What 2020 Taught Me about Building a Business — It’s a Networks Game
By: Milosz Falinski
Tags: Startup, Entrepreneurship, Networking, Growth, Business

How business and networks come together

The term ‘networking’ reminds most of us about the haphazard connection requests we’re all victims of on Linked In. Or the networking events where it’s all about getting something in as short a time as possible. It’s easy to be cynical about it.

This year, I’ve discovered a different perspective. Creating a network that provides us with opportunities and support is about giving. A fact which has surprisingly sound scientific backing.

So how is a business a network’s game? Let’s look at two examples.

In a great study on the art world led by the applied network science pioneer Albert-László Barabási, we can clearly see the hidden network dynamics we’re up against.

Barabási and his lab team looked at how artists become popular and identified only a handful of galleries in the world where exhibiting your work makes a difference to your success. Be featured there and you become a well known artist and the value of your works skyrockets. Do literally anything else, and you will only see marginal returns.

Artists have a very limited direct influence on whether their work shows up in this handful of world-class galleries. You can’t cold-call the gallery offering your works to be exhibited, regardless of how motivated you are. Instead, it’s about how well the artists are connected to the curators at these institutions through their networks.

Where it’s hard to measure performance, it’s networks that drive success.

Closer to home, we have the story of one of the most successful tech startups in history — Dropbox. In the beginning, Drew Houston, the founder of Dropbox founder, was advised to find a co-founder at the right time — he did. He also found himself at YCombinator — one of the best connected and most supportive startup hubs in the world. Later on, Dropbox created a brilliant growth strategy, relying almost entirely on network effects, that got them to where they are today.

They got key advice, support and feedback from the right people at the right times. They were able to hire the right people and get the product right, ending up with a massively successful business.

Barabási’s key insight from his studies on network success is this: Where it’s hard to measure performance, it’s networks that drive success. It’s a spectrum — on one end we have areas where it’s difficult to measure performance, such as art, becoming a celebrity or early stages of building a business. That’s where network effects are strongest. On the other, we have areas where it’s easy to measure performance — repetitive work and sports. That’s where it’s easy to reward those with the highest performance, and so that metric determines success.

So how can we apply this new perspective? Naval Ravikant, the CEO and founder of AngeList, offers a way to build strong authentic networks: “Play long-term games with long-term people”. People that receive highly sought after positions “are trusted, because the relationships they’ve built and the work they’ve done has compounded. They’ve stuck with the business and shown themselves […] to be high-integrity people.”

With this long term perspective in mind, it’s much easier to see how generosity and honesty come into play. As Naval shows in his writings, most good things in life come from compound interest. So we shouldn’t look to build relationships around short-term gains. Instead, create long-term friendships and alliances with people you genuinely find interesting and would like to be around. This way seems a lot more fun and results in a life filled with interesting people. It also happens to be the one that supports our business best.