What matters? Is it the actual number? Or is it compared to something?
As many times, the answer is, “depends”.
When we are trying to determine if we reached a goal, if we “made it”, we have to go with the absolute number. “Black or white”, “night or day”; it has to be clear as that. If we have succeeded on our quarterly goals, we either made the revenue number or not. If we have lost weight, are we either above or below our goal.
But prior to this, when we are setting the goal, or even better, when we just want to know how things are going to turn out, what matters is the relative proportions. Revenue goals are usually set relative to the company’s size, and previous performance. Weight loss, is relative to your current weight.
So let me introduce here Metcalfe’s law. This is the “law” that governs the value of a network, and is the core of the idea of the “network effect”. This is the idea that there are certain “technologies” whose value increases as more people uses them. The fax machine, the telephone, Threads, the new Twitter killer by Meta, and even the written word. The more people connected, the more valuable it is. Metcalfe stated that the value of the network is PROPORTIONAL to n(1-n). It is almost n2, and the “1-n” term is introduced just to make the point that when there is one member, the value is zero.
But it is impossible to know (at least with this formula) how much is a telephone network valued for, or WhatsApp, or any other network. But we can say for sure, that if the number of users doubles, the network will be four times more valuable. And this is the only thing that really matters from Metcalfe’s law, the relative value.