These twelve principles or laws are based on an article by Wired editor Kevin Kelly. It appeared quite a while ago, in the Wired issue of Sept 1997. But it’s amazing how relevant this still is. Definitely worth reading in detail (link).
Here is some background on each of them:
1 The Law of Connection
Two key technologies (semiconductors and telecommunications/internet connectivity) continue to make dramatic advances. The results: Everybody will be increasingly connected to everybody else through a variety of devices. And not only that: Everything will be connected to everything, as tiny chips are implanted into UPS packages and soup cans and refrigerators.
Two key technologies (semiconductors and telecommunications/internet connectivity) continue to make dramatic advances. The results: Everybody will be increasingly connected to everybody else through a variety of devices. And not only that: Everything will be connected to everything, as tiny chips are implanted into UPS packages and soup cans and refrigerators.
2 The Law of Plentitude
As the number of nodes or members in a network increases arithmetically, the value of the network increases exponentially. The more plentiful things become, the more valuable they become (think fax machines).
As the number of nodes or members in a network increases arithmetically, the value of the network increases exponentially. The more plentiful things become, the more valuable they become (think fax machines).
3 The Law of Exponential Value
Success is non-linear in the networked economy. During its first ten years, Microsoft’s profits were negligible. But once they started to grow, they exploded. The same applies to fax machines, net technologies, new software: An early phase of slow growth often turns into explosive growth once the network effects kick in.
Success is non-linear in the networked economy. During its first ten years, Microsoft’s profits were negligible. But once they started to grow, they exploded. The same applies to fax machines, net technologies, new software: An early phase of slow growth often turns into explosive growth once the network effects kick in.
4 The Law of Tipping Points
New businesses, products and services in the economy follow an epidemiology model of spreading: The beginning is an uphill battle, each new user has to be convinced against all odds. Once a critical mass of users is reached, the momentum becomes overwhealming, and success feeds on itself.
New businesses, products and services in the economy follow an epidemiology model of spreading: The beginning is an uphill battle, each new user has to be convinced against all odds. Once a critical mass of users is reached, the momentum becomes overwhealming, and success feeds on itself.
5 The Law of Increasing Returns
This is probably the best know and most critical laws of the networked economy. As a company gains momentum, it’s increased critical mass allows it to further improve and refine its offering, and it will continue to outperform and attract additional users, feeding on itself.
This is probably the best know and most critical laws of the networked economy. As a company gains momentum, it’s increased critical mass allows it to further improve and refine its offering, and it will continue to outperform and attract additional users, feeding on itself.
6 The Law of Inverse Pricing
In the networked economy, the very best gets cheaper every year. New generations of a product or service will show significant improvements in features, but the consumer today expects them to be radically cheaper. In the old economy, small increases in quality came with small increases in price.
In the networked economy, the very best gets cheaper every year. New generations of a product or service will show significant improvements in features, but the consumer today expects them to be radically cheaper. In the old economy, small increases in quality came with small increases in price.
7 The Law of Generosity
Taking laws number 2 and 6 to the extreme means that in many cases, products are given away for free in the networked economy. With marginal costs at or close to zero, free is often the right price to gain momentum. Premium services can cover the limited fixed costs.
Taking laws number 2 and 6 to the extreme means that in many cases, products are given away for free in the networked economy. With marginal costs at or close to zero, free is often the right price to gain momentum. Premium services can cover the limited fixed costs.
8 The Law of Allegiance
A company’s primary focus in the networked world is not to maximize its own value, but to maximize the value of its network and platform (think game companies who nurture their ecosystem of programmers, Apple who nurtures its relationship with app developers and media companies).
A company’s primary focus in the networked world is not to maximize its own value, but to maximize the value of its network and platform (think game companies who nurture their ecosystem of programmers, Apple who nurtures its relationship with app developers and media companies).
9 The Law of Devolution
A company may evolve to become the best hard disk manufacturer of the world. But in the networked economy, things tend to shift very rapidly, and the hard disk market may have evaporated a few years later. So a company has to “devolve”, and find new niches, before it can evolve again in a new area. Kelly wrote this article before Christensen’s Innovator’s Dilemma, but it’s fundamentally the same point.
A company may evolve to become the best hard disk manufacturer of the world. But in the networked economy, things tend to shift very rapidly, and the hard disk market may have evaporated a few years later. So a company has to “devolve”, and find new niches, before it can evolve again in a new area. Kelly wrote this article before Christensen’s Innovator’s Dilemma, but it’s fundamentally the same point.
10 The Law of Displacement
Kelly posits that there is a gradual displacement in the economy of materials by information (cars become lighter yet better, etc.). Nicolas Negroponte made the same “atoms to bits” statement. I’m not so sure about this point. It may apply to certain products (books, laptops, etc.), but not to everything.
Kelly posits that there is a gradual displacement in the economy of materials by information (cars become lighter yet better, etc.). Nicolas Negroponte made the same “atoms to bits” statement. I’m not so sure about this point. It may apply to certain products (books, laptops, etc.), but not to everything.
11 The Law of Churn
This is essentially Schumpeter’s point of the creative forces of destruction. Firms continue to be created and go out of business. The key is to create the right framework and boundary conditions for this process to happen smoothly.
This is essentially Schumpeter’s point of the creative forces of destruction. Firms continue to be created and go out of business. The key is to create the right framework and boundary conditions for this process to happen smoothly.
12 The Law of Inefficiency
In the Network Economy, productivity is not our bottleneck. Our ability to solve our social and economic problems will be limited primarily by our lack of imagination in seizing opportunities, rather than trying to optimize solutions.
In the Network Economy, productivity is not our bottleneck. Our ability to solve our social and economic problems will be limited primarily by our lack of imagination in seizing opportunities, rather than trying to optimize solutions.