Tuesday, August 28, 2001

Clueless business folk I am continually shocked by how poorly people understand the "network effect." The "network effect" occurs when the value of the network rises as there are more users. Email is an example, but hotmail is not. Phone are an example, but cell phones are not. Napster is an example, but streaming audio from a central server is not. Another way to put this is "positive demand side externalities." But shocking, no one gets it. Andrew Odlyzko writes a good piece on the myth of Internet time, but even he doesn't really seperate the network effect from people's slow uptake of new technology.

Linux goes to WallStreet I'm thrilled to see IBM targeting niche sectors with complete Linux based products. This is definately they way to build up critical density in particular industry niches, and build up positive demand side externalities to monopolize those segments. This has already started to happen with small devices also.

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