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Networking Science

New Fundamental Law of Network Economics 106

intersys writes "A new fundamental law of economics has been formulated by Rod Beckstrom, former Director of the National Cyber Security Center. In Words: The value of a network equals the net value added to each user's transactions (PDF) conducted through that network, valued from the perspective of each user, and summed for all. It answers the decades-old question of 'how valuable is a network.' It is granular and transactions-based, and can be used to value any network: social, electronic, support groups, and even the Internet as a whole. This new model or law values the network by looking from the edge of the network at all of the transactions conducted and the value added to each. One way to contemplate the value the network adds to each transaction is to imagine the network being shut off and what the additional transactions' costs or loss would be. Beckstrom's Law replaces Metcalfe's law, Reed's law, and other concepts which proposed that the value of a network was based purely on the size of the network (and in the case of Metcalfe's law, one other variable)."
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New Fundamental Law of Network Economics

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  • by smittyoneeach ( 243267 ) * on Tuesday April 07, 2009 @08:13AM (#27487417) Homepage Journal
    As whiskers abound,
    The network is found,
    Infinitely sound,
    Until Slashdot-ground.
    Burma Shave
  • whats new (Score:5, Funny)

    by Vspirit ( 200600 ) on Tuesday April 07, 2009 @08:16AM (#27487431) Homepage


  • Duh (Score:4, Insightful)

    by tjstork ( 137384 ) <> on Tuesday April 07, 2009 @08:16AM (#27487435) Homepage Journal

    I am completely unimpressed by this common sense "discovery." They pay people to come up with this?

    • Re:Duh (Score:5, Insightful)

      by azgard ( 461476 ) on Tuesday April 07, 2009 @08:21AM (#27487469)

      Me too. I skimmed through the paper; he just defines some functions, and he calls his new model Beckstrom's Law. How is his definition a law?

      • Re:Duh (Score:5, Funny)

        by Opportunist ( 166417 ) on Tuesday April 07, 2009 @08:47AM (#27487667)

        By naming it. I have this definition of contributions to /. that increases your Karma. I call it Opportunist's law.

        See? It's easy!

        No, I didn't prove it in any way. That's not part of the exercise. Naming it is. So make something up and call it azgard's law. You'll see, it's fun, and you'll be the hit at parties when you can say that you're that guy the law was named after.

        You should omit that you did the naming.

        • Re: (Score:3, Funny)

          by Ihmhi ( 1206036 )

          Azgard's Law: Anytime Col. O'Neil is in imminent danger, Thor beams him up to his ship.

      • Re:Duh (Score:5, Funny)

        by inviolet ( 797804 ) <slashdot.ideasmatter@org> on Tuesday April 07, 2009 @09:18AM (#27488027) Journal

        Me too. I skimmed through the paper; he just defines some functions, and he calls his new model Beckstrom's Law. How is his definition a law?

        It's handy that he named his observation "Beckam's Law" for us, because then we can apply inviolet's law:

        A new discovery is headline-grabbing FUD/bunk if its discoverer names it after himself. Whereas a new discovery is probably useful if others name it after its discoverer.

        Think of it as an extrapolation of the importance of peer review. Pretty handy, eh? That's why I named it after mys-- aw, damnit!

      • by Sleen ( 73855 )

        Yeah no kidding. This seems like some stupid shit. But then again most economics despite attempts to appear like science, is nothing but advertizing. Network seen from the individual...its a start but only half way there.

    • by VampireByte ( 447578 ) on Tuesday April 07, 2009 @08:31AM (#27487545) Homepage

      He's with the National Cyber Security Center, and for security purposes there's always this dramatic "the hacker caused damages of X dollars" where X is very large. They want X to be huge so that equally large sums can be spent on bringing offenders to justice, so that the press has this huge amount of loss to report for dramatic purposes, so that huge civil suits can be brought, etc. Additionally, this Beckstrom fellow devises "Beckstrom's Law" and now he can be called in for expert testimony, he being the expert because "Beckstrom's Law" is named after him (by himself of course, but that's just a minor point).

