Metcalfs Law:
Synergy in Action

Metcalfs Law was formulated by Robert Metcalf, one of the people credited with inventing the Ethernet and founded the technology company 3Com Corp. It basically states that the Economic Value of a network does not go up arithmetically, but exponentially. Based on the synergistic effect of the following formula:

As an example, one telephone pole by itself really has no economic value. However, 2 telephone poles that can form a connection now have an economic value. Adding just 1 pole raises the Economic Value of this telephone network from zero (0) to 4 (2 squared).

Here’s a further example of how powerful this principle is using the example of network marketing, a reputable home based business opportunity. As people are added to the network organization, the number of connections, and thus the value of the entire network increase significantly.

2 people = Economic Value of 4

4 people = 16 (2 people bring a gain of 12)

6 people = 36 (2 people bring a gain of 20)

Marc Andreesen, one of the founders of the web, explains Metcalfes Law in this manner:

“A network in general behaves in such a way that the more nodes that are added to it, the whole thing gets more valuable for everyone on it because all of a sudden there's all this new stuff that wasn't there before. You saw it with the phone system. The more phones that are on the network, the more valuable it is to everyone because then you can call these people. Federal Express, in order to grow their business, would add a node in Topeka and business in New York would spike. You see it on the Internet all the time. Every new node, every new server, every new user expands the possibilities for everyone else who's already there.”

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