While Path did indeed fail as a distribution provider, I would argue that keeping the network’s size small can still have benefits in line with my signaling theory: Deliberately limiting the number of people who can join a network (e.g. by charging a membership fee) creates scarcity which in turns makes the network more interesting. Network... See more

A positive feedback loop of views, likes and comments helps you to quantify how successful your signal distribution has been.

Digital products have one crucial disadvantage over atom-based products and services: Intangibility. Apps live on your phone or computer. No one can see them except for you.

You would think that going to school is about learning and acquiring skills, but then why do students pay tens of thousands of dollars for Ivy League schools when all of the learning material is effectively available online for free? Why do we use grading systems when we know that students learn worse when being graded? The answer, again, is... See more

I believe that this is the main reason why consumer software companies have a harder time monetizing than their physical counterparts.

Social networks are subject to network effects: The more users join a network, the more valuable the network becomes. Your incentive to use Facebook increases with the number of people you can distribute your signal message to. This is why social networks are free to use – in order to maximize their signaling potential they need to acquire as many... See more

The app that comes closest to a luxury service that I can think of is Superhuman, which charges its users $30 a month for an email client (which you could also get for free by just using Gmail).

The financially most lucrative strategy for software companies is to provide distribution for free and instead monetize users who want to stand out of the crowd with paid signal amplification.

Another point of evidence is the lack of luxury software products. People spend absurd amounts of money on jewellery, handbags and cars, but I can’t think of a piece of software with an even remotely similar price tag. Sure, people have tried to sell $999 apps but those never took off.