Network Effects - The Key to Understanding Them

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Jift tobuy is the founder and CEO of network effects firm craigsas. The company uses a domain name that was previously used for currency trading. He says there are three key things to understand about network effects. They improve customer user acquisition and retention, he says. And they also help create fragile, more durable businesses.

In Episode #57, we explore network effects and investing in network effect businesses. We’re joined by James Currier, co-founder and general partner of NfX. We cover virality vs. network effects, tweaking rules and systems to take advantage of network effects, and network effects as a business strategy.

“Every company is its own work of art, and the founder is the artist.” – James Currier

EPISODE GUIDE (LINKS, QUOTES, NOTES, AND BOOKS MENTIONED)

https://www.danielscrivner.com/notes/james-currier1-outlier-academy-show-notes

FULL TEXT TRANSCRIPT

https://www.danielscrivner.com/notes/james-currier-outlier-academy-transcript

CHAPTERS

This episode is our definitive guide to network effects and investing in network effect businesses. In it we cover:

(00:00:00) – Introduction
(00:01:58) – James’ background and journey to NfX
(00:07:50) – Defining network effects and why they are so powerful
(00:11:20) – Virality vs. network effects
(00:14:46) – Examples of businesses with network effects
(00:24:57) – Tweaking rules and systems to take advantage of network effects
(00:31:07) – Networks effects as a business strategy
(00:33:58) – Investing in network effects businesses
(00:40:26) – Advice for founders

ABOUT NFX

The name NfX is actually short for Network Effects, and James with his founding partner, Pete Flint, founded NfX after seeing the power of network effects, partially by doing research that confirms that 70% of all unicorns are companies with proven network effects driving their businesses. While NFX has become one of the world's leading thinkers on network effects, having published incredibly salient posts from 13 different network effects and counting, where they've now identified 16 different types of network effects, to their very popular self-help article titled Your Life is Driven by Network Effects, and their strategy is clearly working.

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ABOUT OUTLIER ACADEMY

Learn timeless lessons on work and life from iconic founders, world-renown investors, and bestselling authors. Outlier Academy is the forever school for those chasing greatness. Past guests include Gokul Rajaram of DoorDash, Scott Belsky of Benchmark and Adobe, Joey Krug of Pantera Capital, Mark Sisson of Primal Kitchen, Luke Gromen of The Forest for the Trees, and Brian Scudamore of 1-800-GOT-JUNK.

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ABOUT DANIEL SCRIVNER

Outlier Academy is hosted by Daniel Scrivner. Over the last 15 years, Daniel has led design teams at Square and Apple, turned around a $3M+ ARR SaaS business, and invested in more than 100 companies. He launched Outlier Academy in 2020 to learn from the world’s best founders, investors, authors, and peak performance experts.

Website: https://www.danielscrivner.com

Twitter: https://www.twitter.com/danielscrivner

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