This morning Kevin Marshall tweeted me a link to a blog post by Andy Weissman (partner at Union Square Ventures in New York). The post is about how small things matter—even small words.
He starts by talking about a new sidewalk extension and curb cut at 86th Street and 3rd Avenue in Manhattan. This may seem like a pretty banal thing to talk about, but it’s in support of his argument that small things—like even a curb cut—can be used to solve bigger problems. In this case, the intersection was a dangerous one because of poor pedestrian visibility.
But what I really like is how he describes the pulse of New York:
"The rhythm of NYC is such that we need to keep moving and in motion; as a result, waiting to cross a street by standing at the curb is not enough, we must walk into the street to get going or keep our momentum."
This is great and it’s bang on. People in New York don’t stand at the curb waiting for the light to change. They impatiently push onto the street and wait for the first opportunity to cross. This may seem like a small tendency, but I think it speaks volumes about the character of New York.
People in Toronto generally don’t do this.
They (not me) wait patiently at the street corner even if there aren’t any cars coming. Why? Think about this the next time you’re standing on guard at the crosswalk. Don’t lose the momentum. The world rewards those who poke the box and keep moving.
I was watching this talk with Albert Wenger of Union Square Ventures last night. He was recently in Toronto for a Wattpad board meeting (USV is an investor).
It’s an interesting discussion that touches on education, healthcare, Canada’s tech ecosystem, as well as a bunch of other things. But one point that Albert made that I particularly like is the comparison between industrial and internet scale.
In both cases, it’s all about growth and scale. The bigger a firm can get, the better.
But with industrial production, scale is all about driving down the marginal cost. This is also known as economies of scale. As firms increase in size, efficiencies are found that allow the unit of production to drop in price. This, in turn, creates defensibility, because smaller firms simply can’t compete in the market.
With internet platforms the situation is different. Sure, there are still economies due to scale, but their competitive advantage is often derived from the fact that, on the margin, every new user increases the value for every other user on the network. This is called a network effect.
A perfect example of this is Facebook. People use Facebook because all of their friends are there. And as more and more friends join, it becomes increasingly more valuable. Without friends, a social network has little value. This make starting one fairly difficult. However once started, network effects are incredibly difficult to dismantle. This is their defensibility.
Another network effect example that Albert mentions is search (i.e. Google). This one isn’t so obvious. It may not seem like there are network effects with search, but there are. As a search user, you enter a query and then select from a list of results. In doing so you’re actually helping the search engine figure out what the best and most relevant results are for the keyword(s) you just entered. Again, in the end, everybody benefits.
I found this interesting because, in the case of internet platforms, scale is directly related to value proposition. The bigger something gets, the more useful it becomes. Now, you could maybe argue that the same is true for industrial production, but it’s a bit more tenuous. The direct link is cost.
One of the most important lessons we took from delicious was the value of single user utility in social systems. It might seem odd that systems designed to leverage interactions between people can have (should have?) single person utility. But I strongly believe they should.