Metcalfe’s Law in Reverse

May 31st, 2008

In college, my senior thesis was based on Metcalfe’s law (a network’s value is equal to the number of it’s users squared). This theory originally related to Ethernet and telecommunications technologies. The classic example being that a fax machine is useless if only one person (node) has the machine, but becomes exponentially more useful as other people purchase fax machines (adding nodes to the network) because the number of machines that each user can send and receive from increases. I used Metcalfe’s Law to help explain a major factor in whether an online businesses succeeds or fails. Although, a much better example of the law, and a concept that probably would have raised my grade from a B- to and A+, would have been to use the law to describe how online social networks would rapidly gain users (and ad revenue) over the next 5 years. I would have also probably been on to an idea that would have lead me to riches at a young age.

In Andrew Chen’s Social network death spiral: How Metcalfe’s Law can work against you, he explains how the the same law can also cause the fall of an online network or application just a quickly as it’s rise.

Eflactem’s Law

Funny enough, everyone always talks about Metcalfe’s Law like it’s a good thing, and they say that because they assume that N is increasing! But let’s consider the opposite: If Metcalfe’s Law says that your network grows value competed by N^2, then Eflactem’s Law states the reverse. It says:

As you lose users, the value of your network is decreases exponentially (doh!)

That is:

* If you have 100 users, and then grow to 200 users, your “value” has increased from 10k to 40k.
* But if you START with 200 users, and end up with 100, then you are going from 40k in value to 10k in value.

And that sucks. Perhaps this should be called Murphy’s Law instead?

In fact, you see this happen all the time at dinner parties or events. Things are great until one or two people announce the intention to leave. If those folks are fun and entertaining, there’s an immediate realization that the quality of the experience is about to go down. And yet more people announce their intention to leave, and so on, until you are left with the party hosts and a big mess.

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