      • by Zarf ( 5735 )

        +1 inciteful

        Seriously, bravo. That's exactly how some of this research works. It's not so much science, math, or original thought but marketing. You sell the idea so you can ride the wave of the idea.

        This goes on much more than we would like to admit in science and technology. Scientists and technologists like to think we're unbiased and dispassionate in our analysis... but we're not. We're subject to the forces of marketing and hype as much as anyone else.

        That's why we need to really be careful wit

        • by spud603 ( 832173 )

          +1 inciteful

          Heh. I hope your double meaning was deliberate, but either way I like it.

          • by Zarf ( 5735 )

            yes, that's an old joke that I happen to like. It never got to meme status around here though. Not like that damn "I for one" joke.

      • by mbaer ( 1099749 )

        He seems to have "resigned" according to his website. Maybe he can use his new found spare time and improve his seminal finding!

    • There are two sides to the story. Around college campuses, you can always find one or two classes on networks. The topics covered are relatively common sense and could probably be taught at a 14-year-old's level. Concepts such as how rumors spread, fads develop and fade away, etc. It's all nonsense and incredibly easy on the scale that they're taught.

      However, they can be useful when you scale them up to large systems. Let's not forget either that Steve Nash was awarded the Nobel Prize for game theory. I've

      • Re: (Score:3, Informative)

        by Raffaello ( 230287 )

        Steve Nash is a point guard for the Phoenix Suns

        John Nash is the Nobel laureate.

      • by Yold ( 473518 )

        Umm IIRC, Nash Equilibrium is not really a method for "social analysis". Its been years since I've had a course that covered it, but I remember it being the foundation of the Minimax algorithm.

        It sounds like you are recalling the hollywood definition of Nash Equilibrium, which was a very simple analogy.

    • Re: (Score:3, Funny)

      Look! Now we can determine the true net value of Myspace.


      Oh crap.. nevermind. :D

    • Sure.

      They being big ISP's looking for a reason to charge more per kb used, depending on your use of the network.

      I can really feel some changements coming in my broadband subscription fee...

      Me: Why am i paying more?
      ISP: You paid 5 bills this month, if you didn't do that, you would be homeless, so our network had a great value for you. That's why you're now paying 500 bucks / month.
    • Re:Duh (Score:5, Funny)

      by CopaceticOpus ( 965603 ) on Tuesday April 07, 2009 @09:36AM (#27488329)

      Wait, wait, I have a similar epiphany in another field!

      "The value of a pizza equals the net value added by each topping, multiplied by the cheese, rated by the taste experience of each user, and minus 100 if it came from Domino's."

      There you go - please send accolades and research grants this way.

      • Re: (Score:2, Funny)

        by mbaer ( 1099749 )

        You didn't understand the true "edge-based" genius of Beckstrom's Law. Applied to Pizza it would be:

        "The value of all the worlds pizzas equals precisely the value that each pizza eater attaches to their pizza."

        Yeah, this is the funniest slashdot article I have seen in a while. It becomes even funnier considering that this dude is actually serious about his conjecture. First, I thought it was a mere April's fool joke.

    • Re:Duh (Score:5, Insightful)

      by mea37 ( 1201159 ) on Tuesday April 07, 2009 @09:43AM (#27488431)

      On one hand, you have to put it in context. There have been several models of network value, and none of them have taken this "common sense" approach of defining value in terms of what you get out of the network.

      But before running with that, we have to look at the other hand, and see why none of the older models take this approach. I think it comes down to the question of "what is the model's purpose"? The simplicity and usability of a model are potentially as important as its accuracy.

      If I can't predict the inputs to my model, then my model can't be used for prediction. I can predict a certain level of information about a hypothetical network using size-based models.

      Moreover, if I can't measure the inputs to my model, then I can't use it at all. Claims that we can "measure the value of the Internet" are a bit much.

      Don't get me wrong, this model may be well-suited to some purposes. But it does not, as TFS claims, "replace" the existing models any more than relativity "replaces" classical physics. Sure, it may be a highly accurate definition of the value of a network when you can observe that network empirically (but a definition is not a "law"). This assumes that it accounts for negative value of a transaction, though. (What is the contribution of spam to the value of the Internet?)

