We talked about the network effects of a real society many days ago. Hopefully, that explains why Chinese don’t use voice mail, calendar, or classified. We talked about it in YLF 2009 conference, and there are people who don’t agree with what I said.
Then I have another great example. When I was in Chengdu, no one uses coins. They always use the paper money of 1 RMB. Everyone hates coins. Why? Not for a rational reason. It is just because when you have a 1 RMB coin, you cannot spend it. People won’t accept it, and they ask you to change it to 1 RMB paper money. Just because you cannot spend it, you don’t accept it, and because you don’t accept it, others cannot spend it. The stronger the current feedback loop is, the harder it is to break.
On the contary, people in Shanghai LOVE coins. They don’t want paper money, although they unwillingly accept it. People will be surprised to get 7 coins as change to buy a 3 RMB ticket with 10 RMB note.
That is the network effect. Before debating about whether coin money is better than paper money or not, we need to look at where you are going to spend it, Chengdu, or Shanghai.