Many “laws” are spoken about to describe consistent occurrences in innovation and business management. The ones I’ve come across that are most relevant to the startup ecosystem are below.
Definition: the number of transistors of a computer chip double every two years
This is one of the most famous laws, which was extrapolated to other new technologies to mean that costs will fall at a regular frequency and in turn spark new demand. As seen by the graph above, this law wasn’t entirely accurate for transistors.
Definition: Every time production of a certain product doubles, unit production cost drops by a consistent percentage
While this was originally conceived while Theodore Wright was studying the production of airplanes, it is being applied to new technologies as well, such as with the falling cost of industrial robots and lithium ion batteries.
Definition: we tend to overestimate the impact of technology over the short-term and underestimate it over the long-term
This one points to the general human tendency to get initially hyped about something a lot of people are talking about and then mostly forget about (hello recency bias). A good example is when crypto peaked in the fall and winter of 2017. Since the beginning of the bear market, it’s been a slow burn toward its removal from the mainstream zeitgeist, but its impact 5-10 years out will likely be much greater than most expect.
Definition: The value of a computer network is the square of the number of nodes in the network
This law if frequently used to describe network effects in business models, where each additional user makes the network more valuable to every other user. This business model can be leveraged to create a winner-take-all/most business and lends itself well to the VC model. Facebook is a textbook example.
Definition: Things always take longer than you initially project
This is something I always try to remind founders when looking at their financial projections. It’s easy to set up a roadmap and project scaling revenues to go along with it, but the truth is almost always that the execution will usually present more challenges than anticipated, pushing out the time frame in which to achieve the milestones initially projected.
Definition: the best way to get the right answer on the internet is not to ask a question; it’s to post the wrong answer
I’ve seen people mention this one a countless number of times on Twitter but it holds true so often. Whenever anyone posts something with anything that is factually incorrect, it does not take long for others to chime in and point it out. This is why it’s so important to open source one’s ideas – you can only benefit with exposure to the knowledge of the crowd.