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Schelling Points, Microsoft, Facebook

A bit of strategy today, reader:

In game theory, a focal point (also called Schelling point) is a solution that people will tend to use in the absence of communication, because it seems natural, special or relevant to them. The concept was introduced by the Nobel Prize winning American economist Thomas Schelling in his book The Strategy of Conflict (1960). In this book (at p. 57), Schelling describes "focal point[s] for each person’s expectation of what the other expects him to expect to be expected to do." This type of focal point later was named after Schelling.

(From the source we can only hope is correct)

Schelling points arise naturally, especially when there is no communication. But what about when there is communication? How does HTML become the standard? How did Microsoft become the default OS? How did Facebook get 400 million users? It would be easy to claim that there is something better about these things - some X factor which caused and still causes them to dominate.

I say: No. They are Schelling points. When there is no standard, or no means to really judge the best way to handle a new medium (HTML here) a Schelling point will arise which meets the following criteria: 1. It works. 2. It is not evil.

Note that I didn't say, 'people like it or love it'. Do you love cars? Televisions? Why can't Macintosh and Linux take away Microsoft's hold on the market? Is it because Microsoft is better? Or is it because Microsoft brainwashed everyone? Or is it because Microsoft made a deal with the devil? Probably not; Microsoft is simply the generic solution to the problem. Therefore, it is the Schelling point. Macintosh is too good to be the generic solution. Linux is too powerful.

And Facebook? Same deal: Online social networks are the epitome of Schelling point studies. I only want to be on a social network that has my friends. I can tell my friends to join this or that social network, but since it is a hassle, they might not. We can talk all we want about 'tipping points' - but how does one judge one online social network as 'better' than the other? Oh right, 1. It works. 2. It is not evil. Given those criteria, the most generic solution will become the Schelling point. Facebook cites their massive user base, but it doesn't necessarily represent something they did right in marketing or coding.

In fact, it shouts loud and clear: Mediocrity! So how do you win? By not winning.

Duh.


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