Network effects + low marginal costs + scales of economy. A business model where each additional user adds additional value to the existing user base. Really insightful advice!
I think transaction costs play a big role in network effects. The language example is great because the village of 100 people didn't have free software to auto-translate with zero latency (if such a thing could even exist); if they did and the transaction cost of talking with someone in another language was zero, then it severely blunts the network effect. For money and even social media, I think we'll see better interoperability, lower transaction costs, and less pronounced network effects at some point in the future thanks to software.
Businesses where the products is packaged from ongoing historical data will have network effect but per data and not user because subsequent products will be more valuable than the first. Since they are made form more data samples.
You should get into a bussiness in which making widget nº 100 is cheaper than making widget nº 12. Media products have 0 marginal cost of reproduction. If you are nº 1 in a network effect bussiness you win everything.
Yes, i suggest you to read two books : Blitzscaling and from Zero To one. ( The First was written by the co founder of LinkedIn and the second by the co founder of Paypal ). Those books explains how network effects and competition works, the need for scalling fast without being very secure about the enviroment so you can get the chance to become the winning get all player
The best of the world at it provides value for everyone. That's why you have to escape competition through autenticity and work on the thing in wich you are a natural at. Follow your own obssesion so you can benefit of winer takes all dynamic.
He misrepresents the idea of economics of scale. Economics of scale doesnt translate to a barrier of entry, e.g. economics of scale is the main driver in the agricultural sector (that is why industrial farming is the norm), and its mainly a necessity to stay in business, because the price of products are priced at the average cost of production in amarket with perfect competition.
I've heard Naval say this phrase a number of times "zero marginal cost of reproduction or replication"... I'm pretty sure he means "zero OR marginal cost".
Network effects + low marginal costs + scales of economy. A business model where each additional user adds additional value to the existing user base. Really insightful advice!
I love how he broke down network effects to such simple words.
Big fan of how he understands topics clearly and can clarify so well at the same time
Naval speaks with so much clarity
I think transaction costs play a big role in network effects. The language example is great because the village of 100 people didn't have free software to auto-translate with zero latency (if such a thing could even exist); if they did and the transaction cost of talking with someone in another language was zero, then it severely blunts the network effect. For money and even social media, I think we'll see better interoperability, lower transaction costs, and less pronounced network effects at some point in the future thanks to software.
Learning new concepts and shifting my mindset day to day by your podcast and tweet storms. You're amazing naval 💛
How does this guy not have 10 million subscribers?
Great to learn about scale economies, marginal cost and most importantly network effects. Thank you Naval from India!
I hope to one day meet you in person. Nothing but love for the wealth of knowledge you provide to us. 🤙🏽
Businesses where the products is packaged from ongoing historical data will have network effect but per data and not user because subsequent products will be more valuable than the first. Since they are made form more data samples.
You should get into a bussiness in which making widget nº 100 is cheaper than making widget nº 12. Media products have 0 marginal cost of reproduction. If you are nº 1 in a network effect bussiness you win everything.
Scale of economy + zero or low marginal cost + network effects means getting a new user adds additional value to existing users …
3:55 English language network effect
Amazing! Great to learn about network effects. I can see this with products like Nomad List which dominates the digital nomad space.
Since businesses with network effects tend to be winner-take-all (or most), aren't they also much more fiercely competitive and difficult to win in?
I had the same thought.
Yes it is. There's a reason why Uber keeps bleeding money.
Yes, i suggest you to read two books : Blitzscaling and from Zero To one. ( The First was written by the co founder of LinkedIn and the second by the co founder of Paypal ). Those books explains how network effects and competition works, the need for scalling fast without being very secure about the enviroment so you can get the chance to become the winning get all player
The best of the world at it provides value for everyone. That's why you have to escape competition through autenticity and work on the thing in wich you are a natural at. Follow your own obssesion so you can benefit of winer takes all dynamic.
Facundo Miranda oo
First to comment!!!! Amazing talk Naval
Expected a 1000 comments. Probably will grow over time
He misrepresents the idea of economics of scale. Economics of scale doesnt translate to a barrier of entry, e.g. economics of scale is the main driver in the agricultural sector (that is why industrial farming is the norm), and its mainly a necessity to stay in business, because the price of products are priced at the average cost of production in amarket with perfect competition.
I would like to understand how network affects could apply to professional service based businesses.
Loutos Law, PLLC MLM style referral based comission or something of the sort
Self improvement community
u keep talking about joe rogan naval, i hope he gets u on soon
wondering how this applies to fitness biz, peloton or gyms? as I'm trying to build a startup in the sector.
Network effects = each additional user adds value to existing user base
I've heard Naval say this phrase a number of times "zero marginal cost of reproduction or replication"... I'm pretty sure he means "zero OR marginal cost".
Margin cost = added cost
Zero added cost
@@caltori I appreciate the reply. I didn't realize that had a separate meaning in economics.
I'm very confident in the success of my financial future because I speak English and am invested in crypto. ;-)
Where have you been all my life?
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