Palo Alto: A History of California, Capitalism, and the World Highlight

Metcalfe’s law simply asserts a quadratic relation between a network’s nodes and its value. The more users there are, the more valuable the existing connections. In other words, these companies got big extremely fast, and these networks tended toward monopoly and oligopoly. Meaning that if these firms could use marketing and low prices to expand their user bases exponentially, they could jump from zero to billion-dollar monopolies in a process that looks more like the flipping of a binary switch than growing a company. Sophisticated and risk-tolerant venture capitalists could take an idea, just a prototype and a few sheets of paper sometimes, and build it into one of these firms in a year or two.