All posts by Richard Gayle

How an efficient company makes a ton of money

efficient by NeoGaboX

Apple’s Incredibly Efficient Growth
[Via Daring Fireball]

Steve Cheney analyzes Apple’s R&D expenditures and acquisition pace:

Organic growth is the term coined for growing internally, not via merger or acquisition. Apple has embraced this strategy over its existence, averaging only about 1 acquisition per year during the past 25 years. In contrast — during the past four years alone — Microsoft bought 45 companies, Google 40, and Cisco 30.

Microsoft spent seven times as much as Apple on R&D over the past four years.

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I saw this while working at Immunex – a well-designed and well-run company with a culture of innovation can beat larger, more well-funded companies every time.

Big Phama outspent us by a huge amount, and had many more people working on the same projects, yet we continued to get things done before them. Same with Apple.

It is possible to grow quite large and still maintain this culture. It helps tremendously if the guys at the top are not sales or marketing types, who generally seem to have no clue about rapid innovation and efficient management design.

Buying companies sucks away energy that could have been more efficiently used. It seems that MBAs think the mergers and acquisitions are the way to grow. Immunex did not think so and neither does Apple.

Where would we be without Apple?

apple by davidgsteadman
Will anyone be able to compete with Apple’s revolutionary iPad?
[Via MacDailyNews]

“If you want to buy a consumer-friendly tablet computer today and you don’t want to purchase Apple’s iPad, you’re pretty much out of luck,” John D. Sutter reports for CNN.

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The inability of the computer industry to match what Apple has done over the last 30 years is simply amazing. Apple continues to see where the market is moving and then leaps ahead of its competitors to define the market, rather than simply follow it.

As this post mentions, Jobs and Apple have defined the personal computer interface three and maybe four times – Apple II, Mac, OS X and iPhone/iPad. At each stage, the interaction between the user and the computer became more intuitive and easier.

Apple also defined much of the way computers looked – Apple II, Mac, Powerbook, iMac, iPhone/iPad. Not only have they been largely responsible for how we interact with a computer, they have defined how computers look.

People have been talking about selling tablets for 6 or 7 years. Yet here Apple is again, not only defining the market but selling a ton of the devices, leaving everyone else to try and catch up to something that they really have no clue about.

Why has no one else been able to do that in 6 years? How was Apple able to essentially create a new market?

Apple has always had the unique ability to take something really complex – the creation of a computational device that people can use – and find a way to simplify it. It takes a lot of hard work to accomplish this, but also an ability to manipulate really complex ideas in ways that few organizations are capable of.

Watching other organizations try and define this is like watching blind men describe an elephant – it must be the light weight; it must be the touch screen; it must be the apps. None of them understand how to present a complex device that requires innovation at all stages, not just one.

It requires the creation of an organization that can synthesize large amounts of information and make wise decisions.

Just think what the world would be like if Apple had not existed? I would nominate Jobs for man of the last half century. Not merely because of his individual abilities – which are prodigious – but because he has also been able to leverage the mass creativity of his employees.

One important aspect of all the organizations that Jobs has been associated with is the large number of named individuals that are found in the development of any of the innovations.The names of the Mac developers for Apple are well known. Same at NeXt or at Pixar.

The actual people involved in much of the innovative changes are given their recognition.The Wikipedia article about the Mac lists over 15 people, all with links, who were involved in the development of the computer. The one on the development of Windows lists not a single name.

Coincidence?

Read about the days of the development of the Mac and you see a group of wildly creative people solving difficult problems. Read about NeXT, where Jobs experimented with corporate organization as much as he did with computer programming, or simply observe what happened with a company like Pixar, where the creative geniuses were able to create an entirely new art form using computers, leapfrogging ahead of all their competitors.

The ability to take a core group of creative individuals and harness them to an awesome task is not easy. I wrote about this is a series on Synthetic Organizations – Part 1, Part 2 and Part 3.

Marty Baker at Creativity Central broke down some of the principles seen at Pixar and also can be seen at Apple:

Pixar’s Operating Principles can be distilled down to 3 principles.

1. Everyone must have the freedom to communicate with anyone.

2. It must be safe for everyone to offer ideas.

3. We must stay close to innovations happening in the academic community.

In the Innovator’s Dilemma, Clayton Christensen discusses the difficulty organizations have in utilizing disruptive technology in novel ways. The dilemma is that often the same processes that helped make them successful now prevent them from making the leap to a new technology set. See Clay Shirky’s article on the collapse of business models for some examples.

