Network Effects
Platform business models converge across industries because network effects dominate economics in transportation, lodging, and freelance work.
WhatsApp with 2 billion users is vastly more valuable than a messaging app with 2 million - not because technology is 1000x better but because the network is 1000x larger.
While not a biological mechanism per se, the chapter discusses network effects as analogous to biological lock-in. The QWERTY keyboard persists because network effects (ubiquity makes it the default) and path dependence prevent convergence on superior alternatives. The genetic code is similarly locked in - changing it would require coordinating changes across entire genomes.
Business Application of Network Effects
Network effects can drive convergence (if customers value interoperability, converging on industry standards is necessary) or prevent it (established standards with high switching costs resist displacement by better alternatives). Platform business models converge across industries because network effects dominate economics in transportation, lodging, and freelance work.
Network Effects Appears in 7 Chapters
Network effects can drive convergence toward industry standards or prevent it through path-dependent lock-in, similar to how the genetic code became locked in despite potentially superior alternatives.
How network effects shape convergence →Visa and ARM demonstrate network effects where each additional participant makes the platform more valuable to all others, paralleling mutualistic relationships in biological networks.
Network effects as keystone dynamics →Network effects amplify with geography for platform businesses - Airbnb's global inventory and Spotify's cross-border discovery demonstrate how migration patterns create compounding value.
Geographic amplification of networks →Platform ecosystems exhibit network effects that reinforce constructed niches, making Apple iOS and Amazon Marketplace defensible through self-reinforcing user-developer dynamics.
Network effects in niche construction →Network effects create winner-take-most markets where the #1 platform captures 50-80% of value through exponentially more valuable networks, not incrementally better products.
Power law dynamics in networks →Unlike biological sublinear scaling, network effects create superlinear value growth - but this instability attracts regulation and competition that biological systems don't face.
Network effects vs. biological scaling →Digital territories with network effects achieve economies of scale in defense - WeChat's moat strengthens with each user, inverting the diseconomies that limit physical territory expansion.
Defensive economics of network effects →