The law of diminishing returns of network effects

As a16z’s Anu Hariharan summarizes in her All About Network Effects deck, a “network effect occurs when a product or a service becomes more valuable to its users as more people use it.” The deck goes on, in brilliant fashion, to show us how the economics of network effects play out in social networks and two-sided marketplaces from Facebook to Airbnb.

I think in 2017, were witnessing two phenomenon with respect to network effects: 1) platforms are subject to a law of diminishing returns, 2) this has lead to noise. The result of these two phenomenon is obvious: 3) people want to retreat to smaller communities over time and 4) its harder to find new signals, aka its harder to become famous.

Diminishing Returns for Users

On Investopedia, the law of diminishing returns states that “an increasing number of new employees causes the marginal product of another employee to be smaller than the marginal product of the previous employee at some point.” With more employees, the output of the group becomes less per employee. Let’s extrapolate this to the a16z thesis and user platforms.

With network effects, the platform becomes more valuable (to users) as more users come to the platform. But with diminishing returns the output becomes less when the platform cannot appropriately utilize the producers (or employees). This is interesting when you consider that in social networks like Facebook, all of the users are also producers of content. Therefore, the user who benefits from network effects is also subject to the law of diminishing returns. In sum, Facebook users will all eventually hit a saturation point in their usage where the amount of friends (and updates) they get experience diminishing returns for them.

I can personally feel this in my usage of social media. As I added more people to my friend circle and followed more people in the timeline, the usefulness of Facebook diminished. As more people came onto my timeline, even though Facebook was algorithmically surfacing the appropriate people to me, it still felt noisy. What am I getting from my friends? Their updates and pictures all blur together into a collage of memories and thoughts that my two hundred thousand year old brain infrastructure can barely keep up with. It’s no wonder that young adults using social media are more likely to experience depression.

Users have too many friends and they get less out of Facebook than they give to it. Their experience results in a net negative experience.

Signal, Noise, Fame, Chatter

With more crowds, and more noise, we now have an environment where it’s harder than ever to get a coherent message across or even to just be famous. Its an odd paradox. Weve reached a saturation point for noise, where now if you want to be famous you have to have a brand or brand association as a jumping off point. With too much noise, people now want curation and expertise. Gone is that brief era where people could pierce through the chatter. And even if you have, the chatter will instantaneously augment it to its own emergent ends. It is so noisy that its hard to even hear signals, let alone ones own signal.

(Dis)Connecting on Social Media

The above is interesting when you think about the unprecedented amount of connection that we experience today via social media and the internet. We are more aware of each other than ever before. We can react at fiber-optic speeds to events happening across the world. Yet we, via the plethora of potential cognitive biases from our post-primate brain, are more than ever beholden to our own ideas and prejudices. In the late 90s and early 2000s, it would have been difficult to predict that humans would enter a new polarized era in the late 2010s. With the biggest connections weve ever had, were also more disconnected than ever in other ways.

This calls into question what do we mean by a platform that becomes more useful to a user as more users enter it. What is “useful”? How do we measure the human value of a social media network? What is the difference between good information and bad information? Or too much information and too little information? What kinds of human beings is social media facilitating into being?

In this sense, the definition of useful, appears to be quite basic. Its about information moving faster from one spot in the world to another. And to be fair, politically speaking, that service should, according to certain human standards, be neutral. If the rulers of our internet world, from Mark Zuckerberg to Larry Page to Jeff Bezos, took an overt active role in politicizing their platforms to be “useful” in other ways, the long-term repurcussions of that would be potentially dictatorial in the long term. So we cant have that. But this leaves us with a platform of paradoxes.

It is no wonder then that people feel lonely when they use Facebook. Its ironic.

Intimacy in a Post-Social World

Many of us likely have a friend who has either deleted their Facebook account or gone off of it for deliberate extended periods of time. The diminishing returns are palpable. The oversaturation of social media noise makes (some of) us want to turn off completely. With social media as the dominant form, with its notification-checking and dopamine-inducing effects, it is harder for people to have intimate authentic exchanges. The world is not real unless its documented and uploaded to the cloud. It is the era of clouds. The clouds you upload to and the clouds you wade through.

The rise in offline groups, one-on-one messaging, private clubs (or networks) for millennials, etc. is only the beginning of a backlash to the cloudy world we live in. In a stressed out, overly-connected world, people dont want real connection and sometimes were unable to know what that is or even give ourselves those moments of quiet and boredom to find them. We can only react in conversation or tweet in frustration. But I think we’re seeing the beginnings of a movement in the opposite direction. People are fatigued as they hit their personal saturation point with the diminishing returns of their social networks.

