![]() “We’ve seen over the past decade, in particular, that the emergence of network effects has been arguably the most powerful mode around.” That applies to exchanges around the world and to credit card companies, where merchants only accept popular ones and users only use cards that are accepted by merchants” “It’s just really hard to get that flywheel started. That applies to exchanges around the world and to credit card companies, where merchants only accept popular ones and users only use cards that are accepted by merchants,” Alden says. It’s just really hard to get that flywheel started. “, you have trouble building a user base because there are no users there. Even with a better interface or privacy improvements, it would still be hard to draw away. It just sucks everyone into that platform, it really hard to start up as a competitor.”Īlden points to Facebook as an example, which has reached critical mass “to the extent it just became the de facto social network”.Īs such, she says, it’s become almost impossible to create a better version of the business. “Therefore, it becomes like a sucking force. One of the most powerful ones happens to be a network effect, which is a phenomenon where the more people use it, the more valuable it gets per user” “You can have a strong brand, economies of scale, unique assets - things like that. One of the most powerful ones happens to be a network effect, which is a phenomenon where the more people use it, the more valuable it gets per user,” she explains. ![]() It is the companies with an edge that prevents that - those that avoid success being replicated and displaced - that investors like Buffett look for. “If a company finds an opportunity to have really good returns on invested capital, it’s natural that other companies will want to come in and … take some of those returns.”Īlden explained that this increases competition and drives down the average return of capital for the industry. This was a topic popularised by Warren Buffett,” Alden tells Opto Sessions. “Companies have economic moats, or at least really high-quality companies. In this episode of Opto Sessions, however, the discussion turned to an intriguing theory that has come into play a lot in recent months - the network effect. Throughout Alden’s career, she has contributed to Business Insider, MarketWatch, CNBC, The Street and Time’s Money Magazine, with her particular area of focus being on the intersection between engineering and finance. Her research methods have received global renown and helped her amass more than 165,000 followers on Twitter. We’ll send you reading recommendations, exclusive event invites, and commentary on the latest happenings in Silicon Valley.Lyn Alden is the founder of Lyn Alden Investment Strategy, through which she has been providing research, both publicly and privately, since 2016. Learn more and apply at Thanks for listening - if you like what you hear, please review us on your favorite podcast platform.Ĭheck us out on the web at or get in touch with us on Twitter to get updates from us? Subscribe to get a peek inside the Village. Companies that have been through the accelerator have raised from some of the top venture funds in the world, like a16z, First Round Capital, Founders Fund, Lux Capital, True Ventures, Felicis and more. *The deadline to get your application in for the spring vintage of the Village Global Accelerator is March 1st! It’s a personalized and tight-knit program with an amazing network of peers, advisors, and experts. Thoughts on China and its behavior in global currency markets. How Bitcoin relates to this and whether there will be a transition to it as the global reserve currency. Why the pandemic has pulled forward American loss of leverage in the world. Whether the US should be looking to move on from being the global reserve currency. See More currency has led to a hollowing-out of the American manufacturing base. Whether the US dollar being the global reserve Katherine Boyle partner at General Catalyst ![]() Luke Gromen founder of Forest for the Trees Nic Carter partner at Castle Island Ventures Lyn Alden founder of Lyn Alden Investment Strategy Erik is joined on this episode, recorded as part of a Big Ideas Clubhouse, by: ![]()
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