      • (What is the contribution of spam to the value of the Internet?)

        For the spammer it is placed squarely in the plus column.

      • Claims that we can "measure the value of the Internet" are a bit much.

        No, he lays it all out right there for us:

        the value of a network equals the net value added to each user's transactions... It... can be used to value any network... even the Internet as a whole

        See? So I'll just start adding. Once I get done quantifying the value of every transaction I've ever performed over the internet, I'll start on yours next. So can you email my your entire history of internet usage (including the email itself) and I'll get to it when I finish mine, in about... one hundred years. Following this model, I may finish tabulating the current value of the internet sometime before the heat death of the universe.

    • Exactly. If the article summary is accurate, this seems to just take the centuries-old theory of subjective value and applies it to an economy characterized by a network. Network economics must be in a sad state if it's taking so long for the basics to just be "discovered".
    • Hey, that's the formula Paul Stachour used for the value of email, to compare the ARPAnet and a bunch of lower-connectivity private provider's nets.


  • by Exitar ( 809068 ) on Tuesday April 07, 2009 @08:24AM (#27487485)

    a new law that will, when the current crisis will end, contribute to create the next crisis?

    • yes we do, so that next bubble, I'll be smart enough to build a savings that will carry me on through life during the next crisis.

    • Yes we do.

      The ones that know how the bubble works will know when to jump ship. There are people that got rich during The ones that knew when to bail and leave the mountains of debt to the suckers.

      Just like in real economy.

      • The ones that know how the bubble works will know when to jump ship. There are people that got rich during The ones that knew when to bail and leave the mountains of debt to the suckers. Just like in real economy.

        It's no secret how they did it, either. Warren Buffet (I think?) summed it up when he said, "I knew we were in trouble when the average Joe was flipping houses." The point being: by the time you hear about a great investment, it's not a great investment.

        The point of the point being: sta

  • by Em Emalb ( 452530 ) <> on Tuesday April 07, 2009 @08:40AM (#27487621) Homepage Journal

    Also known as the Law of 24:

    Networks are easy, simply "open a socket". (And have a gun. And Jack needs to yell at the network a lot)


    What? It makes as much sense as the article.

  • by SirLoadALot ( 991302 ) on Tuesday April 07, 2009 @08:43AM (#27487637)

    I think this definition is pretty damn useless -- how is one supposed to calculate this value for anything but trivial example cases? You would have to determine the value of each transaction, and then the 'value-add' of the network for that transaction, as determined by the user. I make 'transactions' (financial and otherwise) on the Internet all the time, and I couldn't begin to guess at useful values for these. And I'm just one of millions of such users.

    Finally, how would one even begin to define 'value' for the transactions in a social network? How much (or little!) is being poked worth?!?

    • I would say being poked is of negative value. It irritates me.
    • by superid ( 46543 ) on Tuesday April 07, 2009 @09:01AM (#27487825) Homepage

      First we assume a spherical network....

    • by melikamp ( 631205 ) on Tuesday April 07, 2009 @09:29AM (#27488217) Homepage Journal

      One word: Statistics.

      You are right, though, about the value of a social network. But this is not a problem of appraising internet, it is a much older issue which has to do with foundations of economics. It falls into a wide category which one writer calls "shadow work". An extreme example is the work of a parent at home, raising a child. The economic worth to the society is tremendous, but no one gets paid for it. Likewise, a person may produce tremendous value by simply connecting the right people with each other, but there is no easy way to put a price sticker on it, simply because there is no money exchange.

      It may be to the best. I personally like the fact that we have other economies besides the one based on money.

    • In fact, I think the ``value'' of some networks can be negative. Just picture the jump in world productivity (added-value) if some networks (WoW? etc.) are shut down.

      ie: useless definition.

    • Re: (Score:3, Insightful)

      by Bombula ( 670389 )

      The distinction between value and utility also seems skewed. The two are not remotely the same, even in purely financial transactions. Add to that all other 'transactions' across a 'network', such as me posting this comment to slashdot, that are non-financial but which certainly have utility, and you're nowhere near a meaningful valuation of said network.

