Breaking Metcalfe’s Law

The power of a network grows approximately by the square of the number of connected nodes. A computer network comprising 10 nodes, for example, is thus not 10 times as powerful as a single unconnected computer but 100 times as powerful. This rough rule is called Metcalfe’s Law, after Bob Metcalfe, the inventor of Ethernet. Ethernet is the networking standard that now dominates not just home, office, and wireless local area networks but increasingly the metro and core networks of the global Internet as well. In coming years, an ever larger proportion of the world’s key innovations and investment opportunities will emerge from China, India, and other non-U.S. locales. Does the U.S. want to be blocked from participating in this epochal surge of new wealth? Metcalfe’s Law works both ways. Protectionist anti-trade policies and attitudes can spin quickly out of control. Severing too many nodes in America’s powerful economic network can reduce its value in exponential fashion.

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