Network Effect Contests

The “klaws” at Venture blog writes:

…John Maynard Keynes called a “beauty contest”.

He named it after beauty contests that ran in newspapers of his day. A selection of women appeared in the paper, and the idea was to pick the prettiest one (nobody ever said Keynes was politically correct). The paper would award a prize to the people who picked the winner — the one with the most votes. In other words, if you are trying to win the prize, you don’t pick the one you think is prettiest — you pick the one other people will pick …

The venture business is driven by the same logic when setting valuations.

Nice. I like to find examples of simple systems with network effect. So that newspaper contest is a perfect example.

Another example of a game with network effect is the that bit of playground exquipment the turn-table. You can tell it has network effect because mothers stand on the periphery and say “somebodies’ going to get hurt.”

The newspaper contest example seems particularly relevant today when I’m surrounded by people who are being punished by their membership (loyality) to the community that goes by the name Red Soxs fans.

Meanwhile, I guess, I should toss in this quote by Adam Smith:

Are you in adversity? Do not mourn in the darkness of solitude, do not regulate your sorrow according to the indulgent sympathy of your intimate friends; return, as soon as possible, to the day-light of the world and of society. Live with strangers, with those who know nothing, or care nothing about your misfortune; do not even shun the company of enemies; but give yourself the pleasure of mortifying their malignant joy, by making them feel how little you are affected by your calamity, and how much you are above it.

Difficult advice to take when the entire region is in a funk. I gleaned that from Daniel Drezner

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