Beta
×

Welcome to the Slashdot Beta site -- learn more here. Use the link in the footer or click here to return to the Classic version of Slashdot.

Thank you!

Before you choose to head back to the Classic look of the site, we'd appreciate it if you share your thoughts on the Beta; your feedback is what drives our ongoing development.

Beta is different and we value you taking the time to try it out. Please take a look at the changes we've made in Beta and  learn more about it. Thanks for reading, and for making the site better!

New Fundamental Law of Network Economics

kdawson posted more than 5 years ago | from the move-over-metcalfe dept.

Networking 106

intersys writes "A new fundamental law of economics has been formulated by Rod Beckstrom, former Director of the National Cyber Security Center. In Words: The value of a network equals the net value added to each user's transactions (PDF) conducted through that network, valued from the perspective of each user, and summed for all. It answers the decades-old question of 'how valuable is a network.' It is granular and transactions-based, and can be used to value any network: social, electronic, support groups, and even the Internet as a whole. This new model or law values the network by looking from the edge of the network at all of the transactions conducted and the value added to each. One way to contemplate the value the network adds to each transaction is to imagine the network being shut off and what the additional transactions' costs or loss would be. Beckstrom's Law replaces Metcalfe's law, Reed's law, and other concepts which proposed that the value of a network was based purely on the size of the network (and in the case of Metcalfe's law, one other variable)."

Sorry! There are no comments related to the filter you selected.

As whiskers abound (4, Funny)

smitty_one_each (243267) | more than 5 years ago | (#27487417)

As whiskers abound,
The network is found,
Infinitely sound,
Until Slashdot-ground.
Burma Shave

Regan Years: VooDoo econmoics (-1, Offtopic)

Anonymous Coward | more than 5 years ago | (#27487429)

Trickle down and piss on is more like it.

whats new (4, Funny)

Vspirit (200600) | more than 5 years ago | (#27487431)

1(4)+1(2)=6

Re:whats new (2, Funny)

Thanshin (1188877) | more than 5 years ago | (#27487663)

Actually:

1--1
|
1--1   =  6
|  |
1--1

Re:whats new (1)

smitty_one_each (243267) | more than 5 years ago | (#27490791)

Brilliant!

Duh (3, Insightful)

tjstork (137384) | more than 5 years ago | (#27487435)

I am completely unimpressed by this common sense "discovery." They pay people to come up with this?

Re:Duh (5, Insightful)

azgard (461476) | more than 5 years ago | (#27487469)

Me too. I skimmed through the paper; he just defines some functions, and he calls his new model Beckstrom's Law. How is his definition a law?

Re:Duh (4, Funny)

Opportunist (166417) | more than 5 years ago | (#27487667)

By naming it. I have this definition of contributions to /. that increases your Karma. I call it Opportunist's law.

See? It's easy!

No, I didn't prove it in any way. That's not part of the exercise. Naming it is. So make something up and call it azgard's law. You'll see, it's fun, and you'll be the hit at parties when you can say that you're that guy the law was named after.

You should omit that you did the naming.

... a little something called Brannigan's Law (0)

Anonymous Coward | more than 5 years ago | (#27492011)

I don't pretend to understand Brannigan's Law. I just enforce it.

Re:Duh (2, Funny)

Ihmhi (1206036) | more than 5 years ago | (#27494357)

Azgard's Law: Anytime Col. O'Neil is in imminent danger, Thor beams him up to his ship.

Re:Duh (5, Funny)

inviolet (797804) | more than 5 years ago | (#27488027)

Me too. I skimmed through the paper; he just defines some functions, and he calls his new model Beckstrom's Law. How is his definition a law?

It's handy that he named his observation "Beckam's Law" for us, because then we can apply inviolet's law:

A new discovery is headline-grabbing FUD/bunk if its discoverer names it after himself. Whereas a new discovery is probably useful if others name it after its discoverer.

Think of it as an extrapolation of the importance of peer review. Pretty handy, eh? That's why I named it after mys-- aw, damnit!

Re:Duh (1)

Sleen (73855) | more than 5 years ago | (#27489721)

Yeah no kidding. This seems like some stupid shit. But then again most economics despite attempts to appear like science, is nothing but advertizing. Network seen from the individual...its a start but only half way there.

Of course they pay people to come up with this (4, Insightful)

VampireByte (447578) | more than 5 years ago | (#27487545)

He's with the National Cyber Security Center, and for security purposes there's always this dramatic "the hacker caused damages of X dollars" where X is very large. They want X to be huge so that equally large sums can be spent on bringing offenders to justice, so that the press has this huge amount of loss to report for dramatic purposes, so that huge civil suits can be brought, etc. Additionally, this Beckstrom fellow devises "Beckstrom's Law" and now he can be called in for expert testimony, he being the expert because "Beckstrom's Law" is named after him (by himself of course, but that's just a minor point).

Re:Of course they pay people to come up with this (1)

Zarf (5735) | more than 5 years ago | (#27489489)

  +1 inciteful

Seriously, bravo. That's exactly how some of this research works. It's not so much science, math, or original thought but marketing. You sell the idea so you can ride the wave of the idea.

