Subject: Re: near/medium future digital media economics
From: "Ben Tilly" <btilly@gmail.com>
Date: Thu, 18 May 2006 18:01:58 -0700

 Thu, 18 May 2006 18:01:58 -0700
On 5/18/06, Stephen J. Turnbull <turnbull@sk.tsukuba.ac.jp> wrote:
> >>>>> "Ben" == Ben Tilly <btilly@gmail.com> writes:
>
>     Ben> I'm sorry, but Metcalfe's Law is certainly wrong in all but a
>     Ben> very small number of circumstances.
>
> One of which is arguably Tom's setting. ;-)

Given the known power laws governing the distribution of articles of
interest for researchers, it is extremely unlikely that Metcalfe's Law
applies in Tom's setting.

>     Ben> Under normal circumstances a far more reasonable scaling rule
>     Ben> is n log(n), which does not pose the same level of
>     Ben> irresistable network effects that Metcalfe's Law does.  There
>     Ben> are network effects, but they are far smaller for mature
>     Ben> networks than Metcalfe's Law would suggest.
>
> Ah, the strange attraction of asymptotics.

So many details can be swept under the carpet when you look at the big
picture. :-)

> Tom isn't talking about a mature network, he's talking about one in
> its infancy.

True, but I suspect that doesn't matter much.  My point about mature
vs immature is one of size, not age.  That is, there is a significant
difference between being part of a network of 1000 people and one of
100,000 people.  But the difference between 100,000 and 10,000,000 is
not just a big gap.  So until you hit significant size, the larger
competitor has a significant advantage.  After you both hit
significant size, this advantage becomes fairly small.

> Also, you should remember that in terms of dynamics, a mature industry
> will be increasing with the rest of the economy, ie, exponentially.
> In an industry where costs can be expected to fall while prices are
> rising linearly with time ... I'm sure you can draw the picture, too.

In a competitive industry, sometimes falling costs result in falling
prices and profits that might go up and might go down...

> In other words, they don't need to be as big as Metcalfe's Law
> suggests to be bi-i-ig.

For collaborative content there is also a time dimension - a network
that has been producing content with twice as many people for twice as
long has 4 times as much content.

However size is not the only factor.  While collaborative content is
big and will get bigger, there are limits to what you can do with it.
For instance wikipedia has a demonstrated history of accidentally
*discouraging* experts from getting involved because said experts
discover fairly quickly that participating means constantly trying to
explain the basics of their subjects to people without much background
or interest in aquiring said background.

Cheers,
Ben