Network effects have dictated the success of technologies from the telephone to shopping platforms like Etsy, and AI tools such as ChatGPT are no exception.
What is different, however, is how those network effects work.
Data network effects are a new form. Like the more familiar direct and indirect network effects, the value of the technology increases as it gains users.
Data network effects are a new form. Like the more familiar direct and indirect network effects, the value of the technology increases as it gains users.
Here, however, the value comes not from the number of peers (like with the telephone) or the presence of many buyers and sellers (as on platforms like Etsy), but from feedback that helps it make better predictions.
More users mean more responses, which further prediction accuracy, creating a virtuous cycle. Companies need to consider three lessons:
1) feedback is crucial,
2) routinize meticulous gathering of information, and
3) consider the data you share, intentionally or not.
1) feedback is crucial,
2) routinize meticulous gathering of information, and
3) consider the data you share, intentionally or not.
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by Sheen S. Levine and Dinkar Jain
by Sheen S. Levine and Dinkar Jain