This goes on much more than we would like to admit in science and technology. Scientists and technologists like to think we're unbiased and dispassionate in our analysis... but we're not. We're subject to the forces of marketing and hype as much as anyone else.

That's why we need to really be careful with our figures especially if they prove what we wanted to prove.

Re:Of course they pay people to come up with this (1)

spud603 (832173) | more than 5 years ago | (#27489601)

+1 inciteful

Heh. I hope your double meaning was deliberate, but either way I like it.

Re:Of course they pay people to come up with this (1)

mbaer (1099749) | more than 5 years ago | (#27492713)

He seems to have "resigned" according to his website. Maybe he can use his new found spare time and improve his seminal finding!

Re:Duh (1)

elashish14 (1302231) | more than 5 years ago | (#27487781)

There are two sides to the story. Around college campuses, you can always find one or two classes on networks. The topics covered are relatively common sense and could probably be taught at a 14-year-old's level. Concepts such as how rumors spread, fads develop and fade away, etc. It's all nonsense and incredibly easy on the scale that they're taught.

However, they can be useful when you scale them up to large systems. Let's not forget either that Steve Nash was awarded the Nobel Prize for game theory. I've never looked at how in-depth his work was myself, but these methods for social analysis sometimes are somewhat useful and enlightening. These models/algorithms make live easier when you're handling massive amounts of data... I guess.

Re:Duh (2, Informative)

Raffaello (230287) | more than 5 years ago | (#27488755)

Steve Nash is a point guard for the Phoenix Suns

John Nash is the Nobel laureate.

Re:Duh (1)

Yold (473518) | more than 5 years ago | (#27489297)

Umm IIRC, Nash Equilibrium is not really a method for "social analysis". Its been years since I've had a course that covered it, but I remember it being the foundation of the Minimax algorithm.

It sounds like you are recalling the hollywood definition of Nash Equilibrium, which was a very simple analogy.

Re:Duh (0)

Anonymous Coward | more than 5 years ago | (#27490169)

Nobel Prize? Umm No. He won the Bank of Sweden Prize in Economic Sciences!!

Re:Duh (2, Funny)

ElizabethGreene (1185405) | more than 5 years ago | (#27487933)

Look! Now we can determine the true net value of Myspace.

-0-

Oh crap.. nevermind. :D

Re:Duh (1)

SalaSSin (1414849) | more than 5 years ago | (#27488321)

Sure.

They being big ISP's looking for a reason to charge more per kb used, depending on your use of the network.

I can really feel some changements coming in my broadband subscription fee...

Me: Why am i paying more?
ISP: You paid 5 bills this month, if you didn't do that, you would be homeless, so our network had a great value for you. That's why you're now paying 500 bucks / month.

Re:Duh (4, Funny)

CopaceticOpus (965603) | more than 5 years ago | (#27488329)

Wait, wait, I have a similar epiphany in another field!

"The value of a pizza equals the net value added by each topping, multiplied by the cheese, rated by the taste experience of each user, and minus 100 if it came from Domino's."

There you go - please send accolades and research grants this way.

Re:Duh (2, Funny)

mbaer (1099749) | more than 5 years ago | (#27492817)

You didn't understand the true "edge-based" genius of Beckstrom's Law. Applied to Pizza it would be:

"The value of all the worlds pizzas equals precisely the value that each pizza eater attaches to their pizza."

Yeah, this is the funniest slashdot article I have seen in a while. It becomes even funnier considering that this dude is actually serious about his conjecture. First, I thought it was a mere April's fool joke.

Re:Duh (4, Insightful)

mea37 (1201159) | more than 5 years ago | (#27488431)

On one hand, you have to put it in context. There have been several models of network value, and none of them have taken this "common sense" approach of defining value in terms of what you get out of the network.

But before running with that, we have to look at the other hand, and see why none of the older models take this approach. I think it comes down to the question of "what is the model's purpose"? The simplicity and usability of a model are potentially as important as its accuracy.

If I can't predict the inputs to my model, then my model can't be used for prediction. I can predict a certain level of information about a hypothetical network using size-based models.

Moreover, if I can't measure the inputs to my model, then I can't use it at all. Claims that we can "measure the value of the Internet" are a bit much.

Don't get me wrong, this model may be well-suited to some purposes. But it does not, as TFS claims, "replace" the existing models any more than relativity "replaces" classical physics. Sure, it may be a highly accurate definition of the value of a network when you can observe that network empirically (but a definition is not a "law"). This assumes that it accounts for negative value of a transaction, though. (What is the contribution of spam to the value of the Internet?)

Re:Duh (1)

Dishevel (1105119) | more than 5 years ago | (#27488587)

(What is the contribution of spam to the value of the Internet?)

For the spammer it is placed squarely in the plus column.

Re:Duh (1)

Phat_Tony (661117) | more than 5 years ago | (#27494899)

Claims that we can "measure the value of the Internet" are a bit much.

