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Extraordinary Popular Software and the Madness of Crowds

October 7, 2010

An article in the NY Times yesterday that I have to take exception to.  Robert Wright lays out the case that Facebook can ascribe its success not so much to any individual’s “Genius” as to what he calls

“[P]ositive network externalities.” In English it means that the more members a network has, the more valuable membership in the network is. The reason you would join Facebook rather than some upstart rival is that Facebook has so many members that the people you’d like to “friend” are more likely to be found there than on the rival site.

Positive network externalities can apply to things that aren’t so literally networks. Bill Gates harnessed this dynamic in making Microsoft’s computer operating system the dominant desktop platform. As more people used Windows, more programmers designed software for Windows; and the more software there was for Windows, the more people chose to join the Windows “network” by buying a PC rather than a Mac — which further encouraged programmers to design software for Windows, and so on.

This seems to imply a sort of “historical inevitability”:

[A]n early lead in market share feeds on itself; the bigger your market share, the more valuable your service, and thus the bigger your market share and so on. Indeed, such is the power of establishing a clear lead in market share that you can make an inferior product and still triumph.

I’m not convinced by the first argument, and the second is absurd on the face of it – Wright gives no instance of an “inferior product” triumphing in this instance, and I can only guess what he might be referring to.  Many people will disparage Microsoft products, trumpeting the “clear” superiority of OSX or Linux or what have you.  But OSX and its successors are “inferior” choices if you aren’t rich and have to buy a Mac that costs 2 or 3 times what a PC costs, and spend lots to upgrade the OS every time; Linux is inferior in that nobody who writes it has yet deigned to cater to us unwashed uncoding masses by providing a smooth, awesome GUI.  Never mind that MySpace had a “clear lead” over Facebook and got its ass handed to it, precisely because it was inferior.  (Oddly, Wright compares Zuckerberg’s clean-design vision of FB with that of the Winklevii, who wanted restaurant ads and the like on the site, but makes no mention of garish, low-rent MySpace and how it might have driven Zuckerberg’s design decisions.)

And comparing FB’s rise with Microsoft’s doesn’t ring true.  MS rose because IBM was the dominant player in the computer market, and released the IBM PC with MS’s operating system.  As the PC replaced the mainframe in offices around the globe,  MS maintained that market share by focusing on the PC as a business tool – people chose a PC or a Mac based on what they needed to do, and Mac positioned itself as a graphic designer’s tool, not a number crunching machine.  In a way, all apologies, the business user didn’t really have a choice when it came to using Microsoft, whereas the user with a choice of Facebook v. MySpace was driven by something more powerful than market share – desire and envy.

Perhaps “positive network externalities” is a way of mathematizing the madness of crowds, but if so, the comparison of Facebook to Apple is more apt than FB and MS.  I know “The Social Network” isn’t a citeable source, but I have no doubt they didn’t make up the parts about how FB grew – according to the film, Baylor University in Texas had its own social network, so FB surrounded it by establishing itself at other campuses, to the point where the “clear lead in market share” which Baylor’s original system had on its campus was extinguished by the sense that its students developed that they were “not cool” if they weren’t on FB.  The ardent cultivation of the coolness of a product, and the terror of the young at the idea that they would not be cool if they didn’t consume it, is more powerful than any early lead or technological superiority.

I had to laugh when I read that the people who were most susceptible to brainwashing – er, I mean, who were most open to advertising, were iPad owners. Twice as many iPad owners as owners of other devices actually believed that “ads on my connected device are new and interesting.”  (!!!) This confirms my belief that many iPad owners are people who purchase whatever they think makes them look cool, and are eager to be told by Mad Ave what else they might need to purchase to remain cool.  All the positive network externalities in the galaxy are no match for the fickle nature of cool. 

Digg v. Reddit is another good example – Digg had a clear lead in traffic, despite its overall crappiness of content and its hijacking by various fringies (I abandoned Digg in ‘08 when it was clear right wing lunatics had successfully managed to change the site – any article which suggested that Sarah Palin couldn’t walk on water was immediately tagged “Reported by Diggers as Possibly Inaccurate.”)  But when Digg made changes to its site recently, there was a mass exodus to Reddit, whose traffic has spiked dramatically in the last few months.  People left Digg for Reddit for a number of reasons – a more democratic posting system, a higher IQ content in the comments and the material posted, sure, but yes, also because their friends were going there, just as people moved from MySpace to FB because that’s where their friends were.  But the core motivators for these flights can be measured in the sudden “uncoolness” of the dominant product. 

The iPhone is “cool” – so cool that people are willing to put up with the (in large metro areas) crappy AT&T network (definitely a case of an inferior product triumphing, but only because of the iPhone).  Its cool is steadily eroding as Apple plays Sith Lord to get its lost prototypes back, or as Steve Jobs’ nose gets bluer and bluer. Windows Phone 7 looks good from what I’ve seen of it, but it doesn’t look like a good business decision to me to put it out only on AT&T (it’s not ready for other carriers’ systems yet).  If you are in competition with the iPhone, putting your new phone on the same crappy network isn’t much of a draw.  AT&T is officially “uncool,” so much so that its crappiness is almost part of the draw of the iPhone – it is so awesome that we’re willing to put up with this network to get it!  It’s just like living in an unheated garret to make art!  We are so groovy and underground! 

Perhaps most importantly, Wright doesn’t think about money, either – sudden shifts are easier when the cost of change is zero.  It costs a lot to change from iPhone to Win7 Phone – cancelling a contract, buying a new phone, replacing the apps – whereas it costs nothing to move from MySpace to Facebook, or from Digg to Reddit.  Or from Facebook to Diaspora, and so on and so on. 

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