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by Jay Fienberg

Relationship between technology, people, and value

posted: Dec 1, 2003 7:21:48 PM

This is something I have been working on, inspired by the good info in Smart Mobs, on the Laws of Moore, Sarnoff, Metcalfe, and Reed. I hope to use a version of this at work to help communicate the value of group-forming (social) network software as an emerging opportunity we should take advantage of (which my team happens to be set up to do :-).


When an enterprise looks to get value out of computer technology, Moore's Law is often cited and used to indicate the ongoing increase in the value that can be leveraged from technology. However, Moore's Law, while essential, was created in 1965, and now must be seen as only one of the laws that describe this increase in value.

With the Internet and now mobile technologies, the value of technology and how people use it can be understood in relation to four laws. These four laws look at not only technology but how people use technology to create value.

Moore's Law = computer processing power doubles every 18 months. Moore's Law also equates to an average performance improvement of over 1% a week.

Sarnoff's Law = the value of a broadcast network is proportionate to the number of viewers / readers.

Metcalfe's Law = value of a computer network is proportionate to the square of the number of nodes, i.e., n2. (And, connecting two networks creates far more value than the sum of their values as independent networks.)

Reed's Law = value of a group-forming network is proportionate to the exponential of the number of groups, i.e., 2n

Two important notes about these laws: 1) While Moore's Law may indicate the increasing value of any single device or computer, it does not account for value derived when that device or computer is connected to another—the other laws each account for this. 2) With the Internet (and so-called intranet technologies), each law builds on the one that precedes it—thus Reed's Law is effective by being the combination of Moore's Law, Sarnoff's Law, Metcalfe's Law and Reed's Law.

Table showing the relative network value of ten and eleven users in relation to each of the above laws:

technology law example technology example application network value, 10 users network value, 11 users
Moore's law desktop pc Word, Excel 1 1
Sarnoff's law
~ n readers
TV, radio, some websites news website 10 11
Metcalfe's law
~ n2 nodes
common network addresses and protocols file sharing, email 100 121
Reed's law
~ 2n groups
group-forming networks / sites eBay, recommendations 1,024 2,048


I would appreciate any suggestions or comments on this!

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Comments and Tracbacks

Comment by: Stefan Smagula ·
posted: Jun 15, 2005 5:29:31 PM

Interesting chart you have here. I'm writing about these various scaling laws, and was happy to see your analysis. The numbers and examples do seem to make common sense.

trackback from: the iCite net development blog
posted: Nov 16, 2004 8:56:22 PM
title: Metcalfe + Reed laws on Open Network Effects

the value of group-forming networks also grows at approximately the square of the number of networks interconnected

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