No, he lays it all out right there for us:

the value of a network equals the net value added to each user's transactions... It... can be used to value any network... even the Internet as a whole

See? So I'll just start adding. Once I get done quantifying the value of every transaction I've ever performed over the internet, I'll start on yours next. So can you email my your entire history of internet usage (including the email itself) and I'll get to it when I finish mine, in about... one hundred years. Following this model, I may finish tabulating the current value of the internet sometime before the heat death of the universe.

Re:Duh (1)

hhallahh (1378697) | more than 5 years ago | (#27488747)

Exactly. If the article summary is accurate, this seems to just take the centuries-old theory of subjective value and applies it to an economy characterized by a network. Network economics must be in a sad state if it's taking so long for the basics to just be "discovered".

It's Stachour's Law (1)

davecb (6526) | more than 5 years ago | (#27493175)

Hey, that's the formula Paul Stachour used for the value of email, to compare the ARPAnet and a bunch of lower-connectivity private provider's nets.

--dave

Do we really need... (4, Funny)

Exitar (809068) | more than 5 years ago | (#27487485)

a new law that will, when the current crisis will end, contribute to create the next crisis?

Re:Do we really need... (1)

i_ate_god (899684) | more than 5 years ago | (#27487559)

yes we do, so that next bubble, I'll be smart enough to build a savings that will carry me on through life during the next crisis.

Re:Do we really need... (1)

Opportunist (166417) | more than 5 years ago | (#27487691)

Yes we do.

The ones that know how the bubble works will know when to jump ship. There are people that got rich during dot.com. The ones that knew when to bail and leave the mountains of debt to the suckers.

Just like in real economy.

Re:Do we really need... (1)

inviolet (797804) | more than 5 years ago | (#27488275)

The ones that know how the bubble works will know when to jump ship. There are people that got rich during dot.com. The ones that knew when to bail and leave the mountains of debt to the suckers. Just like in real economy.

It's no secret how they did it, either. Warren Buffet (I think?) summed it up when he said, "I knew we were in trouble when the average Joe was flipping houses." The point being: by the time you hear about a great investment, it's not a great investment.

The point of the point being: start shorting when the public goes bullish on some new investment sector. Because that public craze *is* the reason why the price is high.

So what's the Internet worth? (0)

Anonymous Coward | more than 5 years ago | (#27487487)

"Value added to each transaction" seems.....dynamic at best. Shutting off the internet would mean time lost to my kid doing homework ( and having to go to the library to research an answer ) , but more time gained from reduction in answering pointless IM messsages and Facebook "5 favorite industrial sludge" survey apps.

Re:So what's the Internet worth? (0)

Anonymous Coward | more than 5 years ago | (#27487793)

My favorite is hexavalent chromium!

"Valued from the perspective of each user" (0)

Anonymous Coward | more than 5 years ago | (#27487513)

In other words, it cannot be measured, it can be freely adjusted for argument's sake, and therefore has no scientific basis whatsoever.

Here is a more robust theory I am calling Fenratty's Law:

The value of a network exceeds the net value added to each user's transactions conducted through that network, even when one takes into account Fenratty's Law.

- Michael P. Fenratty

It's a cop out (0)

Anonymous Coward | more than 5 years ago | (#27487523)

It's a useless definition, as all it does is pass the buck down the chain into the domain of the unmeasurable guesstimate.

Metcalfe might be a guesstimate, but it is much, much simpler, and probably as accurate, as this proposed replacement.

The larger the network the lower the value (0)

Anonymous Coward | more than 5 years ago | (#27487543)

When Google was first introduced, the internet immediately became more valuable to me. When there was a system error, prior to Google I would have to search through dozens manuals and try and decypher what the problem was. With Google, I would punch in the error code and up would come and explanation of what the error was and how to fix it. Savings - many minutes or hours of time and the cost of those many books.

But as Google grew larger, it became harder to get meaningful search results. And with search engine optimization, the results I want are further and further removed from the results. The value of Google and the internet has decreased.

The next killer web app to me would be a small google. That a a replacement for usenet.

So where's the big deal? (0)

Anonymous Coward | more than 5 years ago | (#27487589)

Some scientist defining a new model is not breaking news by itself. Does this new model allow to predict things better? And how do you estimate the value added by a network for practical systems? If it's done RIAA way (which says they lose zillions of dollars because people won't buy their shitty CDs), then it's not good. :)

This is going to be used to justify micropayments (1)

imric (6240) | more than 5 years ago | (#27487597)

And to discredit network neutrality. Mark my words. Without network neutrality, the conservative elements will attempt to make the net into a broadcast medium dominated by a few mega-players, with 1-1 communications as an expensive add-on. The micropayment scheme discourages any use of the 'Net that isn't 'money-making'. Either one of these concepts transforms the 'Net into aol, msn, and compu-serve in the bad old days where you paid by the hour or by the bit. IOW, just like the cell phone networks are right now (profitable, certainly, but not as useful as the net not fully controlled by telcos).

Whenever 'value' is equated to function of 'cost' and the units are $$, you're gonna get this.

Re:This is going to be used to justify micropaymen (3, Insightful)

AvitarX (172628) | more than 5 years ago | (#27487693)

Except this could be used as an argument FOR net neutrality too.

