2: INCREASING RETURNS

An old saying puts it succinctly: Them that's got shall get.

A new way of saying it: Networks encourage the successful to be yet more successful. Economist Brian Arthur calls this effect "increasing returns." "Increasing returns" he says, "are the tendency for that which is ahead to get further ahead; for that which loses advantage to lose further advantage."


In networks, we find self-reinforcing virtuous circles. Each additional member increases the network's value, which in turn attracts more members, initiating a spiral of benefits.

2009/05/13 2 Comments 0 Links

 

2 Comments

#1 | Wed, 05-13-09 12:02 | ian

Sounds like a good old feedback loop to me!

The noises that get in the microphone are increased, and the ones that don't are drowned out.

 
#2 | Wed, 05-13-09 03:29 | gmoke

In Donella Meadows' _Thinking in Systems_, she sees this as a system trap, as an unregulated postive feedback loop can be. Sounds like the culture of Wall Street to me.


"The Trap: Success to the Successful
If the winners of a competition are systematically rewarded with the means to win again, a reinforcing feedback loop is created by which, if it is allowed to proceed uninhibited, the winners eventually take all, while the losers are eliminated.

"The Way Out
Diversification, which allows those who are losing the competition to get out of that game and start another one; strict limitation on the fraction of the pie any one winner may win (antitrust laws); polices that level the playing field, removing some of the advantage of the strongest players or increasing the advantage of the weakest; policies that devise rewards for success that do not bias the next round of competition."


 

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