This law is named after robert metcalf, the inventor of Taiwang. The law indicates that the value of the network increases with the square of the number of users. In other words, the value of a certain network, such as telephone, increases with the number of users.

Metcalfe's Law was put forward by robert metcalf, the founder of 3Com Company and the pioneer of computer network. Metcalfe's law holds that the value of a network is directly proportional to the square of the number of users connected to it.

Metcalfe's law determines the speed of new technology popularization. Metcalfe's law is often compared with Moore's law. This is a law about online resources. Metcalfe's law states that the value of a network is directly proportional to the square of the number of users connected to it. Therefore, the more computers connected to the Internet, the greater the value of each computer. New technology will become valuable only when many people use it. The more people use the network, the more valuable these products become, thus attracting more people to use them, and ultimately improving the total value of the whole network. One telephone has no value, and the value of several telephones is very limited. The communication network composed of thousands of telephones maximizes the value of communication technology. When a technology has established the necessary user scale, its value will explode. How fast a technology can reach the necessary user scale depends on the cost of users entering the network. The lower the cost, the faster it will reach the necessary user scale. Interestingly, once the necessary user scale is formed, new technology developers can theoretically raise the price for users, because the application value of this technology has increased compared with before. Then it is derived into the law that the value of a commercial product increases with the number of users.

the uniqueness of information resources lies not only in that it can be consumed without loss (for example, an ancient book has been "consumed" from ancient times to the present, but it can't be "consumed"), but also in the process of information consumption, which may be the production process of information, and the knowledge or feelings it contains will give birth to more knowledge and feelings among consumers. The more people consume it, the greater the total amount of resources it contains. The power of the Internet is not only that it can maximize the number of information consumers (all mankind), but also that it is an interactive medium with simultaneous dissemination and feedback (which is the most different from newspapers, radio and television). Therefore, Metcalfe concluded that with the growth of Internet users, online resources will increase geometrically.

Metcalfe's law is based on the fact that every new user gets more opportunities for information exchange because of other people's networking. It is pointed out that the network has strong externalities and positive feedback: the more users are connected to the network, the greater the value of the network, and the greater the demand for networking. In this way, we can see that Metcalfe's law points out that there is increasing utility in consumption as a whole-that is, demand creates new demand.

Coase's law: the impact of transaction costs on enterprises

Ronald H．Coase was born in London in 1911, and obtained a bachelor's degree in business from the London School of Economics in 1931. In 1932, Coase came to the United States to study the vertical integration and horizontal integration of industries, with the aim of finding out why industries are organized in different ways. Through the investigation of many American enterprises, he formed a new concept-transaction cost, and used this concept to explain why enterprises exist and how big they should be. His theory won the Nobel Prize 51 years later.

Coase thinks that transaction cost is an extremely important concept, and it can be said that it is the root cause of enterprises. Enterprise organization is a "substitute for price mechanism", and enterprises exist to save transaction costs, that is, internal transactions with lower costs replace market transactions with higher costs. Enterprises must calculate transaction costs when deciding how they do business and what to produce. If the cost of doing a transaction is greater than the benefits brought by the exchange, the transaction will not happen or be realized. The optimal scale of an enterprise is determined by the point that the marginal cost of internal transactions is equal to the marginal cost of market transactions. In fact, it is the comparison between these expenses and the expenses that will be brought about by the operation of those enterprises that determines whether the establishment of enterprises is profitable or not. In order to determine the enterprise scale, we must consider the market cost and the organization cost of different enterprises, and then we can determine how many products each enterprise produces and how much each product produces, that is, how big the enterprise is.

the emergence of the network has reduced the transaction cost in many ways. When the transaction cost is zero, the nature and scale of the enterprise will change fundamentally.

Even before the digital revolution, technology played a central role in the evolution of the company. By adopting a large number of advanced scientific and technological achievements, the company greatly reduced its operating costs, and digital technology continued to undertake this task. But some differences are that it greatly reduces the operating cost of the company and the cost of the market itself. A new market has been formed under the combined action of Moore's Law and Metcalfe's Law. In this new market, the transaction cost is decreasing exponentially.

The resulting impact is two-way: the transaction cost of almost all products and services used has dropped significantly, and at the same time, it has dropped much faster in the open market than in the company. We can completely predict that the market will become more efficient by reducing transaction costs. What if the company expands to its next transaction as cheap as completing it outside the company, and what if the cost of the outside world is cheaper? The natural idea is that the size of the company will shrink. If Mr. Coase's theory about the relationship between market and transaction cost is correct, then it seems that we can draw a more surprising conclusion: the law of company size reduction: as the transaction cost tends to zero in the open market, the company size will also tend to zero.

we are not saying that such a thing is about to happen or may happen. For most complex transactions, there are still a lot of transaction costs. However, the nature of the company will definitely change, or it is already changing. The concept of company gradually gave way from a physical entity composed of employees and fixed assets to a so-called virtual organization. In this organizational form, employees may work part-time or as contract workers, and assets may be jointly owned by many organizations, and the division between inside and outside the company is becoming more and more blurred. Individuals may join many enterprises, just like today's big entrepreneurs. The composition of enterprises will focus more on events closely related to transactions than on immortality in the traditional sense.

The outsourcing craze and many companies' scale reduction in the past decade are all due to the response to the decrease of transaction costs in the open market. As pointed out in the law of company downsizing, the US Department of Labor has predicted that the largest employer in the United States will be "individuals" in the next few years.