Adding a fee is a zero sum game, the person paying gets less value, the person being payed gets more.

so, in the no transaction payment model:

perceived value - (overhead/large number) + (advertising revenue + marketing value) - (overhead/larger number + transactional cost) = transaction value added.

taking a fee out of the perceived value, and adding it to the revenue does not improve the transaction's value at all. And will decrease the number of transactions overall, since people will be less likely to get value out of any given transaction. Using this model it should be the goal to increase usage so that there are more value adding transactions, not decrease it so that some people make more money.

Jack Bauer's law (4, Funny)

Em Emalb (452530) | more than 5 years ago | (#27487621)

Also known as the Law of 24:

Networks are easy, simply "open a socket". (And have a gun. And Jack needs to yell at the network a lot)

Jack: "WHY ARE YOU NOT ROUTING THESE PACKETS! "JUST TELL ME WHERE THE BIT-BUCKET IS!" "WHO ORDERED THE 3COM HUB?"

What? It makes as much sense as the article.

How exactly does one calculate this value? (4, Insightful)

SirLoadALot (991302) | more than 5 years ago | (#27487637)

I think this definition is pretty damn useless -- how is one supposed to calculate this value for anything but trivial example cases? You would have to determine the value of each transaction, and then the 'value-add' of the network for that transaction, as determined by the user. I make 'transactions' (financial and otherwise) on the Internet all the time, and I couldn't begin to guess at useful values for these. And I'm just one of millions of such users.

Finally, how would one even begin to define 'value' for the transactions in a social network? How much (or little!) is being poked worth?!?

Re:How exactly does one calculate this value? (1)

ashtophoenix (929197) | more than 5 years ago | (#27487787)

I would say being poked is of negative value. It irritates me.

Re:How exactly does one calculate this value? (2, Funny)

TeknoHog (164938) | more than 5 years ago | (#27487903)

10 POKE 929197, -1

Re:How exactly does one calculate this value? (4, Funny)

superid (46543) | more than 5 years ago | (#27487825)

First we assume a spherical network....

Re:How exactly does one calculate this value? (1)

mspohr (589790) | more than 5 years ago | (#27488403)

... and a cat ...

Re:How exactly does one calculate this value? (0)

Anonymous Coward | more than 5 years ago | (#27491115)

... and a cat ...

A live cat or a dead cat?

P.S.
CAPTCHA is "rabies"

Re:How exactly does one calculate this value? (1)

PPH (736903) | more than 5 years ago | (#27491601)

...consisting of a series of tubes.

Re:How exactly does one calculate this value? (0)

Anonymous Coward | more than 5 years ago | (#27495531)

...of diameter zero.

Re:How exactly does one calculate this value? (4, Insightful)

melikamp (631205) | more than 5 years ago | (#27488217)

One word: Statistics.

You are right, though, about the value of a social network. But this is not a problem of appraising internet, it is a much older issue which has to do with foundations of economics. It falls into a wide category which one writer calls "shadow work". An extreme example is the work of a parent at home, raising a child. The economic worth to the society is tremendous, but no one gets paid for it. Likewise, a person may produce tremendous value by simply connecting the right people with each other, but there is no easy way to put a price sticker on it, simply because there is no money exchange.

It may be to the best. I personally like the fact that we have other economies besides the one based on money.

Re:How exactly does one calculate this value? (1)

Prof.Phreak (584152) | more than 5 years ago | (#27489157)

In fact, I think the ``value'' of some networks can be negative. Just picture the jump in world productivity (added-value) if some networks (WoW? etc.) are shut down.

ie: useless definition.

Re:How exactly does one calculate this value? (1)

camperdave (969942) | more than 5 years ago | (#27489485)

Just picture the jump in world productivity if Slashdot were shut down.

Re:How exactly does one calculate this value? (2, Insightful)

Bombula (670389) | more than 5 years ago | (#27489299)

The distinction between value and utility also seems skewed. The two are not remotely the same, even in purely financial transactions. Add to that all other 'transactions' across a 'network', such as me posting this comment to slashdot, that are non-financial but which certainly have utility, and you're nowhere near a meaningful valuation of said network.

So I'm forced to agree with the cynics: this seems to be a put-up job designed to make it easier to assign $$ losses resulting from network outages in court cases.

Re:How exactly does one calculate this value? (0)

Anonymous Coward | more than 5 years ago | (#27491415)

well.. i suppose it depends on how long since you were last poked.

Not even really a research paper... (2, Interesting)

bradley13 (1118935) | more than 5 years ago | (#27487639)

...at least, not in the academic sense. Though there are some research papers that contribute just as little. At its base, this is how Value-Added-Tax is calculated. Wheel, reinvented, wow...

Wouldn't that be a theory? (0)

BlueBoxSW.com (745855) | more than 5 years ago | (#27487729)

I thought to call something a "law" in science you needed a much firmer proof.

Re:Wouldn't that be a theory? (2, Interesting)

flaming error (1041742) | more than 5 years ago | (#27488449)

The "firmer proof" is only required if you want the scientific community to call it a law.

The standard for getting your fifteen minutes of fame is considerably lower.

No (1)

Mr2001 (90979) | more than 5 years ago | (#27498259)

Theories and laws are different categories of things.

