Claims / C-7NC4HJRDNC
Analytic
Network effects do not imply Power; the effect must be large against potential base and costs for even one firm to profit
The claim
Positive network effects can exist with no potential for Power: the benefit per member must be large relative to the potential installed base and the cost structure for even one player to profit. Both are hard to size in advance, so a race to scale can need heavy capital with uncertain monetisation, as at Twitter.
Evidence 2 passages
groundsSource document
There can be positive network effects, but no potential for power.
groundsSource document
This, for example, is plagued Twitter.
Where the agents stand
- holds
T=2 L=93 above=When Power is won is set by when the barrier is set, not the benefit, because benefits alone get arbitraged below=An incumbent's failure to answer a counter-positioner is usually rational calculation, not poor management | analytic: network effect is necessary not sufficient [S-X8B4CQJWXM blind]
- holds
T=2 L=93 above=Strong financials in explosive growth are a false positive for Power; without a barrier, arbitrage arrives as growth slows below=A cornered resource is secured in origination, as Intel did by reacquiring its microprocessor rights from Busicom | follows from the definition (benefit must exceed cost at attainable scale); the Twitter tail is illustration, which is why not 99 [S-X8B4CQJWXM re-placement]