In my piece “Can retail investors still make outsized returns - Part 2?” on Sep 18, 2021, I started off by saying Julius Caesar was born in 100 BC but there was not much difference in technological advancements up to the 14th century after Caesar. Just think about that. It is mind-boggling. Those who are serious about understanding my frame, I highly encourage you to dig into my four-part series on “Gutenberg to Blockchain”. I consider them to be one of my finest pieces in recent times.
I have always contrasted and compared linear versus exponential growth. While exponential growth can be described better by Moore’s Law, the law in its true sense is not happening now. As described by Moore’s law, the chip densities are not doubling every two years, it is still delivering exponential growth, albeit at a slower pace. I just wanted to illustrate the principle.
What we are faced with now is a new set of laws and I am not sure how many of you are familiar with them. If you want to understand network effects, its development, and adoption through the internet and social media, it is very important you understand this.
When the World Wide Web was introduced to us between the late 1990s and early 2000s it served as the internet of information. When Sir Tim Berners-Lee, the Oxford-educated British scientist, made the World Wide Web available to us and that too free, his desire was that the world would make good use of it and democratize information and communication. But that’s not what actually what happened.
Certain companies and certain individuals became insanely rich. They built their applications on the super highway of the World Wide Web to become very wealthy. And certain companies that are very successful now would not have existed if it was not for the WWW and household internet connections.
Take Twitter for instance. It couldn’t have existed in the 1990s. Twitter came into existence after internet connections became ubiquitous. But now circumstances are being made and coming to the common man or the middle-class to build generational wealth - by developing independent thinking, doing deep research, and fostering clarity of thought.
Most important of all, one has to distinguish between price and value. We are all here for a higher price but it can be totally detached from value for a long time. We can monetize things only if the price is right for us. This is a very difficult concept to come to grips with and only those who can understand the benefits of long-term investing will find themselves in alignment.
There is no time in history as it is now for someone to make generational wealth by making just a few clicks with your mouse. Okay, maybe not as simple as that. But you get the point. You can do it, unlike the Rothschilds and Vanderbilts who spent years slogging to develop banking and railroads the way they did it. While they toiled hard for their riches, they spotted things much early and were lucky to be in the right place at the right time. I mean that they were not born in Somalia nor living in Yemen.
You are living in a period like no other and your kids and grandkids can benefit from it if they are early and are able to adapt to the new changes and developments. Then what will you do with all these riches? So this is going to be a multi-part series of writings forged from my own personal experience and research.
Now, the key to unlocking generational riches - ‘Metcalfe’s Law’. The law is a neat rule of thumb for thinking about the value of network technologies, and not a complete deep dive into the assets’ fundamentals.
In its rudimentary form, Metcalfe’s Law states that the value of a network is proportional to the square of the number of connected users of the system (n^2) or n(n-1)/2, where n equals the number of nodes. n(n-1)/2 is proportional to n^2 asymptotically. The end nodes can be computers, servers, or simply users.
Take for example, if a network has 100 nodes, its inherent value is 10,000 (=100x100). When you add one more node the value is 10201 (=101x101). Add another node to the equation the value is 10404 (=102x102). This is non-linear, exponential growth. When you are able to understand this growth potential in your investments, things will become much clearer to you.
Watch this short interview with Rosie Rios, 43rd US treasurer under the Obama Administration for 8 years and currently an adviser and board member to Ripple labs. She throws some small light on these changing times.
Continue to Part 2.
If you received value from this post, and you’d like to send some back, or if you’d like to signal to me to continue spending time on these types of explorations, feel free to buy me coffees (thank you!):
So, there we go. Thanks for reading Breezy Briefings. If you enjoyed this, I'd really appreciate it if you could take a second and tell a friend. Honestly. It makes such a big difference.
Forward this email. Recommend the newsletter. Share on Twitter, WhatsApp, Telegram, LinkedIn, Slack, wherever!
Join Breezy Briefings’ Official Telegram Channel: https://t.me/BreezyBriefings
Abraham George is a seasoned investment manager with more than 40 years of experience in trading & investment and multi-billion dollar portfolio management spanning diverse environments like banks (HSBC, ADCB), sovereign wealth fund (ADIA), a royal family office and a hedge fund.