Who is on this subjectordered by the date of their first quote here
1 of 2 lane rests on fewer than 5 quotes and is marked thin. Offsets are days from the middle first-quote date, 29 Apr 2013 — a date, and nothing else. It is not a claim about who reached a view first.
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Bill Gurley
25
29 Apr 2013 – 4 Aug 2026
+0 d
- David Sacks 1 thin 21 May 2020 – 21 May 2020 +2579 d
The chronologysourced and dated, oldest first
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“And it turns out the majority of people don't know how, including really large companies like Apple and Google”
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Bill Gurley
Gurley argues Apple and Google don't know how to build UGC communities because it requires specific expertise.
“And it turns out the majority of people don't know how, including really large companies like Apple and Google because it's really hard and it requires a lot of hand holding and hand stitching and building in place a network effect where the atoms start to bounce into one another.”
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Bill Gurley
Gurley argues network effects decay as platforms scale, citing LinkedIn as an example of diminishing marginal value per user.
“Like what's the value of an incremental member joining LinkedIn? It's probably less than what the value of the 10,000 person that joined LinkedIn.”
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Bill Gurley
Gurley argues network effects decay as platforms scale, with each incremental user adding less value than earlier ones.
“Like what's the value of an incremental member joining LinkedIn? It's probably less than what the value of the 10,000 person that joined LinkedIn. And so there are many, many, many nuances.”
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Bill Gurley
Gurley shares his unpublished formula for evaluating network effects using value versus market penetration.
“If it's a two sided network, you could build one for the value to the supplier, one for the value to the consumer. On the x axis is your penetration into the market.”
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Bill Gurley
Gurley explains Mechanical Turk failed to show network effects because value didn't increase with supply penetration.
“Rather than say don't work, let's say didn't show signs of a network effect was Mechanical Turk that Amazon built, which was a labor marketplace for perfunctory work that could be pushed over the internet.”
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Bill Gurley
Gurley explains labor marketplaces fail because 5% supply provides same customer value as 95%, preventing network effects.
“It turns out that if you get just 5% of the supply, the value you provide in customer is no different than if you get 95% of the supply.”
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David Sacks
Sacks argues remote work via Zoom could break Silicon Valley's network effect, threatening San Francisco's appeal.
“And if those jobs opportunities are now available via Zoom and you can be doing them from anywhere, are people still gonna choose to live in San Francisco?”
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Bill Gurley
Gurley would bet on a 500 million user communication platform adding avatars over a perfect avatar system without users.
“if I had to place a bet on whether someone that had 500,000,000 users on a digital place platform where people are communicating and that they might add avatars or some digital thing that makes it more immersive versus someone that built the perfect digital three d avatar immersive system but doesn't have the users yet?”
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Bill Gurley
Gurley argues tokenization with appreciating currency can provide massive advantage for marketplace bootstrapping through incentive structures.
“And so if you build the right incentive structure around your tokenization, that could be a massive advantage to an on ramp, especially if you're able to get your currency to appreciate over time.”
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Bill Gurley
Gurley recalls OpenTable's CFO wanted to quit because his model capped market share at 17 percent.
“And one day I showed up early for a board meeting and and the CFO comes to me and he says, Bill, I'm I'm gonna quit.”
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Bill Gurley
Gurley asks entrepreneurs whether value proposition to one marketplace side increases as supplier base penetrates.
“When I push entrepreneurs to think about this and it gets to your increasing marginal utility, but I just say, as you penetrate a supplier base, one side of a marketplace, whatever, is the value proposition to the other side going up?”
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Bill Gurley
Gurley tests marketplace strength by asking if value to one side grows exponentially as the other side scales.
“When I push entrepreneurs to think about this and it gets to your increasing marginal utility, but I just say, as you penetrate a supplier base, one side of a marketplace, whatever, is the value proposition to the other side going up? And ideally, it would be going up exponentially, which is super hard.”
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Bill Gurley
Gurley argues increasing returns vary in strength, with some linear and some exponential, forming a scale of network effects.
“It's arguable there are levels of increasing returns. Like, you could come up with some kind of scale or index because some of them are more linear and some of them can go exponential.”
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Bill Gurley
Gurley cites CrowdStrike as example of network effects in enterprise security through shared threat intelligence across customers.
“But they posted a memo four years ago titled the CrowdStrike Security Cloud Network Effect.”
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Bill Gurley
Gurley explains CrowdStrike's network effect where threat-sharing makes the largest security network most valuable.
“the way that it worked for them and the way that the marginal customer ends up with more utility is if the threats are shared across a network, then if you belong to the biggest network, then you get the shared learning of everyone in that network, which lowers your threat exposure.”
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Bill Gurley
Gurley posed question about how player behavior changes when multiple competitors understand increasing returns dynamics in advance.
“I said to Michael one time, what if there were multiple players in an increasing returns game and they knew what the outcome was gonna look like? How would it affect their behavior?”
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Bill Gurley
Gurley suggests the Magnificent Seven's dominance may stem from all players now understanding network effects dynamics.
“maybe the reason the magnificent seven exists, maybe the reason why those price wars went to where they did is just everyone got educated.”
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Bill Gurley
Gurley argues institutionalized belief in network effects drives AI capital flood, creating competitive chaos and forced raises.
“Then it's a competitive dynamic. Like once your company raises, you know, 200,000,000, 1,000,000,000, if you're in that market, you raise it too. And it does create chaos.”
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Bill Gurley
Gurley explains OpenTable unlocked parametric search for restaurants that was previously impossible without calling each restaurant individually.
“Before OpenTable, you could not do that. You'd have to call each one of them, and so it unlocked a consumer value proposition that didn't exist.”
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Bill Gurley
Gurley argues network effects are easier to build when supply is fragmented rather than consolidated like Ticketmaster venues.
“Part of what I loved about both OpenTable and Uber, it's easier to build a network effect if supply is limited, I can't You know how many people have tilted against Ticketmaster and whatnot?”
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Bill Gurley
Gurley says OpenTable had the most intellectual appeal because Benchmark invested at three restaurants with a network effect thesis.
“The one that had kind of the most intellectual appeal was probably OpenTable because we invested when there were three restaurants on the network and had a theory that a network effect could take place where it could tip towards winter, take most.”
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Bill Gurley
Gurley backed OpenTable with only three restaurants on the network based on network effect thesis.
“we invested when there were three restaurants on the network and had a theory that a network effect could take place where it could tip towards winter, take most.”
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Bill Gurley
Gurley says Mechanical Turk network effects level out because aggregating more commodity workers does not improve quality.
“If you had 100,000, it doesn't really change the quality of the work that much.”
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Bill Gurley
Gurley learned from Bill Miller that network effects justify Amazon growing at unreasonable rates for extended periods.
“value just means that the asset is underpriced relative to what you think it will be worth in the future.”
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Bill Gurley
Gurley told OpenTable CFO they would reach 99% market share, not 17%, due to network effects understanding.
“And he said, oh, no one gets more than 17% market share, all the businesses I've worked with. Because I believed in network effects, I was like, we're gonna get 99.”
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