The Game And Its Networks

Ed Fowkes
May 29
9 min read

I’ve been examining how we tend to misread reality. Specifically we miss how the systems we build move and change over time. We expect linear change, but we get a series of curves.

First we looked at growth, and how these are already complex wave forms. Then we looked at distribution and how both value and effort tends to form clusters rather than show up evenly.

Today I embark on Part 3 of the series and I look at The Game we play and the effect our and its Networks have on it and our business within it. At the right time, networks have a multiplying effect on both value and effort, but it doesn’t always show up in the obvious places. Life is cruel at the best of times.

The Game And Its Networks

Let’s return to my client, our founder with the garden design and build business. At this point we have looked at two ways that the client misread their situation. Stuck in an early growth mindset, they failed to recognise that the business was not moving in a straight line, and the effort within it was not translating evenly into results.

After spending some time with me, timing and leverage began to make sense. The curve was visible. The concentration of value was clearer.

I could also see that they were about to experience another bump. The good kind of bump that we call ‘being in the right place at the right time’. It happens to you. It puts you into summer, making you busy, speeding things up. But it can reveal problems fast. In my client’s business there were kinks to iron out before this level of summer arrived but as with many founders, they took the ‘if it ain’t broke, don’t fix it’ approach. Both opportunity and resulting challenge were just on the horizon and not yet in plain sight.

I had to let it go but for me something still lingered. Even with non-linear and value concentration addressed, which was a great improvement, I could see the next moment hovering on that horizon. What I thought of as the final layer that would impact them. The inevitability that no business operates in isolation.

It is tempting to think of a business as a contained system. Inputs go in, outputs come out. The task of the founder is to optimise what happens in between:

Improve the product
Refine the sales process
Tighten operations
Manage the team

All of this matters. But there is more to the picture.

Networks

Every business sits within a wider network. Customers interact with one another. Ideas travel beyond the boundaries of the organisation. Reputation forms not just through what is said but through how it is shared, repeated and interpreted.

The value of what you build is not determined solely by its intrinsic quality. It is shaped by how it connects.

Robert Metcalfe articulated this through a simple but powerful observation that became a revolutionary thesis. He proposed that the value of a network grows in proportion to the square of its participants. Ten connected users do not create twice the value of five. They create something closer to four times the value.

At a certain point, this changes the experience of growth entirely for the founder. In the early stages, progress feels dependent on effort. Each new customer is acquired through deliberate action. Each relationship requires attention. Growth is something that must be pushed. But gradually something shifts. Connections begin to reinforce one another. Customers refer others. Conversations extend beyond the original point of contact as the network starts to generate its own momentum.

From the outside, it looks like luck. But it is not. It is a structural inevitability that arrives from fulfilling a need with good service.

Our founder went away happy, and after a short while began to notice something. While in the early years almost every project arrived through deliberate effort.

Instagram posts were carefully produced.
Local advertising was tested.
Every lead felt individually earned.
Relationships with architects and suppliers were useful, but largely transactional.

Gradually, the dynamic started to shift:

Past clients began referring neighbours.
Architects started introducing projects proactively because the delivery team had become trusted.
Instagram no longer functioned merely as marketing, but as social proof reinforcing conversations already happening elsewhere.

The network surrounding the business had become denser. And with that density came leverage.

A single successful project generated three more within eighteen months.
One architect relationship unlocked an entire cluster of higher value projects.

Reputation began moving ahead of the founder rather than relying entirely upon them. But as momentum increased, so did strain.

The founder could no longer personally maintain every client relationship, oversee every project and coordinate every contractor interaction.
Communication pathways multiplied rapidly.
Small misunderstandings between design, installation and subcontractors began creating disproportionate friction.

What once functioned naturally through proximity and trust now required different systems, structure and process. The network had become an asset. But it had also become a complexity of problems.

We can clearly see the benefits of Metcalfe’s expression and yet, even this understates what is possible when networks deepen.

David P. Reed extended the idea further, recognising that when networks enable the formation of groups, rather than just connections, the value increases exponentially. He said it’s no longer simply the number of participants that matters but the number of possible sub-groups that can form within them.

This is the difference between an audience and a community. An audience consumes. A community interacts. Once interaction takes hold, value begins to emerge from within the network itself. It is no longer entirely dependent on the founder or the central organisation. It becomes distributed, generative and far more resilient.

We see this most acutely across social media and its explosive growth and capture of society. But this also helps explain a phenomenon many founders encounter but struggle to define.

For a long period, a business feels effortful. Each step forward needs to be earned. Progress is real but it’s hard-won. Then, without a clear moment of transition, friction reduces and things begin to move more freely. Opportunities appear with less direct input. Relationships deepen. The system of acquisition feels lighter. Nothing fundamental has changed in the product or the capability. But the network reaches a level of density where it begins to sustain itself. And this is where the ideas from earlier parts 1 and 2 converge. The curve was always present, but the network truly activates it. The concentration of value becomes more visible as interactions multiply. And what once required force begins to respond to structure.

Valuation

The implications of this actually extended far beyond technology. Before the internet era, businesses were largely valued through relatively linear assumptions. More factories, more staff and more distribution generally meant proportionally more output. Scale was powerful but expensive. Valuations therefore remained tied fairly closely to present earnings and tangible assets.

Network businesses changed that logic. Once investors began to understand the implications of Metcalfe’s Law, markets started pricing not merely current profitability, but the future value of connectivity itself. A platform with twice the users was not perceived as twice as valuable, but exponentially more strategically important if network effects became dominant.