A law is an observation that's so reliable that you assume it's always going to happen. For example, the law of gravity says that if you drop something on Earth, it will accelerate toward the ground at approximately 9.8 m/s^2. That law says nothing about why things fall (at all, or at that rate) when you drop them, it just says that they do. There's no proof for that, other than the fact that billions of people have been dropping things for thousands of years and the same thing happens every time.

A theory is an explanation for observed facts. A theory of gravity attempts to explain why things fall, for example "matter emits gravitons" or "matter distorts the shape of spacetime". You can disprove a theory by observing something that contradicts it, and you can add weight to a theory by observing things that it predicts you'll observe, but no matter how much evidence you find, it'll always be a theory.

(Similarly, creationists like to point out that evolution is "just a theory", but besides the fact that they're conflating the scientific meaning of "theory" with the layman's definition, it's also not true. The fact -- or law -- of evolution is that genetic distribution changes over time; we can observe that in fossil beds, mutating viruses, isolated islands, and basically all around us. The theory of evolution attempts to explain why that happens.)

Re:Yes. (1)

BlueBoxSW.com (745855) | more than 5 years ago | (#27499035)

Every time I post something on slashdot, someone tells me I'm wrong, and then never disprove what I'm saying or make a case for the other side.

It's like everyone just likes to hear themselves type.

Just a theory.

For us Layer 1 guys: Ohm's Law (2, Insightful)

Gothmolly (148874) | more than 5 years ago | (#27487731)

For any consumer- or end-user-level network, Ohm's law is the one you need to most worry about.

Re:For us Layer 1 guys: Ohm's Law (1)

Cyberax (705495) | more than 5 years ago | (#27487779)

Ohm's law is for wimps. It's just a special case of Kirchhoff's circuit laws which are a special case of Maxwell's equations. Which, of course, are a special case of electroweak theory. Which can be a part of string theory.

Re:For us Layer 1 guys: Ohm's Law (1)

Timmmm (636430) | more than 5 years ago | (#27487921)

Ohms law is completely different to Kirchoff's voltage and current laws.

KVL says the sum of the voltages around a loop is zero. KCL says the sum of the currents entering a node is zero.

Ohms law describes how voltage and current are related in a resistor. Totally unrelated.

Re:For us Layer 1 guys: Ohm's Law (2, Informative)

Cyberax (705495) | more than 5 years ago | (#27487983)

My bad.

You're right. Need more coffee....

Re:For us Layer 1 guys: Ohm's Law (0)

Anonymous Coward | more than 5 years ago | (#27492305)

Don't apologize so quickly. They're dual formulations of the same idea, via Stokes' theorem. They are not completely different. They are, however, complementary.

Shut off (1)

wytcld (179112) | more than 5 years ago | (#27487753)

One way to contemplate the value the network adds to each transaction is to imagine the network being shut off and what the additional transactions' costs or loss would be.

So if one network were shut off, and another network turned on, and the second network was more efficient, then the value of the first network would be negative, since shutting it off ended up decreasing transaction costs? Or consider the value of my wife. If I shut her down, but a new, more efficient wife were immediately available, did my former wife have negative value?

Now, you might say that there's not a replacement network immediately available. But surely there are replacement wives available. So is the value of my wife in the positive things that I get from her currently, or is it only relative to the potential value of other wives, or of the freedom of having no wife at all?

Also, is an elegant wife or an elegant network of more value than an inelegant one, regardless of any direct effect of that elegance on transaction costs? Should we prefer an ugly wife or network merely because transaction costs are less?

Beckstrom's approach gets at something, just as most simple-minded reductions have some grain of truth in them. But it's also, in the large picture, mostly wrong.

Re:Shut off (5, Funny)

vlm (69642) | more than 5 years ago | (#27487959)

But surely there are replacement wives available. So is the value of my wife in the positive things that I get from her currently, or is it only relative to the potential value of other wives, or of the freedom of having no wife at all?

Clearly, sir, you need a Redundant Array of Inexpensive Wives (RAIW). Twins (RAIW-1) are OK but RAIW-5 with lots of hot spares works better. Most admins agree that products with large rack mounts are better. A lot of hot air is generated resulting in increased cooling requirements. Also an astounding amount of noise, OSHA requires earplugs in that environment. This solution is popular in certain datacenters in Utah. Some folks claim a competing product exists, the Redundant Array of Inexpensive Girlfriends (RAIG) but everyone I've met agrees it usually ends up pretty expensive, the opposite of the original acronym, and there are often serious interoperability and EM compatibility issues. Finally w/ regards to financing there is considerable debate about rent vs purchase, short term lease vs long term lease, mileage reimbursement, etc. Rent to own agreements usually don't work out. Maintenance costs are somewhat beyond the realm of this email, but can be extraordinarily high. Anyway good luck with your network, Sir.

Re:Shut off (0)

Anonymous Coward | more than 5 years ago | (#27488363)

Your strawman, like most simple-minded reductions, is mostly wrong :)

Your imaginary scenario is silly. The second network would not be switched off lying in wait. It would be switched on and in use otherwise why would it have been built?

