Facebook Data to the Rescue of Metcalfe's Law

The December 2013 issue of IEEE"s Computer magazine has as its theme: Computing Laws Revisited. Our hardcopy issue (my husband is a subscriber) arrived yesterday, on New Year's Eve, and, today, New Year's Day, I sat down to read the article, "Metcalfe's Law after 40 Years of Ethernet," written by none other than Bob Metcalfe, Ethernet's inventor, himself. The Ethernet is the physical transport level of today's Internet. On May 22, 2013, Ethernet industry leaders gathered at the Computer History Museum in California to celebrate its 40th birthday and to catch up on what has become a $100 billion industry (do I now have your attention?).

I have been interested in Metcalfe's Law since, as an Associate Editor of over a dozen journals, and a frequent reviewer of journal articles, as well as a Co-PI on a Future Internet Architecture NSF grant: Network Innovation Through Choice (which I most recently spoke on at the Network Frontiers Workshop at Northwestern University), I not only encounter related controversies but also write and review papers that touch upon this law.

I guess that Metcalfe must have been reading over my shoulder!

Now, back to a controversy: In 2006, Briscoe, Odlyzko (I do like some of his math models a lot), and Tilly published an article, "Metcalfe's Law is Wrong" in the IEEE Spectrum, which you can read online without a subscription. These authors described Metcalfe's Law as both "wrong" and "dangerous."

So, what is Metcalfe's law, you may be asking (for those not so much into hardware). As explained by Metcalfe himself in his very clear and erudite December Computer magazine article: The "law" bearing his name states that the value of a network grows as the square number of users: V= NxN. The law started as a high-concept Ethernet sales tool in the early 1980s and entered into the public discourse in the new millennium when Gilder "championed" Metcalfe's law in his book, "Telecosm: The World After Bandwidth Abundance," published in 2000.

During  a presentation to the 3Com sales force (Metcalfe cofounded this company in 1979), Metcalfe showed the figure below (thanks to his article in Computer magazine) to argue that if  a network is too small its cost exceeds its value, but if a network gets large enough to reach a critical mass, then the sky is the limit.

Valuation of Internet-based companies such as Google, LinkedIn, Facebook, Twitter, Snapchat, and others is clearly important and detractors have said that Metcalfe's law may be overvaluing such firms.

The main critique of Metcalfe's law, noted by Metcalfe, himself, was that Briscoe, Odlyzko, and Tilly countered that not all network connections are of equal value and that the growth in the value of a network is approximately Nxln(N) and not NxN as Metcalfe had stated.

Moreover, neither "law" had been validated empirically until Metcalfe did recently and reported the results in his article in the December issue of the IEEE Computer magazine.

And he used 10 years of real data from Facebook and fitted the data looking at N as a function of time. To estimate the growth of users and individual groups of friends, he first applied a sigmoid function (S-shaped adoption function). He then generalized it to what he calls a "netoid" function using the Python programming language. (It looks as though Metcalfe also thinks in code, which is cool.) He plotted Facebook annual revenue (as the value V) for the last 10 years and used a Python slider to the Metcalfe's function to "get a pretty good visual fit to this data" as he displayed in the figure below reported in Computer magazine.

Metcalfe also notes that a more elaborate model of network growth and value would involve using "nesting netoids." Fascinatingly, he observed that Facebook groups seem to be netoiding (a new verb) towards Dunbar's number, which is due to the anthropologist Robin Dunbar who theorized that humans have a cognitive limit on the number of people with whom they can maintain stable social relationships with this figure being about 150. And, since Facebook has about 1.06 billion users and 150 billion friend connections this implies  an average of 141 friends per user.

So, as we begin to celebrate the New 2014 Year, it is quite interesting that we are also marking technological advances that challenge and intrigue us in both theory and practice and that are still very much with us such as the Ethernet, which is now 40 years old!

There is also a great interview with Bob Metcalfe, thanks to Charles Severance of Computer magazine, which can be viewed below.

Are Your Students Getting Jobs at the Best Companies to Work for?

Have you ever envisioned your dream job?

I regularly ask my students where would they like to work after graduation and I ask this question of both my undergraduate and graduate students.

Some have geographical preferences (don't we all, in a sense) whereas others look for "name" companies and/or those that provide certain benefits.

Ultimately, employees will stay with an organization (company or, in the case of certain PhD graduates, a university or college) if they feel appreciated and are "happy."

Fortune has released its list of top 100 companies to work for  and what really pleased me was the list included so many companies that our graduates in Operations Management (undergrads)  and Management Science (PhDs) have been or are presently employed by. Note the majority of our PhD graduates from the Isenberg School of Management at UMass Amherst do enter academia.

At the top of the list was Google (not surprising) but second on the list was SAS, where one of my former PhD students, Dr. Padma Ramanujam,  works.  I had blogged about visiting her there last year while at the SAMSI workshop and being hosted by Dr. Radhika Kulkarni, who is a fellow recipient of the INFORMS WORMS Award. The cafeteria reminded me of places in Sweden, which I regularly write about. I had been on a dissertation committee of a PhD student at UMass in computer science and he is employed by Google.

