Summary & Key Takeaways
The 10 rules
Embrace the Swarm
Increasing returns
Plentitude, not scarcity
Follow the free
Feed the web first
Let go at the top
From places to spaces
No harmony, all flux
Relationship tech
Opportunities before efficiencies
Notes
The three characteristics of the new economy
It is global
It favors intangible things — ideas, information, and relationships
It is intensely interlinked
The new economy is about communication
“Communication is the economy”
“The new economy is about communication, deep and wide...Communication is the foundation of society, of our culture, or our humanity, of our own individual identity, and of all economic systems.”
Understand networks -> understand the new economy
“Understanding how networks will work will be the key to understanding how the economy works.”
To get smart, distribute from the bottom
“The surest way to advance massive connection is is to exploit decentralized forces— to link the distributed bottom.”
“A very complex problem is broken up into tiny parts and distributed throughout the network.”
Note: it is done today through services like Kaggle.
Governance and leadership helps address the paradox of choice
“Without some element of governance from the top, bottom-up control will freeze when options are many. Without some element of leadership, the many at the bottom will be paralyzed with choices.”
Develop products and services that hide in the background
“Since the measure of a technology’s success is how invisible it becomes, the best long-term strategy is to develop products and services that can be ignored.”
Advantage of getting ahead first in winner take all markets
“If a product or a company or a technology — one of many competing in a market — get ahead by chance or clever strategy, increasing returns can magnify this advantage, and the product or company can go on to lock in the market.”
The impact of biological growth in technology
“If the web feels like a frontier, it’s because for the first time in history we are witnessing biological growth in technological systems.
Notes: this fits with decentralization of things too
What helps you, also hurts you
“But if success follows a biological model, so does failure.”
Increase network value by bringing together more networks
“The fastest way to amp up the worth of your own network is to bring smaller networks together with it so they can act as one larger network and gain the total n^2 value. The internet won this way. It was the network of networks, the stuff in between that glued highly diverse existing networks together.”
If you’re late, you must be 10x better
“Latecomers have to follow Drucker’s Rule — they must be ten times better than what they hope to displace. Delayed participation often makes sense when the new offering can increase the ways to participate.”
Success is a hits business
“In the network economy, the winner-take-all behavior of Hollywood hit movies will become the norm for most products — even bulky manufactured items.”
“You try a whole bunch of ideas with no foreknowledge of which ones will work. Your only certainty is that each idea will either soar or flop, with little in between. A few high-soaring hits have to pay for all the many flops.”
“There is much to learn from long-term survivors in existing hits-oriented business (such as music and books). They know you need to keep trying lots of things and that you don’t try to predict the hits, because you can’t.”
Notes: like Venture Capital
Relationships are valuable in a world where everything is easy to copy
“What becomes valuable is the relationships—sparked by the copies—that tangle up in the network itself.”
The more networks, the more valuable
“The more networks a thing touches, the more valuable it becomes.”
More opportunities creates more uses
“As opportunities proliferate, unintended uses take off.”
More interconnected = more opportunities (good or bad)
“The more interconnected a technology is, the more opportunities it spawns for both use and misuse.”
Note: create things others can use to create, especially things you can’t think of yourself. These are the most powerful forms of technology
A network is a possibility factory
Maximize the number of relations
“You want to maximize the number of relations flowing to and from you, or your service or product.”
Maximize the opportunities of others
“In every aspect of your business (and personal life) try to allow others to build their success around your own success.”
Notes: like creating win-win companies
“You want to entice others to create services centered around the customer attention you have won, or to supply add-ons to your product.”
Notes: Aggregation Theory and effect of platforms
The hardest part is creating the first
“The primary cost will be developing the first copy, and then getting attention to it.”
How easy is it for someone outside the company to advance the product or service?
“The issue is whether it is easy or difficult for others to invent something that plays off your invention. The strategic question is simple: How easy is it for someone outside of the host company to contribute an advance to their system or product or service? Are the opportunities for participating in your own network scarce or plentiful?”
Notes: I think this idea could/should be applied to traditionally very closed systems like education and government and could have an enormous effect.
Information consumes attention
“The only factor becoming scarce in a world of abundance is human attention.”
“What information consumes is rather obvious: it consumes the attention of its recipients. Hence a wealth of information creates a poverty of attention.”
Notes: I also think trust is scarce in today’s world.
Think about giving your product away for free
“Even if the idea is never actualized, my experience is that the very act of contemplating the free will inevitably illuminate all kinds of beneficial attributes that were never visible before.”
Spread the subscription model
“Could subscriptions really apply to old order physical products, like say food? The idea of subscribing to food is not so outlandish.”
Look for generosity
“Look for the following tricks: charges only for ancillaries, as-if-free behavior, memberships, and outright generosity.”
Maximize the value of the network
“Maximizing the value of the net itself soon becomes the number one strategy for a firm. For instance, game companies will devote as much energy to promoting the platform — the tangle of users, game developers, and hardware manufacturers — as they do to their games. For unless their web thrives, they die.”
Raise the system, raise yourself
“In both country and network, the surest route to raising one’s own prosperity is raising the system’s prosperity.”
“To raise your product, lift the networks it ties into...To raise your country, increase the connections (in quality and quantity) that allow others to prosper.”
A rising tide lifts all boats
“Lester Thurow, an MIT economist, has pointed out that enabling the lowest paid to earn more is the best way to raise wages for the highest paid — the theory being that a rising tide lifts all boats.”