In this case, indeed, the value of the first network is negative because people are losing money by using the network A when network B is available.

Indeed, as network B is built, network A loses value, until it has negative value (by this definition).

There is nothing mysterious going on here. Work your example through with realistic assumptions about WHY the other network exists, and in every case you'll come to the same conclusion - given that network B exists, network A has negative value.

This is a necessary property of the law if it is indeed to represent value as a relative concept.

Applying this to wives is an exercise for the reader, if you enjoy assigning zero inherent value to all long-term relationships.

Re:Shut off (2, Interesting)

Red Flayer (890720) | more than 5 years ago | (#27488631)

If you really want to use a wife analogy, then we can do that.

The value of your wife is the summation of the change in transaction costs if you replaced her with a null wife (as opposed to a dull wife, which you may already have).

If you replace her with a more efficient wife, then the old wife's value is less than the new wife's, but it would be almost always non-zero.

Beckstrom's approach gets at something, just as most simple-minded reductions have some grain of truth in them. But it's also, in the large picture, mostly wrong.

Says you. I disagree... I think it's a good estimation of the value of a network. The key is to properly assign the transactional costs/benefits of the network; if they are overstated, then the value of the network could be multiplied greatly. Summation of transactional gains/losses for all users, from the perspective of each user? That's a whole lot of transactions. Even a small network of say, five nodes, with twenty transactions between each pair of nodes. There are ten node pairs, so 200 transactions... double the size of the netork and there are now 900 transactions. In a large network, a bad estimate of transactional value could skew the network value way off.

Re:Shut off (1)

Hognoxious (631665) | more than 5 years ago | (#27490735)

If I shut her down, but a new, more efficient wife were immediately available, did my former wife have negative value?

Her value = ( your value - x - y ) ( y / x )

where x = how much your lawyer charges
and y = how much her lawyer charges

(McCartney's law, incorporating the Mills correction)

The value of drying out Open Source networks (0, Offtopic)

nuddlegg (1076483) | more than 5 years ago | (#27487809)

... and what exactly was the value conquering a 10 years old Open Source project like TWiki using a VC funded company, acquiring the trademark and then locking out all of its contributors [slashdot.org] ? Because that's what Rod did 2008. I tell you: it only had value for a single node/company while other stakeholders were trampled under their feet. Sour grapes? No, live goes on on the Foswiki [foswiki.org] fork. Let's see 2009.

Hologram? (1)

bigattichouse (527527) | more than 5 years ago | (#27488013)

So, could you say that a network is a hologram, which is why its perceived value changes based on the point you occupy with in it? It was the "edge of the network" statement that drew up that whole universe-as-hologram thing.

This *is* metcalfe's law. (5, Informative)

Bazzargh (39195) | more than 5 years ago | (#27488055)

And surely Beckstrom must've realised this, since its trivial to get to Metcalfe's law from his equations.

Beckstrom:

Vj = Sum(i=1..n, V[i,j]) = Sum(i=1..n, Sum(k=1..n, B(i,k)) - Sum(l=1..n, C(i, l)))
= Sum(i=1..n,Sum(k=1..n, B(i, k) - C(i, k))).
= Sum(i=1..n,Sum(k=1..n, Sum(z=1..n, B(i, k) - C(i, k))/n ))

Let A(i) = Sum(z=1..n, B(i, k) - C(i, k))/n , the average benefit to user i of the network. Then:

Vj = Sum(i=1..n, Sum(z=1..n, Ai))
= Sum(i=1..n, n*Ai)
= n* Sum(i=1..n, Ai)

I'm sure you can see where I'm going with this now...
Let A = Sum(i=1..n, A(i))/n , the average benefit to any user of the network.
Vj = n^2 * A. Oh wait - that's Metcalfe's law. All Beckstrom's done here is give an expansion of the average benefit per user.

Re:This *is* metcalfe's law. (1)

Bazzargh (39195) | more than 5 years ago | (#27489389)

I should point out the obvious assumption in what I posted: Metcalfe's law assumes 'A', the average benefit to any user of the network, is independent of 'n'. This fails eg if one particularly valuable user enters or leaves the network, but at the scale of the internet, it is reasonable to assume that the vast majority of users and potential users have the same value.

Re:This *is* metcalfe's law. (0)

Anonymous Coward | more than 5 years ago | (#27498653)

I'm sure you can see where I'm going with this now...

You over estimate me good Sir!

Re:This *is* metcalfe's law. (1)

hitchhacker (122525) | more than 5 years ago | (#27499313)

Vj = Sum(i=1..n, Sum(z=1..n, Ai))
= Sum(i=1..n, n*Ai)
= n* Sum(i=1..n, Ai)
I'm sure you can see where I'm going with this now...

3. ...
4. Profit! .. no? damnit!

-metric

Law my ass (2, Insightful)

cretog8 (144589) | more than 5 years ago | (#27488303)

A rule for assigning a value to something--when you come right down to it, an arbitrary rule, even if it turns out to be useful--is not a law. Sheesh!

