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We are living amid two great infrastructure changeouts:
- the internet, upon which commerce, media and information flow
- the cloud, upon which IT is stored, powered, and distributed
Both happen to be hyper-connected networks. Networks whose power to disrupt and change the world is still largely untapped.
To understand why, let’s recall Metcalfe’s Law. Robert Metcalfe was an engineer in the early days of the internet who said that a network’s value is proportional to the square of the number of its nodes – with nodes meaning either a participant or connection point that can send, receive and/or redistribute information. This law is supposed to hold true whether it is applied to a network of landline phones or users of a social media app.
I’d add a wrinkle and suggest that the value of a network is also a function of the capabilities (or power) of the nodes in the network AND of the capabilities (or power) of the cargo that the network carries.
These are the fundamental components and core jobs of a network, after all: to connect nodes and to transmit something through them.
In other words, the following are critical determinants of a network’s power and its ability to disrupt:
- what the nodes are
- what the cargo happens to be
- what is its capacity to affect change
To bring this to life, let’s reflect on the impact that the transcontinental railroad had in the US in the mid-19th century. Its nodes were towns and ports. Its cargo was freight and people. All things of the material world. Finite. Yet it supercharged American industry. No mean feat!
Contrast that with the nodes and cargo of today’s new communication infrastructures. Their nodes are, theoretically, every human and any machine connected to them. And instead of transporting people, cattle, and crops, they transport bits and bytes. Not merely ‘data’ but also software and applications – the very vessels for ideas and human creativity and ingenuity.
The power of all this is expressed well in Paul Graham’s excellent essay Great Hackers. He writes: “In a low-tech society you don’t see much variation in productivity. If you have a tribe of nomads collecting sticks for a fire, how much more productive is the best stick gatherer going to be than the worst? A factor of two? Whereas when you hand people a complex tool like a computer, the variation in what they can do with it is enormous.”
As I read that, the question that pops to mind is: “What tool is even more complex than a computer? Where can the variability be even greater?”. The answer, I think, lies inside our heads and hearts: imagination, creativity, human ingenuity.
Thanks to these new infrastructures, the tools are at hand for entrepreneurial-minded individuals to address problems that couldn’t be dealt with before. And they can do so by collaborating creatively and imaginatively with others in real time and on a global scale in ways that were not possible until now.
As a communication network grows, more unique connections become possible, increasing its value.
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The views expressed should not be considered as advice or a recommendation to buy, sell or hold a particular investment. They reflect opinion and should not be taken as statements of fact nor should any reliance be placed on them when making investment decisions.
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