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Six Degrees: The Science of a Connected Age (2003) - Duncan J. Watts
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A wide variety of systems of interconnected components are called networks --http://en.wikipedia.org/wiki/Network, May 2004

Retiary organisation

Retiary organisation is an organizational method which needs a complex mapping or guidance system for navigation. In blood circulation, telephone networks or power distribution it means that many alternative routes are available to reach a destination passing through many nodes. To connect any two nodes needs a guide or map. In the human context each member of a network needs an address(or phone number) to find any other individual (node) in the net. In electronic devices the points in networks are also identified and accessed by unique addresses. --http://en.wikipedia.org/wiki/Retiary [Feb 2005]

Retiary organization, a web or network. --http://en.wikipedia.org/wiki/Hierarchy#Criticism_and_alternatives [Feb 2005]

Network effect

The network effect means that a good or service is such that the value of the good or service to a potential customer is dependent on the number of customers already owning that good or using that service. Equivalently, it means that the total value of a good or service that possesses network effects is roughly proportional to the square of the number of customers already owning that good or using that service.

One consequence of a network effect is that the purchase of a good by one individual indirectly benefits others who own the good - for example by purchasing a telephone a person makes other people's telephones more useful. This type of side effect in a transaction is known as an externality in economics, and externalities arising from network effects are known as network externalities.

Network effects were used as justification for some of the business strategy for dot-coms in the late 1990s. These firms operated under the belief that when a new market comes into being which contains strong network effects, firms should care more about growing their market share than about becoming profitable. This was believed to be rational because market share will determine which firm can set technical and marketing standards and thus determine the basis of future competition. A good example of this strategy was that deployed by Mirabilis, the Israeli start-up which pioneered instant messaging and was bought-out by AOL. By giving away their product (ICQ) for free and preventing interoperability between their client software and other products, they were able to corner the market for instant messaging. Because of the network effect, new IM users gained much more value by choosing to use the Mirabilis system (and join its large network of users) than they would using a competing system. As was typical for that era, the company never made any attempt to generate profits from their dominant position before selling out.

Network effects become significant after a certain subscription rate has been achieved, called critical mass. At the critical mass point, the value obtained from the good or service is greater than or equal to the price paid for the good or service. As the value of the good is determined by the user base, this implies that after a certain number of people have subscribed to the service or purchased the good, additional people will subscribe to the service or purchase the good due to the positive utility / price ratio. Until this point has been achieved, however, only early adopters will subscribe.

The increasing number of subscribers does not continue indefinitely however. After a certain point, the network becomes either congested or saturated, stopping future uptake. Congestion occurs due to overuse. The applicable analogy is that of a telephone network. While the number of users is below the congestion point, each additional user adds additional value to every other customer. However, at some point the addition of an extra user exceeds the capacity of the existing system. After this point, each additional user decreases the value obtained by every other user. In practical terms, each additional user increases the total system load, leading to busy signals, the inability to get a dial-tone, and poor customer support. The next critical point is where the value obtained equals the price paid again. The network will cease to grow at this point, and the system must be enlarged. The congestion point may be larger than the market size.

Network effects are commonly mistaken for economies of scale, which result from business size rather than interoperability. --http://www.wikipedia.org/wiki/Network_effect

Six Degrees: The Science of a Connected Age (2003) - Duncan J. Watts

You may be only six degrees away from Kevin Bacon, but would he let you borrow his car? It depends on the structures within the network that links you. When the power goes out, when we find that a stranger knows someone we know, when dot-com stocks soar in price, networks are evident. In Six Degrees, sociologist Duncan Watts examines networks like these: what they are, how they're being studied, and what we can use them for. To illustrate the often complicated mathematics that describe such structures, Watts uses plenty of examples from life, without which this book would quickly move beyond a general science readership. Small chapters make each thought-provoking conclusion easy to swallow, though some are hard to digest. For instance, in a short bit on "coercive externalities," Watts sums up sociological research showing that:

"Conversations concerning politics displayed a consistent pattern .... On election day, the strongest predictor of electoral success was not which party an individual privately supported but which party he or she expected would win."
Six Degrees attempts to help readers understand the new and exciting field of networks and complexity. While considerably more demanding than a general book like The Tipping Point, it offers readers a snapshot of a riveting moment in science, when understanding things like disease epidemics and the stock market seems almost within our reach. --Therese Littleton

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