Re:Law my ass (0)

Anonymous Coward | more than 5 years ago | (#27489793)

A rule for assigning a value to something ... is not a law

You are approaching this from the wrong viewpoint. We are not talking about physical laws but Laws of Enforcement.

Re:Law my ass (1)

oldhack (1037484) | more than 5 years ago | (#27490851)

Hence some people (including me) keep harping on distinguishing real sciences as distinct from social stuffs and others that a wise man here approximated as "online wankery". They spew out terms like "laws" as if they are throw-away newsprints to be discarded daily, and yet they have the nerve to insist on being considered on the same plane of credibility.

On a second thought, maybe they suck at spelling and mispelled "lore".

Un-oh (1)

davidwr (791652) | more than 5 years ago | (#27488325)

Now that we know the value, it's only a matter of time before some government tries to tax it based on it's current up-to-the-minute value.

Important questions. (1)

Bobucles (1526625) | more than 5 years ago | (#27488417)

What about competing networks? What about redundant networks? Do the networks lose value because they become individually less important? Or do they multiply because they all can do the same valued transactions?

What if the main network fails, and the auxiliary network takes over. Does that network now adopt the new value of its transactions? Is it more valuable because it's the last of the backbone? Is that value lost as soon as the main network goes back up?

What about a server that changes load depending on the time of day? Does that network become more valuable at peak, and less valuable at the minimum? Can I invest in a network early morning, sell at peak, and get filthy rich within a month? Is this kind of value something that can be really traded?

Can these questions be answered by a flimsy 10 page PDF, with one title page, 2 huge diagrams, and an empty last page? A: No, they can't!

Simple logical disproof (0)

cenc (1310167) | more than 5 years ago | (#27488643)

This simply is none sense logically.

Here is a thought experiment of sorts.

Company A and company B are competitors, same size, same work, same number of employees, same clients. All things are equal.

Company A has invested in multiple redundant servers, their network is made up of dozens of different services such as web sites, databases, file sharing. Essentially all the bells and whistles.

Company B has an antiquated 1985 dos based network. They are able to produce the same amount of results. They however have to put in 10 x the amount of information to reach those results.

Now, company C has one employee, that works 1 hour a day, with a super network of software and servers at his disposal and inputs 1% of the information of either A or B, yet gets 10% more return.

Are you telling me that company C, has a less valuable network?

Thus, the value of a network is not what goes in, but what comes out. No difference than how we determine computer performance, car performance, and so on. Basically, what is the utility of the thing involved. We do not value networks or anything else just on the sake of how much work it takes to use it. Only a government bureaucrat would assume something is more valuable because it is more work to use, and would define efficiency according to how much resources it consumes.

Increased value?? (1)

Igarden2 (916096) | more than 5 years ago | (#27488733)

Are we gonna have to pay taxes based on this?

non-economist creates theory of economics (0)

Anonymous Coward | more than 5 years ago | (#27488761)

"Law of Network Economics"

I suppose only a non-economist would call a theory of economics a "law".

What's next, rocket engineers coming up with a new theory of gravity?

Law of sex appeal of website (0)

Anonymous Coward | more than 5 years ago | (#27488853)

This law, I just came up with, is important for website advertising and revenue, because sex appeal may be part of the ??? before $$$!!!

The value of a website sexiness equals the net added by each post conducted through that website, valued from the perspective of the opposite sex, and summed for all.

One step closer to the $$$!

Boring article.... (1)

martin_dk (1368035) | more than 5 years ago | (#27489015)

Btw:

The optimal security investment occurs on the loss function line where it is tangent to a 45 degree line

I guess this may happen more than one place on such a curve, and who knows when its a global optimal situation?

Anybody ever work for CATS software? (1)

QuincyDurant (943157) | more than 5 years ago | (#27489479)

Look at his pic. You gotta believe the guy was a dick for a boss.

He was student body president at Stanford and made $200 million (more or less)when he sold CATS. No wonder he thinks his shit doesn't stink.

Credit where it's due: I should have hair like that.

This work has not seen any reasonable peer review (3, Insightful)

kune (63504) | more than 5 years ago | (#27489987)

This paper has not seen any reasonable peer review. There are indices simply missing. The letter l (ell) is clearly not a good index. He uses n for number of transactions, users and networks. He even uses n for networks and users in the same formula, which must mean that number of users and networks are identical. In the summation of the users he leaves the denominators simply away. Usually scientiest don't name laws after themselves.

This doesn't mean that the basic idea might be wrong, but the work itself doesn't support the argument.

Define Value? (1)

fish_in_the_c (577259) | more than 5 years ago | (#27490601)

Monetary is only one kind and sometimes the poorest measure of value.
Consider social networking? What is the unit of exchange? What are the values of those transactions?
Some things that are little or no monetary worth are priceless in their value.
Peace, health, love/friendship, freedom, joy. No one transaction on a network can equate or be specifically related to any of these
yet improving and maintaining those things is the primary thrust of nearly all human activity.

No one transaction has made me a more loving person, but the cumulative effect of many of them has given
me a greater respect for humanity and life. How do you measure the value of these transactions?

definition != law (1)

panthroman (1415081) | more than 5 years ago | (#27491739)

"Discovering a law" ain't the same thing as "defining a term."