Relationships are more powerful than technical quality
Choose the more connected version when given the option
“Whenever you need to make a technological decision, if you err on the side of choosing the more connected, the more open system, the more widely linked standard, you will always be right.”
Something at its prime is at its peak
“Indeed, an innovation at its prime increases its chances of being eclipsed.”
“Successful firms are more prone to failure during high rates of change.”
Notes: there is a related strategy that says when you have the advantage (bigger, stronger, etc) keep the game/contest simple and straightforward, but when you at a disadvantage, you want to cause chaos.
Win by changing the rules
“While one product is perfecting its peak, an outsider can move the entire mountain by changing the rules.”
You have to descend to rise again
“You have to descend and risk extinction in order to have the opportunity to rise again.”
Removing undesirable qualities may also remove desirable ones
“It is difficult to breed out an unwanted trait without breeding out many desirable ones.”
Notes: very similar to the traits that make people successful can be the very traits that cause their downfall (Robert Moses, Napoleon, etc.)
Source of innovation comes from the outside
“Found that in all the industries he studied, the source of innovations were usually either ‘outsiders’ or else relative outsiders”
The basic rules of success
“The basic rules of success are eternal: serve customers obsessively, escalate quality, outdo your competitors, have fun.”
Success breeds paranoia
“For anyone sane, success should breed paranoia.”
Notes: Andy Grove’s ‘only the paranoid survive’
Speed and agility trump size and experience
Question success
“Not every success needs to be abandoned drastically, but every success needs to be questioned drastically.”
Incrementalism is innovation’s worst enemy
Places vs spaces
“A person in an electronic space can communicate to 10 million people at once, or interact in a game with 20,000 others — things that would be impossible in physical space.”
Notes: space vs place: space has unlimited potential connections
There are lots of middlemen in large networks
“Network technologies do not eliminate intermediaries. They spawn them. Networks are a cradle for intermediaries.”
“The more nodes, the more middlemen.”
“Every node on the network is a node between other nodes.”
Notes: this is very counterintuitive
Well made networks are never at an equilibrium
“This seems to be the goal of a well-made network: to sustain a perpetual disequilibrium.”
Hollywood is the future
“Eventually, every knowledge-intensive industry will end up in the same flattened, atomized state. Hollywood just has gotten there first.”
Innovation is dangerous
“A real innovation is sufficiently different to be dangerous. It is change just this side of being ludicrous.”
Start small
“To grow a large network, one needs to start with a small network that works, then add more sophisticated nodes and levels to it. Every successful large system was once a successful small system.”
Prosumerism
The future of prosumerism can be seen most clearly online, where some of the very best stuff is produced by the people who consume it.”
Smart relationship tech
“And the remembering must be intelligent. You order the same espresso every day, except when it’s cold out, and then you order a latte. The relationship tech has to be robust enough to be taught these distinctions.”
Create relationships amongst customers
“But the most powerful forms of R-tech rely on the swarm of other customers and the latent relationships between them to anticipate desires.”
Negatives can be just as good as positives
“A negative rating is just as useful as a strong positive rating.”
The value of Amazon is in the network and relationship created
“The value that Amazon adds is in the reviews, the recommendations, the advice, the information about new and upcoming releases, the user interface, the community interest around certain subjects.”
Let your customers capture their information
“Instead of helping your firm capture as much information about the customer as you can, you want the customer to capture as much information about themselves as they can.”
“Smart companies have finally figured out that the most accurate way to get customer information, such as a simple address, without error, is to have the customer type it themselves right from the first.”
The “reverse market” concept
The idea that instead of customers having to find merchants for the price they are willing to purchase something at, the customer says what they want and what price they’re willing to pay for it and merchants come to them.”
Trust plays a very important role in relationships
“Trust is a peculiar quality. It can’t be bought. It can’t be downloaded. It can’t be instant — a startling fact in an instant culture. It can only accumulate very slowly, over multiple iterations. But it can disappear in a blink…’The most important work in the new economy is creating conversation.’”
“In the end, conversation comes down to trust.”
“The more interactions, the more important learning becomes, the more essential relationship become, the more trust becomes a factor.”
Conversation = network economy
“A conversation is a pretty good model for understanding what is going on in the network economy.”
Transparency creates trust
“For trust to bloom, customers need to know who knows about them, and the full details of what they know.”
Get the things with the most connections
“If you are in doubt about what technology to purchase, get the stuff that will connect the most widely, the most often, and in the most ways.”
The power of compounding
“Perhaps the most potent physical force on earth is the power of compounded results, whether that is compounded interest, compounded growth, compounded life, or compounded opportunities.”
The future is about growth and seizing opportunities, not optimizing solutions
“In both the short and long term, our ability to solve social and economic problems will be limited primarily to our lack of imagination in seizing opportunities, rather than trying to optimize solutions.”
Productivity driven jobs will be gone in the future
“Any job that can be measured for productivity probably should be eliminated from the list of jobs that people do.”
It requires wasting time to create new things
“It takes 56 hours of wasting time on the web — clicking aimlessly through dumb web sites, trying stuff, and making tones of mistakes and silly requests — before you master its search process.”
“Out of these inefficient tinkerings will come the future.”
To raise productivity, don’t try to do the same things better, but to choose the right things to do
“For any individual, organization, or country the key decision is not how to raise productivity by doing the same better, but how to negotiate among the explosion of opportunities, and choose right things to do.”
Notes: what to do is more important than how
The jobs fought over by labor unions won’t be around tomorrow
Create opportunities
“How many other technologies or businesses can be started by other based on this opportunity?”