SUPERCONNECT
SUPERCONNECT
Harnessing the Power of Networks and the Strength of Weak Links
RICHARD KOCH
GREG LOCKWOOD
W. W. Norton & Company
New York • London
Copyright © 2010 by Richard Koch and Gregory Lockwood
Originally published in Great Britain under the title
Superconnect: The Power of Networks and the Strength of Weak Links
All rights reserved
For information about permission to reproduce selections from this book, write to Permissions, W. W. Norton & Company, Inc., 500 Fifth Avenue, New York, NY 10110
Library of Congress Cataloging-in-Publication Data
Koch, Richard, 1950–
Superconnect: harnessing the power of networks and the strength of weak links /
Richard Koch, Greg Lockwood.—1st American ed.
p. cm.
“Originally published in Great Britain under the title Superconnect:
The Power of Networks and the Strength of Weak Links.”
Includes bibliographical references.
ISBN: 978-0-393-07920-3
1. Social networks. 2. Success. I. Lockwood, Greg. II. Title.
HM741.K67 2010
302.3—dc22
2010017950
W. W. Norton & Company, Inc.
500 Fifth Avenue, New York, N.Y. 10110
W. W. Norton & Company Ltd.
Castle House, 75/76 Wells Street, London W1T 3QT
This book is dedicated to Christina and Zoe,
and to Matthew and Tocker
We keep passing unseen through little moments of other people’s lives.
Robert M. Pirsig,
Zen and the Art of Motorcycle Maintenance
Contents
Authors’ Note
Preface
1 Authors of Our Own Success?
2 Do You Live in a Small World?
3 The Strength of Weak Links
4 The Superconnectors
5 Heaven, Hell and Hubs
6 Cyberspace–Brave New World?
7 Rolodex Roulette
8 Hub to Hub
9 The Network Structure of Ideas
10 Network Stars
11 The Business of Weak Links
12 Poverty, Urban Renewal and Gangsters
13 A Network Society
Acknowledgements
Endnotes
Authors’ Note
The authors decided that it was too confusing for us both to use ‘I’ in recounting stories in our lives. As Greg is far more modest than Richard, he used ‘I’ less. We therefore decided that ‘I’ would mean Richard. Where there is a story involving Greg, he is introduced by Richard.
Preface
This book should never have happened. If it wasn’t for the most bizarre and twisted sequence of events involving a diverse array of people it wouldn’t have. Let us explain. If someone we, the authors, had wanted to impress–a publisher, say, or a book reviewer–had asked us how it had emerged, we could have come up with all kinds of things to establish our credentials for writing it. But they would have been only a small part of the story of how it came about, and not the interesting bit either. The truth is much more human and fascinating–and it also gets to the heart of the book and shows how networks really work.
Greg has always been fascinated by ‘network theory’–the findings of sociologists, mathematicians and physicists, which seemed to translate to the real world of links between people. Early in his professional life at Auto Trader magazine in Canada he got to see an extraordinary network of buyers and sellers in operation. Later, when he became a venture capitalist–someone who invests in new or young companies, hoping that some of them will become very valuable–he applied what he’d learned. He invested in businesses that could benefit from the way networks behave, and this approach yielded some notable successes.
Richard came from a different slant. For twenty years, he was a ‘strategy consultant’, using economic analysis to help firms become more profitable than their rivals. He ended up co-founding LEK, the fastest-growing ‘strategy boutique’ of the 1980s, with offices in the US, Europe and Asia. He also wrote books on business strategy, and in particular championed the ‘star business’ idea, which stated that the most valuable venture was nearly always a ‘star’, defined as the biggest firm in a high-growth market. In the 1990s and 2000s, Richard successfully invested the money he had made as a management consultant in a series of star ventures. He also read everything available about networks, feeling intuitively that they were another reason for business success, and might also help explain why some people’s careers took off while equally intelligent and qualified people often languished.
So, there were good reasons why Greg and Richard might want to write a book together about networks. But the problem with all such ‘formal’ explanations is that they ignore the human events and coincidences that took place before that book could ever see the light of day. The most obvious of these is that, prior to 2001, Richard and Greg were not aware of each other’s existence. And it is absolutely certain that this book would not have been written if we had not met.
When asked how that happened, we can give a one-word answer, but behind it lie a large number of unlikely events which together add up to extreme implausibility. That one-word reason is ‘Betfair’. This venture was founded in 2000 on a shoestring and has since become the world’s largest ‘betting exchange’, worth around two billion dollars.
Now for the more complete answer. On Richard’s side, he was contacted one day in 2000 by a friend of a friend of someone called Robert Markwick. Robert and Richard did not know each other. But Robert knew Jeremy Black, whose brother Andrew was trying to raise money to get his invention–an online betting exchange which linked gamblers to other gamblers so that they could make and take opposite sides of a bet–off the ground. So Richard heard of this fledgling company, Betfair, at four removes from its founders, and did not know the three closest links to the company at all. In deciding to invest in Betfair, Richard relied heavily on advice from Patrick Weaver, a racing journalist, whom he had met by chance at a party near Santa Anita racecourse in California. If Richard had not met Patrick, and if Patrick had not given a favourable verdict on Betfair, Richard might not have invested in the company.
Meanwhile, Greg heard about another investment opportunity, in a similar betting exchange called Flutter, also launched in 2000, this time by two former management consultants from California. One of them, Josh, had met a guy called Tim Levene while working in Sydney, Australia, who much later joined him in the Flutter start-up in London. Tim told the story of this start-up to Jason Katz, a long-time buddy in the banking world. Jason knew Greg, and that Greg was interested in investing in online businesses, so he told him about Flutter. Greg suspected that Flutter could be a business benefiting from a network, like Auto Trader all those years before. So he invested.
By early 2001, therefore, Richard and Greg had become shareholders in similar businesses, both based in London. But they still didn’t know each other. However, they had unwittingly taken a step closer to meeting when they agreed to go on the boards of directors of Betfair and Flutter respectively. But the ventures were rivals, and didn’t talk to each other. Then, to cut a long story short, a merger between Flutter and Betfair was mooted. And after protracted negotiations–which nearly broke down at several points–the two firms joined forces. Greg joined Richard on the enlarged Betfair board.