The first telephone was useless. The first two telephones could show a neat trick to the uninitiated. Western Union didn’t understand the value of the telephone when it turned down an opportunity to purchase the most valuable patent in history. The telegraph was indeed a very efficient and reliable mode of communication.

Telephones are the classic example used to show the value of a network. Economists use the term network effect to describe the phenomenon of goods and services that increase in value the more widely they are adopted. Every person who opts in for telephone service, without wanting to, adds value to the existing network. It is a powerful network precisely because almost everyone is connected to it.

In this blog post, I point out that belonging to a small network can have benefits that large networks are unable to deliver.