      So I'm forced to agree with the cynics: this seems to be a put-up job designed to make it easier to assign $$ losses resulting from network outages in co

  • least, not in the academic sense. Though there are some research papers that contribute just as little. At its base, this is how Value-Added-Tax is calculated. Wheel, reinvented, wow...
  • I thought to call something a "law" in science you needed a much firmer proof.

    • Re: (Score:3, Interesting)

      The "firmer proof" is only required if you want the scientific community to call it a law.

      The standard for getting your fifteen minutes of fame is considerably lower.

    • by Mr2001 ( 90979 )

      Theories and laws are different categories of things.

      A law is an observation that's so reliable that you assume it's always going to happen. For example, the law of gravity says that if you drop something on Earth, it will accelerate toward the ground at approximately 9.8 m/s^2. That law says nothing about why things fall (at all, or at that rate) when you drop them, it just says that they do. There's no proof for that, other than the fact that billions of people have been dropping things for thousands of y

      • Every time I post something on slashdot, someone tells me I'm wrong, and then never disprove what I'm saying or make a case for the other side.

        It's like everyone just likes to hear themselves type.

        Just a theory.

        • by Mr2001 ( 90979 )

          Actually, I did disprove what you said and made a case for the other side. A theory can never become a law, even if you provide "a much firmer proof", because theories and laws are entirely different.

          It's like you just like to post replies without reading the comments you're replying to.

          Just an observation. (But if you find this happening every time you post something on Slashdot, maybe it's actually a law.)

  • by Gothmolly ( 148874 ) on Tuesday April 07, 2009 @08:53AM (#27487731)

    For any consumer- or end-user-level network, Ohm's law is the one you need to most worry about.

    • by Cyberax ( 705495 )

      Ohm's law is for wimps. It's just a special case of Kirchhoff's circuit laws which are a special case of Maxwell's equations. Which, of course, are a special case of electroweak theory. Which can be a part of string theory.

      • by Timmmm ( 636430 )

        Ohms law is completely different to Kirchoff's voltage and current laws.

        KVL says the sum of the voltages around a loop is zero. KCL says the sum of the currents entering a node is zero.

        Ohms law describes how voltage and current are related in a resistor. Totally unrelated.

  • One way to contemplate the value the network adds to each transaction is to imagine the network being shut off and what the additional transactions' costs or loss would be.

    So if one network were shut off, and another network turned on, and the second network was more efficient, then the value of the first network would be negative, since shutting it off ended up decreasing transaction costs? Or consider the value of my wife. If I shut her down, but a new, more efficient wife were immediately available, did

    • Re:Shut off (Score:5, Funny)

      by vlm ( 69642 ) on Tuesday April 07, 2009 @09:12AM (#27487959)

      But surely there are replacement wives available. So is the value of my wife in the positive things that I get from her currently, or is it only relative to the potential value of other wives, or of the freedom of having no wife at all?

      Clearly, sir, you need a Redundant Array of Inexpensive Wives (RAIW). Twins (RAIW-1) are OK but RAIW-5 with lots of hot spares works better. Most admins agree that products with large rack mounts are better. A lot of hot air is generated resulting in increased cooling requirements. Also an astounding amount of noise, OSHA requires earplugs in that environment. This solution is popular in certain datacenters in Utah. Some folks claim a competing product exists, the Redundant Array of Inexpensive Girlfriends (RAIG) but everyone I've met agrees it usually ends up pretty expensive, the opposite of the original acronym, and there are often serious interoperability and EM compatibility issues. Finally w/ regards to financing there is considerable debate about rent vs purchase, short term lease vs long term lease, mileage reimbursement, etc. Rent to own agreements usually don't work out. Maintenance costs are somewhat beyond the realm of this email, but can be extraordinarily high. Anyway good luck with your network, Sir.

    • Re: (Score:3, Interesting)

      by Red Flayer ( 890720 )
      If you really want to use a wife analogy, then we can do that.

