Technology is enabling winner-takes-most markets in an unprecedented manner.

Here’s a thread on how to take advantage of this as an investor.

Technology and the Internet has created network effects. Add a person to the network and the value of the entire network grows, meaning the network becomes more valuable to every person on the network.

Network effects tend to be bi-directional.

For each new seller on Ebay, value is added to buyers (meaning more selection, lower prices, etc).

And for each new buyer on Ebay, value is added to sellers (meaning larger buyer base, more demand and volume).

Strong network effects are extremely difficult to beat.

For example, tough to beat Ebay at it’s game because it has the stronger network effects with auctions thus making hard for other competitors to even get off the ground.

Network effects allow companies to improve their product faster & better, gain more customers, have cheaper & more effective marketing/distribution, and offer a stronger value proposition to customers.

Technology and the Internet are enablers to this market-takes-most phenomena.

Global network effects are superior than local network effects.

This is why Uber (predominantly a local network effect business) doesn’t experience the same global network effects as a global network effect business like Amazon.

Autonomy has strong network effects.

Every Tesla car provides crucial data to train neural nets, which improves FSD experience, which makes Tesla cars more attractive to more people, which sell more cars, which adds more value to entire network. Repeat.

Invest early in companies that are in huge markets with true global network effects and are poised to become the dominant player.

This is profound. Think about what this means. :)

I explain these concepts more in my latest video.

Winner Takes Most - Investing In the Modern Age (Ep. 230)