
Zipf's law says that the value of the n'th thing tends to be 1/n times the value of the first. This has been found to apply in a wide range of different areas. (Personal wealth, size of cities, etc.) If this holds for the potential value of connections over networks, and the value of the most important connections is fixed by the medium and human nature, then the average value from being in a network is the value of the most valuable times (1 + 1/2 + ... + 1/n) which scales as log(n). Over n people this totals n log(n).
Cheers, Ben
I have come to believe that idealism without discipline is a quick road to disaster, while discipline without idealism is pointless. -- Aaron Ward (my brother)
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Post #197,487
3/7/05 12:26:30 PM
3/7/05 12:26:44 PM
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There's your example :-)
Odds are that you prefer A, because most of the people that you care about are going to be on that network. You asked for an example where the smaller network was more valuable. There it is.
===
Purveyor of Doc Hope's [link|http://DocHope.com|fresh-baked dog biscuits and pet treats]. [link|http://DocHope.com|http://DocHope.com]
Edited by drewk
March 7, 2005, 12:26:44 PM EST
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Post #197,493
3/7/05 12:57:30 PM
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More valuable to you, yes
More valuable across all members of the network? No.
Cheers, Ben
I have come to believe that idealism without discipline is a quick road to disaster, while discipline without idealism is pointless. -- Aaron Ward (my brother)
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