"So we think in terms of that moat and the ability to keep its width and its
impossibility of being crossed as the primary criterion of a great business.
And we tell our managers we want the moat widened every year.
That doesn't necessarily mean the profit will be more this year than it was
last year because it won't be sometimes.
However, if the moat is widened every year, the business will do very well.“
- Warren Buffet
According to Hal Varian, positive
feedbacks come in two forms:
supply-side or demand-side
economies of scale.
Supply-side economies of scale: cost
advantages attributable to scale.
Demand-side economies of scale are
generally called “network effects”.
Network effects make a product
worth more to each user the more
users it has.
“Whether real or virtual, networks have a fundamental economic
characteristic: the value of connecting to a network depends on the
number of other people already connected to it. This fundamental
value proposition goes under many names: network effects, network
externalities, and demand-side economies of scale”
- Hal Varian, Information Rules
How valuable would a new
Instagram be if none of your friends