# 67: The Value of Networks

Story behind the Passage

Today I gave a workshop for a group of Ph.D. students. It was about “Gender Diversity.” One message I got across was that all diversity issues are cultural issues and therefore, they can primarily be managed by means of communication. And communication theory is also at the basis of all media technology and social media issues. In addition, communication is my topic, there is hardly anything that fascinates me more. I studied communication, I learn more about communication every day, and I value communication as the activity that I most enjoy.

But I had to learn it the hard way. It was a necessity. Because people like me constantly confuse other people with their unpolished communication, conflicts emerge. We speak too fast, we jump around between 5+ topics, we are impatient, we sound as if we want to provoke people all the time… In order to solve the problem, you need to learn to communicate better. This challenge got me deeper and deeper into the mysteries and treasures of human communication. And now I also pass on this knowledge, that is all.

The passage above is related to all this. I learned about James Currier and NFX when I did my first book project with a startup in 2018. NFX is one of the catalysts in the Valley. You might hate or love startups, I do not care. But the Valley is the heart of tech, where the new age of digital business started. And Currier with his focus on network effects is certainly a key figure in the game. I am not saying that I am a fan of everything that happens there. Actually, I have never been there in person. But my first client had been there with his company. He learned from Currier and he shared this knowledge about network effects with me which was a great benefit for me.

The Network Effects Bible is not a ‘book book’ in the traditional sense. Everyone can download it on the website. And no, I am not saying this because I am being paid by NFX for some marketing. I am simply explaining where you get the short book. I did not even know that they turned this into a book. I had only known about the content on the website before. The reason why I picked it for today is very simple: The workshop today and another conversation I had this afternoon made me realize again how valuable networks are. Basically, they have come to form the basis of my life and business. No, I am not exaggerating, I simply want to share what I think about them.

My Learnings

“Metcalfe’s Law states the value of a communications network grows in proportion to the square of the number of users on the network (N2 where N is the total number of users on the network).” When I first learned about Metcalfe’s Law from my client, I was completely fascinated and convinced at the same time. Even though I am not into maths or IT that much, I could instantly draw the connections to my previous knowledge about communication and my personal life experience. But how do the two go together? How can someone talking about high-tech business stuff and mathematical ‘formulas’ get his message across to me — someone who is so much into people and culture?

First, let me repeat again what is written there in my own words (and since Covid, we all know what ‘exponential’ means, right`?): “in proportion to the number of users on the network” means that the value of your network grows exponentially with every additional member. Is that not so awesome? To make this even easier: Let’s say you have 2 people in a network, the ‘value’ would be 4. You add only 1 more person, and the network is worth 3 over 2 = 9. The difference is 5! Yes, I know, you can count to ten, no worries. But do you see the point?

Of course, what I describe as ‘value’ here is completely abstract. But the number refers to all the potential connections between the members of the network. And that leads to the entire magic: Just imagine you and your best friend playing tennis once a week. You add another friend to your network or even two. Now you start playing doubles and afterwards, you usually have dinner together and a couple of beers. The chances are much higher that some valuable conversation will derive from these hours spent together if you are four instead of two (4 over 2 = 16). Because the two additional people bring so many more contacts to the table (in their own networks) that you cannot actually see physically but they are there and might be of use.

So, of course, not everyone is running a business and needs potential clients via ‘networking’ or whatever. Sure, but that is not even what I am talking about. I am talking about networks as sort of a life networks. People who will help you in situations which you have no idea about until they happen for real. Usually, these moments are not the happiest ones in your lives. Sometimes, however, there is nothing special about them. In any case, a network provides you with everything you might need when you yourself cannot achieve a goal or solve a problem.

The reason why I am quite emotional about this is not only because I am fascinated by how digital media can scale network effects. This is the field of Currier, of course, network effects businesses. Basically, every business in the Valley uses some sort of network effect. What I have just come to realize, however, is how crucial networking has been in my own life and how much I depend on my ability and strength to bring together people from all kinds of backgrounds. The magic of innovation of any kind — small and large, business or private — happens when you bring together people who share the same values but complementary strengths, to mention at least some aspects of how network magic happens, at least from my perspective.

I was very lucky today to talk to someone who shares this strength or even trait. In his case as well, this was never a conscious intention. It happened because life demanded it. And that is the emotional part of it for me. You know, when Marshall McLuhan talked about the “Global Village,” digital technology was in its infancy. Still, he already projected the immense impact the media networks would have. But if you are like us, people who, when hard times arrive, only have your networks to rely on, you learn how valuable human networks actually are. They save your life in many cases — literally. The people that you know and trust — and who trust you — give you a job, they give you shelter, they give you food and they give you a feeling that life will go on.

I know that this is something that you do not learn overnight. I think, in my case, it is a gift I literally inherited. And then I had the privilege of meeting people who passed on more knowledge to me on how to expand your network in a meaningful way — in a way that the network is based on your values. Only then can magical things happen that bring joy to your life. I am very thankful that I was somehow guided to walk this path of a networker — by heart and by profession. And I know that life will bring more people to me who will strengthen the value of my network. I have no idea where exactly this value will materialize. But that is not important. The important thing is that I can trust in it.

Reflection Questions

1) How do you define a “network”’

2) In how far did you benefit from a network of people in the past?

3) Think of your personal networks (e.g., closer friends, acquaintances, colleagues) — which values connect all of you?

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Founder & CEO of Companypoets

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Silke Schmidt

Silke Schmidt

Founder & CEO of Companypoets

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