PEERS ONLINE INTERACTION FRAMEWORK

The fundamental flaw underlying both Metcalfe's and Reed's laws is in the assignment of equal value to all connections or all groups. The underlying problem with this assumption was pointed out a century and a half ago by Henry David Thoreau in relation to the very first large telecommunications network, then being built in the United States. In his famous book Walden (1854), he wrote: "We are in great haste to construct a magnetic telegraph from Maine to Texas; but Maine and Texas, it may be, have nothing important to communicate." As it turns out, Maine did have quite a bit to communicate with Texas—but not nearly as much as with, say, Boston and New York City. In general, connections are not all used with the same intensity. In fact, in large networks, such as the Internet, with millions and millions of potential connections between individuals, most are not used at all. So assigning equal value to all of them is not justified. This is our basic objection to Metcalfe's Law, and it's not a new one: it has been noted by many observers, including Metcalfe himself.

Metcalfe's Law does not lead to conclusions as obviously counterintuitive as Reed's Law. But it does fly in the face of a great deal of the history of telecommunications: if Metcalfe's Law were true, it would create overwhelming incentives for all networks relying on the same technology to merge, or at least to interconnect. These incentives would make isolated networks hard to explain. To see this, consider two networks, each with n members. By Metcalfe's Law, each one's value is on the order of n 2, so the total value of both of these separate networks is roughly 2n 2. But suppose these two networks merge. Then we will effectively have a single network with 2n members, which, by Metcalfe's Law, will be worth (2n)2 or 4n 2—twice as much as the combined value of the two separate networks. Surely it would require a singularly obtuse management, to say nothing of stunningly inefficient financial markets, to fail to seize this obvious opportunity to double total network value by simply combining the two.

Zipf's Law is one of those empirical rules that characterize a surprising range of real-world phenomena remarkably well. It says that if we order some large collection by size or popularity, the second element in the collection will be about half the measure of the first one, the third one will be about one-third the measure of the first one, and so on. In general, in other words, the kth-ranked item will measure about 1/k of the first one. To take one example, in a typical large body of English-language text, the most popular word, "the," usually accounts for nearly 7 percent of all word occurrences. The second-place word, "of," makes up 3.5 percent of such occurrences, and the third-place word, "and," accounts for 2.8 percent. In other words, the sequence of percentages (7.0, 3.5, 2.8, and so on) corresponds closely with the 1/k sequence (1/1, 1/2, 1/3…). Although Zipf originally formulated his law to apply just to this phenomenon of word frequencies, scientists find that it describes a surprisingly wide range of statistical distributions, such as individual wealth and income, populations of cities, and even the readership of blogs.

Zipf's Law can also describe in quantitative terms a currently popular thesis called The Long Tail. Consider the items in a collection, such as the books for sale at Amazon, ranked by popularity. A popularity graph would slope downward, with the few dozen most popular books in the upper left-hand corner. The graph would trail off to the lower right, and the long tail would list the hundreds of thousands of books that sell only one or two copies each year.