Kepler discovered the elliptic nature of the planets' orbits. The orbits were there all along, and Kepler was the first to notice their eccentricity.

Descartes defined the Cartesian coordinate system. The system did not exist until Descartes invented it as a useful heuristic.

Definitions tell us a lot about how our minds works. Discoveries tell us a lot about how the world works.

Sounds like ... (1)

PPH (736903) | more than 5 years ago | (#27491753)

... a variation of Cole's Law.

Too vague to be useful (2, Interesting)

HiThere (15173) | more than 5 years ago | (#27492381)

Value is an ill-defined term, and different observers will value the same transaction differently. This isn't only because it's ill-defined, but also because valuation is observer centric.

Because of this the law is both too vague to be useful, and silly. Many observers will only value some of the transactions. Others will value some of the transactions negatively. Etc.

E.g., what is the value of the advertisement that may appear at the top of this page? To slashdot it's valued as a source of income. To the advertiser it's valued as a way of attracting business. To most readers it's ignored. To some readers it's a nuisance. Each means of valuing the ad gives it a different valuation...and each valuation is clearly observer-centric.

By Neruos (0)

Anonymous Coward | more than 5 years ago | (#27492795)

This is just madness. How valuable is a network? That's like asking, how valuable is your telephone or the mailbox.

This is so wrong (1)

Klync (152475) | more than 5 years ago | (#27494061)

I'm no fancy expert like this guy, but here are two obvious problems that invalidate the theory as far as I'm concerned:

1. It's impossible to measure. Ergo, it's useless.

2. There is value in potential uses, not just actual transactions. For example, how much is 911 service worth? Zero until you break your arm? No. There is a value in knowing that you can reach 911, regardless of whether you use it. Similarly, networks provide value by creating opportunity, even if that opportunity is unrealized.

mod 3own (-1, Redundant)

Anonymous Coward | more than 5 years ago | (#27494291)

a sad world. At coming a piss a facT: FrreBSD BSD culminated in is also a miserable

Value Is Determined By Other Things..... (1)

IHC Navistar (967161) | more than 5 years ago | (#27494477)

"The value of a network equals the net value added to each user's transactions"

-----So, if I build a $25,000,000 computing center, and 1,000,000 people make searches for porn, then each search was worth $25?

I don't think so.

What determines a network's value is:

1. Quality of network hardware,
2. Quality of network software,
3. Network speed,
4. Network efficency.

However, this is just the value of the network.

The value of each transaction is dependent on the transaction's criticality value to the user, with 'criticality' being:

1. Usefulness of the transaction (to the customer),
2. Quality of the data (informational content),
3. Quality of the data (dropped bits, errors, etc.),
4. Urgency of the transaction (how badly the customer needs the information).

If the customer is in a situation where they need the information *NOW*, then the value of the transaction will increase as the deadline for the use of the information gets closer.

An Analogy:

If you have a research paper due in 2 months, the transactions you make are valuable, but not as valuable as transactions made 6 hours before the due date.

A company can have a cheap operation, but still have roughly the same value as any high-priced operation if they can make critical transactions just as fast. The limiting factor would be expansion capacity. Expansion capacity would limit the number of transactions that could be handled at comparative quality before needing to upgrade. If the need to expand does not justify the need for expenditures on an upgrade, than the values are roughly the same.

Old News (0)

Anonymous Coward | more than 5 years ago | (#27496603)

I believe this principle was proposed previously by others, including Benkler's "The Wealth of Networks."
Scott

Rediscovering is easy .... (0)

Anonymous Coward | more than 5 years ago | (#27497997)

This definition has been used in the literature on Network Economics for over 20 years.

Its the beginning to the end of net neutrality (1)

StillNeedMoreCoffee (123989) | more than 5 years ago | (#27499027)

The problem with this kind of model if that it give a value in such a way that business men can start to calculate how much they should charge for a given pipe, even the pipe to your house. Quantizing everything, giving it value. Well to do that you have to Identify each kind of thing over that pipe, which means they have to know what each thing is, its type, its size, track on it save its value.

Two problems. The cost of doing that and saving that intformation is huge. Of course that would be factored into the cost in such a way that it did not look like you were getting that overhead. And all that juicy information left around for the government and law enforcement folks to monitor, even more than they currently do.

But it means the end of cheap phone, video, audio. Even though its profitable for them now. They will see the the opportunity to make billions, and control what you can see and do, if by nothing like pricing policy. Like that old fellow Watt the Secretary of the Interior. Who thought that all that public land in the parks and forests was under-producing and sold off large tracks of land for logging and mining etc. They will try to privatize the internet, turn it into a large cash cow as well as control the media, like they have been doing with radio and tv and print. The internet is currently the last frontier the right does not have a solid grip or a good deal of control.

can you hear the bell tolling?

Fundamentals of Economics (1)

mahadiga (1346169) | more than 5 years ago | (#27499775)

  1. INVESTING Cash is GOOD
  2. SAVING Cash is BAD
  3. SPENDING Cash is UGLY
Load More Comments
Slashdot Login

Need an Account?

Forgot your password?