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22 Apr 09

Guest Blogger Bob Metcalfe: Metcalfe’s Law Recurses Down the Long Tail of Social Networks « VCMike’s Blog

  • As I wrote a decade ago, Metcalfe’s Law is a vision thing. It is applicable mostly to smaller networks approaching “critical mass.” And it is undone numerically by the difficulty in quantifying concepts like “connected” and “value.”
  • There may be diseconomies of network scale that eventually drive values down with increasing size. So, if V=A*N^2, it could be that A (for “affinity,” value per connection) is also a function of N and heads down after some network size, overwhelming N^2. Somebody should look at that and take another crack at my poor old law.
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21 Apr 09

IEEE Spectrum: Metcalfe's Law is Wrong

  • Metcalfe's Law attempts to quantify this increase in
    value. It is named for no less a luminary than Robert M.
    Metcalfe, the inventor of Ethernet. During the Internet
    boom, the law was an article of faith with
    entrepreneurs, venture capitalists, and engineers,
    because it seemed to offer a quantitative explanation
    for the boom's various now-quaint mantras, like "network
    effects," "first-mover advantage," "Internet time," and,
    most poignant of all, "build it and they will come."
  • The foundation of his eponymous law is the observation
    that in a communications network with n members, each
    can make (n–1) connections with
    other participants. If all those connections are equally
    valuable—and this is the big "if" as far as we are
    concerned—the total value of the network is
    proportional to n(n–1), that is,
    roughly, n
    2.
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