This was one of the hidden forces beneath the dot-com bubble. While much of the speculation proved irrational, the market had correctly identified something profound: networks obeyed different economic rules to traditional industrial businesses.

Blockchain pushed this idea further still. The network itself became investable. Users became participants, stakeholders and sometimes speculators simultaneously. Value no longer sits neatly inside a company balance sheet, but increasingly within the ecosystem that surrounds it. In many ways, the last twenty-five years of markets can be read as a gradual repricing of networks.

Constraint

However, just as momentum builds, another force emerges. Robin Dunbar suggested that humans are limited in the number of stable relationships they can maintain, often cited at around 150. Beyond this, cohesion weakens. Communication becomes less effective. Trust becomes harder to sustain.

There are other numbers that Dunbar points to that are relevant for businesses. 5 is the number of people that we can have close, intimate relationships with. This explains why the ‘Band of Brothers’ (or sisters) phase cannot grow well past 5 people.

In a growing business, changes relating to comfort in numbers manifest quickly. A small team operates fluidly. Decisions are made informally. Information travels easily. As the team expands, layers form. Communication requires structure. Processes emerge. What once worked instinctively now needs to be designed with purpose.

What worked at five people does not work at twenty. What worked at twenty begins to strain past fifty. By the time a business approaches a hundred or more, the informal systems that carried it early on cannot cope. This is not failure. It’s simply the natural consequence of scale.

There is a similar pattern in the tools and efficiencies we introduce.

William Stanley Jevons observed that increases in efficiency often lead not to reduced consumption, but to increased use. Make something cheaper or easier, and it is used more, not less. It feels obvious but in business it appears in subtle ways and has interesting effects.

Better marketing tools lead to more marketing activity. Improved communication platforms increase the volume of communication. Automation allows for scale, but often introduces new layers of complexity alongside it.

It’s not all great:

More marketing > more noise.

More communication > fake news.

And complexity brings its own challenges. The intention is to simplify. The result is often expansion. This creates a tension. As efficiency increases, so too does the demand placed on the system. What begins as a solution can, over time, become another source of pressure.

Returning to our founder, the situation should start to become clear.

The issue was not simply a lack of leads or an inefficient sales process. Nor was it a question of timing or leverage. The business first reached a point where its internal structure was no longer aligned with its distribution of effort or value. See parts 1 and 2. It then showed quickly that the structure wasn’t capable of satisfying the success that its external network began to bring.

Customers weren’t being guided effectively through decisions, relationships weren’t able to compound. The organisation relied heavily on continuous input, with little designed to sustain itself. The system had not been designed for the stage it had reached. The problems started with not following up with enquiries and continued throughout delivery.

The founder called me about the balls the business was dropping and said “Now I’ve got too much work and can’t cope!”. A good problem to have to be sure, but reputations erode fast so you don’t want it for long. And it didn’t take long to carry it out. We did a quick ‘reflect and plan’, setting some tests in place to fill the gaps, measuring their success, and they managed their summer season admirably.

Longevity

Against the backdrop of acceleration and expansion that we have talked about, it’s useful to consider what endures.

The Lindy Effect offers counterbalance, saying that ideas, practices and systems that have existed for a long time are likely to continue existing. Their longevity is not accidental. It reflects a form of resilience, a capacity to survive change.

In a world shaped by rapid technological progress, this tends to matter. New tools, new platforms, new methods appear constantly. Some will transform industries. Many will fade. The challenge is not simply to adopt the new, but to understand what is likely to last. A business built entirely on transient advantages is fragile. One that incorporates enduring principles has a different kind of stability.

This leads to a broader realisation. A business is not a machine to be optimised in isolation. It is a system influenced by multiple forces, some internal, some external, all interacting.

Growth curves determine how progress unfolds over time. Distribution patterns determine where value is created. Networks determine how that value spreads. Constraints determine where and how the system begins to strain.

Focusing on any one of these in isolation creates imbalance. Pursue growth without regard for constraint, and the system becomes fragile. Optimise for efficiency without understanding distribution, and effort is wasted. Build without considering networks, and momentum never compounds.

As we evolve the nature of the work changes. It becomes no longer about applying more effort or even making better individual decisions. It is always a question of proactive design.

How is the system structured?
Where does value originate, and how does it move?
What are the natural limits, and how can they be worked with rather than against?

These are not operational questions. They are architectural ones.

Most founders are taught, implicitly or explicitly, to apply force. More activity. More pressure. More output. But moving, changing systems like businesses do not often respond well to force alone. They respond to alignment. When the structure fits the stage, when the distribution of effort reflects the underlying reality, when the network is allowed to do its work, progress feels less forced, more natural. It’s still demanding, but it’s coherent.

If there is a final conclusion to take from this series, it might be this. The goal is not to eliminate constraints. They are inherent. Nor is it to equalise contribution, as that runs against the nature of complex systems. It is to understand the forces at play and to design within them. Because every business, whether consciously or not, is balancing the forces that accelerate its growth with those that limit it.

Perhaps that is the real transition. From operator to designer. From reacting to shaping. From pushing harder… to understanding what the system is asking of you.

Most frustration in business doesn’t come from failure. It comes from misreading the shape of reality.

Once that shape becomes visible, decisions simplify. Not because they’re easier per se, but because they flow in line with how the system behaves.