The Service We Do for Future Humanity

Despite the diminishing returns, the paradoxical isolation, and how beholden we are to devices and internet accounts, there seems to be a small saving grace to all of this internet activity. History repeats itself, as we know. And as we manifest and project our old and new values into this technological ecosystem, it becomes a mirror for us. And it also becomes a mirror for the future humans. In 50 to 100 years and onwards, if we preserve all of our data, it will be the most rich picture of humanity we’ve ever created as an aggregate. And that set of rich data only gets better as the technology to record and preserve it gets better, while the need to record it exponentially increases.

The recording of every moment of every human, privacy notwithstanding, will redefine history as we know it. Think about it. When you read history books that cover events that happened just 100 years ago, we barely have any pictures of the people of that time, and only some recordings of what they thought. You go even further back and historical recordings are dominated by only the most significant voices of their times. Today, we have an unprecedented democratization of history. It’s possible that in the next 100 years, we will have a picture of every living human on the planet. I envy the humans of the future for the data we are giving them.

Are we trapped in the solar system? Feeling out the lightyear

Before you start reading this, scroll down to the bottom of the page and check out the picture from NASA.

Space intrigues me. The stars are so far away that it dwarfs the imagination to think about what that distance really means for humans. What really is a lightyear?

Are we confined to our little part of the galaxy for the next million years? Or will we eventually unlock technologies that will allow us to travel across the galaxy with ease and encounter new aliens and planets? Will the universe become smaller for us as our technology evolves? Or will the physics of the universe forever put constraints on us? Will humanity be forever confined to this solar system?


Everything travels at most at the speed of light. That means getting to the nearest star to us, Alpha Centauri, will take 4.2 lightyears traveling at the speed of light. And don’t forget, that also means you must have no mass in order to do that! Such a task alone would require significant upgrades to our current technology, and it would still take 4.2 years to arrive. If you go to the bottom of this list, The 53rd star is 16 light years away. Just think for a second, if everything goes right for humanity, one day, some little boy would grow up on a spaceship headed to a star 16 years away from us, traveling at the speed of light. And think about it, this is the most optimistic scenario so far.


But let’s look at this list now. That’s a list of the nearest galaxies. The closest one, Canis Major Dwarf, a kinda crappy galaxy, is 25,000 light years away. That’s right. If we wanted to travel there, it would be close to the amount of time homo sapiens have spent recording their history. That’s the length of time it takes for you to get to be a great great great great great great great great great great (x 20) grandparent. Of course, we existed for even longer prior to that and homonid life does starts millions of years before. Well, it’s funny you should mention millions of years, because Andromeda Galaxy, the largest full-fledged galaxy near us is approximately 2.5 million light years away. In other words, it would take 2.5 million years for us to get there by lightspeed. It’s just staggering. 2.5 million years! Well, at least that’s not 6 million years, that’s how long ago it was when the first hominid arose from earth, Ardipithecus Kadabba (they used to look like this). So there’s a silver lining.

The Universe

Okay, so then let’s make a big assumption that one day it really is possible for us to travel millions of lightyears in a heartbeat. Note that the known observable universe contains one hundred billion galaxies. That’s trillions upon quadrillions upon googols of potential planets. What kinds of technologies would we need to discover to get to explore the entire universe? Is it even physically possible for us to travel and populate across such distances? Given the numbers above, and the many things we likely still don’t know, even in the best case scenario, it’s not possible for humans to grow across the entire universe. It is far more likely for humans to eventually disappear in the next few thousand years and life would form again or elsewhere in the universe. The fate of yourself and of the entire of humanity seems bleak. It’s a bleakness that is challenging and provocative. It’s relatively easy to realize how small we are in the world and the universe, but the sheer number and scale of the universe challenges us to think about what is the best case scenario of all of humanity.

I think given the above picture, you can either take two major lines of thinking. The first is to consider the bleakness and the vastness and live a good life within that, coming to terms with the harsh impermanence of life and the universe. This is taken to certain extremes or logical conclusions in philosophies from existentialism to Buddhism. The alternate extreme mode is to consider that it is possible for us to keep improving our technologies until we can travel across the billions of galaxies and quadrillions of planets, believing in some faith that humanity will ascend to a god-like status, able to manipulate time and space at ease, traveling and populating the universe with life everywhere. I’m game for either one.

Why I love writing

My love of writing dates back to the times when I was a child and my mother forced me to keep a journal. To this day, I still have these notebooks, tomes of the 90’s, that have inscribed within them a curiosity I can still feel in my being today. I don’t remember why I loved writing. But I know why I love it today.

