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The ‘Virtuous Cycles’ of Amazon and Uber

The "virtuous cycle" of Amazon and Uber illustration: closed loop flow diagrams demonstrate the effect of growth on factors like demand, price and service for Amazon and Uber.

Networks effects can lead to massive, rapid growth especially if you manage to get a virtuous cycle turning.

Amazon leveraged this model by Jeff Bezos in 2001 for mega growth. Amazon calls it a virtuous cycle (and some call it a virtuous circle). And, more recently, the Uber variation, by David Sacks explains much of Uber’s wild ride. The virtuous cycle is a form of flywheel where once it gets going it keeps on spinning.

When you build a platform that leverages network effects in the right way it can enable growth way beyond what has historically been possible.

Also, see Metcalfe’s Law, the business flywheel, exercise and sleep

Published 21 Apr 2018

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Dunbar's number: a person can't remember the name of the one person outside their circles of closer friends, super family, clan and tribe behind them

Dunbar’s number: 150

For want of a nail

The business flywheel

Strahler Stream Order animation: what looks like the silhouette of a tree with branches but no leaves, is actually a plan view of a large river network. Starting at the outermost, narrowest parts, each time two tributaries of the same order merge together the order of river size increases until it flows out into the sea.

Strahler stream order: Streams, rivers, the Amazon and how to organise them.

Metcalfe’s Law

The Peter Principle

The evolutionary psychologist Robin Dunbar identified that an average person’s social network appeared to follow simple scaling laws from the closest friends — who you would seek personal advice or help from in times of severe emotional and financial distress — through your superfamily (or close friends), to your acquaintances (or clan), whom you might invite to a party, to your most casual friends (or tribe). At each level, the number of people typically increases by about a factor of 3. So you might have 5 close friends, 15 in your super family, about 50 in your clan and about 150 in your tribe. The 150, with some variance, seems to be around the limit for the number of people we can keep track of and reasonably call part of our social network and maintain as a cohesive group. Partly perhaps due to limits of our memories and also to the effort it takes to maintain the relationships. There are many instances of the ~150 in action, for example, in challenges of transitioning companies as you exceed 150 employees while maintaining cohesiveness, the size of Neolithic farming communities and the basic unit size of Roman armies. The number is actually 148, but 150 is catchier and seems fine between friends.…The evolutionary psychologist Robin Dunbar identified that an average person’s social network appeared to follow simple scaling laws from the closest friends — who you would seek personal advice or help from in times of severe emotional and financial distress — through your superfamily (or close friends), to your acquaintances (or clan), whom you might invite to a party, to your most casual friends (or tribe). At each level, the number of people typically increases by about a factor of 3. So you might have 5 close friends, 15 in your super family, about 50 in your clan and about 150 in your tribe. The 150, with some variance, seems to be around the limit for the number of people we can keep track of and reasonably call part of our social network and maintain as a cohesive group. Partly perhaps due to limits of our memories and also to the effort it takes to maintain the relationships. There are many instances of the ~150 in action, for example, in challenges of transitioning companies as you exceed 150 employees while maintaining cohesiveness, the size of Neolithic farming communities and the basic unit size of Roman armies. The number is actually 148, but 150 is catchier and seems fine between friends.

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