Chapter 3 (part 1) The Network

By Jonathan Goodman | Follow Him on Twitter
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“Wire People Should Know Something About Wires” – Neil Stevenson

Consider an electric circuit. To build it you go to a hardware store and buy the cheapest wires and a battery you can find. Upon opening the door at home you excitedly throw the wires on the ground. Then, you attach one end of a wire to a battery, flick the switch, and send out a charge. Depending on how lucky you got the charge might cause a flicker before it fizzles out. That, or it will burn your house down.

Knowing something about how wires operate is important if you want to make the charge follow a pre determined path in order to have the desired effect. Failing to design a path is inefficient and potentially dangerous. So it’s safe to assume that you agree with me when I suggest, in agreement with Neil Stevenson, that wire people should know something about wires.

Online networks don’t have wires. The concept is abstract but let’s pretend for a minute that the wires connecting the nodes on the network are material.

A microblog (Facebook / Twitter etc.) or full-fledged blog post is a charge. It creates a spark. Unless the network of wires that you carefully assembled are both organized and ready to accept the charge it will fizzle out and die. You can keep creating as many sparks as you like, to no avail, and eventually become disenchanted and quit. Or you can understand how the network was built, what you can use as currency, and how it operates.

Metcalfe’s Law and the Power of the Network

In 1970 Robert Metcalfe discovered a paper by Norman Abramson. Abramson described a process of message transduction called AlohaNet that was currently being used for communication among the Hawaiian Islands.

The simplicity of AlohaNet was what initially got Metcalfe interested. The system allowed for packets of information led by a header to be sent from one person to another specifically chosen person. The problem was that only about 17% of messages got through. According to Abramson the messages were colliding with each other. In Metcalfe’s words, “they were lost in the ether”.

Using an advanced form of mathematics called queuing theory Metcalfe was able to bring the success rate of message transduction up to 90%. The Ethernet was born and it issued in a new era of interconnectedness. *3*1

But most people don’t know of Metcalfe for the Ethernet.

George Glider, in a 1993 issue of FORBES magazine, first coined the phrase “Metcalfe’s Law”. This law states that the power of a network is directly proportional to the square of the number of nodes on that network. In other words the value of each node (or person) grows disproportionately as the network gets bigger. Glider created the term to describe the interconnections of machines. Since the development of the social network the law has been thrust into the forefront. *3*2

“Social networks form around what might be called affinities”, said Metcalfe in a 2006 blog post. He stated that as long as the number of people sharing an affinity is above a critical mass the social network would form. In that same blog post Metcalfe postulated that, with broadening social networks and Internet access getting cheaper, many more social networks will become viable. *3*3

I’d say he was right.

The one corollary is that each person in the network can, in theory, link to every other user.

Every network that we have at our disposal today allows for us to link to everybody else. For example, we can “tag” others in Facebook, “@ mention” people in Twitter, and link to people in blogs. Linking and connecting to others in some capacity is the one commonality of every modern social network built. Up until 2010 social networks were, for the most part, insulated and self-contained. Material spread within them but not outside of them.

As the network grows it becomes more powerful. Facebook hit 1 million active users by the end of 2004. In August of 2008 they reached 100 million. In September of 2012 they hit an astonishing 1.01 billion active users. *3*4

In 2010 Mark Zuckerberg took the stage at the F8 conference and announced what he called “the most transformative thing we’ve ever done for the web”. Facebook had developed a series of social plugins to allow website publishers to add a “like” button to any piece of content on their site without writing a single line of code. *3*5

Today it seems odd to come across a website that doesn’t host a plethora of sharing buttons. Facebook’s transformative innovation allowed anybody with a website to incorporate the social network directly onto their page. The age of sharing was upon us. An individual’s affinity increased which made it easier for them to reach their personal social networks critical mass.

The network is developed. It’s there for your taking and, although you cannot see or touch it, it’s power is palpable and reach is infinite. The network is governed by a series of rules. Some of which are well known and rooted in common sense, others in computer geek talk, and some lesser known rules that govern peoples actions within the network are rooted in behavioral economics.