I love to daydream about premises and worlds when I’m idle or bored. In some ways, this is my mind’s natural state. When boredom creeps up on a moment, be it waiting in line or stuck without the internet, my mind will sink into a relaxed state and ideas will float up into view. Other times, a conversation or a speech, especially one I’m fully engaged in, will inspire a sudden flash of an idea, where two (or more) configurations merge in my mind. It could be one simple idea coming into contact with a complex world that is being discussed. Within that sudden merging, a fresh idea is born, and I must follow it. I have to write it down.

I get similar such flashes when I’m reading books, watching movies, or even during mundane activities like eating or staring out a car. The quest then is to have a mind that is constantly engaged yet sufficiently bored to stumble upon flashes that can turn into stories or articles like this. Simultaneously, to have a mind that is alert and aware enough to remember these flashes as they pass through me.

Sometimes ideas come to me while I’m writing and they make it to the page. Other times, the ideas float through my mind just enough for me to be mildly excited about them but not enough to remember them. The difficulty then is writing a piece that truly speaks to the moment while also being true to the thrust of the central idea. I must capture the essence. Although I am now writing about writing, am I really touching on what is most important about it for myself and for everyone? Does it not only capture this moment but all moments? Does the writing speak to universals? If the answer is yes, the writing becomes accessible to more people.

Another reason why I love writing is that it’s a vehicle for learning. As studies have shown, writing is a way for a person to master a subject. Just like teaching allows you to learn a subject better, so too does writing. No wonder school is full of essay writing, the perfect way for someone to communicate their understanding. I have an unquenchable thirst for learning. From philosophy to history to technology to the arts, I want to learn how all of these things work and there isn’t enough time in the day to tackle them. But the temporary configuration of neurons that these ideas and knowledge create in my mind is delightful. Transmuting that configuration into creation and reflection via writing is ultimately satisfying. Oftentimes, it’s the practice of taking an idea from this abstract world of neurons and hazy images and imprinting into reality. In a sense, writing makes ideas real.

I discover myself when I write. I find out who I am as words distill my thoughts into solid form. In a vivid sense, writing is about self-discovery and ultimately about self-actualization.

Writing for me is also about legacy. It is like an epitaph. The majority of written material created by humans is done by people long dead. But their writing breaths on into the imperceptible grand flow of human knowledge and the human experience. Writing from great people, or the accounts of them, add contours to how we experience our days and nights. It is an expression that comes out of that mysterious configuration. I do hope one day my writing can be significant enough or true enough that it can touch someone and even many people.

Sometimes I have this problem when I write where I don’t write that flash idea with enough precision and completeness that when I return to my notes later, I can’t quite make out what I meant. A conversation with my memories and my old self ensues. Sometimes, tragically, I must abandon that idea altogether and move on. As a result, I attempt to be as complete as possible going forward. But as you can see from this, my ideas are very precious to me. They distill and capture a moment of inspiration. For I see new fresh ideas as gifts that come to me from an unknown place. It gives me an intimate vision of the zeitgeist of neurons as they fire in formation in my brain, a configuration I know not where it comes from. Therefore, precision is central.

This speaks to a paradox of writing. The flashes and configurations that happen in my mind, no matter how I struggle to encapsulate them to you, dear reader, I cannot have one hundred percent certitude that you will grok my ideas. It’s not you, it’s not me, it’s the process. It’s impossible for my configuration of neurons to appear in similar formation in your brain. It doesn’t matter how precise or eloquent I am.

An interesting future issue for writing is whether it will continue to be a medium for creation and transference of ideas in the years and centuries to come. It has enabled the writers of the past to communicate with readers of the future. But if new mediums and technologies come that can pierce through the barrier of reader and writer, between past and present, between here and there, than writing as a medium might finally lose its power. If I can create a device that transfers my entire configuration mapped perfectly onto your brain, with its ideas and images, why do I need to go through the intermediary of pen and paper or keyboard?

But this begs the question, do I write to create a complete transference? I write everyday, but .00001% of all humans read my writing. I don’t write for you or for the future, ultimately, I write for myself. Writing, no matter the mediums of the future, will remain resilient for humans because of the interplay between self, abstraction, and reality. It’s the process. That is the metaphysics of writing.  As my ideas make it to the page, they achieve a particular solidity. They are trapped in language. Before that, they are a jumble of images, non-linear coda, and dream-like phantoms. As the ideas become real, they take on a life of their own. In that sense, writing thus becomes an allegory for the universe and creation. It is an act that is a microcosm, a little universe. It is divine.