Network Effects: Value Grows with Users

A product with network effects is like a telephone: its value isn't intrinsic but grows as more users join the network, creating value for everyone. This dynamic is the engine behind social platforms, marketplaces, and communication tools where more participants mean more connections or opportunities. The critical footgun is the 'cold start problem'—a network with no users has no value, creating a chicken-and-egg dilemma where you can't attract users without value, and can't create value without users.