Even when they know that they have to change and even what the changes must be, they almost always fail in making the leap.

That is mainly in the way they are organized, how they are run and the types of communities they represent.

Yet companies that have Steve Jobs organizing them seem to have been able to do this. Apple defined personal computing, it defined the graphic user interface, the laptop, the MP3 player, the smartphone, the tablet computer. Pixar defined computer generated animation.

By creating organizations where innovations are not shuttled through layers of middle management, with each layer sucking the originality out, Jobs has been able to drive disruptive innovations rather than react to them.

The most amazing thing to me is that Apple has succeeded in being a market leader during two separate paradigm shifting market wars – first the graphical user interface wars between Apple vs Microsoft and now the Internet as interface wars between Apple vs Google. Microsoft’s inability to become a major player in the new way of the world is an example of corporations failing to make the leap, of suffering the Innovator’s Dilemma.

Yet Apple is right there, leading the way as the market makes another decision about the future course of computing. Apple may not win but the course it charts drives decisions in ways that no other company of the last half century has.

Now the market must find ways to respond, to be more innovative than Apple.

Without Apple driving the industry to be creative – how in the hell do we keep up with Apple – we would not be where we are today. It makes one wonder where we would be if Jobs had not been forced out at Apple by a sugar-water salesman. We may only just now have gained where we would have been without those 10 lost years.

‘Twitter’ for business

conversation by cliff1066™

Use Microblogging to Increase Productivity
[Via HarvardBusiness.org]

Are you using Twitter to reach your customers and followers? Do you update your status on Facebook several times a day? Maybe you daily ask questions of one of your specialized LinkedIn groups?

You can replicate this experience inside your organization. There are a number of internal solutions that allow employees to share messages and information with each other, including Yammer and Socialtext. Laurence Smith, Vice President of Global Learning & Development at LG Electronics in Seoul, Korea has become an advocate of Yammer as a way to drive greater innovation in the design of the company’s training programs.

Just a few years ago, Smith says, “when we wanted to revise a classroom training program, we would write a survey, send this to all business unit HR leaders around the world, analyze the results and then use this input to design a new pilot.” The total time elapsed was several weeks to several months and often yielded limited feedback.

But today, Smith and his team start a conversation on Yammer and use tags to create a dialogue with employees. One program in the development stage is FSE (Foreign Service Executive) Soft Landing. It’s targeted to managers assigned to a new country who need to understand the local culture and norms.

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Companies are beginning to see that microblogging approaches can have real value behind the firewall. They are useful fro rapid information dispersion across a variety of devices as well as providing simple ways for people to carry on ad-hoc discussions.

Socialtext continues to have the greatest number of useful social media tools for corporations. and at a very reasonable price also. By making these conversations explicit, not only can the company leverage the information it can also harness the knowledge of all its employees.

And by having everything time stamped, everyone knows who should get the credit for great new ideas or helpful information.

Why science communication often fails

science by o palsson

A great paradox of the current world:

Researchers are probably uniquely qualified to present the facts about much of the complexity we are dealing with, allowing us to make rational decisions about the problems facing us. But their training also makes them uniquely UNABLE to provide the stories that people will actually listen to.

My words about the problem.The same rules of thumb that create great science produces scientists that have a hard time connecting with the rules of thumb used by most others. Their heuristics do not overlap enough.

There was a wonderful conjunction of several online posts I read today that helps illustrate this. The first was this one:

Is Our Scientists Learning?
[Via The Intersection]

In my talks, I often discuss the different groups who came to meet with me when I worked on Capitol Hill with regard to who was most effective. On science related issues, the general breakdown fell into two categories (with exceptions):

  1. Scientists from universities or NGO’s would usually show up in my office with a briefing binder as thick as a phone book. There would be a lot of charts, p-values, figures, and complicated concepts. Most didn’t talk to me, but at me. And the take home message would be different than that of the other scientists I met the previous hour on the same subject.
  2. Special interest groups were frequently very well organized. They spoke with a common theme and brought articulate speakers. Rather than stop in our office, they usually hosted large and well attended briefings, supplying easy to digest hardcover books with titles like ‘climate change conspiracy.’ Typically they were funny and made references to Michael Crichton’s science fiction. Perhaps most importantly, they provided a free boxed lunches and held long Q&As to engage the audience.

