Network Disciplines & Options
Must read article from Strategy + Business weaves together reviews of network theory books Linked, Nexus & Smart Mobs. But what's really interesting are the two points made by the article itself:
Suggests that the reason network theory is taking off is its multi-disciplinary. Physicists talking to Sociologists talking to Mathematicians talking to Economists talking to Organizational Theorists. There might even be room for a political-economist marketeer in there somewhere. But the point I fundamentally believe is the only time innovation occurs is as a result of interdisciplinary dialogue. This is why startups need diverse management teams from the outset. And what's cool about network theory is it is developing the science of what networks to connect. So you have an innovation that exponentially sparks innovation.
The article also draws parallels between network theory and Black Scholes option pricing theory. Understanding how to price an option created enormous derivative wealth while reducing risk. The question is 5-10 years from now if there will be a similar model in network theory. Perhaps there is model as simple and elegant that prices the value of a link or cluster? But what's interesting to me is that a link is essentially an option, so these two disciplines may not be as far apart as we think.
Back when I was the CEO of a risk management software company I learned a fundamental principle, that risk management models are constantly evolving. There is always a fat tail out there, lurking, ready to show that the distribution is really skewed. But every time that major event happens, it provides new data, new understanding -- and the model evolves.
Network theory needs data and change over time for models to emerge.