5-1b1b1a3 Network effects (digital) ＞ Supply and demand (physical)

“You can’t use up creativity. The more you use, the more you have.” – Maya Angelou

“Figure out what you are good at, and start helping other people with it. Give it away. Pay it forward.” – Naval Ravikant

Don’t use the supply-and-demand mental model everywhere. Knowledge is rare but never a scarce resource. Help yourself and others at the same time with the knowledge you have—that’s the definition of intelligent person.

A key challenge when building networks is overcoming the “bootstrap” or “cold start” problem: attracting users (fans) and contributors before enough of them are participating to make the network intrinsically useful.

Network effects cut both ways: they can accelerate growth, but they can also handicap it. Scaled networks attract new users without much effort. Conversely, subscale networks struggle just to survive.

Related Notes:

• Start small
  • 7-1a2a1.1 ‘Scale’ - Anything that scaled started small, at the edge, at the frontier, as an avant-garde
  • 5-1b4c Exponential growth feels flat in the beginning, precisely why it’s worth making an extraordinary effort to get it started. You can also follow the Fun Criterion (the latter likely exhausts the former). Consistency is the key.
  • 3-1d6c Amara’s law modified - we underestimate the importance of consistency in the short-run, but overestimate in the long-run
• It gets easier
  • 5-1b1b1a1 Things can become easier the more complexity you have (Network effects = Power-law)

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“Skeptics sometimes suggest that NFTs will restrict the sharing of media. In fact, NFTs provide an incentive to loosen restrictions. Copying and remixing generally increase the value of NFTs, just as more players in video games increase the value of virtual goods. The same effect happens with physical art too. Both owner and artist can benefit from copying because, as the art is more widely shared, the original copies can grow in value. In the extreme case, a work of art, like the Mona Lisa, can become a widely reproduced cultural icon.” – Chris Dixon

Physical is getting expensive because people fight over the tangibles. But lower cost to produce anything means we need new model to capture supply and demand in the realm of digital.

You can’t be at many places at the same time in the analog world. But in the digital world, you can.

Related Notes:

• Useful tactics
  • 5-1b1b1a5 ‘Come for the tool, stay for the network’ tactic
    • Gaming industry understood this better—they redefined the game (5-1b1b1a4 Game = Game + Streaming + Virtual Goods)
      • “People love video games, but people also love music, books, films, podcasts, and digital art. These other creative industries have simply experimented with fewer new business models. People make and listen to music as much as ever. The problem isn’t supply and demand; it’s the broken business models in between.” – Chris Dixon
  • 8-1c Look for inherently digital-native areas and concepts
    • 8-1b Look for places where we’ve taken an offline experience and put it online (physical ⇒ intermediate) but haven’t fundamentally innovated yet (⇒ internet-native)
    • 8-1d Look for inherently crypto-native areas and conceptsdevelop
      • • 6-3b6 Digital-native ownership can address ambiguities of physical ones
    • 6-3b2d Composability is software’s version of compounding interest-effect, because composability saving keystrokes implies compoundingdevelop
• 3-1a4b2 Price can only convey so muchdevelop
  • Price is not a simple reflection of the supply and demand

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Standard market-sizing fails when the supply side changes. Long podcasts are evidence that attention isn’t inherently short—supply was missing (source)

“10x bigger” mechanism: big tech shifts often expand markets by an order of magnitude (e.g., on-prem → cloud: PeopleSoft→Workday, Siebel→Salesforce; Databricks could be “10x Oracle”).

Substack does roughly $45Minannualrevenuetoday.Theglobalmediaandentertainmentmarketis$3.5 trillion. $45M\times 1000=$45B. That’s 1.3% of the current market share (source).

Related:

• 5-3b Knowledge creates new frontiers (and new markets)
• 7-1 Create what people want or will want
• 8-1c Look for inherently digital-native areas and concepts

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“Both GDP and its rate of growth can fool one in projecting future states; but errors from ignoring growth differentials can be monstrous owing to their compounding. When in doubt, use the rate of growth as status quo. In 2007, the U.S. accounted for about 20% of the world economy (using purchasing power parity, the most rational metric), Europe about the same, and China around 6%. Now, the U.S. is roughly 15% and declining, Europe is about 14% and dropping faster, while China is north of 20%. Small differences in compound growth produce massive outcome differentials over time, as Warren Buffett keeps preaching. By some mental bias, people think that status quo is GDP. No; it is GDP growth. China pulled from 6% to more than 20% of world GDP (PPP) in 15 years. So consider what the state of geopolitics would be in 2035.” – Nassim Taleb (20250923)

Related:

• 2-1b2c ‘Compounding’ - Permeate across the timeline
• 5-1b1b1a2 Network effect means compounding
• 5-2a0 Know what to measure
• 5-2a2.1 Know what you are measuring it with
• 9-2a3b0.2 Understand the downside 5 to 10 years from now
  • 5-1b4a Amara’s law - we expect too much in the short-run, but too little in the long-run
• 13-1a3a2e8 The capital value—the “price of the good as a whole”—of any good at any time is based on expectations of future rental prices