Today in 1870, The U.S. Weather Bureau made its first meteorological observations using 24 locations that provided reports via telegraph.
For the first time, weather observations from distant points could be “rapidly” collected, plotted, and analyzed at one location. Data collection by “edge” devices, combined into a central data pool for real-time analysis is a key promise of today’s integration of AI with the Internet of Things (IoT).
The Weather Bureau’s experiment in 1870 was a great early example of how the value of information increases when it’s shared or what “Metcalfe’s Law” should have been about. Instead, Metcalfe’s Law tries to capture the increase in the value of the network as more users join it.
Metcalfe was not the first to make a connection between the number of users and the value of what they were using to connect with each other. The “network effect” posits that the value of a product or service depends on the number of people using it. This principle was first associated with the telephone—the lager the number of people owning telephones, the more valuable the telephone is to each owner—and recently has been applied to all types of social networks, with the growth in the number of “Monthly Active Users (MAU)” becoming the most important metric in valuing the business potential of online startups.
When Bob Metcalfe co-founded 3Com to develop and sell Ethernet cards, he expressed this principle in what later became known as “Metcalfe’s Law.” In 1983, answering his sales force’s need to convince customers that they should buy additional $1,000 Ethernet cards, he argued that “if a network is too small, its cost exceeds its value; but if a network gets large enough to achieve critical mass, then the sky’s the limit.” He even came up with a mathematical formulation, claiming that the value of a network is proportional to the square of the number of “compatibly communicating devices.”
That made sense in an era when there was not much information sent over the network and the motivation to connect PCs in a network was the economic benefit of sharing a printer rather than the sharing (and analysis) of information. Today, the economic benefit—of any network connecting people, organizations, and devices—lies in what is done with the information that is created and shared by all the “nodes” of the network.