Dr. Davit Khachatryan, who also received a PhD with a concentration in Management Science from the Isenberg School of Management, recently gave a talk at the Isenberg School, in our Meet a PhD Alum initiative, works at Price, Waterhouse, and Coopers, which is 81 on the list.

And our most recent PhD recipient in Management Science, with an official PhD receipt of February 1, 2013, is Dr. Milad Ebtehaj, whose new position is with Fedex, number 98 on the list. I have had former undergrads in Operations Management also work for Fedex, as well as for Deloitte, number 47 on the list. Ernst&Young is number 57 on this latest ranking, and one of our former Jack Welch scholars is employed by this company in Boston. I have a warm spot for Ernst&Young because of the recognition that I received from them for my mentoring activities (Thanks!).

I could list more connections between our graduates and the best companies to work for but I will stop here.

Congrats to all the companies that made the list, which, even if they do not employ our graduates now,  they may do so in the future. In any event, it is clear that being good to employees is good for business! Have you ever seen an unhappy employee at Whole Foods?

Congratulations to the Winners of the Google Global Science Fair -- All Girls!

The results are now in and congratulations are in order.

The winners of the Google Global Science Fair 2011 are not only all from the US but they all are girls.

They are: Shree Bose, the Grand Prize Winner, Age 17-18,
Naomi Shah, Age 15-16, and
Lauren Hodge, Age 13-14.

You can read about their respective projects on ovarian cancer and drug resistance, environmental pollution, grilled chicken and PHPs on the competition website. The prizes that they have won are pretty fantastic.

The three were selected from a pool of 7,500 entries from 91 countries!

The New York Times has an article on the competition and the results.

Art as an Escape, Google, and Why More Americans Don't Travel Abroad

As we endure a true winter in New England, and some of us are getting tired of the white, snowy landscape for weeks on end, despite its beauty, I thought it appropriate to write on "escapes."

I love travel, and since I teach and conduct research on networks and especially transportation & logistics, travel is part of my "practica." My international travel is almost exclusively coupled with professional travel. I have also lived abroad in several countries, with these experiences being some of my very best.

I gain inspiration from museums, whenever I have a chance, and art especially feeds my mind and my soul. One of my recent favorite museums that I had a chance to explore two summers ago while in Paris (where I spoke at two conferences) is the Musee Marmottan Monet. When I close my eyes I can transport myself to the perfect Sunday in Paris when my family and I visited this museum and were surrounded by Monet paintings followed by the most delicious lunch of baguette sandwiches in the neighboring park. The website for this exquisite museum housed in a mansion will break up this winter's whiteness.

CNN Travel has an interesting article entitled: "Why more Americans don't travel abroad," in which it is reported that only 30% of Americans hold passports (and this is a jump from only teens a few years ago and attributed primarily to the requirement of travel to Canada). The article notes that 60% of Canadians hold passports and 75% of those in the United Kingdom.The below quotes are taken from the article:

"Not taking the leap is comforting, because this is the American life," said Matthew Kepnes, international traveler and creator of NomadicMatt.com, a blog chronicling his travels and observations. "Breaking outside anything that is your norm is scary."

Tourism experts and avid travelers attribute Americans' lack of interest in international travel to a few key factors, including: the United States' own rich cultural and geographic diversity, an American skepticism and/or ignorance about international destinations, a work culture that prevents Americans from taking long vacations abroad and the prohibitive cost and logistics of going overseas.

If you can't get away but would like to feed your soul, thanks to Google and its Art Project, which was reported on in The New York Times, you can now take a virtual journey through some of the world's art museums.

Above are some photos taken in Paris two summers ago.

Of course, at this point in a New England winter, we may all just decide to move to Hawaii, where I spoke at a fabulous conference last May!

High Tech Mergers Are HOT Again

USAToday.com is reporting that high tech mergers, both in number and in value, are on the increase. Especially attractive, as acquisitions, are firms associated with mobile computing, cloud computing, and search engines. In the past year, SAP, IBM, Apple, and Google have acquired firms and Oracle's success may be due, in part, to its earlier wise acquisitions.

Interestingly, the article also notes that the Chinese are eager to acquire firms. One of the major drivers in mergers and acquisitions (M&A) this time around is the desire to obtain access to new global markets, coupled with bigger firms acquiring smaller, agile firms with technological know-how and cutting-edge technological expertise and products. Moreover, many of the leading high tech companies are sitting on a lot of cash and interest rates are lower than a year ago signaling an improved economic climate for such transactions.

Our research on the integration of multiproduct firms, and the quantification of associated synergy, entitled,"Multiproduct Supply Chain Horizontal Network Integration: Models, Theory, and Computational Results," was just published in the International Journal of Operational Research, volume 17 (2010), pp 333-349. The results therein can be applied to assess the synergy of mergers and acquisitions of firms with similar or distinct portfolios of products and with access to different markets.

Another recent M&A study of ours, which is in press, also in a peer-reviewed journal, Computational Management Science, entitled, "Formulation and Analysis of Horizontal Mergers Among Oligopolistic Firms with Insights into the Merger Paradox: A Supply Chain Network Perspective," shows the impacts on profits of different acquisitions in industries in which the firms compete directly and feed the same markets.