Both types introduced themselves as the “honest broker” of scientific information, but the latter often made the stronger impression with staffers.

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So we have a whole post discussing how sucky scientists are because they present facts and not lunches, they show figures instead smoozing, they have charts instead of playing to the egos of policy makers.

As a researcher, it was a little upsetting to read something like this, that facts are not what are important. In fact, the truth may be the least important thing. Others felt the same way:

Once Again, Professional Science Communicators Blame the Victim
[Via Mike the Mad Biologist]

Since I’ve raised this issue before, and it doesn’t seem to have taken, the gloves are coming off.

Once again, we see the sorry spectacle of blaming scientists for policy failures–all scientists, not a subset (consider this foreshadowing). As always the ‘scientists’ are described as bookish nerds who bore policy makers and reporters with p-values.

This is as stupid as blaming a working ob/gyn for the lobbying failures of NARAL.

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This pretty much shows the scientist’s viewpoint. We deal in facts. That is how we’re trained, how we talk and how we expect others to respond. It is really hard to understand that most people are not convinced by facts. In contrast to researchers, they are convinced by stories and by narratives.

An article I ran across drove this point home:

BBC News – Why do people vote against their own interests?

[Via BBC ]

Last year, in a series of “town-hall meetings” across the country, Americans got the chance to debate President Obama’s proposed healthcare reforms.

What happened was an explosion of rage and barely suppressed violence.

Polling evidence suggests that the numbers who think the reforms go too far are nearly matched by those who think they do not go far enough.

But it is striking that the people who most dislike the whole idea of healthcare reform – the ones who think it is socialist, godless, a step on the road to a police state – are often the ones it seems designed to help.

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This article explored why people were so against things that actually would help them. And it suggests that stories are what count, not facts:

For Mr Westen, stories always trump statistics, which means the politician with the best stories is going to win: “One of the fallacies that politicians often have on the Left is that things are obvious, when they are not obvious.

<snip>

As Mr Frank sees it, authenticity has replaced economics as the driving force of modern politics. The authentic politicians are the ones who sound like they are speaking from the gut, not the cerebral cortex.

In a very complex world, people do not have the time to fully understand the many aspects of this complexity. They have to use their own heuristics to try and reach a decision. These rules of thumb are very seldom based purely on facts unless those are what one has been trained to use.

I’ve written about the need for a story, the need to create narratives, in order to effect change.

Scientists have had a lot of hard training to provide them with tools and approaches to make decisions based on facts. Most people have not. They respond to stories and narratives that resonate with their personal heuristics.

So, researchers present the facts, show charts and expect people to reach the same logical conclusions they did. But most people react to stories that make these complex facts understandable.

But to scientists, those stories are poor substitutes for the truth. And they may be poor substitutes but that is often irrelevant to the discussion.

It does not matter whether a scientist is able to convince someone to adopt a policy because of the facts or because of a nice lunch. What matters is the convincing.

Of course, that is an anathema to many researchers. If facts do not work, nothing will.

So, the conflict.

I agree with Mike that this is not something most scientists can deal with. It goes against their own heuristics.

But there has to be a way to identify people who can present a truthful scientific narrative that will help policy makers decide on the reality-based solution. Otherwise, the group with the best lunch – and most money – will drive the decisions.

Who am I?

I figure that I may be getting some traffic from the Huffington Post article so an introduction.

I’ve been working in the field of biotechnology since the early 80s, spending 16 years as a researcher at Immunex, the premier biotech in the Seattle area until it was bought by Amgen. It was an incredible crucible of top-notch researchers working with little money to find cures for important diseases. There were, I believe, less than 50 employees when I started and several thousand when I left. So I had first hand knowledge of many of the needs of a small biotech as it grew. I was a small part in the development of a biologic that changed people’s lives – ENBREL.

I left Immunex when Amgen finalized the merger and spent some time thinking about what to do next. Luckily Immunex stock options, which were given to all Immunex employees when I started, provided some economic buffer. I worked with the Washington Biotechnology and Biomedical Association on several projects and helped form a philanthropic organization called the Sustainable Path Foundation, where I am still a Board member.

