- Hey Dan!
Me and some friends were talking, we were just wondering,
what do you think is the most powerful
business model of the 21st century?
- The most powerful business model?
Well, I think the business model has changed for years.
Now what works now compared to what works before
you think about back in the industrial age,
people are the most valuable things, right?
In order to, to have manufacturing power, right?
If we're talking about Carnegie days,
that they need people, right?
And then later on,
even later on then is now more technology now.
So that's the difference.
And you think about the most,
some of the most successful companies in the world today
where you're thinking about like Airbnb,
let's say Airbnb, right?
Well, they own no real estate.
Facebook, which is the largest media company in the world,
they create no content, right?
Uber, largest taxi company owns no taxi, right?
And it's only now, recently they develop more,
but really a lot of them started off that way.
So I believe the most powerful,
I would say business model in the 21st century
is actually what I call the network effect.
Okay?
So it's not, you're not just selling a product or service,
but you are creating a network
where you put people together, right?
And tech is the easiest to explain
because that's what most people would understand, right?
So, and there's a difference between a network effect and a,
what I call economy of scale, right?
So economy of scale, let's say Apple for example, right?
For Apple, the more people buying something
that will lower the cost of production.
Now we have the economy of scale, right?
The more we manufacturer, we lowered each unit costs.
That's great, right?
So more people buying Apple
that is an economy of scale thing.
But the network effect is now people buy Apple,
people buy the iPhone because
they want to use iMessage to difference.
That's a network effect.
Now you think about Apple
is actually a network within a network.
So think about all the app developers.
Apple attracts a lot of good app developers
who would develop those apps because why?
They have a lot of users, right?
A lot of users.
So when they have a lot of users,
so that attracts the talent then they want to develop apps
and because they have a lot of good apps on Apple
so then more people want to go to the marketplace and buy,
buy all the apps in the marketplace.
So you think about the network effect meaning
for each user that gets added to the network,
that network becomes more valuable
and adds more value to the other users.
So think about Uber.
If Uber doesn't have drivers, how valuable is Uber?
Not very valuable, right?
No one is using it.
But if more drivers are using Uber,
that means that if I need a car,
I can just call and boom, here it comes.
And it's because there are more customers,
more users using the app
that attracts more people wanting to become Uber drivers,
earning money because they could, they could turn over fast.
So the trick to the network effect is
we need to be able to create and attract suppliers.
So that attracts more users
and more users attract more suppliers.
Now the key you think about once you get that going,
it almost creates a perpetual effect.
It almost creates almost like an invisible monopoly.
If you think about it, right?
That now, it's pretty difficult.
Yeah, you have Lyft trying to compete with Uber,
but whoever is first, whoever it's good
and they actually grabbed the majority of market share
has the most amount of users,
they will naturally attract more and more and more people.
And you look at Craigslist, you look at eBay,
you look a number of these platforms after all these years.
Yeah, there's ups and downs,
but they kind of still dominated industry
because they have the network effect.
No different than the platform that we have,
closers.com, right?
Where we connect companies
with sales professionals together, right?
So the more companies going on closers.com
the bigger the platform, the more successful,
and the more gigs, more opportunities, more jobs there,
more jobs, more remot sales talents
going there using the platform.
The more talents that we have on the platform,
there are more companies want to use the platform.
So after a while in the beginning, maybe slow
because you need to build up that network effect,
but once you hit that critical mass, it just goes like that.
And most platforms are like that.
It takes a long time
but once they hit the critical mass, that's it.
Then they become the leader.
I think in terms of business model
and what I tell young people all the time is
you don't want to just sell a product or service,
that model is out of date.
Like if you want to make a living, you know,
sell a product or service, that's fine.
But if you actually want to build something great,
like something that's significant,
you want to create a network.
When you create a network
and you become the preferred choice in your marketplace,
then you don't just sell product service.
Now you become what I call a category king or queen.
You are the leader in that category.
And when you do that, you just, you just dominate.
And now the value that you can
add to the marketplace is exponential.
And when that happens,
also the wealth that you create is exponential.