Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Strategies & Market Trends : Gorilla and King Portfolio Candidates -- Ignore unavailable to you. Want to Upgrade?

To: Thomas Mercer-Hursh who wrote (38903)	2/5/2001 6:44:55 AM
From: Don Mosher	Read Replies (3) \| Respond to of 54805

Thomas, we agree that the issue of connectivity is important. Hence, I wrote in my network report on WIND: "The value of the Internet as an asset is determined by the expected benefits that it will generate. Yet, the use of the Internet will permit scientists, engineers, and entrepreneurs to leverage innovation beyond our expectations. The Internet is destined to generate benefits that we do not yet know that we want or need and that we cannot even imagine. However, what we do know is that the value of any physical network increases as the number of connected elements increases. Metcalfe's law approximates the magnitude of that increase in value by specifying: as the number of elements or nodes increases arithmetically, the value of the network expands exponentially. Metcalfe proposed this model after observing that networks needed to reach a critical mass before they exploded in value. Using a model of a telephone network in which each customer talks to all others once a day, when you have 10 customers, the value of that network is approximated as n-squared, 10 X 10 = 100. If you add one new customer, the value would increase to 121; if you doubled the number of customers to 20, the value explodes to 400. When that value compounds by doubling every 100 days, you have the non-linear explosive growth of the Internet. Metcalfe's telephone network model assumed one-to-one communication. With the Internet, not only one-to-one, but also one-to-many, many-to-one, and many-to-many communication(s) occur among many sets of people. Necessarily, moving from one-to-one communication to many-to-many communications increases the number of potential interactions. Thus, it must expand the exponent beyond the square. Not only that, Internet communication extends beyond human communication: many devices with embedded systems talk to one another or to many others. Therefore, the exponent of growth in network effects is not limited to a fixed exponent of 2, but may have larger exponents. What we know for certain about network effects is the bigger the better: the more elements, the greater the value. And, what we also know is that interactivity drives the value higher. Furthermore, the small world effect spreads the outcomes of adaptive interactions faster and further than ever before. The human being is a social animal, and the Internet enlarged the diverse human and nonhuman networks of communicators as it shattered the restraints of space and time. The Internet revolutionizes how humans live, work, and play. The change is an order of magnitude beyond the usual order of magnitude levels of change in revolutionary products because of the significance of it unparalleled escalation in connected interaction"

To: Thomas Mercer-Hursh who wrote (38903)	2/5/2001 9:40:46 AM
From: JAPG	Read Replies (1) \| Respond to of 54805

Hi Thomas, Just wanted to add some comments on Networks and Network Effects, as they relate to products and services provided by the type of companies that we are interested in (ie. the “limits” of our interest): 1) IMHO the network is constituted “only” by: A) The installed customer base B) The value chain. Every time I think I found a new network group, within the “limits”, I somehow end up with a variation of A or B. Then again, I welcome any information that shows otherwise. Please note that type A usually has either a linear or a many to many connectivity and type B usually has one to many connectivity. Also the size of networks type A is orders of magnitude larger than Type B. 2) IMHO, the 2 most important NE effects are: - The value of a product, for an individual user, increases as other individuals use that same product - The “Information Contagion” phenomena which acts as a positive feedback for potential users entering the market. (see: Message 15288968 ) 3) Marrying GG and NE theory. The good news is that NE is almost secretly embedded into GG. There are hints of it in, page 40 - paragraph 2 and page 315 – paragraph 2 of TRFM. It goes something like this: (helps to read mentioned paragraphs first) - Network Effects cause Increasing returns - The Gorilla advantage is created due to the existence of Increasing returns. - The Gorilla advantage creates the Gorilla. - Within the “limits” of our interest, the TALC curve describes our network All of the above IMHO So I guess it is: more power to Geoffrey Take care JAPG