I started a blog called A Man With a PhD, something I continue to this day, as well as a science-based blog called Living Code for Corante, that Forbes picked as the 3rd best Medical blog in 2003.

In 2004, I became the third employee of a startup biotechnology company called Etubics. As VP in charge of Research, I did everything from ordering lab equipment, growing cells, negotiating contracts and having to fly cross country to talk with suppliers. All while trying to raise money so we could have a hope of producing the vaccines that I believe can change the world.

So I got to see firsthand and at the highest levels, what it takes to start and run a company. I left last year as the company was entering a new phase, where clinical development and manufacturing were at the forefront and research was on the back burner. Not only were these areas I did not have a lot of expertise or interest, but I also was pretty well burned out. The stress of a small company is enormous, particularly in an industry where it takes over 15 years for a therapeutic to get from the research lab to the patient.

I left to pursue one of my real passions – how to understand why Immunex was such a powerhouse of research, why it is was one of the few biotech companies started in the 80s to produce a blockbuster drugs, along with several other good drugs, and whether this could be replicated.

That is what SpreadingScience is about – how to create organizations that are resilient to change, that can adapt in ways that increase the successful outcomes need. You can read some of the material or follow my blog to get an idea of how I am accomplishing this.


Fixing problems

I expect some traffic from people following the Huffington Post article about Peter Rubin.

I always get a few butterflies in my stomach when I talk with a reporter who contacts me out of the blue. As with most things, trust is important. Also, I have a tendency to babble a lot on the phone, especially when talking extemporaneously, so I always worry if I will say something that does not exactly fit what I really mean. I hope I did not sound like too much of a Pollyanna.

I think Arthur did a reasonable job, particularly since he was talking with me for the first time and having to deal with my speech patterns.

The point I had is that I’m torn because there are vitally important reasons for some companies to need the expertise of some people so I do not want to prevent access to their expertise. But I also do not ant to see people using their position, particularly if it is a tax=payer supported one, to simply enrich themselves.

How to remove the latter without harming the former?

One big point I made to Arthur Delaney, who was the reporter that called, was that openness and transparency are a huge part of solving what is a difficult problem. Shining a light into this process makes it much less likely that people will game the system. Not impossible but less likely.

It seems to me that much of the misbehavior that many people partake in comes from the fact that they can carry out this bad behavior, and escape its consequences, because is happens in the dark, behind the scenes.

Most people – not all, I’m not that much of an idealist – may modify their misbehavior if they know that others can see it. And if they know that there will be consequences if they do misbehave.

There are lots of important, legitimate reasons for organizations to need the expertise of a range of people who have worked in government or for a company or for an NGO. To be successful, specialized expertise is sometimes needed. This expertise can be critical, particularly for small companies.

We need to make sure that those types of interactions are not harmed.

Real openness should not harm them. At least I hope not.

Maybe because Alan Mullaly actually has built things

ford mustang by stevoarnold

Alan Mulally — Making Ford a Model for the Future
[Via HarvardBusiness.org]

Almost exactly a year ago, I wrote an article about why Ford has the potential to become a company of the future. It had just come off reporting a $14.6 billion loss for 2008, its fourth losing year in a row.

One year later, Ford reported a profit of $2.7 billion. Yesterday the company reported March sales up 40 percent. GM, by contrast, was up 22 per cent, and Chrysler was down 8.3 per cent.

There are many reasons Ford has achieved such an extraordinary turnaround since Alan Mulally took over as CEO in 2006. After observing him in action, talking with him and spending time with his senior team, I’m convinced Mulally is taking an old-school industrial company and turning it into a model of how a modern company ought to be run.

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Perhaps because Mulally is an engineer who actually built things at Boeing, rather than just a sales/marketing MBA, he has a firm understanding of how to get people to do creative things, even at an automobile manufacturer.

Innovation, and the creativity that drives it, does not come from short term metrics and 9-5 mentalities. Mulally had a huge influence on Boeing’s success against Airbus and is now doing something similar with Ford.

I wrote about some of these approaches before. It looks like Mulally has continued on this path.

Some we have heard before. ‘Rally around a mission.’ ‘Long-term strategic planning.’ ‘Be fearless.’