      The value of your wife is the summation of the change in transaction costs if you replaced her with a null wife (as opposed to a dull wife, which you may already have).

      If you replace her with a more efficient wife, then the old wife's value is less than the new wife's, but it would be almost always non-zero.

      Beckstrom's approach gets at something, just as most simple-minded reductions have some grain of truth in them. But it's also, in the large

    • If I shut her down, but a new, more efficient wife were immediately available, did my former wife have negative value?

      Her value = ( your value - x - y ) ( y / x )

      where x = how much your lawyer charges
      and y = how much her lawyer charges

      (McCartney's law, incorporating the Mills correction)

  • So, could you say that a network is a hologram, which is why its perceived value changes based on the point you occupy with in it? It was the "edge of the network" statement that drew up that whole universe-as-hologram thing.
  • by Bazzargh ( 39195 ) on Tuesday April 07, 2009 @09:20AM (#27488055)

    And surely Beckstrom must've realised this, since its trivial to get to Metcalfe's law from his equations.


    Vj = Sum(i=1..n, V[i,j]) = Sum(i=1..n, Sum(k=1..n, B(i,k)) - Sum(l=1..n, C(i, l)))
    = Sum(i=1..n,Sum(k=1..n, B(i, k) - C(i, k))).
    = Sum(i=1..n,Sum(k=1..n, Sum(z=1..n, B(i, k) - C(i, k))/n ))

    Let A(i) = Sum(z=1..n, B(i, k) - C(i, k))/n , the average benefit to user i of the network. Then:

    Vj = Sum(i=1..n, Sum(z=1..n, Ai))
    = Sum(i=1..n, n*Ai)
    = n* Sum(i=1..n, Ai)

    I'm sure you can see where I'm going with this now...
    Let A = Sum(i=1..n, A(i))/n , the average benefit to any user of the network.
    Vj = n^2 * A. Oh wait - that's Metcalfe's law. All Beckstrom's done here is give an expansion of the average benefit per user.

    • by Bazzargh ( 39195 )

      I should point out the obvious assumption in what I posted: Metcalfe's law assumes 'A', the average benefit to any user of the network, is independent of 'n'. This fails eg if one particularly valuable user enters or leaves the network, but at the scale of the internet, it is reasonable to assume that the vast majority of users and potential users have the same value.

    • Vj = Sum(i=1..n, Sum(z=1..n, Ai))
      = Sum(i=1..n, n*Ai)
      = n* Sum(i=1..n, Ai)
      I'm sure you can see where I'm going with this now...

      3. ...
      4. Profit! .. no? damnit!


  • Law my ass (Score:3, Insightful)

    by cretog8 ( 144589 ) on Tuesday April 07, 2009 @09:35AM (#27488303)

    A rule for assigning a value to something--when you come right down to it, an arbitrary rule, even if it turns out to be useful--is not a law. Sheesh!

    • Hence some people (including me) keep harping on distinguishing real sciences as distinct from social stuffs and others that a wise man here approximated as "online wankery". They spew out terms like "laws" as if they are throw-away newsprints to be discarded daily, and yet they have the nerve to insist on being considered on the same plane of credibility.

      On a second thought, maybe they suck at spelling and mispelled "lore".

  • Now that we know the value, it's only a matter of time before some government tries to tax it based on it's current up-to-the-minute value.

  • What about competing networks? What about redundant networks? Do the networks lose value because they become individually less important? Or do they multiply because they all can do the same valued transactions?

    What if the main network fails, and the auxiliary network takes over. Does that network now adopt the new value of its transactions? Is it more valuable because it's the last of the backbone? Is that value lost as soon as the main network goes back up?

    What about a server that changes load de
  • This simply is none sense logically.

    Here is a thought experiment of sorts.

    Company A and company B are competitors, same size, same work, same number of employees, same clients. All things are equal.

    Company A has invested in multiple redundant servers, their network is made up of dozens of different services such as web sites, databases, file sharing. Essentially all the bells and whistles.