It all starts with what you have to offer.

You Have Currency, if You Know How to Spend it

Everybody who attempts to gain influence online inevitable encounters the same Catch-22. It’s hard to build up any influence because you have nothing to offer but it’s hard to have anything to offer unless you have influence.

You do have currency, a lot of it. The currency is valuable. But the currencies value changes depending on how it is delivered. Use it right and it will build relationships with important people and gain influence. Use it wrong and you will be ignored or earn the dubious title of “spammer”.

Rooted in behavioral economics is the concept of social vs. market norms. Dan Ariely in his book Predictably Irrational uses the example of Thanksgiving dinner. He describes a scene where, after dinner, you sit back in your chair and ask your mother in law how much you owe her for the delicious meal she just served you.

It’s not considered acceptable to bring somebody an enveloped stuffed with cash as payment for dinner. Instead we bring them gifts. Rationally we would think somebody would prefer $20 as opposed to another $15 bottle of Cabernet or a sincere thank you but this isn’t the case. Ariely describes two distinct economic systems at play:

“Social norms are wrapped up in our social nature and our need for community. They are usually warm and fuzzy. Instant paybacks are not required: you may help move your neighbor’s couch, but this doesn’t mean he has to come right over and move yours. It’s like opening a door for someone: it provides a pleasure for both of you, and reciprocity is not immediately required.

The second world, the one governed by market norms, is very different. There’s nothing warm and fuzzy about it. The exchanges are sharp-edged: wages, prices, rents, interest, and costs-and-benefits […] when you are in the domain of market norms, you get what you pay for – that’s just the way it is.” *3*6

The Catch-22 is that you don’t have enough to offer influential people until you yourself have influence. This Catch-22 is born in market norms. Avoid introducing it into the equation and your currency becomes valuable.

Unfortunately if you have already introduced market norms you may have a hard time switching back to social norms. This was illustrated in a study done by Uri Gneezy and Aldo Rustichini. A daycare in Israel wanted to see whether imposing a fine would deter parents from showing up late picking up their children.

The researches concluded that the introduction of a fine shifted the mindset of parents and was therefore ineffective. They were now paying for their tardiness and no longer felt bad for the teachers who had to stay late. Perhaps most interesting was that when the fine was removed the parents still showed up late (in fact the numbers rose once again from the time when the fine was instituted). As it turns out a shift towards market norms has long-term effects and are not easy to reverse. *3*7

Have you ever done a search for technical web help and came across a forum? The users participating in the forum providing advice have highly developed skill sets. If you were to hire them to troubleshoot your problem it would cost you a decent amount of money. Yet they are happy to, in their spare time, work at solving your problem. These people gain social equity by helping you and feel that they are being a part of a greater whole.

Understanding the concept of social vs. market norms is important in theory. I urge you to be creative and develop your own methods. The following sections are all ways that I was able to develop my unbelievable network.

We’re getting into the good stuff now. Put your email in the box below to be notified when the next section of Chapter 3 gets dropped. I also have a 55-page eBook coming out next week only for email subscribers that you will get sent to your mailbox.

 

References

1. http://www.gilder.com/public/telecosm_series/metcalf.html

2. GILDER, G. (1993, September 13). METCALF’S LAW AND LEGACY. Forbes ASAP. Retrieved at http://www.seas.upenn.edu/~gaj1/metgg.html

3. http://vcmike.wordpress.com/2006/08/18/metcalfe-social-networks/

4. http://finance.yahoo.com/news/number-active-users-facebook-over-230449748.html

5. http://techcrunch.com/2010/03/25/facebook-to-release-a-like-button-for-the-whole-darn-internet/

6. Predictably Irrational: The Hidden Forces That Shape Our Decisions (Ariely, 2008)

7. Uri Gneezy and Aldo Rustichini, “A Fine is a Price,” Journal of Legal Studies (2000).

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