All great aphorisms but execution is what makes them work. Observe how he creates a culture of truth-telling and transparency:

Finally, Mulally has created a culture in which telling the truth, however painful it may be, gets rewarded. Every Thursday morning, he presides over what he calls a “Business Plan Review.” The heads of Ford’s four profit centers around the world and its 12 functional gather to report on how well they’re meeting their targets and on any problems they’re having. They’re all in together.

To broaden transparency, Mulally invites outside guests to sit in on the meeting each week. The day I was there, one Ford executive described a significant shortfall on a key projection. No one cringed, including Mulally, and the executive calmly outlined his suggested solutions. Then he invited others to share their ideas.

Not only does he have everyone in it together and makes sure his own approach of finding solutions to problems, not blame, but he includes outsiders with no ax to grind or domain to defend. These observers provide a perspective that keeps the focus on finding answers.

And I bet they often ask naive questions that can sometimes explode into creative ideas.

I think that they have a great chance to adapt to the changing markets in ways others can not.

Watch the video with the original narrator

How to start a movement: Derek Sivers on TED.com
[Via ED | TEDBlog]

With help from some surprising footage, Derek Sivers explains how movements really get started. (Hint: it takes two.) (Recorded at TED2010, February 2010 in Long Beach, CA. Duration: 3:10)

Watch Derek Sivers’ talk on TED.com, where you can download this TEDTalk, rate it, comment on it and find other talks and performances from our archive of 600+ TEDTalks.

[More]

I talked about this a few weeks ago. well, it turns out the Derek Silvers gave a TED talk in February and here it is. So you can see the actual fellow who put the video together.

A very informative three minutes.

My Op/Ed in Xconomy

petri dish by kaibara87

The opinion piece I wrote for Xconomy has been published. Luke Timmerman asked me on Monday to examine the bill and the sections that impacted the Biotechnology industry. I had not even realized there were parts of the huge healthcare reform bill.

I started writing on Monday evening and got Luke my version by about 1 PM on Tuesday (I had to take my car to the shop for its 15,000 checkup or I would have been done sooner). Luke had some edits and it was ready by early evening.

Everything was done using online technologies. Even 5 years ago it would have been hard to put this all together in such a short time. I essentially started from zero on the specifics (I mean how many people have actually read any of the healthcare reform bill itself?), educated myself rapidly, used my background of 25 years in the industry to form an opinion and composed the piece. I then carried on a ‘conversation’ with Luke to get it into final shape.

I found the relevant parts using Open Congress’s interface, which allows you to link to specific paragraphs, as well as leave comments. It presents a unique way for citizens to interact with the legislation that our Congress is working on. Not only are there links to every piece of information one may want, there are also links to news stories, and other facts (Like the Senate version has over 400,000 words.)

Without this web site, it would have been very difficult to even find the sections dealing with biotechnology, much less try to understand them, It was very easy to search for the relevant sections and get an understanding of what they really said. I read a few articles online to get some other viewpoints and then wrote my opinion of the sections.

The fact that the biotechnology industry now gets 12 years of market exclusivity for its products, several years longer than for the small molecule drugs sold by pharmaceutical companies, is really a pretty big deal.

There has been uncertainty for several years over this time frame, with the FTC feeling there should be little or no market exclusivity outside of the patent time frame to the industry’s organization, BIO, which wanted at least 12 years without regard of patent considerations.

Not knowing just how long a time period a new biologic might be free of competition can have a large effect on determining which therapeutics make it to the market place. Now those who model the value of a product have much surer time frames to work with.

I do not think the bill is as friendly to those companies hoping to create ‘generic’ biologics called biosimilars. While it does delineate a path to government approval, the legislation does not make it easy. There are some substantial costs for getting approval of these products. They may not be very much cheaper than the original therapeutic itself. and they do not get any real exclusivity for their products in the end.

For many possible follow-on biologics it will simply be too expensive to take them to market. The large costs incurred while doing this will also make it harder for them to take market share away from a biologic, which has had 12 years of unfettered ability to market itself and its positive results to the customers. at least market share based on cost.

And, as I read the section dealing with patent issues, I became even more aware of the hard road for these follow-on generics. In order to get patent issues dealt with before the follow-on biologic is marketed, the patent holders/licensees of the original drug must be furnished the same information that is submitted in the application to the FDA – the results of clinical trials, assays to determine the follow-on biologic’s potency, stability, etc.

