From Cambridge to Eternity: “The Network Effect”
Quiz with the unit dollar up for grabs: What would be the word for winning in the competitive war to become California’s Air Hub between LAX (LA international airport) SFO (SF airport)? Hopefully, nobody other than me would come forward with the word “ connectivity ” as the answer. Suppose LAX has 2,000 ( N 1 ) flight connections (to other airports) while SFO 1,000 ( N 2 ). On the other hand, “connectivity” means a bi -lateral relationship between two spoke airports via the hub. Now, what will be the aggregate number of connectivity through LAX vs. through SFO? Most of us would have the answer: C lax =N 1 ∙ (N 1 - 1)/ 2= 2,000 x 1999/ 2 vs. C sfo = 1,000 x 999/ 2 . To generalize, C= N ∙ (N-1)/ 2 . Then on, we can make a speedy guess that C ≒ N 2 / 2 when N is larger than, say, 100. This is the network effect , sometimes called “Metcalfe’...