Capitalism and Metcalfe’s Law

Metcalfe’s Law is the idea that the value of a computer network increases at a rate exponentially higher than the number of connected users on the network.

For example, a network of 10 connected users will be 4 times as valuable as a network with 5 users.

I believe there’s a key reason for this: luck. As the number of users increase, so do the odds that someone on the network will have something valuable to contribute for the others.

This why markets work, too.

Well before the internet, the price network connected people and encouraged them to do things of value for each other. The more people connected through the price network, the more valuable that network becomes.

If your trade network has 10 people in it, you won’t get much.  Expand that network to hundreds of millions and you get useful things like grocery stores filled to the brim with food, TVs packed with thousands of channels of programming, phones that take pictures and keep you in constant contact with your friends and families, movies to fill movie theaters with 24 screens, satellites that talk to your smart phone so you can find the closest Subway to get something to eat.

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