Network Theory Principles

Study Notes

Networks are composed of nodes and links.
Nodes can have different roles and levels of impact within the network.
Central nodes have a high number of links and are more valuable.
Marginal nodes have fewer links and typically have less value.
Networks are interconnected systems of nodes.
Understanding the underlying components of networks is useful for Founders looking to build network effect businesses.
Networks consist of nodes that are connected to each other by links.
The density of a network is determined by its ratio of links to nodes.
Networks with high density are more powerful.
Networks can be directed or undirected, depending on the nature of the connections between the nodes.
The direction of a link between nodes in a network is determined by which way, if any, the interaction between nodes in a network flows.
Networks with more directed links are rare.
Understanding the directionality of links in your network and mapping them visually leads to better product design and prioritization of features.
Networks are collections of nodes that are connected to each other.
Networks can be directed or undirected.
One-to-many relationships are directed, while one-to-one relationships are functionally reciprocal.
Clustering is a phenomena that can be seen in online personal utility networks.
Networks with higher degrees of clustering have the very powerful network effects.
Networks must reach critical mass in order to take advantage of the defensibility principle.
Network value increases in proportion to the size of the network.
This is an accurate description of broadcast networks with a few central nodes broadcasting to many marginal nodes.
Metcalfe’s Law states the value of a communications network grows in proportion to the square of the number of users on the network.
Reed’s Law was published by David P. Reed of MIT in 1999.
Group-forming networks, according to Reed, increase in value a rate of 2^N, where N is the total number of nodes on the network.
Most online networks allow for the formation of clusters, so they behave at least somewhat as Reed’s Law suggests.

Description

Test your knowledge of network theory and its underlying components. Explore the roles of nodes, the impact of link density, and the effects of network size on value. Understand the directionality of links and how it impacts product design. Learn about Metcalfe’s Law and Reed’s Law as they relate to network value and cluster formation.