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October 08, 2006

End-to-End: Smart Nodes, Dumb Network

From the October issue of WIRED (whose covers are starting to resemble the fancy, glossy fashion or business magazines), George Gilder reminds us that the power of a network should reside at the ends or the nodes.

“As the redoubtable Bell Labs engineer turned giga-investor Andy Kessler tells me, “It’s sure to happen. It always has. Because all the creativity, customer whims, long tails, and money are at the network’s edge. That’s where chipmakers find the volumes that feed their Moore’s law margins. That’s where you can find elastically ascending revenues and relentlessly declining costs.” (link)

This quote is the essence of the end-to-end principle, which is a technological/structural idea or even an overarching philosophical idea for how networked computing should work. From Lessig:

“The Internet under its original design built a platform that induced lots of innovation in applications and content. And it did this by embracing an end-to-end principle, which meant that the network would remain as simple as possible and push all of the intelligence and, therefore, innovation to the end. This is the vision that is now enabled by a peer-to-peer architecture, and it's the environment that has inspired the greatest amount of innovation around the Internet in its history.” (link)

This concept is worth emphasizing because I mentioned Umair’s concept of edge competencies when commenting on Fred’s post on the purported YouTube-Google discussions. Edge competencies, (which is more of a business model idea bout new value chains in the future) and the end-to-end principle are different things but based on the same premise: value or innovation occurs at the edges of the network when users/people/nodes do the heavy lifting and then contribute and share via the network. The network should be “dumb,” used simply for moving bits around neutrally, and the end nodes should be “smart” (where the real action/innovation should occur for new technologies or businesses).

I’ve been thinking a lot lately (both professionally and personally) about business models and how to leverage network affects (Metcalfe’s and Reed’s laws) and peer production. Why?

I’ll let you know.

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