It seems to me that this could open up all sorts of shenanigans. And it appears to be more than regular generics have to do. From what I could determine, a company hoping for approval of a generic simply has to provide the patent numbers that cover the drug it is proposing to market. I could find nothing to indicate that it must turn over all the data of the generic to its direct competitor before going to market.

How many companies will be willing to provide their direct competitor with all the information present in its application to the FDA? It seems to me a place where some mischief could occur.

Now, I did not have time to review the complete history of these sections. I’m sure I could find all the committee testimonies on these parts. Perhaps someone out there has more detailed information. I’d love to pull an Emily Litella and say “Never Mind.”

So, this bill settled something really important for the biotech industry and, while bringing some clarity to the idea of biosimlars, also introduced some possible complications.

I have to say it was fun to use the power of the Web to investigate the issue and form some opinions. Using technology to move information around faster is part of what SpreadingScience does.

The world’s oldest profession provides modern insights

sugarloaf by Paul Mannix

Brazilian hooker-john hookups used for network analysis
[Via Ars Technica]

Modern communication networks, such as cell phone systems and the Internet, have provided researchers with the opportunity to study human associations and movement on a much greater scale than previously possible. Almost all of the papers that describe this sort of network analysis notes that it could have real world applications, since existing and emerging disease threats can spread through social and transit networks. A paper that will be released later this week by PNAS, however, skips the whole “this may be a useful model” aspect, and goes straight to a network in which diseases actually do spread: prostitutes and their clients.

Although organized prostitution is apparently illegal in Brazil, there are no laws against receiving payment for sex, making it possible for sex workers to freelance. Like everything else these days, that trade has found its way onto the Internet, and some enterprising Brazilians created an ad-supported public forum for individuals on both sides of the transaction. The forum is heavily moderated to keep it strictly on-topic: sellers (aka prostitutes) can advertise their business, and those that partake can rate the experience, as well as provide some information about the precise services rendered (the focus was strictly on heterosexual prostitution in this system).

[More]

Using the data generated by Web 2.0 technologies these researchers have been able to garner a lot of insight into a very large social network that has existed for some time.

This looks like it will be a pretty interesting article – Information dynamics shape the sexual networks of Internet-mediated prostitution. And you can download it for free.

These online forums map very well with the correlated social networks, providing a nice insight into how the networks are set up and how something like diseases might progress through the network.

It is also a network that is highly optimized to move information around – who is the best for doing whatever at whichever price. It is also a very large network, so they were able to identify some other interesting characteristics.

For example, social networks also alter over time. Because they had 6 years worth of data, the researchers could examine how the contacts changed over time. They found that there were still very large connected networks at all times, with a minimum of 71% of the people being connected in the network.

There were over 10,000 buyers and about 6600 sellers. The average number of jumps between buyers was about 5.8 (those 6 degrees of separation) while it was smaller for sellers (about 4.9). Also interestingly, was the high number of what are called four-cycles – a set of connections that end where they start. These are normally described as a mutual friend introducing two people, this creating a triangle. This seems to make sense to me – someone who has found a great prostitute telling his friends, for example.

Another interesting aspect of the network, and one that has implications for disease spread, is that it was slightly disassortative. In a highly assortative network, highly connected members also tend to connect to each other. In a disassortative network, highly connected members tend to connect to less highly connected members.

The data suggest that for this network the most active buyers, those with the most connections to prostitutes, tended to connect to prostitutes that were less active in the network (i.e. fewer connections). And the most popular sex workers tended to connect to buyers that were not actively seeking out other prostitutes.

This actually creates a network where disease is not likely to arise but when it does, it could spread to a larger part of the network.

Another intriguing observation they made is that on a log-log plot, the number of sex workers and buyers increases linearly as the size of the city increases. In many things (such as wealth or information workers), the trend is greater than linear because larger cities provide greater benefits. Linear scaling falls for things that are usually necessities, such as water or power.

Normally, prostitution requires face-to-face interactions, so being in a big city, with its increasing large social networks, makes it easier to find one. And thus harder to find one in a small town. But, the online form removes that need and now small towns can do just as well as large towns, bringing prostitution down to the level of human necessities.

Pretty nice examination of a somewhat specialized human social network, one that could only really be studied because of Web 2.0 technologies.