    Company B has an antiquated 1985 dos based network. They are able to produce the same amount of results. They however ha

  • Are we gonna have to pay taxes based on this?
  • Btw:

    The optimal security investment occurs on the loss function line where it is tangent to a 45 degree line

    I guess this may happen more than one place on such a curve, and who knows when its a global optimal situation?

  • Look at his pic. You gotta believe the guy was a dick for a boss.

    He was student body president at Stanford and made $200 million (more or less)when he sold CATS. No wonder he thinks his shit doesn't stink.

    Credit where it's due: I should have hair like that.

  • by kune ( 63504 ) on Tuesday April 07, 2009 @11:28AM (#27489987)

    This paper has not seen any reasonable peer review. There are indices simply missing. The letter l (ell) is clearly not a good index. He uses n for number of transactions, users and networks. He even uses n for networks and users in the same formula, which must mean that number of users and networks are identical. In the summation of the users he leaves the denominators simply away. Usually scientiest don't name laws after themselves.

    This doesn't mean that the basic idea might be wrong, but the work itself doesn't support the argument.

  • Monetary is only one kind and sometimes the poorest measure of value.
    Consider social networking? What is the unit of exchange? What are the values of those transactions?
    Some things that are little or no monetary worth are priceless in their value.
    Peace, health, love/friendship, freedom, joy. No one transaction on a network can equate or be specifically related to any of these
    yet improving and maintaining those things is the primary thrust of nearly all human activity.

    No one transaction has made me a more l

  • "Discovering a law" ain't the same thing as "defining a term."

    Kepler discovered the elliptic nature of the planets' orbits. The orbits were there all along, and Kepler was the first to notice their eccentricity.

    Descartes defined the Cartesian coordinate system. The system did not exist until Descartes invented it as a useful heuristic.

    Definitions tell us a lot about how our minds works. Discoveries tell us a lot about how the world works.

  • ... a variation of Cole's Law.
  • by HiThere ( 15173 ) <<charleshixsn> <at> <>> on Tuesday April 07, 2009 @01:39PM (#27492381)

    Value is an ill-defined term, and different observers will value the same transaction differently. This isn't only because it's ill-defined, but also because valuation is observer centric.

    Because of this the law is both too vague to be useful, and silly. Many observers will only value some of the transactions. Others will value some of the transactions negatively. Etc.

    E.g., what is the value of the advertisement that may appear at the top of this page? To slashdot it's valued as a source of income. To the advertiser it's valued as a way of attracting business. To most readers it's ignored. To some readers it's a nuisance. Each means of valuing the ad gives it a different valuation...and each valuation is clearly observer-centric.

  • I'm no fancy expert like this guy, but here are two obvious problems that invalidate the theory as far as I'm concerned:

    1. It's impossible to measure. Ergo, it's useless.

    2. There is value in potential uses, not just actual transactions. For example, how much is 911 service worth? Zero until you break your arm? No. There is a value in knowing that you can reach 911, regardless of whether you use it. Similarly, networks provide value by creating opportunity, even if that opportunity is unrealized.

  • "The value of a network equals the net value added to each user's transactions"

    -----So, if I build a $25,000,000 computing center, and 1,000,000 people make searches for porn, then each search was worth $25?

    I don't think so.

    What determines a network's value is:

    1. Quality of network hardware,
    2. Quality of network software,
    3. Network speed,
    4. Network efficency.

    However, this is just the value of the network.

    The value of each transaction is dependent on the transaction's criticality value to the user, with 'cri

  • The problem with this kind of model if that it give a value in such a way that business men can start to calculate how much they should charge for a given pipe, even the pipe to your house. Quantizing everything, giving it value. Well to do that you have to Identify each kind of thing over that pipe, which means they have to know what each thing is, its type, its size, track on it save its value.

    Two problems. The cost of doing that and saving that intformation is huge. Of course that would be factored into

    1. INVESTING Cash is GOOD
    2. SAVING Cash is BAD
    3. SPENDING Cash is UGLY
  • Great, its defined by the 'transactions'. So what is a transaction? The intellectual value gained from reading a website? Credit card values charged? Advertisement revenues? Bandwidth use?

"If it's not loud, it doesn't work!" -- Blank Reg, from "Max Headroom"