mental models | Wall Street Financier: Notes from High Altitude© https://wallstreetdealmaker.com He who makes a beast out of himself gets rid of the pain of being a man. Wed, 03 Apr 2019 04:31:14 +0000 en-US hourly 1 https://i0.wp.com/wallstreetdealmaker.com/wp-content/uploads/2018/12/pitbullgif.gif?fit=32%2C22&ssl=1 mental models | Wall Street Financier: Notes from High Altitude© https://wallstreetdealmaker.com 32 32 155119938 On network effects and critical mass https://wallstreetdealmaker.com/2018/08/on-network-effects-and-critical-mass/ https://wallstreetdealmaker.com/2018/08/on-network-effects-and-critical-mass/#comments Sat, 11 Aug 2018 22:30:00 +0000 http://wallstreetdealmaker.com/index.php/2018/08/11/on-network-effects-and-critical-mass/ There are some very good points in Tren Griffin’s article reprinted on Andreessen Horowitz’s website Two Powerful Mental Models: Network Effects and Critical Mass in 2016. The article discusses how some network effects are weak while others are strong. There’s the example of Friendster, a social network that existed before … Continue ReadingOn network effects and critical mass

The post On network effects and critical mass first appeared on Wall Street Financier: Notes from High Altitude©.]]> There are some very good points in Tren Griffin’s article reprinted on Andreessen Horowitz’s website Two Powerful Mental Models: Network Effects and Critical Mass in 2016. The article discusses how some network effects are weak while others are strong. There’s the example of Friendster, a social network that existed before Facebook and before MySpace.

“the strength of network effects is not just determined by the number of participants in a network.” -citing a study by Andrew Odlyzko

There’s an examination of why Friendster failed: “the bonds linking the network were loose.”

Why did the VHS tape won over the Sony Betamax back in the 70’s and 80’s in the home VCR market ? VHS got to critical mass before Betamax. VHS recorders and tapes were cheaper.

The author also mentions the apparent reason why Facebook overtook MySpace “Facebook held off monetizing until its moat was secure”.

Thought of the day: “Let’s talk less about the elites and let us become the elites.” -Max Cantor

Griffin gives us 12 quotes about critical mass and 12 on network effects. Read them.

Network effects and critical mass are two -most important- mental models. Charlie Munger hints at 100 mental models in his book, Poor Charlie’s Almanack -one of the books I recommend. However, Griffin says quoting Munger, just a few of those mental models “really carry the heavy freight”. 

What are some of those models we apply in tech and VC, in additions to those two above ?

  • Cumulative effect

  • Bottlenecks and founder effects

  • Parreto Principle (everybody knows that)

  • Inversion

  • Occam’s razor (simplest solution is the best one)

  • Margin of Safety

What are some of your mental models, and how do they help you ? Let me know.


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