The Network Age

How are you going to run your network effect business? Now that the Internet's here, now that web3 is here and now that you understand network effects, you have lightning in your hands.

Let's take a historical step back. Where are we now? We've always had networks. As soon as we had 10,000 people living near each other 8,000 years ago, you had a commerce network. You had network effects playing out around marketplaces where people would gather and trade. They just played out in slow motion and on a small scale. Now that we've got the internet, we have billions of people connected and it's happening in an instant. Geography is gone. Time is gone. We're at a thousand times what it used to be. It's a different order of magnitude.

However, even back then they were dealing with power laws. They were dealing with the conundrum of the fact that once networks form, power laws form, and we're still struggling with it today, as we look at income disparity and outcome disparity in our society and the internet is only accelerating these power laws. The way we say it is the degree of the power law is getting greater. You have Jeff Bezos with $300 billion and Elon Musk with $250 billion. Incredible accretions of capital that the network is driving to the peaks of the power law. By power law, we mean that the people at the top have so much more than the next person, and the next person. So you might say the top person has two times as much as the next person who has two times as much as the next person, and then you have this very long tail for the 95% who get a smaller percentage of society's wealth and outcome or status or appearance or attention. So everything in a network conforms to a power law; it has always been thus. It will always thus be.

It's a problem because 95% of people are in the long tail and only the very people at the top get to have all the spoils and it makes us upset, that it has to be so disparate. The business you start is likely, if it's got a network effect, going to create a similar power law among your users, perhaps among your employees, some of which will earn great riches and others who will earn some. You have to think about how you're going to operate within this context.

Years ago, Alvin Toffler wrote a book called "Future Shock" in 1970, in which case he laid out that we used to have the agrarian economy where 95% of us were involved with making food. Now, we're down to less than 1% of our society. It's transitioned. The second economy was the scale economy with manufacturing, where we learned to have factories manufacture large quantities of goods. A lot of people were upset with this phase. Dickens wrote about the conditions that people were living in London, in the 1850s, with factories and smoke being belched out. No one was really enjoying their lives, all being slaves to this new machine. Then Marx come along talking about the two tribes of the winners and losers in this new economy and what should thus take place because the losers should be on top. That became widely known as Marxism.

In 1970 Toffler said, we're now moving into the information economy, but he didn't have the benefit at that time of seeing the internet. If he had, I don't think he would've called it the information economy, he would've called it the network economy. Because what we're seeing now that we have the internet and web3 is that the means of wealth creation is the network; just like it was with the industrial age.