Hi everyone, welcome to the A6 and Z podcast. I'm Sonal, and today we're doing a podcast on data network effects. And we have two general partners here to have that conversation with us. We have Vijay Ponday, who covers all things bio, and Alex Rampel, who covers all things fintech as well as other areas. Welcome, guys.

Hey, thank you. Okay, so first let's just kick off by talking about what a data network effect is.

In the most simplest form, it's a network effect that results from data.

And if a network effect is defined as something where values, where the value to users and all

the participants increase as more users use a particular platform or marketplace,

how does this play out with data?

So if you think about eBay, which is more people, more buyers go to eBay because more sellers go to eBay, more sellers go to eBay, because more buyers go to eBay, that is the canonical

network effect. And their commerce is happening. That's the transaction. For a data network effect,

typically there's no commerce per se. There's an extraction. You're either reading or writing. In most cases, you're reading. And by reading or writing, you mean in the database sense, like reading to a database, right into a database. And as more people write, the value of each read goes up. That's the way of thinking about it. So an example would be the credit

score. I could figure out what your credit is by just looking at you and profiling you in legal

ways, not illegal ways, and saying, here's what I think your proclivity to repay is. But if every

bank on earth is using one central repository, then they will pay more money to actually extract to read.

The reads become far more valuable. And if a new company started tomorrow and said, hey,

we're going to do credit scores and we're going to charge a dollar per extraction per read

and not $10 per extraction, well, there's nothing to extract. Like they can't actually

provide any value. If they end up having more data

than the current number one person, then they could charge a lot more than $10. They could

charge $100. And in fact, the value of the number two person goes to zero because they actually

have a demonstrably poor product, which is why there aren't really any competitors to eBay.

Right. It's also a way people often talk about network, companies have network effects as winner-take-all markets. Yeah, which is generally the case,

or winner-take most, or winter-take, like, the vast majority. But I think of it is, if you think

about it in the database sense of reads and rights, the reads just become disproportionately more

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