Reed's law is the assertion of David P. Reed that the utility of large Network, particularly social networks, can scale exponentially with the size of the network.

The reason for this is that the number of possible sub-groups of network participants is $2^N\; -\; N\; -\; 1\; \backslash ,$, where $N$ is the number of participants. This grows much more rapidly than either

• the number of participants, $N$, or
• the number of possible pair connections, $N\; (N\; -\; 1)\; /\; 2\backslash ,$ (which follows Metcalfe's law)

so that even if the utility of groups available to be joined is very small on a per-group basis, eventually the network effect of potential group membership can dominate the overall economics of the system.

Derivation of the number of possible subgroups

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Given a set A which represents a group of people, and whose members are persons, then the number of people in the group is the cardinality of set A.

The set of all subsets of A is the power set of A, denoted as $\backslash mathcal\{P\}\; (A)$:

$\backslash mathcal\{P\}(A)\; =\; \backslash \{B\; :\; B\; \backslash subseteq\; A\backslash \}$.

It is known in set theory that the cardinality of $\backslash mathcal\{P\}(A)$ is equal to 2 to the power of the cardinality of A, i.e.

$\backslash mbox\{card\}\; \backslash ,\; \backslash mathcal\{P\}(A)\; =\; 2^\{\backslash mbox\{card\}\; \backslash ,\; A\}$.

This is not difficult to see, since we can form each possible subgroup by simply choosing for each element of A one of two possibilities: whether to include that element, or not.

However, the empty set $\backslash emptyset$ belongs to the power set $\backslash mathcal\{P\}(A)$ but is not a group of people; hence we must subtract it out:

$\backslash mbox\{card\}\; \backslash ,\; \backslash left(\; \backslash mathcal\{P\}(A)\; -\; \backslash emptyset\; \backslash right)\; =\; 2^N\; -\; 1$,

where $N\; =\; \backslash mbox\{card\}\; \backslash ,\; A$.

Further, any members of $\backslash mathcal\{P\}(A)$ which are singletons are not considered "groups of people". Since each individual in a group can form a singleton, then the number of singletons in A is equal to the cardinality of A:

$\backslash mbox\{card\}\; \backslash \{C\; :\; C\; \backslash in\; \backslash mathcal\{P\}(A)\; \backslash wedge\; \backslash mbox\{card\}\; \backslash ,\; C\; =\; 1\; \backslash \}\; =\; N,$

$\backslash mbox\{card\}\; \backslash ,\; \backslash left(\; \backslash mathcal\{P\}(A)\; -\; \backslash emptyset\; -\; \backslash \{C\; :\; C\; \backslash in\; \backslash mathcal\{P\}(A)\; \backslash wedge\; \backslash mbox\{card\}\; \backslash ,\; C\; =\; 1\; \backslash \}\; \backslash right)\; =\; 2^N\; -\; N\; -\; 1.$

Notice that the function $2^N\; -\; N\; -\; 1$ is exponential, in proportion to $2^N$.

Quote

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From David P. Reed's, "The Law of the Pack":

"^*ven Metcalfe's Law understates the value created by a group-forming network as it grows. Let's say you have a GFN with n members. If you add up all the potential two-person groups, three-person groups, and so on that those members could form, the number of possible groups equals 2^n. So the value of a GFN increases exponentially, in proportion to 2^n. I call that Reed's Law. And its implications are profound."

See also

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• Coase's Penguin
• social capital
• Metcalfe's law
• McCandlish's Foil to Reed and Metcalfe (humor)
• Content is Not King
• Observations named after people

External links

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• That Sneaky Exponential—Beyond Metcalfe's Law to the Power of Community Building
• Weapon of Math Destruction: A simple formula explains why the Internet is wreaking havoc on business models.

Networks | Eponymous laws

Reedsches Gesetz | Reeds lag